samchain/econo-pairs-v1 huggingface dataset:
For example, in the aftermath of the crisis in Europe, when the European banks were shrinking their balance sheets and pulling back from their overseas lending, concerns were raised about the fact that the European banks in Malaysia had claims of $ billion on Malaysians, which was equivalent to about 23% of Malaysia’s GDP then. These concerns focused on the impact of a pullback by European Banks on capital flows and the availability of financing to Malaysian companies. What ultimately helped us to alleviate those concerns was the fact that two-thirds of these claims were held by locally incorporated subsidiaries of European banks. Incidences like this not only highlight the fact that being part of the global financial system brings risks of contagion, but it also points to the fact that having prudent policies – in this case, requiring foreign banks to be locally incorporated – can help to mitigate some of these risks. I will have more to say on risk mitigation a little later. The second way that the financial contagion can spread to the domestic economy is through capital flows into domestic asset markets. These create asset bubbles and if the central bank doesn’t intervene, the twin attraction of rising asset prices and an appreciating exchange rate can be an irresistible draw for foreign portfolio funds. If not well-managed, such inflows can create imbalances in the economy and financial system, which will eventually manifest themselves, usually when the flows reverse.

For the ringgit exchange rate market, the past two years have been uniquely challenging. At the end of 2014, the situation appeared rather benign. The ringgit was stable, market liquidity was good, trading activity was healthy with market volumes averaging USD11.8 billion daily while the volume for USD/MYR pair averaged USD8.3 billion in 2014. The subsequent period however, precipitated by the weakening external conditions, falling oil prices and domestic uncertainties have laid bare these notions. Volume and liquidity declined, bid-offer spreads widened and at times, there were one-way markets which exacerbated any movements. Given these developments, 2015 was a year where our actions were primarily geared towards stabilizing the markets. While this was clearly achieved, it was not without cost; a reduction in foreign exchange reserves, a markedly less liquid and volatile foreign exchange market, and a weaker currency. In the midst of this, an important observation that became increasingly evident is the continued vulnerability of our markets to the arbitrary and unpredictable devices of the offshore markets. Adverse conditions brought on by the NDF market Activities in the offshore market, in particular the ringgit non-deliverable forward (NDF) market, had brought on observable adverse impacts to the onshore market. To our disappointment, onshore players had become followers rather than leaders in determining domestic market rates. Consequently, taking the lead from the NDF market, the ringgit exchange rate has been quite volatile since last year, peaking at 23.1% for its 1-month historical volatility and is the highest among regional currencies for this year.
Sooner or later, bubbles burst and, sooner or later, financial imbalances are corrected. The problem is that it is very difficult to predict exactly when this will happen. As we know, asset prices can increase relatively rapidly for many years, perhaps as long as a decade, before a bubble arises and bursts. Individuals expressing concern over the build-up of worrying financial imbalances are often regarded as whining pessimists who have failed to realise that times have changed and that there is no danger this time. I’m sure we all remember the “New Economy” that everybody was talking about during the build-up of the IT bubble. Technological developments had boosted long-term global growth to higher levels, which was reflected in asset prices. Has anybody forgotten what happened next? However, as has been said, no serious macroeconomic problem ever arose from the IT bubble, as it was not funded by loans. When the correction of a bubble finally takes place, it generally has extensive real economic effects, particularly, of course, if it has been funded by loans. The stock exchange drops sharply, even if no great over-valuation has initially been present on the stock market itself. Economic uncertainty and the drop in asset prices mean that consumption and investments become heavily subdued. Risk aversion among financial investors increases and the price of risk, credit spreads, increases. The banks suffer increasing loan losses as the value of collateral falls and more and more borrowers find that they cannot make repayments.

We will participate actively to propagate free and open trading alliances as Asia grows and becomes more economically integrated. In this way, we help to unlock the value, spin off new opportunities and create good jobs for Singaporeans. ASEAN and AEC 2015 One key market for Singapore is ASEAN. ASEAN is a growing region and has a combined population of 600 million people. ASEAN also has a GDP that is the third largest in Asia, after China and Japan. In recent years, ASEAN has embarked on an enterprise to integrate our economies into a regional bloc. ASEAN today, through initiatives like the ASEAN Free Trade Area, has resulted in virtually no tariffs for flows of goods between our countries. Going forward, ASEAN is making good progress towards becoming the single market and product base envisioned in the ASEAN Economic Community (AEC). The realisation of the AEC by 2015 will result in an even more tightly integrated region, and this has opened up more opportunities for corporates as well as investors. A key principle underpinning the AEC 2015 is the free flow of goods, services and investment within the region by 2015. Let me update you on the progress so far. •  1  On trade in goods, virtually all goods in ASEAN already move throughout the region tariff-free1. We are now working on reducing non-tariff barriers. ASEAN-6 countries have eliminated tariffs on 99.65% of tariff lines effective 1 Jan 2010.
In order for the U.S. to reduce its dependence on consumption and to increase its exports, there need to be offsetting adjustments in other countries, such as China. Thus, the key issue to consider in crafting internationally coordinated macroeconomic policy is not whether these adjustments will ultimately take place. They will take place because they have to take place. Instead, the issue for policymakers is whether the policies we put in place will allow adjustments to occur in a way that is consistent with a stable global economy, high levels of employment, and low inflation. At times, the situation is akin to the Prisoner’s Dilemma – a non-cooperative approach will lead to inferior results for both players compared to a cooperative approach in which each side foregoes the chance for highest potential payoff in exchange for the payoff that maximizes returns jointly. But effective cooperation that leads to higher joint returns is difficult in this game because of the complexity of the inter-linkages and the political and institutional constraints that constrain the scope for action at the national level. In macroeconomic terms, the prospects for achieving a more cooperative solution can be enhanced by policy transparency so that the policy goals and reaction function of each authority can be well understood by others. This again applies both within and across countries. For example, the Federal Reserve is making efforts to provide greater clarity about its inflation objective in the context of the dual mandate.

As always, my remarks today reflect my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. We live in a globalized economy in which the flows of products, capital, and ideas across borders have led to significant economic gains for literally hundreds of millions of people around the world. Thus, there is a strong public interest in ensuring that this global economic integration is supported by a coherent set of coordinated national macroeconomic policies and a harmonized international regulatory regime. This applies to the policy actions we undertake to reduce economic imbalances as well as to the regulations we develop to address the vulnerabilities in our financial system that were exposed by the crisis. The better we are able to develop cooperative global solutions to these types of issues, the more successful we will be in creating a sounder and more sustainable global economy and financial system. It is clear that there were important imbalances in both economic and financial activity in the years preceding the financial crisis. For example, in the U.S., too much of economic activity was based on an unsustainable housing boom. The turmoil in financial markets that was unleashed when the boom collapsed subsequently forced the U.S. and other countries to undergo significant adjustments. These adjustments were often sudden. They transmitted large shocks across the global economy. These shocks, in turn, necessitated other adjustments in trade, investment, and in financial markets elsewhere.
In my view, the government must determine its exposure net of the loss absorption capacity provided by the private sector. This includes evaluating the counterparty credit risks generated by any risk-sharing transactions. Risk-sharing must require a payment of cash from the private sector and oversight of the capital and overall risk profile of any participants in risk sharing. Of course, the required private capital should be of high quality and should be determined relative to the total risk associated with a given set of mortgage underwriting standards. This may sound complicated, but it is not brain surgery. The government should bear only the cost of extraordinary systemic risks and the private sector must bear losses associated with  1  The Capital Structure and Governance of a Mortgage Securitization Utility, Federal Reserve Bank of New York Staff Report, Number 644, October 2013. BIS central bankers’ speeches  1  the normal business cycle. If this can be arranged, then the largest portion of the overall guarantee fee will be priced by the market and not by the government. An important design decision for a housing finance system is whether the government backstop will apply directly to mortgage-backed securities, their issuers, or some other legal entity. An institution-based program could erode private sector discipline, while a securitybased backstop would pick up the idiosyncratic and cyclical risks that are better left to the private sector.

Banks have improved their capital positions and profitability since the euro area crisis, and the stock of non-performing loans continues to decline at a moderate pace. But further improvements are needed in parts of the banking sector if banks are to achieve sustainable rates of return. In particular, overcapacity and cost inefficiencies weigh on many banks’ long-term profitability prospects. The better performance of some banks within the euro area, and in jurisdictions facing similar economic and financial conditions, illustrates the importance of addressing structural issues. The current interest rate environment has various implications for the resilience of the banking sector. Banks have benefited, and will continue to benefit, from the lower credit risk for borrowers, and from the higher asset valuations associated with lower interest rates and 1/2  BIS central bankers' speeches  better macroeconomic outcomes. This has helped support bank profitability across the euro area since the deposit facility rate turned negative in 2014. However, the negative interest rate policy also entails costs for banks, and these could increase the longer negative rates are in place, the lower policy rates are set and the larger the amount of excess liquidity held by banks. These vulnerabilities could crystallize if economic growth is much weaker than expected, or if weak growth persists for longer than expected. We thus welcome the measures taken by the banking sector in recent years to improve resilience, and support efforts to further strengthen resilience while conditions are benign.
Continued lending from other parts of the euro area can therefore help cushion the impact and support consumption and investment. In addition, holding foreign bonds – which are less affected by the asymmetric shock – helps maintain income and support domestic consumption. In the United States, these channels alleviate around 60% of the impact of state-level shocks on GDP growth, compared with just 20% in the euro area. Indeed, the contribution of credit smoothing in the euro area was negative during the global financial crisis as cross-border credit provision evaporated, worsening the recessions in the periphery. [2] During the pandemic there have also been sizeable swings in measures of financial integration, albeit more muted than during the financial crisis. [3] Indicators based on the convergence of asset prices declined sharply at the onset of the pandemic, but then rebounded following the ECB’s announcement of substantial monetary accommodation and subsequent progress on European fiscal support packages (Chart 1). Movements in quantity-based financial integration indicators, which reflect cross-border asset holdings, have been slower, but more persistent. [4] Cross-border activity in the unsecured segments of the money markets paused and cross-border equity holdings declined sharply at the onset of the pandemic, posting a partial rebound in mid-2020. Over the past year, financial flows have tended to be characterised by more liquid assets and securities with shorter maturities, pointing to a higher vulnerability to shocks.

In practice, however, there is already a substantial insurance “protection gap”. Only one-third of climate-related economic losses in the euro area are currently insured, a situation that could worsen with climate change. More frequent and severe natural disasters are likely to increase insurance claims, which may result in higher insurance premiums and potentially lead to lower insurance coverage, further widening the protection gap. [6]  Green finance as a driver of financial integration A substantial amount of finance will be needed for there to be a smooth transition to meet the ambitious goals for a carbon neutral economy. But we also need a robust financial system capable of maintaining the flow of credit even if asymmetric shocks happen or if the transition is a little bumpy. That brings me back once more to the importance of financial integration. Progress has certainly been made in stepping up sustainable finance. Since 2015, the assets under management of environmental, social and governance (ESG)[7] funds have almost tripled, the volume of outstanding green bonds has risen tenfold, and the amount of catastrophe bonds has almost doubled (Chart 3, left panel). Chart 3 Investments in ESG funds  Sources: Artemis, Bloomberg Finance L.P., EMIR data, EPFR Global, Lipper and ECB calculations. Notes: Left panel: data on catastrophe bonds are copyright to www.artemis.bm, Steve Evans Ltd. To avoid end-of-year effects, the outstanding amount of emission-related derivatives is the notional value of open positions reported under EMIR as at the end of November. 2015 values are not included due to data unavailability.
Aggregate cumulative UK impairment charges over the five years of the (a) stress Impairments in the stress (left-hand scale) Impairment rates in the stress (right-hand scale) Per cent 25  £ billions 20  20  15  15 10 10 5  5  0  0 UK mortgages  Sources: PRA regulatory returns, published accounts and Bank calculations. (a) Major UK banks’ core Tier 1 capital as a percentage of their risk-weighted assets. Major UK banks are Banco Santander, Bank of Ireland, Barclays, Co-operative Banking Group, HSBC, Lloyds Banking Group, National Australia Bank, Nationwide, RBS and Virgin Money. Data exclude Northern Rock/Virgin Money from 2008. (b) Between 2008 and 2011, the chart shows core Tier 1 ratios as published by banks, excluding hybrid capital instruments and making deductions from capital based on FSA definitions. Prior to 2008 that measure was not typically disclosed; the chart shows Bank calculations approximating it as previously published in the Report. (c) Weighted by risk-weighted assets. (d) From 2012, the ‘Basel III common equity Tier 1 capital ratio’ is calculated as common equity Tier 1 capital over riskweighted assets, according to the CRD IV definition as implemented in the United Kingdom. The Basel III peer group includes Barclays, Co-operative Banking Group, HSBC, Lloyds Banking Group, Nationwide, RBS and Santander UK. (e) CET1 ratio less the aggregate percentage point fall projected under the Bank of England’s 2016 annual cyclical stress scenario for the six largest UK banks.

The availability of policy spaces in fiscal, monetary and financial policies provided a cushion for the economy to withstand, shocks both domestic such as our own flood, and external from the risks of a global slowdown. You may be reading market commentaries on the rise in household debt and credit growth in Thailand. Let me remind you that those were the very issue raised by the Bank of Thailand. Successive Monetary Policy Committee statements have pinned these as issues of concern to the MPC even though there were calls for a reduction in policy rates. Our traditional bias towards conservatism and our strong belief in looking beyond shortermism, kept us steadfast in our mission to be the voice of conscience and moderation. Through these repeated messages, the banking system and the property sectors, through their own reevaluation of risks and returns, have put on their own brakes and are now proceeding more cautiously. The economy overall is also benefiting from the slower pace of activities which were they to continue, would risk the build-up of imbalances in the property sector or household balance sheet. Connecting Thailand to the new investment frontier To enable Thailand to enjoy the benefits from the new investment frontier requires the continued pursuit of sound macroeconomic and financial policies. It also requires improvement on the supply side, ie the investment in infrastructure, education and innovation to raise the competitiveness of the country. This is a forward looking chapter that is unfolding.
In my remarks, I will discuss the U.S. economic outlook and the implications for U.S. monetary policy. I will focus primarily on last month’s Federal Open Market Committee (FOMC) “lift-off” decision – the first increase in the federal funds rate target range in nearly 10 years. I’ll explain what motivated my vote to begin to normalize U.S. monetary policy. I’ll also offer a preliminary assessment of how things are going so far – both with respect to how the U.S. bond market reacted to lift-off and how well our new tools are working as we begin to push up short-term interest rates. Both issues are pertinent, as money market rates have spent a very long time close to zero and we have never attempted to tighten monetary policy with such a large balance sheet and high level of excess reserves. To summarize my conclusions: Generally so far, so good on both fronts. Looking ahead, I’ll talk about what comes next. No surprises here – it depends on the data. As noted in the December FOMC statement, we expect that the normalization of monetary policy will be quite gradual. But, there is no commitment here. The flow of the data – broadly defined – will drive our actions as it influences our assessment of the economic outlook and our view of the stance of monetary policy best suited to achieve our dual mandate objectives of maximum sustainable employment and price stability.

BIS central bankers’ speeches  9  price movements are large, LFT market-making is driving in the dark, stock-picking with a safety-pin. During the Flash Crash, many traders suffered just this problem. Message traffic resulted in delays in disseminating quotes for over 1000 stocks. These delays lasted for up to 35 seconds. As a result, discrepancies emerged between the prices of common stocks trading on different exchanges (Chart 13). Faced with such uncertainty, a number of market participants paused or halted trading. The equilibrating force of long-term investors went missing. Bargain-hunting shoppers simply had no price list. The combined effects of these inventory and information problems is to widen the bid-ask spreads LFT market-makers charge. Greater execution risk and uncertainty calls for a larger insurance premium. This, too, may have an adverse feedback effect on financial market pricing. That is because it is likely to render uncompetitive LFT firms relative to HFT firms able to charge tighter spreads. Market-making will increasingly congregate around HFT firms proffering these lower spreads. If the way to make money is to make markets, and the way to market markets is to make haste, the result is likely to be a race – an arms race to zero latency. Competitive forces will generate incentives to break the speed barrier, as this is the passport to lower spreads which is in turn the passport to making markets. This arms race to zero is precisely what has played out in financial markets over the past few years. Arms races rarely have a winner.
But I would expect that there is enough potential here to ensure that the debt markets in Hong Kong as well as in the wider region continue to develop and prosper as we look ahead. BIS Review 57/2000  4

However, today I would like to return instead to the subject of liquidity regulation. 1  One important pre-requisite is that the authorities have access to up-to-date and accurate information about financial firms, on which they can base shared assessments of the position of individual firms and the likelihood of a crisis affecting the financial system as a whole. The information needed includes, inter alia, a firm’s group structure, capital, liquidity asset holdings, large exposures, and its involvement in markets and in payment, clearing and settlement systems. This information can be collectively thought of as a ‘Fact Book’ on a firm. In some countries much of this information is already available. The FSA recently published a paper outlining the information that the UK authorities collectively deem it necessary to have in a financial crisis, and asking for firms’ cooperation in making available a limited amount of additional information that is not already collected on a routine basis. 4  BIS Review 79/2005  The potential willingness of the authorities to supply discretionary—as opposed to routine—liquidity in a crisis is likely to give rise to moral hazard, because in the real world, faced with incomplete information, it is difficult or impossible to identify ex ante a ‘pure’ liquidity crisis. By, for example, relaxing normal criteria on collateral quality authorities may move from the injection of liquidity to what is effectively the provision of risk capital.