samchain/econo-pairs-v1 huggingface dataset:
This could be classed as a failure by global standard setters. To some extent, the criticism can be justified – not enough has been done in the past to ensure global agreements have been truly implemented by national authorities. However, just as the Committee has been determined to revise the Basel framework to fix the problems that emerged from the lessons of the crisis, the RCAP should be seen as demonstrating the Committee’s determination to also find implementation problems and fix them. 4  BIS central bankers’ speeches  It would be easy to continue to ignore any problems. A fascinating1 history of the Basel Committee published recently by Professor Charles Goodhart2 notes that the Committee has on more than one occasion over the past 35 years considered undertaking more detailed analysis of domestic implementation of global standards, but shied away from this as being “too intrusive”. However, we have now taken that step, since if we are serious about fixing the problems of the past, then we need to not just look at the policy settings, but also their application. Our efforts on implementation should therefore be seen as an integral part of the reform agenda – not just an adjunct to it. When it comes to our country-by-country assessments, thus far the Committee has conducted detailed assessments of the final regulations adopted in Japan, and the draft regulations in the European Union and the United States.3 Follow-up assessments in the European Union and United States will be conducted once final regulations are available.

In summary, we decided that it was necessary to: •  require banks to maintain substantially higher levels of capital, with the minimum common equity requirement increasing from 2% to 7% of risk weighted assets;  •  require banks to hold higher quality forms of capital, with common equity at the core of the requirements, and standards to ensure other types of capital instruments are truly loss-absorbing. It is worthwhile emphasising that these reforms also go a long way to simplifying banks’ capital structures, as well as making them more transparent and comparable;  BIS central bankers’ speeches  1  •  introduce an additional capital buffer (the capital conservation buffer) designed to enforce corrective action when a bank’s capital ratio deteriorates.
The Malaysian insurance sector is also fortunate that the global insurance sector has also, to a certain extent, been insulated from the worst aspects of the global crisis. The above not withstanding, we must always bear in mind that as institutions grow bigger and become more complex, they are more vulnerable to contagion risks and spill-over effects. A pertinent example is that of the American International Group (AIG). AIG suffered a liquidity crisis when its credit ratings were downgraded due to the mounting losses arising from its Financial Products division during the sub-prime crisis beginning in 2008. More recently, the European Union faced one of its gravest crisis as Greece’s ballooning sovereign debts spiraled and threatened to unravel both the European Union and the Euro currency. What are the lessons from these examples? A fundamental point is to realize that the financial world is now a web of risks, with complex inter-linkages between different financial markets and sectors. The highly contagious effects of a failure of a single entity in one part of the world on all other connected parties illustrate the tremendous importance of sound and effective risk management in today’s financial world. Due to the inter-connected economies around the world, Asia has not been isolated from the spill-over effects of the global financial crisis. The Western economies continued to be bogged down by slow and hesitant recovery with weak economic growth and high unemployment rates. Emerging economies, particularly in Asia, however, have been resilient through these financial challenges.

Together with IOSCO and the IAIS, we should work to strengthen internal financial firm management, supervision and market discipline, no matter what the nature of the financial firm or market. As a final point, let me stress that while we continue to elaborate the roadmap of the Core Principles, we must also press on in understanding the frontiers of financial developments. This makes for a difficult and ambitious agenda, but we must be and we are up to the challenge. The most important example of this broad effort is the work the Committee has begun on the future of capital. We know the value the Basle Accord has had in strengthening capital standards around the world. At the same time, we have recognized that advances in risk management and financial practices are beginning to erode the relevance of the Accord for the most technically sophisticated banks. That means that we must identify ways to ensure that the Accord will provide meaningful guidance for the maintenance of strong capital levels at those banks, while still providing the fundamental protection to the financial system that is needed in all countries. To that end, the Committee has formed a Steering Group on the Future of Capital, chaired by Claes Norgren of the Swedish Financial Supervisory Authority. It is my hope that the review conducted by the Steering Group will bring together new thinking on a minimum capital rule, a comprehensive look at the supervisory evaluation of capital adequacy, which I described earlier, and enhancements to market discipline.
A few days prior to the monetary policy meeting we have another formal Executive Board meeting where we go through the text of the report in detail and where the report is tabled. However, the forecast can be changed as late as during the monetary policy meeting. It is not until the monetary policy meeting that the text and forecasts of the Monetary Policy Report are finally determined. The Executive Board makes interest rate decisions through a majority vote The Executive Board holds six monetary policy meetings a year. If necessary we can meet more often. The number of meetings is not stipulated by law, but is determined by us Executive Board members. We make decisions on the current level of the repo rate at the monetary policy meetings. We also agree on which interest rate path is most appropriate at the present time. The decisions are made through a majority vote, where the Chairman of the Executive board has a casting vote, and they are announced in a press release. In addition to the Executive Board members, a number of employees from the Monetary Policy Department and the Communications Secretariat take part in the meeting, as well as some advisers and legal advisers. In addition, the Chairman and Vice Chairman of the General Council regularly take part in the meetings and thus obtain a good insight into the work of the Executive Board. They both have the right to express opinions, but not to put forward proposals or take part in any decisions.

In a recent study by the Managed Funds Association, BNY Mellon and Hedgemark, 4 it was found that 79% of global hedge funds now separate the roles of the risk manager and fund manager, with 60% of the larger hedge funds having a dedicated risk management function. This augurs well for the hedge fund industry, as it allows the industry to grow in a more sustainable manner with strong internal control systems and risk management oversight. Asia is well placed to provide capital and investment opportunities As global institutions and investors seek to address challenges resulting from structural shifts in the global economy, many are turning to Asia to harness opportunities and to generate higher returns. This is due to a few reasons. Firstly, Asia has been leading the global recovery with growth expectations in developing Asia projected to exceed global growth at 6.7% in 2012 and 7.2% in 2013. 5 Secondly, both demand and supply side factors in Asia are relatively positive. Corporate and government balance sheets are generally healthy. Households are not overly levered, savings rates are high and unemployment is comparatively low. The rising middle class, highly educated workforce and favourable demographics are also plus points for Asia. These factors, coupled with Asia’s strong commitment to economic openness and free trade, are important in creating a business friendly and conducive environment for its financial sector to continue to thrive and grow.
Risks to the outlook for price developments are broadly balanced. Upside risks over the medium term relate, in particular, to the evolution of commodity prices. Furthermore, increases in indirect taxation and administered prices may be greater than currently expected, owing to the need for fiscal consolidation in the coming years. At the same time, risks to domestic price and cost developments are contained. Overall, the Governing Council will monitor closely the future evolution of all available price indicators. Turning to the monetary analysis, the annual growth rate of M3 was unchanged at –0.1% in April 2010. The annual growth rate of loans to the private sector increased somewhat further and turned positive, but remained weak at 0.1%. Together, these data continue to support the assessment that the underlying pace of monetary expansion is moderate and that inflationary pressures over the medium term are contained. Shorter-term developments in M3 and loans have remained volatile and, given the renewed tensions in some financial market segments, volatility in M3 and its components may well continue. The actual growth in M3 continues to understate the underlying pace of monetary expansion, but the downward impact of the rather steep yield curve and the associated allocation of funds to longer-term deposits and securities outside M3 appear to be gradually waning. The same holds for the shifts within M3 that have been observed as a response to the narrow spreads between the interest rates paid on different M3 instruments. At 10.7%, annual M1 growth is still very strong.

This concern was at the forefront of UK and international prudential regulators’ minds and motivated the various interventions they made at the time to make clear that regulatory buffers could and should be used.6 So today and in the spirit of John Dewey, I want to reflect on the lessons from the Covid stress so far for the prudential framework for banks and in particular for the regulatory buffers within it. What we worried about during the early Covid stress With hindsight, this banking system resilience is evident. But during the stress of March and April 2020, we were concerned that it was, to use the words of the Chair of Financial Stability Board, Randal Quarles, “a close run thing”.7 One concern was a potential decline in capital ratios at the time. There were two effects in play. First, banks were increasing provisions as their expectations about the state of economy and credit quality declined. This affected capital resources. Second, capital requirements were increasing. This was because risk weights in some parts of the capital framework are sensitive to current market conditions, which had worsened; and total assets were increasing, as firms drew down pre-existing credit facilities. Third, liquidity requirements and resources were sensitive to market conditions too. Mechanisms designed to capture potential liquidity needs related to derivatives activity produced estimates that were too low going into the shock and then increased rapidly after the shock had crystallised.
If we compare with the high-inflation period – the 20 years from the mid-1970s, we can, however, see that we have had a faster increase in productivity in the past five years. We should not therefore rule out the possibility that we are on threshold of a faster growth in productivity when IT investments spread on a broad basis to the “old economy” in the same way as has happened in the United States. The strong increase in productivity in recent years has taken place without inflation accelerating. This has surprised many people – for even though the previously high unemployment, indicated that there were a lot of unused resources in the economy, there were many who doubted whether it would be possible for so many to return to the labour market so quickly. Month after month, we have seen increases in employment of 80-90 000 persons on an annual basis, 70 per cent of which have taken place by an increased supply of labour. Flexibility in the labour market has thus exceeded expectations. Open unemployment is now down to around 4 per cent, which, while it is higher than that considered normal in the 1980s, is lower than what many people in the early 1990s feared would be normal. Stable inflation expectations The stabilisation of inflation expectations at a low level shows that the Riksbank’s inflation target has attained high credibility. A number of factors have contributed to confirming confidence in the price stability objective.

High real wage increases despite moderate nominal pay increases are one factor that has undoubtedly increased the support of wage earners for the price stability objective. The fact that the price stability objective has been confirmed by law has also probably contributed to confirming confidence in the inflation target. However, the Riksbank has a pedagogical and practical problem. Monetary policy decisions are based on assessments of inflation a couple of years ahead and are focused on achieving the inflation target during that period. This means that we can often be compelled to increase the interest rate despite the actual rate of inflation at the time being under the target. In December last year, for instance, the Riksbank increased interest by 25 points despite inflation then being at 1.4 per cent. Decisions are then made on the basis of forecasts over a two-year horizon. The most important reason for not waiting until inflation actually exceeds the target is that inflation expectations would then risk accelerating since it takes up to two years before monetary policy has its full effect. And then we may – to rein in inflationary expectations again – be compelled to tighten up the economy more than we would have to have done if we had reacted earlier. The Riksbank’s way of conducting monetary policy obviously plays an important role with regard to maintaining confidence in price stability. However, we should not forget that fiscal policy also has to be conducted in a way compatible with the price stability target.
It goes without saying that Hong Kong, as a major financial centre, will comply with international regulatory standards. Implementing Basel III has been complex, and it has involved extensive consultation exercises. As with much of our work, your feedback and cooperation have been invaluable in this process. 19. Despite all our precautions, we can never totally rule out the possibility that an institution might have a crisis. I think it is true to say that Hong Kong is as well-prepared, if not better, than any centre in Asia. One reason is the Financial Institutions (Resolution) Ordinance, which came into effect in 2017. This is not something most of the community thinks about. But I am confident that we have the tools to handle a bank failure in a way that best serves the overall interests of stakeholders, including the taxpayer. 20. Our regulatory work has not hindered banks from exploring new opportunities and adapting to change. During the last 10 years, we have seen the volume and complexity of offshore Renminbi business increase significantly. We have also embraced – as a regulator and as an organization – the need to address climate and environmental risk through green and sustainable banking, responsible investment and capacity building in green finance. And then there is the fast-changing use of technology – which I will mention later. 21. So overall, I am pleased to say that our banking sector today is safe and resilient – probably more so than at any time in Hong Kong’s history.

It is a fundamental priority of the HKMA to ensure that the community can have full confidence in the system. 15. Confidence in our banks is also key to the functioning of our economy and society. And our work in this area in the last 10 years has affected all of you here today. 16. I think the most high-profile example is the loan-to-value ratio and debt-serving ratio limits on property mortgage loans. The last 10 years have seen strongly rising property prices, and competition between banks has been fierce. To some observers, including home-buyers, mortgage caps seem like a nuisance and make it harder to buy a property. But to the HKMA, it is an important matter of credit risk management and the stability of the banking system. We call these measures “counter-cyclical macroprudential”. And it would be highly irresponsible of us if we did not impose these limits. 17. This is also the case with Mainland-related lending. You all know the ways we have stepped up our supervisory efforts in this area, to ensure credit underwriting standards and risk management. As with property lending, the basic principle is “prevention is better than cure”. To take one example, we are collecting granular data from banks more frequently, to help identify emerging risks. As with mortgage caps, this might not please everyone – but it serves the wider public interest. 18. More generally, we have been implementing Basel III.
Ida Wolden Bache: The conduct of monetary policy Introductory statement by Ms Ida Wolden Bache, Governor of Norges Bank (Central Bank of Norway), at the hearing of the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament) in connection with the Storting's deliberations on the Financial Market Report, 9 May 2023. ***  Accompanying charts of the speech Thank you for this opportunity to report on the conduct of monetary policy. When I was here in April last year, Norges Bank had started a gradual normalisation of the policy rate following the coronavirus pandemic. Chart 1: In March 2022, a gradual rise in the policy rate was envisaged The Norwegian economy had recovered after the sharp downturn during the pandemic. High energy prices and a sharp rise in international goods prices had driven up consumer price inflation to a level markedly above the inflation target. Economic activity was strong, and job vacancies were high. Norges Bank expected rising wage growth and higher imported goods inflation to push up inflation through the year, and overall price inflation was projected to be 3.4 percent in 2022. The policy rate was projected to rise towards 2 percent over spring 2023. Chart 2: The policy rate has been raised more than projected a year ago These forecasts were less than accurate. The policy rate has been raised faster and more than projected in March 2022.

Inflation may then become ingrained and difficult to bring down again. When inflation took off in spring 2022, it became clear that the policy rate level was no longer appropriate for the economic situation in Norway. The policy rate was raised quickly, and in autumn 2022, the rate reached a level where it likely began to have a tightening effect on the economy. At its meeting last week, the Monetary Policy and Financial Stability Committee raised the policy rate to 3.25 percent and will most likely raise the rate further in June. Let me say a little more about economic developments over the past year and our assessments. The pandemic led to higher prices for energy, metals and other globally traded goods. The price increases were amplified by Russia's invasion of Ukraine. The rise in these prices is an important source of the high level of consumer price inflation. High energy prices and other input costs have generated higher costs for businesses, who have in turn raised their selling prices. Chart 4: A year ago the economy was in high gear When the cost shock hit Norway in spring last year, the economy was in high gear, with strong demand and higher-than-potential output in the economy. Many businesses were facing labour shortages. Economic activity remained strong through 2022. Excess savings accumulated during the pandemic have enabled many people to sustain consumption despite high inflation and higher interest rates. At the same time, mainland business investment has risen substantially.
In the local financial market, the exchange rate, interest rates, and the risk premium have shown greater volatility than is observed in other economies. Worth noting is the peso/dollar parity, which by mid-July experienced unusually high swings, with a marked divergence from its external determinants, causing distortions in the functioning of the markets and leading the Central Bank to announce an intervention program (box I.2). Upon said announcement tensions in the price formation process in the foreign exchange market eased, with a decrease in volatility and in the exchange rate. Compared to the statistical close of the June Report, the peso depreciated in both nominal and real terms (figure 10). Projections The central scenario does not consider a specific effect of the plebiscite outcome on the economy. It does assume that uncertainty will gradually subside in the coming quarters, in the midst of a process where institutional changes continue, allowing institutions and the economy to function properly. 4  In the central scenario, headline inflation is estimated to be near its peak for this cycle, which it is still expected to occur in the third quarter of this year. In the coming months, prices will begin to slow down the pace of increases compared to previous months, so that annual inflation will begin to gradually decline. Inflation projection for the end of 2022 and all throughout 2023 is revised upwards with respect to our last Report, due to the additional depreciation of the peso and more persistent inflation.

Figure 3 Imacec (index, September 2019 = 100, seasonally-adjusted series)  135  Total  Manufacturing  Trade  Services  125 115 105 95 85 75 Jan.19  Jul.19  Jan.20  Jul.20  Jan.21  Jul.21  Jan.22  Jul.22  Source: Central Bank of Chile. 11  Figure 4 Private consumption (index, 2019Q3 = 100, seasonally-adjusted series)  160  Private consumption  Durable goods  Non-durable goods  Services  140 120 100 80 60 15  16  17  18  19  20  21  22  Source: Central Bank of Chile. Figure 5 Employment by occupational category  Online job postings and applications  (difference w/ respect to January 2020, thousands) (index, base 100= 3/March/2020, moving 15-day average) No. vacancies Salaried, formal Salaried, informal 260 140 500 Self-employed  No. applications (right axis)  Other (*)  0  220  120  -500  180  100  -1.000  140  80  -1.500  100  60  -2.000  60  40  -2.500  20 20  21  22  20 19  20  21  22  (*) Includes household help, employers, and unpaid family work. Source: Central Bank of Chile based on National Statistics Institute and Project SABE of Labor Observatory SENCE and ISCI-WIC, Universidad de Chile, taken from websites trabajando.com and laborum.com.