samchain/econo-pairs-v1 huggingface dataset:
David Carse: Banking in Hong Kong after the Asian crisis  Speech by Mr David Carse, Deputy Chief Executive of the Hong Kong Monetary Authority, at a Luncheon Meeting of the Ginyukai, held on 21 August 2000. *  *  *  Ladies and gentlemen, I am very pleased to be here to address this luncheon meeting of the Ginyukai. Although I meet Japanese banks on an individual basis quite frequently, I see them as a group less often than I used to before the Asian crisis. In my earlier days in Hong Kong, we used to meet regularly at the numerous opening ceremonies and receptions of Japanese banks who were setting up new offices in Hong Kong. Over the last two years however I have been dealing with the voluntary revocation of the licenses of many of these same banks as they depart the Territory. This is a much sadder task than cutting the ribbon at an opening ceremony. The figures tell their own story. In March 1997, there were 91 Japanese authorised institutions in Hong Kong. This includes some banks with multiple authorisations, for example as licensed banks and as deposit-taking companies. By June of this year, the number of authorised institutions had dropped to 35, a decline of 60%. The reasons behind this decline are varied. Some of the Japanese banks were forced to cut their overseas operations, including those in Hong Kong, because of critical balance sheet problems and heavy losses.

The problem is not the idea of the euro. It is much more about repeatedly reviving citizens’ awareness of the benefits of a united Europe and a single currency. And about creating a solid and sustainable economic basis. I have shared with you some proposals on how monetary union could be designed so that it responds to people’s wishes and durably fulfils its objectives. Are these proposals new? No, these and other proposals for the further development of monetary union have been around  4  4  Asdrubali, P., Sørensen, B.E. Yosha, O (1996), “Channels of Interstate Risk Sharing: US 1963–1990”, Quarterly Journal of Economics, 111(4), 1081–1110. BIS central bankers’ speeches  for quite some time. This shows that we have no problem understanding, but we do have a problem implementing. It’s up to politicians to create a framework that is appropriate for the idea of a single currency – at national as well as at European level. The longer politicians stand still, the more people will lose faith in Europe. One sign of this is that political parties which want to move backwards have recently been gaining support. At the same time, the European Central Bank is being pushed into a role for which it was not created. Monetary policy can neither solve structural problems at national level nor institutional problems at European level. On the contrary, the more that is expected from monetary policy, the more likely it is to be overburdened. The ECB alone cannot create growth and prosperity for all.
1) The changing nature of systemic liquidity risk Stripped of its superficial idiosyncrasies, the LDI episode provides an almost canonical example of the structural trends we identified in our BIS work: First, the growing use of LDI[6] increased the exposure of real people, in this case current and prospective UK pensioners, to developments in gilt markets. Second, key features of LDI funds left them, and their Defined Benefit (DB) pension scheme investors, exposed to very substantial liquidity risks in the event of a sharp change in interest rates. Those features were: large leveraged holdings of longer-duration gilts or interest rate derivatives; liquidity buffers for meeting margin or collateral calls that had not been rigorously stress tested for more severe shocks; and an overly cumbersome recapitalisation process that left DB schemes unable to inject resources quickly enough into their LDI funds, even where they had the means to do so. Third, in such circumstances, the LDIs’ business model was reliant on being able to liquidate their gilt holdings in size, and at stable well-defined prices. In markets where there was limited intermediation capacity and few if any other marginal buyers, that proved impossible. Expressed like this, and abstracting from the very different initial trigger, these features bear a striking resemblance to the 2020 dash for cash. A wide range of non-bank players with leveraged positions and thin liquidity buffers all rushed simultaneously to get out of positions in normallyliquid financial instruments in order to raise funds for margin calls and other liquidity needs.

Because we had cut the repo rate so quickly and substantially during the autumn of 2008 and early 2009, the scope for pursuing traditional monetary began to shrink as the repo rate began to approach its lower limit. Determining what level is the repo rate's lower limit also proved to be difficult. Can the repo rate be cut all the way to zero, or even to a negative level? There is no clear answer to these questions. However, in line with the majority of the Executive Board, my assessment in July was that the repo rate should not be cut beyond 0.25 per cent. The reasons for this were the concern that some financial markets would find it difficult to function normally at lower interest rate levels and that it could have a negative impact on the profitability of the banks. My view was that the economic situation in principle called for an even greater cut. At the same time, I thought it was too risky to reduce the repo rate even more when we did not really know how the financial markets would function with such low interest rates. One can note after the event that cutting the repo rate to 0.25 per cent was carried out without any apparent problems. In this perspective, the fears that I had in July would seem to be somewhat exaggerated.
I see several reasons why this is the right thing to do. I do not believe that the Swedish asset purchases will significantly affect how expansionary monetary policy is when the financial markets are functioning well. In that case, selling bonds does not entail any significant tightening of monetary policy. I do not mean that sales would go unnoticed. On the contrary, I believe that sales would lead to price movements and some disturbance in the market. But that is exactly what we should avoid. The Riksbank should as far as possible avoid interfering in market pricing. The arguments against active sales are strengthened by the fact that the maturities of many of our assets are relatively short. In principle, it would be good if we  45 I have highlighted the risk to the Riksbank's finances (Flodén 2016 and 2018, as well as my contributions at the  monetary policy meetings in December 2017, April 2019 and November 2020) and risks to the functioning of the government bond market (April 2019). I have also pointed out that it is desirable that pricing of risk should normally be left to the market (November 2020 and November 2021). 24 [30]  could rapidly reduce our holdings of private securities, that is, mortgage and corporate bonds. However, these assets have the shortest maturity and almost the entire holding will mature within five years (see Figure 14).46 The strongest argument for active sales concerns government bonds.

Today's high inflation was hardly caused by excessive asset purchases I do agree that asset purchases should have been concluded earlier. However, the objections I have sometimes had to them have not been about monetary policy becoming too expansionary. My view has rather been that asset purchases are not a particularly effective monetary policy tool when the Swedish financial markets are functioning normally. The small monetary policy effects must be weighed against a number of costs and risks associated with asset purchases.45 In my opinion, the experiences of our asset purchases underpins these views. It is therefore unlikely that the development of inflation in Sweden would have been very different if we had concluded the asset purchases earlier. The rise in inflation this year has been caused by international factors related to the pandemic, energy, raw materials and the war in Ukraine, and has been similar in most developed countries despite differences in the way monetary policy was conducted both before and during the pandemic. There is no point in actively selling mortgage or corporate bonds This interpretation also has implications for the question of whether the Riksbank should begin active sales of our holdings. The question has been raised, among other things, as the Bank of England has recently begun selling securities. Moreover, Calmfors, Hassler and Seim (2022) argue that the best strategy is unlikely to be keeping the securities to maturity. However, the Executive Board of the Riksbank has indicated that the bonds will be held to maturity.
The consolidated entity is expected to deliver a range of benefits, including:      Strategic leadership that is forward looking and proactive, with an enhanced ability to identify the challenges and risks of tomorrow and prepare for them today; Higher standards of governance and risk management, with an improved ability to leverage best practices across the schemes. As an example, a variety of access models have evolved in schemes over the years, and the NPSO is now in a great position to look across the schemes and consider which models deliver the best outcomes and risk management; and The development and delivery of a best in class New Payments Architecture. The NPSO is also set up to be a leader in the field of retail payments. And the Bank is now their counterpart in the UK wholesale payments space, following the move to direct delivery of CHAPS, the UK’s high value 3  payment system (HVPS) in November of last year. Collectively, these developments should lead to a considerable step change in risk management expertise, standards, and capabilities across the entirety of UK payments. As an example of the two organisations working together to bring such change to the payments industry across wholesale and retail, the NPSO and the Bank recently launched a joint consultation on ISO 20022. 4  This move towards harmonised messaging standards will enable the transportation of richer payments data, improved compatibility and therefore redirection across payment schemes, and new opportunities for collaboration and product development.

In line with this, today I would like to share how we at the Bank of England are looking to the future to ensure our systemically important payment systems are robust and resilient, their underlying infrastructure is best in class, and our regulatory toolkit remains fit for purpose and future-proof. NPSO: A mandate to be greater than the sum of its parts Payment systems, by their very nature, bring together participants that would otherwise transact bilaterally. Crucially, by doing so, they promote increased efficiency and resiliency that is enjoyed by all. They manage  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  risks, eliminate intermediate arrangements and related costs at the back-end of the payments value chain, and provide functionality that enables innovation to proliferate at the front-end. As described in our Annual 1  Report this year , financial market infrastructure, including payment systems, exist to reduce the risks and costs involved when participants make payments. And this leads me to the NPSO and its creation. The PSF, established by the Payment Systems Regulator (PSR) in March 2015, proposed the consolidation of the UK retail interbank payment system operators: Bacs 2  and Faster Payments, as well as the Cheque and Credit Clearing Company . The Bank was engaged closely with the work of the Forum and was supportive of this change as we could see the potential for the consolidated scheme to be greater than the sum of its constituent parts.
With such technology, they tend to increase the opportunity in creating more values from the traditional services that we have been offering; not just in a higher valueadded way but in a more scalable way, using technology to increase the footprint of the medical tourism and wellness services. The fourth area might seem a bit far-fledged but it is something that has been constraining Thailand’s ability to grow in the way that other countries have grown. That is the  Page 9 of 11  link again between digital work-from-anywhere technology and our stalled or delayed urbanization. Thailand, oddly enough, is a country where level of urbanization, the percentage of population lives in large cities, is extremely low given our level of development. We are here in Bangkok so we might not feel that because here in Bangkok and Eastern Seaboard are all very crowded. However, the urbanization is all here in Bangkok and the second- and thirdlargest cities are all close to Bangkok. In contrast, the pattern of other countries, especially those that have grown quite rapidly, is largely due to the substantial growth of the urban middle class. People are coming to the cities as they want to live the middle-class urban lifestyle. This drives domestic consumption growth in a lot of countries in the region like Indonesia or even for the countries that are more developed compared to Thailand like South Korea and Malaysia.

Nevertheless, we see the recovery being driven to a large degree by consumption growth which is quite steady; surprisingly steady to be fair, given that 20 percent of our employment got hit with the shutdown in foreign tourism. The overall consumption has held up surprisingly well largely due to higher-income people that are still able to consume. Besides Page 4 of 11  consumption, the recovery is also driven by exports, which I am sure all of you know, has responded quite well largely due to improvements in the economic growth of our trading partners. It is not just only China that has done consistently well, but also the United States would likely see very strong growth going forward given the recent stimulus package. Hence, we expect the overall recovery to be driven substantially by private consumption and exports in the year ahead. The big risk to the outlook that I mentioned is again tourism. In our baseline forecast of 3 percent GDP growth this year, we assume foreign tourist arrival of about 3 million, and most of that is expected to be in the fourth quarter. So if for some reasons, the vaccine rollout is delayed or we are not able to open the economy as expected by the fourth quarter this year, the GDP growth of 3 percent would be less likely. The 3 million this year is not that much, however, this risk will become more significant for the next year.
On the part of the financiers, it is crucial for financial institutions to build their capacity and capabilities to be able to better assess the viability of green projects, given the complexity and ever-evolving technology. Limited technical know-how on the part of the financial institutions on the green sector can lead to hesitation to provide funding or any form of protection or guarantees due to perceived risks. Limited financial literacy of project sponsors such as corporates and micro, small and medium enterprises (MSMEs) would also put them in a disadvantaged position in project evaluation. Many may also be unaware of the available financing instruments and suitable financing for their green ventures. Although Malaysia is a high saving nation with high gross national savings, averaging above 20%, without addressing this, there will continue to be a mismatch between where the money sits, and where it is needed for green investments. Green investments would continue to appear aspirational rather than a necessity. 1/3  BIS central bankers' speeches  The pursuit of climate action, including expanding climate finance is one that calls for action from four key actors – first, the Government; second, businesses; third the NGOs and civil societies; and finally, the financial sector. Businesses need to pay attention to the environment. Simply put, there can be no profit without the planet. The NGOs and civil societies could play diverse roles in support of the climate agenda including creating deeper awareness and highlighting problems.

This is part of the priorities of the members of the Joint Committee on Climate Change over the next 12 months to pave the way for the adoption of disclosure standards by the industry in the immediate future3. This will not only contribute towards lowering information asymmetry, but will also assist external stakeholders to hold financial institutions to account for their climate risk commitments. Leveraging Malaysia’s value offering – opportunities in sukuk  2/3  BIS central bankers' speeches  The capital market can play a critical role to address the financing gaps not only in green, but social and sustainable sectors. The SRI Roadmap for the Malaysian Capital Market issued in November last year aims to create a facilitative SRI ecosystem and chart the role of the capital market in driving Malaysia’s sustainable development. The sukuk market, which is a high growth segment in Islamic finance, has an important role in supporting the growth of the green technology sector. Malaysia continues to be at the forefront of green sukuk, which is the preferred mode of investment for those that prefer investments with a positive environmental impact. We can certainly tap into the sukuk market to fund activities or technologies that support a low-carbon and climate resilient society. Conclusion I am not asking us to reinvent capitalism at this conference – there is simply not enough time for that if we are to meet our Paris Agreement commitment!
In the  BIS Review 11/2002  5  agricultural sector, the number employed may be less than 50 000 person-years. Changes in industry structure, with an increase in the number employed in services and a decrease in manufacturing, will probably reduce the role of pay increases in manufacturing as a benchmark for wage determination. Wage formation and the labour market The structure of wage and income formation, the laws and rules governing the labour market and the social safety net are the main determinants of business costs and employment. If the cost level is too high, the business sector will find it unprofitable to employ everyone who wants to work. The business sector must restructure rapidly when real wages increase sharply. Many activities will no longer be profitable and will be shut down. This could lead to higher unemployment. However, lower employment will not necessarily be reflected in unemployment figures. We may instead see a flow of discouraged workers into, for example, disability pensions, early retirement schemes or different types of adjustment packages. The extent to which these schemes are used will depend on financial incentives and entitlement thresholds. 6  BIS Review 11/2002  In many European countries unemployment has remained relatively high. By contrast, the US managed to reduce unemployment rapidly following the period of high unemployment early in the 1980s. The labour market in the US is decentralised, with local wage agreements and market-determined wages.

I won’t use any more of this speech today to look backwards. For those that do want to dig deeper, I’d like to briefly plug a speech by my colleague Jon Hall, which will cover the risks of leverage including in LDIs next week. What I’d like to do instead is explain what the Financial Policy Committee (FPC) is doing to build steady state resilience in LDI funds and what needs to be done by pension funds to ensure risks to financial stability are reduced. Then I’ll look forwards to how the FPC might use this framework for steady state resilience in LDI funds to build resilience throughout the system of market-based finance[6] in the future. How are we building resilience in LDI funds? As this audience will know, the FPC does not have specific regulatory responsibility for pension schemes or LDI funds. However, the FPC has recommended a framework for steady-state resilience within LDI funds. [7] The FPC recommended that The Pensions Regulator (TPR) specify and enforce minimum levels of resilience for LDI funds, continuing its collaboration with other  Page 3  relevant regulators where necessary. TPR took a first step towards this in April. [8]  What should LDI funds be resilient to? And what form will this resilience take? The FPC wants to ensure that in the future, core markets such as gilt markets can continue operating even while suddenly repricing.
Operational independence of the Bank of England – with which I was heavily involved while at the Treasury, played a major part in this. But there is clearly something more going on here. 1  The long-term rate used here is the ten-year instantaneous forward rate. 2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  I want therefore to use two concepts of the interest rate to explore what may be going on and what we have learned and relearned about interest rates. The first concept is the trend real rate of interest and the second is the natural real interest rate (R*). The trend real rate of interest  The trend real rate is a long-term interest rate, 10 years or more. It is the interest rate, or to put it another way, the price which balances the demand for investment with the supply of saving when the economy is growing at trend – that is when supply and demand are in balance and inflation is at its target. The level of the trend real rate depends on structural, long-lived factors that determine the supply of savings and the demand for investment. This trend real rate cannot of course be observed directly. We can observe the long-term nominal rate of interest on bonds. This includes compensation for inflation that might occur over the duration of the bond. It also includes a variety of so called nominal and real ‘term premia’.

UK headline inflation over that period was of course affected by externally generated disinflation pressure from the sudden and very substantial drop in energy prices. But over that period, the average of a range of measures of domestically-generated inflation in the UK fell from around 2% to ½% at the end of 2014 – it has since recovered but only to nearly 1½% which is considerably below its pre-crisis average of 2½%. Over the same period, pay increases averaged around 2% – despite the fastest drop in unemployment in 40 years. Output growth picked up briefly to over 3% but has now fallen back to nearer 2%. And a small output gap probably persisted over the period. The MPC’s 2% inflation target is for UK CPI as a whole not for domestically generated inflation. But if we want to get a cross-check on where monetary policy was relative to where the natural rate might have been over this period, we can observe that monetary policy was not able to get domestically generated inflation to the inflation target over the policy horizon. In other words, far from being exceptionally loose, policy with hindsight may even have been a little tight. If this is right and the natural rate is currently slightly negative, how can that low level be explained? The great shocks that hit the economy after the crisis have surely dissipated. What are the headwinds now pushing the natural rate down? There are I think three interesting candidate explanations for this.