samchain/econo-pairs-v1 huggingface dataset:
The major dealers and the buy-side investors are making substantial investments in improving the process around the credit derivatives market. The overall strategy outlined in the public letter signed by the 14 major market participants on March 10, 2006, offers the prospect of a more automated confirmation and settlement process, with significantly less operational risk than has existed in these markets since their inception. Looking beyond the specific objectives for reducing confirmation times and backlogs, we hope to see agreement over the next several months on a new ISDA® protocol for net physical settlement in the event of default and progress toward adoption of emerging utilities for centralizing certain processing and information functions that can facilitate netting and matching of payments and collateral. Alongside these improvements in what we call infrastructure, this is a moment where it is important to see more care and attention and greater conservatism applied to the discipline of risk management. This is most critical in the areas that are hardest to do well. The challenges seem most exacting in the firms’ abilities to capture the exposure of the institution to stress scenarios that lie outside the range of recent experience, and to set exposure limits and calibrate margin and credit terms accordingly. The challenges here are magnified by the changes I described earlier, including the rapid growth in complex structure products with imbedded leverage, uncertainty about liquidity in many instruments in less-benign financial conditions and other features of the present environment.

The balance between innovation and resilience that has characterized the U.S. financial system in recent years has played an important role in the improved performance of the U.S. economy. We all have a strong interest in preserving this balance. Thank you. BIS Review 28/2006  3
•  We also want to partner with financial institutions to create a working environment that is conducive to accommodate changes, be it in life-cycles or lifestyles, so that employees can manage demands better, both at work and from home. It is heartening to note that many financial institutions are offering flexible work arrangements, including flexible working hours, telecommuting and teleconferencing, as well as mentors, who can lend a helping hand, providing that needed uplift and moral support. 1  These are done under the Finance Associate Management Scheme (FAMS) and the International Postings Programme (iPOST). 2  BIS central bankers’ speeches  12. Our collaborative efforts in developing talent in the financial sector will allow individuals opportunities to continually develop themselves and chart their own career progression, from students to mid-career professionals to leaders within the sector. Working hand-in-hand with FWA 13. Our efforts will be more effective and achieve greater success with the help of industry professionals like yourselves. Given the strong network FWA has established, you are well placed to play an important role in ensuring equal opportunity for all. I would like to touch on three areas in which I see tremendous potential to harness the collective experience and wisdom of the FWA. 14.

The legacy of those losses has likely limited the banking sector’s ability to extend new loans during this expansion, as banks acted in a highly precautionary way to accrue capital that had been depleted as well as to add to their previous capital levels. The need for banks to repair their balance sheets following the financial crisis contributed to the far slower growth of outstanding bank loans during this expansion when compared to previous long expansions. Real outstanding loans to businesses, which are dominated by bank loans, declined more in this recovery than in previous recoveries (Figure 4). On the household side, real outstanding residential mortgages, which are largely originated by banks, have declined through most of this expansion while they grew steadily in previous expansions (Figure 5). Consumer credit has risen at a modest rate in this recovery – comparable to that of the last cycle (Figure 6). This category includes auto loans, credit cards and other consumer debts that are mainly originated by banks. But it also includes student loans where the federal government is the dominant lender. Student loans have risen robustly during this expansion, and have driven much of the rise of overall consumer credit. We will have much more to say about them later in today’s briefing. The U.S. financial system relies more heavily on capital markets than other advanced economies. Bonds and other negotiable debt instruments are an important source of funding to credit-worthy corporations.
5  The real exchange rate shock is likely to push down on domestic demand but should increase export supply. 4  BIS central bankers’ speeches  disturbances. Attempts to keep inflation at the inflation target in these circumstances may cause undesirable volatility in output”.6 In other words, if shocks drive inflation sufficiently away from the target, the MPC are allowed to choose how quickly to return inflation to 2% and should explain such policy decisions via the open letter system. I have often been asked whether or not changes to the target, or the remit, or to CPI itself would help us to set policy. The answer is a clear no. Of course, the Government can decide to change these things if it wants to, but that wouldn’t magic away the problem. The unfortunate and difficult truth is that the shocks that have hit the economy recently have not been caused by monetary conditions. They are real economy shocks which make us individually and collectively worse off – we have to pay more tax, we have to pay more, in real terms, for petrol, gas, electricity and imported goods or services. The choice that monetary policymakers face is how much of these relative price shocks should be accommodated by a higher level of prices, and how much should be accommodated by a squeeze on nominal wages (and higher unemployment).

It goes without saying that Hong Kong, as a major financial centre, will comply with international regulatory standards. Implementing Basel III has been complex, and it has involved extensive consultation exercises. As with much of our work, your feedback and cooperation have been invaluable in this process. 19. Despite all our precautions, we can never totally rule out the possibility that an institution might have a crisis. I think it is true to say that Hong Kong is as well-prepared, if not better, than any centre in Asia. One reason is the Financial Institutions (Resolution) Ordinance, which came into effect in 2017. This is not something most of the community thinks about. But I am confident that we have the tools to handle a bank failure in a way that best serves the overall interests of stakeholders, including the taxpayer. 20. Our regulatory work has not hindered banks from exploring new opportunities and adapting to change. During the last 10 years, we have seen the volume and complexity of offshore Renminbi business increase significantly. We have also embraced – as a regulator and as an organization – the need to address climate and environmental risk through green and sustainable banking, responsible investment and capacity building in green finance. And then there is the fast-changing use of technology – which I will mention later. 21. So overall, I am pleased to say that our banking sector today is safe and resilient – probably more so than at any time in Hong Kong’s history.
There are two cyber threats which the financial sector needs to pay keen attention to. The first is ransomware attacks where the modus operandi has become more threatening. In addition to corrupting a victim’s data using crypto-ransomware, attackers are now exfiltrating information from their victims. 6/9  BIS central bankers' speeches  MAS has asked financial institutions to review the adequacy of their internal IT controls, as well as incident response and business continuity plans to fend against the latest ransomware threats. Second, cyber criminals are targeting major third-party IT vendors to amplify the coverage of their attacks. The cyber attack on Solarwinds is a powerful illustration of the increased sophistication and persistence of cyber criminals. They are now attacking supply chains to infiltrate the networks and systems of multiple entities. MAS has exhorted financial institutions to exercise strong oversight of arrangements with third party service providers, to ensure system resilience and maintain data confidentiality. FINANCIAL SECTOR PERFORMANCE Let me now provide an update on the financial sector. In 2020, the financial services sector 9 grew by 5.1% even as the overall economy contracted. In the first half of this year, we estimate the sector grew by about 6%. Growth has been broad-based across the financial services sector. The banking industry has been supported by strong fee income growth. The insurance industry expanded strongly on the back of robust demand for single-premium life insurance products. The payments industry grew significantly as adoption of e-payments gained traction with businesses and individuals moving towards online transactions.

However, as long as the rules of the game prize short-term gain over long-term earnings stability, the temptation to cheat by  4  BIS Review 50/2002  manipulating the market will remain strong. Reforms cannot remove risk from investment, but firms can do more to promote transparency and ensure that their risks are properly disclosed. It is thus vital for firms - not just politicians and the public - to determine if there are weaknesses in legislation or regulation so that they too can correct and begin their part of the process of rebuilding investor confidence. But the present challenges are not only those of better regulation. The global economy is also facing a crisis of confidence, which interferes with investment decisions and dampens activity. Against this international backdrop, we have reacted swiftly to the changing winds that bring new risks to the domestic economy. The latest reductions in the target range are aimed at injecting further monetary stimulus in our economy. These actions are undertaken with an eye on keeping price stability in check. This is the best contribution the Swiss National Bank can make to restore confidence in the economy and promote a strong and sustainable recovery. BIS Review 50/2002  5
The  BIS central bankers’ speeches  11  economic relationships are illustrated here by a simple New Keynesian model, which you will become more familiar with in the course of your studies.10  NEMO is an empirical model, that is to say it is estimated on Norwegian data. In order to see how monetary policy works in NEMO, we have increased the interest rate to the same extent as in the VAR models. As indicated by the red line in the chart, NEMO provides a description of monetary policy that is broadly consistent with that derived from the VAR models,11 in spite of the different principles on which the models are based. Overall, it appears that a one percentage point increase in the interest rate dampens output growth by about ½ percentage point and inflation by around ¼ percentage point. The effect of the interest rate increase on GDP reaches its maximum after about one year, while the maximum effect on inflation occurs with a lag of close to two years. 10  See Alstadheim, Ragna et.al (2010), “Monetary Policy Analysis in Practice”, Norges Bank Staff Memo 11/2010  11  The estimation is based on a one percentage point increase in the interest rate, followed by a gradual reduction in line with the response pattern in the model  12  BIS central bankers’ speeches  The Monetary Policy Report, which Norges Bank publishes three times a year, includes a discussion of key trends and an analysis of the interest rate path ahead.

BIS central bankers’ speeches  13  The Bank’s Monetary Policy Report also presents alternative scenarios for the Norwegian economy. If developments are broadly in line with expectations, economic agents can expect that the interest rate will be set in line with that projected by Norges Bank. If conditions change, as was the case in August, Norges Bank will naturally adapt the monetary policy stance in the light of new economic prospects. Through summer, dramatic falls on stock exchanges and political unrest made the headlines. There are now prospects of lower economic growth in many countries. In both the US and many countries in Europe, public debt is high and fiscal deficits are substantial. At the same time, measures to reduce the deficit in the short term will also dampen activity. Some economists fear a renewed economic setback in the US and the financial markets are characterised by turbulence and uncertainty. The US and EU authorities are facing demanding decision-making processes. In the US, the political parties and the people are divided in their views on taxation and the exercise of central government authority, reflected for example in the absence of measures to strengthen central government revenues. The debt problems in the EU are being aggravated by the lack of a similar coordination of fiscal policy to support the European monetary union. Government finances in many of the countries now experiencing problems have been weaker than required under the EU’s own rules for several years. Measures have been put in place.
On the contrary, I think that appropriate fiscal retrenchment in countries that need it is part of growth enhancement, because sustainable public finances makes a difference in terms of improving confidence of households, enterprises, investors and savers, which is decisive to foster growth and job creation. WSJ: Does the U.S. have it wrong? It is engaging in even more fiscal stimulus. TRICHET: It’s not for me to give a lecture to other advanced economies. We have our own responsibilities. In our own case we strongly believe that fiscal soundness is confidenceenhancing and therefore part of a growth-enhancing strategy. WSJ: In your recent ECB press conference you made repeated references to the July 2008 rate hike and said the ECB is never pre-committed not to move interest rates. Were your remarks over-interpreted as hawkish? TRICHET: I have nothing to add to what I have said last Thursday (ECB press conference on 13 January). You have to place my remarks in the context of the first 12 years of the euro, during which we delivered price stability in line with our definition: less than 2%, close to 2%. When you look at the yearly average since the setting up of the euro it is 1.97%, better than had been done in any such period of time in the previous 50 years. You don’t get this result by chance. We are profoundly attached to our mandate.

That being said all central banks, in periods like this where you have inflationary threats that are coming from commodities, have to go through the hump and be very careful that there are no second-round effects. This is what we are doing. WSJ: When you hiked rates in 2008 there were signs of those second-round effects. Do you see evidence they are starting to take hold in Germany or elsewhere? TRICHET: At this stage, we do not see this. And everybody knows we would not let secondround effects materialize. We will continue to deliver price stability. WSJ: Could the ECB raise interest rates while still maintaining nonstandard measures including unlimited loans to banks? TRICHET: It is our doctrine since the beginning of the turbulence that interest rates on the one hand and non-standard measures on the other hand are decoupled. We design the monetary policy stance; we decide interest rates to deliver price stability in the medium term. Non-standard measures are there to help restoring a better functioning of monetary policy transmission. We are disconnecting both measures. We can move interest rates on the one hand, and we can move non-standard measures on the other hand independently. WSJ: Euro member states are working on comprehensive measures to address the debt crisis. What elements should be in that package? TRICHET: These decisions are the responsibility of governments. We have in particular a very strong message, which is that we need a “quantum leap” in the strengthening of governance of economic and fiscal policies.
The fact that unrest in a market, in this case the mortgage market, spread rapidly to other markets should not surprise anyone who follows financial events in the world. However, on the whole hedge funds have fared well and played a positive role In an efficient market where competition is permitted there will always exist companies who fail in their strategies and default. There are always winners and losers in the financial markets. This time, for example, the winners have been the hedge funds with a short position in the subprime sector, that is, those who have sold securities with subprime content that they have not owned. After the price fall they have been able to acquire the assets at a significantly lower price than they sold them at and have thus earned substantial amounts of money. The losers have had opposite positions or just had strategies in the stock market that did not work. In those instances where individual hedge funds have experienced problems, this has not spread to the financial system overall. As a group, hedge funds have overcome the turmoil relatively well. Indices of the hedge funds’ return fell a few points in August but in September hedge funds as a group once again showed a positive return. During the whole of 2007, the hedge funds have performed better than share indices generally.

5 The reason for this is partly that the hedge funds have not to any great extent been exposed to the subprime sector and partly that they were flexible and could rapidly close positions where they lost money. In addition, the hedge funds generally seem to have had a stabilising role in the financial markets. In some cases hedge funds have had considerable liquidity, seen the large fall in prices as an opportunity, and taken advantage of this to go in as a buyer. In this way they have contributed to, rather than consumed liquidity. It does not appear as though the hedge funds have played a specifically negative role during the turmoil we have seen to date. Nor have the hedge funds triggered it. 4  For instance, see Khandani and Lo (November 2007) “What happened to the Quants in August 2007?”, http://ssrn.com/abstract=1015987. 5  The two indices of hedge funds’ return, the HFRX Global Index and the HFRI Composite, showed an upswing of 4.2 per cent and 10.4 per cent respectively in 2007. For example, this can be compared with the S&P 500 index which rose by 3.5 per cent. BIS Review 11/2008  3  Some reflections on events There are always experiences to reflect upon when unrest arises in the financial markets. It is already possible in this crisis to point at certain weaknesses that have come into focus. Firstly, we have had a clear reminder as to how events can turn suddenly and unpredictably.
In connection with international risk factors, we placed emphasis on the uncertainty surrounding international economic conditions and the concern about the low risk premia in financial markets. I think it is fair to say that developments have borne us out here. Other risk factors were related to the vulnerability of Norwegian bank customers, lower interest margins for banks and the new capital adequacy rules. Uncertainty surrounding developments in international economic conditions and financial markets There has recently been considerable turbulence in international financial markets. Could this have a substantial impact on Norwegian financial markets and could it have serious consequences for growth and employment in Norway? Let us look at the reasons for the turbulence and how it has spread. The source of the turbulence can be found in the US housing market and particularly in the subprime mortgage market. In addition, this type of loan is frequently offered at a low rate of interest with small repayments in the first years of the loan term and a higher interest rate later. Mortgages with this structure involve gambling on a rise in house prices. If house prices rise, borrowers’ collateral will increase in value, allowing the mortgage to be refinanced on better terms. Or the borrower can turn around and sell the dwelling at a profit. This is what happened for a period, but then house price inflation slowed, partly as a result of tighter monetary policy.

Credit premia also increased for other fixed income instruments, such as conventional mortgage bonds, corporate bonds and loans to emerging markets, from summer 2007, although on a far more moderate scale than for subprime-backed securities. In the last half of July, the turbulence spread to other financial market segments. The risk premium required by investors rose, and equity prices fell sharply. The contagion was due to uncertainty as to the risk subprime-backed financial products represented for the financial system, and to a lack of information about who had invested in such products. Conduits and Structured Investment Vehicles (SIVs) were among the investor groups investing in the financial products based on subprime mortgages. As a rule, these investment companies were wholly or partially owned by banks. They invested in assets with a high rating, such as the senior tranche in subprime-backed securities. These investments were debt-financed, primarily in the short-term money market through asset-backed commercial paper (ABCP). High ratings on these assets gave investment companies favourable funding rates. Due to the turbulence in the subprime market, interest rates for ABCP have risen sharply and maturities have been reduced. The flow of money to investment companies through money markets has dried up. Banks have to a large extent had to finance the investment companies themselves. However, this increases banks’ liquidity requirements. There have been examples of banks that did not have the capacity to finance their investment companies.