samchain/econo-pairs-v1 huggingface dataset:
This is a little unsettling, because during the last 20 years we have been successful in establishing as a better practice the approval of the compliance program by the board of directors. One might think that, if the board of directors approves the compliance program, then it should not be difficult for the chief ethics and compliance officer to get the business owners to pay close attention. The devil here, as in so many other places, lies in the details. It is usually the implementation of the compliance program that causes the conflict. It is usually related to the cost of compliance, because the cost ordinarily affects how the business owner measures success, which is the size of the business’ profit. The chief ethics and compliance officer will not be able to resolve the conflict easily, because compliance is a cost to the business which can make compliance the adversary of the business owner. The chief ethics and compliance officer will not want to bring a specific conflict issue to the attention of the board of directors. While this might be very effective in resolving the specific conflict, it could absolutely destroy her ability to function effectively thereafter. In a recent survey of chief ethics and compliance officers conducted by Price Waterhouse, the survey respondents identified as a problem their “struggle to gain the attention of the board of directors.”6 Two specific issues were identified.

As consumers embrace the digital era, insurers will need to rethink their distribution strategies and partner relationships as digital and remote options are rapidly replacing commonplace functions and tasks. Digital technology can be deployed effectively to accommodate customers’ priorities in ways that would promote customer support and loyalty whilst significantly enhancing the consumer experience and satisfaction. In many ways, the human capital and technology imperatives share characteristics that are borderless. We are living in a globalised world, with significantly greater capital and labour mobility than in any other period in history. For multinational organisations, this enables ideas and innovations to transcend borders and be more easily replicated to great positive effect, to grow successful businesses and transform the economies in which they operate. This is where foreign partners of local entities with international presence have enormous potential to make a significant contribution to the development of local economies. As international entities that actively operate in more developed insurance markets, foreign insurers should bring new and proven systems, technology and experiences which can enhance their domestic operations and benefit the wider economy of the host country. This is the fundamental value of foreign direct investments. We know of successful cases in Europe where digitisation has been transformational, where a higher adoption of straight-through  BIS central bankers’ speeches  3  processing, paperless documentation, usage of customer analytics and electronic payments have all led to improved efficiency and higher service value for insurers.
For the record, I would like to point out here that the forecast assumption that the repo rate will follow implied forward rates does not of course entail any commitment from the Riksbank that this will be the case. We have no unique information about the future. We cannot in advance commit monetary policy to a particular sequence of future interest rate changes, as future economic developments are uncertain. The stand we take regarding the development of the repo rate at our monetary policy meetings is based on the information available at the time the decision is made. Our considerations can and should change if the economy develops in a manner different to that we had expected. 2  This is further described in the box entitled, ”Changes in the Riksbank’s forecasting methods”, Inflation Report 2005:1, in Irma Rosenberg’s speech ”The Riksbank and monetary policy” at Danske Bank, 29 September 2005 and in Lars Heikensten’s speech, ”Thoughts on how to develop the Riksbank’s monetary policy work”, at the Swedish Economics Association on 22 February 2005. BIS Review 84/2006  3  Managing risks in monetary policy decisions As monetary policy must be based on uncertain forecasts of the future, there is a need to manage the risk that the economy will develop in a way different to what was expected by the central bank. The former Federal Reserve Governor Alan Greenspan called this the risk management approach to policy.

Ravi Menon: MAS Marks 50 Years Serving Singapore Welcome remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at MAS 50th Anniversary Partners Appreciation Evening, 7 October 2021. * * * Prime Minister Lee Hsien Loong, Chairman and Board Members of MAS, ESM Goh Chok Tong, Friends and Family of MAS Welcome to the MAS’ 50th Anniversary Partners Appreciation Evening – the first in a series of events to commemorate our Golden Jubilee. This evening is a time for thanksgiving. There are about 50 of us here at the MAS Building and about 800 friends and family joining us virtually. This includes our friends from the financial industry, consumer and governance groups, tripartite partners, academic institutions, and international organisations. And of course, our family – past and present staff and leaders of MAS and our colleagues in the broader Public Service. This is a special occasion for me personally. I joined MAS in 1987 and have spent most of my professional career here. So much of what I have learnt and how I have evolved, I owe it to the many bosses and colleagues I worked with in MAS over the years. MAS was already a highly competent organisation in 1987, and I have seen it grow over the decades to become what it is today – a central bank and financial regulator highly regarded among its international peers and the global financial industry.
We need a third pillar of partnership, where authorities and financial institutions each take on specific responsibilities to develop a shared ownership of supervisory outcomes. Indeed, the design of regulation and the supervisory approach taken should allow for financial institutions to take on responsibility in contributing towards desired supervisory outcomes where appropriate. Let me highlight two of these areas, namely the industry’s role in improving corporate governance and in capability building. Corporate governance 20. One lesson from the recent crisis is that good corporate governance matters. The failure by Boards to exercise effective risk management oversight had damaging consequences for many institutions. Boards play a vital role in safeguarding the safety and soundness of their institutions by setting the risk appetite, remuneration policies and strategic direction, amongst others. For directors to discharge their responsibilities, they have to have the requisite knowledge, skills and experience. 21. MAS will place increasing emphasis on the quality of the board of directors of financial institutions. Among the proposals to enhance our Corporate Governance Framework for locally incorporated banks and significant life insurers is the requirement for financial institutions to assess the current skills of their Boards on an ongoing basis, and to establish a continuing development programme for all their directors. Given the important role that the banking industry plays in our economy, MAS is also considering developing a mandatory training programme for bank directors. 22. But let me add that rules, and mechanical compliance with rules, can only go so far in encouraging good corporate governance in organisations.

•  Through the work of our business line specialists, we are developing a better understanding of the businesses you all are engaged in, including improving the dialogue with the front office and getting to know those business leaders. This has given us a much improved window into your strategies – into how you are thinking about the changes you will make and need to make in the face of increased regulation, increased regulatory pressure, competition and future economic growth. Areas where work remains Of course, there are many more areas where progress is being made, but those are the ones that I would highlight for you today. And, while I tend to be a “glass half-full” kind of person, I am also a realist and recognize the tough road ahead to continue implementing the kinds of changes needed across the system to achieve the end state of a more resilient, better managed and less complex financial system. In this regard, I’d highlight four areas where additional work is needed across firms and supervisors/regulators: 1. Resolution planning  2. Coordinating supervision across global organizations  3. Bank Secrecy Act/Anti-Money Laundering (AML/BSA) compliance  4. Culture of firms and the system  1. Resolution planning  I noted earlier that resolution planning was an area where progress had been made – and it has.
In fact, a definitive framework for analyzing capital account sustainability would be most helpful for emerging market members in their own assessments of their vulnerabilities to capital flow reversals. I think this capital account sustainability framework is important, given the Fund’s mandate on the balance of payments and the recent episode of capital account crises in emerging markets. The second point I want to raise is that the Fund should look more positively at the progressing efforts by members to increase their own immunity against the risks of financial crisis and contagion by engaging in various self-insurance activities. These activities include (1) strengthening domestic policies, institutions, and data transparency which have led to greater flexibilities in dealing with shocks, (2) improving external positions by running current account surpluses, reducing external debt, and holding larger international reserves, (3) being more careful with capital account liberalization with greater willingness to use prudential and capital account measures to check excesses and to deter speculative short-term capital flows; and (4) engaging in regional cooperative efforts, such as the Chiang Mai Initiative in East Asia, to undertake collective regional surveillance and set up liquidity facilities that can be drawn in the case of emergency. To me, these developments reflect the genuine desire by regional policymakers to work together towards a common goal of reducing the likelihood of the next crisis. The Fund can look more positively at these developments as they contribute to raising global capabilities in preventing and dealing with financial crises.

It is in this context that Fund surveillance could help members to be more informed of the implications of such risks, and to assist members, through Fund policy advice, on how best to prepare. In this respect, I have a view that the Fund could do more in three areas. First, it should step up its surveillance of the major economies by providing frank and independent assessments. Also, the briefings, papers, and analyses that the Fund prepares on G7 economies and meetings could be shared more widely with other Fund members. Second, in the area of financial markets surveillance, a few things could also be done. The Fund could produce and circulate monthly report on global financial markets to members focusing on the key financial flows to keep members informed of what the Fund sees as the current trends and risks in financial markets. Important in this context is the monitoring of activities or position-takings of large institutional players and hedge funds. Also, it would be useful for members if the Fund could develop its own in-house view of a benchmark risk scenario which then can be used, or shared with members, in stress-testing the vulnerabilities of economies to capital flow reversals. And third, in addition to the debt sustainability framework, the central focus of the Fund’s surveillance in emerging markets should be the analyses of capital flows and capital account sustainability.
Consequently, the SNB will suspend its issuance of SNB USD Bills. The last auction will be held on 21 June 2010. As has already been mentioned by Philipp Hildebrand, the extent of foreign exchange interventions are leading to a higher risk concentration for the SNB. However, monetary policy considerations remain paramount. Furthermore, we need to keep the overall picture in mind. Thus, since our portfolio is well diversified, no loss has been recorded overall since the beginning of the year. This is due, in particular, to investments in foreign currencies other than euro as well as our gold investments, which also constitute one of our main sources of risk. What is more, the important time period is the long term and over that horizon potential exchange rate losses should be offset (at least in part) by the return on foreign exchange investments. Finally, it must be borne in mind that the SNB has set aside substantial provisions to absorb any possible future losses. Transition from a liquidity deficit to excess liquidity in the financial system The unconventional measures taken by the SNB to combat the impact of the crisis and to avert deflation risks have led to an ample supply of liquidity to the financial system. Therefore, we have witnessed a gradual shift from a liquidity deficit to a situation characterised by excess liquidity. In fact, before the crisis, banks had to obtain liquidity from the SNB in order to satisfy their minimum reserve requirements.

These doubts are reflected in a significant increase in risk premia for sovereign debt in these countries, which has prompted them to establish major cost-cutting programmes. This situation is weighing on financial markets, despite the relatively favourable reports of economic recovery at the global level. Indeed, current market uncertainty has reached a high level, although it remains lower than that observed during the recent crisis. To give an example, the VIX index (which measures uncertainty on the equity market) and the CDX index (which measures credit risk) are both rising again. However, they are still significantly lower than at the end of 2008, i.e. at the peak of the subprime crisis (cf. chart 1). The uncertainty associated with the fiscal situation of certain European countries has also triggered another rise in tension on the interbank market for US dollars. To counter this, several central banks, including the SNB, have reactivated swap facilities in cooperation with the Federal Reserve in order to provide dollar liquidity that may be required for the smooth functioning of the markets. In Switzerland, the interbank market has remained calm. Indeed, the ample supply of liquidity has reduced Swiss franc interbank rates. As can be seen in chart 2, risk premia on the Swiss franc interbank market have also declined. They fell by more than a half in May while, during the same period, US dollar risk premia on the interbank market in the US rose again. Alongside the uncertainty, investor risk aversion has grown over the last few months.
On the labor market front, we see continuous improvement in manufacturing employment, reversing a multiyear decline trend. These are encouraging signs that the benefits from export growth has spilled over to other sectors. As we move into the second half of this year and the next, even more spillovers are expected from various public infrastructure projects that we have heard about earlier this morning. Certainly, there are risks to this growth outlook, both external and domestic. Recent developments in the trade war between the United States and China, development of the financial conditions in vulnerable emerging market countries, as well as the recovery of tourism in the Southern region after the Phuket boat accident are some of the major risks discussed by the MPC. While monetary policy decisions will need to take these risks into account in supporting the economy towards a more robust growth, solving the two-speed economy requires solutions beyond the scope of monetary policy. Structural challenges that caused this two-speed economy require more precision tools like fiscal programs that could accurately target the specific sectors in need of support. Promoting education and skills reform could help address the change in labor market landscape mentioned earlier. As another example, creating an environment that stimulates innovation will be the key for boosting productivity and lifting Thailand onto a higher long-term growth path. The third factor that the MPC considers when deliberating its policy is financial stability.

For the past few years, Thailand’s growth was filled with imbalances, creating the so-called “two-speed economy.” On the high-speed track, exports of goods and services had been expanding robustly in tandem with improved  2/5  external demand, consistently contributing over half of the GDP growth. The benefits from these growths, however, were felt mostly by those associated with the export sector— especially large exporters—leaving behind the low-speed domestic demand track. Private investment’s gradual growth was also concentrated only within the export sector, while private consumption growth registered well below historical average as strong export growth and pickup in manufacturing did not lead to higher employment and higher household income. Excess production capacity in certain manufacturing sectors and a movement towards automation in manufacturing processes were some of the reasons often cited for this disconnect. In addition, a high level of household debt constrained private consumption growth as households had to use additional income to service their debt obligations rather than spending on goods and services. More recently, even though the imbalances still exist, we started to observe a change in this trend. We begin to see a more broad-based growth in exports, reaching beyond large exporters. We also begin to see steady growth in private consumption and private investment, making the strong growth performance in the first half of 2018 even more meaningful. Along with the recovery in private consumption and private investment was the pick-up in loan growth, particularly consumer and SME loans.
As you know, the second line establishes the control standards and monitors adherence to them, encompassing risk and compliance functions. Nevertheless, other areas, such as legal, human resources or tax, may also be included, in order to ensure that their expertise in these areas is considered by management. There is no one-size-fits-all approach for the division of tasks between both lines; but the identification, assessment, validation and reporting of risks and controls should certainly be clearly assigned in every organisation. As I mentioned before, it is very hard to measure these kind of risks precisely; nevertheless, banks should include qualitative and quantitative key risk indicators in their integrated management information system. To achieve this integration, all parties must speak the same language, which implies applying common taxonomies with clear definitions and indicators per type of risk. Last, but certainly not least, I wanted to emphasise the importance of having an adequate internal audit as the third line of defense. The role of internal audit is key to challenging the adequacy of the first two lines, underpinning the whole framework. Let me conclude. The losses experienced during the crisis and its aftermath should act as a powerful reminder that we cannot relax or lower the bar. There is no room for complacency if we want to avoid repeating past mistakes. In this regard, I wanted to convey a few messages today.

North Macedonia stands out as an outlier, as the share of investments continued to increase, and it is one of the rare economies with investment level currently well above the pre-crisis one. This reflects stable and resilient domestic financial system, and rising inflows of FDIs, mostly in the tradable sector, that persisted despite the global crisis. This process was driven by the investment supportive policies and reforms, that significantly improved the business environment, as visible through the high ranking on the WB’s Doing business - improvement of 22 positions in ten years, currently ranked tenth. It diversified the structure of the economy, making it more resilient to external shocks, and leading to positive shifts in the export base towards higher value added products. The outcome of this process was visible improvement of the external position of the economy, and further increase of official reserves, thus creating room for accommodative monetary policy, given the de facto fixed exchange rate. Clearly, we are a good example that reforms pay off and we remain committed to their implementation. The best contribution that we as central bank can and do make is to maintain price stability and assure and strengthen the soundness of the financial system. Macroeconomic and financial stability is the basis of the investment climate that when in place significantly reduces the country risk premium and attracts foreign investors, but also boost domestic savings. In this light, in recent period, we have undertaken a number of measures to assure for the soundness and resilience of the banking system.
A particular problem could arise if losses were large enough to exhaust any high-trigger CoCos, leaving the bank undercapitalised, but not so severe that solvency was in the balance. By limping on and deleveraging, the bank’s supply of credit to the economy would be impaired. An option to force a recapitalisation in such circumstances might be CoCos with low triggers. But the bank might suffer a run, becoming unviable and requiring resolution, before its measured capital ratio fell through the instruments’ trigger point. Any such bonds must, therefore, convert into equity and take “first loss” upon entry into resolution. That is, I think, the best way of thinking about so-called Point-Of-Non-Viability (PONV) instruments counted towards “total capital” in the current Bank Capital Accord.10  8  The capital ratio in the trigger would need to be based on the Basel 3 definitions applying at the end of the transition period. 9  See Myers (1977), “Determinants of Corporate Borrowing”, Journal of Financial Economics, 5, 147–75. 10  Total capital is in quotation marks here because this is not capital in the same sense as equity. 4  BIS central bankers’ speeches  A Capital Accord for the future In summary, the system cannot be relied upon to recapitalise itself as the probability of failure rises. There is, therefore, a premium on getting micro-prudential rules for minimum capital broadly right rather than, as happened in the past, badly wrong.

In essence, all policy actions by the Fed, the ECB, the banks of Japan, England, Canada, and of many small open economies in the last 6 years have been about affecting long-term rates by influencing one, and often times more, of these interest rate components. Take the case of forward guidance. When nominal rates reached the ZLB, and particularly due to the low inflation environments, traditional monetary policy became very constrained –fully constrained by definition, one might say, given the impossibility of lowering short term rates any further. However, to the extent that one can credibly influence the expected path of future monetary policy actions, risk-neutral rates at different horizons can be lowered, perhaps even significantly so. However, as pointed out by Mike Woodford in an influential paper presented at Jackson Hole a few years ago, to truly make a dent on rates with this strategy, central bankers were likely to run into a temporal-inconsistency problem. This problem is basically that in the event that long-term rates can be reduced enough to jump-start the economy, the expost optimal policy stance would be inconsistent with the one promised in the midst of stagnation.