samchain/econo-pairs-v1 huggingface dataset:
The role of the authorities What are the lessons to be learnt from this crisis with respect to the role of the authorities? If the regulatory progress we are aiming for is also to be enforced, we need strong authorities. BIS Review 77/2009  3  This applies, on the one hand, to FINMA, which is charged with oversight of individual banks, or microprudential oversight. FINMA needs sufficient qualified resources to fulfil its oversight responsibilities. On the other hand, the SNB must step up its own activities through an even closer collaboration with FINMA and also by reinforcing our macroprudential oversight. Unlike FINMA, the SNB does not supervise banks. We do not focus our attention on individual institutions but on the banking system as a whole. Our macroprudential oversight is largely complementary to the microprudential oversight carried out by FINMA. However, in Switzerland, overlaps occur naturally between the microprudential and macroprudential perspectives due to the systemic importance of the two big banks. Within the ambit of its mandate, the SNB therefore considers it imperative to maintain direct and frequent contact with the big banks. Where necessary, we will step up the frequency and intensity of these contacts. Their purpose is to obtain information of relevance for macroprudential oversight, but also to inform the big banks of our risk assessment. The SNB will also become increasingly involved in regulatory projects that are relevant from a systemic point of view.

Last autumn, for instance, the then SFBC issued decrees imposing tighter capital adequacy requirements on the big banks. In future, the capital base at these institutions will have to exceed, in good times, the minimum risk-weighted capital requirements by 100%. As a complement to this, FINMA has also introduced a “leverage ratio”, i.e. a limit to the banks’ leverage. The SNB considers that leverage of over 20 in the banking sector is not prudent and thus is undesirable in good times. In other words, we consider that, in good times, the capital base should account for at least 5% of the balance sheet total. This is in line with FINMA’s requirements. FINMA expects the big banks’ “leverage ratio” to be well over 3% at group level and well over 4% for individual institutions in good times. To prevent the capital requirements from having a procyclical impact, two steps have been taken. First, there will be a long time delay before they are implemented. The new FINMA targets will apply as of 2013 at the earliest, and an extension would be an option for the big banks if compliance becomes impossible due to the situation on the capital markets or the big banks’ individual earnings position. Second, an anticyclical element is explicitly built into the new Swiss regulations. In bad times, the big banks will be allowed to fall short of the new targets. In other words, a capital cushion will be built up in good times to absorb losses in crises.
12  BIS Review 112/2008  Chart 1: Premium on unsecured interbank lending (Libor-OIS)  Chart 2: Selective effective rates and Bank rate  Basis points 140 1 month  3 month  6 month  Per cent 9.0  PNFC overdraft rate  120  8.0  100  7.0  80  6.0 5.0  60 Bank rate  40 20  3.0  Household mortgage rate  2.0  0  1.0  -20 2002  2003  2004  2005  2006  2007  2008  0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008  Chart 3: Credit condition survey(a)- large corporates  Chart 4: CPI and the capital goods deflator  Net percentage balances(b)  Cheaper credit  Percentage changes on a year earlier 10  80 Spreads  Loan covenants  4.0  8  60  6  40 20  CPI  0  4 2  -20  0  -40  -2  -60 Dearer credit  -80  Capital goods  -100 Q2 Q3 Q4 Q1 Q2 Q3 Q2 Q3 Q4 Q1 Q2 Q3 2008 2007 2008 2007  -4 -6  1989 1991 1993 1995 1997 1999 2001 2003 2005 2007  (a) The blue bars show responses over the past three months. The red diamonds show expectations over the next three months. Expectations balances have been moved forward one quarter so that they can be compared with the actual outturns in the following quarter.

If Bank Rate is increased, monetary conditions are being tightened; and conditions are being loosened if Bank Rate is cut. There are a few important simplifying assumptions being made here – assumptions whose validity in current circumstances is doubtful. In the first place, that view of the world implicitly assumes that the equilibrium real rate is stable over time, whereas in fact it will move about. 6 Sometimes the central bank will need to change its policy rate simply in order to maintain unchanged monetary conditions (as proxied in the literature by r minus r star). In the same vein, if near-term inflation expectations rise or fall, our nominal policy rate may need to change just to leave the actual short real rate unchanged. In other words, we can fix only one thing – the short nominal rate – but what any particular level of Bank Rate means for monetary conditions will depend on short-run inflation expectations and on the equilibrium real rate needed to balance the economy. Both will likely have changed materially in the face of the cost and credit shocks. What our Bank Rate will mean for monetary conditions will depend on how it relates to the panoply of other interest rates on financial contracts. In fully efficient markets, the risk-free  6  See Neiss, K and Nelson, E (2001) “The real interest rate as an inflation indicator”, Bank of England Working Paper No 130.
And, anyway, repapering contracts helps to convey to counterparties that there will be continuity in resolution and so reduce incentives to break for the exit. FSB has published guidance in this space for operational continuity in resolution and continuity of access to FMIs. 5  Perhaps the most notable effort has been FSB’s work with industry to agree a protocol to International Swaps and Derivatives Association (ISDA) and other master netting agreements that addresses close-out 6  risk in over-the-counter (OTC), derivative and repo transactions. Agreement in 2014 of the universal protocol amongst G-SIBs, and subsequently of jurisdictional modular protocols for individual jurisdictions to bring in buy-side and non-G-SIB counterparties, is another major landmark in ensuring big international firms 7  are resolvable. The protocol is built around the premise that entry into resolution should not be classed as an event of default as long as a firm continues to perform. This underscores the importance of funding to making resolution credible. FSB set out principles on funding in resolution in 2016 and just last week published for consultation guidance for use in CMGs on the liquid resources and liquidity management capabilities firms require to be adequately resolvable and how liquidity 8  in firms might be bolstered in adverse cases by public backstops. CMGs will use the guidance to draw up resolution funding plans setting out how, in order to achieve resolvability, liquidity and collateral should be held in a group across legal entities, currencies and locations.

4 [14]  Monetary policy also seems to have had the desired effect on inflation and inflation expectations. The upturn in inflation that began in 2014 has continued, and the downward trend in long-term expectations has turned into an upward trend since the beginning of 2015. Another sign that the expansionary monetary policy has had an effect is that we have had strong economic activity in Sweden. Growth has been high and employment has increased. Monetary policy's distribution effects are difficult to disentangle At the same time as the expansionary monetary policy has contributed to the economic upturn, asset prices have risen. They can be affected by monetary policy through several different channels. Lower policy rates mean that bond yields become lower, at the same time as prices of bonds rise. If the central bank also purchases bonds, this puts further downward pressure on yields and further upward pressure on prices. Those selling the bonds to the central bank may also wish to adapt their portfolios and buy other assets, which means that the prices of these assets will in turn rise. The central bank can also, by means of various types of communication on monetary policy, make it clear that the expansionary policy will continue for a longer period of time, which can contribute to a more positive view of activity in the economy. This can in turn contribute to asset prices rising. The Riksbank and other central banks are well aware of all of these channels.
Underlying inflation has fallen in both geographical areas since the middle of 2008. One contributing cause of this low and, for a period, negative inflation is the weak development of the labour market. In the United States, employment levels have continued to decline during the autumn, with unemployment rising to approximately 10 per cent. Likewise, in the euro area, the situation in the labour market has continued to deteriorate and unemployment has increased to approximately 10 per cent. An expected weak growth in wages together with low inflation expectations is contributing towards dampening inflation. Falling market expectations for the policy rate during the autumn may also be compatible with lower expected inflationary pressure. Both survey results and implied forward rate curves indicate that market participants’ monetary policy expectations in the United States and euro area have fallen somewhat during the autumn. Sweden also experiences recovery but low resource utilisation Developments in the rest of the world have impacted small, open, export-dependent countries such as Sweden hard. However, even in Sweden, the lowest point of the recession has been passed and recovery has started. GDP increased slightly during both the second and third quarters of 2009, after having previously fallen four quarters in a row. The National Institute of Economic Research’s Economic Tendency Survey and Swedbank’s Purchasing Managers’ Index have also reached levels indicating growth in the Swedish economy (Figure 10).

Rose’s (2009) more recent meta-analysis also finds a significant effect of trade on the synchronisation of business cycles. De Grauwe (2000) provides a discussion of how closer integration may affect the likelihood that countries experience asymmetric shocks. On the one hand closer trade links could result in greater specialisation, leaving currency union members more prone to asymmetric shocks. On the other, it could result in more intra-industry trade, increasing the likelihood that countries will experience similar shocks, and thereby helping to align business cycles. 17  4  A high degree of openness also means that the adjustment required to boost net exports is somewhat lower. A much weaker adjustment in prices and wages is necessary to raise net exports by a given share of GDP if both exports and imports are a large share of GDP than if they are a small share, Krugman (1992). However Adrian and Gros (2004) observe that open economies are correspondingly more vulnerable to external shocks. BIS central bankers’ speeches  Scotland and the rest of the UK are highly integrated. 70% of Scottish exports are destined for, and 74% of imports into Scotland come from, the rest of the UK (table 3). A word of caution applies here. There is a body of evidence that national borders can influence trade flows, even between otherwise highly integrated economies.18 The high degree of integration between Scotland and the rest of the UK may in part depend on their being part of the same sovereign nation.
Central banks and financial supervisors can support this effort to varying degrees, depending on their mandates. The NGFS has launched a Blended Finance Initiative to contribute to this collective effort in two ways. We will use our convening power to raise awareness of blended finance for climate action and help to bring the relevant parties into the room. We will identify any potential market, policy or regulatory barriers that hamper the scaling up of blended finance. The NGFS aims to launch at COP28 a Handbook on Blended Finance. We will release next month a conceptual note on the Handbook which will serve as a preamble. The Handbook will be organised around three key themes. First, identify key elements needed to build a climate blended finance ecosystem. To scale up blended finance for climate adaptation and mitigation, we need financial instruments and vehicles that can align incentives in both the public and private sector and entice private capital with varying appetite for risk. 4/5  BIS - Central bankers' speeches  For example, green bond funds or outcome-based debt instruments such as sustainability-linked bonds can attract various types of private sector actors if key contractual terms are appropriately set. To attract investors with different expected returns, risk profiles, investment horizons and objectives, the investor base should be expanded. For example, we can aim for a higher level of participation by institutional and private equity investors as well as philanthropic capital. Second, highlight best practices and principles to scale up blended finance for climate adaptation and mitigation.

9  Moody’s and S&P have removed or reduced government support from the ratings of some UK and US banks. Fitch has revised the support assumptions for UK and US banks to remove the ‘Support Rating Floors’ that capture government support assumptions. 4  BIS central bankers’ speeches  the cost of banking services and reduce return on equity. But those costs are the flipside of the removal of a subsidy – they are not wider social costs. It is essential that efforts to ensure even the largest banks can be resolved remain on track. In the UK, that includes the ringfencing of entities taking core deposits. Impediments to resolvability must continue to be addressed. If those efforts hit obstacles, higher equity requirements will be needed to achieve the same ends. The necessary protections for the real economy have to be bought. The only question is at what price. But even with an effective resolution backstop in place, the costs of systemic bank failure are far from insignificant. So the second part of our macroprudential approach is a baseline capital standard that makes economic disruption caused by a weak banking system extremely rare. But not more so. Our baseline – tier 1 capital of 13.5% of risk weighted assets, or around 3.75% of total assets – aims to do this. The dual key approach – risk-weighted capital and leverage – recognises the imperfections in risk weight models and guards against them.
In my view, LIBOR is likely to go away—and it should, because it is not supported by a sufficiently robust regime. The LIBOR countdown clock should provide an impetus for action, but it should also make market participants and regulators increasingly nervous as we approach the deadline—especially if longer-term solutions are not in train or in 4/6  BIS central bankers' speeches  place. Time is of the essence, and we must manage it well. The ARRC and others have laid out valuable transition plans, and we need to ensure that they are executed expeditiously and well. Of course, I do not mean to minimize the costs involved. This is a monumental and complicated effort—one that the industry has never undertaken—and it will entail overcoming many obstacles. It requires collective action by a wide variety of market participants, some of whom may not be fully convinced of the need for change. And, there may be others with a direct interest in the preservation of LIBOR—such as its administrator—who may not support moving away from the status quo. There also undoubtedly will be those who seek a free ride on the efforts of others. And, of course, the effort will encounter inertia and wishful thinking. All of this is to be expected in such a large undertaking with significant upfront costs. Nevertheless, delay is not a viable option. This task is borne out of necessity.

This is an interesting hypothesis, but it must be pointed out that it is difficult to prove whether, and, if so, how much growth potential has actually changed. This obviously restricts the room for manoeuvre in monetary policy to a certain extent. What we must do here is to strike a balance between not holding the economy back more than necessary while at the same time making sure that the credibility of our inflation target policy, which has taken so much effort to build up, is not lost. 1  BIS Review 128/1999  However, there is another aspect of the American debate that has received much less attention than the “new economy”, but that I think is at least as important, and that is the role that monetary policy is assumed to have played in the favourable developments of the last twenty years. There is much talk in the US about the “long boom”, i.e. the period lasting from the early-1980s to the present, which has been characterised by a high rate of growth, with only one rather mild recession in 1990-91. Household sectors’ saving rate and debt ratio in USA 10  100 95  8  90 6  85  4  80 75  2  70 0  65  -2  60 80  82  84  86  88  90  92  94  96  98 Source: Ecowin  There are various theories about the reasons for this positive trend.
This should probably be considered an upper bound. 16  All speeches are available online at www.bankofengland.co.uk/speeches  16  These sorts of evaluation also have greatest value when conducted at times of significant change in the monetary policy stance or when this change is not expected. That is to say, they are probably best undertaken periodically rather than regularly. One important point is that the interpretation of these evaluations depends greatly on the reasons monetary policy is changing in the first place. For example, the loosening of monetary policy in the case study was positive for most households. But that does not imply a tightening of monetary policy would thus be negative for household finances and welfare. For example, if this tightening came in response to a stronger economy, and helped avoid inflation overshooting its target requiring higher-still interest rates, its effects are likely to be positive too. This suggests these scorecard exercises are likely to be context-specific and hence are best done periodically at times of significant change to the monetary stance. Reporting its effects in a disaggregated way should not call into question the purpose of monetary policy which, as set in statute, is to stabilise aggregate economic activity and prices. Nor does it imply monetary tools should be used to meet distributional ends. Rather, its purpose would be to improve public understanding of the effects of monetary policy. This would hopefully help close the public perception gap 46  about the effects of monetary policy and the trust deficit facing monetary policymakers.

You must continue to organize and support the necessary training and mentoring of supervisors so that a pool of capable and technically sound personnel is always available and that greater reliability may be placed on their output. During today and tomorrow several papers will be presented on a variety of sub themes and I anticipate that at the end of this conference some critical imperatives would have been identified to steer us through the current challenges and others looming on the horizon. Our confidence in the role of the CGBS has never been misplaced. I wish you all successful deliberations and trust that your stay here will afford you the opportunity to discover for yourself the beauty of our country and the warmth of the Guyanese people. Welcome once again to all. BIS central bankers’ speeches  3
Real wages almost stood still during the period 19801993, but over the past ten years they have increased by an average of almost 3 per cent a year (see Figure 6). The foreign trade deficit transformed into a surplus and the same had happened with the government deficit. Open unemployment increased in connection with the crisis of the 1990s, from levels around 2.5 per cent to around 9 per cent. Since then, unemployment has fallen to a lowest level of just over 4 per cent in 2001. At present, unemployment is at a higher level than it was prior to the 1990s crisis. Out of a working-age population (20-64 years) of just over 5.3 million, around 900,000 persons are outside of the labour force. 245,000 are unemployed. This means that just over 4.1 million people are employed and that just under 1.2 million have no job. 1 The biggest problem in the Swedish labour market is thus, in my opinion, not open unemployment, but the fact that the number of those outside the labour force, that is, the number of people of working age who are not employed, has increased substantially since the 1990s crisis. In connection with the crisis, this share increased by 8-9 percentage points. It has since fallen by around 4 percentage points between 1995 and 2002, to increase once again in recent years (see Figure 7).

It has issued consumer guides and organized public seminars to educate consumers on fire insurance, property insurance, health insurance and motor insurance under the MoneySENSE national financial education programme. There is, however, more to be done. As Mr Teo mentioned earlier, general insurance penetration remains low in Singapore. Insurance density, measured by gross premiums as a percentage of GDP, rose from 1.0% in 2000 to 1.5% in 2005, but this is still lower than the 1.8% in Malaysia, 1.6% in Thailand, 2.9% in Taiwan and 3.0% in South Korea. When compared against developed countries like UK and Switzerland, which reported insurance densities of between 3.5% and 5.0%, we are much further behind. There is therefore significant room for the industry to grow. It would be worthwhile for GIA to focus on improving insurance penetration in Singapore by identifying insurance lines that have greater prospects for growth. MAS’ supervisory approach MAS believes that there should be a constructive partnership between the regulator and the industry. On our part, we will continue to fine tune our supervisory approach to support the growth of the industry. Competition is a necessary ingredient for growth, but there are many areas where the industry can work together. In particular, the industry should work together to promote best practices in risk management and professional standards. MAS will continue to support efforts by the industry to promote sustainable and healthy growth by maintaining an appropriate regulatory framework that recognises innovation.