samchain/econo-pairs-v1 huggingface dataset:
Our views on the risk margin have been set out previously, and we welcome its inclusion in HMT’s Call for Evidence on Solvency II reform. 2. Implications for supervision  Context The growth of annuity lines through bulk purchase transfers from defined benefit pension schemes, and the specialisation in annuity lines, attracts significant supervisory focus. With much longevity risk currently being reinsured, firms will not have failed to notice that our engagement on asset risk has increased markedly as investment returns on assets backing the annuities are the key driver of pricing in the bulk annuity market. MA portfolios have increased since the start of 2018 by 30%, to around £ 3 [Chart 3]. The range of assets that firms hold in their MA portfolios suggests to us that Solvency II is not of itself a barrier to firms investing in a wide range of asset classes. We see everything from covered bonds to infrastructure; and social housing to restructured Equity Release Mortgages (ERMs) backing annuity liabilities. And whilst the majority of exposures are what might be deemed traditional annuity assets, such as gilts and corporate bonds, less liquid exposures as a proportion of the MA portfolios are large and increasing [Chart 4]. 3  QRT data at YE20, PRA Analysis 3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  The risk management of less liquid assets is of particular concern to us.

As I said earlier, MA portfolios already include many types of debt instrument, and where assets are not MA eligible firms may consider – if appropriate – holding them outside the MA portfolio to back other liabilities. And the PRA has taken, as far as possible, a pragmatic approach to fixity – for example for floating rate bonds and for assets with inadequate modified Spens clauses. Over 2020, we saw very few applications for asset classes not already held in peer MA portfolios, instead seeing firms applying to invest in less liquid asset classes such as ground rents and ERMs. While the asset classes may not be new to us, firms can expect to be challenged when investing in asset classes that are new to them. We have published supervisory expectations in Supervisory Statement 1/20 “Solvency II: Prudent Person Principle”5 and Supervisory Statement 8/18: “Solvency II: Internal models – modelling of the matching adjustment”6. These cover risk management aspects including the consistency of investments with the prudent person principle, the ability to manage the assets – including in stress or in default – and the ability to model the solvency capital requirement appropriately. Next I would like to touch on the future direction for new asset classes in MA portfolios. As Sam Woods, the Deputy Governor for Prudential Regulation, and PRA’s Chief Executive said in his March speech7 at the ABI, we are wary of calls to encourage specific forms of investment with prudential regulatory incentives.
In addition, more countries have shown signs of further tightening in their labor markets, which will continue to put pressure on wages (figure 7). 3  Against this inflationary backdrop, most central banks have raised their benchmark rates and/or signaled a path of faster withdrawal of monetary stimulus. The Fed made its largest rate hike in two decades, anticipating additional raises at upcoming meetings and a reduction of its balance sheet from June onwards. Sweden, India, and Australia surprised the market by initiating monetary normalization in the face of increased inflationary pressures. The European Central Bank confirmed that it will end unconventional stimulus in the third quarter of this year, although it remains more cautious about raising rates. Central banks in Latin America have continued to raise policy rates in the face of growing inflation. (figure 8). In this context, and comparing with the closing of the March MP Report, global markets are increasing their risk aversion, reflected in higher long-term rates, falling stock prices, and an appreciated dollar. In any case, these trends have seen important changes in the period, with some recent reversal of these changes. The Chilean market has had a more favorable performance compared with its external peers. Compared to the end of the previous MP Report, long-term rates have remained unchanged, the depreciation of the peso is around the average of emerging economies and stock prices have risen, although specific factors have played a role in the latter (figure 9).

Although its fundamentals suggest that it should start to weaken in the short term, it cannot be ruled out that it will continue to be stronger than expected, particularly because of the financing capacity provided by remaining liquidity and the decrease in the level of household debt during 2021. Such a scenario may also emerge if strong global cost pressures increase. This would exacerbate the inflationary problem, triggering a stronger monetary policy reaction by various central banks in the short term, but increasing the likelihood of a global recession in the medium term. The lower part of the MPR corridor accounts for scenarios where inflationary pressures dissipate sooner than expected. It is possible that the contraction in activity and demand will be stronger, either due to weaker investment or faster adjustment in private consumption. Nor can it be ruled out that the external scenario will see a reduction in global cost pressures and inflation easing in most economies, Chile included (figure 13). 6  There are also scenarios where the economy would face more significant changes, which would place growth outside the range of the central scenario projections. One such event could occur if the unfolding Russian invasion of Ukraine proves much more damaging for the world economy. It could also occur if global financial conditions worsen even more significantly, for example, in a scenario where inflation leads to a much larger than expected tightening of monetary policy in the main economies.
One of the reasons why we have an Executive Board consisting of several members is that different assessments and approaches can be tested against one another, which should ultimately lead to better decisions. In addition to the agreement on economic developments and the direction for monetary policy, there was also broad unity among the Executive Board that household indebtedness is a risk that needs to be managed. The low interest rates mean that there is an increased risk that the economy will not develop in a way that is sustainable in the long run. There are thus now even greater demands for measures within other policy areas to deal with household indebtedness and developments on the housing market. Macroprudential policy plays an important role in this context. Welcome framework for macroprudential policy – it improves the conditions for managing household indebtedness One message I have conveyed time and time again – including in my August speech last year – has been that a framework for macroprudential policy would facilitate the monetary policy deliberations.8 More accurate tools could be used to manage household indebtedness (see the lower half of the diagram in Figure 8), at the same time as monetary policy could to a greater extent focus on the inflation target within the normal forecast period (see the upper half of the diagram in Figure 8). 7  One must bear in mind that the inflation forecasts in the Figure are calculated on the basis of the current reporate paths.

In addition to increasing the resilience of the banking system, higher capital adequacy requirements could also contribute to slowing down household indebtedness as the banks’ funding would become more expensive if they had to have more capital, which could lead to higher lending rates and reduced credit granting. However, further capital requirements of the magnitude now being discussed would have only relatively marginal effects on household indebtedness.10 At the same time, both household debt and housing prices are continuing to increase from already high levels, despite the fact that Finansinspektionen introduced a mortgage cap already in 2010. I therefore feel that further measures are needed to subdue household demand for credit. The Riksbank has proposed, for instance, the introduction of healthy minimum levels for the standard values used by the banks in their discretionary income calculations, which form part of their credit assessment of households. This means that a borrower should be able to manage certain minimum levels with regard to interest rate, amortisation rate on both first and last mortgages, as well as maintenance and general living costs. Examples of further measures that might have an effect on indebtedness are amortisation requirements, limits to loan amounts or interest payments in relation to income or a stricter mortgage cap. The question of measures to increase households’ amortisation of their loans was discussed by the Financial Stability Council in May.
4  BIS central bankers’ speeches  Iyer, R. and J.L. Peydró (2011), Interbank Contagion at Work: Evidence from a Natural Experiment, Review of Financial Studies. Jiménez, G., Mian, A., Peydró, J.L. and J. Saurina (2010), Local versus Aggregate Lending Channels: The Effects of Securitization on Corporate Credit Supply in Spain, NBER WP 16595. Jiménez, G., Ongena, S., Peydró, J.L. and J. Saurina (forthcoming), Credit Availability: Identifying Balance-Sheet Channels with Loan Applications & Granted Loans, American Economic Review. Jiménez, G., Ongena, S., Peydró and J. Saurina (2011), Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments, Bank of Spain mimeo. Jiménez, G., Ongena, S., Peydró-Alcalde, J.L. and J. Saurina (2011), Hazardous Times for Monetary Policy: What do 23 Million Loans Say About the Impact of Monetary Policy on Credit Risk-Taking?, CEPR DP 6514. Jiménez, G. and J. Saurina (2006), Credit cycles, credit risk and prudential regulation, International Journal of Central Banking. Kalemli-Ozcan, S., Pappaioannou, E. and J.L. Peydró (2010), What Lies Beneath the Euro, Journal of International Economics. Maddaloni, A. and J.L. Peydró (2011), Bank Risk-taking, Securitization, Supervision, and Low Interest Rates: Evidence from the Euro-area and the U.S. Lending Standards, Review of Financial Studies. Martínez-Miera, D. and R. Repullo (2010), Does Competition Reduce the Risk of Bank Failure? Review of Financial Studies (2010). Matutes, C. and X. Vives (2000), Imperfect competition, risk taking, and regulation in banking, European Economic Review.

William C Dudley: The US economic outlook and the implications for monetary policy Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at Money Marketeers of New York University, New York City, 7 September 2017. * * * Good evening. It is a pleasure to have the opportunity to speak at this Money Marketeers event. In my remarks, I will focus on two topics: 1) The economic outlook and the implications for monetary policy, and 2) the Fed’s balance sheet normalization process, which is likely to begin relatively soon. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System.1 Overall, the economy remains on a trajectory of slightly above-trend growth, which is gradually tightening the U.S. labor market. Over time, this should support a rise in wage growth. When combined with a firmer import price trend—partly reflecting recent depreciation of the dollar—and the fading of effects from a number of temporary, idiosyncratic factors, that causes me to expect inflation will rise and stabilize around the FOMC’s 2 percent objective over the medium term. In response, the Fed will likely continue to remove monetary policy accommodation gradually.
Finally, we must remember that the application of strict standards, as required by the law, will, at least in the short term, limit the access to owner-occupied housing of certain low income groups. I sincerely believe that in the medium and long-term the effect will be more positive, by fostering greater price stability over the business cycle. We should remember that runaway growth of prices is the main factor that ultimately restricts access to owneroccupied housing. In any event, it is up to public authorities to shape the social measures that aim to guarantee decent homes for the less well off. It should be noted that construction of subsidised housing is currently at low levels, despite the economic recovery. Certain initiatives in our neighbouring countries are of interest, such as the role played by the deposits and consignments fund in France or the state guarantee arrangements in the Netherlands for housing up to a certain value. It is true that banks must not forget to apply strict economic criteria in their business, but it is just as true that a fair and responsible society should not be guided by economic criteria alone. 11/15  Use of the new macroprudential tools. In the last part of my speech I would like to depart a little from the real estate credit law to discuss the new macroprudential tools recently introduced by Royal Decree-Law 22/2018. As I have already mentioned, the crisis highlighted the insufficiency of microprudential supervision to identify, prevent and mitigate the materialisation of systemic risk.

Banks must integrate customer protection in the risk appetite framework and in the three lines of defence. Of course, as with all cultural change, to be successfully implemented, it must begin at senior management level. In order to be able to develop and implement this new culture, it is essential for the governing bodies to be committed and actively involved in aspects such as the design and governance of the products sold by banks, as well as in training and changes to incentive mechanisms for sales staff. Credit standards: ability to pay vs. value of collateral. Apart from the strengthening of transparency and protection of customers, I would like to mention an aspect of the law which seems to me especially significant from a supervisory viewpoint. Specifically, the law requires lenders to assess the solvency of potential borrowers, sureties and guarantors in depth before entering into loan agreements. This quires them to evaluate, among other matters, their employment situation, present and future income, assets, available savings, and any other fixed expenditure or commitment they may have already assumed. Of course, as a supervisor I fully agree with all these requirements, which are absolutely necessary and obvious. However it is somewhat disheartening to have to see them specifically mentioned in legislation. The text of this law shows that on many occasions institutions relaxed their standards and basic principles excessively, in order to carry on lending. That does not say much for us supervisors either, since we did not react sufficiently to the weakness of credit standards.
While exports of goods and services expanded robustly, the growth of domestic demand continued to register well below historical average, creating the so-called “two-speed economy.” However, concerns over the economic recovery have lessened over the past few quarters, as the economy has shown signs of a more balanced growth. We begin to see that the growth in export sector started to spill over to other parts of the economy, particularly private consumption and private investment. According to our projection, private consumption was projected to continue its solid expansion, as the underpinning factors such as employment and consumer confidence continued to show signs of improvements. Private investment continued to expand with additional supports from public investment projects as 3  well as heightened overall confidence. In our latest forecast, the economy is projected to grow at 4.4 percent this year and 4.2 percent in 2019—the strongest twoyear performance since 2008. Nonetheless, in this multidimensional nature of financial and economic development, bounded by the tight-knitted inter-country financial linkages, a strong domestic economy alone may not be enough to safeguard itself from external shocks. Thus, the best thing a country can do to protect itself is to build immunity and resilience for the economy. Against external volatilities and volatile fund flows, our flexible exchange rate regime has served as the first line of defense, with foreign exchange interventions being used to calm disorderly markets. Our international reserves are around 3.2 times short-term external debt (compared to only 0.7 during the Asian Economic Crisis in 1997).

Mario Draghi: Exchange of views with members of the Irish Parliament Introductory statement by Mr Mario Draghi, President of the European Central Bank, during his exchange of views with the House of Representatives, Dublin, 8 November 2018. * * * Thank you, Chairman. I am happy to be back in Dublin and honoured to be invited to speak at the Oireachtas. On this occasion, I am joined by my colleague, Philip Lane, whom you meet regularly in his capacity as Governor of the Central Bank of Ireland. While the ECB is accountable to the European Parliament, we greatly value our exchanges with national parliaments. In September, some of you already met the Chair of the Supervisory Board, Danièle Nouy, in Frankfurt and discussed the ECB’s supervisory policies. In full respect of the functional separation between the ECB’s monetary policy and its supervisory tasks, today is an opportunity to discuss our monetary policy and policies to make the euro area economy and its constituent parts more resilient. In this respect, I expect an open exchange from this meeting, which will give us a chance to listen to and better appreciate each other’s positions. I am conscious that I am speaking in a country that went through a severe crisis. The Irish people made tremendous efforts, for which I have great respect. And these efforts are now paying off.
Supervisors will review and respond to those internal assessments, thereby creating incentives for banks to evaluate their exposures thoroughly and to plan their capital strategies carefully. •  Finally, Pillar 3 - market discipline - seeks to make a bank’s risk profile more transparent to outside investors and market participants. This should better enable the market to reward banks that take a responsible approach to risk management and penalise those that do not. Market discipline can serve as a powerful incentive for prudent behaviour: indeed, markets are sometimes stricter than supervisors. Basel II’s combination of a process-oriented focus with incentives for banks to improve their risk management offers benefits both for individual banks and for the banking system as a whole. For an individual bank, Basel II encourages management to adopt approaches that are relevant to the risks the bank faces and that are appropriate for its level of sophistication. That, in turn, ensures that the bank takes prudent steps to protect itself against losses, including making appropriate use of its capital resources. The consequences are even greater at a macro level. I believe that, when risks are properly assessed and managed across all banks, our banking system becomes more stable, less sensitive to the swings of the business cycle, and better able to promote sustainable growth. This benefits not just individual banks, but also businesses and consumers alike. 3. Strengthening the foundation for Basel II  To achieve these benefits, supervisors must ensure that the foundation for Basel II is ready.

The significant increase in the share of OIC member states in our exports might be, at first sight, attributed only to the economic slowdown in the European Union. However, related figures indicate that the share of OIC members in Turkey’s exports had already increased from 13% to 19% between 2000 and 2007 before the start of the global financial crisis. Besides, visa exemptions probably played an important role in the recent improvement in Turkey’s trade with the region’s countries. Distinguished Guests, Regional collaborations have made a significant contribution to the increase in the volume of intra-emerging markets trade. Although tradable products can be transported to markets of any distance owing to advancements in transportation infrastructure and technology worldwide, distance is no less important than it was previously. Due to increased competition among countries, factors such as distance and transportation costs continued to be among the leading determinants of competitiveness. Various academic studies also confirm that the distance elasticity of trade is on the rise. As it is known, complementary value added chains have been formed particularly among Asian countries, and having benefited from the proximity of neighbor countries and their individual advantages in different fields, these countries have experienced a high-speed development process through regional cooperation, where low-costs-for-all have boosted the competitiveness of all economies in the region.
The evidence is that, so purposed, companies create extra value, not just for their staff and customers, but for their shareholders too; it is win-win-win. 58 Indeed, it is win-win-win-win if you throw society into the mix. Other companies, including perhaps some in banking, may need a helping hand in this journey. One option here would be to revisit the UK Companies Act. At the time it was introduced in 2006, the Companies Act envisioned an “enlightened” model of shareholder interest which weighed, albeit secondarily, the claims of a wider set of stakeholders, including employees and customers. The experience since has been rather different. Most academics would put the UK at one end of the spectrum in the primacy it gives to shareholders. The model has, judged at least by public opinion, failed to be sufficiently “enlightened”. That begs the same question begged by the PCBS report back in 2013: would a more plural, less shareholder-centric, statutory definition of companies’ objectives, the like of which exists in a number of other countries, help in better serving investors’, customers’ and ultimately society’s needs? There is no off-the-shelf corporate model that suits all seasons. But there may be value in a plurality of corporate structures. For example, so-called “Benefit Corporations” have recently begun springing up in the US. 59 “B-corporations” redefine the fiduciary responsibilities of a company to embrace a much wider range of stakeholders.

The main themes from that exercise were outlined in the BSB’s first Annual Review published earlier this year. 35 Following several episodes of misconduct in wholesale capital markets, the Fair and Effective Markets Review (FEMR) was launched in 2014 to assess their functioning, overseen by the Bank, HM Treasury and the FCA. It reported last year, making a number of recommendations including the establishment of a FICC Markets Standards Board (FMSB). 36 The FMSB came together last year with a remit to provide guidance on appropriate standards of conduct in wholesale markets. Encouragingly, most of the major players in wholesale markets have joined the FMSB. Regulators will use these standards to inform their judgements under the expanded Senior Managers Regime. At an international level, the Financial Stability Board (FSB) agreed in early 2015 a work-plan to reduce misconduct risk, including in the area of key market benchmarks. 37 Following a recommendation in FEMR, work is underway to develop a global code of conduct in the foreign exchange market. Also in 2015, the G30 issued a report on Banking Culture and  34  For further details see http://www.fca.org.uk/consumers/financial-services-products/insurance/paymentprotection-insurance/refunds. 35  See BSB (2016). 36  See FEMR (2015). FICC here refers to Fixed Income, Currency and Commodity markets. 37  FSB (2015). 8  BIS central bankers’ speeches  Conduct. 38 And in the same year, the New City Agenda published its assessment of progress towards improving culture among UK banks. 39 This is good progress.