samchain/econo-pairs-v1 huggingface dataset:
Jean-Pierre Roth: Highly leveraged institutions and financial stability – a case for regulation? Address by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the Second Conference on Law and Economics of Risk in Finance, University of St. Gallen, St. Gallen, 29 June 2007. The author thanks Ms Jeanette Henggeler-Müller, Financial Stability Unit of the Swiss National Bank for the first draft of this paper. *  *  *  Highly leveraged institutions (HLIs), or hedge funds, are currently a hot topic. No day passes without a warning about HLIs in the financial press, and HLIs are on the agenda of politicians, supervisors and central bankers in many countries. The German presidency of the EU and the G8 have declared HLIs to be a high priority agenda item. After the collapse of LTCM, the then chairman of the Federal Reserve Bank said that "had the failure of LTCM triggered the seizing up of markets, substantial damage could have been inflicted on many market participants, including some not directly involved with the firm, and could have potentially impaired the economies of many nations, including our own" 1 . And in the newspaper Bild am Sonntag of 17 April 2005, the German Bundesminister für Arbeit und Soziales accused HLIs of "remaining anonymous, having no face, pouncing on firms like locusts, grazing them and moving on." Why is there such distrust of HLIs?

This requires that creditors and investors receive sufficient and timely information from HLIs and that they act upon this information. It is up to the prime brokers, for instance, to make collateral and margin requirements dependant on the transparency and risk profile of their HLI counterparties. Second, the private and official sector can make a contribution to regulation by developing best practice guidelines – or recommendations – for HLIs and large international banks acting as counterparties. A good example of recommendations for and by the HLI industry are the “Sound Practices for Hedge Fund Managers”, developed by the Managed Fund Association 10 . This is a promising approach, and the Financial Stability Forum (FSF) 11 thus encourages "the global hedge fund industry (to) review and enhance existing sound practice benchmarks for hedge fund managers in the light of expectations for improved practices set out by the official and private sectors". 12 A further private sector initiative, even if it is not focussed specifically on HLIs, is the extensive report of the Counterparty Risk Management Policy Group II 13 with guiding principles on risk management, risk monitoring and enhanced transparency for financial institutions. 8  The President's Working Group on Financial Markets, 1999, page C-12. 9  The President's Working Group on Financial Markets, 1999, page 18. 10  The Managed Fund Association (MFA) is the U.S.-based trade association representing the interests of the alternative investment industry such as hedge funds and fund of funds.
Such scenarios are where contingency planning and evidence-led preparation will be most valuable. It’s not our job to assess point estimates of their likelihood – it’s to assess the risks to safety and soundness, and consider how to mitigate them. This is second nature for forward-looking supervisors who are in the business of precautions. The Treasury Committee is also quite rightly taking a close interest in these issues. We are also engaging with financial institutions, trade bodies, the FCA and the government to unpick cross-sectoral problems. The two uppermost in our mind are the need to ensure that existing insurance and derivatives contracts can continue post-Brexit, and that data can be shared within groups across the UK/EU27 border. It would be messy and difficult for all firms to try to self-solve for these risks and I hope that we can find suitable fixes as the Brexit negotiations progress. Most important is some form of transition or implementation period. This will not only help mitigate the Day 1 risks, but will also enable firms to adjust to the new relationship in an orderly way. While it is highly welcome that the UK government is clearly committed to this, the EU’s position on transition is not yet clear – despite some obvious risks to EU financial stability in its absence. If we get to Christmas and the negotiations have not reached any agreement on this topic, diminishing marginal returns will kick in. Firms would start discounting the likelihood of a transition in the central case of their planning.

Extending the logic of domestication  Retail deposit-taking is a critical economic function and local supervisors have more levers over subsidiaries than branches. Therefore – consistent with the ICB’s logic – we have preferred for several years that international banks from outside the EEA (known as ‘third countries’) with more than £ of retail and SME FSCS-covered 6  transactional or instant access account balances put them in a subsidiary . There are not many of these: most international banks in retail focus on small expatriate or diaspora communities, or on particular niches in private banking. We expect each of these firms to have a viable and sustainable UK business model which accretes a portion of its own capital, rather than being reliant on its parent, with high standards of risk management and governance. 5  See the PRA Annual Report and Accounts; July 2017 and U.S. Department of the Treasury; A Financial System That Creates Economic Opportunities; June 2017. 6 See SS10/14: Supervising international banks: the PRA’s approach to branch supervision; September 2014. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  EMBARGO: not for release before 19:30 on Wednesday 4 October 2017  These retail subsidiaries are not as insulated as the financial and operational separation required by the ICB. But with a much lower threshold than the £ billion of core deposits at which ring-fencing kicks in, our policy follows the same logic, proportionately applied.
But I feel acutely the loss of working relationships and external stimuli – the chance conversations, listening to very different people with very different lived experiences, the exposure to new ideas and experiences. These losses will grow with time. At some point, they will offset the benefits of avoiding South-West trains. Although it is hard to measure, I feel home-working probably has reduced my capacity for creative thought. No modern-day classic novels lie unfinished in my office drawer – or at least not ones penned by me. And the past six months have certainly depleted my social capital: I do not feel I know anyone at work better than six months ago and most a little less well. Everyone I know would I think say the same. Conclusion Let me conclude. Covid has re-shaped our working lives, our economic contributions and our well-being, certainly in the short-term but probably in the longer-term too. Whether this change is for the better is one of the key questions of our time, as workers, businesses, policymakers and citizens. The evidence so far on these issues cannot at this stage be more than illustrative. There is a balance to be struck between events which distract and events which fire the imagination. For me, the 0-5 model of homeworking strikes this balance in the wrong place, as with hindsight did my pre-pandemic 5-0 model.

Interestingly, the main reason cited is improved staff well-being. Among workers the picture is much the same, with surveys suggesting more than a quarter expect to spend more time home-working after the pandemic has abated. My own experience since March has mirrored trends in the wider economy. I am one of the lucky ones who has been able to work from home, as have virtually all other Bank of England staff. I have been back into the office only twice in the past six months. Full-time home-working has, for me, been a radical shift. For the past 30, my working week has been 5-0, office versus home. Nonetheless, like many others, if you asked me how my future working week might look, I think it unlikely I will revert back to the 5-0 model. 2  APSCo (2020). ONS (2020a). 4 Milasi et al (2020), Mongey et al (2020). 3  3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  The Effects on Productivity and Output Given these shifts, some of which seem likely to prove durable, what impact might they have had on workers’ and businesses’ economic contribution – that is to say, their productivity (the amount done per hour worked) and their overall output (productivity multiplied by working hours)? In short, how has this shift in working practices affected working capacity of the economy?
Counterparty credit risk as well as uncertainty about the development of own liquidity needs have led banks to hoard liquidity and impaired the normal functioning of money markets. As a consequence, the liquidity provided to the market does not circulate as smoothly as it does in normal times. Moreover, the nervousness of market players sometimes implies stronger than anticipated interest rate reactions. 5. Conclusion  I would like to conclude by saying that monetary policy implementation has certainly become a more challenging task as a result of the current financial turmoil. At the same time, the flexibility of the ECB’s operational framework has very much helped us in coping with the turmoil. The ECB has been able to maintain control over the short end of the money market, though – not surprisingly – our influence on longer maturities, where prices are driven mainly by credit concerns, remained limited. At the ECB we believe that the separation principle, i.e. the separation of liquidity policy measures from any considerations about the monetary policy stance, has served us well. 9  On this subject, see Cassola, N., M. Drehmann, P. Hartmann, M. lo Duca, and M. Scheicher (2008): “A Research perspective on the propagation of the credit market turmoil”, ECB Research Bulletin No. 7, June 2008. 10  This has been modelled formally by Duffie and Lando (2001): “Term structure of credit spreads with incomplete accounting information”, Econometrica 69, pp. 633-664.

Further, I call upon all banks to partner with the Government in alleviating the suffering of our people by contributing to the development of our nation. After all a growing and more developed economy will contribute more to the banking sector and therefore increase more profits. Banks need to seriously engage in activities that will contribute to the environment in which they are benefiting. This can be achieved in many ways including; •  By making available more loans that will increase the productivity of our economy;  •  By encouraging more Zambians to open bank accounts through provision of easily accessible and affordable products and services;  •  By providing products and services that suit the needs of the various customers across the country and not only those that suit people in Lusaka;  •  By opening more branches across the country; and  •  By installing more ATMs  All this, Ladies and Gentlemen, will greatly contribute to the emergence of a middle class in Zambia, which will bring real economic development and lead to poverty reduction. I am pleased to note that despite the recent challenges facing the financial sectors in the world, Standard Chartered Bank’s commitment to growth and re-investment is unwavering. The bank continues to be adequately capitalised with its total assets accounting for 14.4% of the banking sector’s total assets while its deposit base remained strong at 16.3% of the total industry deposits.
Philipp M Hildebrand: From monetarism to the inflation forecast 30 years of Swiss monetary policy Public lecture by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, at the University of Berne, Berne, 23 November 2004. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Following the collapse of the Bretton Woods system, the Swiss National Bank, in 1974, was one of the first central banks to adopt a monetary policy with monetary aggregates as intermediate targets. The monetarist phase of the National Bank lasted until 1999. During this phase, the National Bank repeatedly changed its monetary targets. In the course of time, it adopted an increasingly pragmatic monetary policy and paid more attention to the development of the exchange rate. In December 1999, the SNB introduced its current monetary policy concept, which uses an inflation forecast as the basis for monetary policy decisions. On the whole, monetarist ideas had a positive influence on Switzerland’s monetary policy. They brought the realisation that price stability is important, thus furthering the process of disinflation in the 1970s and 1980s. Moreover, monetarism caused the SNB to make its monetary policy more transparent and rule-based. The use of monetary aggregates as intermediate targets, however, was more problematic. With money demand proving to be too instable, simply controlling money supply growth was not sufficient to achieve price stability.

Several companies have applied, and Royal Decrees were issued approving the establishment of 21 insurance companies. Approvals were issued by SAMA for 50 offices to provide insurance related services such as brokerage, loss assessment and insurance consultations. Some offices completed necessary procedures to obtain commercial registrations and others are about to finalize necessary procedures. More licenses are expected to be issued soon. The banking system is also being expanded by allowing foreign banks to open branches in the Kingdom. So far ten licenses have been issued for that purpose to 5 GCC banks and to 5 banks from other countries. All of them have already established their branches in the Kingdom, or are likely to open their branches in the very near future. Also, in March 2006 the Council of Ministers approved the foundation of a Saudi joint-stock company under the name "Alinm'a Bank" with a capital of SR 15 billion to carry out normal banking business and investment. This bank is likely to become operational in the near future. Saudi Arabia has one of the youngest populations in the world. This means that one of the challenges facing the national economy is to continue creating jobs for our young people to enter the labour market. This involves development of education and training to qualify the youth and prepare it to meet the requirements of the labour market.
See Kim, D. H. and Wright, J. H. (2005), “An Arbitrage-Free Three-Factor Term Structure Model and the Recent Behavior of Long-Term Yields and Distant-Horizon Forward Rates”, FEDS Working Paper No. 2005-33. 17. See, for example, Bullard, J. (2019), “When Quantitative Tightening Is Not Quantitative Tightening”, The Economy Blog, Federal Reserve Bank of St Louis, 7 March; and Lee Smith, A. and Valcarcel, V., op. cit. For the signalling channel under QE, see Krishnamurthy, A. and Vissing-Jorgensen, A., op. cit. ; and Bauer,  M. D. and Rudebusch, G. D. (2014), “The signaling channel for federal reserve bond purchases”, International Journal of Central Banking, September. 18. See also D’Amico, S. and King, T.B. (2013), “Flow and stock effects of large-scale treasury purchases: evidence on the importance of local supply”, Journal of Financial Economics, Vol. 108, Issue 2, pp. 425448. 19. Schnabel, I. (2020), “The ECB’s response to the COVID-19 pandemic”, remarks at a 24-Hour Global Webinar co-organised by the SAFE Policy Center on “The COVID-19 Crisis and Its Aftermath: Corporate Governance Implications and Policy Challenges”, Frankfurt am Main, 16 April; and Motto, R. and Özen, K. (2022), “Market-stabilization QE”, Working Paper Series, No 2640, ECB, February. 20. Prospects of QT may have contributed to the rise in the OIS term premium through the arbitrage relationship with German government bond yields. Expectations of an increase in the net supply of German government bonds could have increased term premia in both the OIS and the Bund markets.

14, No 5; and Arora, C. and Cerisola, M. (2001), “How Does U.S. Monetary Policy Influence Sovereign Spreads in Emerging Markets?”, IMF Staff Papers, Vol. 48, No 3, pp. 474-498. 25. Gilchrist et al. (2019), “U.S. Monetary Policy and International Bond Markets”, Journal of Money, Credit and Banking, Vol. 51, No S1, pp. 1-200; Motto, R. and Özen, K., op. cit. ; Andrade, S. C. et al. (2023), “Sovereign risk premia and global macroeconomic conditions”, Journal of Financial Economics, Vol. 147, No 1, pp. 172-197; and Eichengreen, B. and Mody, A. (1998), “What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?” NBER Working Paper, No 6408. 26. See, for example, Miranda-Agrippino, S. and Rey, H. (2020), “U.S. monetary policy and the global financial cycle”, The Review of Economic Studies, Vol 87, No 6, pp. 2754-2776; and Gilchrist, S. et al. (2022), “Sovereign risk and financial risk”, Journal of International Economics, Vol. 136. 27. Gilchrist, S. and Zakrajšek, E. (2012), “Credit spreads and business cycle fluctuations”, American Economic Review, 102, No 4, pp. 1692-1720. The excess bond premium has also been shown to be a powerful driver of economic activity. See Gilchrist, S. and Mojon, B. (2016), “Credit risk in the euro area”, The Economic Journal, 128, No 608, pp. 118-158; and Bleaney, M. et al. (2016), “Bond spreads and economic activity in eight European economies”, The Economic Journal, Vol. 126, No 598, pp. 2257-2291. 28. Anderson, G. and Cesa-Bianchi, A.
In 1997 and 1998 the economy shifted from an upturn with high growth rates to an expansion with lower growth but low unemployment, labour shortages in many sectors and strong growth in labour costs. Unemployment has increased again since 2001. Capacity utilisation in the mainland economy has fallen again from a high level and is now on a par with the level in the years 1995-1997, before cost inflation accelerated. The output gap has again closed. At the same time, wage growth has dropped to a more sustainable level. However, growth in the economy stalled last winter. It has therefore been appropriate to reduce interest rates markedly. Even though the krone has depreciated this year, competitiveness is still fairly weak. In the period 1996-2003, competitiveness in Norwegian manufacturing has deteriorated by about 13 per cent. The deterioration is solely ascribable to higher growth in labour costs in Norway than among our trading partners. The krone measured in terms of the trade-weighted exchange rate index (TWI) is currently at about the same level as in 1996. Compared with the average for the last 30 years (1970-2003), wage growth has contributed to a deterioration in competitiveness of 15 per cent. In the years around the turn of the millennium, the depreciation of the krone veiled the underlying deterioration in competitiveness. In May 2000, the krone exchange rate reached its lowest level in six years.

The effect of the interest rate differential on the krone has been amplified by developments in international capital markets. Part of the appreciation in 2002 may also be due to higher oil prices. In a highly uncertain situation and with fears of war in Iraq, the Norwegian krone, buoyed by a relatively high interest rate and oil wealth, may have been regarded as an attractive alternative. Investment in NOK may have been considered a good hedge against a downturn in the world economy as a result of fears of war and high oil prices. Since December last year, the interest rate differential between Norway and other countries has narrowed by  2  BIS Review 38/2003  about 3 percentage points. Since the beginning of 2003, the krone measured in terms of the trade-weighted exchange rate index (TWI) has depreciated by 11 per cent. At the beginning of the 1990s, the Norwegian economy was in a deep recession. Production was far below capacity. When growth in the economy picked up, capacity utilisation increased. The output gap shows the difference between actual GDP and the level indicated by trend growth - estimated at close to 2½ per cent in Norway. Around 1996, there was full capacity utilisation, and the output gap, as we normally measure it, closed. Subsequently, costs increased and prices for goods and services produced for the Norwegian market accelerated. The upturn peaked in 1997, with GDP growth approaching 5 per cent.
Some background Chart: Oil wealth has brought strong rise in prosperity In order to put the Norwegian economy into some perspective, we can compare Norway with Sweden, our close neighbour and a country with many similar characteristics. The relative income level between the two countries was stable – until 1969, when oil was discovered in the Norwegian part of the North Sea. Since then, Norway’s income has pulled ahead. Chart: Terms of trade and real exchange rate in Norway and other countries Our national income reflects the considerable improvement in Norway’s terms of trade over the past couple of decades compared with other resource-rich countries. Nonetheless, the real exchange rate in Norway has not appreciated as sharply as in these countries. The extraction of oil and natural gas from the sea bed along Norway’s coast has come to play a major role in the economy. The petroleum sector now accounts for 50 percent of our exports and more than 20 percent of GDP. Furthermore, tax payments by oil and gas companies1 and direct government ownership interests in oil and gas fields ensure that economic rent largely accrues to the public sector. Petroleum income makes up 30 percent of government revenues. Chart: Oil and gas exporters  1  Both ordinary income tax and an additional resource rent tax. BIS central bankers’ speeches  1  On the world market, Norway’s most significant role is that of natural gas exporter. Norway was the world’s second largest exporter of natural gas in 20102.

•  Thirdly, a fund owned by the government must be highly transparent, not only to the Norwegian public but also in an international context. Let me elaborate on these aspects. In the early summer of 2007, the fund’s strategic equity share was raised from 40 to 60 percent. From summer 2007 to 2009, the fund bought equities worth USD 180 billion in international markets, equivalent to 0.5 percent of all globally listed equities. The largest volume of transactions was carried out in the midst of the financial crisis of 2008 and 2009. The long-term horizon also enables us to invest countercyclically, by rebalancing asset classes: If the equity share increases by more than 4 percentage points from the target weight of 60 percent, we will sell equities and buy bonds. Conversely, if the equity share drops below 56 percent, we will sell bonds and buy equities. The capacity to withstand market turmoil was demonstrated during the financial crisis in 2008 and 2009. For a period of 18 months, the fund’s losses totalled roughly USD 120 billion – more than 25 percent of Norway’s GDP. The losses did not go unnoticed. They led to lively public debate on the fund’s investment strategy. However, the conclusion drawn was that the strategy was robust, and the government remained committed to it.10 Norway would have to accept that the fund’s capital would fluctuate, sometimes dramatically, given the high equity share. Indeed, through 2009 and 2010, not only were those losses reversed, but additional gains were also made.