samchain/econo-pairs-v1 huggingface dataset:
Speed of payment clearing and settlement is defined as the time from payment initiation to payment completion in final funds. In a world where many other countries are moving to payment systems that support near real-time payments from any bank account sender to any bank account receiver, the U.S. payments system is slow. Countries such as the UK, Australia, Mexico, Switzerland and Singapore have built or are building near real-time retail payment systems. Is the need for faster payments in the U.S. a key gap in the payment industry that should be addressed? As we’ve discussed this issue with industry leaders, we hear that although end users don’t demand this today, they will expect it tomorrow. The sentiment seems to be that a proactive approach to preparing for a real-time future is wise. And near real-time seems likely to be transformative to the transactions of daily life and work. Notification of payment to end-users is an element of speed in payment clearing. End users increasingly expect near real-time informational features, which are lacking in payment mechanisms such as ACH and even in much provision of wire, but typically available with cards and certain non-bank innovator products. For credit transactions, receivers expect to be informed that good funds have arrived or are on their way. Transaction confirmation is expected by both the sender and receiver. If settlement is deferred, the sender’s financial institution may need to send a message to communicate that good funds are on their way.

The GPFG is to be managed within an adequate control and risk management framework and in a responsible and efficient manner with a high degree of transparency. The Bank pursues a variety of investment strategies. The strategies are complementary and aimed at delivering good returns over time. In 2018, the return was 0.3 percentage point lower than the GPFG’s benchmark index. Over the whole period since 1998 when Norges Bank established Norges Bank Investment Management (NBIM), the annual return has been 0.25 percentage point higher than the return on the benchmark index set by the Ministry of Finance. A cost-efficient management operation contributes to the aim of highest possible return. Management costs are low, measured as a share of capital under management and compared with other managers. In 2018, the return was weak both in absolute terms and relative to the benchmark index. In 2017, the return was 13.7 percent, as much as 0.7 percentage point higher than the benchmark index. The Executive Board is prepared for wide variations in return from year to year, and applies the principle that performance must be assessed over time. From that perspective, the return of the GPFG has been good and higher than the return on the benchmark index. In the report to the Storting on energy stocks, the Government intends to remove exploration and production companies from the GPFG’s benchmark index and investment universe.
Once macroprudential policy is in place, monetary policy can focus on attaining the inflation target and stabilising resource utilisation a couple of years ahead. An analysis of the target versus the means thus does not advocate the repo rate as a tool for dampening household debt. It would be costly to society as a whole to use monetary policy for something it is not particularly well-adapted to influence. The trade-offs must also include the risks of deviating from the inflation target My final objection to the monetary policy conducted recently is that the trade-offs have not sufficiently taken into account the costs and risks linked to deviating from the inflation target over a long period of time. Flexible inflation-targeting means that the central bank can deliberately allow inflation to deviate from the target out of consideration for developments in the real economy. This is possible as long as the deviation is assessed as temporary, and households and companies perceive that the central bank aims to bring inflation back to the target level. However, a situation where monetary policy leans against the wind does not really fit into this description. Here the central bank allows target attainment for both inflation and the real economy a couple of years ahead to stand back, out of consideration for the risk of a really poor target attainment, probably far ahead in the future.

14  Model estimates of the short-term relation between the repo rate and household indebtedness indicate that the average effects may be relatively small: a 1 per cent lower repo rate over a period of one year, and which gradually reverts, will give rise to an approximately 4 percentage points higher level of indebtedness as a percentage of disposable income. Similar estimates of the relation between housing prices and the repo rate also show small effects – see Sveriges Riksbank (2011) Chapter 2.1.However, estimates of short-term relations might underestimate the total effects of the repo rate on household indebtedness. 6  BIS central bankers’ speeches  and having a potentially better target attainment in the long run is thus very unclear. On the other hand, the costs in terms of poorer target attainment a couple of years ahead are very clear. Other tools than the repo rate could moreover influence household debt more effectively. Various types of tax tools are probably particularly potent, such as tax deduction regulations and property taxation, but at the same time these are the most politically sensitive. So-called macroprudential policy tools are probably more effective than monetary policy in influencing debt in the household sector. Finansinspektionen, which has been given the main responsibility for these tools, has already used several of them and has signalled that it will remain vigilant with regard to risks linked to household indebtedness. This should reasonably have an effect on the monetary policy trade-offs.
These institutions participate in the financial sector in pursuit of their specific objectives, and  2  BIS Review 85/2007  also play an important role as institutional players and investors in deepening the financial market. Saudi Banks have made tremendous progress in terms of products, services, technological sophistication and capitalization. SAMA has all along been keen that banks conduct their business on sound principles. The Banking Control Law, enacted in 1966, has vested SAMA with broad supervisory powers. It requires SAMA to conduct on-site and off-site supervision and has stringent provisions for capital adequacy, liquidity and reserve requirements, loan concentration, etc. The law also provides for banks to submit regular financial and statistical statements to SAMA and for SAMA to carry out on-site and off-site banking supervision. SAMA has also set up, in cooperation with the commercial banks, a number of advanced and sophisticated payments and settlement systems, including Automated Clearing Houses, Saudi Payments Network (SPAN) which supports the ATMs and POS terminals, Electronic Share Information System. These systems have been interlinked with each other by the Saudi Arabian Riyal Interbank Express System (SARIE), an electronic fund transfer system, instituted in May 1997. These technological developments have contributed significantly to improving the level of quality of consumer services, reducing costs, enhancing efficiencies, and strengthening controls. They have created a strong and sophisticated technological platform for a quantum leap in electronic banking and financial services in the new millennium. Together with SAMA, commercial banks still constitute the backbone of the Saudi financial system.

The fall in house prices towards the end of 2006 and in 2007 resulted in rising defaults on mortgages, especially in the subprime segment. In 2007 and 2008, interest rates will  2  BIS Review 100/2007  increase for a substantial portion of the most recently granted subprime mortgages. This will probably result in a further rise in defaults on these mortgages. Housing starts have also declined considerably. The sharp fall in housing investment has reduced the annual rate of US economic growth by about ¾ percentage point on average over the past year and a half. Housing market developments in the US may result in a more sluggish trend in private consumption and may further amplify the tendency to slower growth in the US, which may spread to the global economy. At the moment, the spillover effects seem to have been moderate and downward revisions of growth estimates have been modest. In the US, more than half of total mortgage debt is securitised and sold to investment managers all over the world. This is one of the largest fixed income markets in the world and accounts in volume terms for almost 10 per cent of global securities debt. Subprime securitised issuance showed a sharp rise in 2004 and increased further in 2005. Estimates of subprime mortgages as a share of the total volume of securitised mortgages in the US are uncertain and vary from 12 to 18 per cent. In the chart, the share is 12 per cent, or USD 665 billion.
Subject only but crucially to confidence in their soundness, banks extend credit by simply increasing the borrowing customer’s current account, which can be paid away to wherever the borrower wants by the bank “writing a cheque on itself”. That is, banks extend credit by creating money. This “money creation” process is constrained: by their need to manage the liquidity risk – from the withdrawal of deposits and the draw-down of back-up lines – to which it  13  Akerlof, G. A. (1970), “The market for “lemons”: quality uncertainty and the market mechanism”, Quarterly Journal of Economics, Vol. 84, No. 3, pp. 488-500. A market for “lemons” issue arises when informational deficiencies give rise to uncertainty about the true quality of a product. In such circumstances, buyers choose to pay only average prices for goods that carry the risk of sellers overstating their true quality. As a result, sellers of good products, having little incentive to participate in such markets, are driven out by those sellers of poor quality products. The most common example of the problem is the market for used new cars. Rationing in the interbank markets is discussed by Freixas, X. and J. Jorge (2007) in “The role of interbank markets in monetary policy: a model with rationing”, Universitat Pompeu Fabra, Economics Working Papers. 14  Kashyap, A. K. and J. C. Stein (2000), “What do a million observations say about the transmission of monetary policy”, The American Economic Review, Vol. 90, No. 3, pp. 407-28.

In the UK, the starting point has been robust domestic demand; the leveraged-buyout sector aside, generally healthy corporate balance sheets; somewhat more vulnerable household balance sheets; 21 and potentially stretched commercial and residential property prices. At the Committee’s November meeting, I explored the case for an “insurance cut” addressed to the downside risks from tightening credit conditions. The case for such a cut was strengthened by Bank Rate, at 5¾%, standing at a level that was most probably mildly restrictive. But that had to be weighed against the upward pressures on inflation stemming largely from the rise in energy and other commodity prices. Our November projections seemed to me likely to validate the expectation already embodied in the money market curve that Bank Rate would over time be lowered, representing some offset to the tightening in liquidity and credit premia. That being so, on balance, I concluded that an immediate cut was not necessary; and that “no change” would give the Committee a valuable opportunity to explain in the Inflation Report the implications of both the credit and commodity shocks, underlining that the Committee remains focused on anchoring inflation expectations and so achieving the inflation target over the medium term. Looking ahead, I noted the importance of distinguishing between, on the one hand, the passing through into the macroeconomy of the shocks that had already occurred to credit conditions and to commodity prices; and, on the other hand, the possibility of new shocks on either or both fronts.
European integration is a dynamic project, permanently under construction, which is today facing up to the challenges of a global economic recession and an international financial crisis of proportions unseen in many years. Over ten years ago, before the euro was created, there was an academic debate turning on the theory of optimal currency areas, which questioned whether a single interest rate and, therefore, a single monetary policy could possibly be appropriate for such diverse countries. Ten years after the birth of the euro those of us who joined EMU, and many of those who did not, acknowledge the enormous advantages of being inside the monetary union. Today, the contribution of the single currency in lessening uncertainty for economic agents is clear. The enormous advantages of moderate inflation, of interest rates with a limited range of volatility and of the fact that companies need not consider the exchange rate when buying and selling in an area with almost three hundred and thirty million consumers, are obvious. The upshot is stability, which is a valuable contribution to growth, as we have seen in other, similar-sized monetary areas such as the United States, and we should build on it. We should also celebrate the institutional success of the Eurosystem. The ECB has fulfilled the goal entrusted to it by the Treaty, of keeping inflation expectations anchored, even at very difficult times. And the Eurosystem is in itself a truly fascinating experiment.

But let us first highlight the huge benefits of EMU precisely in the current crisis. Can anyone imagine how the 16 euro area countries would have weathered the international financial storm had they retained their 16 currencies? Anyone can appreciate the scale and seriousness of the financial problems these countries would have faced had each one retained its currency. Remember what happened in the early 1990s when the effects of the US recession took some time to be felt in Europe, but eventually did so with unusual virulence. Amid the serious challenges arising from German reunification, the lack of a coordinated monetary policy response on this side of the Atlantic then led to massive speculation against exchange rates and to a major foreign exchange crisis, which some did not hesitate to call the collapse of the European Monetary System. This speculation ultimately imposed enormous costs for all the countries involved. This will not happen again now. At this time of enormous uncertainty, the key institution of the Monetary Union, the ECB, has reacted in an exemplary fashion. In the space of five months it has managed to reduce the Euribor from 5.3% to 2% through changes in monetary policy, despite the increases in spreads arising from the financial crisis. And it has further adopted a policy of unlimited liquidity provision, in coordination with other central banks, as illustrated by the agreements for liquidity provision in currencies other than the euro.
This needs to be more than feeding a handful of macroeconomic assumptions into a model. It requires an understanding of the events that could lead to that macroeconomic outcome, and what other indirect effects might be likely to occur. Who should be responsible for regular, thoughtful stress testing? Risk managers, CEOs, and boards of directors should all understand key risk drivers – and should consider whether a stress scenario is sufficiently severe, and whether the direct and indirect effects are reasonably captured. Rating agencies and stock analysts should be increasingly demanding better quality stress tests, and that the results be made available to them. Finally, regulators should be able to compare and contrast the quality of stress tests across organizations and hold accountable those organizations that are not keeping up with their peers. As I mentioned at the outset, challenging assumptions and understanding risks should not only be the responsibility of the risk manager. These things also need to be better ingrained in CEOs, members of boards of directors, and regulators. Operationalizing this point is not going to be easy, but it is critical. At a fundamental level, debunking a myth requires individuals to go against strongly and widely held beliefs, to convince decision-makers, and to build consensus. For this to happen we may need significant changes in the governance of risk management at banks and other parties in the financial system.

Eric S Rosengren: The role of “financial myths” in financial crises Remarks by Mr Eric S Rosengren, President and Chief Executive Officer of the Federal Reserve Bank of Boston, at the Boston University conference on “The State of Financial Reform” (panel on Lessons Learned from the Global Financial Meltdown), Boston, Massachusetts, 28 February 2011. *  *  *  Good morning. I’d like to thank Boston University and all the conference organizers, particularly Larry Kotlikoff, for the opportunity to be here to discuss lessons learned from the global financial meltdown.1 Everyone knows that the past three years have been a particularly difficult period for global financial market stability and for the global economy. The financial crisis clearly showed the dramatic impact that financial problems can have on the real economy. And in spite of a fair amount of focus on financial stability prior to the crisis, events highlighted that the private and public sectors both here and abroad were not fully prepared for the kinds of financial shocks we experienced. Today I’d like to discuss the role of what I call “financial myths” in creating financial crises. By financial myths I mean the beliefs, held by most market participants and by regulators, that certain outcomes are so unlikely to occur that they can basically be ignored – essentially that low probability events, based on historical experience, can be reclassified as zero probability events.
•  Our banks also undertake regular stress tests on their own and those coordinated by MAS. •  We have subjected the banks’ balance sheets to a combination of stresses – including a sharp rise in interest rates, a decline in property prices, and a rise in unemployment rate. They have enough capital to see them through. It is the household sector that we are concerned about. •  At the aggregate level, household balance sheets are resilient. Cash and deposits exceed household debt. •  But the health of the balance sheet is not uniform across all households. Many households could have over-extended themselves, fuelled by low interest rates and stretched loan tenures. •  The vast majority of mortgage loans are on floating-rate packages, which means that households will face higher monthly repayments when interest rates normalise. •  An estimated 5 to 10% of borrowers have probably over-leveraged on their property purchases, i.e. they have total debt service payments at more than 60% of their income. •  If mortgage rates were to rise by 3 percentage points, the proportion of borrowers at risk could reach 10 to 15%. •  In particular, lower income households and those with smaller saving pools may find this a strain. Those with longer tenure loans will also be adversely affected. So, when interest rates rise, long before any bank gets into trouble, some households will. Banks must therefore practice responsible lending, and consider the ability of borrowers to service their debt in a sustainable manner.

•  Abstracting from this volatility, there are a few discernible trends emerging that augur well for future of Singapore’s financial centre. First, asset management. •  As at end-2012, total assets managed by Singapore-based asset managers reached an all-time high of $ trillion, a year-on-year increase of 22%. •  About 80% of AUM was sourced from outside Singapore and more than 70% of total assets were invested in the Asia-Pacific region, reflecting Singapore’s role as an asset management hub serving both regional and international investors. •  We continue to see strong interest from global fund houses, seeking to set up or expand their Asian presence in Singapore  Second, insurance and reinsurance. •  Singapore is now the leading reinsurance and specialty insurance hub in Asia, housing a strong cluster of direct insurers, reinsurers, captives, brokers and ancillary service providers. •  Increasingly, more insurers and brokers are offering specialised lines such as trade credit and political risk insurance, aviation, marine, energy, against terrorism and professional indemnity. •  For example, we are home to Lloyd’s Asia, the only major marketplace outside of Lloyd’s of London that writes specialist and reinsurance business in the region. Third, our offshore RMB centre. A key milestone in 2013 was launch of RMB clearing facilities in Singapore. More importantly, a broader ecosystem is taking shape. •  MAS has entered enhanced bilateral currency swap arrangement with People’s Bank of China (PBOC) in Mar 2013: –  The size of the swap arrangement has doubled to RMB300 billion.
Because a targeted attack on a hub risks bringing the heart of the system to a standstill, whereas random attacks are most likely to fall on the periphery. This result carries important policy implications. Long periods of apparent robustness, where peripheral nodes are subject to random shocks, should offer little comfort or assurance of network health. It is only when the hub – a large or connected financial institution – is subject to stress that network dynamics will be properly unearthed. When large financial institutions came under stress during this crisis, these adverse system-wide network dynamics revealed themselves. The third result is the well-known “small world” property of connected networks. 11 The origin of this was a chain letter experiment by Stanley Milgram in 1967. This showed that the average path length (number of links) between any two individuals was around six – hence “six degrees of separation”. Although networks tend to exhibit local clustering or neighbourhoods, certain key nodes can introduce short-cuts connecting otherwise detached local communities. This small world property has again been found across a range of physical networks, including the World Wide Web and forest fires. 12 Its implications for network robustness are subtle. In general, however, it will tend to increase the likelihood of local disturbances having global effects – so-called “long hops”. That could occur between different institutions or between different nation states. Either way, a small world is more likely to turn a local problem into a global one.

Provided that link is secure – the hub’s resilience is beyond question – counterparty uncertainty is effectively eliminated. Table 3 simulates the benefits of introducing a CCP in reducing counterparty uncertainty. As in the earlier example, Knightian uncertainty is measured by the size of the range of CDS spreads. In all cases, moving to a central counterparty (n = 1) results in a material reduction in uncertainty around spreads. These benefits are predicated on the CCP “super-spreader” itself being impregnable to attack. There have been various initiatives over the recent past to introduce central counterparties for the clearing of certain financial instruments, including CDS products over the past 18  36  Carlson and Doyle (1999). 37  Kelling et al (2003). 16  BIS Review 53/2009  months. 38 This is welcome. But the debate needs not to end there. A much broad range of over-the-counter financial instruments, both cash and derivatives, could potentially benefit from the introduction of a central counterparty. Central counterparties are of course not new. Clearing houses date from the early 19th century. But, latterly, the question often most asked of central counterparties has been “Why”? Experience during the crisis means we now know why. From a network resilience perspective, it is important that in future the central counterparty question becomes not “Why?” but “Why not”? Second, financial innovation has created strings of gross claims between financial entities which far exceed their capital bases. Lehman had gross CDS exposures around eight times its balance sheet.