samchain/econo-pairs-v1 huggingface dataset:
That means that with very little spare capacity in the economy, even the unusually weak actual growth of around 1¾% over the forecast horizon – which you can see here in the MPC’s projection for GDP from the latest Inflation Report (Slide 7) – is still sufficient to generate excess demand. There are of course significant risks in both directions to the outlook for productivity. To the downside, there are at least two reasons to think that productivity won’t pick up to its pre-crisis rate. The first is that after such a long period of weak productivity growth it is reasonable to argue that we are in a new paradigm of lower productivity growth, and that is reinforced by the global nature of the weakness. The second is that that the dampening effect of Brexit on productivity growth – both through the effect of uncertainty on business investment in the short run and through the need to anticipate and respond to post-Brexit trading relationships – is likely to continue for some time. To the upside, productivity, although volatile, has tended to grow by around 2% on average for many decades, if not centuries. Productivity could ultimately pick up by more than expected globally and if there is a global upswing in trade and investment that benefits the United Kingdom. Additionally, if there is clarity around the transition and future trading arrangements post-Brexit, this could continue to reduce uncertainty, support business investment and lead to a stronger-than-expected pickup in productivity growth.

These actions, taken together, should vaccinate the economy and protect it from the more insidious disease of too low inflation. Thank you. 1 John C. Williams, The Research-Policy Nexus: ZLB, JMCB and FOMC, Remarks at the Conference Celebrating  the 50th Anniversary of the Journal of Money, Credit and Banking, New York (May 31, 2019). 2 John C. Williams, The Economic Outlook: The ‘New Normal’ is Now, Remarks at The Economic Club of New  York, New York (March 6, 2019). 3 David Reifschneider and John C. Williams, Three Lessons for Monetary Policy in a Low-Inflation Era, Journal of  Money, Credit and Banking, Volume 32, Issue 4, pp. 936–66, November 2000. 4 Board of Governors of the Federal Reserve System, FOMC Briefing. January 2002. 5 3/4  BIS central bankers' speeches  5 This discussion abstracts from balance sheet policies such as quantitative easing, which can make financial  conditions even more favorable to growth. See, for example, Ben S. Bernanke, Vincent R. Reinhart, and Brian P. Sack, Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment, Brookings Papers on Economic Activity, The Brookings Institution, Volume 35, No. 2, pp. 1–100, 2004. 6 Thomas M. Mertens and John C. Williams, What to Expect from the Lower Bound on Interest Rates: Evidence  from Derivatives Prices, Federal Reserve Bank of New York, Staff Report No. 865, August 2018. 7 John C. Williams, When the Facts Change..., Remarks at the 9th High-Level Conference on the International  Monetary System, Zürich, Switzerland (May 14, 2019).
All insurance industry professionals need to become more astute at assessing risks, and competency needs to be upgraded at all levels in the company. Regulators must also keep pace. In supervising individual insurers, regulators need to look beyond insurance risks and protecting policy-holders. From a broader systemic perspective, greater engagement of insurers in financial markets raises important questions concerning their impact on financial stability. How well are insurers managing this new portfolio of risks? What are the spillover effects of an insurance company failure in this environment of inter-linkages? Traditionally, regulators associate systemic risk with the failure of large banks. The events of Sep 11 have turned the spotlight onto the importance of the insurance industry as a whole, and even of individual insurance players. A number of recent failures and near failures of insurance companies have revealed just how wide an economic impact insurers have. The high-profile collapse of a few major insurers such as HIH and Independent, left businesses without essential insurance cover, and critical services without professional indemnity coverage. Economic activity in these sectors might have ground to a halt, had the government not stepped in. But by stepping in, the governments created a new source of moral hazard. These issues have been extensively debated. The IMF has concluded that the insurance industry, while not systemically critical, has taken up a definite systemic relevance. We need to understand better the nature of insurance companies' financial activities and their possible impact on global financial stability.

First, not enough was done to reflect changes in business models in disclosure regimes and practices. In some distant world, banks in, say, Germany were exposed largely to German companies and households; and similarly Californian banks to Californian borrowers and projects. So if conditions deteriorated in Germany, California or wherever, the markets would be alert to the need to scrutinise the “home” banks operating in those regions or sectors. In today’s world, the markets knew that risk really had been dispersed. But they did not know where it might be concentrated; and, crucially, did not know how or how far it might flow back to the banking sector and so towards the core of the payments system that supports our  BIS Review 77/2008  1  monetary economy. It is in the interests of banks themselves – and certainly in the interests of their creditors and shareholders – to make those risks clearer in future; and if they do so, they will face stronger incentives to avoid risk concentrations. But my second point is that talk of the shift to “Originate & Distribute” can be overdone. Many of the largest global banks seem to have occupied a half-way house. They retained large positions on what amounted to a view that macroeconomic conditions could never get so bad as to cause material impairment, but booked them to portfolios that were marked-to-market (or to models).
In other words, with the rise of new FinTech players, activities that are considered banking services need not be provided by traditional banks alone. Technology or e-commerce giants like Alibaba and Tencent have moved into the financial services space, as they seek to strengthen their customer-centric propositions and services. Business disruptions need not be led only by the large firms. Smaller nimble start-ups have also sought to un-bundle the banking value chain by focusing on niche areas such as financial advisory services and consumer finance. There are two underlying factors: (a) One, is the arrival of the smartphones that launched a new era of mobile apps. Banking has moved from physical branches, to the desks, and now to the palm. Recently, I read a report that British psychologists found that young adults use their smartphones roughly one-third of their total waking hours. Simply put, all of us can now do banking anytime, anywhere. And many segments of our populations are increasingly comfortable going digital, be it for banking, or to purchase goods and services. (b) Second, the accessibility afforded by technology has led banks to shift away from a production-consumption model. Traditional banking models are based on making available the range of the services that a customer need. Today, competition centres on the customer experience. One of our local Singapore banks has a tag line on making banking joyful. The notion of delighting a customer opens up a whole field of competitive ideas as to how to generate that positive experience.

Some people wonder why don’t we simply make the Charter part of the HKMA’s regulatory requirements for banks given the importance of fair customer treatment? My reply to this is that: banks have to deal with tens of thousands of customers every day to provide a great variety of services and conduct countless transactions. While imposition of regulatory rules would bring about some effects, no external rules could possibly be all-pervasive, more difficult still about transforming the corporate culture or long-standing values in workplace. Fair treatment of customers ought to be firmly embedded in the corporate culture of banks that all personnel – from board of directors, chief executives, senior management, to frontline employees – will accept, defend and uphold treating their customers fairly as a guiding principle. Banks’ incentive mechanism must also promote and support this culture in every aspect of the banks’ operations. BIS central bankers’ speeches  1  6. Bank customers, as consumers of various types of bank products and services, should receive appropriate protection. While banks should treat their customers fairly, the latter should also be responsible and smart. The most basic requirement is that customers should try their best to understand the products and services provided by banks, including credit cards, personal loans, home mortgages and wealth management products, their relevant risks, costs and expenses, and whether the products and services are suitable for them.
Undoubtedly, there are still many things to improve. Attaining a level of development such that prosperity reaches the whole population is still far away, but at least we are on the right track. Thank you. BIS central bankers’ speeches  5

Andrew Bailey: Defining the objectives and goals of supervision Speech by Mr Andrew Bailey, Deputy Governor of Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority at the Bank of England, at the New York Fed conference “Defining the objectives and goals of supervision”, Federal Reserve Bank of New York, New York City, 18 March 2016. *  *  *  First of all, many thanks to the New York Fed for organising a conference on supervision of banks. This sounds a strange thing to say in one sense – not in another because the gratitude is genuine – but strange in the sense that surely supervision is such an important part of what we do that we shouldn’t be particularly surprised at the idea of having a conference on it. But in my experience, it is surprising how little time we spend being more reflective about supervision. I want to start with some important definitions. Frequently, and mistakenly, “supervision” and “regulation” as terms are used interchangeably. That’s wrong. Regulation is to do with the framework of rules and guidance that put the structure around the objectives that as authorities we are usually given in statute. In the UK, the PRA has a primary objective in terms of the safety and soundness of firms we authorise to do business, and safety and soundness are expressed in terms of the stability of the financial system. There is then a rulebook that tells us what safety and soundness means. That’s the framework of regulations.
They occupy a position in the top right hand corner, with levels of complexity higher-even than commercial bank annual reports. This suggests the vast majority of the Bank’s publications may be inaccessible to the vast majority of the general public. Having assessed my own speeches, including this one, the conclusion is much the same. They, too, are likely to be impenetrable to most. These linguistic issues are not merely matters of careful drafting. They are important at a substantive level when it comes to building social capital, accreting generalised trust, closing the Great Divide. Plainly, there is further still for us all to go, myself very much included, in simplifying our communications to enable us to speak clearly to those we serve. Set-piece communications, in the form of written reports and speeches, are only one aspect. There are different methods and media which can be used to reach different audiences using different voices. Last year’s Open Forum was an example of such an initiative. 64 The Bank’s  63  Results from a poll conducted by Populus for the Bank of England in March 2016 of around 2,000 adults. 64  For further details, please see Bank of England Open Forum (2015). BIS central bankers’ speeches  15  enhanced public understanding programme is another. A third would be to seek different means of engaging more directly with the general public around the country.

While in general it fares pretty well relative to others, the Bank’s net trust rating currently stands at 28%. 29 The Bank has a positive trust rating of more than 80% among some members of the public, but among others it has a trust deficit of more than 50%. As for banks, governments and the media, this too is quite a Great Divide. It was writer Norman Douglas who said that “distrust of authority should be the first civic duty”. 30 And as someone sometimes described as an iconoclast, I have sympathy with that sentiment. But, again rather like cholesterol, it is possible to have too much of a good thing. Taken too far, distrust can be corrosive rather than regenerative. Sometimes bridging that Great Divide can be a bridge too far. Progress so far That begs the question of what can be done to close the gap, to restore trust in the financial sector, to alter the social identity of banking. There has been no shortage of ink spilled in crafting a response to the crisis. That includes regulatory response where there has been root-and-branch reform of both banks’ prudential standards – their safety and soundness – and consumer protection – their offering to customers and clients. The prudential regulatory reform agenda has been covered extensively elsewhere, including in speeches and consultation documents by the Bank of England, over the past few years. 31 So I shall confine myself to three points.
10/29  It is often argued that banks’ net interest income is being adversely affected not only by the low level of interest rates but also by the flattening of the yield curve observed in recent years. This effect depends, first, on the extent to which there are positive differences between the maturities of banks’ assets and liabilities, in other words, what is known as maturity transformation. However, in order for the flattening of the yield curve to have a negative impact on banks’ net interest income, in addition to maturity transformation, there also needs to be lending at fixed interest rates. If the loans granted are variable rate, their remuneration will generally be linked to short-term yields, and will therefore not be affected by changes in the yield curve. In the case of Spain, although banks perform maturity transformation, the bulk of long-term lending is variable rate. In consequence, the flattening of the yield curve in recent years should have had less impact on Spanish banks’ net interest income than on the net interest income of banks in other European jurisdictions where fixed-rate loans predominate, such as Germany and France. However, in recent years a significant volume of new fixed-rate mortgage lending is starting to be observed, so these effects could become more significant in the future. 11/29  In any event, to assess the overall impact of interest rates on banks’ profitability, it is important to note that interest rates affect not only net interest margin but also other income statement items.

I am happy to say that quite some research on the interaction of these two policy areas has been undertaken here at the ECB. [1] In particular, two papers of the Research Task Force are dedicated to this issue: one documents the macroeconomic impact of macroprudential policy measures and its interaction with monetary policy[2]; a second one sheds light and quantifies the transmission between monetary policy and bank stability. [3]  On-going research at the ECB Moreover, ECB research has showcased the particular importance of remaining vigilant about banks’ resilience in episodes of increasing cyclical systemic risk. Recent work quantifies how exuberant credit and asset price dynamics lead to large downside risks to bank-level return on assets, putting a banking system’s capital at risk over the medium term. [4] The quantification of bank capital at risk can support the calibration of macroprudential instruments. In turn, by subjecting the banking sector to specific shocks, a macroprudential stress-testing framework can help in assessing the capital shortfall in times of stress. Whereas traditional stress-testing frameworks focus on initial capital shortfalls, macroprudential stress-testing frameworks quantify the propagation of costs for banks and the real economy over time. This is the aim of the macro-micro approach, which takes into account the heterogeneity in banks’ reaction functions. [5] More generally, stress-testing has become a key instrument in the macroprudential and financial stability toolkit for assessing risks to the banking system in adverse conditions.
At this point, I would like to share with you an expression we frequently reiterated at the initial stage of the fight against inflation, which was supposed to be a tough and long-lasting process: “Even a thousand-year long journey starts with a single step4.”  Dear Guests, As I have mentioned before, derivatives markets are one of the components of economies that “ought to be present anyhow in the natural evolution of markets”, as put forward by Friedman. At this stage, I would like to draw your attention to the magnitude and significance of the functions performed and changes brought about in the economy by these markets, which were also evaluated within the framework of the experiences of other countries. The more informed we are about this subject, the more derivatives markets will be embraced and derivative instruments will become more widespread. Considering the three-dimensional nature of the functions of financial markets; time, risk and information, the time dimension creates risks concerning the future, whereas the information dimension facilitates more accurate decisions to be taken as the future can be predicted with fewer errors. Within this framework, the first function of derivates markets is to ensure the management of risks on a wide spectrum ranging from financial instruments such as foreign exchange rates and interest rates to commodity prices. The second function is to provide economic agents with correct information through the prices formed in the market.

At the outset of this process, many people severely objected to the establishment of derivatives markets claiming that they would encourage volatility and increase speculations and manipulations on the markets. This very much reminds me of the “it is not possible in Turkey” or “it is not the right time,” comments I hear whenever we try to implement something new. The Nobel prize winning economist Milton Friedman’s speech at the opening of the foreign exchange options market at the Chicago Mercantile Exchange in Autumn 1971 contains some very important information for us2. As Friedman pointed out, financial instruments relating to foreign trade are all complementary and the British case shows that financial services may well become a very profitable export item. Within this framework, he argued that the development of a derivatives market, which is normally expected to exist in the natural evolution of markets, not in another country but in the USA is important not because it increases trade and investment here but it enables export of these services as well. Thus, he claimed that the development of derivatives markets would support the development  2  Friedman, M. (1971), “The Need for Futures Markets in Currencies”, in The Futures Market in Foreign Currencies, Prepared for the International Monetary Market of the Chicago Mercantile Exchange, Inc. pp. 6-12. BIS Review 17/2005  3  of other financial activities in the country, would bring additional income through exports in services sector and enhance the effectiveness of monetary policy.
So it is not that we envisage problems for the financial system or the economy as a whole but rather that individuals and households could run into difficulties. That of course is unfortunate enough. That there does not appear to be any general overvaluation in the housing market does not in any way mean that prices cannot fall in the future either. At least from some media reports in conjunction with the Financial Stability Report the impression was that the Riksbank was almost guaranteeing that future price declines would not happen. That of course is something we cannot do. In our main scenario we do expect average house price inflation to moderate gradually – but still to remain positive – when interest rates normalise, but that does not mean that house prices cannot fall in parts of the country where they are highly elevated. Nor does it rule out a more general drop in prices in the period ahead, even though any such decline is likely to be less drastic than if prices had shot up in a way that could not be explained by developments in underlying factors. That could be the case if, for example,  2  BIS Review 88/2005  incomes were to fall in a way that we cannot foresee today. Of course, things can also happen beyond the forecast horizon that cause house prices to drop.

This remains true even though we have not had to enforce the minimum exchange rate with foreign currency purchases since autumn 2012. In my comments today I will explain the reasons why we are maintaining the minimum exchange rate. I will begin with a brief look at global economic developments. Then I will present our forecast for the global economy and the Swiss economy. Based on this, I will follow with an examination of the outlook for price stability. As you know, in our view, developments on the Swiss mortgage and real estate markets represent a risk for financial stability. I will therefore use this opportunity to follow up with a brief presentation of our considerations on this topic. I will round up my remarks with two examples which illustrate the link between monetary policy decisions and our balance sheet. Global economic developments in 2013 First, let me begin by reviewing the events of 2013. On the one hand, there was a certain feeling of renewed confidence last year. This can be mainly attributed to the ebbing of the European financial and debt crisis. The alleviation of the crisis is likely to have made a significant contribution to Europe’s emergence from recession. Meanwhile, economic growth in the US firmed and the economy in Japan picked up perceptibly. On the other hand, concerns about a number of emerging economies increased.