samchain/econo-pairs-v1 huggingface dataset:
When evaluating possible packages of quantitative reform, an important validation point for the PRA is whether the resultant liability values, including the risk margin, are adequate relative to the transfer values implied by actual buy-out transactions. If current liability valuations were to be insufficient to fund these observable transfer costs, then the balance sheet would lack the resilience that it would be expected to have under Solvency II and a key safeguard of policyholder protection would be put at risk. In other words, we could no longer be confident enough that if an insurer failed in the future, its liabilities could be safely transferred to a third party. The long-term security of policyholder benefits would then be in question. The PRA is continuing its work to assess the extent to which different reform combinations lead to an adequate transfer value being achieved and see this as a key validation tool when assessing the merits of any package. Page 8  Regulation I now come to the final R – regulation – and want to focus remarks today specifically on the work to reform the existing regulatory framework for insurers – Solvency II. The interlinkages between the first three Rs I have covered help explain why such regulatory reform needs to be considered as a package: changes in one part of our regulatory and supervisory framework have consequences for others.

However, given the uncertainty inherent in assessing future performance of long-term assets, it is particularly important that the regulatory regime does not allow firms to over-anticipate future profits on these assets, before it is clear whether the profits will truly be earned. In the reform process, we are challenging ourselves to consider the extent to which the existing Solvency II regulations are unduly constraining diversity and innovation in firms’ MA portfolios. And we are contemplating changes that we consider will loosen requirements in a few key areas. To materially expand MA portfolios in the absence of a sound quantitative basis is again likely to be detrimental to policyholders and could also threaten the resilience of the BPA sector. This is why any work to further extend MA eligibility needs to be coupled with firms having effective risk  Page 7  management and a reassessment of the appropriateness of the quantification of the MA. Resilience As noted earlier, for very long-term business – with liabilities that can stretch several decades into the future – it is critical to make appropriate assumptions when undertaking balance sheet valuations and when calculating the amount of capital that is required now to support that business. This brings us to the third R, which is resilience.
Moreover, life expectancy has grown sharply in the last 45 years, meaning that generally it is now necessary to save for a longer retirement period. The relatively well-financed occupational pension plans in Switzerland – one of the few countries in the world to have a mandatory system – also contribute to the high saving rate. This system helps to accumulate the savings that will be necessary in future to support the growing numbers of pensioners and years spent in retirement. 7 Many countries with ageing populations do not have a comparable system in place. Contributions to occupational pension schemes are currently recorded as savings in the national accounts. This mandatory pension  7  It can be assumed that even more capital will have to be saved in future to maintain occupational pension benefits at their current levels. Page 9/13  system with its high contribution rates thus also influences the high saving rate in Switzerland. The saving rate in Switzerland is at this high level because the Swiss population is rapidly ageing and we have a relatively well-financed pension system compared with other countries. In other words, there is an economically plausible reason why Switzerland has a current account surplus. Against the backdrop of demographic developments, when corrected for statistical distortions, the current account surplus or savings surplus is not excessive but entirely legitimate. I will now turn to the last factor contributing to the persistently high current account surplus, and that is the distinctive industrial structure of the Swiss economy.

The Riksbank, too, is keeping a close watch on the financial system’s stability. In times of financial unrest, such as recently, the Riksbank steps up its oversight as a matter of routine, above all as regards financial enterprises. If problems were to arise with bank liquidity, for instance, they would create difficulties not only for monetary policy, in that the interbank market would function less well, but also for other parts of Sweden’s economy. The Riksbank therefore monitors the potential effects that financial unrest could have on the financial sector’s solvency and liquidity. BIS Review 83/1998  -6-  The analysis of the situation is supplemented with an ongoing exchange of information with the competent authorities in this field. Stockmarket unrest of this kind also leads to heightened surveillance of the flow of payments in the Riksbank’s payment system, RIX. Judging from the available statistics, the Swedish banks are in a better position than many of the international banks, with lower direct exposures to the countries involved in the crisis. Perhaps one could say that Sweden’s bank crisis did at least result in Swedish banks becoming much more efficient at risk management. Central banks throughout the world have accordingly become more watchful. No one can remain passive if world economic growth continues to slacken as a consequence of financial problems. BIS Review 83/1998
Through these successive waves, the world financial system found itself with almost every link in the credit chain – in the chain of trust – having been weakened or broken. That is evident in surveys of the public’s trust in industry: banking and finance are firmly rooted to the foot of the league table of trust, in the UK and internationally (Chart 6). That loss of trust is mirrored in aggregate bank lending in the UK, in particular to companies, where annual growth has fallen from a peak of 23% in March 2008 to around zero now (Chart 7). And this has in turn been reflected in the largest and most synchronous global economic slowdown since the Great Depression. Confidence and credit So how is trust, and thereby credit, to be restored? To date, the answer has been to rely on the one sector whose credit has not been seriously questioned – governments and central banks. There has been large-scale provision of government and central bank credit over the past two years in an attempt to ease pressures and shore up breaks in the private sector credit chain. These interventions have been unprecedented in size during peacetime. The total potentially on the table is in excess of $ trillion.7 That is roughly $ for every man, woman and child on the planet. Half of the world’s 20 largest banks have needed direct government support. Central bank balance sheets in the major financial centres, including in the UK, have more than doubled in size.

8 The predicted effect  Chart 7: The reduction in investment has been driven by firms that expect a resolution soon  is quite powerful: at least in this highly stylised set-up, halving the expected duration of the uncertainty (i.e. doubling q) has the same impact on the required rate of return on new investment as doubling the chances or scale of the bad outcome. Directionally, at least, I think the evidence provides some support for this effect. The  Sources: Decision Maker Panel and Bank calculations. fact that protracted declines in investment were seen only in 2018, some time after the referendum but increasingly close to (what was expected to be) the exit date in March 2019, is consistent with it. So too is Chart 7. Taken from the latest Decision Maker Panel survey, it suggests that the firms who’ve cut back the most on their investment spending tend to be those who also expect a relatively early resolution to Brexit. Firms who think the process will take longer – and obviously those (in blue) who don’t consider Brexit an important factor in their decisions to begin with – have been less aggressive in their response. One implication is that the overall hit to investment is worse than it need be if firms have unrealistic expectations about how rapidly the situation is likely to be resolved.
This is achieved through projects such as the e-bill platform, which was launched last year, and the e-cheque initiative, which is scheduled to be launched next year;  ii)  Second, we will take proactive steps to facilitate the development of mobile payment services, and  iii)  Third, we will put in place a robust legal and regulatory framework to manage the risks that may arise from these new technologies. Let me elaborate below on the second and third components of this strategy. III. Embracing the m-commerce opportunities in HK  14. Talking about m-commerce, I believe that, if there is an “app” that would guide market players to search for a place to launch their m-payment business with any of these key words – “market readiness”, “policy support”, or “sound regulatory framework”, the choices to pop up on your app screen would likely include Hong Kong. Let me explain. (a)  Market readiness  15. In terms of market readiness, the relevant statistics clearly indicate that Hong Kong is ready and willing to embrace m-commerce. According to some research, the market size of Hong Kong’s mobile commerce exceeded $ billion in 2012, and is expected to reach near $ billion by 2015. 2 16. These online shoppers are well-equipped for mobile payment. The mobile subscriber penetration rate in Hong Kong, which stood at 237% as of May 2014, is one of the highest in the world. Moreover, many of the new smartphones shipped to Hong Kong are NFC-enabled. 17.

With a limited battery life of an hour and weighing more than a pound, that might not be entirely surprising. But another key reason was probably this – there was no m-commerce at that time. (b)  The present – opportunities offered by m-commerce/m-payment  5. Let’s fast-forward to 20 years later after the birth of the first smart-phone, and get back to the present. We are all witnessing the sea change in the landscape of e-commerce, and are enjoying its huge benefits. 6. Most smartphones are much lighter now and have much longer battery life. But more importantly, what was once known as “e-commerce” is expanded by what we now call “m-commerce”. It is the name of the game. 7. People are no longer satisfied with buying or selling things online using their desktop or notebook computers. They want to do these in both the virtual and the real world anywhere, anytime, using their mobile devices like smartphones or tablet computers. 8. Let’s face it: businesses can take place in the virtual marketplace, but people don’t live there. Books can be made digital, but coffee cannot. We still enjoy – and need – physical goods and services. That’s why “m-commerce” is becoming the “game changer”, as it fills the gaps of “e-commerce” by making it portable and connecting the virtual world with the real world. 9. Furthermore, the penetration power of m-commerce has been significantly boosted by new marketing tools made possible by combining mobile technology with Big Data analytics.
4/9  BIS central bankers' speeches  MAS has comprehensively expanded its liquidity facilities – in four ways: what currency we lend in; how long we lend for; what rate we lend at; and what collateral we take. The MAS USD Facility has helped to maintain stable US Dollar funding conditions. Since its introduction in March last year on the back of a swap line with the US Federal Reserve, the MAS USD Facility has provided $ 25 billion to banks for use in Singapore and the region. Alongside the extension of the Fed swap line, MAS has extended the USD Facility to endDecember 2021. The MAS SGD Term Facility has extended the tenor of Singapore Dollar lending from overnight to up to three months. The facility was set up pre-emptively to meet higher precautionary demand for SGD liquidity by banks and finance companies. This helped promote more stable funding conditions and support credit intermediation to businesses and households. The MAS SGD Facility for ESG Loans has provided funding at 0.1% to financial institutions for lending to small and medium enterprises under the ESG loan schemes. The Facility, which has helped to reduce the borrowing costs for viable businesses, has been extended till end-September 2021. As of 31 March 2021, about $ billion was lent to eligible financial institutions, catalysing around $ billion of ESG loans and benefitting more than 22,000 firms. Utilisation of the Facility was lower in 2021 compared to 2020 as the cashflows of firms improved.

Assets under management in Singapore grew by 17% year-on-year, to $ trillion as at end-2020, driven by strong inflows into traditional and alternative investment strategies 10 as well as valuation gains 11 across major asset markets. The FinTech sector has also continued to do well. Investments in FinTech firms based in Singapore reached a record $ billion in 2020, an increase of more than 30% from 2019. In the first quarter of this year, FinTech companies here already raised more than $ million. The financial services and FinTech sectors created 2,500 net jobs last year. We expect the financial sector to continue to create good jobs this year. Financial institutions expect to create about 6,500 new hiring opportunities 12 this year, with strong demand in areas such as technology, wealth management, corporate banking, and insurance. 13 The financial services sector has exceeded both the value-added and employment targets set by the Industry Transformation Map (ITM) for 2016–2020. Growth in value-added during this 5-year period averaged 5.4% per annum, above the ITM target of 4.3%. The sector, together with FinTech, added an average of 4,700 net jobs per annum, above 7/9  BIS central bankers' speeches  the target of 4,000. MAS has started reviewing the ITM strategies and targets for the next 5 years. MAS has been studying in depth how the financial services landscape will transform and what Singapore must do to remain competitive in the coming decade.
We should take great care not to roll back this important achievement, or to water down its implementation to an extent that it would no longer be seen as a credible framework. Notwithstanding the significance of the reinforcements put in place for the policy framework, I believe that there is still room for further legislative action where the financial sector is concerned. In addition to a better performing banking sector, an increased role of capital markets could help to support both growth in Europe and the financing of the real economy. To fully reap the benefits of capital market integration, the regulatory environment needs to be harmonised further and, potentially, to be adapted. The joint paper of the ECB and the Bank of England on a better functioning securitisation market in the EU has set out a number of proposals in this regard. Furthermore, a better regulation of financial benchmarks is BIS central bankers’ speeches  3  necessary to restore the confidence and trust of citizens and market participants in the financial system. A swift adoption of the relevant Commission’s proposal is of utmost importance. Discussions will also continue on the shape and structure of our banking sector and the regulation of the shadow banking sector. Finally, over and beyond this focus on concrete short and medium-term measures, we should bear in mind that Economic and Monetary Union still remains an incomplete structure.

•  The facts therefore served as a stark reminder that self-regulation just doesn’t work, primarily because of the imperfections in certain financial markets, which are neither transparent nor efficient (like the CDS market for example) and can generate potentially huge negative externalities. Thus, regulation and supervision were once again elevated to their rightful role after the crisis – a role they should never have lost. By way of an aside, I note that the crisis was triggered in the United States by unregulated entities (conduits) or banks that weren’t applying Basel 2 requirements (investment banks which theoretically were regulated by the SEC). By contrast, French banks for example, where supervision was at times branded “intrusive”, managed on the whole to get through the different phases of the crisis relatively unscathed. ii)  What rules should apply to finance? •  Once a consensus had been reached over the need to reinforce financial regulation and supervision, the next question was naturally: what kind of regulation? •  The principle that guided the regulators, notably on the Basel Committee, was that finance should once again be made useful to the economy: that it should serve the economy rather than govern it.
7  These include losses as a result of both malicious acts (eg cyber attack, infection of an IT system with malicious code) and non-malicious acts (eg loss of data, accidental acts or omissions); and involving both tangible and intangible assets. 8 http://www.bankofengland.co.uk/pra/Pages/publications/ss/2017/ss417.aspx 9 From around £ billion to nearly £ billion. Data are taken from Solvency II returns. They include direct property holdings, loans and mortgages secured on commercial and residential property and real estate investment funds. Some of the change may be due to reclassification of reporting by insurers. 10 Source: Article 132 of the Solvency II Directive https://eiopa.europa.eu/regulation-supervision/insurance/solvency-ii 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Conclusion  In conclusion, the search for yield on Solvency II capital is changing insurer behaviour. In response we are spending more time understanding how risks are changing, including through more in-depth supervisory reviews. Our approach to supervision remains forward looking and judgment based. We will use all the supervisory tools available to us to ensure that UK insurers are adequately capitalised and managing their risks prudently. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  Speed of recovery in house prices  Discount assumption  £ billion 12  Undiscounted  0% p.a. Risk-free rate  1% p.a. 10 Risk-free rate + 100bps  2% p.a.

It is therefore more  2  Source: Record of the November 2016 Financial Policy Committee Meetings published 6 December 2016 http://www.bankofengland.co.uk/publications/Documents/records/fpc/pdf/2016/record1612.pdf 3 http://www.bankofengland.co.uk/pra/Pages/publications/ss/2016/ss1816.aspx 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  difficult for insurers to assess credit and other risks. Investing in and managing these assets also requires different skills. For example, when bonds are downgraded, an insurer may expect to be able to sell them. But when a direct investment begins to go wrong, the insurer will probably only be able to sell at a fire-sale price. It needs the capability to renegotiate and restructure the debt. One particular area of growth has been equity release mortgage lending. Life insurers take on almost all of the flow of new equity release mortgages in the UK. This now stands at around £ billion or 1.4% of non-linked assets. We published a discussion paper on Equity Release Mortgages last year. A typical such mortgage is a loan to an older borrower that does not require regular interest payments. Instead interest accrues over time and is repaid, together with the principal, from the proceeds of the sale of the house when the loan becomes due. That is usually when the borrower either dies or goes into long-term care. Borrowers have a ‘no negative equity guarantee’. It protects them from being required to pay back any more than the value of their property. In economic terms, the insurer has sold the borrower a put option on the house.
Since 2004 – that is, before the crisis – average productivity growth among the 99%-ers has averaged only 1%. This suggests that, among a significant swathe of UK companies, levels of productivity must have flat-lined or fallen. This lower tail of companies shares one important feature with the upper tail: neither is confined to particular regions or sectors. Near-zero rates of productivity growth among the 99%-ers are a feature of all regions and almost all sectors (Table 1). Even the best-performing region (London) and best-performing sector (professional, scientific and technical) in the lower tail has mustered productivity growth of only 2% and 4%. 11  Cornell University, INSEAD and WIPO (2017). Department for Business, Energy & Industrial Strategy (2017). 13 Department for Business, Energy & Industrial Strategy (2017). 14 These numbers control for differences in the sectoral composition and sizes of firms between the countries in question. Further detail of the method used here is set out below Chart 7 in the annex. 12  5  All speeches are available online at www.bankofengland.co.uk/speeches  5  We can look more precisely at the fraction of firms who have seen effectively no rise in productivity since before the crisis. 15  For the UK as a whole, that amounts to around half of them. For some regions and st  sectors, the fraction of firms that have stood still in the 21 century is closer to two-thirds. This tail of seriallystagnating companies is long indeed.

The MPC helps to determine monetary conditions in the UK, with a view to hitting a 2% inflation target on a sustainable basis. Monetary conditions in the UK remain highly accommodative by any historical metric. Bank Rate currently stands at 0.5%, as it has stood for much of the past decade. That is, by some margin, lower than at any time in the Bank’s 324-year history, which it celebrates next month. With headline inflation running at around 2.4%, this means inflation-adjusted interest rates in the UK are currently significantly negative. The MPC has also undertaken asset purchases amounting to almost £ trillion since 2009. This has provided additional monetary stimulus to the UK economy, at its peak equivalent to a further reduction in interest rates of up to around 2.5 percentage points. 52  Taking account of that would put inflation-adjusted  interest rates into even more deeply negative territory. 50  As discussed, for example, in Carney (2017). For example, Ramsden (2018) and Tenreyro (2018). 52 Estimated based on simple ready-reckoners. There is a high degree of uncertainty around these estimates. In the May 2014 Inflation Report, the MPC judged that QE had a peak effect on GDP of around 2.5% in 2013. The range of QE estimates in Joyce et al (2011) would suggest that would have a percentage point impact on annual inflation of roughly half that amount. Joyce et al (2011) also suggest as a ready reckoner than a 100bp cut in interest rates would boost inflation by 0.5pp.