samchain/econo-pairs-v1 huggingface dataset:
As a complement to our statistical studies of productivity and other subjects, we will also create channels for direct contacts with companies. This is to improve our knowledge of the current status and current events in the economy. At the same time, I would like to point out that one should not have overly high expectations that the work will lead to significantly more accurate forecasts. We will probably have to continue to live with some surprises in the economy. This applies in particular when structural changes in the economy change the historical pattern. But improving understanding of what has happened is still important. The cause behind fluctuations in inflation and growth is important for how monetary policy should be designed. The high productivity growth has meant that the Riksbank has been able to conduct an expansionary monetary policy. In other words, the economy has managed a high growth rate without prices rising much. Under these circumstances a natural question might be whether we should have cut the rate more in order to push up inflation towards the target more quickly? With hindsight it is fairly easy to note that we could possibly have made the interest rate cuts at a slightly faster pace when we began making cuts a few years ago. We have already noted this in various contexts and it is hardly controversial. On the other hand, I do not believe that it would have been wise to cut the rate much more in recent years.

Because of this, during the first two weeks of September, concern about LongTerm Capital was a widespread topic of conversation in financial markets. It is a traditional and essential role for the President and senior officers of the New York Fed to be talking to, and receiving calls from, market participants regarding significant developments and potential dislocations. In fact, the partners at Long-Term Capital called me early in September to notify me of their difficulties and their discussion with investment houses about plans to raise new capital. By Friday, September 18, with the efforts to raise new capital still unsuccessful and with an increasing number of people now aware of Long-Term’s plight because of the efforts to bring in new investors - events seemed to come to a head. With market conditions particularly unsettled that day, I made a series of calls to senior Wall Street officials to discuss overall market conditions. Let me take a moment to put those calls in context. One important objective of the Federal Reserve is to assure financial stability. Particularly in times of stress, it is essential that the Federal Reserve continue to take the pulse of the market. One way to do that is through candid and open communication with key market participants. Everyone I spoke to that day volunteered concern about the serious effect the deteriorating situation of Long-Term could have on world markets.
With this in mind, the key questions are: 1) Where are we in the adjustment process, and 2) what, if anything, can monetary policy do to facilitate a smoother adjustment and more rapid progress toward our dual mandate objectives? In terms of the adjustment process, starting on the household side, most signs point to significant progress. For example, the revisions to the national income and product accounts announced in July revealed substantial upward revisions to the personal saving rate (Chart 5). The current saving rate is broadly consistent with the historical relationship between personal saving and the household net worth-to-income ratio. Of course, part of this story depends on the stabilization of household net worth, which had earlier fallen sharply due to declines in both home and equity prices. Although household net worth dropped significantly again in the second quarter according to the Flow of Funds accounts, the subsequent rise in the U.S. equity market is likely to have reversed that decline. Meanwhile, housing price declines have moderated substantially, helped, in part, by the fact that the low  2  BIS Review 127/2010  level of mortgage rates combined with the sharp drop in house prices has resulted in a substantial improvement in affordability (Chart 6). Households have retrenched in terms of their borrowing and this has helped push down the household debt-to-income ratio sharply from its peak in 2007. Another factor behind the fall in the debt-to-income ratio has been credit losses and debt forgiveness.

Since 2007, chargeoffs have reduced household debt outstanding by over $ billion. Some argue that the decline in the household debt-to-income ratio must go much further before the deleveraging process can be complete. After all, the household debt-to-income ratio is still far above the level reached as late as 2002, before the surge in household borrowing began. Some even argue that household debt-to-income ratios must fall back to the level of the 1980s. I think that this is an overly pessimistic view for a simple reason – both household debt and household financial assets have been rising faster than income growth on a secular basis since the 1950s. Focusing just on debt misses what is happening on the other side of the balance sheet (Chart 7). One reason why both household assets and debt have been rising faster than income is due to greater financial intermediation. For instance, tax incentives encourage people to fund their 401(K) pension plans rather than pay down mortgage debt as they get older. The notion that the household adjustment process is well advanced is also supported by other data, as well. For example, the share of after-tax income devoted to servicing debts, as well as paying property taxes and homeowners insurance or rent, has declined sharply over the past two years and is now back to levels that prevailed in the late 1990s (Chart 8). In addition to the declining stock of debt, households have been able to refinance outstanding debt at lower interest rates.
Per cent 25  December 2003  20  25 20  Household debt  15  15  10  10  5  5  0  0  -5  House prices  January 2004  -5 -10  -10 1983  1987  1991  1995  1999  2003  Sources: Norwegian Association of Real Estate Agents, Statistics Norway and Norges Bank  Home-owners who have seen the value of their dwellings rise have the possibility of taking up new mortgage-secured loans. They free up a portion of their home equity value to finance consumption and other investments. It is easiest to sell dwellings in the largest cities and some specific areas are particularly attractive. Residential property is now a fairly liquid and attractive investment. Price developments in the housing market are characterised by the fact that there is little change in the housing stock from one year to the next. As a result, higher demand for housing will in the first round translate into higher prices. Housing prices fluctuate more than prices for goods and services, where supply can be rapidly adapted. A persistently high rate of increase in house prices can in isolation engender expectations of a further rise and can thus prove to be self-reinforcing for a period. BIS Review 11/2004  17  Chart 26. Short-term interest rates in Norway Actual and market expectations.

We do not wish to act in a way that may trigger a game situation in the foreign exchange market. Foreign exchange intervention rather than a change in the interest rate may give ambiguous signals to foreign exchange operators and a game situation may arise. Chart 11. Real krone exchange rate Deviation from average. Per cent  15  15  10  10  5  5  0  0  -5  -5  -10  -10  -15 1970  1980  1990  2000  -15 2004  Source: Norges Bank  Although the krone may fluctuate in the short term, it will generally stabilise over time. When inflation has been higher in Norway than among our trading partners for a longer period, the krone has generally depreciated. When inflation in Norway is expected to be broadly in line with that of other countries, the exchange rate will normally also return to its normal range following periods when the krone has been particularly strong or particularly weak. This provides a basis for stable exchange rate expectations. The advantage of a flexible exchange rate is perhaps most evident when the economy is sluggish. If the krone were to remain at a level that is too strong, nominal wages would have to remain unchanged over a longer period or fall in order to bolster companies and jobs. This only occurs when unemployment is very high. With a flexible exchange rate, a depreciation of the krone can also boost competitiveness.
I presume that the audience is conversant with the idea of Regtech. But it remains good to define upfront what we are dealing with. So, by Regtech, which is a subset of fintech, we are referring to a specific focus on technologies that can facilitate more effective or efficient regulatory compliance or risk management by financial firms. The benefits of Regtech 6. So, why do we need Regtech adoption? That’s because we believe that Regtech solutions offer clear benefits to banks, customers, and regulators alike. 7. For Banks, they can leverage on Regtech solutions to enhance risk management quality and reduce costs. For example, in the area of financial crime and transaction monitoring, some banks still have teams dedicated to the manual remediation of false positives. But others have already used Regtech solutions to put automation in place. In doing so, not only have their alert outputs become more accurate, the process also freed up precious resources to focus on higher value tasks, including in particular their interactions with customers. 8. For Customers, Regtech delivers improved customer experience and drives financial inclusion. Several years ago, opening a bank account in Hong Kong could be timeconsuming. You often had to take time off work in order to visit a branch and physically verify your identity. By contrast, with the help of Regtech, today I can open a bank account in the comfort of my home or office in a matter of just minutes. 9. There are also benefits to banking supervisors and regulators.

And late last year, the HKMA hosted our first AML/CFT Regtech Forum with the aim of generating more conversation and traction on Regtech usage in that particular area. White Paper on Regtech 14. The White Paper that we are launching today moves forward the conversation on Regtech even further. It sets out a number of Regtech initiatives that we will undertake in the coming 18 months. 15. Next I would use a few slides to take you through the concept behind our White Paper as well as to provide a quick overview of its contents. 16. Despite the Covid-19 disruptions, we have been working very hard in the past few months on a plan to better promote the adoption of Regtech in Hong Kong. The first phase of the plan has now led to the formulation of this White Paper. 17. Conceptually, we can think of the White Paper as a useful MAP for users: MAP meaning three key elements – M for Monitor, A for Assess, and P for Plan. 18. What exactly do we mean by that? Again, “M” is for Monitor – it involves understanding the current and evolving Regtech landscape. “A” stands for Assess – it involves analysing existing practices and risks associated with Regtech. And “P” is for Plan – it involves putting our insights into practice by developing practical steps for the future. 19.
This story was much more unique, as it was part of the first banking crisis in Europe since the EU single market was formed in the early 1990s. Taking advantage of this framework and the prevailing international conditions of ample and cheap credit, these banks grew phenomenally, in less than five years, to almost ten times Iceland’s GDP, with most of the expansion being crossborder – or maybe more aptly put, off-border, as the bulk of both financing and investment took place abroad. The result was very big FX-denominated balance sheets with the usual maturity transformation that banks, as we know them, are all about. However, the safety net that we have in national settings to back them up, including LOLR facilities, was not there. It was an accident waiting to happen, and so it did. I will be very brief on how the failure of these cross-border banks was dealt with and the lessons learned from it. It is now more widely known in our circles than it was to begin with and less controversial. For more, I can refer you to various publications and speeches of mine and others. But the main reason is that, as far as Iceland is concerned, the problem is solved for the near future: we are simply not going to do it. We are not going to establish international banks headquartered in a very small country with its own currency without an access to a sufficient regional or international financial safety net.

Although it has already been activated due to the special situation we find ourselves in regarding the process of lifting capital controls, for the longer term we see it very much as a third line of defence after macroeconomic policies, and micro and more usual macropru. It is no panacea and comes with distortions. All of this remains a work in progress, and history will tell whether it will be sufficient to preserve monetary and financial stability in the rougher seas of freer capital movements that we intend to embark upon. 2/2  BIS central bankers' speeches
There is already an official exercise underway to frame the determination of minimum margin levels in the parts of the derivatives market that will not be centrally cleared. At some point down the road, this will need to be brought into a coherent framework with any measures on the collateralised-financing market. Doing so would require deciding whether to apply the same or different approaches to the inter-dealer market and dealer-customer transactions. Conclusion: innovation, evolution and surveillance Those are just a few thoughts for debate, based on some current manifestations of shadow banking. I have not even covered the existing waterfront. For example, we need policies on those levered credit funds that offer near-instant withdrawal rights. In the EU distinctions need to be made within the Alternative Investment Fund Managers Directive and UCITs regime, which allows risky structures to be branded as retail products. But it would be foolhardy to imagine that we can frame policies today that will stand the test of time. The financial system will evolve, and we need to permit innovation. A policy framework on shadow banking therefore needs to be adaptive. And it mustn’t try to shut  3  See Committee on the Global Financial System, “The role of margin requirements and haircuts in procyclicality”, March 2010. 4  See “Securities lending and Repo: Market Overview and Financial Stability Issues”, and interim report of an FSB group chaired by my colleague David Rule. BIS central bankers’ speeches  5  everything down.

If, against our hopes and expectations, that proves not to be the case, authorities in Europe and elsewhere will need to think through what if any measures we could sensibly take to make our part of the global financial system more resilient to the faultline that the money fund industry currently represents. One possibility would be for   bank supervisors to limit the extent to which banks could fund themselves short-term from US money funds and from other fragile/flighty sources, including CNAV money funds domiciled elsewhere. I should stress that such a policy need not be targeted at US funds per se. It is also a question of the prudence of the banks that borrow. So it could be cast in terms of the liability structure and sources of funding of the banking system. The Basel 3 Net Stable Funding Ratio may help a bit with this. And I should add that on some fronts – notably transparency – Europe should aim to catch up with the progress the US has already made. Securities dealers, finance companies Some shadow banks are “businesses”, not funds or vehicles. These non-bank financial intermediaries finance themselves externally in the markets. Some such financing is short-term and so effectively runnable, as events showed. In those cases:   If they are financed materially by short-term debt, they should be subject to bank-type regulation and supervision of the resilience of their balance sheets. That would apply to some kinds of finance company. It might apply to securities dealers too.
With the November 2019 adjustment, banks’ exemption thresholds became dynamic, in the sense that the reference period over which the exemption thresholds are calculated is updated each month as the sliding window over the preceding 36 months. Starting in January 2015, a bank’s exemption threshold was determined as 20 times its minimum reserve requirement, based on the October 2014 reference period. With the November 2019 adjustment, its exemption threshold was raised to 25 times (raised further to 30 on 1 April 2020) its minimum reserve requirement, using a moving average of the minimum reserve requirements over the preceding 36 months. Page 9/13  The increases in the exemption thresholds also broadened the scope for additional liquidity redistribution, causing trading volume on the repo market to rise. Indeed, repo market trading volume, shown by the vertical blue bars in Chart 4, increased substantially in November 2019, as did the number of banks active on the repo market. Let us now take a closer look at the impact of the exemption threshold adjustments on the repo market and, in particular, at the tools the SNB has deployed to ensure that secured money market rates remain close to its policy rate. The role of SNB monetary policy operations in the money market The increases in the aggregate exemption thresholds have changed the dynamics in the repo market, as they simultaneously caused the demand for liquidity to rise and the supply of liquidity to fall in the repo market.

As we have shown, it is entirely feasible to steer secured money market interest rates effectively in negative territory. This is due in no small part to the fact that the secured Swiss franc money market is efficient, is based on a modern infrastructure, and can count on committed market participants. The SNB will continue to help shape this money market infrastructure in the future. Ladies and gentlemen, many thanks indeed for participating in this event this afternoon. The fact that you have made the effort to tune in, despite the unusual format, demonstrates your interest in the Swiss money market, and we thank you for this interest.
Out of the first wave we may be - indeed we are - but we remain very much an active and, I would hope, a constructive partner in the process of European monetary integration in a wider sense, and we clearly want the euro to succeed. That is why I prefer to think of Britain in Europe which I took as the title for my talk. BIS Review 88/1998  -6-  Let me conclude, Mr. Chairman, with just a few remarks on the prospects for the euro in the current climate of global financial turmoil. For much of the past two years or so financial markets have shown a degree of scepticism about the future character of the euro. The sense, from about the autumn of 1996, appeared to be that the process was being driven by the politics of Europe with less emphasis on the importance of economic convergence; expectations therefore increasingly focused upon the prospect of a broadly-based rather than a narrower euro; and the inference was drawn that this would mean a weaker rather than a strong euro. Together with comparatively subdued economic activity on the Continent, this perception - or misperception - meant that the core European currencies were for a time relatively weak against the dollar, and against sterling. That situation has more recently begun to change.

Waiting for the global community through international financial institutions (IFIs) for regional surveillance may be too little too late for timely policy measures that can safeguard the region from contagion from other parts of the world. While IFIs will remain useful for surveillance and financing balance of payments need when necessary, regional surveillance capacity must be enhanced more quickly. This is one important area where central bank cooperation can be strengthened. Indeed, it is very important for policymakers in ASEAN with common challenges to put greater efforts in regional cooperation on maintaining financial stability. Having close consultations and sharing experience can usefully avoid potential policy missteps and create policy synergies that eventually foster confidence of investors and other economic agents within and outside ASEAN. Second, we have to consider making regional liquidity pool sufficient and effective enough in size and automaticity of disbursement in time of need. In the past, stakeholders outside ASEAN have been more concerned about moral hazard problem than the real benefits of regional liquidity pool in time of actual need. The present global situation has reconfirmed the vision set forth by the ASEAN Swap Agreement (ASA) and Chiangmai Initiative (CMI) that Asia needs to have its own liquidity pool to protect itself from contagion, be it caused within the region or from outside. On the whole, the current financial episode has taught us that, to restore confidence to the public, the authorities’ action must be decisive and timely.
The performance of the US Treasury market was also materially affected on each of these days, such that much smaller trades than normal moved prices. But in each of these cases there were stabilising forces that meant volatility subsided and liquidity returned relatively quickly. In the case of the 15 October event, what had been a crowded trade was pushed so far from prices viewed as “justified” by fundamentals that market participants were willing to provide support to the market. Similarly there was a reappraisal of the fundamentally justified level of the Swiss franc in the days that followed the removal of the peg, following public comments by the SNB. Volatility declined, if not all the way back to the pre-news level, relatively quickly following these initial spikes. This is most true of the 15 October episode: the implied volatility of 10-year interest rate swaps retraced about half of its upward move after two days, and was back to pre-October 15th levels within just two weeks. This quick stabilisation helped to limit contagion to other markets. Neither the increase in “baseline” volatility, nor the recent episodes I have just described, in of themselves materially affected stability in the United Kingdom. For us then, the question becomes what lessons can we learn? Why have volatility and liquidity evolved in this way?

I will argue that those phenomenons can all be ascribed to two common causes: a worldwide based shift in the primary distribution of income; and asymmetries in financial development among countries. Together, they combine to produce (1) excess saving in emerging economies (2) strong capital inflows to the US (3) an increasing frequency in financial booms and busts and asset price bubbles in both advanced and emerging economies. Let’s look first at income distribution. In China, the share of wages in GDP has declined from 55% in 1992 to 48% in 2008. In the US, the median real wage has been stagnant over the last fifteen years despite the fact that real GDP has grown annually by above 3% over the same period. These are deep changes mostly driven by technology and demographics, in proportions which are hotly debated, and partly unexplained. In contrast to wage developments, consumption trends have been widely divergent. In China, the share of consumption has gone down by more than 10 % of GDP over the last decade. In the US, consumption kept growing (both in absolute and in GDP share) fueling the demand for imports. Households in the US could consume more and save less because they felt richer. And they felt richer because the value of their houses and financial assets was rising at a quick pace and that trend was expected to persist. Broadly speaking, the worldwide equilibrium between demand and supply of goods was based on a continuing asset price bubble in the United States.