samchain/econo-pairs-v1 huggingface dataset:
4  See the Financial Times article “Draghi attacks bankers over ECB fears” from 9 February 2012. 5  Philippon, T., and P. Schnabl, (2013) “Efficient Recapitalization”, Journal of Finance, 68(1), 1–42. 2  BIS central bankers’ speeches  bank resolution, which are founded on a strong change of culture – from easy public bailouts to a new culture of private bailing-in 6 – clearly go in the direction of preventing these distortions, while retaining the possibility of direct recapitalisation to safeguard financial stability. 7 The new resolution framework that is going to be implemented in Europe will help to support a sustainable growth of the financial sector by inducing financial institutions to internalise the negative spillovers originating from their failures. Thomas Philippon and his co-authors – among whom is the winner of the 2011 Germán Bernácer Prize, Lasse Heje Pedersen – have also contributed to the literature on systemic risk, a topic of particular policy relevance in which the ECB has also invested considerable research efforts. 8 In this paper, the authors argue that a financial institution’s contribution to systemic risk might be measured by its propensity to be undercapitalised when the system as a whole is undercapitalised – the “systemic expected shortfall”. They also advocate the introduction of a “tax” proportionate to each bank’s systemic expected shortfall which should cover losses in the event of a crisis. Let me now turn to Thomas’s second research area, namely dealing with the efficiency of the financial sector.

This line of research points to the wide range of subjects that interest Thomas Philippon already shown in his 2007 book “Un capitalisme d´héritiers: la crise française du travail” 12  6  See speech by Vítor Constâncio: Banking Union: meaning and implications for the future of banking at the Banking Union Conference, Navarra University, Madrid 24 April 2014. 7  See the opening speech entitled “The implications of bail-in rules for bank activity and stability” by Benoît Cœuré at the conference “Financing the recovery after the crisis – the roles of bank profitability, stability and regulation”, held at Bocconi University on 30 September 2013. 8  Acharya, V., L. H. Pedersen, T. Philippon and M. Richardson, (2010) “Measuring Systemic Risk,” working paper. 9  See, for example, the Vox article entitled “Finance and growth: Too much of a good thing?” by Thorsten Beck, 27 October 2013. 10  Philippon, T., (2010), “Financiers versus Engineers: Should the Financial Sector be Taxed or Subsidized?”, American Economic Journal: Macroeconomics, 2(3), 158–182. 11  Philippon, T. and A. Reshef, (2012) “Wages and Human Capital in the U.S. Finance Industry: 1909–2006”, Quarterly Journal of Economics, 127(4), 1551–1609. 12  Philippon, T., (2007) “Un capitalisme d´héritiers: la crise française du travail”, Éditions Seuil. BIS central bankers’ speeches  3  where he musters a lot of empirical evidence to show that the labour crisis in France stems from bad employers-employees relations associated with a system that “preserves inheritance, direct or sociological”.
They do not reflect the underlying investment approach of the MAS which is conservative and emphasises steady, long-term returns. The profit outturn for the last FY reflects positive currency translation effects and higher investment gains. MAS’ underlying foreign investment gains remain fairly stable at $ billion on average. In FY2016/17, MAS made a gain of $ billion from its investment of the official foreign reserves. 5 / 10  BIS central bankers' speeches  Currency translation effects, reflecting the depreciation of the Singapore Dollar against some major currencies, amounted to $ billion. Foreign investment gains therefore amounted to $ billion, compared to $ billion the previous FY. The increase was due to higher interest and dividend income, higher realised capital gains and lower valuation provisions made as global markets rose over the period. In fact, taking the two FYs together, the foreign investment gain averaged $ billion, not much higher than the average of $ billion recorded in previous years. A CLEAN AND TRUSTED FINANCIAL CENTRE Last year, I spoke about how the growth of Singapore’s financial centre has been underpinned by its reputation as a clean and trusted jurisdiction. Upholding high standards of integrity in the financial industry is an absolute priority for MAS. That is why we took very seriously the lapses in anti-money laundering controls among some of our financial institutions with respect to suspicious 1MDB-related transactions.

Working closely with the Commercial Affairs Department and the Attorney-General’s Chambers, MAS undertook a rigorous probe of these transactions which were part of a large, complex, cross-border money laundering scheme. Last year, I said that the findings on the 1MDB-related transactions that flowed through here had made a dent in our reputation as a clean and trusted financial centre. I believe we have begun the process of restoring that reputation. We have taken tough and unprecedented enforcement actions and sent an unequivocal message that MAS will not tolerate the criminal abuse of Singapore’s financial system. Just last month, we announced the completion of an intensive two-year long review of banks connected to 1MDB-related transactions known to-date. All in, we have closed 2 merchant banks and fined 8 banks nearly $ million – the heaviest aggregate financial penalties to-date. We have also issued prohibition orders (POs) against 4 individuals and served notices of intention to issue POs against 3 others for various regulatory breaches. MAS also issued lifetime bans, for the first time, against 2 of these individuals. MAS’ regulatory actions so far are based on what we know to-date. Thanks to excellent co-operation we have had with overseas jurisdictions, Singapore authorities were able to obtain good intelligence and piece together most of the significant flows from end to end. We have found nothing new in the latest filing by the US Department of Justice that warrants further action by us.
The banks, which are particularly important because of the role they play in the payment system, are better capitalised than they were a decade ago. Credit risk management has also improved considerably. This applies in particular to the Swedish banks, which are now much better equipped to manage risks than they were prior to the bank crisis at the beginning of the 1990s. Central banks and financial supervisory authorities have also become better at assessing risks. Looking back, the really devastating bank crises have stemmed from a combination of soaring property prices and rapid growth in bank lending, and they have often taken place in countries with a fixed exchange rate. A growing number of central banks now closely follow macroeconomic factors that could lead to a build-up of imbalances in the financial system and publish their conclusions in special stability reports. The Riksbank is one of the forerunners in this field, based on the experiences gained from the Swedish bank crisis. For some years now, the IMF has carried out assessments of the functioning and safety of the entire financial sector in both developing countries and industrial nations. Sweden was subject to one of these FSAPs (Financial Sector Assessment Programs) last year and this year it will be the turn of Japan and the United Kingdom. These assessment programs compare the entire financial systems of the countries; banks, clearing houses, payment systems, legislation, supervisory authorities, central banks, etc. with the "best practice" in the world and any shortcomings are pointed out.

Low interest rates and household indebtedness I would like to conclude by saying something about my view of household indebtedness. However, before I discuss the last of the three risks that I associate with a low real repo rate I would like to clarify a matter of principle. I am one of those who believe that a long period with low interest rates can lead to various imbalances. Such imbalances can arise, for example, if credit growth is too rapid, if asset prices increase too much or if the price of financial risk is set too low.8 Unbalanced development is characterised by the fact that, for one reason or another, an excessive level of indebtedness arises in the economy. If the economy has fallen into a recession following such a period, the recovery may be very slow as households and companies will spend a larger part of their incomes on amortization payments rather than on consumption and investment. The financial crisis of 2008–2009 is the latest example that clearly demonstrates  8  For a similar discussion see, for example http://www.norges-bank.no/en/about/published/speeches/2012/annualaddress/ or 80th Annual Report, June 2010. BIS. BIS central bankers’ speeches  11  how important it is to avoid such a situation. The US economy fell into recession in early 2008 as a result of problems on the housing market and an excessive expansion of credit in the household sector.
At the end of 2007, it accounted for about 60 percent of the global sukuk outstanding which now amounts to about USD100 billion. The sukuk market has been an important source of financing for productive investment activities, while for investors, it provides great potential for diversification into new asset classes. The issuance of sukuk has not only become a means of raising financing but it also provides access to a wider base of investors, both Islamic and conventional. The Malaysian bond market has also been liberalised to enable non-resident corporations to raise ringgit and foreign currency denominated funds from our market. International issuers may thus issue multi-currency sukuks or alternatively have the flexibility to swap domestic currency funding into other currencies. Stamp duty exemption for ten years beginning 2007 has been granted on these instruments. There is also withholding tax exemption on income earned by non-residents for investments in ringgit and non-ringgit Islamic securities. With the growing maturity of the market, it has been able to efficiently manage significantly large size issuances. Recently, a Malaysian telecommunications company issued the largest-ever sukuk in the world market that amounted to an equivalent of USD4.7 billion. Though the size was large, the issue was two times oversubscribed, indicating the depth of the market. As an investment destination, the Malaysian capital market offers a wide range of world class products. More than 85 percent of the companies listed on the Stock Exchange are Shariah compliant, representing about 60 percent of total market capitalization.

Zeti Akhtar Aziz: Economic outlook and business opportunities in Malaysia Opening remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 5th IFSB Summit "Economic Outlook and Business Opportunities in Malaysia", Amman, Jordan, 12 May 2008. *  *  *  It is my pleasure to welcome you to the Malaysia Country Showcase held in conjunction with the 5th Islamic Financial Services Board Summit. On behalf of the Malaysian delegation, I wish to thank you for your presence here to give us this opportunity to share with you the Malaysian business proposition and our drive to strengthen trade and investment ties between our regions. We have with us today a special panel to discuss the business potentials and opportunities in Malaysia. We are very pleased to be here in Jordan and to be given this opportunity to hold this event in this beautiful country. The current global economic and financial environment is being confronted with new challenges and uncertainties. The financial crisis in the United States has spread to other parts of the world, increasing the prospects for a global economic slowdown. We are seeing in the global financial markets, banks continuing to de-leverage and reducing lending activities, resulting in a contraction in credit supply. Going forward, financial markets are expected to continue to be volatile. In this environment, the fear of contagion is prompting investors to spread their investment and business risks and to search for new asset classes and for markets that provide stability.
By comparison, we are still in the Stone Age in respect of deploying macroprudential policies. There is lots of scope for academia to help us out here, on both the theoretical and empirical fronts. Even so – indeed, in large part because of that state of relative ignorance – I think one can lay out some key principles that should govern the deployment of the FPC’s tools. It will be very easy for the future FPC, particularly during long periods of tranquillity, to slip into the temptation of neurotically twiddling the dials on its instruments or issuing recommendations left, right and centre. But what will determine the worth of the FPC will be whether it is successful in heading off the really big risks – in other words, avoiding a repeat of the sort of crisis we have just experienced. Ensuring resilience, rather than fine-tuning the credit cycle, must be the name of the game. Second, when the FPC does find it necessary to act, it will need to show resolution in taking the punchbowl away as the party is just getting going. With recent events so fresh in everyone’s memories, this may not seem much of an issue now. But in a decade or two’s time, when recent events have receded into history, such actions will be less welcome. No doubt there will be plenty of people willing then to claim that “this time is different” and that the FPC’s actions are unnecessarily inhibiting growth.

So, as yet, we do not seem to be in a liquidity trap in which yields can be pushed down no further. What to my mind is a more open question, though, is the degree of traction these lower yields have on demand at the present juncture. Looser monetary policy works in large part by encouraging households and businesses to bring forward future spending to the present. It is plausible, however, that such intertemporal substitution will be weaker when uncertainty is elevated and when banks and some households are concentrating on repairing their balance sheets. For instance, a modest fall in the cost of capital may do little to boost investment spending when the environment is so dominated by uncertainty about the outlook for demand. To illustrate this, Chart 9 shows the results from CBI business surveys of the factors holding back investment spending at the current juncture. Uncertainty about the outlook for demand is far and away the dominant factor. That does not mean that quantitative easing is impotent, as demand will still be affected by the wealth effect from the higher asset prices, as well as by any related exchange rate depreciation. But I think there are reasons to believe the effect of lower yields may be weaker than usual at the current juncture (in old speak, the IS curve may be quite steep, even though the LM curve may not be absolutely flat).
Regulation and home-host issues There are many issues at the table, but in the context of this presentation I would like to divide them into two categories. The first category includes the issues of what regulations should be imposed on institutions and markets in the EU. How can we design laws and regulations that are flexible enough to fit all countries reasonably well, while strict and “harmonised” enough to support a single market? The second category is essentially about the relationship between supervisors and central banks in different countries – the division of labour, power and responsibilities. This category of issues has come to be broadly referred to as the home-host issues. I will just give a short comment on the regulatory issues, while devoting the rest of my time to the home-host issues. Regulation Regulation on the EU-level first of all faces the same basic trade-off as on the country level. The Riksbank’s view is that since almost all regulation involves costs – in terms of lower efficiency and growth – it should be the last resort and used only when there is a clear case of market failure. Some regulation is surely needed to ensure a stable and sound financial system and necessary consumer protection. But too much or too strict regulation will give rise to new costs that are higher than the original costs that regulation initially aimed to address.

In the event of a crisis it can only hope that the home country will take the host country’s situation into account when managing the crisis. The home country, on the other hand, faces a situation where it could be necessary for its central bank to provide emergency liquidity assistance (ELA) to support a bank which has a large part of its activities in other countries. Should the bank need to be reconstructed it would be the home country’s tax payers that would have to foot the bill – either by supplying the necessary capital to the bank or by supporting the deposit guarantee system with the funds needed to pay out insurance to the bank’s depositors. The imbalance between home and host countries may be further deepened by differences in size between the two countries. One case will be that of a big home country and a smaller host country. The banking group’s exposure to the host country is then probably relatively small on a consolidated basis. This results in the home country authorities spending relatively limited resources – in terms of staff – on the foreign subsidiary’s activities in the host country. If such a banking group runs into problems, the home country authorities will not necessarily view it as systemic, while the host country authorities certainly will do. How to deal with the home-host asymmetry?
The draft Budget and the Stability Programme Update have introduced measures to increase pensions above the level established by the Revaluation Index, in 2018 and 2019, and to delay the entry into force of the Sustainability Factor, from 2019 to 2023. Allow me to reiterate what I have said in various addresses regarding this matter: it is a priority that we define, in accordance with social preferences, the substitution rates for the pension system that it is sought to ensure; and then, that we adjust revenue accordingly, so that sustainability is ensured. I believe this is a structural issue, requiring a debate not confined to the habitual discussions of an annual budget. Conclusions To conclude, I wish to highlight the fact that the Spanish economy is in its fifth consecutive year of growth, with the prospect that this trend will continue in the coming years, albeit at progressively more moderate rates. Set against this baseline scenario are a series of risks, which might shorten or moderate the current upturn. Accordingly, efforts to continue improving the Spanish general government budgetary position should not be delayed, so as to be able to effectively withstand potentially negative future developments. In this respect, fulfilment of the objectives set in the draft State Budget for 2018 and in the recent Stability Programme Update is crucial. Success will require strict implementation of spending policies and the continuous monitoring of revenue.

With respect to welfare benefits, the Stability Programme reflects the 1.6% settlement for the revaluation of public pensions, both in 2018 and 2019. This increase will be 3% this year, 2018, in the case of minimum and non-contributory pensions. I shall later return to this. In any event, given the trend growth in the number of pensions and the substitution effect arising from the new pensions replacing those that are terminated, which are generally higher than was earlier the case, the forecast growth in the budget earmarked for welfare benefits in 2018 (3.7%) may also be surpassed. Among the remaining expenditure items for this year, goods and services purchases will notably continue to be contained, and interest payments to decline, while there will be a significant increase in public investment. This latter development is partly in response to the inclusion in 2018 of the expenditure associated with amounts for which the government may be liable under the insolvency-related legal proceedings currently affecting certain toll motorways. But even after adjusting for this effect, public investment is expected to be more expansionary than other items, as was the case in 2017. All told, public investment is expected to stand at 2.1% of GDP in 2018, excluding the temporary effect arising from the above-mentioning legal proceedings, a level far below the average for the previous two decades, which was 3.6%. Overall, it may be concluded that the attainment of the budget deficit target for this year, namely 2.2% of GDP, is subject to significant risks.
An increasing number of households experienced problems meeting their payment obligations, which led to problems in the US mortgage market. The  2  BIS Review 162/2009  problems then spread quickly to other countries with banks that had invested in the new financial products. These banks were not able to estimate the contagion risks in full, as the risks in these products were difficult to assess and even the credit rating agencies underestimated them. Uncertainty over the size of the problems led the banks to tighten their lending, which in turn impaired consumption and investment. Inadequate supervision and regulation With regard to the supervision and regulation of the financial markets, there has clearly been a lot left to desire in several areas. Supervision in the United States in particular appears to have been inadequate. The trade in OTC derivatives 2 exploded and many new, complicated financial instruments were introduced onto the market. This made the banks’ counterparty risks larger and less transparent. Nor were the financial supervisory authorities fully aware of the contagion risks in these new instruments. The complex financial instruments created in the search for yield when interest rates were very low did not comprise a problem as long as the situation on the financial markets was stable, but when the turbulence increased, it became very difficult to understand and evaluate these new instruments.

3 Today, with my focus on the mortgage and real estate markets, I would like to explain the cyclical dimension of systemic risks in greater detail. Experience shows that cyclical systemic risks often stem from the mortgage and real estate markets. Upheavals on these markets after periods of excessive price and credit growth have repeatedly triggered chain reactions with a negative impact on the banking system, public finances and the economy as a whole. History also shows that crises originating in mortgage and real estate markets entail particularly high costs for the economy as a whole, for example by causing recessions that are typically long and severe. 4  3 4  Cf. Zurbrügg F., After the storm: ten years on, how weatherproof is the Swiss banking system today?, speech held at the University of Lucerne, 6 September 2018. Cf. Jordà, O., M. Schularick, and A.M. Taylor (2015), ‘Leveraged bubbles’, Journal of Monetary Economics, vol. 76(S): 1–20. Page 3/12  Let me remind you of the example from Switzerland in the early 1990s. After a long period of rising real estate prices, mortgage interest rates increased and prices declined significantly. This triggered a banking crisis, which in turn led to a recession and a lengthy phase of economic stagnation. The global financial crisis of 2008 was also closely connected with declining prices on real estate markets, particularly in the US, the United Kingdom, Spain and Ireland. In this case, lax lending standards prior to the crisis proved to be a key factor.