samchain/econo-pairs-v1 huggingface dataset:
The Market Conduct and Claims Department was set up for that purpose in 2013 and has been allocated an increasing amount of resources. In 2016 a total of 109 measures were taken, mostly relating to compliance with transparency regulations in the sale of mortgage and consumer loans, the operation of banks’ customer service departments and observance of the rules on bank advertising. These activities are expected to intensify this year and other measures will be launched relating to the use of new technologies in the sale and purchase of bank products. 4 Closing comments To conclude, we are indeed in the midst of a profound transformation of traditional banking activity. The setting is one of pressure on financial intermediation margins that means institutions need to seek further ways to enhance their operating efficiency. We are waiting to see the as yet uncertain impact that new technologies linked to the provision of financial services will have on traditional banking business. And above all, we are at a point in time when banks must ensure that their customers are their main priority, as this is the only way to maintain confidence in the correct functioning of the banking industry. Thank you very much. 7/7

Ida Wolden Bache: Norges Bank's management of the Government Pension Fund Global Introductory statement by Ms Ida Wolden Bache, Governor of Norges Bank (Central Bank of Norway), at the hearing of the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament), Oslo, 18 April 2023. *** Thank you for the invitation and for the opportunity to talk about Norges Bank's management of the Government Pension Fund Global. 2022 saw substantial movements in global financial markets. Interest rates rose, and both equity and bond markets gave negative returns. The fund's return last year was equivalent to a drop in value of NOK 1 637 billion. In absolute terms, this is the weakest return in the fund's history. With such a large fund and an equity allocation of 70 percent, we need to be prepared for substantial fluctuations in returns The objective for Norges Bank's management of the fund is the highest possible longterm return within the constraints set by the Ministry of Finance. The Ministry has defined a benchmark index for the fund, and we manage the fund close to this index. Over time, the return on the fund has been higher than the return on the benchmark index. The Executive Board is satisfied with this. The excess return in 2022 was equivalent to NOK 117 billion. The Executive Board has overriding responsibility for Norges Bank's management of the fund. We adopted a new strategy for the management of the fund towards the end of 2022.
However, as we know from Slide 10, this masks substantial changes in the underlying density forecasts, with the lower rate mode becoming more prominent. 50  See e.g. Crump et al. (2014), and more recently Brodsky et al. (2016a). 51  Market-implied rates were derived from futures prices at the same time as responses were received from the surveys. 52  Adrian, Crump, and Moench (2013). 14  BIS central bankers’ speeches  Finance models make a variety of assumptions that allows them to extract risk premia from asset prices. Once that is done, they can obtain the underlying so-called “physical” probability distribution of the marginal investor – that is, the actual probability she assigns to various outcomes. Brodsky et al. propose a complementary approach, called “tilting,” which is, in a way, the reverse of the finance approach.53 It starts from the survey probability distribution and asks: How much do I have to “tilt” the original distribution – that is, how much probability mass do I have to shift around – to obtain the market-implied path as its mean? There are many ways to tilt or alter the survey distribution such that its mean is the market rate. Our approach is to require that the tilted distribution is as close as possible to the original survey distribution, where the notion of distance is one that is commonly used in statistics, and is based on a measure called relative entropy or Kullback-Leibler information criterion (KLIC). This relative entropy approach is nothing new.

Market rates and probability forecasts It is well understood in theory why the market-implied path of the policy rate usually differs from survey measures of policy expectations.50 Even if the marginal investor’s probability distribution for future outcomes coincided with that of the average survey respondent, she would want additional compensation for bearing risk in states of the world that are unfavorable to her. It is conceivable in the current environment that outcomes in which the federal funds rate would return to the zero lower bound, or more generally remain low, are not good news for the overall portfolio of the marginal investor. Thus, in assessing the price at which she would be willing to trade interest rate derivatives like federal funds futures, she would weight those “negative” states of the world, such as states involving a return to the zero lower bound, more than her subjective probability distribution would imply – and the opposite would hold true for “positive” states of the world. In other words, in this environment the risk premium compensation she requires would pull the market-implied path downward, away from survey expectations. While risk premia, especially at this juncture, are likely very important, looking only at pointforecasts may overemphasize their role when these point forecasts coincide with modal forecasts. In particular, when the implied policy rate from federal funds or Eurodollar futures changes, while the point forecasts from surveys do not, it is customary to attribute all the change in the market rates to risk premia.
Inflation has been declining since 2001, and historic lows that had not been observed in the last 30 years were made possible in this process. Independence enables the Central Bank to shape its policies free from political pressure and daily disputes, and with a medium-term perspective focusing directly on the targets. The point reached in the fight against inflation and the achievements so far confirm the importance of an “independent structure” with respect to both the legal framework and the implementation. Therefore, not merely political circles but all sections of the public are expected to take this into account - not only as an element of discourse but in their actions as a whole. It should be borne in mind that controversy over this concept leads to the questioning of economic policies and the credibility of targets, as these discussions eventually focus on monetary policy. It is obvious that these controversies may be very costly. There is no doubt that the Central Bank will show no hesitation to continue utilizing instrumental independence in order to achieve targets and will be ready to take any risks and provide the necessary warnings. It suffices to take a look at the past five years to see why fighting inflation is so important. The high and chronic inflation led to considerable economic and social losses in Turkey in the last 30 years.

As I have mentioned earlier, some risks that endanger the continuation of the downward trend of inflation in the medium term do exist. The first risk is the continuation of the increases in crude oil prices. Other main risk factors include the rapid changes in global risk perceptions resulting from the monetary policies of developed countries and the fluctuations that might occur in financial markets accordingly. In case such a risk materializes, the Central Bank will act with a medium-term perspective, as it does today: It will not respond to temporary increases in inflation; however, it will closely monitor medium-term inflation expectations. Another risk factor is that by returning to old habits, variables other than the inflation target are taken as a reference in pricing behaviors. This represents the risk of deterioration in pricing behaviors. In order to prevent such a risk from materializing, the Central Bank will maintain its cautious stance until medium-term inflation expectations converge to the targets. One of the risk factors, which are important in the disinflation process and are closely monitored, is the price rigidity in the services sector. These sectors require implementations that will increase supply and competition. Additionally, the Central Bank carefully monitors the political risks that have come to the forefront more and more in the recent period. In this scope, in case it is foreseen that political developments in the country will have a negative effect on inflation, the Central Bank shall take the necessary measures.
For example, there is no real point in observing that we would have acted differently if we had managed to predict the debt crisis in Europe and its effects. It is highly likely that, in the future, this type of event will be more or less just as difficult to predict. However, one experience that I believe we should take with us concerns our monetary policy communication. Much of our communication at this time was about pointing out risks connected to the development of debts and housing prices, in particular during the period in which we had again started to cut the repo rate. Even if we still expected to reach the inflation target, it could well be that we talked too little about the target and too much about financial imbalances. This may have created uncertainty among economic agents regarding the status of the inflation target, which may, in turn, have contributed towards inflation expectations falling. This is something worth bearing in mind going forward. The problem was possibly also exacerbated by the Riksbank's critics often exaggerating the significance to monetary policy of the development of debt and housing prices. A deeper question concerning keeping inflation in sight is whether confidence in the inflation target is really so important. Would it not be possible to conduct monetary policy without there being confidence in the inflation target – or, for that matter, without there being any inflation target at all?

The situation is reminiscent of that in the mid-1990s, when the Riksbank, despite widespread scepticism, managed to establish confidence in the inflation target, even though the aim that time was to bring down inflation. There are, of course, no guarantees that inflation will stay at around 2 per cent going forward. Nevertheless, things look good so far, even though a lot of support from monetary policy will still be necessary and further monetary policy easing cannot be ruled out. Links to the international debate How, then, can Sweden's experiences be linked to the international debate – the implicit ideological debate between the Yellen camp and the Borio camp? To more easily understand this, it is useful to start by reviewing the debate in a little more detail. There are, above all, two differences, which are closely related, between the two camps: the view of the so-called Phillips curve and the view of the possibilities central banks have to steer inflation. The Phillips curve exists in different variations but, in one way or another, all of these deal with the relationship between resource utilisation and the development of prices or wages. The starting point is that, by adjusting its policy rate, the central bank can influence resource utilisation in the economy. When resource utilisation increases, prices and wages rise faster, and vice versa, via the Phillips curve.
The IMF has a key role to play in this implementation process, through their assessments of compliance with standards and transparency about these assessments. But even with preventative measures in place, liquidity crises will still occur from time to time. Creditors may sometimes choose to flee simply for fear of other creditors doing so before them. A country can face a liquidity “run” in much the same way as a bank. And these types of coordination failure are difficult to resolve with standard macroeconomic policy tools, like monetary policy. So what policy alternatives are available? One means of resolving this rush for the exits is for the IMF to provide emergency liquidity support in potentially unlimited amounts - a classic international lender of last resort. But virtually no-one envisages the IMF (or anyone else) playing such a role. As a practical matter, the IMF simply lacks the resources. Its usable resources are currently less than $ billion. The external debt of the developing countries is well over $ trillion. So the IMF’s ability to fill financing gaps is already heavily circumscribed and will become more so over time. Even with the resources, it is very doubtful whether unlimited IMF lending would be desirable. More likely, it would simply stoke-up moral hazard problems for the future, potentially increasing the incidence of crisis and the corresponding cost for taxpayers. So an international lender of last resort appears both impractical and undesirable.

Within the Bank, the Financial Stability Committee occupies a similar position in relation to financial stability as the MPC does for monetary stability. Bank staff present papers to the Financial Stability Committee evaluating the overall conjunctural position and reviewing issues of specific concern. The staff assessment of financial stability is shared with the Treasury and FSA and discussed with them in the Standing Committee, set up under the MoU, that meets each month to monitor financial stability and to consider issues of common concern. The objective is to identify sources of instability before problems emerge, to be in a position to take preventative action or to respond quickly in the event of trouble. The Bank sets out to articulate publicly its financial stability role and to communicate current concerns by the publication semi-annually of the Financial Stability Review. Each edition includes an overview of financial stability providing an assessment of current threats to the system, ranging from imbalances  1  BIS Review 70/2000  in the major industrialised economies or debt structures in EMEs, to sectoral issues such as equity market volatility or gearing in the telecoms industry. While other commentators may talk of economic miracles, you can rely on central banks to find disaster waiting in the wings! But if surveillance feeds off central bankers’ capacity to worry, then crisis prevention and crisis resolution, working on rules to minimise the risk or the cost of a financial crisis, may be the only prospect for us to get a decent night’s sleep.
These tools pertain largely to depository institutions (DIs or “banks”) and include the discount rate – that is, the rate at which banks borrow from the discount window, the Fed’s lending facility administered through the twelve regional Federal Reserve Banks – and policies around reserves held by depository institutions at the Fed (including reserve requirements, and more recently, the payment of interest on reserve balances and term deposits). 1 However, it’s important to note that each of these tools is merely a means to an end, used to influence financial conditions in order to achieve the Federal Reserve’s dual mandate. Since 1936, the New York Fed has been selected each year by the FOMC as the Bank within the System responsible for the execution of OMOs. Within the New York Fed, the Desk, under the guidance of a manager of the SOMA selected by the FOMC – currently me – is responsible for conducting open market operations under the authorization and direction of the FOMC. 2 In practice, the FOMC’s operating objective for OMOs – for example, a target rate for overnight interest rates or a specified amount of assets to purchase – is communicated to the Desk through a policy “directive” that the Committee votes on at the conclusion of each meeting. This directive specifically instructs the Desk to conduct transactions for the SOMA in furtherance of the desired operating objective.

The BoE’s Asset Purchase Facility, through which its Monetary Policy Committee (MPC) purchased £ billion of longer-term assets between 2009 and 2012, was quite comparable in purpose and design to the Fed’s LSAP programs. Moreover, since March 2013, the BoE has reinvested the cash flows associated with maturing gilts in the facility in order to maintain the stock of securities at a steady level. In its February 2014 Inflation Report, the MPC provided guidance on its expected normalization framework, laying out an approach in which its Bank Rate – the deposit rate for central bank reserves in the U.K. – is the active marginal instrument for monetary policy while portfolio-related tools, including reinvestments and asset sales, receive less emphasis. Specifically, the MPC suggested that it intends to maintain its stock of purchased assets, including reinvesting the cash flows associated with maturing securities, at least until it raises its target short-term interest rate from its current level. Meanwhile, the BoJ is still purchasing assets under QQE, which it launched in April 2013. With a goal of increasing its Japanese government bond (JGB) holdings by ¥ trillion per year, it has not yet initiated a discussion of eventual normalization. When that time comes, however, the BoJ will be holding a large portfolio of longer-term JGBs. The BoJ’s balance sheet will therefore look markedly different than it did when the QEP ended in 2006, at which time the BoJ just allowed short-term funds-supplying operations to roll off.
This in turn has been a catalyst for increased financial innovation and resulted in a wider range of Islamic financial products and services. This has ignited interest from conventional global players from Non-Muslim countries largely in the form of increased participation in Islamic financial markets and in acquisition of strategic stakes in domestic Islamic financial institutions. With the opening of borders for banking institutions and other players, the Islamic financial system has become more diversified and the Islamic financial markets deepened. These developments have contributed to its rapid expansion across the globe, and Islamic finance has now emerged as among the fastest segments in the financial services industry. The scope of Islamic finance business has thus expanded beyond retail and trade financing, to more sophisticated financial products in response to the changing global customer base. Such Shariah-compliant products include private equity, project finance, the origination and issuance of sukuk, as well as fund, asset and wealth management products. The sukuk market in particular, has become an important avenue for international fund raising and investment activities, has expanded by an annual growth rate of 40%. The vast potential in sukuk market in the international financial system indeed represents the crest of a new wave of innovation in Islamic finance and is very much part of the globalisation process in Islamic finance. Sukuk Musyarakah and Ijarah, which command the broader global acceptance, represents the majority of global sukuk issuances.

BIS Review 59/2008  3  In relation to this, Malaysia has taken a three-prong strategic initiative to promote greater mutual respect of the Shariah views. The first is to recognise the principle of mutual respect in Shariah opinions issued in other jurisdictions by a recognized Shariah committee for transactions undertaken in Malaysia. In addition to the key role of a centralized Shariah Advisory Council as the reference point for all Shariah matters in Islamic finance, Malaysia welcomes Shariah rulings by other Shariah committees that are deemed to be deduced through generally accepted rigorous principles, processes and rules. The second initiative is to have strong resource foundation supported by a pool of qualified and competent Shariah talent, as well as to accord more emphasis on extensive Shariah research in Islamic finance. Given the rapid global growth of Islamic finance, there is an urgent need to meet the talent demand for Shariah scholars with strong interest in the strategic development of the Islamic finance industry. From the supply side, the International Centre for Education in Islamic Finance (INCEIF) established in 2006 has made significant progress with more than 1000 registered students in its professional Islamic finance certification. It also has 28 PhD students and has recently launched a Masters Programme in Islamic finance. The Islamic Banking and Finance Institute Malaysia (IBFIM) also offers a structured, modular training solutions for Shariah advisers focusing on practical and operational aspects of Islamic banking and takaful.
For example, it is much more common today than in 1998 for hedge funds to seek arrangements that provide contingent credit and thus provide the hedge fund with protection against the need to liquidate positions too rapidly. Similarly, many hedge funds are today seeking to base margining agreements, including initial margins, on the results of VaR calculations that incorporate the effect of netting across multiple products. While both of these developments have their basis in sound risk management principles, firms extending such credit should carefully examine the impact of these and other innovations on their potential exposures to hedge funds in stress conditions, and set the terms for such credit accordingly. A reinforced due diligence process also is critical in assessing the operational capabilities of the hedge funds, the quality of their risk management process and execution and compliance infrastructure. This may sound self evident, but it is not as common as one might think. Timely access to forward looking measures of risk by hedge fund counterparties is obviously important for assessing the risks in firms’ exposures to hedge funds as a group, and for assessing the impact of hedge funds’ activities on a firm’s own positions. To the extent that information is not made available, and there seem to be a number of legitimate reasons why hedge funds may resist providing it and are sometimes successful in doing so, then it makes sense for the dealer to reduce the exposure it is willing to take to that fund.

In general, credit terms should be calibrated to the quality of the information provided by the hedge fund counterparty. To the extent this is done generally across those funds that are less transparent, have weak risk management disciplines and/or inadequate operational infrastructure, they will be able to take on less leverage, which would limit the potential risk they may pose in a disruptive event. As these points suggest, it is not enough to simply manage the firm’s direct potential future credit exposure to hedge funds within prudently low limits. This has to be complimented with a more exacting approach to the evaluation of a firm’s overall vulnerability to market risk that includes full consideration of the potential impact of a large shock, including one that involves hedge funds. Alongside these enhancements to risk management practices, we believe that market participants should also intensify their efforts to improve the underlying infrastructure of the markets in which hedge funds are important. Weaknesses in close-out procedures for OTC derivatives were among the areas singled out by the CRMPG for collective action in the wake of LTCM, and important progress has been made in this area since. In addition, there are potentially valuable efforts underway to standardize documentation and improve the confirmation and execution process in these markets.