samchain/econo-pairs-v1 huggingface dataset:
The fiscal rules set up under the Maastricht Treaty and the Stability and Growth Pact provide an important framework to ensure the necessary fiscal discipline. The rules are useful at the country level to preserve budgetary discipline and sustainable public finances, which is the best contribution fiscal policy can make to macroeconomic stability and growth. In a monetary union like EMU with a single monetary policy and national fiscal policies, there are two additional arguments. For small countries, there is an incentive for an expansionary fiscal bias which could threaten sustainability, because the common interest and exchange rate might adjust only marginally to their fiscal imbalances. For big countries, on the other hand, lack of fiscal discipline may have an effect on the common interest and exchange rates, creating a negative externality for the other participants. Compliance with the fiscal framework of the Treaty and the SGP guarantees the sustainability of public finances and the operation of automatic stabilisers, while respecting as much as possible the fiscal sovereignty of Member States. Could we rely on financial markets to impose sufficient discipline on budgetary policy? In principle, growing concerns about the sustainability of a country’s debt should be reflected in the risk premia that this country would have to pay for its borrowing. However, it would be unrealistic and therefore very risky to rely only on financial markets.

When it comes to the payment market, I think the ambition should be for the Riksbank to promote harmonisation and competition on equal terms by offering attractive platforms for banks and others to make their final payments. This also increases security in that the liquidity risks in the system decline. One could of course imagine that the banks would have their own system to regulate payments with each other. But if a private player were to run such a system, all participating banks would have large claims on that player, just as they have on the Riksbank at present. And if such a private player were to go bankrupt, this money would be lost if a payment had not gone through. That risk does not exist when the central bank runs the settlement system. Moreover, there could be large volumes of payments so that costs become low, especially if a lot of countries collaborate, as is now the case on the ECB's TIPS platform 12. By ensuring that there is transactional efficiency in Swedish krona, we also reduce the risk of any other type of currency taking over parts of the economy. New payment methods emerging Changes in the payment market are not only about new companies coming in to compete for business. The way that households and companies make their payments is also changing. For instance, they more often make direct payments to other countries, as online trade is increasing. The central banks need to ensure that these flows are also stable and efficient.
However, I believe all of us who have experienced this environment have emerged with a very different lesson learnt. Indeed, we cannot overstate the extraordinary potential this setting offers to an institution such as ours which has always valued, and legitimately so, the soundness of its judgement. With that conviction, we should devote most of our efforts to forging closer insertion, collaboration and coordination-based links with our European partners with an essential aim in mind: to reinforce our weight and ability to influence decision-making. This is a challenge and it is also an opportunity, but it is above all a responsibility to support, from the vantage of the Banco de España, the project for European construction. The second objective has to do with our contribution to financial and macroeconomic stability. After an unprecedented financial crisis, the reputation of economic policymakers, of central banks in particular and, indeed, of the economics profession as a whole was enormously dented. 4/5  Testifying to this were the regulatory and institutional changes set in train to prevent similar situations from recurring. However, the real test, where we place our social prestige and credibility on the line, will involve us truly being able to identify risks and vulnerabilities in due time, being able to issue warnings about them and, within our remit, being able to act to mitigate them or to contribute decisively to other players acting when they must.

Just why should the Riksbank be at all concerned with the debate about the new economy and the conditions for long-term growth? Monetary policy’s concern surely lies in influencing the development of aggregate demand in order to keep inflation in check. The reason is that fluctuations in the rate of inflation stem mainly from demand’s deviations from the trend rate of growth. The Riksbank therefore has to form an opinion about the economy’s potential growth rate. We also need to know how the growth trend changes over time. A dilemma here, however, is that the growth path cannot be observed directly. The fundamental factors behind an economy’s trend rate of growth include population changes, the capital stock, technology and the efficiency of resource utilisation. In the United States, recent innovations in telecommunications and computerisation have contributed to higher gains in productivity. The far-reaching effects that the new information technology is having on production and distribution processes have improved the conditions for growth. A period of high investment growth is needed if information technology is to generate tangible effects. The new investment transforms the capital stock; new technology replaces outmoded practices and the labour required for each unit of capital equipment decreases. Unprofitable units or firms are closed and new facilities are established. Productivity rises in the economy as a whole. High productivity growth makes it possible to maintain business profits and keep price increases down. The transformation process generates a positive spiral; the introduction of the new technology results in widespread rationalisation and greater efficiency.
I am also grateful to Senior Deputy Governor Dr. Nandalal Weerasinghe, and the Deputy Governors, Mr. K D Ranasinghe, Mr. S R Attygalle and Mr. H A Karunaratne. Their support and contribution in terms of highly professional advice and excellent technical expertise helped me to effectively discharge the duties as the CEO of this iconic institution. I would also like to acknowledge the extraordinary service rendered by former Deputy Governor, Mr. C J P Siriwardana, who retired from the Bank service last year. I am also thankful to the members of the Monetary Policy Consultative Committee, Financial System Stability Consultative Committee as well as the Monetary Board Advisory Audit Committee for their valuable views and suggestions, which helped us immensely in better calibrating our policies and operations. 42  Last and most importantly, I would also like to express my sincere gratitude to the Assistant Governors, Senior Heads and Heads of Departments, particularly the Director of Economic Research and the Staff of the Economic Research Department for their effort in producing this policy document. It is my pleasure to acknowledge my colleagues in the Governor’s Secretariat who support me on a day-to-day basis. I would be lost without their assistance. In my view, the greatest asset of the Central Bank is its staff without whom we cannot deliver our tasks and achieve our objectives for the nation. I thank all Staff of the Central Bank who serve the nation with professionalism, technical excellence and integrity and more importantly with vigour and enthusiasm even amidst turbulences.

Partly because the Matching Adjustment benefit to holding sub-investment grade bonds is low, the great majority of these bonds are investment grade. The overall credit quality of the investment-grade bond universe has deteriorated significantly over the past decade. The share of BBB-rated bonds in the sterling market, for example, has increased from under 10% to nearly half since 1998 (Chart 5). Within this BBB-rated segment, analysts have drawn attention to potential ‘fallen angels’ at risk of downgrade to sub-investment grade or even default. These issuers may be at risk because of a combination of excessive debt, structural change in the economy and poor management. Insurers face a risk of reduced Matching Adjustment benefit if issuers are downgraded and financial loss if they default. They should be reviewing the credit quality of their corporate bond investments and focusing in particular on any lumpy exposures. It is reassuring that the proportion of BBB-rated bonds in UK insurers’ aggregate Matching Adjustment portfolios has remained more or less unchanged notwithstanding the increasing share in the wider market. These proportions do vary considerably across individual insurers, however (Chart 6). Firms with higher proportions of BBB assets should be stress testing to make sure that they can comfortably absorb downgrades at a time when markets may be less liquid and they cannot easily rebalance their assets. We will explore this in our upcoming Insurance Stress Test.
As for the elderly, the Government provides a non-contributory means tested Old Age Living Allowance for those aged 65 or above; and people that do not fall within either of the first two groups. Typically this group of citizens are those who have worked hard for their whole life, used up the bulk of their earnings in raising their children, and may be owning a small apartment. Most (iii) of them, by the time they retire, do not enjoy any pension or other forms of voluntary retirement benefits. They do have some accumulated savings in their Mandatory Provident Fund accounts, but it is unlikely that, for various reasons, the amount, on its own, would be large enough to support a decent retirement life. 3. It is the retirement protection of this third group of citizens that I wish to address today. In Hong Kong, about 70% of the 1.7 million privately owned residential housing units, including subsidized home ownership flats, are owner-occupied. Around 65% of the owner-occupiers have fully paid down the mortgage loans, if any, of their properties. For those owner occupiers who have already paid off their mortgages, many of them don’t have a lot of other savings or assets at their disposal. Even for those with some savings, they are having a tough time in managing their money if they don’t have the expertise or the appetite in active investment.

This is understandable because, under the prolonged period of quantitative easing by the major central banks in the advanced economies, bank deposits and bonds offer rather low and unattractive interest income. As for the stock market, the volatility in share prices will expose the retirees to significant market risks. As a result, there can be a fairly large group of retirees who find them not having enough cash flows to support a decent retirement life, despite the fact that the properties they own and occupy are worth quite a lot. 1/4  BIS central bankers' speeches  At the same time, their cash savings are basically left idle, yielding very little, if any, cash flow income. Many old folks would feel apprehensive to dip into the principals of their bank savings to meet daily expenses, as this would expose them to the uncertain but rather scary longevity risk. This situation is not unique in Hong Kong as there are many places that have similar problems. So it may be useful if I share with you the Hong Kong experiment in helping this group of retirees through some market based and financially sustainable solutions. HKMC and Market-based Financial Solutions for Retirees 4. These market based retirement protection solutions are developed and operated by the Hong Kong Mortgage Corporation (HKMC), which was set up in 1997 and is fully owned by the Government through the Exchange Fund managed by the Hong Kong Monetary Authority (HKMA).
Banks have also tended to engage in transactions that lower capital requirements without reducing economic risk. In addition, it has proved difficult to incorporate into the Accord’s simple risk-weighting scheme the innovations of the last decade in the way banks manage and mitigate risk. As market risk management techniques developed, we were able to incorporate a state-of-the-art, value-at-risk approach in a 1996 Market Risk Amendment. Still, as credit risk management techniques have advanced, and as the importance of operational risk management has increasingly been recognized, it has become apparent that the long run relevance and efficacy of the Basel ratios as an indicator of capital adequacy has been eroded. Supervisors have long known that analyzing simple capital ratios in isolation can lead to incorrect conclusions about the relative strengths of institutions. Thus, we also have relied on a review of banks’ capital plans and on market discipline to assess capital adequacy. In June of last year, the Basel Committee formalized the link between these elements when it released a Consultative Paper laying out our vision for a new, more refined capital adequacy framework. In addition to establishing minimum capital requirements, the proposed framework places increased emphasis on the supervisory review of capital adequacy and the role of market discipline. We refer to these elements - minimum standards, supervisory review and market discipline - as the “three pillars”. Together these pillars mutually reinforce safety and soundness by aligning capital relative to risk and by encouraging prudent risk management.

Meanwhile, it is of key importance, not just for the financial centre but for Switzerland as a whole, that an acceptable solution be found for the taxation of foreign bank deposits. BIS Review 68/2010  1
Strong economic activity We can look back on several years of strong economic growth. This has occurred in an environment where price and wage increases have remained comparatively low even though the economic upswing is now in its seventh year, with annual GDP growth averaging around 3%. In recent years, annual demand growth has been in the region of 3 to 4%. A common, though not entirely certain, estimate is that in the long run the Swedish economy can sustain an annual growth rate of 2 to 2.5%. So the economy has been expanding faster than the supply side can cope with in the longer run. This is liable to result in problems with bottlenecks. That in turn can generate growing tensions and accelerating rates of price and wage increases. In the worst case, the result could be a recession, with falling output and rising unemployment. It goes without saying that that must not happen. The Riksbank is required by the Riksdag (Sweden’s parliament) to “maintain price stability”, which involves ensuring that the rate of price increases is kept stable around the 2% target. If we can manage this and take timely measures that prevent imbalances from arising, economic growth will normally follow the long-term trend. As the economy has been expanding above its sustainable rate, the spotlight falls on the amount of unutilised resources. When resource utilisation is liable to generate upward pressure on prices, the economy must wind down from the strong upward trend to a stable rate that is more sustainable.

BIS Review 15/2003  5  Next Steps in finalizing the New Accord Most of my remarks today have been centered on implementation of the new framework. I’d like to conclude by spending a few moments discussing where we are in the process to finalize the New Accord. As I mentioned, the Committee has just finished gathering data from the industry through its third impact study. The aim of the study was to collect and to analyze information from banks worldwide regarding the capital impact of the new proposals on their existing portfolios. The results are under review and will help us to determine whether any adjustments will be needed prior to release of the final consultative package. That final consultative paper will be issued by early May. Our goal continues to be to have a final Accord agreed to by the fourth quarter of this year. In closing, I want to emphasize that effective supervision of modern banking organizations will necessarily entail a closer and more cooperative partnership between industry participants and official supervisors. The industry’s participation in the formulation of a more risk-sensitive capital adequacy framework is a good example of this kind of constructive interaction. Indeed, the three pillars of the proposed framework reflect the understanding that regulatory requirements alone are no longer sufficient to address the growing complexity of banks’ activities and the associated risks. Consistent with this notion is the need for effective corporate governance, which plays an increasingly important role in a rapidly evolving banking environment.
Today, I will speak about how we are working closely with the industry to ensure that our financial sector remains purposeful for the economy – - financing the growth of local and Asian companies; and - creating good jobs for the Singapore workforce. FINANCING GROWTH OF LOCAL AND ASIAN COMPANIES MAS has been working with the industry to deepen the financing ecosystem for regional and local companies in three ways. First, we are working to strengthen the venture capital and private equity financing ecosystem to serve Asian growth companies. The next-generation Asian growth companies, with their new ideas and models, have injected vibrancy to our corporate landscape. Venture capital and private equity (VC/PE) play an important role in supporting the growth of such companies and stimulating innovation. We have a small but thriving VC/PE industry. VC/PE assets under management has grown at a compound annual growth rate of 28% over the past 5 years. But we need to do more – given the growing numbers of Asian growth companies and their tendency to stay private for longer and not go the IPO route. We are simplifying the regulatory framework for VC managers. We are working with the industry to foster a deeper and more comprehensive ecosystem for venture capital and private equity.

But if any new relevant information or leads arise from ongoing investigations in Singapore or elsewhere, rest assured MAS will re-open the files and pursue the matter. At the same time, MAS has intensified its supervision of financial institutions that have higher inherent money laundering risks or control areas found wanting from past inspections. The inspections go beyond rules-based compliance to focus on risk understanding and 6 / 10  BIS central bankers' speeches  management. In our inspections, we examine: - whether the Board and senior management have effective oversight of money laundering/terrorism financing risks; - whether the financial institution takes timely action to properly resolve risk control concerns; and - whether there is good risk understanding, adequate risk culture and systems throughout the organisation, to support the proper execution of risk controls. Sustained effort and unstinting vigilance will be needed on the part of industry players to manage the risk of illicit finance and keep our financial centre clean. CREATING VALUE FOR THE ECONOMY MAS is reputed as a tough, “no-nonsense” regulator. But we also seek to be progressive and proactive in developing the financial sector – to be dynamic, innovative, and purposeful. We have said much before about our strategies to help grow various activities in the financial sector. We have also shared on many occasions our FinTech agenda and efforts to facilitate innovation in the financial sector.
Here, I must say, our fears proved not just to be unfounded, but the reality turned out to be much more favourable than we could have hoped for. The exchange rate between the Swiss franc and the euro ended up being much steadier than expected, in fact even steadier than it used to be against the German mark, not to mention the French franc and the Italian lira. Over the past six years, the real exchange rate has moved within a relatively narrow band little more than five percentage points wide. Except for the immediate after-September-11 period, when the Swiss franc appreciated significantly, the external value of the franc has largely reflected economic fundamentals. In fact, even the post 9/11 safe-haven effect was relatively mild compared to what we experienced in the past, during the seventies and the eighties, for instance. But vigilance is of the essence. Recent foreign exchange market developments show that in highly turbulent times the Swiss franc can come under upward speculative pressure. This may interfere with our domestic monetary strategy and can eventually trigger corrective policy actions. 4. A new international monetary order  I truly believe that one can make the case that the introduction of the euro has brought about a new international monetary order, that it has produced an element of stability that benefits many countries, not just Europe’s immediate neighbours, but nations around the globe.

Although we fully appreciated the benefits that Switzerland would draw from the creation of the euro in terms of increased transparency and lower transaction costs, we were also quite concerned about the possible risks. Three of these came to mind. First, we feared that the Swiss franc might be in for a bumpy ride. In the past, whenever the dollar was under attack, international investors turned their attention to the German mark and the Swiss franc. Their status as safe-haven currencies meant that at times of turbulences on foreign exchange markets they would move well beyond what economic fundamentals could justify. In fact, the Swiss franc often revealed a tendency to appreciate even more than the German mark, a phenomenon that was generally attributed to the relative narrowness of the Swiss financial markets. Now with the German mark gone, wouldn’t all attention focus almost exclusively on our currency? Would it not mean that in a dollar crisis the franc would have to bear even more of the adjustment than in the past? Even more frightful, what would happen if the euro itself were under attack? The last thing we needed was for the franc to become the first currency in the line of fire, or something like the lightening rod of the international monetary system. A second apprehension that we had was that it might become very difficult in the future to conduct an autonomous monetary policy. Switzerland, together with Liechtenstein, would now be totally surrounded by a single monetary zone.