samchain/econo-pairs-v1 huggingface dataset:
Egil Matsen: Government Pension Fund Global - experiences and organisation Speech by Mr Egil Matsen, Deputy Governor of Norges Bank (Central Bank of Norway), Oslo, 27 October 2017. * * * Accompanying slides  Introduction At a press conference in February 2017, Prime Minister Erna Solberg summarised Norway’s management of its oil and gas revenues as follows: “We have been fortunate, but we have also managed our resources well.”1 Many will probably agree with the Prime Minister’s assessment. In 1990, the Storting (Norwegian parliament) passed the Act relating to the Government Petroleum Fund, an important milestone for the management of Norway’s petroleum revenues. The Act draws a distinction between current oil and gas revenues and the spending of these revenues over the central government budget. This distinction has allowed the accumulation of the savings in what is now called the Government Pension Fund Global (GPFG). Under the Act, all of the government petroleum revenues are to be placed in the GPFG, which can only be used via the central government budget. Under the fiscal rule, the transfers are to follow the long-term expected annual real return of the GPFG. Chart: A large fund – NOK 8 000 billion The first deposit in the fund was NOK 2 billion and was made in May 1996 by Sigbjørn Johnsen, the Minister of Finance at the time. Today, the value of the GPFG is around NOK 8 000 billon, or almost three times annual mainland GDP.

Miguel Fernández Ordóñez: Global rebalancing, asset prices and policy responses Opening remarks by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the Fifth High-Level Seminar of the Eurosystem and Latin American Central Banks, Madrid, 10 December 2010. *  *  *  Good morning and welcome again. More than three years after the global financial system started to show serious signs of instability and two years after being on the verge of a global economic and financial meltdown, the world economy seems to have avoided that risk, backed by a strong and coordinated policy response. Nevertheless, the strengthening has been uneven and the risk of economic and financial instability is still persistent and significant in some regions, like the euro area. Indeed, it is hard to emphasise sufficiently the challenges ahead and how crucial the present juncture is for the future of our Monetary Union. On the contrary, Latin American economies had learned the lessons from the severe financial and economic disruptions they experienced in the not so distant past, and the challenges they currently face are more similar to those that characterised the period of strong growth prior to the financial crisis. These very different sets of present circumstances make today’s exchange of mutual experiences and policy discussion particularly interesting. The title of today’s Seminar was chosen almost a year ago, but it couldn’t be more timely: Global Rebalancing, Asset Prices and Policy Responses.
Such restricted access would effectively remove any distortions between the treatment of credit institutions that are domestic legal persons, but have majority Eurozone capital ownership (where access to euro liquidity may be done via parent banks), and the treatment applicable to banks which do not have capital originating in the Eurozone. Concluding remarks Summing up, it is my view that Romania should be part of all three pillars of the Banking Union – despite the sequenced manner in which they will inevitably come into being, all of them are required for the Banking Union to function effectively. I trust that adhering to this European project will strengthen financial stability, further increasing confidence in the national banking sector (through the harmonisation of supervisory practices and deposit guarantee schemes), as well as fostering sustainable lending and economic growth (by reducing fragmentation of European financial markets). My opinion that Romania should participate in the Banking Union may seem overly optimistic, but as a long-standing supporter of the European project, I believe that staying positive is the only way forward. Such an attitude was actually inspired by the many meetings I had over the years, in Frankfurt, Basel or Brussels, with some of the leading minds of Europe, among which Tomasso Padoa Schioppa, who said that “the crisis will possibly generate the means that are now lacking and get us closer to an accomplished Union”.

Figures differ across countries – with the lowest numbers in the Czech Republic (around 20 percent) and the highest in Romania (above 50 percent) – but the tendency is the same. Referring to the benefits of euro adoption, one of the prominent ones, namely the lower financing costs, is no longer obvious. The incomplete institutional setup of the European project in general and the European Monetary Union in particular – weak fiscal rules and the lack of any transnational instruments that would have enabled monitoring cross-border private capital flows – gave rise to a number of vulnerabilities which the recent crisis has exposed. To be more specific, what sets the European Union apart from the other industrialized economies is precisely the fact that the initial banking crisis which hit everybody here gave birth to fears of sovereign default, which reinforced banking system vulnerability and sapped investor confidence further, thus deepening the recession. The consequence of all that was the financial fragmentation issue, which is precisely the reason why the lower financing cost benefit of euro adoption, seems to have vanished. Another unfortunate consequence was that the benefits brought about by commercial integration were significantly diminished by lack of growth in the euro area. The fixes proposed to the institutional architecture of the European Monetary Union, such as the setup of the European Stability Mechanism and even that of the Banking Union, brought 2  BIS central bankers’ speeches  about direct costs of adopting the euro.
Turning to reserve releases, our obvious concern is that these should reflect genuine reserve redundancy with the decisions taken by risk managers and actuaries using their best professional judgement and not in any way influenced by a desire to sustain reported profits. For long tail lines, such as casualty, a key assumption in setting reserves is the expectation of future claims inflation. In most cases this assumption is derived implicitly using the recent actual data and trending this forward. Given that the recent past has seen falling inflation in many sectors the obvious question is – is it reasonable to assume that these trends will continue? It does seem plausible that claims inflation has often been lower than expected against the background of the current low inflation environment. But our calculations suggest reserve releases have in some cases got to a point where implied future claims inflation looks very low. In an extreme case, we estimated past claims inflation for the class of business to be 5% per annum, whereas to obtain the particular insurer’s booked reserves would imply a future claims inflation assumption of –2%. If the future trend is in fact in line with past inflation, booked reserves would need to be 25% higher than currently assumed. Insurers that have sought to diversify and grow their business into longer-tail liability insurance classes have critical questions to answer about the future direction of claims inflation.

Despite falling premium rates, general insurer profits in the past few years have been sustained by both benign catastrophe experience and levels of prior year reserve releases that are now the highest for thirty years (Chart 2). Natural catastrophes are a major component of many GI firms’ risk profiles. Catastrophe losses returned to more normal levels by historical standards in the first half of this year. But the low incidence of catastrophic events in recent years may have given support to the idea that this component has in some way diminished, whether due to trends in nature or more effective management of risks by policyholders and insurers. I have also heard speculation that some man-made risks may have decreased: for example, if planes and ships are built better than previously, or if companies are better at managing their risks. Mindful of both the impact and the uncertainty involved in considering this, we would expect firms to seek the BIS central bankers’ speeches  1  best available evidence and to take a prudent and comprehensive view to the assessment of risks. Put simply, we would not expect a handful of recent data points to lead to a marked reduction in a firm’s assessment of its best estimate of liabilities nor its “1 in 200” risk.
The governments, in  8  BIS Review 39/2006  turn, rely on their ability to raise tax. Such a system would of course demand very strict and well thought-out rules governing what actions the fund should be allowed to take in the case of a bank failure. These rules could be inspired, for example, by the US FDIC’s very strict mandate to always choose the least cost solution. Among other things, this would in some cases mean allowing shareholders as well as uninsured depositors and debt holders to lose their money. One would of course also have to think hard about what formula to use for burden sharing. In my opinion, I think a fixed key would probably be the most practical choice. I might mention that there does, in fact, already exist one type of burden sharing arrangement in the EU today, and that is for topping up the national deposit guarantee schemes for foreign branches. Although the potential sums involved in these topping-up schemes are insignificant in comparison to the potential costs of a large cross-border bank failure, one could perhaps draw some inspiration and build on such an existing arrangement. Another source of inspiration, where an ex ante determined key for obligations to provide liquidity is used, are the IMF financing system and its second line defence in the form of General Agreements to Borrow and New Agreements to Borrow. These burden sharing arrangements have been successfully in use for half a century.

Despite EU regulations on consolidated supervision, there is always the risk that no supervisory authority will gain sufficient oversight of and insight into all parts of a banking group. The supervision is also complicated by the functional specialisation within the banks, which does not always follow the national and legal divisions. If, for instance, a banking group with operations in two countries has concentrated all of its credit risk management in its home country, it will probably be difficult for the host country’s supervisory authority to assess the total risk in the subsidiary. On top of problems of getting a fair overall picture, there is the problem of coordinating information. When several authorities in different countries are involved, the information flow may be  BIS Review 39/2006  3  slowed down. The MoU on Cooperation between Banking Supervisors, Central Banks, and Finance Ministries in the European Union in Financial Crisis Situations that was recently agreed among the 25 member states provides a useful framework for sharing information in a crisis. Decision making In a crisis you need the ability to make rapid decisions. For example, central banks might consider providing emergency liquidity assistance. In some cases, there might also be reasons to consider a swift take-over of the bank and temporarily placing it under public administration. For decisions like these, you would ideally need a clear line of command. It is difficult enough to organise efficient management of a national crisis.
Jordà, Schularick and Taylor (2011) show in a study of crises in 14 countries during the period 1870-2008 that if the upswing phase is marked by a strong credit boom, the crisis tends to be deeper and the recovery slower. 8  Note that such a scenario would not necessarily lead to financial stability problems. See, for example, the stress tests published in the Riksbank's Financial Stability Reports. 9  Of course, the repo rate is not the only tool for managing this type of circumstance, which is discussed below. BIS central bankers’ speeches  5  will occur with certainty if one conducts a specific policy; it entails weighing the risks and probabilities of various scenarios against one another. In this case, the risk of a really poor development further ahead must be balanced against short-term costs. One is forced, so to speak, to pay an "insurance premium" in that a slightly less expansionary monetary policy in the short term leads to slightly lower inflation and slightly higher unemployment. A particularly difficult situation arises if a weak development of the real economy means that the short-term costs of conducting a less expansionary policy appear to be large at the same time as the risks linked to credit granting and the housing market increase. To summarise: in principle, there is no doubt that the Riksbank according to its mandate may take into consideration risks linked to a rapid increase in household debt.

They also make an alternative calculation of the effects of monetary policy on unemployment, based on the deviation in CPIF inflation from 2 per cent and reach a figure of around 12,000 unemployed on average. But the main message in their analysis is that calculations of this type must necessarily be based on a number of more or less realistic assumptions of how the economy functions. It is therefore important to take the figures produced with a fairly large pinch of salt.5 Recent criticism As I noted in my introduction, in addition to the criticism of the historical attainment of the inflation target, there has also been criticism of the policy conducted in recent years. This claims that the Riksbank has considered factors in its repo-rate decisions that should not have been considered. The main focus of this criticism has been that the Riksbank has concerned itself with household debt and developments on the housing market and thus not conducted a sufficiently expansionary monetary policy. Sometimes it has even been claimed that the Riksbank has introduced a new target that contravenes its mandate and that the Riksbank has begun to conduct "housing policy". 4  Svensson (2013c). 5  Assar Lindbeck, although having preferred a lower interest rate than the one the Riksbank decided on, also argues that this type of calculation should not be taken “too seriously”, as it is based on assumptions that are “too uncertain” (Dagens Industri, 2013a).
BIS Review 59/2001  1  Banking facilities have become so much an accepted and necessary part of life that access to them is sometimes regarded as an absolute and unconditional right, in the same way as is argued for universal education or health services. This has been a topic of debate in Hong Kong recently, in the context of likely changes to savings rates and to fees and charges in the light of the final deregulation of interest rates next week. As a general rule, however, businesses such as banks should be allowed to determine their own strategies in the light of market forces, although the authorities may claim a legitimate interest in ensuring that those market forces do indeed function competitively. One bank may decide that the provision and encouragement of the widest possible access to its services fits well into its business plan; another may decide otherwise. In the rather unlikely event that insufficient basic banking services are available to some section of society, the case may be argued for official intervention. But one must distinguish between different aspects of the situation – commercial, competitive and social. If, other things being equal, banks are to be pressed into assisting with the delivery of social policies, then the precise terms of that obligation, including responsibility for funding it, should be made clear – whether by law or in suitable agreements or codes.

However, in a context where inflation has turned out to be higher than expected; where inflationary expectations remain above target; where the peso is weaker than normal; where the global inflationary problem has become more complex and there are doubts as to how policies to address it will affect the global economy and financial markets, we must acknowledge that the risk of experiencing a more persistent inflationary phenomenon is our primary concern. Monetary policy makers will remain attentive to these developments and, as I mentioned a few moments ago, future movements of the MPR will be contingent on them. Urgently resolving the inflationary problem does not imply that we should set aside our medium-term challenges. More than two years into the pandemic and almost three since the social unrest of October 2019, our economy has suffered a string of events that have put the effectiveness of our economic policy framework and the authorities' ability to react to the test. In addition to the inflationary effects, some of the measures adopted to deal with the effects of the pandemic generated significant costs in the local financial market. Withdrawals of pension funds reduced the size of long-term savings and possibly also the economy's capacity to react to external shocks, especially under conditions of high uncertainty. Therefore, the strengthening of financial markets should be an important item on the economic agenda.
In addition, at liftoff, the FOMC decided to widen the spread between IOR and the ON RRP offered rate by 5 basis points, which acted to slightly reduce secured rates relative to unsecured rates.30 These two factors explain why dispersion rose around the first tightening, but not at the following two tightenings: reduced uplift from the zero lower bound and the lower relative setting of the ON RRP offered rate had some effect on the outcome of the first tightening, but had no effect on the subsequent two. Finally, the new SEC money market fund rules brought about a pickup in demand for ultra-low-risk investments, and a corresponding decline in demand for unsecured investments. If these one-off factors were the primary reasons that this spread widened, we would expect to see essentially one-for-one passthrough of future monetary tightening into both markets. Transmission to broader money markets This evidence on control and transmission is encouraging. However, there have been some recent signs of more volatile transmission of interest rates into broader money markets. The most notable of these has been the rise in LIBOR rates relative to like-maturity overnight index swaps, shown for a 3-month maturity in (Figure 14). This figure suggests that banks’ cost to obtain funding for three months has risen relative to the cost of borrowing that funding overnight—for example in the federal funds or Eurodollar market—and hedging the overnight interest rate risk of such borrowing with a swap.

I would now like briefly to address three central points connected with oversight: which systems should be overseen by the National Bank? What minimum requirements should the operators of these systems fulfil? And finally: how will collaboration with other regulatory and supervisory authorities especially the Swiss Federal Banking Commission (FBC) - be structured? Oversight focuses on systems which might constitute a threat to the stability of the Swiss financial system. The question of the systems to which this applies cannot be answered in precise terms. The ordinance lists a number of criteria that we will consider when assessing the systemic importance of an infrastructure. In addition to the type, number and monetary volume of the transactions that are cleared or settled via a system, the outcome of the assessment will depend, for example, on the other financial market infrastructures with which a system is linked, and whether or not the clearing and settlement of transactions can be diverted temporarily to another system in the event of a failure in the first system. The latter option alleviates the problem somewhat. Given these and other criteria, it can be assumed that the group of systems overseen by the National Bank will be composed first and foremost of those payment and securities settlement systems that are part of what is known as the Swiss value chain. These are the interbank payment system Swiss Interbank Clearing (SIC), the SECOM securities settlement system and x-clear, the central counterparty.
BIS Review 150/2007  3  First, since the early 1980s, we have witnessed broad-based and sustained political momentum to deregulate and liberalise economic structures, enhance the role of market forces and attempt to reduce the role of governments in the global economy. Looking back, Ronald Reagan’s confrontation with the air traffic controllers union in 1981 marks the beginning of this process. Most of you in this room would probably concur with the premise that the secular trend to strengthen the role of free markets and competition as the overarching organising principles of the global economy has contributed significantly to the long period of prosperity that the world economy has enjoyed. In this context, SWFs represent a potential threat. Sizeable state-sponsored foreign investments in mature economies can be perceived to be a threat to free market forces. 14 Moreover, such investments run the risk of triggering protectionist reactions in the recipient countries. Second, one of the basic premises of open global capital markets is the idea that capital flows freely worldwide in search of investment opportunities that yield optimal risk-adjusted rates of return. The fact that large and government-controlled investment companies make substantial investments in privately owned companies in other countries raises concerns about the validity of the hypothesis that capital seeks optimal risk-adjusted rates of returns. Governments of recipient countries may have doubts about the motivation behind such investments. Are SWFs in pursuit of a variant of the traditional motive to maximise returns?

Nonetheless, it is difficult to argue with the basic direction of these forecasts. The fundamental dynamic behind the recent rise of SWFs will not disappear over night. As I mentioned, estimated excess reserves are very large. 12 In all likelihood, at least some of these excess reserves will be transferred to SWFs in coming years. Moreover, even if global imbalances were to unwind quickly, for instance in association with a sharp and protracted recession in the United States, the power of compound return will continue to be a substantial source of growth for SWFs that already exist. Fourth, SWFs have so far been initiated predominantly in the Middle East and in Asia. Slide 8 shows that these two regions account for 77 percent of the assets of the largest SWFs. Nonetheless, we should not lose sight of the fact that 16 percent of the assets of the 14 largest SWFs are held in developed countries. 13 Fifth, SWFs will increasingly attempt to diversify their holdings. They will do so gradually, given the prevailing size and liquidity constraints. Like central banks, SWFs have traditionally been investors in highly rated fixed income assets. Going forward, SWFs will increasingly look for investments in equity markets, both public and private ones. Several of these investments have recently produced headlines in the global financial press. Slide 9 depicts some of them. 3.