samchain/econo-pairs-v1 huggingface dataset:
Today, I would like to focus my remarks on three important shifts that I believe will underpin innovative risk management practices going forward. · First is the changing role and focus of risk managers in supporting business decisionmaking. ·  Second, is a shift from risk measures to risk narratives. · And third is an increasing emphasis on building resilience alongside the prevailing focus on averting risks. Changing role of risk managers One of the most important changes that corporations can make to strengthen risk management is to appropriately position the risk function to effectively support enhanced business decision making. An effective risk management function should interact with other business functions to deliver value. This itself is hardly an innovative idea. But you would be surprised (or maybe not) to learn that despite an increasing involvement of risk managers in business decision-making, poor alignment between decisions that are taken by business leaders, and the intentions of senior management and the board, continue to persist in many organisations. A common reason for this is the absence of, or a poorly defined risk appetite framework. And very few organisations, if any, have gone further to articulate their risk appetite for managing innovation specifically. This has important implications for risk managers. We cannot expect risk managers to be very helpful to business leaders who have explicit growth and revenue targets to meet, if risk managers are not themselves guided by a risk appetite that is equally well-defined.

Of note, payments abroad for insurance and reinsurance services, largely by corporates, grew significantly by 45% since 2010 to reach RM10.2 billion in 2017. As our needs increase, it is imperative that efforts be intensified to optimise onshore insurance capacity. Risk and insurance managers play an important role in supporting broader efforts to develop domestic insurance capacity. More can and must be done to improve the quality of risk information and work collectively with brokers and onshore insurers – both Malaysian and foreign – to develop costefficient and innovative solutions that are tailored to business needs. This will go a long way to build domestic capacity while contributing to a stronger domestic economy. In closing, I am reminded of the famous Italian poet, Pietro Metastasio, who said this of risks: “Every noble acquisition is attended with its risks; he who fears to encounter the one must not expect to obtain the other”. I cannot think of a better reason for advancing innovative approaches to risk management that will provide the confidence and economic freedom for businesses to grow and evolve. On that note, let me once again thank MARIM for the opportunity to share some thoughts with you today and I wish you a productive conference ahead. 5/5  BIS central bankers' speeches
Our monetary policy strategy is based on using a highly expansionary monetary policy to safeguard confidence in the inflation target, which has provided a nominal anchor for the Swedish economy for over 20 years. However, we are well aware that the low interest rate level increases the risk of problems arising on the housing market later on and that measures need to be taken elsewhere to make our strategy successful in the longer term. Consequently, when we discuss possible measures for the housing market and household indebtedness, this is a matter of risk management: of adopting measures today to prevent the risk of unfavourable events later on. When it comes to the exact design of measures, to some extent it is, therefore, a matter of subjective opinions and not an exact science. The mandate for macroprudential policy in Sweden must be clarified Macroprudential policy is the policy area which has come to dominate the international discussion about reducing risks linked to household indebtedness. 12 Several targeted tools are offered within macroprudential policy which could be used for this purpose. For example, requirements could be placed on banks’ equity by introducing countercyclical capital buffers and risk-weight floors on mortgages, and limits could be placed on how much households can borrow by way of loan-to-value limits and an amortisation requirement. It is therefore obviously very concerning that the previously adopted macroprudential policy framework in Sweden has encountered legal problems.

After the Second World War the abandonment of the “golden standard” changed things completely. The introduction of the fiat money changed the monetary policy framework dramatically, forcing the financial stability issues to take back seats in the central banks considerations. There were two main reasons for financial stability being less of a worry. First, by using the fiat money the role of the lender of the last resort was not limited anymore. The central bank could lend to commercial banks as much as they wanted to borrow, just printing new money. There was no need to hold a parity to anything. Second, many central banks faced serious troubles in order to meet their ultimate target, the price stability, within the new fiat money environment. Therefore the policy focus shifted and huge effort was concentrated on finding a new appropriate policy framework. The situation was even more complicated due to the fact that both aforementioned points were closely interdependent. To illustrate this point, let's assume that there was an inflationary pressure which caused redistribution disturbances to the financial system as it led to the redistribution of wealth from lenders to borrowers. The central bank either had not established the appropriate framework for dealing inflation yet, or even worse, inflation had not been viewed as an undesirable phenomenon. On the other hand, the central bank was ready to fulfil its role as a lender of last resort. But saving the commercial banks from imminent bankruptcy further increased inflationary pressures. At the end this caused kind of inflationary trap.
With modern production processes broken down to components and parts that could be regrouped at the final assembly, East Asians have availed themselves of this phenomenon by capitalizing on the “benefits” from the international division of labour and production in the areas where they have the greatest comparative advantage. This has in turn brought about the lowest and most efficient production processes available on an international scale, while at the same time encouraging specialization and boosting productivity growth in individual economies. This “internationalization” of the production process has now been replicated many times over. Countries move up the product ladder towards more sophisticated manufactured products, and parts of the production process are then relocated from traditional producers such as from Japan, Korea, and Taiwan to South East Asian countries with lower production costs. This has led not only to a rise in the value of trade in the region, but also in a shift of the structure of trade and inter-linkages in production in the region. Against this background, the success of any enterprise in the region, going forward, must involve production networks and supply chains based not only on one single national economy, but also across borders. This can be witnessed today in the case of manufactured goods, such as automobile production, electronics or textile and garments. In each case, raw materials are being sourced in one country, whilst assembly production or designs of that same product could be made in another country - all based on the location where they best have comparative advantage.

With the possible exception of Australia, I don’t know if any other country has a word for “gazumping”. In April, over 500 newspaper headlines referenced house prices, around two thirds more than the total seen in that month last year. Central banks are very well aware of the impact that expectations about prices can have in the generation of inflationary pressures across the economy – the way in which expectations of future prices increases or decreases change people’s behaviour and actions. And while inflation expectations in the UK are generally well anchored around the MPC’s 2% inflation target, it is a very different story when it comes to expectations for house prices. Though expectations for sharply rising housing prices are not an issue of inflation pressure generally, they can matter a lot for the actions of people and the choices they make. Expectations of a fast rising market put pressure on potential buyers to get into the market as quickly as possible for fear of being priced out. And on sellers to delay and ask for higher prices. And expectations of future increases in the value of homes can make people more willing to take on debt to get on the ladder or to reach for that next rung. It is difficult to know how much expectations are driving the current market.
I should note that the remaining vulnerabilities in non-bank finance are perhaps the exception, as on the whole the post-crisis reforms have left a financial system that has stood up well to the acute stress of the Covid period. In order to create a framework for reforms, it is important to set out clearly the principles that should shape the changes. The following principles – while not intended as prescriptive rules – are I think helpful in this respect: 1. As a general principle for all funds – investment and money market – redemption terms should be aligned with the underlying liquidity of assets. 2. Where investors regard funds as cash-like, they should be made resilient so they can operate as such at all times, which means running minimal maturity mismatch risk. 3. Money market funds should not hold less liquid assets on a scale that would make them more suitable to be traditional investment funds. 4. Money market funds should not be designed with regulatory thresholds or cliff-edges which create adverse incentives and amplify first-mover advantage behaviour. 5. Reforms should improve the ability of funds to support short-term funding markets, including by making them more resilient. These principles may sound obvious; indeed, I hope they do. But I would emphasise that they are not obvious in the sense that the current landscape is some way from meeting these principles. I think there are three big picture changes which follow from these principles, and should form the basis of the necessary reforms.

13  Sending a strong message in this way at the outset of the resolution will  maximise the chances of stabilising the firm and if liability holders know their claims will be refinanced, reduce the risk of a further run. This need for clarity is understood at international level. FSB has just published a consultation paper on bail-in execution addressing a number of issues I have described including valuation and exchange mechanics. 14  Not least there are important home-host dependencies that need to be addressed. After all, in  a UK G-SIB resolution we will need to bail-in debt on both sides of the Atlantic, in the Depository Trust and Clearing Corporation (DTCC) as well as Clearstream and Euroclear. This includes working through with market regulators the securities law issues that will arise through a bail-in, ensuring that disclosure and listing requirements continue to be satisfied. 13  See Box 2 – the Bank’s approach to providing liquidity in resolution in https://www.bankofengland.co.uk/-/media/boe/files/financialstability/resolution/boes-approach-to-resolution.pdf?la=en&hash=8213BE00D67C4CADB948D51FEBD164E136A70BE6 14 See FSB ‘ Principles on Bail-In Execution’ (2017) http://www.fsb.org/wp-content/uploads/P301117-1.pdf 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  (c) Disclosure The third and final area I want to address is disclosure. A recurrent theme of my remarks has been the importance of ex ante disclosure to making resolution credible and to realising the benefits of increased market discipline.
Behind this incredible economic momentum are globalisation, investments, and supportive government policies, factors expected to continue to drive the region for the foreseeable future. Indeed, the Asian region is expected to grow at 5 percent per year through 2023, easily topping all other regions of the world. Robust regional economic development has benefitted Hong Kong, just as the services we provide as an International Financial Centre has benefitted the region. Hong Kong offers an excellent platform for global businesses and investors, governed by a well-established legal system, backed by a resilient banking sector, and supported by its geographic and cultural proximity to China. Our city has become a global leader in IPO fundraising, bond issuance, asset management, and renminbi products. In addition, innovation – both financial and technological – is a key policy priority and is at the heart of the city’s future plans. But underlying this promising trend for Asia is a number of challenges. The most important downside risk to our region at this juncture is the China-US trade war. Some negative spillover effects of the three rounds of tariffs have already been experienced by various Asian economies, as we have seen exports slowing in a number of economies. Here in Hong Kong re-export volumes destined for China or the US that are on the tariff lists fell in the fourth quarter of 2018. While we’re all hopeful that a resolution is on its way, we should also be prepared for further damage to businesses and confidence if the conflict continues to linger.

4/4  BIS central bankers' speeches
The decline, as a percentage of GDP, in government consumption, social transfers and the interest burden is particularly noteworthy. As a result of the interplay between these fiscal targets and the macroeconomic setting described above, the budgetary policy stance can be described as practically neutral, if the estimations of the change in the primary structural balance included in the 2016 Budget Plan are taken into consideration. Clearly, if any of the risks to growth I mentioned earlier were to materialise, or financing costs were to increase, it would be more difficult to meet the government deficit commitments, and this must continue to be the main aim of Spanish budgetary policy. The enhanced credibility of Spanish economic policy in recent years is a result of the achievements in the area of fiscal consolidation; to maintain this credibility we need to continue and complete the process of correcting the fiscal imbalances. Conclusions The Spanish economy has made visible progress in the correction of the external imbalance, the deleveraging of households and firms, the redressing of fiscal balances towards levels more compatible with the sustainability of public finances and the restructuring and consolidation of the banking sector. Unemployment has also begun to decrease significantly. The reforms undertaken within Spain, along with the headway made in furthering economic and monetary union and the ECB’s highly expansionary monetary policy, have proven key to restoring confidence. However, the legacy of the crisis, eight years after its onset, is still burdensome as shown by the high levels of unemployment and foreign debt.

Exports were expected to move upwards, driven by the progressive recovery of foreign markets in 2016 and by the effects of exchange rate depreciation heightening the gains in competitiveness built up over the last few years. Imports were projected to remain buoyant, in line with final demand. The data on foreign trade transactions for the first half are in line with this forecast made in June. Until June the balance of payments performed more strongly than last year. In the first six months the current account balance reached a surplus of 0.6% of GDP compared with a deficit of 0.1% last year. The bulk of this improvement derived from the smaller energy deficit due to cheaper imports, and from the smaller income deficit. By contrast, the non-energy goods surplus has continued to shrink due to the greater vigour of our imports of this type of goods. The dynamism of imports stems in part from the momentum of domestic spending. It should be kept in mind that gains and losses in competitiveness manifest themselves not only in export capacity, but also in competition in the domestic market between national production and imports. The vigour with which imports are reacting to the upsurge in demand signals the need to maintain and further pursue the improvements in competitiveness. The recovery of output has been accompanied by the somewhat more expansionary behaviour of employment than might be expected from historical patterns.
The correction in terms of non-performing asset levels is in line with what was observed in previous cycles; but the adjustment in terms of the non-performing loans ratio is proving slower than on previous occasions, which is attributable to the flatness of credit during the current cycle. Compared with the banking systems in other euro area countries that have also accumulated a high volume of non-performing assets during the crisis, the correction in Spain is at a relatively more advanced stage. Indeed, the non-performing loans ratio in our country, at the consolidated level, stands at around the average for the euro area countries. 3/8  Moreover, the fall at banks is across the board, albeit sharper for those that were in a position of greater vulnerability, the reflection of which has been a lessening of the dispersion of the non-performing loan ratio. Despite this progress, the non-performing assets ratio in Spain is still at a high level from a historical perspective. Our forecasts indicate that non-performing assets will continue on a path of correction in the coming years, boosted by economic growth, which we expect to run into the medium term, albeit at more moderate rates than those observed in recent years. In the absence of an active management policy pursued by banks, the non-performing loan ratio will continue to be relatively high in late 2020.

Low interest rate levels have contributed to compressing banks’ net interest income given that, with zero proving an effective floor for the remuneration of most deposits, once that level is reached banks have not been able to continue reducing their funding costs in a setting in which risk-free returns have come to stand at negative values. In any event, the evidence available indicates that this negative effect on net interest income has been partly offset by a lesser pass-through of market movements to the interest rates on the outstanding balance of lending. It should be borne in mind, moreover, that the reduction in interest rates also has some positive effects on bank profits via various channels. On one hand, the expansionary monetary policy has a favourable impact on economic activity, boosting the demand for credit and for other banking services. On the other, the decline in the return on risk-free assets tends to raise the value of assets by reducing the discount factor implicit in their price, which translates into capital gains for the banks. Lastly, the decline in interest rates is conducive to a decline in loan default losses, as it reduces the debt burden and raises borrowers’ income as a result of the boost to economic activity it entails. Overall, the above points suggest that the net final impact of the low interest rate levels on bank profitability has been comparatively low compared with the other above-mentioned factors. I will now move on to the third major challenge the Spanish banking industry faces.
It is part of the increasingly daunting and uncertain macroeconomic environment that I have just outlined – an environment that differs from previous downturns in the last two decades in that it is largely characterised by an economy running into constraints. In such an environment, it would not be appropriate to expect fiscal and monetary policy to support the economy by sustaining demand. This combination of factors is one of the many good reasons why the Chair of the ECB's Supervisory Board, Andrea Enria, has recently insisted that, even if balance sheets are sound and profitability is favourable, it is still better to be safe than to be sorry in banking supervision, especially in the current uncertain macroeconomic circumstances.3  -and underlying currents are firming Moreover – while the macroeconomic tides may have changed, many of the structural challenges facing banks have not. Indeed, the underlying currents which banks were already affected by last year, are still very much present. In fact, important currents have even firmed with the change in tides. This becomes very clear if we look at the consequences of the ongoing climate and environmental crises. Another year has passed, and we have further confirmation – not that any was needed – that heatwaves, floods, droughts and environmental degradation are on the rise.

The consequences for the macroeconomic outlook are clear: if labour productivity and/or labour input fail to improve, the impending demographic development will lead to slower medium and long-term growth. It is thus all the more important that labour productivity increases. The growth in labour productivity depends primarily on workplace capital and product market success. It would be ill advised, however, to make oversimplified calculations. Neither technological progress nor capital investment are unaffected by demographic aging. While enthusiasm for embracing innovation may decrease with old age, greater experience can enrich human capital. On the one hand, a tighter labour market can be counteracted by shoring up investment. On the other hand, both the savings and the investment rate can decline. If foreign locations become more attractive, the latter is a particularly likely scenario. It is not clear how the overall effect of these interactions would impact overall on growth. These perspectives call for measures that boost both labour productivity and labour input. In a market economy, employers, employees and the self-employed have a number of instruments and options at their disposal to increase labour productivity and labour input. However, there is also room for improvement with regard to the economic conditions within which businesses operate. First, the capacity for innovation in Switzerland should not be allowed to decline. Therefore, policies fostering education and research are called for. Second, Switzerland ought to continue to attract more investment. In other words, domestic investment should become more attractive.