samchain/econo-pairs-v1 huggingface dataset:
We have, however, been pursuing our objective assiduously on the insurance side – to pick out some examples of steps we have taken to facilitate competition:   we have created a very proportionate regime for the 40% of firms we regulate who are not covered by Solvency II;    we have given around 85% of Solvency II firms in the UK the opportunity to avoid around 70% of the quarterly reporting burden they would otherwise face;    we are working with HMT, HMRC and the London Market to introduce a new structure for insurance-linked securities; and  12  http://www.bankofengland.co.uk/about/Documents/ieo/evaluation0316.pdf 9  All speeches are available online at www.bankofengland.co.uk/speeches  9    we have authorised 19 new insurance companies and Lloyd’s managing agents in the first three years of the PRA’s existence. Conclusion  Financial regulation and supervision can sometimes be a dry business. And in insurance in particular, some of the more arcane aspects of the regulatory framework can rapidly turn off everyone except us and the industry. I have therefore spent some time looking into individual policyholder cases, to remind myself about what is going on at the frontline. One in particular made a powerful impression on me. A young man got in touch with an insurance company to claim on his critical illness cover. The reason for the claim was that his 4-year old son had brain cancer. The cancer was in a difficult place, and the best-case outcome from a forthcoming operation was grim.

The results of this appropriate policy mix, which placed the burden of the response to the crisis on the shoulders of the SNB, can be seen in the remarkable accounts of the Swiss general government: public surpluses in both 2009 and 2010 (+0.8% and +0.2% relative to GDP, respectively) and a reduction of the debt level to less than 40% of GDP.11 One reason for the misperception is probably the view, propagated by the academic literature on the subject, that central bank interventions in foreign exchange markets are geared to achieving an exchange rate target and that they are generally unsuccessful at doing so. As has been repeatedly emphasised, this was not the objective for the SNB in 2009–2010.12 The SNB’s objective was to provide appropriate monetary conditions to the Swiss economy. A given exchange rate level in that context may be maintained for a limited time period, but it is subject to review as macroeconomic conditions evolve. And as the SNB’s experience in 2009 demonstrates (illustrated in Chart 7), influencing the exchange rate level temporarily is feasible and makes sense at the zero lower bound when the traditional monetary policy instrument is exhausted. III. Conclusion: how to judge whether interventions were successful? All actions by the SNB have to be considered in the light of its mandate. The primary goal is to ensure price stability, while taking due account of the overall economic situation. In this way monetary policy contributes to creating an environment that fosters prosperity and economic growth.
Drivers of today’s elevated inflation If that commitment is as strong as I claim, it begs the question of how we have ended up in the current situation, with inflation so uncomfortably high. Answering that question requires we delve a little further into recent economic developments – peeling another layer from the onion. The character of external shocks In large part, recent price developments have been driven by a succession of unanticipated external disturbances to the UK economy – among others, the Covid-19 pandemic and its aftermath, and the Russian invasion of Ukraine. In the jargon of economics, we label this ‘a sequence of adverse external shocks’. Four features of these disturbances are worth emphasising. First, they were genuine ‘shocks’ in a specific, technical sense: they were not (and could not have been) anticipated. [5] Second, they have transmitted into UK inflation relatively quickly. For simplicity, I’ll focus for a moment on the impact of higher international oil and gas prices on UK consumer price inflation. [6] The direct implications of these external shocks for UK price developments transmits within a matter of months. Even with the added complications implied by the OfGEM price cap, higher European wholesale gas prices entered UK utility prices – and thus UK CPI inflation – within six months. Moreover, many of the subsequent indirect implications of higher international energy prices – that is, their impact on a wider set of UK goods and services prices, via (say) higher transport or utility costs – are already also being felt.

Supply chains  Page 7  continue to be disrupted owing to the fall-out from the pandemic and invasion of Ukraine. For each firm that reports difficulty in obtaining components necessary for production, there is a supplier facing strong demand with significant pricing power and the ability to pass higher costs along the value chain. In this context, one way of viewing the interaction between external price shocks and domestic price, wage and cost pressures would be to see the two stories as additive. UK inflation is high both because of the direct and indirect impact of higher international energy and goods prices and because of the impetus to domestic inflation imparted by the strength of wage growth and corporate efforts to re-establish profit margins. An alternative and more worrying view would characterise the impact of the two drivers of UK inflation as multiplicative. The strength of corporate pricing power, the tightness of the UK labour market, and the real income squeeze on UK households owing to higher energy prices all make it more likely that the impact of higher international goods and energy prices will extend beyond the direct and indirect effects that I have already mentioned, and translate into second-round effects on price, wage and cost setting behaviour. In other words, UK price setters and wage bargainers will try to offset the impact of higher headline inflation on their real spending power by seeking higher profit margins or higher wages in order to preserve their real income.
All in all, this recent recommandation from the Governing Council is testimony to its ability to smoothly adapt its internal governance to the challenges posed by enlargement. Strategy of the single monetary policy The Maastricht Treaty clearly defines the ultimate objective of the single monetary policy, that is to say maintaining price stability. However, for attaining this goal, it is essential to clearly define price stability: we define it as a year-on-year increase in the overall Harmonised Index of Consumer Prices (HICP) of below 2% in the whole euro area. Bearing in mind this objective, our monetary policy strategy is based on two “pillars”. We have first assigned a key role to the monetary aggregate M3. This “pillar” is based on a reference value which is set at 4.5% for the annual growth rate of the broad monetary aggregate M3. The concept of a reference value does not mean that the Eurosystem is committed to automatically correcting deviations in monetary growth in the short term. Naturally, we also follow the components and counterparts of M3 closely. In this regard, the development of loans to the private sector, as well as the evolution of government finance and capital flows with the rest of the world, deserve a particular attention. However, it is common sense to say that monetary developments do not account for all the risks to price stability.

In the Central Bank’s view, the real estate market will cool down significantly in the near future and private consumption growth will normalise next year. It might seem natural to ask whether the Bank’s concerns about inflation will not vanish overnight then, because housing prices have been the only factor keeping inflation figures high. Unfortunately the matter is not  BIS Review 28/2006  1  so simple. There is no doubt that the Central Bank’s policy rate measures have played a crucial part in helping the other index components to counteract house price inflation in the recent term. The movements in the exchange rate of the króna in the past few weeks exacerbate the challenge of steering inflation back onto a more moderate course. Of course it would be easy to cite repeated comments and Central Bank declarations that the strength of the króna was unsustainable in the long run, and the many arguments supporting them. However, the Central Bank had hoped that the inevitable exchange rate adjustment would have occurred somewhat later than it actually did and would also have been more measured. The exchange rate adjustment would preferably have taken place after a slowdown in house price inflation and a substantial easing of the pressures which, according to newly published national accounts figures, were even greater than previously thought. Under these circumstances, what the Central Bank must do is clear and it has no alternatives.
If now EMU leads to increased competition in the housing loan market, which should be an effect of monetary union, there will also be an expanded need to finance housing loans in way that is economical with capital. It is not unreasonable to believe that securitisation in this perspective will attract increasing interest. Increased competition can accordingly drive forward a growing market for securitisation. However, the causal connection can also be the opposite, namely that improved opportunities for securitisation will increase competition. This is the experience in Australia, where the housing loan market was deregulated in the 1990s. A legislation that facilitates securitisation reduced the previously high entry barriers which existed in the market, cleared the way for new players and reduced costs for the housing loan customers – in fact by as much as a couple of percentage points. Some conclusions Taken as a whole, we seem to be moving towards greater competition in the housing finance sector. New financing forms, new technology and possible EMU membership are driving factors that will together reduce entry barriers and thus increase competition. Since housing loans are standardised products, it is above all price which is the means of competition. The financing issues will thus be at the centre of interest. The traditional Swedish form for housing finance where the entire balance sheet constitutes one body of collateral has many advantages. It is possible that the investors’ demands for collateral in the form of equity may gradually make this form too expensive.

Securitisation means that a given loan stock with the collateral pertaining to it is lifted out of the balance sheet in the housing loan institution and invested in a company separately created for the purpose (a so-called special purpose vehicle), which is then financed in the market by issuing bonds. This company has a clearly defined risk scenario and does not carry out any activity besides holding the specified loans. It need not therefore be subject to the capital adequacy rules that apply for housing loan institutions. Assume that the housing loan institution must set aside four million kronor of a loan stock of 100 million while the market accepts financing the securitised stock with a capital of 1 million kronor in the company created for the purpose. If the stock provides a return of SEK400,000 after financing and operating expenses, this gives a return on capital in the housing loan institution of 10% before tax. The same loan invested in the special company will provide a return on capital of 40% before tax. A buffer for investors can also be added on via credit guarantees, which further reduce the requirement of equity. A number of objections can be raised to this example, but it serves well to illustrate the driving mechanism behind a securitisation. In practice there are many difficulties.
Many have argued that subsidiaries offer sub-optimal use of bank capital, which will be split up and locked up in separate geographical pockets or jurisdictions. In times of stress they could not so readily rely on parent level support or the home central bank. The inability of subsidiaries of international banks to leverage on the capital of their parents would limit their lending in many emerging market economies. This may in turn have negative impact on the trade, investment and other economic activities of these emerging market economies. Besides, liquidity management would likely be more efficient for a branch than for a subsidiary as funds can flow more freely within the same legal entity. On resolution, it is true that the insolvency proceedings for a subsidiary would normally be simpler than for a branch, but in practice there could be many complications such as: linkages to other group entities through intragroup guarantees and exposures, service reliance and shared management, to name but a few issues, which would affect the ultimate resolvability of a subsidiary when it actually happens. 15. After the Global Financial Crisis, the subsidiarisation model has actually gained greater support in some jurisdictions. This is because some home supervisors of internationally active banks feel that it might be easier for these international banks to undertake “de-risking” operations should trouble occur in overseas subsidiaries than in branches. 16. From Hong Kong’s perspective, we believe that subsidiaries and branches of overseas banks can and do play different roles in servicing the real economy.

What I would like to do here is to share with you our views on the following three issues that have profound impact on the way in which the banking industry, including that in Hong Kong, should structure itself:    Universal Banking vs. Segregated Banking    Universal Banking vs. Narrow Banking    Branch vs. Subsidiary Operations. Universal banking vs. segregated banking 2. First let me talk about “universal banking”, which may mean different things to different people. By “universal banking” I refer to a business model in which banks are allowed to provide a wide range of banking and other financial services to their customers, whether they are mass retail, high net-worth, SMEs or large corporates. In this connection, it may be appropriate to regard a universal bank as a one-stop financial supermarket. 3. Hong Kong has a long tradition of this type of universal banking. Notwithstanding the experiences of the recent Global Financial Crisis and the ongoing debate and scepticism in some jurisdictions, we continue to see merit in the model of universal banking. Why? Let me explain. 4. First of all, universal banking in the form of a one-stop financial supermarket provides what the customers need to meet their rising demand for investments in a wide range of financial and wealth management products. These customers can enjoy the convenience of a one-stop service, ranging from simple products such as equities, unit trusts, insurance, gold etc. to the more complex derivative or structured products that meet their investment needs.
Over the past decade, a flurry of macroprudential policy actions have been taken to address the fault lines that caused the crisis including raising bank capital minima and buffers, introducing liquidity buffers for banks, reducing bank interconnectedness and improving their resolvability, targeted restrictions on mortgage  4 Macroprudential policy is distinct from microprudential policy. Microprudential policy concentrates on promoting the  safety and soundness of individual institutions. Macroprudential policy addresses risks arising from interactions between institutions and sectors within the financial system, and interactions between the financial system and the real economy. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  lending, transforming fragile OTC derivative markets, and winding down the toxic forms of shadow banking and building up more resilient market-based finance (Chart 1).5  And with these policies have come a flurry of speeches too (Chart 2). Chart 1: Increasing use of macroprudential meaures over time  Chart 2: Flurry of macroprudential policy speeches post-crisis  Use of macroprudential measures over time  Number of speeches 250  14 12  200  10 150  8 6  100  4 2  50  0 1995-2000  2001-06 AEs  2007-12  2013-18  EMEs  Bars show the average number of macroprudential measures per year and per 10 economies in each group of economies.

The FPC’s judgement is that, if risks were to build above standard, then increasing the CCyB above 2% and bearing this cost would better optimise the balance between primary and secondary objectives. The cost would be warranted because, by building resilience, it would reduce the likelihood and severity of future downturns.28,29 The grey triangles in Chart 18 estimate GDP-at-risk (proxied by the 5th percentile of the forecast distribution of GDP in 3 years’ time, conditional on risks at time t on the x-axis), versus on the y-axis the Bank of England’s 1-year ahead median GDP forecast at time t. The blue line illustrates how this trade-off could have changed if in 2004 capital levels (as measured by the total capital equity ratio) had been increased from 2004 levels. GDP-at-risk in 2004 (proxied by the estimated change in the level of GDP expected by 2007, based on information in 2004, at the 5th percentile of the  27 The CCyB is a particularly powerful policy tool in this regard because it can be removed altogether in a stress. Banks entering the capital conservation buffer, by contrast, are subject to restrictions on their dividends and other capital distributions. 28The FPC’s CCyB decisions are informed by results of the Bank’s annual concurrent stress tests of the UK banking system. These tests provide a gauge of the sensitivity of banks’ balance sheets under stress.
There is now a growing body of evidence on the very damaging impact of financial crises on the productive capacity of economies. Third, we should not imagine that there is some recent halcyon world of banks supporting the real economy to which we can quickly return if the regulatory straitjacket is loosened. The system was badly distorted in the long run up to the crisis. The post crisis world requires a major adjustment in bank business models. This is not some unintended consequence of overzealous regulation. It is a necessary, if painful adjustment to a new reality. Some numbers from the UK illustrate this point starkly. In the long upswing of the credit cycle, the stock of domestic lending by UK banks in the UK grew enormously from 95% in 1997 to 170% of GDP in 2008. The stock of non-property lending to companies as a proportion of GDP, however, grew only modestly from 19% in 1997 to 23% in 2008. Meanwhile, mortgage lending increased from 45% to 70% of GDP; lending to real estate tripled from 5% to 15% of GDP; and lending to the UK non-bank financial sector – including institutions like hedge funds, securities dealers and insurance companies – shot up from 25% of GDP to 60%. And these numbers do not count the explosion in UK-owned banks’ overseas exposures which more than quadrupled between the end of the 1990s and 2008.

In other words, it does not seem as though we can expect monetary policy scope to increase that way very soon. It is primarily for this reason that I believe we need to think about how we will be able to conduct monetary policy over the next ten to fifteen years or so. I would like to stress that my discussion is general and looks forward over a relatively long perspective. It should not be interpreted as dealing with contemporary policies. As regards such policies, my conviction is that we will succeed in bringing Swedish inflation up to target and in anchoring the long-term expectations – as I’m sure you know, we are almost there. Preparedness for a different monetary policy playing field But at the same time, we must be prepared for it perhaps not being possible, in the future, to conduct monetary policy in the way and with the impact we have previously been accustomed to. For example, we should include in the calculation that the policy rate will probably be unusually low when the next recession occurs. A recession is certainly not on the cards at the moment, but we know that, sooner or later, one will inevitably arrive. When the financial crisis broke out, we were able to cut the repo rate from a level of almost 5 per cent. The Riksbank’s latest forecast indicates that, in the middle of 2019, the repo rate will be 0.7 per cent.
To begin with, the Capital Account Liberalization Master Plan aims to make our financial markets serve residents and non-residents more flexibly with diverse products and services. This would facilitate regional financial transactions. Companies with regional operations are encouraged to set up a Treasury Center (TC) with the flexibility of foreign exchange regulations as well as tax incentives. To date, 16 companies, most of which are Multinational Corporations (MNCs) with intention to use Thailand as a springboard to gain access to CLMV, have already received a TC License, with several more to participate. The Bank of Thailand is also continuously promoting the use of local currency in regional trade settlement. In March this year, cross-currency dealers were appointed to act as clearing agents for the Baht and the Malaysian Ringgit. In the near future, we will allow securities companies to buy and sell foreign currencies within the scope of their brokerage business. Foreign corporations will also be permitted to borrow directly in Thai baht from domestic financial institutions to invest in the Greater Mekong Subregion (GMS). Also in March of this year, we have signed Letter of Intent with Malaysia and Indonesia, and negotiations are currently under way, to establish the Qualified ASEAN Banks. Looking forward, this initiative should help enhance financial connectivity, and improve operational flexibility of businesses in the region. Ladies and gentlemen, as I outlined above, the Bank of Thailand is committed to establishing financial infrastructure which will facilitate efficient and inclusive growth.

Among others, we would adopt the Regulatory Sandbox Framework, allowing banks and FinTech firms to test their innovation with limited group of customers before launching their services to broader public. Financial institutions are also allowed to invest more flexibly in FinTech related venture capital . It is worth noting here that the benefits of FinTech are not only limited to lower cost of financial services but also greater financial inclusion, to which I now turn. Greater financial inclusion not only improves welfare of the people but also unleashes economic potential of the previously excluded. The Bank of Thailand has focused on promoting financial system’s access and inclusion. For instance, e-Payment channels play an important role in providing payment access at low costs. Money transfer via the PromptPay platform will be free for the amount not higher than 5,000 baht. Besides, the government will also be able to use e-Payment as a means to directly transfer welfare benefits to the targeted group of end beneficiaries as mentioned by the Minister of Finance. In addition to embracing FinTech and implementing the e-Payment as part of the key measures to improve financial access, other notable measures are the implementation of the Business Security Act and the expansion of data bases for individual and SME borrowers. The Business  Security Act, which came into effect in July of this year, expands the list of eligible collaterals for secured lending by financial institutions to include things like inventories, and receivables.