samchain/econo-pairs-v1 huggingface dataset:
The extent of pre-positioning varies across firms, however, and we hope to continue to both sign up new counterparties and encourage firms to increase further the quantity of pre-positioned collateral over time. b)  Addressing perceptions of stigma  The latest data, published in the Bank’s Quarterly Bulletin this week, show that there was no borrowing under the DWF between its introduction in late 2008 and 30th September 2011. In part, that is likely to reflect the fact that the UK banking system (in aggregate) has not been short of sterling liquidity over this period – the Bank has injected large amounts of liquidity through a variety of operations including both the SLS and expanded LTR operations. And since early 2009 asset purchases under the MPC’s QE programme have mechanically led to a large increase in the stock of central bank reserves. Of course more reserves in total do not ensure an appropriate distribution of liquidity across individual banks – but it does help. Some people have suggested that lack of use of the DWF may reflect concerns about stigma attached to such support facilities. Stigma might arise from counterparty concerns that their use of the DWF would be detected, coupled with a perception by others that only weak institutions would ever use a bilateral, on-demand facility. In fact, as we have made clear, the DWF is not there to support a failing firm – when borrowing from the DWF, firms must have convinced the Bank of their ability to repay.

Based on the examples of negative interest and foreign exchange market interventions by the SNB, I have shown that the requirements, scope and complexity of analyses as well as the importance of regular market contacts have significantly increased in this environment. Unconventional monetary policy has extended central banks’ reach in the financial markets, and their direct influence on various financial markets has increased. To reiterate, this is desirable from a monetary policy perspective since it helps to transmit the required monetary policy stimuli to the economy and inflation. Just how much the activity, sometimes intensive, of central banks on the financial markets has changed traditional price relationships and correlation patterns is difficult to answer definitively. However, it is still the case that financial market prices reflect investor expectations for the future development of the economy and inflation. I would like to thank you for your attention, and hand over to my colleague Dewet Moser.
As a result, there is a lack of integration of GRC across business areas or functions. 2. New regulations and pressure for integrated risk management  2.1 During the past few years, regulatory and compliance requirements of the financial institutions have strengthened globally. Since the first updating of the Basel Capital Accord in the late 1990s, the Sarbanes-Oxley Act in 2002, the launch of new regulations seems to  2  BIS Review 15/2008  have become more frequent. With these new requirements, financial institutions are facing an amplified focus on risk management with risk based performance measures and capital allocation. Rating agencies too have expanded their analysis of Integrated Risk Management practices when determining credit ratings. 2.2 The Financial Services Authority (FSA) in the UK, which has come under much criticism in recent times due to the failure of Northern Rock, has published its risk outlook report in 2008, which has identified 5 priority risks. Although some of these may not be directly relevant or applicable to Sri Lanka’s financial institutions, they are common risks that need to be flagged by the Boards of Directors of financial institutions. The priority risks set out by the FSA are: •  Existing business model of some financial institutions are under strain as a result of adverse market conditions. Given the nature of financial business, i.e.

Considering the fiduciary responsibility of the Boards towards their stakeholders, and in the interest of wider financial system stability, the Central Bank issued directions on corporate governance in December 2007, requiring the banks to streamline their governance practices commencing from 2008. 3.2 The implementation of the Basel II framework from January 2008 is another enhancement to the regulatory structure, which requires the financial industry to have a better risk management framework. Most of the leading banks have set up independent risk management and compliance divisions to monitor bank-wide risks. These institutions should now focus in moving forward to implement advanced approaches under Basel II framework by setting up data warehouses and sophisticated IT systems in order to have better risk management and compliance. Similarly, the adoption of International Accounting Standards such as IAS 32 & 39 and IFRS 7, which deal with disclosures, presentation, recognition and measurement of financial instruments, also highlight the need for an integrated risk management, disclosures and compliance. There is, however, reluctance by banks to build robust IT infrastructure and advanced IT frameworks due to the high cost of investment and the time it would take to reap the benefits. It is important that banks and financial institutions change this mindset to pave the way for a GRC management and also to avoid operational losses due to product failures and frauds. Risks arising in these areas could spread beyond the financial institution concerned and have the potential to affect the entire industry. 4.
But in a new and rapidly changing international financial system, the instruments that the international financial institutions have at their disposal seem to be increasingly inadequate. They soon found out that they can no longer use traditional strategies to deal with novel and unprecedented problems thrown up by constantly changing technologies and ever more sophisticated market practices. The striking thing about these problems is that they erupt without much warning and to the surprise of even the most knowledgeable in this field. They are also not specific to individual economies: market liberalisation and globalisation have made them common problems for all economies that wish to play a part in the international financial system. Indeed, with a few economies in Asia going through the same process of financial liberalisation and encountering the same problems, the crisis was characterised as one specific to Asia, hence the reference to the Asian financial turmoil. BIS Review 47/1999  2  But explanations of the financial crisis soon moved from regional to international. Events in Russia and Latin America, the Long Term Capital Management (LTCM) episode, and the subsequent deleveraging of hedge funds soon made it clear that our regional crisis was more than just a problem of a few individual economies not keeping their houses in order. The root of the crisis is in the great increase in the speed, quantity and unpredictability of international capital flows.

But more importantly, gathering and processing this information is costly. There is no incentive for the various investors to incur these costs if they believe that others will do it and thus ensure the efficiency of the market. When banks are engaged in financial intermediation, they gather and process the information concerning their borrowers through their customer relations. Bank intermediation is therefore a means of overcoming the problems of the asymmetry of information and its accessibility. However, on a securitised market, where borrowers are directly in contact with lenders, this solution does not exist. The rating system is an answer to the problem, as it enables all players to have access to simple, clear and concise information on the credit risk attached to the various classes and categories of financial instruments. The rating activity has expanded in parallel with that of bond markets. All major issuers are now rated by one or more rating agencies. For them it is a sine qua non condition for widening their investor base. The rating system goes hand in hand with the development of large liquid, deep and international markets. It is a precondition and a tool for ensuring the smooth functioning of these markets. Securitisation, as we know it today, and which underpins national and international financial activity, would be impossible without these ratings. A further step was made with the expansion of structured products. The role of rating agencies now extends well beyond that of mere information providers.
•  Support financial stability. Unsustainably high property prices could create risks of financial stability given the banking system’s loan exposure to property. •  Encourage greater financial prudence. The combination of global low interest rates and high asset prices could lead to some households over-extending themselves financially. 26 How far have these policy objectives been met? •  There are some indications that property market is stabilising. The private property price index has moderated by cumulative 3.3% over the last three quarters. This has alleviated the pressure on headline inflation, as I have explained earlier. •  The banking system is resilient to property market shocks. Stress tests of our banks during last year’s Financial Sector Assessment Programme by the IMF showed they were resilient against various stress scenarios. These stresses included a combination of: domestic interest rates increasing by more than 200 bps; unemployment rate rising above 10%; cumulative decline in equity prices up to 70% over three years; and cumulative decline in residential property prices up to 50% over three years. MAS’ own stress test this year – assuming disorderly unwinding of quantitative easing in US and higher level of USD funding squeeze – shows similar results. •  Household balance sheets are in better shape. Last year I highlighted MAS’ concerns over rising household leverage. Property-related measures have helped to strengthen overall household balance sheets in two ways. First, they have tempered the growth of household debt.

57 As I had explained on previous occasions, MAS’ overall profit position is strongly influenced by currency translation effects – these are the effects of converting value of our reserves in foreign currency to Singapore Dollars (SGD). •  A weaker SGD means a positive translation effect, i.e. investment gains on our foreign assets are amplified when reported in SGD. •  Conversely, a stronger SGD means a negative translation effect, i.e. investment gains are smaller or even negative when measured in SGD. But these translation effects have no bearing on the international purchasing power of MAS’ reserves. 58 Therefore, it is important to look at the underlying investment gains holding the SGD exchange rate constant to strip out currency translation effects. When we do this, for FY2013/14, MAS posted foreign investment gains of $ billion, comparable to investment gains of $ billion for FY 2012/13. 59 For this financial year, we recorded positive translation effects as SGD weakened against the USD, EURO and GBP. In the last financial year, we had negative translation effects because the SGD appreciated against these three currencies as well as the JPY. 60 To help make sense of MAS’ underlying investment performance, we have provided a write-up on page 27 of annual report, showing the overall profit position, currency translation effects, and investment gains. 61 As shown in the chart on page 27, MAS’ investment gains have been relatively stable.
10  5  5  4  4  3  3  2 1974  1982  1990  1998  2 2006  Note: Inflation and growth have been calculated as in figure 1 over the same country groups. Volatility is measured as the standard deviation, over a rolling window of five years. Source: IFS. 8  BIS Review 74/2008  Figure 3: Inflation volatility in developing economies: IT versus non IT  6  6  4  4  2  2  0 1998  2000  2002 Non-IT  0 2006  2004 IT  Note: Inflation has been calculated as in figure 1. Volatility is measured as the standard deviation, over a rolling window of five years. Countries were considered part of one group when more than 50% of the window corresponded to that group. Source: IFS. Figure 4: Real WTI oil price $ of February 2008 per barrel)  120  120  100  100  80  80  60  60  40  40  20  20  0 1947  0 1962  1977  1992  2007  Note: Price deflated by US Producer Price Index. Source: Bloomberg.

Ball, L. and N. Sheridan (2005), “Does Inflation Targeting Matter?” in B. Bernanke and M. Woodford (eds. ), The Inflation-Targeting Debate, University of Chicago Press. Blanchard, O. and J. Gali (2007), “The Macroeconomic Effects of Oil Price Shocks: Why are the 2000s so different from the 1970s?” Working Paper Series N°13368, NBER. Blanchard, O. and J. Simon (2001), “The Long and Large Decline in US Output Volatility,” Brookings Papers on Economic Activity, (1) pp. 135-164. Bernanke, B. (2004), “The Great Moderation”, remarks by the Governor at the meetings of the Eastern Economic Association, Washington, DC. Betancour, C., J. De Gregorio and J. Medina (2008), “The Great Moderation and the Monetary Transmission Mechanism in Chile,” BIS Papers No. 35, Bank of International Settlements, pp. 159-178. Cavallo, E. (2007), “Output Volatility and Openness to Trade: A Reassessment”, Working Paper No.604, Inter-American Development Bank. Cecchetti, S., A. Flores-Lagunes, and S. Krause (2005), “Sources of Changes in the Volatility of Real Growth,” in C. Kent and D. Norman (eds. ), The Changing Nature of the Business Cycle, Proceedings of a Conference held at the H. C. Coombs Centre for Financial Studies, Reserve Bank of Australia. De Gregorio, J. (2007), “Defining Inflation Targets, the Policy Horizon and the OutputInflation Tradeoff,” Working Paper N°415, Central Bank of Chile. De Gregorio, J., O. Landerretche and C. Neilson (2007), “Another Pass-Through Bites the Dust? Oil Prices and Inflation,” Economía, Volume 7, Number 2, Spring, pp. 155-196.
The interest rate set by central banks is normally a very short-term interest rate, which in itself has negligible effects on economic decisions. It is mainly expectations about future policy rates that affect market interest rates and thus economic decisions. Most central banks communicate future policy intentions in one way or another. The majority of central banks communicate indirectly through forecasts based on technical interest rate assumptions, and by giving verbal signals about future interest rate decisions in policy statements and speeches. With such indirect communication, the market participants gain information about the sign of future interest rate decisions, but may have less information about the size. Until November 2005, Norges Bank used technical interest rate assumptions in the inflation forecasts, but also on some occasions commented on whether the Bank intended to follow a different policy than what seemed to be reflected in market interest rates. Thus, the Bank gave signals about the sign of future policy intentions relative to market expectations, but not on the size. 3 From November 2005, Norges Bank started to use endogenous interest rate forecasts in the Monetary Policy Report. Norges Bank was the  1  This process has also been acknowledged by the Norwegian parliament: “The majority think that it is a prerequisite for an effective monetary policy that the central bank is open about the interest rate forecasts, and are satisfied with the fact that Norges Bank emphasises this.” (Innstilling frå finanskomiteen om Kredittmeldinga 2007, Innst.S.nr.274, s.11.

One natural cross-check is market expectations about the future interest rate, as represented by implied forward interest rates (adjusted for risk and term premia). In addition, simple interest rate rules like the Taylor rule and other variants suggested in the literature provide potentially useful cross-checks. Experiences What are our experiences of our communication approach? The ultimate objective of our communication is to achieve better outcomes in terms of improved stability in inflation and the real economy. However, with less than three years of being fully transparent about our future policy intentions, it is too early to draw a conclusion regarding macroeconomic stability. An intermediate objective of communication is to provide a better understanding of the Bank’s reaction pattern. One test of this to consider the volatility of market interest rates on the day Norges Bank decides the interest rate. If the new communication approach has been successful, one should expect that the interest rate decisions are more predictable. Chart 5 shows the magnitude of market rate changes on the day the interest rate is decided. We see that volatility in market interest rates has on average been smaller after we started publishing our interest rate forecasts. Although one cannot exclude the possibility that the  4  BIS Review 94/2008  reduction in volatility is caused by other factors than policy communication, it seems that our reaction pattern has become somewhat better understood.
Karolina Ekholm: How can financial crises be avoided in Sweden? Speech by Ms Karolina Ekholm, Deputy Governor of the Sveriges Riksbank, at a meeting at Handelsbanken, Stockholm, 27 September 2012. *  *  *  The views expressed in this speech are my own and are not necessarily shared by the other members of the Executive Board of the Riksbank. I would like to thank Jill Billborn, Johanna Fager Wettergren and Per Åsberg-Sommar for their great assistance in the writing of this speech. Four years after the financial crisis broke out, we are still living with its consequences: a sovereign debt crisis in the euro area, sluggish recovery in the United States and United Kingdom, with unemployment entrenched at high levels and a world beyond Europe and the United States that is finding it hard to adjust to the fact that their most important export markets are faltering. The realisation that the costs of financial crises are dreadfully high has led to a general understanding that economic policy must focus much more on preventing such crises. Here in Sweden, we have coped relatively well through the recent turbulent years. But, even here, unemployment remains on a high level – and part of the high Swedish growth rate has merely been a recovery from the great fall in GDP in 2008 and 2009.

In fact, a recent study by the ECB shows that the closer a country comes to an excessive deficit, the more likely it is that the forecast the government presents officially will later turn out to be wrong. There is a strong bias towards unrealistic optimism once a country’s deficit approaches 3 per cent of GDP. Let me say something in this respect about the new member states. It is all too apparent that the collapse of Germany’s leading role in fiscal discipline has also set a bad example for some of the larger new member states. Given that public finances have deteriorated so much in Poland, Hungary and the Czech Republic during the first years of this century it is fortunate both for themselves and for the euro zone that these countries have postponed joining ERM II and the attempt to rapidly adopt the euro. Had they tried and locked their currencies within ERM II they may well have stayed in that position for a long time, becoming in the meantime targets for speculation - as their poor public finances would have lent little credibility to their overall economic policy. This was Sweden’s experience with the combination of a currency peg and deteriorating public finances in 1991-1992. But now there is another danger.
Mian, Atif R., and Amir Sufi. House of Debt: How They (and You) Cause the Great Recession, and How We Can Prevent It from Happening Again. 2014. Chicago, IL: University of Chicago Press. Reinhart, Carmen M., and Kenneth Rogoff. This Time is Different: Eight Centuries of Financial Folly. 2009. Princeton University Press. Reinhart, Carmen M., and Kenneth Rogoff. 2011. “From Financial Crash to Debt Crisis.” American Economic Review 101 (August): 1676–706. Sastry, Parinitha. Forthcoming. “The Political Origins of Section 13(3).” Economic Policy Review, Federal Reserve Bank of New York. Schularick, Moritz, and Alan M. Taylor. 2012. “Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870–2008.” American Economic Review, 102, no. 2 (April): 1029–61. Stein, Jeremy. 2012. “Monetary Policy as Financial Stability Regulation.” Quarterly Journal of Economics 127 (February): 57–95. 10  BIS central bankers’ speeches

Of significance is that the global insurance industry on the whole has remained resilient throughout the current financial crisis. The overall aggregate financial position of insurers in the crisis affected countries have continued to be strong, and generally not severely affected by liquidity pressures or exposures in the credit derivatives markets. Earlier losses by insurers in financial market activities had resulted in a shift to "back-to-basics" models, focusing on core underwriting business instead of heavily relying on investments as the main source of earnings. The industry had also benefited from the subsequent upturn in the pricing cycle which has fortified the capital position of insurers and provided the support to maintaining sound underwriting standards. These conditions have placed the industry on a much stronger position to withstand the challenges emanating from this global financial turmoil. BIS Review 131/2009  1  Domestic and external conditions are however expected to remain volatile for some time. Significant uncertainties will persist in the international financial markets and the broader global economic conditions. These conditions will continue to pose significant challenges to the insurance industry. In this environment, maintaining strong capital buffers and sound risk management is even more imperative to ensuring the continued resilience of the insurance industry. With the adoption of Solvency II in Europe and its influence on solvency regimes in other jurisdictions, more countries, including Malaysia, have now moved to adopt more riskaligned capital regimes.