samchain/econo-pairs-v1 huggingface dataset:
Page 1  Solvency II: Striking the balance − speech by Sam Woods Given at Bank of England Webinar  Page 2  Published on 08 July 2022  Sam Woods talks about reforms to the regulation of insurance providers. He says the key aims of the reforms are to make the insurance sector work better for the UK economy and to safeguard policyholders. Speech Introduction The UK’s post-Brexit review of insurance regulation is entering a critical phase, with important decisions shortly to come for us, government and Parliament. With that in mind I thought it would be useful to highlight some of the key points from the Prudential Regulation Authority’s (PRA’s) perspective, while HM Treasury’s current consultation on Solvency II is ongoing, with a particular focus on the main point of contention between us and parts of the industry. My main message is this. Following Brexit we have a once-in-a-generation opportunity to reshape insurance regulation to work better for the UK. We can do this while loosening parts of the regime which were over-calibrated by the EU and making it easier for insurers to invest in a wider range of assets, but we also need to strengthen it in one area in order to avoid risks to the millions of current and future pensioners who rely on insurers for their retirement income. The combined effect of these changes should support the government’s objectives for competitiveness, growth and investment in the economy.

Note that the number of policyholders estimated in this way may not precisely match the number of individuals: there will be cases where one contract covers multiple individuals, or where the same individual has multiple policies. The ABI, which covers most but not all of the sector, estimates 6.1 million annuities from its members. 4. Particularly where credit losses have been mitigated by significant government intervention in the past, which may or  Page 12 may not be available in future crises. 5. The only way in which the EU’s FS formulation includes any further allowance beyond expected losses is via an allpurpose floor that is unsatisfactory because it is not explicitly additive, as it should be if it were intending to allow for costs of transfer beyond expected losses. Indeed it does not bite for some rating and duration combinations, meaning that for those the FS is equal to expected losses. In fact, it is used specifically as a catch-all for when there isn’t enough default data (e.g. for government bonds). 6. Specifically this is the calibration of the Solvency Capital Requirement (SCR). 7. There are more technical reasons why the SCR does not substitute for a robust MA. The SCR only covers stressed outcomes over a 1 year time horizon.
But the specific nature of France’s situation makes it impossible to single them out as the central cause: rates are low across the euro area, and yet, on average, the levels of debt carried by households, firms and state governments have declined as a share of GDP, whereas in France they have increased. Page 11 of 14  This is more a justification for greater vigilance in our country. I shall turn now to two current limits of monetary policy. 2.2  Two limits requiring vigilance  Financial stability The first area where vigilance is required is regarding the consequences of low rates for financial stability. It is important first to stress that the financial sector’s capacity to absorb shocks has been substantially reinforced since the great 2008-09 crisis: balance sheets have been cleaned up and bank solvency and liquidity have been improved thanks to the European and international regulations known as Basel III, and to a considerable reduction in the weight of non-performing loans. What is more, the effects of monetary policy include some positive aspectsxi that are all too often overlooked by the banks: lower financing costs; a reduced cost of risk due to the improvement in borrower solvency. That said, while accommodative monetary policy is a benefit for economic agents, prolonging it puts pressure on the profitability of financial players – both banks and insurers alike.

We need to start with an admission of humility. Contrary to a widespread preconception, central banks do not bare full responsability for the low level of interest rates. The downward trajectory of global nominal rates is part of a trend that has been going on for nearly 40 years.ii  Source: FRED, Banque de France, Levy-Garboua and Monnet (2016), “Les taux d'intérêt en France : une perspective historique”. Page 2 of 14  However, the decade since the financial crisis has marked a turning point. Nominal rates have continued to decline and short-term rates have even fallen into negative territory in the euro area since 2014, a radical development and one that we share with Sweden and Switzerland, and with Japan since 2016. In parallel, inflation has stabilised at a low level, dragging real interest rates down in its wake. A long-term analysis of the global path of real interest rates shows that current levels are historically low, and that, over the very long run, global real long rates have instead remained between 2% and 4%. 1.1  Structural causes  To understand the origin of today’s low real interest rates, we need to consider the concept of the natural or neutral rate of interest: in other words, the real interest rate that would balance savings and investment in a context of full employment and stable prices. This “R*” rate, described by the Norwegian economist Wickselliii in 1898, has been back in the spotlight recently.
We are therefore doing all in our power to compliment the efforts of the Government and other well meaning partners to help foster economic and social development. To this end, our corporate social responsibility is focused on providing a stimulus that will help promote excellence in every aspect of our development, but more so in EDUCATION. By supporting the education sector, our aim is to achieve the following: •  contribute towards the development of the human resource base required to drive economic activities in the country. In this regard, our objective is to open doors leading to abounding opportunities for future generations in our own small way. We hope that by providing for those who have the ability to achieve academic excellence but cannot do so for lack of financial support, we can help restore the academic prowess for which Sierra Leone was known in the continent. We would therefore assure everyone, not only those in secondary schools, but also institutions and individuals who have the talent and the commitment to demonstrate outstanding performance, that you will get our attention and support, if you are deserving. Mr Chairman, Distinguished Guests, Ladies and Gentlemen, it is only recently that the Bank of Sierra Leone has taken up the responsibility of helping in the pursuit of excellence especially in education, as a vehicle of development in Sierra Leone.

It is worthy at this point to mention our partners that have been supportive of our efforts as follows: •  De La Rue of the United Kingdom  •  Sierra Leone Commercial Bank  •  Standard Chartered Bank  •  Rokel Commercial Bank  •  Union Trust Bank  •  Guaranty Trust Bank  •  International Commercial Bank  •  First International Bank  •  Trustee in the name of Mr Tom Lee,  •  and finally Pobjoy of the U.K.  Our thanks and appreciation go to all of them and we appeal that they continue to support the Charity on a sustainable basis. Let me however emphasise that there are daunting challenges ahead of us and if we are to progress as a nation we should have the capacity to provide trained and skilled manpower on a sustainable basis. I should therefore like to appeal to our development partners that have not yet come on board, to do so, so that together we can build a better Sierra Leone, one that can compete in the global market. 2  BIS Review 32/2008  To the awardees, I extend to you hearty congratulations on behalf of the Board of Directors, Management and Staff of the Bank of Sierra Leone. You have been chosen out of many as a result of your outstanding performance. You therefore have a great responsibility to maintain those standards and even surpass them in the cause of your study.
The second area of prospective demand for humans skills is bespoke design and manufacture (“hands”). Routine technical tasks are relatively simple to automate and are already well on their way to disappearing. 57  Gratton and Scott (2016). AlphaGoZero is one such attempt. It is an updated version of AlphaGo, a computer programme that plays the game ‘Go’, which itself was the first software to beat a human professional player in full match. 58  15  All speeches are available online at www.bankofengland.co.uk/speeches  15  But the same is not true of non-routine technical tasks – for example, the creation of goods and services that are distinctive in their design, manufacture or delivery. A rise in global wealth and income is likely to create an increasing demand for luxury goods and services of this type, whose characteristics are unique and supply constrained. Indeed, this can be seen already in the rising demand and price of rare art and artefacts and independently-produced foodstuffs and beverages. To meet this demand, Mark Carney has spoken about the re-emergence of a new artisan class. If so, this would mark something of a return to our pre-industrial revolution future. 59  The third, and perhaps the biggest potential growth area of all, is social skills (“hearts”). That is, tasks requiring emotional intelligence (such as sympathy and empathy, relationship-building and negotiation skills, resilience and character) rather than cognitive intelligence alone. These are skills a robot is likely to find it hard to replicate.

11  th  In the second half of the 18 century in the UK, ideas began sprouting like morning mushrooms. These ideas emerged seemingly spontaneously and roughly contemporaneously. They were also relatively closely clustered geographically. They included James Hargreaves’ spinning jenny in 1764, Richard Arkwright’s water frame in 1769 and James Watt’s steam engine in 1775. In the fullness of time, these ideas began to revolutionise both industry and work. After a lengthy adoption lag, they spread across sectors and across regions. They migrated from being mere ideas to becoming “GPTs” or General Purpose Technologies. 12  In the process, they generated waves of investment in new  factories, machines, processes and infrastructures. There was, in the jargon, capital-deepening. Neo-Classical theories of economic growth are very clear what would be expected to happen next. 13  When  an outward shift in the economy’s technological frontier is combined with higher levels of physical capital, the fuse is lit on higher productivity among companies, higher wages among workers and, ultimately, higher living standards among societies. So it was during the Golden Era. Chart 2 plots productivity, wages and GDP per head in the UK since the Industrial Revolution. All three plateaued prior to 1750. Since then, all three have moved up in lockstep. Ideas and innovation have borne continuous fruit in higher productivity, pay and living standards. This fruit has been shared roughly equally between owners of companies (profits) and workers in companies (wages).
• Slow growth in industrial output for the domestic market • For retail trade and services there is growth in supplies to households and no growth in supplies to the business sector  • Lower unemployment in manufacturing and higher demand for labour in retail trade  SG Gausdal 31.01.03  Last autumn, our regional network reported lower activity in some manufacturing sectors and low growth in manufacturing production for the home market. In addition, there is no growth in sectors supplying services to the business sector. On the other hand, the level of activity in retail trade and services for households is higher. Companies are reporting lower employment in manufacturing, but higher demand for labour in retail trade. Unemployment has edged up over the last six months. There was little increase in manufacturing up to end-2002. Unemployment has primarily risen in services, communication and the IT sector. However, an increase in manufacturing unemployment was observed in January. Manufacturing unemployment is expected to edge up in the period ahead. Moreover, the high pay increases awarded in last year’s settlements have consumed a large share of the growth in allocations to government agencies. As a result, employment is not likely to show strong growth in this sector in 2003.

Zeti Akhtar Aziz: Comparing financial crises Special address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Tun Ismail Ali Chair in Monetary and Financial Economies: Lecture on Comparison of the Financial Crises: "Japan and Asia in 1997-1998 vs. US 2008-2009", Kuala Lumpur, 10 July 2009. *  *  *  This year Bank Negara Malaysia celebrates 50 years of Central Banking. While a number of special events are taking place during the course of this year, perhaps the most significant one has taken place yesterday. It is most meaningful that I inform you on this occasion of the Public Lecture organised in honour of the first Malaysian Governor of Bank Negara Malaysia, Tun Ismail Mohamed Ali that yesterday the new Central Banking Act for Bank Negara Malaysia was passed by the Parliament. This new Act represents the culmination of more than two years' work to address many of the issues and challenges that are confronting Central Banks in the 21st century. The Act provides greater clarity of the mandate for which the Central Bank is accountable for, ensures adequate powers to undertake these mandates, and ensures autonomy in achieving these mandates thus providing for the integrity and credibility of the decisions made by the Bank. This is further reinforced by legislating the checks and balances in the Bank and a higher level of transparency to the Government, the legislature, the market and the public.
4  BIS Review 40/2010  The McFadden Act (1927) in the US gave nationally-chartered banks broadly the same branching rights as state banks within the state. But it also confirmed the effective prohibition on national banks opening new branches across state lines that had previously been implicit in the US National Banking Act (1864). It covered a wide range of banking functions, including deposit-taking and brokerage. The motivation behind the Act appears to have been in part political, reflecting lobbying by small unit banks under threat from larger competitors. But it also had an economic dimension, as a check on the dangers of “excessive concentration of financial power”. 14 The same too-big-to-fail arguments are of course heard today, though the concerns then were competition rather than crisis-related ones. Weitzman’s marginal social benefit curve was perceived to be steep, made so by state-level competition concerns. McFadden appeared to be fairly effective in limiting the size of US banks from the 1930s right through to the mid-1970s. Over this period, the average asset size of US banks in relation to nominal GDP was roughly flat (Chart 1). As recently as the early 1980s, it was still at around its level at the time of the Great Depression. The 1980s marked a watershed, with interstate branching restrictions progressively lifted. States began to open their borders to out-of-state Bank Holding Companies (BHCs). The 1982 Garn-St Germain Act allowed any BHC to acquire failed banks and thrifts, regardless of the state law.

Each has a potentially important bearing on systemic resilience and hence on the social benefits of restrictions. (a)  Modularity  In 1973, Nobel-prizing winning economist Robert Merton showed that the value of a portfolio of options is at least as great as the value of an option on the portfolio. 15 On the face of it, this seems to fly in the face of modern portfolio theory, of which Merton himself was of course one of the key architects. Whatever happened to the benefits of portfolio diversification? The answer can be found in an unlikely source – Al’Qaeda. Although the precise organisational form of Al’Qaeda is not known with certainty, two structural characteristics are clear. First, it operates not as a centralised, integrated organisation but rather as a highly decentralised and loose network of small terrorist cells. Second, as events have shown, Al’Qaeda has exhibited considerable systemic resilience in the face of repeated and on-going attempts to bring about its collapse. These two characteristics are closely connected. A series of decentralised cells, loosely bonded, make infiltration of the entire Al’Qaeda network extremely unlikely. If any one cell is incapacitated, the likelihood of this undermining the operations of other cells is severely reduced. That, of course, is precisely why Al’Qaeda has chosen this organisational form. 15  6  Merton (1973). BIS Review 40/2010  Al’Qaeda is a prime example of modularity and its effects in strengthening systemic resilience.
I believe that all of us at this gathering are not dissimilar in trying to do the right things today for a better tomorrow. Indeed, the pursuit to become a higher income economy is not a lone man or lone organization journey. This ambitious goal calls for coordination and synergy of all participants in the economy. And, with everyone’s support, including all of us here in this room, Thailand’s fortune should be as bright and promising as ever. Thank you very much for your attention. BIS Review 119/2008  5

This is achieved through the hard work, dedication and ingenuity of our manufacturers, who have seized the opportunity to exploit the synergy between Hong Kong and the Mainland China by relocating the land- and labour-intensive processes north of Hong Kong while retaining the servicing and supporting base in Hong Kong. 8. Finally, I would like to close by echoing what Mr. C.H. Tung said in Vancouver during the APEC meeting. Hong Kong, given its sound fundamentals, robust monetary and banking systems, huge foreign reserves, flexibility and resilience in coping with external shocks, would be the first economy to rebound after this episode. We should have confidence that, while in the short run the markets may become more volatile or they may overshoot from time to time and there may be pain involved during the adjustment process, economic fundamentals should prevail in the end. We should be confident that, as we have done on so many occasions in the past, we shall be able to overcome this difficult period and emerge as a stronger and more competitive financial and servicing centre in Asia. We have done it before and we can surely do it again. BIS Review 116/1997
See Section 13(3) of the Federal Reserve Act (12 USC 343) and Regulation A (12 CFR 201.4(d)). BIS central bankers’ speeches  5  In the U.S., given the restrictions on central bank lending, if a securities firm were to lose access to funding the remaining options available would be finding a means of replenishing the firm’s capital, selling assets, or selling all or part of the securities firm’s operations. While this might be manageable in the case of a firm-specific idiosyncratic shock, it might prove more difficult if a common shock was broadly hitting the securities industry. In this circumstance, the failure of one firm could increase the stress on other firms that were facing similar difficulties. If all of the requirements for Section 13(3) are met, the central bank could provide liquidity support. However, since this is not a certainty, it is worth considering possible alternatives. Now that all major securities firms in the U.S. are part of bank holding companies and are subject to enhanced prudential standards as well as capital and liquidity stress tests, providing these firms with access to the Discount Window might be worth exploring. To me, this is a more reasonable proposition now than it was prior to the crisis when the major dealers weren’t subject to those safeguards.

At the end of discussions, the Supervisory Council decided to keep the key interest rate unchanged, at 3.75%. The outlook of economic and financial developments inside and outside Albania establishes the continuation of an accommodating monetary conditions cycle over the monetary policy-relevant horizon. This policy establishes the proper conditions to meet the inflation target in the medium-term period, contributing at the same time to the growth of aggregate demand and full utilisation of production capacities in the economy. In its meeting today, the Supervisory Council decided to amend some regulations relating to banking system activity. These amendments strengthen the monetary policy transmission mechanism and establish better conditions to boost lending. They harmonize well with the easing monetary policy and help stimulate economic activity in Albania. More specifically, the approved amendments increase the level of liquidity allowed for banks' use and provide the banking system with greater room to use the financial leverage. Both these initiatives provide a direct impact on a faster growth of lending to the economy. 2  BIS central bankers’ speeches
It should be recognised, however, that the use of buffers may be hindered if banks are afraid that reaching certain capital ratios would be penalised by the financial markets, raising their cost of financing and, thus, their solvency levels. This market stigma effect may lead banks to avoid using capital buffers, which, according to the above-mentioned analysis, would have a negative impact on the economy. One way of trying to alleviate this problem has been through the forceful monetary and fiscal policy measures applied during the crisis, which have enabled the financing costs of European banks to remain very low. The use of these capital buffers by banks may also be hindered if there are doubts regarding the process of capital buffer rebuilding after the crisis. The difficulty would be if banks were required to rebuild their buffers at a time when the capacity to generate profit was modest or the market was not receptive, as the fall of the banking sector on global stock markets demonstrates. To ease this problem, the authorities have made it clear that banks will have sufficient time to restore compliance with capital requirements and that the process will not start before the main effects of the pandemic have been dispelled. An additional issue that hinders banks’ use of capital buffers is that, under current regulations, if their capital levels fall below certain thresholds, preventive measures, such as a ban on paying dividends and the suspension of interest payments on AT1 and T2 instruments, are activated.

EU Member States should also make swift progress towards an agreement to create a common European procedure for the administrative winding-up of credit institutions. This procedure would benefit from the instruments developed for the resolution of credit institutions, aiming to maximise the realisable value of the financial assets that make up the bulk of banks’ balance sheets. In Spain, recent experience has shown how inefficient the existing insolvency proceedings for credit institutions are in terms both of timelines and recovery in value. It would, therefore, be desirable for progress to be made in determining an administrative mechanism for winding up credit institutions that maximises the preservation of value and reduces both the timelines and the costs of the existing insolvency proceedings. Conclusion To sum up, our duty, as economic and supervisory authorities, is to continue our close monitoring of financial institutions and markets, to ensure that they continue to provide the necessary flow of credit to the economy, and of financial stability risks stemming from this crisis. We must continue to adopt measures to mitigate those risks and, naturally, stand ready to provide an appropriate European response should such risks materialise. Thank you for your attention. 10