samchain/econo-pairs-v1 huggingface dataset:
Norman T L Chan: HKMA Fintech Day Speech by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at HKMA Fintech Day, Hong Kong, 11 November 2016. * * * MY, George, Julia, Frank, Herman, Albert, distinguished guests, ladies and gentlemen, 1. It gives me great pleasure to welcome you all to this HKMA Fintech Day, which is part of the Fintech week. Today we have a great gathering with speakers and participants from diverse background of the financial and technology sectors, including banks, stored value facility (SVF) operators, fintech firms, fintech investors, regulators and many others. I am sure the discussions today both on and off the stage will be extremely interesting. 2. The event today is organized by the Fintech Facilitation Office (FFO) of the HKMA together with our three strategic partners: the Applied Science and Technology Research Institute (ASTRI), Cyberport and the Hong Kong Science and Technology Parks (the Science Park). As you are aware, we set up the FFO in March this year with the mission to facilitate the development of fintech in Hong Kong. 3. In the last few months, the FFO has organized many activities to bring together users and solution providers of fintech, so as to build an ecosystem to promote the adoption of new technologies in the banking sector. The FFO will continue to develop this collaborative platform together with ASTRI, Cyberport and the Science Park.

Third, the extent of barriers - regulatory or otherwise - to adoption and what techniques and tools can enable safe use of this technology. Fourth, an assessment of firms’ perceptions of the risks, to both their own safety and soundness as well as to their conduct towards customers and clients, arising from AI/ML. And fifth, the extent to which the appreciation of these risks has given rise to changes in risk management, governance and compliance frameworks. The full results of the survey will be published by the Bank and FCA in Q3 2019, and are likely to prove insightful. Responses were returned to the Bank in late April, so some early indicative results are emerging. Overall, the mood around AI implementation amongst firms regulated by the Bank of England is strategic but cautious. Four fifths of the firms surveyed returned a response; many reported that they are currently in the process of building the infrastructure necessary for larger scale AI deployment, and 80 per cent reported using ML applications in some form. The median firm reported deploying six distinct such applications currently, and expected three further applications to go live over the next year, with ten more over the following three years. Consistent with the McKinsey survey, barriers to AI deployment currently seem to be mostly internal to firms, rather than stemming from regulation. Some of the main reasons include: (i) legacy systems and unsuitable IT infrastructure; (ii) lack of access to sufficient data; and (iii) challenges integrating ML into existing business processes.
Second, when property prices were rising and there was a clear expectation that they would continue to rise, those who were responsible for lending took comfort from the possibility of second mortgages providing borrowers with funding for servicing the first, sub-prime mortgages, in the event that the borrowers encounter difficulties in their mortgage payments. Indeed, when property prices were on a rising trend, the delinquency rate of sub-prime mortgages was quite low and sub-standard financial assets were considered as good quality assets. BIS Review 139/2007  1  Third, through securitisation the lender was able to off-load the sub-standard financial assets to third parties quickly. This eroded the incentive of the lender to carefully assess the ability of the borrower to service the sub-prime mortgage. Instead, the lender was more interested in accelerating the production line in this “originate and distribute” model, earning a fee and providing other customer services. Ironically, therefore, financial innovation in the form of securitisation and credit risk transfer to those in a better position to assume risks, while it should theoretically enhance financial efficiency and promote financial stability, has led to distortions in the incentives of financial intermediaries, eroded credit standards and undermined financial stability. Fourth, the powers of financial innovation continued to work after the sub-standard financial assets got into the hands of the third parties. Slicing, mixing and re-packaging came in and the sub-prime mortgages were buried in very complex financial arrangements to become what are nicely described as Collateralised Debt Obligations (CDO), or generally as structured products.

Joseph Yam: Current issues for monetary and financial stability in Hong Kong Speech by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the Hong Kong Management Association Annual Fellowship Dinner, Hong Kong, 27 November 2007. *  *  *  Introduction I feel especially honoured to have been asked to speak at this HKMA Fellowship Dinner, one particular reason being that the Hong Kong Management Association and the Hong Kong Monetary Authority share the same initials. I have, ever since the establishment of the Hong Kong Monetary Authority in April 1993, felt some what indebted to the Hong Kong Management Association in its acquiescence to our use of that symbol of excellence, the HKMA, no doubt in the hope that we too would in time mature to deserve the respect that those initials command. About fifteen years on, I hope we have not disappointed you. This evening I would like to talk about the monetary and financial issues currently confronting Hong Kong. I have chosen to do so because what is going on around us on the monetary and financial fronts appears, to me at least, to be unusually complex, presenting risks to monetary and financial stability that are perhaps less well understood and possibly less benign than those that we have been experiencing since the economic recovery from the second quarter of 2003.
But the scale and scope of broader international activity here suggests that clustering effects such as labour market externalities, specialised inputs and knowledge transfer have become even more powerful in a world of financial globalisation. It is conceivable that given time these effects and the benefits they bring in terms of more efficient allocation of capital and risk could be replicated elsewhere in Europe. It is in my view more likely that if they are lost in London they would be lost to Europe – for the foreseeable future at the least. Fragmentation of wholesale financial markets activity in Europe, to the extent it occurs, is likely to have a general cost to European economies, including the UK. And to the extent that the transition to whatever new arrangements will apply is not orderly and smooth, the costs and risks will be greater. This is of course a technocrat’s view and these issues, rightly, will not be settled by technocrats. The impact of Brexit on European financial markets is only a part of a much broader set of considerations. As an ex EU negotiator, I have some inkling of how many other factors can come into play. Whatever the outcome, and the twists and turns on the way, the Bank will continue to focus on its role in protecting financial stability. Financial markets have come a long way since Cunliffe Bros became a founding member of the Accepting Houses Committee at the end of the first wave of financial globalisation.

2  Woodford, M. (2005), “Central-Bank Communication and Policy Effectiveness,” paper presented at FRB Kansas City Symposium on “The Greenspan Era: Lessons for the Future,” Jackson Hole, Wyoming, August 25-27, 2005. 3  Providing forecasts based on both a constant interest rate and market expectations give information not only about the sign but may also give some guidance about the range. See, for example, the following citation from the Bank of England’s Inflation Report of February 2008: “Under market interest rates, the central projection for inflation was a little above the target in the medium term, while under constant interest rates, it was below the target.” This suggests that the likely interest rate path lies somewhere between a constant rate and market expectations. BIS Review 94/2008  1  second central bank with endogenous interest rate assumptions, following the Reserve Bank of New Zealand, who introduced it in 1997. More recently, the Swedish Riksbank, the Czech National Bank, and the Central Bank of Iceland have also started to publish interest rate forecasts. Publishing endogenous interest rate paths raises a number of issues, and there is disagreement among both academics and central bankers on whether being that precise about future policy intentions is beneficial or not. The key issue in the debate is whether such communication implies guidance or noise. Some of the arguments for transparency relate to the beneficial effects when private agents understand the central bank’s reaction function, such that market interest rates will adjust more appropriately to economic news.
Fourth, we have thoroughly analysed the issue of nonperforming loans (NPL), both at banking system level and at an individual bank level, and we are developing comprehensive measures which would create conditions for reduction of these loans, including strengthened loan-loss provisions, higher NPL write-offs, improved collateral valuations, enhanced disclosure practices, and strengthened data collection. Fifth, we are continuing the efforts to bring the regulatory framework fully in line with the EU law. For example, we are drawing up a completely new law on payment services and payment systems which, inter alia, would strengthen the requirements for security of payments made electronically and via Internet. I mention all these priority tasks of the BNB because for their performance we would largely rely on our constructive partnership with you, as we have done so far. Of course, we are well aware of the specific challenges that you too are facing. The strong pressure on profitability with a still weak, though increasing, and demand for loans requires that you keep seeking solutions for greater efficiency. The topics of credit risk management and costs policies would more and more be high on the agenda also because it is likely that we would witness another cycle of rising interest rates, given the worldwide trends and the expectations of such a development in the euro area sooner or later. These are topics that we will continue to discuss. Thank you for the good cooperation, and congratulations on the 25th anniversary! 2/2  BIS central bankers' speeches

The way forward Becoming a member of the euro area does not represent the end of a process, but rather the beginning of a new era in which the burden of adjustment will have to be carried entirely by the real economy and in which the harmful effects of inefficient institutions and practices on costs and final prices will become more visible. The policy challenge, therefore, is to maximize the benefits of participation in monetary union and so bridge the remaining income gap with the euro area. Malta’s per capita income level is still around 70% of the euro area average. Among other things, this means that further fiscal consolidation is necessary in order to achieve a balanced budget by the set date of 2010. There must also be more emphasis on expenditure-based adjustment, particularly in view of rising pressures caused by ageing-  BIS Review 14/2008  5  related factors such as pension and health care costs. It will be equally important, in both the private and public sectors, for wage growth to be compatible with productivity growth, labour market conditions and cost developments in competitor countries. The further strengthening of competition in both product and resource markets and the creation of more incentives to work are also necessary in order to raise the participation rate. These ambitious objectives clearly allow no room for complacency. In this regard, it is a positive sign that the Budget for 2008 promises policy continuity.
Historical data does not always predict the future and so we should not place too much confidence in models. A floor may be  BIS central bankers’ speeches  5  necessary to prevent the combination of low risk weights and high leverage from becoming unreasonable. Most of what I have been saying here has been said by us at the Riksbank for some time. We have encountered both counterarguments and cries of encouragement. We have also been asked if we couldn’t be more precise. Consequently, I thought I would wrap up by telling you a little about what will be happening in the immediate future. The Riksbank will clarify its recommendations soon When motorway junctions are planned, the traffic planners take many factors into account to ensure that the traffic flows smoothly and safely. Benefit is balanced against cost – and safety is given a high priority. We at the Riksbank take the same approach when we and other authorities are considering how to implement Basel III in Sweden. The Riksbank will soon announce its view of the measures that should be adopted. One example is how much higher we think that the capital adequacy requirements for the major banks should be – in addition to the minimum levels in Basel III. One important step is this year’s second Financial Stability Report, to be published on 29 November. In connection with this, we will also publish a report analysing the economically appropriate capital adequacy requirements for the major Swedish banks.

These include the two European countries whose banking sectors have greater assets in relation to GDP than the Swedish banking sector – Switzerland and the United Kingdom. In Switzerland, an expert committee has proposed progressive capital adequacy requirements. The larger and more important to the economy a bank is, the higher these requirements will be. The two major banks – UBS and Credit Suisse – have a capital adequacy requirement of 19 per cent, at least 10 per cent of which is to be Common Equity Tier 1. The remaining 9 per cent can be supplied by what are known as contingent convertibles (CoCos) – which is to say debt instruments that can be converted to equity under certain circumstances. In the United Kingdom, the Vickers commission proposes a structural separation of retail and investment banking. Major retail banks will have an extra capital buffer of 3 per cent. The proposal also includes forcing certain debt instruments with long maturities to cover losses when a bank encounters problems – by introducing what are known as bail-in bonds. In total, equity and bail-in bonds in major banks are to amount to 17–20 per cent. It is time to take the discussion one step further Considering the characteristics of the Swedish bank market, historical experiences and international developments, we at the Riksbank feel that there are several areas that still require attention. The Swedish system needs extra-large airbags. We consider that capital requirements for major Swedish banks need to go beyond the requirements of Basel III.
•  The central government budget – growth in public expenditure – influences the krone and the size of the internationally exposed business sector in the medium term. Government expenditure and revenues must be in balance in the long term. •  Wage formation, the structure of the economy and incentives determine how well and how efficiently we utilise our labour resources and other economic resources. There is also an interaction: •  In its budget resolutions, the government authorities will attach importance to the effects of the budget on the Norwegian economy and will therefore take account of interest rate effects. In this way, they avoid a situation where growth in public expenditure and the interest rate push the economy in different directions. •  With a known monetary policy response pattern, the parties to the centralised income settlements can take interest rate effects into account when wage increases are negotiated. •  Moreover, the parties to public sector negotiations can take into account that the higher pay increases are, the fewer people that can be paid over government budgets. The interaction here became clear when public sector employment fell after the expensive wage settlement in 2002. The value of the Petroleum Fund, measured as a percentage of GDP, will rise in the years ahead. On the other hand, Norway, like many other countries, is facing substantial fiscal challenges. The expected dependency ratio, i.e.

In addition, the government uses more of the petroleum revenues than before. Growth in public expenditure started to accelerate in 1997 after having been low in the mid-1990s. Spending growth has also been fairly strong in recent years, but perhaps somewhat slower than earlier. 6/7  The fiscal rule for the budget implies that the government can use 4 per cent of the Fund over time. This year, around 6 per cent is being used. The deviation partly reflects an unexpected shortfall in tax revenues in recent years. The government budget deficit is the difference between total revenues and total expenditure. They each account for about half of total GDP in Norway. Even small deviations from expenditure and revenue projections can have a major impact on the deficit. Exchange rate changes will also lead to fluctuations in the value of the Petroleum Fund. For these reasons alone, the use of petroleum revenues may in periods deviate from the 4 per cent rule. Spending was also increased in response to the economic downturn. We can, therefore, safely affirm that the fiscal rule has been normative for fiscal policy. Together with the fiscal rule, the monetary policy guidelines provide the framework for economic policy in Norway. The various components of economic policy have varying effects. This is why they have different functions: •  Monetary policy steers inflation in the medium and long term and can also contribute to smoothing swings in output and employment.
The UK economy exhibits none of these traits – annual broad money growth is around 1%, growth in regular pay is close to 2% and money spending growth is around 3%; all of which are significantly lower than the average growth rates recorded before the crisis. And a range of indicators point to spare capacity in the economy rather than excess demand. Perhaps most obviously, unemployment is around 8%, three percentage points above the average levels before the crisis – a million fewer people in work. The Monetary Policy Committee judges that it is likely, though not certain, that this spare capacity will press down on inflation. That seems to be happening in both the United States and the euro area where underlying inflation is falling. No one should take this as a sign of complacency. The MPC is conscious that there are always risks to the upside, and the apparent rise in inflation expectations is one that concerns us. We have always explicitly recognised that there is a significant chance that inflation may turn out to be above target. A forecast is not a single number; it is an assessment of risks. In our May forecast, the MPC judged that, under prevailing market interest rates, the odds were in favour of inflation remaining above target over the next year,  BIS Review 84/2010  1  whereas, looking two to three years ahead, the odds were on inflation being below the target.

Luis M Linde: Situation of and challenges facing the European and Spanish banking industry following the start-up of the Single Supervisory Mechanism (SSM) Opening address by Mr Luis M Linde, Governor of the Bank of Spain, at the 10th Banking Industry/IESE (Escuela de Negocios de la Universidad de Navarra) Meeting, Madrid, 10 December 2014. *  *  *  I much appreciate Professor Juan José Toribio’s kind invitation to me to participate in this 10th Banking Industry Meeting. In my address I shall review the situation of and the challenges facing the European and Spanish banking industry following the start-up of the Single Supervisory Mechanism (SSM). Since the height of the tensions in mid-2012, the position of the Spanish banking industry has improved notably. This improvement has been due to a series of factors, ranging from far-reaching changes in European institutional arrangements to common monetary policy measures and, no doubt, to the reforms in Spain. Clearly, however, the improvement cannot be explained without recalling the changes made in our banking system. Recapitalisation, restructuring, downsizing and reform of the savings bank sector have spearheaded the Spanish banking industry reform and have contributed to correcting the imbalances that had built up. The improvement in Spanish banks was substantiated by the interim assessments made by the European (the ECB and the European Commission) and international (IMF) authorities until the European Union’s financial assistance programme for the recapitalisation of Spanish banks was successfully concluded in January this year.
Good governance underpins any successful business model and it is of utmost importance that DFIs follow best practices that promote integrity, transparency and accountability. To achieve this, DFIs should strive to strengthen behaviour and risk culture within the organisation. Strong governance entails crafting well-defined mandates that will insulate the organisation from undue external interference. Focus should also be given to foster a culture that welcomes active debates and critical thinking at all levels of the organisation to guard against groupthink. Last but not least, to sustain effective and high performance, continuous upskilling of the board, senior management and staff is crucial to be able to seize opportunities and overcome challenges as they arise. While the DFIs of today have grown in size and outreach, there remain opportunities for them to maximise their full potential. Innovation is lacking in developing diversified financial products that are tailored to meet the specific needs of targeted sectors. This is compounded by their limited capacity and capability to manage the potential risks arising from financing high risk sectors due to information asymmetries. DFIs should aim to become the centre of reference for new growth sectors and emerging markets and develop expertise in risk assessment and management of high risk projects in those sectors. Underlying the strategies for a good business model is the need for DFIs to strengthen research and analytical capabilities to address their lending capacity by developing innovative solutions.

Exactly how the problems will take shape can vary, but it is almost always a question of some sector having become “over-leveraged”, which sooner or later leads to problems. Here I will assume that it is household indebtedness that is the main problem. At some stage, it becomes evident that the credit boom and the increased indebtedness have been based on too optimistic expectations and calculations. A lot more people will want to sell rather than buy the asset that formed the basis for the credit expansion and its price therefore falls. Let us assume that, as with the most recent crisis, it mainly concerns housing. The banks become cautious and reduce their lending, as the value of the collateral declines. Households’ assets have now fallen in value substantially, but the size of the loans remains unchanged. To attain a better balance between assets and debts, households reduce their consumption and begin to save. In addition to the fact that the credit supply declines as a result of the banks becoming more cautious, the demand for loans also declines. This adjustment in households’ balance sheets gives a fall in demand, which in practice has often proved fairly prolonged.3 This process often leads to a substantial weakening in public finances, too, partly because of the rapid decline in economic activity and partly because the banking system may in a worst case scenario require support. This development means that the business cycle and the financial cycle take a simultaneous downturn, as in Figure 1.