samchain/econo-pairs-v1 huggingface dataset:
•  Trust that asset managers and investment brokers are acting in the clients’ interest and not front-running them is key to the investment process. The licensing and regulation of financial institutions confers a degree of legitimacy on them. But being a bank, an insurance company or a capital markets intermediary is not just about holding an official stamp to collect and manage funds. •  As Mark Carney puts it, financial institutions also need a social licence to operate. 2  •  They earn this social licence through a track record of exemplary conduct and a reputation for integrity and prudence. •  Their obligations towards their customers and counterparties must be based on not just a contractual obligation but a moral one as well. Getting the culture right What accounts for the repeated cases of misconduct in the global financial industry? Weaknesses in governance, risk management, and operational controls have allowed unbridled risk-taking and encouraged some individuals to push, and in several cases, break the bounds of what is permissible. Since the financial crisis, the international regulatory community has issued directions and guidance to tighten financial institutions’ governance standards and curb excessive risk-taking. But weaknesses in governance and control, grave as they were in some financial institutions, cannot fully account for the spate of misconduct. There are deeper issues of trust, ethics and culture in the financial industry that we need to confront. First, finance is at risk becoming more “de-personalised”.

In terms of solvency, the position of the Spanish banking industry has improved significantly in recent years, thanks to the reforms implemented in the industry, the strengthening of regulation and supervision, and the recovery in economic activity that has taken place in Spain. It should be recalled that the regulatory response to the financial crisis led to a substantial increase in capital requirements, as part of a raft of measures geared to minimising the probability of bank crises and to reducing their impact if they do occur, in particular in terms of the use of public funds. Not only were the own funds requirements increased for institutions but also the quality of own funds (i.e. their loss absorbing capacity) was improved, through the introduction of a number of more restrictive criteria for the determination of eligible capital, known as “common equity tier 1” (CET1). Thus, in terms of CET1, although the Spanish banking system still has a ratio below that of the main European countries, its strengthening in recent years has been notable: by more than one percentage point on average since its introduction in 2014. As at December 2016 this ratio for the Spanish banking industry as a whole reached 12.8%, exceeding the regulatory minimum requirements and standing not far from the average for banks supervised by the Single Supervisory Mechanism (SSM), which is close to 14%.
There has also been a trend towards greater intraAsian investment flows in the region. This includes higher investment of surplus funds into the region, in the form of foreign direct investments as well as portfolio capital flows. These regional developments will lead to greater demand for OTC financial derivatives, which can be met by any of the major national, regional or global financial institutions operating in these markets. Malaysian banking institutions must be prepared to compete in this highly innovative and agile global industry by staying ahead on the learning curve for writing OTC derivatives that precisely match the risk management characteristics needed for effective hedging. At the same time, banking institutions must take into account the need for robust internal controls specifically in the area of credit, market, operational and legal risks to prevent the failure of any derivative contract. 2  BIS Review 11/2004  My second point concerns the New Basle II Capital Accord. The International Swap Dealers Association, as the global trade association representing the leading participants of the OTC derivatives industry, has provided its views to ensure that the capital requirements of the New Capital Accord’s will reflect the actual amount of risk that a bank is exposed to in a particular derivatives transaction. According to the recommendations put forth by the Basle Committee, capital requirements to support off-balance sheet derivatives are calculated by reference to the credit risk of the item adjusted for credit quality of the counter party.

The approach essentially “marks to market” to determine the current replacement cost including the potential future exposures. One particular development that should be observed is the growth of the use of credit derivatives. The 2001 Triennial Survey of Foreign Exchange and Derivatives Market Activity conducted by the BIS indicates a rapid expansion of the market for credit derivatives, with outstanding positions increasing from 108 billion US dollars in 1998 to 695 billion US dollars in 2001. The Centre for the Study of Financial Innovation has identified credit derivatives as a major risk area due to their rapid growth coupled with a lower understanding of the product. The implementation of Basle II’s risk weighted approach to capital adequacy will have implications for banking institutions whose risk management systems have not assessed correctly the exposure due to off-balance sheet derivative items. As I have mentioned earlier, globalization and regional integration are introducing changes that will alter the nature of risks relevant to international trade, capital and the use of derivatives for risk management. Banks should be transparent and upfront in disclosing the risk and valuation approach of their derivative products such that the inherent risk of the product is adequately addressed. Let me also stress that the effectiveness of the risk adjusted capital requirements hinges not only on the capacity to perform sound risk assessments, but also on the legality of such derivatives transactions.
3  BIS Review 31/1999  As to foreign exchange risk, the difference between the Turkish lira interest rate and the nominal depreciation of the Turkish lira is the major reason why the banks place foreign currency funds in Turkish lira funds or other alternative investment opportunities. In Turkey’s case, the practice of taking short positions for foreign exchange started in 1985. After facing several difficulties and losses, the Turkish banking system has become very well informed about foreign exchange risk. Furthermore, we, the Turkish authorities, have reduced the risk by means of a number of regulations. I can say that all these kinds of risk have been thoroughly monitored by the supervisory authorities, and preventive measures have been put in place before the effects of any problems could damage financial stability. All banks operating in Turkey are subject to the Banking Law, and to Decrees and Communiqués concerning the law. This Law authorizes the Treasury and Central Bank to supervise and regulate banks. Under this regulatory framework, banks must submit yearly, quarterly and even daily compilations of financial data to the Central Bank and the Treasury. In addition to frequent financial evaluations of banks by off-site examiners, on-site examinations are carried out to confirm the reliability and accuracy of the reported data, and clarify any special issues arising during off-site examinations.

Remarks on the launch of the Recommendations of the Task Force on Climate-related Financial Disclosures Mark Carney Chair of the Financial Stability Board Governor of the Bank of England  Delivered at the Tate Modern 14 December 2016  1  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  Welcome  It is my great pleasure to have been invited, in my capacity as Chair of the Financial Stability Board (FSB), to help launch the Task Force on Climate-related Financial Disclosures consultative report. 1  In late 2015, at the request of the G20 , the FSB established this private-sector, industry-led Task Force, under the leadership of Michael Bloomberg. Its mandate was to develop recommendations for voluntary, consistent, comparable, clear and reliable disclosures around climate-related financial risks for companies. The purpose was to provide the information that investors, lenders, insurers and other stakeholders need to manage these risks, and seize the associated opportunities. As those of you who’ve had an opportunity to read their report will have seen, the Task Force has achieved a great deal during the year. So on behalf of shareholders, creditors and citizens, I thank all of the Task Force members for their tremendous efforts, and your companies for making you available for this important work. If you want a job done well, give it to busy people. Public authorities – like the G20 and the FSB – could identify the problem, but we needed the private-sector to provide the solution. This is a solution for the market, by the market.
Other academic work assigns a greater role to expectations. Expectations are important to house prices as they influence both consumption choices (as housing is ‘service’ that people consume) and investment 5  See e.g. Assenmacher-Wesche and Gerlach (2009), Calza, Monacelli and Stracca (2013), Goodhart and Hofmann (2008), Iacoviello and Minetti (2008), Jorda, Schularick and Taylor (2015), Sa, Towbin and Wieladek (2011)). 6 See for example Favilukis et al. (2017) which assumes a large share of credit constrained households. A loosening in credit conditions increases a sufficient proportion of households’ demand for homeownership to generate a rise in house prices. Kaplan et al. (2019) and Greenwald & Gruber (2019) in contrast assume more ‘deep pocketed’ investors, so that a change in credit conditions has less effect on house prices. 7 Empirical evidence on this arbitrage mechanism is somewhat limited, but long-run evidence of rental yields and house prices may provide some support. In the UK, high rental yield tends to precede house price growth: see Broadbent, 2019 “Debt dynamics”. There is evidence of buy-to-let investors entering the market when letting out properties is relatively profitable, driving up house prices. As yields decline, house prices also decline. These dynamics would be consistent with the arbitrage mechanism 8 In equilibrium, rental yields (the ratio of rent to prices) is a function of risk-free rates, depreciation, a risk premium, and real house price growth.

(2011), "Risk off" 9  8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  To help gauge the role played by these factors, we can consider the historic relationship between house prices and fundamentals and how this relationship might have evolved in the decade since the crisis11. The blue line in Chart 6 shows how we might have expected mortgage debt to evolve following the crisis, based on the historic relationship between mortgage lending and fundamentals such as the housing stock and incomes. This shows underlying demand falling in the immediate post-crisis period. This reflects weaker fundamentals. And to the extent that households’ beliefs are shaped by recent trends – and there is good reason to believe that is the case - weaker expectations will be captured in weaker demand. This fall in demand could also reflect credit conditions. In the years immediately following the crisis Bank Rate remained close to zero, but the interest rate spreads over Bank Rate charged by banks and building societies, for new mortgages, were high. This meant that interest rates on new mortgage did not fall with Bank Rate. But, as is shown in Chart 7, from 2013 onwards, mortgage spreads fell and the cost of mortgage credit dropped to well below pre-GFC level. 11  I have borrowed this thought experiment from Geoff Meen. It makes a number of simplifying assumptions, notably that there would not be feedback from higher demand into house prices in the counterfactual in which credit is unconstrained.
22, No. 1 (Winter, 2008), pp. 25–44. 13  Carol Corrado, Jonathan Haskel, Cecilia Jona-Lasinio and Massi miliano Iommi , Innovation and intangible investment in Europe, Japan, and the United States, Oxford Review of Economic Policy, Vol: 29 (Oxford, 2012), pp. 261–6. 14  Carl Frey and Michael Osborne, The Future of Employment: How susceptible are jobs to computerisation? (Oxford, September 2013). 4  BIS central bankers’ speeches  skills in logistics, (re-)programming, and routine or basic maintenance. Are our education systems ready for that challenge? Moreover, what will happen to those who are displaced by new technologies? Economic theory tells us that technological gains raise disposable income and hence create new demand somewhere in the economy. But as the literature on “hollowing out” has shown, technological advances may lead to a polarisation of jobs – at the expense of the middleskilled. 15 And this seems to be evident also in recent employment growth seen in the euro area, with the bulk of the recent employment growth seen concentrated in the lower productivity sectors. 16 So the risk is that the one effect offsets the other: technological advances in some sectors are neutralised by gains in employment in other, lower productivity ones. That might be damaging for social cohesion. This is why the second channel is crucial: across-firm productivity growth. 17 To combine productivity growth with full employment, it’s essential that labour can flow to the most productive firms, rather than being bottled up in the least productive.

Not only was the size of the output gap significantly mis-measured – with real-time estimates subsequently revised up by some 3–4 percentage points – but, more importantly, even the sign of the gap was wrong. This example is not just an aberration: large errors are inherent in the concept of the output gap. And worse still, at the critical moments when policymakers need to understand what’s  1  See Potential Output from a euro area perspective (ECB Occasional Paper series No 156, November 2014). BIS central bankers’ speeches  1  happening in the economy – in the build-up to and aftermath of crises – measures of output gap are often at their least dependable. 2 So that poor track record in the run up to the crisis is one reason why I’m sceptical of finetuning. But there’s also a second one: such difficulties are only likely to increase given current trends in the economy and society – and not just in estimating potential output, but in measuring actual output too. 3 We’re living through an era where the nature of production and consumption is changing rapidly. And that has profound implications for our ability to understand the economy – or, at least, our ability to adequately measure what is actually being produced and how efficiently this is achieved. Consider, for example, the difficulties that the digital economy creates for measuring labour input.
However, the forecast made by the Riksbank and almost all other Swedish forecasters is that the rise in inflation is temporary and is mainly due to various pandemic-related imbalances between demand and supply.18 The same assessment is being made in many other parts of the world where similar developments are being seen, even though the persistence of inflation in the United States in particular is being discussed more and more. However, even if the rise in inflation were to bring us closer to the target after the pandemic, a continued low global real equilibrium interest rate would mean that central banks’ policy rates would still reach the lower bound from time to time. The problem of it being difficult to make monetary policy as expansionary as it would sometimes have to be would thus remain. A new policy regime with fiscal policy in the driver’s seat? According to some economists, the fact that the scope of monetary policy has been restricted has meant that, for some time, we have been in a different regime in which it is fiscal policy instead that has ended up in the driver’s seat of macroeconomic policy.19 If that is the case – and I think there is much that suggests that it is – then this will put higher demands on fiscal policy to be more active in the period ahead than it has been in recent decades. And we could probably have had a better development until now if fiscal policy had taken this more active role even earlier.

But other reasons were also given when the surplus target was introduced, namely that good public finances create room for stabilisation policy and that an ageing population entails challenges that need to be addressed.2 The surplus target was thus seen not only as an end in itself, but also as a means of increasing the fiscal room for manoeuvre over time. This was, of course, a wise way of dealing with the problems that the Swedish economy had been struggling with for so long. In order for monetary policy and fiscal policy – and thus macroeconomic policy in general – to be conducted in an efficient manner, some basic conditions must be met. One of these is that they are anchored over the long term, and this, above all, was what Sweden wanted to achieve. 1 The Economic Commission (1993), otherwise known as the Lindbeck Commission’s report, remains perhaps the  best account of the crisis of the 1990s and the developments that preceded it. 2 Swedish Government (1997). 2 [17]  Long-term sustainable finances are the anchor for fiscal policy… For fiscal policy, it is crucial that economic actors have confidence in public finances and see them as sustainable in the long term, or, in other words, that public debt is stable in the long term, expressed as a share of GDP.
It said that: “The authorities’ commitment to a rules-based and non-interventionist approach should enhance the economy’s ability to withstand the recent regional and financial market turmoil.” “As in the past, the mission strongly endorses the authorities’ continued commitment to the linked exchange rate system.” “Appropriately, the authorities have taken forceful action during the past two weeks to tighten significantly monetary conditions, and have successfully demonstrated their ability and commitment to defend the link.” “It is important to recognize that allowing interest rates to rise in response to exchange market pressures is an essential element of the currency board mechanism that lies at the heart of Hong Kong’s monetary arrangements.” BIS Review 115/1997  -4-  “Recent events demonstrate that the system is working exactly as intended ...” “Our discussions with market participants have indicated a widely-held consensus that the prudential and regulatory oversight of the financial sector is strong, which has helped underpin confidence in the system.” 16. But what the internationally renowned doctor, in the form of the IMF, says may not always be universally acceptable, particularly for those who may have been innocent parties having to suffer the pain of market adjustment, inevitable as it may be. It is quite understandable therefore that there will always be grievances and consequently calls for prescriptions for pain killers and other preventive medicine.

While measures have been taken to increase housing supply, it will take some time for this supply to come onstream. Second, should demand remain resilient, COE premiums are likely to stay high. This could present upside risks to the 4.0–4.5% forecast for CPI-All Items inflation. In sum, the costs of imputed rentals on owner-occupied homes and private road transport will account for about 60% of CPI-All Items inflation this year. CPI-All Items inflation will also be volatile from month to month. Two factors are significant: one, the fluctuations in COE premiums; and two, the base effects associated with the timing of the government’s disbursement of service & conservancy charges and rental rebates.2 This factor, for example, accounted almost entirely for temporary rise in inflation from 5.0% in  2  S&CC and HDB rental rebates were given out in June, September and December last year, but were discontinued after March 2012. This will result in higher temporary contributions from accommodation cost in the corresponding months in 2012. 2  BIS central bankers’ speeches  May to 5.3% in June. We expect inflation in July to fall to around 4%, in part reflecting the reversal of this base effect. Let me now move on to MAS’ monetary policy. Monetary policy Monetary policy has had restraining effect on inflation and current policy stance remains appropriate The persistence in Headline Inflation has led to some questions about efficacy of Singapore’s exchange rate-centred monetary policy framework. MAS has studied this issue very carefully.
2  BIS central bankers’ speeches  In this context, the need for principles of the above-mentioned international organisations to be supported and adhered to by both private and public sectors becomes increasingly clear. This should be done by adopting and implementing codes of conduct at corporate level and industry-wide, as well as by improving the legal, institutional and regulatory framework pertaining to corporate governance. Let me now turn to Europe. In the case of the European Union, the crisis has exposed fundamental weaknesses of the European economy, revealing growing internal imbalances. The functioning of the European Monetary Union has been under particular stress as the existing surveillance procedures proved to be not comprehensive enough. One point that has been neglected was the relevance of current account deficits. I believe that within the EU, the external deficits of Member States are relevant as they reveal discrepancies related to competitiveness, and therefore inconsistent and weak coherence of the economic policies. The accumulation of imbalances has triggered a slow pace of recovery in Europe. The crisis took its toll on productivity, and prices and competitiveness remain key issues. Also, the functioning of the European Monetary Union caused headaches because of insufficient comprehensive preventive and supervisory procedures. Moreover, sovereign debt crisis has brought in the limelight not the crisis of the euro per se but of the institutions that governs the eurozone. In this context, I will repeat what Douglas North said: Institutions play a pivotal role in governance.

The borrowers were willing but the banks were also pushing the supply by reducing costs and conditions (culminating some said in NINJA mortgages – for those with no income, no job and no assets). So I have no doubt that we have seen some supply changes to credit. Next we need to distinguish the sustainable changes from the cyclical. Sustained changes either in the economy or in financial sector technology may justify some increase in supply. For example, we have seen a long period of low and stable inflation and unemployment and that is expected to continue. That reduces some of the risks to lenders and borrowers and may increase both the demand and supply of credit and the value of assets on a lasting basis. The development of information technology allows banks to collect and analyse more information about borrowers which should allow them to target credit better and justify a change in supply. Finally the development of derivative markets has allowed the risks in loans to be split into their separate components and distributed to the people best placed to bear them. Again that should lower the supply curve for credit. All these factors were at play in the consumer credit and the sub prime markets but, despite the new sophistication of credit scoring and the derivatives markets, they both also showed all the classic signs of a credit cycle. Banks competed for business by lowering the costs and conditions on lending while the economy expanded, defaults were few, and profits appeared high.