samchain/econo-pairs-v1 huggingface dataset:
Norman T L Chan: 3Ds – an era of awakening? Speech by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the 4th Santander International Banking Conference: “A Global Financial System for a Global Economy”, Madrid, 18 October 2011. *  *  *  Good afternoon ladies and gentlemen, I am honoured to receive the invitation to attend and speak at the 4th Santander International Banking Conference today. It is only a few short years ago that the world economy was shaken to its core by the Global Financial Crisis. That we again face the threat of profound and traumatic disruption so soon is a measure of the urgency that governments must employ to correct the structural imbalances necessary to get the economy back on song for the long term. Today I want to take up a little bit of your time explaining what I see as fundamental to righting the ship so that it can survive in the roughest of seas. Collapse of Bretton Woods System After World War II, the World’s Superpowers tried to maintain a system of semi (or quasi) Gold Standard in which major currencies were fixed to the US dollar, which was in turn fixed to Gold at $ an ounce. This global monetary system was basically a fixed rate regime, which imposed an external discipline to restrain monetary expansion globally.

However, it is fair to say that financial innovation in the last decade or so contributed in no small part to the breakdown of market discipline. 2  BIS central bankers’ speeches  Coming back to the US, the proliferation of MBS and complex financial derivatives of CDOs had, as we now know, greatly increased the leverage and thus risk of the entire financial system. What was worse was that the structure of these financial products was so complex and so far removed from the underlying assets that it was virtually impossible for anyone, including the rating agencies, to fully understand the risks involved and to price such risks appropriately. We now know that there were thousands and thousands of CDOs sold before the Global Financial Crisis that were given Triple-A ratings simply because seriously flawed assumptions and models were used in assessing the risk of defaults. As I mentioned earlier, these financial derivatives had helped amplify the shocks and transmit these shocks across the global financial system during the latest Global Financial Crisis. An era of awakening? While we have seen many instances where market discipline has broken down, it is hard to believe that market discipline will break down permanently. As Europe has recently found out, the market can suddenly awaken and begin to doubt the fiscal sustainability of some members of the Euro Zone. This belated awakening has so far created considerable dislocation to the banking system and capital markets.
Comparison of October 2012 and January 2013 Inflation Report Forecasts Inflation Forecasts  Source: TurkStat, CBRT. Output Gap Forecasts  Source: CBRT. The same slide presents the revision in the output gap forecasts. We revised the output gap upwards for the first quarter of 2013 due to recent acceleration in capital inflows and credit growth. However, we assumed that the policy measures would drive the output gap and credit path closer to the October forecast in the second half of the year. BIS central bankers’ speeches  9  We can summarize the main message of the forecast regarding the monetary policy as follows: a cautious monetary policy stance should be maintained to keep inflation close to the target at the end of 2013. It is important that the CBRT does not disregard excessive volatility in credit and exchange rates, for macro financial risks to be contained. It should be kept in mind that keeping credit growth at healthy and reasonable levels will support both price stability and financial stability. In fact, notwithstanding the recent faster-than-expected growth in credit, we envisaged that credit growth would hover around 15 percent. I would like to once more underline that any new data or information regarding the inflation outlook may lead to a change in the monetary policy stance. Therefore, assumptions regarding the monetary policy outlook underlying our inflation forecasts should not be perceived as a commitment on behalf of the CBRT.

Yield Curve*  2-Year Real Interest Rates for Turkey*  (Percent)  (Percent)  *Calculated from the compounded returns on bonds quoted at the ISE Bonds and Bills Market by using ENS method. Source: CBRT, ISE. * Calculated as the 2-year discounted bond returns derived from the yield curve, minus the 24month ahead CPI nflation expectations from the CBRT’s Survey of Expectations. Source: ISE, CBRT. BIS central bankers’ speeches  3  Market interest rates plummeted in the last quarter due to improved risk appetite besides the liquidity policies pursued by the CBRT. Meanwhile, the decline in long term rates proved more notable. As a consequence, yields shifted down across all maturities while the yield curve flattened in the interreporting period as illustrated in the slide (Chart 8). Real interest rates also plunged since the fall in nominal interest rates was more significant than that in inflation expectations. Although having crept up recently, real rates still stand at ever-low levels (Chart 9). Bank lending rates also remained on a downward track in the last quarter amid eased external financing conditions alongside our liquidity policy. Consumer loan rates maintained a downward trend in line with the market interest rates. Moreover, the fall in corporate loan rates became more significant in the final quarter of the year owing to the cuts in the upper bound of the corridor (Chart 10). What is more, tightening in the credit supply conditions for corporate lending receded in this period (Chart 11). Chart 10. Chart 11.
In general, a system comprising three bodies undergoing motion via a force cannot be solved analytically – the “three-body problem”. And there are many problems in physics which involve the interaction of “particles” in ways which are complex and non-deterministic. 13  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  13  These features have resulted in ABMs being extremely widely used in the physical sciences, at various different levels of resolution. At the micro scale, some of the earliest applications of ABMs were to study plasmas – charged particles which constantly interact. Plasmas are the fourth state of matter after solids, liquids and gases. They are prime ABM candidates because they exhibit rich, non-linear, complex behaviour. In 1966, Edward Teller wrote a paper which described how to build a plasma ABM with 32 interacting particles (Brush, Sahlin and Teller (1966)). Even with “only” 32 interacting agents, this was a formidable computational challenge. But the advent of parallel and high performance computing since the 1990s has changed the scale of plasma particle simulations. Simulations today regularly use as many as 10  9  computational agents (Turrell et al (2015)). These plasma ABMs have found widespread application, micro and macro. At the micro level, they have been used to help identify and kill cancer cells with pinpoint accuracy, while leaving healthy surrounding cells unharmed (Bulanov et al (2002)).

30  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  30  Chart 9: Model simulations of the housing market  Chart 10: The distribution of house prices Percent year on year  30 25  Real house price growth  20 15  Simulation  10 5 0 -5 -10 -15 -20 -20  30  80  130  180  Number of years Source: Baptista et al (2016). Notes: Blue is the list price index, red the house price index and green the number of years a house is on the market. Please see the speech website for the animation. Source: Baptista et al (2016); Hills, Thomas and Dimsdale (2016); Bank calculations. Notes: The blue diamonds show the distribution of simulated house price growth for over 160 years from the model. The red diamonds show the distribution of real house price growth between 1847 and 2015. This same approach can also be used to examine the impact of various macro-prudential policy measures, whether hard limits (such as an LTV limit of 80% for all mortgage contracts) or soft limits (such as an LTI cap for some fraction of mortgages). These policies could also be state-contingent (such as an LTV limit if credit growth rises above a certain threshold). As an example, we can simulate the effects of introducing a loan-to-income (LTI) limit of 3.5, where 15% of mortgages are not bound by this limit.
We envisage that these could operate alongside the digital pound and alongside commercial bank money and cash. The digital pound could act as a bridging asset between different types of privately issued digital money and establish standards for interoperability. And, crucially, the requirement for privately issued digital money to be exchangeable on demand and at par for Bank of England digital pounds would help secure the interchangeability and uniformity of money in the UK. Finally, many central banks, across the globe are exploring the issuance of a central bank digital currency for both retail and wholesale purposes. A few have now been launched[15]. Page 10  There is clearly a great opportunity and a great need for international cooperation in this area. Interoperability between national and regional central bank digital currencies could bring substantial benefits by reducing the cost and frictions in cross border payments. At the same time, there are broader macro-economic and geopolitical issues that need to be considered. The Bank of England is working actively on these issues with international counterparts through the Bank for International Settlements Committee on Payments and Market Infrastructures (CPMI), through the G7, the G20 and FSB and through close cooperation with a small group of advanced economy central banks[16]. Conclusion To conclude, the Consultation Paper and accompanying Technology Working Paper marks the end of the first stage of the work of the Bank of England – HM Treasury Taskforce.

It would, as many in this audience know, have major implications for the way we transact with each other and, more broadly, for the financial sector and the economy in general. The Taskforce’s conclusion is that we are not yet at a point where a firm decision can be made to implement a digital pound. However, in view of the likely need and the lead time to introduction, the Bank and The Treasury, will now proceed to the next stage of detailed policy and technical development of the digital pound - including the development of a technical blueprint. This stage will take around two to three years following which a decision will be made whether or not to proceed to the next stage and implement a digital pound in the UK. The work over the next two to three years will inform that decision and will reduce the lead time to launch should the decision at the end of this stage be to implement the digital pound in the UK, which could then be introduced in the second half of the decade. In this next stage of detailed policy and technical work, including the development of a technical blueprint for the chosen model of the digital pound, we will work closely with private sector partners on proofs of concept, experimentation as well as on the development of the blueprint  Page 3  itself.
Norman Chan: Facilitating financial innovation in Hong Kong Welcoming remarks by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the HKMA Fintech Day, Hong Kong, 25 October 2017. * * * Good morning, distinguished guests, ladies and gentlemen. 1. This is the second year that the HKMA organises a Fintech Day. I am pleased to say that, compared with the much smaller venue at PMQ last year, we have almost 1,000 participants attending today’s event, which is double of the participation last year. This is a clear demonstration of the very rapid growth in the interest as well as progress in the field of fintech in Hong Kong. 2. Talking about progress, I would like to update you on the latest developments since I announced a “New Era of Smart Banking” on 29 September at the annual conference of the Hong Kong Institute of Bankers. You may recall that I mentioned seven initiatives to prepare Hong Kong to enter into the Smart Banking Era: a Faster Payment System, Supervisory Sandbox 2.0, Virtual Banking, Open API, Banking Made Easy, Cross-border Collaboration, and Research and Talent Development. Although it is only less than a month after my announcement, I am pleased to report on the encouraging progress made in respect of two of these seven initiatives, i.e. cross-border collaboration, and research and talent development. Cross-border collaboration Singapore 3. One of the key characteristics of Fintech is that it is borderless.

Furthermore, in economic terms, given that these deposits were used to a significant degree to finance illiquid assets in outside Iceland, such a payment, if it had been possible, would have amounted to a net transfer of resources from Iceland to other countries – where the United Kingdom would have been prominent – at a time when Iceland was going through its deepest financial and economic crisis in the post-war period! That made no sense. Finally, it should be noted that the deposit preference introduced before the banks failed is securing full recovery to all deposits if we discount the time value of money, which so far has been low during the postcrisis period. This case clearly highlights the link that must exist between the LOLR function and deposit insurance, which, in the absence of clear prior arrangements for currency swaps or other such mechanisms, must be predominantly in the same currency in order to work. The EU framework for this was therefore deeply flawed, as has been recognised in the discussions about a banking union. You can see from this that the key characteristics of crisis management and bank resolution in Iceland during the crisis were that share-holders lost all their equity, unsecured bond holders were bailed in, vital infrastructure elements of the domestic banking system were preserved and deposit were given preference over other unsecured claims. It seems in many ways a standard approach today, but it was not always well received at the time.
Andrew Gracie: LAC and MREL – from design to implementation Speech by Mr Andrew Gracie, Executive Director of Resolution of the Bank of England, at the BBA loss absorbing capacity forum, London, 23 July 2015. *  *  *  Thanks for the opportunity to speak. In many ways, resolution is the last major piece of the financial reform agenda and ensuring banks have sufficient loss-absorbing capacity is central to that. Rules in this area remain to be finalised, but the components are coming into place. The binding requirement for European resolution authorities is, from early next year, to begin setting a minimum requirement of own funds and eligible liabilities (MREL) for all EU banks in line with the Bank Recovery and Resolution Directive (BRRD) requirements and European Banking Authority (EBA) Regulatory Technical Standards (RTS). You will have seen that the RTS have recently been published in an “EBA final” version. This will be a binding EU regulation once formally adopted by the Commission. For European G-SIBs, MREL requirements will need to be set consistently with the FSB’s Total Loss-Absorbing Capacity (TLAC) standard. Consultation responses on this are being considered alongside the results of the impact assessment. The standard will be finalised by the time of the G20 summit in November. So no definitive statements today, but I want to address some recurrent issues, including some points that have cropped up in the FSB and EBA consultations.

The resolution naysayers point to the events of the crisis and the Lehman failure in particular and say that cross-border resolution will never work, national interest will always win out. Clearly the whole enterprise of resolution planning is to face up to this challenge ex ante. The Key Attributes envisaged Cooperation Agreements (CoAgs) among the authorities to describe a common resolution plan for an individual G-SIB. But to work CoAgs need underpinning and this is where TLAC comes in. Not only does TLAC provide countries with confidence that G-SIBs are operating with sufficient resources to be resolved safely. But that confidence is provided in a concrete form. This is the internal TLAC downstreamed in SPE groups from the parent entity to material subsidiaries. This is intended to provide hosts with comfort that in the event of a resolution they will not be exposed as losses would be upstreamed to the holdco, enabling the hosted legal entity to continue to operate. Hosts would therefore not need to take the sort of unilateral actions to ring-fence assets that were so damaging during the crisis and have tended to fragment the international financial system since. In short we need cross border resolution to work through structural changes like TLAC for international banking to work. And we need this to be internalised by the market as well. I mentioned before disclosure for investors. But it is as important for liability holders that are unlikely to be bailed in to understand that too.
(1936)  9  For instance, wealth of Swiss households relative to GDP, measured in terms of financial assets, shows no clear trend over the last decade (Figure 7). 4  BIS central bankers’ speeches  2008–09 and the sluggish recovery recorded since 2009. In the fall of 2008, the SNB lowered the policy rate significantly to counter unwarranted tightening of financial conditions and the risk of deflation and recession. Since then, the policy rate has been kept close to zero and, in September 2011, the SNB set a minimum exchange rate for the euro against the Swiss franc to ensure appropriate monetary conditions for the Swiss economy. In this environment the interest rate is not available as an instrument for influencing developments in the credit market. As a consequence of this exceptional period of low rates, Swiss mortgage rates have fallen substantially over this time period, with advertised rates for 10 year mortgage credits hitting all-time lows in 2012 at 2.1%, substantially below the pre-crisis average of 4.7% (Figure 7b). It thus comes as no surprise that credit growth, mainly driven by the growth of residential mortgage loans, accelerated from 2009 onwards (as shown before in Figure 2a). Given the rather rigid Swiss rental market, the decrease in mortgage rates has not been, until recently, accompanied by a similar decrease in rental rates. This has led to a situation where it may seem relatively more attractive to buy than to rent. Such a prolonged period of ultra-low rates is also fertile ground for behavioral biases.

There are also signs that the strong growth in productivity that has been evident in other countries – for example in the US – is moderating somewhat. And we may see a similar trend in Norway. Second, even without a reversal, profits may fall and unemployment rise. The implications of this will depend on how far businesses, in their search for qualified labour, will go in bidding up wages. It will also depend on how wage-earners react and on their ability to adapt to change. Furthermore, it must be expected that the strong krone will shave profits in some enterprises and industries at the moment, even though many have used currency hedging to safeguard their income. Even though demand for labour is strong, there is a risk that outflows from the labour market to various social security schemes will remain high. Sickness absence is high, and the share of the working-age population on rehabilitation schemes or receiving disability pensions is rising. Many workers choose to take early retirement under the AFP scheme (contractual early retirement) when they reach 62 years of age, and – because this age group is expanding sharply – this number will probably increase in the years ahead. In Norway, close to 600 000 persons of working age receive social security benefits or pensions. This is equivalent to 25 per cent of the labour force. This is the Norwegian economy’s Achilles’ heel. A particularly disturbing aspect is that disability is increasing among young people 1 .
While this does not seem to be a great concern to market participants today, the current fiscal path is unsustainable. In the long run, ignoring the budget math risks driving up longer-term interest rates, crowding out private sector investment and diminishing the country’s creditworthiness. These dynamics could counteract any favorable direct effects the tax package might have on capital spending and potential output. Favorable near-term outlook Turning to the near-term outlook, the prospects appear favorable for another year of above-trend growth. Consumer spending should continue to grow at a moderate pace, supported by solid fundamentals. Household income is being bolstered by faster compensation growth and continued healthy employment gains. Moreover, the aggregate household balance sheet remains in good shape, due in part to rising home prices, a strong stock market, and only moderate growth in household debt. Over the past year, home prices have risen by about 7 percent on a national basis, and the S&P 500 equity index has risen by nearly 20 percent. In contrast, household debt has risen about 4 percent over the past year, only slightly higher than the growth in personal income. Further, the household debt service burden is low, reflecting the extended period of low interest rates. Of course, the aggregate figures mask some underlying problems. Two issues worth highlighting are the persistent growth in income and wealth inequality and the burden of rising student loan debt.2 Many people of more modest means don’t directly benefit from rising home and stock prices.

Everything suggests, moreover, that the economy will continue to impress. Last year, GDP growth was 3.8% and the increase in employment was the highest in the past twenty-five years. Another indication of the good circle in which the Swedish economy is developing at present is that forward-looking GDP assessments have also been revised upwards, whereas forecasts of inflation have not been adjusted upwards to the same degree. Financial market pricing is also a tribute to the present credibility of Swedish economic policy. Who would have believed a decade ago that the Swedish economy would achieve such a favourable path? The successful combination of relatively high GDP growth and low inflation can in principle be attributed to a number of factors. One may be the plentiful supply of unutilised resources after the crisis in the early 1990s. A change in pricing behaviour may have contributed once the rate of inflation had been brought down to a low and stable level. Increased competition in connection with, for example, deregulations, globalisation and IT commerce may also have played a part. But it may also have to do as well with an upward shift in trend productivity, so that more goods and services can be produced without an increase in prices, in other words, a higher rate of potential growth. It can be argued that all these factors have in fact contributed to the favourable development. When the upswing started there were plenty of unutilised resources.