samchain/econo-pairs-v1 huggingface dataset:
The third thread is the absence or failure of key control activities, such as segregation of duties, approvals, verifications, reconciliations, and reviews of operating performance. Lack of segregation of duties in particular has played a major role in the significant losses that have occurred at banks. The fourth thread is inadequate communication of information between levels of management within the bank, especially in the upward communication of problems. To be effective, policies and procedures need to be effectively communicated to all personnel involved in an activity. Some losses in banks occurred because relevant personnel were not aware of or did not understand the bank’s policies. In several instances, information about inappropriate activities that should have been reported upward through organisational levels was not communicated to the Board of Directors or senior management until the problems became severe. In other instances, information in management reports was not complete or accurate, creating a favourable impression of a business situation that was in fact problematic. The fifth and final thread is inadequate or ineffective audit programs and other monitoring activities. In many cases, audits were not sufficiently rigorous to identify and report the control weaknesses associated with problem banks. In other cases, even though auditors reported problems, they were not corrected by management. From these common threads, it should now be clear why, in the first part of my remarks today, I stressed the things I did - management oversight and control culture, risk assessment, control activities and monitoring, and information and communication.

If an institution engages in types of business that we regard as being at the higher end of the risk scale, such as share margin financing or lending for property development, this will also attract our attention. Other things that will attract our attention include major changes in the operating environment, including new technology; areas or activities which are experiencing rapid growth; the introduction of new lines of business, products or activities; and domestic and foreign acquisitions. In each case we would want to be assured that any necessary enhancements to the control environment have been made so as to reduce the chance of adverse and unforeseen effects on the institution. Different risk areas require different approaches, but essentially our approach is to start by reviewing the written policies and procedures setting down the controls over a particular area, and then to look at how the controls work in practice. This may involve a combination of reviews of documentation, discussions with staff, and some testing of transactions. The end-result will be a judgement as to whether we believe the controls are effective or need improvement. If improvement is needed we will discuss our recommendations with the management and agree an action plan and time-scale for the remedial action. This may sound to you quite similar in some respects to the work of an institution’s internal audit department and external auditors.
As my colleague, David Miles, argued in a speech to the Home Builders Federation earlier this year5, we are presently in a transition from a precrisis world with compressed risk premia and in some cases imprudently generous loan-tovalue and loan-to-income ratios, to a more sustainable equilibrium with lower ratios. That implies a period during which first-time buyers and those hoping to move up the housing ladder save the necessary extra equity, low transactions and a fall in the share of owneroccupiers. That is pretty much what we have seen and the transition has been made harder by the squeeze in real incomes. The prospective moderation in the squeeze on real household incomes should help those saving for a deposit to get onto, or move up, the housing ladder. So, as well as supporting consumer spending, it should also help support mortgage demand. That would, no doubt, be a most welcome development to you, as well as to the households themselves. On that note, let me finish by hoping that the rest of your conference today proves most stimulating and valuable. Thank you! 3  In fact using the PAYE system would probably be the easiest way to implement such a scheme. Moreover, if the Government were actually to send out vouchers redeemable into cash it might well fall foul of the prohibition on monetary finance contained in the Lisbon Treaty.

Mr Lopes’ speech before the Economic Affairs Commission of the Federal Senate Summary of a speech by the new President of the Central Bank of Brazil, Mr Francisco Lopes, before the Economic Affairs Commission of the Federal Senate in Brasilia on 26/1/99. Translated from Jornal do Brasil of 27/1/99. Inflation I am sure inflation will not come back. Of course, there will be some adjustment in relative prices but there is no possibility of resuming the old inflationary process. We will have to put in place tight monetary policy and prevent any forms of indexation, opportunism or speculation. As the Brazilian economy is relatively closed - imports correspond to 8% of GDP - a devaluation of 50%, (i.e. the exchange rate stabilising at the very depreciated level of $ 1.80), would add about 4 to 5% to the rate of inflation. Overvaluation of the real The use of the exchange rate anchor made an exchange rate overvaluation inevitable. Nevertheless we had imagined it would be possible to shift from the mini-band regime to the free floating regime in a rather gradual way, while the economy was still attracting foreign capital. But reality sometimes frustrates the best intentions. With the benefit of hindsight (after the Asian and Russian crises), the widening of the exchange rate band in April last year, which widened the amplitude of the exchange rate fluctuation by 1% per year, was a rather timid movement. But it is easy to be wise after the event.
Tarisa Watanagase: Thai financial sector and the challenges ahead Speech by Dr Tarisa Watanagase, Deputy Governor of the Bank of Thailand, at the conference on Asian Finance & Capital Markets 2004, Bangkok, 8 July 2004. *  *  *  Good morning, Let me first begin by thanking Euro Events for inviting me to address this distinguished audience. I am delighted to be here to share with you some of my thoughts on the Thai financial sector and where it is heading, especially since a lot is happening at this juncture, with the Financial Sector Master Plan being implemented. I trust therefore that we will have much to learn from each other, given the diverse background of participants in this conference, ranging from banking and government officials to investment managers and business leaders. Since you will engage in absorbing debates on practical issues on finance and capital markets, my presentation will deal with the broader issue of prospects and challenges for the financial market in the Thai perspective. While the discussion will be based on the experience of Thailand, some of the challenges will be commonly faced by other emerging economies. Thus, it is my sincere hope that the implication drawn from this presentation will also be applicable and useful for participants from other countries. I will first touch on the structure of the Thai financial sector and the assessment of where the banking sector currently stands.

The logical question to ask here is how do we ensure that these positive developments will maintain their momentum and that the banking sector will remain strong and sound amidst a more liberalized environment, fierce domestic and external competition, and the advent of more advanced technology and financial innovation? We can wait passively for external forces to inflict changes on us, or we can chart our own path of development in anticipation of any change. The Asian crisis brought it to the fore that complacency when met with abrupt and radical reforms as a result of external forces could entail enormous output loss and social cost. Thus, we must do what we can to ensure that the banking system is up to meeting any challenge. This brings us to the second point I want to make - what the authorities intend to do to enhance the financial system’s competitiveness and its capability to withstand forces of change in this age of globalization. The authorities are quick to grasp the opportunity of healthy economic and banking conditions conducive to embarking on a structural reform, with the announcement of the Financial Sector Master Plan. Thorough discussion on the Master Plan will require a separate session of its own. So, let me just pick some of its key features that will have the most significant impacts on the structure and efficiency of the banking industry.
Unconventional monetary policy measures, including large-scale purchases of government securities, were necessary to deliver effective market rates negative enough to mitigate globally deficient demand. In the UK, forward guidance supplemented such measures, ensuring households and firms could be confident that interest rates would not be raised prematurely, helping to secure the nascent recovery. 4  See Rachel, L and Smith, T (2015), “Secular drivers of the global real interest rate”, Bank of England Working Paper No. 571. BIS central bankers’ speeches  9  Central banks have also purchased other assets – in some cases using small-scale programmes to alleviate specific cases of market dysfunction, and, in others, larger ones to inject greater stimulus into the economy. By deploying a broad range of ammunition, the economy has been stimulated through a number of channels. Lower policy rates brought forward consumption to today from spending tomorrow – the real interest rate channel. The all-in costs of borrowing were lowered, boosting existing borrowers’ spending power – the cash flow channel. And lower funding costs for banks increased the availability of credit – the credit channel. Lower discount rates and portfolio balance effects supported asset prices – the wealth channel. Currencies’ values fell, boosting competitiveness – the exchange rate channel. And determined central bank action and forward guidance put a floor under inflation expectations and bolstered sentiment – the confidence channel. In this way, central bank actions combatted the worst global downturn since the Great Depression.

Thirty-day dollar-mark and dollar-yen historical volatility remained below 10 percent throughout most of 1996 and the first quarter of 1997, and, even with the price action we saw in May, the spike in thirty-day historical volatility we’ve observed is not particularly dramatic when compared with similar periods in past years. Similarly, implied volatility on dollar-mark and dollar-yen options traded to near record lows in 1996. But, as this month has shown, volatility has not been eliminated. There also have been a number of days in the past year and a half with considerable volatility in the foreign exchange market. And, I have no doubt that we’ll have many more of these days -- at times, for example, when markets rapidly adjust to new information or when periods of poor liquidity result in exaggerated price swings. What is clear is that this is a market that is constantly evolving. None of us can say with any certainty whether we’re observing the beginning of a trend or an anomalous period BIS Review 60/1997  -2-  that will ultimately be viewed as a brief lull in volatility. However, I don’t think many of you would disagree with me when I say that the foreign exchange market over the past six quarters or so has changed significantly from that in 1994 and 1992. For those of you who, like me, were involved in this business in the 1970s and 1980s following the collapse of the Bretton Woods system, the contrast is very dramatic.
In this process, we will make use of the experience gained during the last months and the directions in which the international standards are changing in this area. We are aware that this process requires constant communication with the banking industry. Also, the identified measures will be taken by allowing the proper time necessary for the banking industry to recover and prepare. As a matter of fact, the Bank of Albania has initiated this negotiating process first of all within itself. Some regulatory acts of supervisory framework, which are being discussed lately, mentioning the draft-regulation “On liquidity risk management”, are prepared by taking into account the above goals. Also, procedures for systemic risk identification and assessment, as well as response to them, are being completed. 4  BIS Review 129/2009  In this framework and beyond it, the Bank of Albania believes that all the public authorities that play a role in financial market regulation, supervision and development, should be committed to a similar process, having the strengthening of the regulatory and operational framework as the final goal, in order to firm up the long-term financial system stability. To this end, we think that it is necessary to pursue such policies that enable re-establishment and maintenance of balances in fiscal, banking and monetary activity, supportive to a stable economic growth over the medium and long run.

The crisis originated in the USA through the bursting of the housing bubble, bringing a number of existing problems to the fore. Now, it has become clear that global imbalances of currency flows, affected by irresistible behaviour of expenditures or savings between developed and developing ones, have led in the course of time to extremely easing monetary  BIS Review 129/2009  1  policies in advanced economies, which have further deepened these imbalances, thus leading to rise in the financial activity risk, while searching for a higher return from investment. Innovations in financial products reflected inside or outside financial institutions’ balance sheets, found the necessary mechanism to conceal the real risk size in the extreme stratification. Management structures’ remuneration policies of financial institutions that were at the heart of the crisis supported the aggressiveness for short-term and unsteady profits on the back of the need for a better understanding of risk, intending a positive performance and long-term investments stability. Several market mechanisms resulted non-efficient to precede developments in some global-wide institutions. Pronounced weaknesses were reflected even in financial market regulatory authorities, who believed that difficulties would be sorted out by a market discipline mechanism or by a greater reliance on internal models of financial industry assessment. Also, it has become clear that the supervisory regulatory authorities have not paid due attention to developments that affect the overall financial system, focusing more on certain institutions’ behaviour.
This Banque de France view is now widely shared by the central banking community  1. Concerning gold holdings:  The ECB’s decision in July 1998 to hold 15% of its reserves in gold, taken from the gold stocks of the national central banks, was generally seen as a positive signal in a market hitherto inhibited by fears that governments might decide upon new gold sales. This was evidence that gold remains an important element of global monetary reserves. 2. Concerning gold selling and gold lending:  The Banque de France and the Bundesbank have been a driving force behind the 1999 joint statement on gold, which is fully consistent with our traditional position. And I quote: –  “The undersigned institutions will not enter the market as sellers, with the exception of already decided sales. –  The gold sales already decided will be achieved through a concerted programme of sales over the next 5 years. Annual sales will not exceed approximately 400 tons and total sales over this period will not exceed 2,000 tons. –  The signatories of this agreement have agreed not to expand their gold lendings and the use of gold futures and options over the period.” (End quote.) The so-called “Washington Agreement” has clarified the intentions of the Eurosystem as well as of the Sveriges Riksbank, the Swiss National Bank and the Bank of England with respect to their gold holdings.

With respect to domestic demand, the persistently low confidence indicators and the downsized public investment plans for 2016 means lowering the growth forecast for gross fixed capital formation. Private consumption is also revised downward, in line with low household expectations and slower than expected non-durable consumption. The labor market has proved resilient, but we expect it to show some deterioration during 2016. All considered, consumption should grow in 2016 more than it did this year. The drop in the copper price and the worsened financing conditions would also discourage investment. About its construction component, the momentum coming from the upcoming entry into force of the VAT will fade gradually. Measured as a percentage of GDP, in both nominal and real terms, gross fixed capital formation will change little from 2015, at 21.9 and 23.5 percent, respectively. The worsening of the external scenario, as I will detail later, has a significant effect on the larger current account deficit of 2015 and 2016: 1.7 and 2.6 percent of GDP, respectively (0.7 2  BIS central bankers’ speeches  and 1.5 percent in September). This owes mainly to the decline in the terms of trade. Add a larger than expected increase in capital goods imports this year, particularly of transport equipment (table 1). This projection assumes that fiscal policy will continue to contribute to expenditure growth, although not so intensely as in 2015.
And the second is the observation that economic agents in emerging market face limitations in the ability to smooth consumption in response of shocks. BIS Review 89/2007  1  Table 1 summarizes the empirical evidence from the two recent studies. As documented in Aguiar and Gopinath (2007), consumption in emerging markets is around 40 percent more volatile than income at business cycle frequencies. The same is true when comparing relative volatility in growth rates of consumption and income. A study by Prasad and his colleagues in 2005 also shows greater income and consumption volatility in emerging market relative to developed economies. Such heightened volatility in macroeconomic outcomes undoubtedly has adverse implications for welfare. Our central proposition is that a large part of the explanation for higher macroeconomic volatility rests with key differences in the nature of shocks hitting emerging economies as well as the way in which their economic systems propagate those shocks. Figure 1 depicts how observed macroeconomic outcomes are the result of the interaction between the nature of shocks hitting emerging market and the structural features of the economic system. On the nature of shocks, a particularly pertinent example in this context is capital flow shocks. As shown in Table 2, capital flow shocks, especially debt and equity, are more volatile in emerging markets relative to advanced economies, as well as relative to other developing economies.

Thomas Jordan: Real estate, mortgages and monetary policy Speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the IAZI, Schweizer Immobilienkongress 2009, Zurich, 10 November 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  There is a close interrelationship between real estate, mortgages and monetary policy. On the one hand, monetary policy impacts on the real estate and mortgage market. When the central bank reduces interest rates, this eases the burden on household and company budgets and fosters the demand for real estate. On the other hand, monetary policy also takes account of developments on the real estate market because these can affect economic growth, inflation and financial stability. Once again, the current financial crisis has thrown these interrelationships into sharp relief. Problems in a number of mortgage and real estate markets – in particular in the US and the UK – triggered the financial crisis and plunged the global financial system into a systemic crisis. This impacted on Switzerland’s financial stability and made it necessary to create the StabilisationFund for the transfer of illiquid UBS assets. The Swiss real estate and mortgage market played a positive role in various measures adopted by the SNB to handle the financial crisis. Swiss mortgages played a role in securing Swiss financial stability in the Limmat Pfandbrief transactions, whereby big banks improved their refinancing situation by issuing covered bonds.
4 Negative interest rates As I mentioned earlier, it has long been assumed that interest rates had to be positive. That barrier has now been broken by a number of central banks. They now operate a policy of negative rates with a view to bringing short-term market rates below zero. Two approaches are being used to achieve this. Chart: Sveriges Riksbank interest rates Sweden has chosen the first approach. The policy rate itself is a negative 0.35 percent. This is combined with normal liquidity management without excess reserves in the banking system. As a result, the shortest money market rates are also negative. 5 The central banks in the euro area, Switzerland and Denmark have chosen a different approach. Policy rates are zero or marginally positive, while the reserve rate is negative. At the same time, there are substantial excess reserves in the banking system. The reserve rate is a negative 0.75 percent in Switzerland and Denmark and a negative 0.2 percent in the euro area. 6 Maintaining large excess reserves is a deliberate policy. These central banks have supplied liquidity to the market and intentionally used the excess reserves to push down the overnight interbank rate towards the reserve rate. The central banks of Denmark and Switzerland have achieved this by purchasing foreign currency to counteract an appreciation of the exchange rate. By also permitting short-term money market rates to become negative, they have made the domestic currency less attractive.

Chart: Long-term yields and term premiums In addition, the central banks’ purchases have pushed up prices for government bonds and pushed down yields. Term premiums on government bonds have fallen. While 10-year government bond yields in the US and UK are now at around 2 percent, German yields are as low as less than 1 percent. BIS central bankers’ speeches  5  Chart: Credit premiums and equity prices Another important transmission channel into the economy is the portfolio rebalancing channel. Investors selling government bonds are left with a more liquid portfolio, which they then seek to invest in other financial assets. Prices for a number of securities have risen, and yields on bonds issued by banks and other enterprises have fallen. Premiums on covered bonds, for example, have fallen back to the very low levels prevailing in the pre-crisis period. A fourth transmission channel operates via global financial markets. Cross-border capital movements as a result of portfolio rebalancing have generated exchange rate fluctuations. Unconventional monetary policy can contribute to a depreciation of the domestic currency, providing a positive extra effect of the policy in the short term. However, the effect diminishes when a number of countries implement quantitative easing and policy rate cuts in parallel. Exchange rate movements may then quickly reverse. Increased volatility creates an environment of uncertainty. Capital inflows and a stronger exchange rate have at the same time created challenges in other countries, not least in some emerging economies.