samchain/econo-pairs-v1 huggingface dataset:
This answers to the fact that cyber knows no borders and the significant operational interlinkages between our systems and it reflects the growing dialogue with the US and others as to how best to manage the risk to financial stability from cyber. So it is clear the world has changed; cyber is an ever-present threat. Firms need to stand ready to manage this risk. And just as cyber has changed the world for firms, it has also changed the landscape for authorities; we need to adapt our approach to operational resilience of the financial sector as a whole. Our work in response to the FPC’s recommendation typifies this; but we will continue to work with firms, government and cyber experts to learn and evolve our approach. 7  4  http://www.bankofengland.co.uk/financialstability/fsc/Documents/wakingshark2report.pdf. BIS central bankers’ speeches

Although it is difficult for the industry to be insulated from an economic downturn, there is scope for more forward-looking evaluation and management of the risks facing the insurance industry as a whole. Rigorous stress testing and risk mitigating strategies for the asset side of the books are examples of  BIS Review 45/2009  1  areas that insurance companies should be paying particular attention to in these difficult times. (ii)  Encouraging investments in research and talent development  Second, I would like to encourage the industry to take advantage of the current downtime to channel resources to research and training. Companies should not lose sight of the long term and use this opportunity to invest in trying to identify new risks, new trends and in capacity building. For research, this is very important. As the insurance industry in Asia develops, there is an increasing need for better understanding of insurance risks in Asia in order to allow for more robust risk modelling. For instance, systemic demographic shifts in Asian countries will pose many retirement planning challenges. Just to cite a quick statistic, from the year 2000 to 2050, the old-age dependency ratio in Asia is projected to rise from 9% to 27%. There is a need for everyone to have a better grasp of this relatively new challenge of managing longevity risk. Many countries have been reviewing and improving their pension systems given this trend.
The vast majority of subprime loans were financed by investors through placing the loans into securities that were sold onto the market. Most of the securities derived from these subprime mortgages were deemed to be AAA rated by the rating agencies. The subprime mortgage securities differed in an important way from those based on prime conforming mortgages. For prime conforming mortgage-backed securities, the degree of credit protection for the AAA investors is fixed in advance. In contrast, for subprime mortgage-backed securities, the degree of credit protection for AAA investors started out “thin” and built up over the initial couple of years so long as mortgages did not default early in their life. 9 At the peak of the housing boom, not only was leverage high for the individual subprime borrower, but leverage was high for the investors in lower rated subprime mortgage securities. 10 This dynamic buildup of credit protection worked well so long as house prices kept increasing, but proved to be disastrous for investors in AAA subprime securities when house prices began to decline. The AAA rated subprime securities were then used as collateral against repurchase agreements. Given how safe the assets were thought to be, very small haircuts were required for these loans. In addition, the composition of repo loan terms shifted toward  8  Andrew Haughwout, Richard Peach and Joseph Tracy. 2008. “Juvenile Delinquent Mortgages: Bad Credit or Bad Economy?” Journal of Urban Economics 64 (September): 246–257. 9  Gary Gorton. “The Panic of 2007”.

The haircut spiral, can be seen in Chart 6. A fire sale dynamic developed, which depressed asset prices further leading to additional upward pressure on haircuts. The rapid deleveraging of the shadow banking system as the run progressed led to a sharp contraction in credit. We saw this earlier in Chart 2 with the near complete collapse in the asset-backed security market. Banks were also adversely affected by this run on securitization markets since they used these markets as well to fund many types of loans. Several banks had to bring onto their balance sheets previously off-balance sheet entities that they had used to securitize loans. This used up balance-sheet capacity making it more difficult for banks to make up for the credit contraction going on outside of the banking system. The problems in the financial system spread to the real economy. When Lehman Brothers declared bankruptcy, a money market mutual fund – the Reserve Fund – “broke the buck”. The unanticipated losses incurred by the Reserve Fund expanded the bank run to the money market mutual funds. Since these funds were significant investors in the commercial paper market, this transmitted the strains to the commercial paper market. Dollar funding pressures were also increasing for firms operating outside the United States as their ability to access dollars through the foreign exchange markets began to become strained. The  11  An overnight repo loan as compared with a longer term repo loan is the closest in nature to a demand deposit.
Interest rates that are high enough to have a noticeable effect on credit growth and asset prices may have strong negative effects on inflation and resource utilization, and a central bank will probably rarely have sufficient information about the likely beneficial longer-horizon effects on inflation and resource utilization for the trade-off to be worthwhile and motivated. 18  16  Walsh (2009) points out that when financial factors cause distortions, these distortions will in general introduce corresponding terms in a loss function for monetary policy that is a second-order approximation to household welfare. Curdia and Woodford (2009) present a model where the second-order welfare approximation is a standard quadratic loss function of inflation and the output gap between output and potential output, but where potential output is affected by financial factors. Then inflation and the output gap remain the target variables, with and without financial factors. The neutral rate in the model, that is, the real rate consistent with output equal to potential output, is then also affected by financial factors. 17  Adrian and Shin (2007, 2009) argue, in a model with a risk-taking channel as in Borio and Zhu (2008), that short interest-rate movements may have considerable effects on the leverage of securities broker-dealers in the market-based financial sector outside the commercial-banking sector. However, new regulation may affect the magnitude of these affects, and the size of the market-based financial sector may end up being smaller after the crisis. In Europe, the commercial banks dominate the financial sector.

2 Because of the time lags between monetary-policy actions and their effect on inflation and the real economy, flexible inflation targeting is more effective if it relies on forecasts of inflation and the real economy. Therefore, flexible inflation targeting can be described as “forecast targeting”: the central bank chooses a policy-rate path so that the forecast of inflation and resource utilization “looks good.” By a forecast that looks good I mean a forecast for inflation and resource utilization that effectively stabilizes both inflation around  1  I have previously discussed these issues in Svensson (2009 b). 2  The term “inflation nutter” for a central bank that is only concerned about stabilizing inflation was introduced in a paper by Mervyn King at a conference in Gerzensee, Switzerland, in 1995 and later published as King (1997). The terms “strict” and “flexible” inflation targeting were to my knowledge first introduced in a paper of mine presented at a conference at the Bank of Portugal in 1996, later published as Svensson (1999). BIS Review 16/2010  1  the inflation target and resource utilization around a normal level. In the event of conflicting objectives, it achieves a reasonable compromise between the stability of inflation and the stability of resource utilization. Different central banks express this in slightly different words. The Riksbank has often used the term “well-balanced” monetary policy.
Zeti Akhtar Aziz: Economic ties between China and Malaysia Address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Launch of Industrial and Commercial Bank of China (Malaysia) Berhad, Kuala Lumpur, 28 April 2010. *  *  *  It gives me great pleasure to be here today on the official launch of Industrial and Commercial Bank of China (Malaysia) Berhad (ICBC). The establishment of ICBC in Malaysia, the largest commercial bank in the world today, represents an important development in forging stronger economic and financial ties between the People’s Republic of China and Malaysia. This licence is issued pursuant to the arrangement entered into between the Government of Malaysia and the People’s Republic of China in 2009, reinforcing a long-term relationship that has been strengthened over the years. The presence of ICBC, in our financial system will pave the way for increased business and investment opportunities between our two countries. As Asia leads the global recovery and with the progressive liberalisation in the region, the economic integration of the Asian region can be expected to strengthen further. Today, intraregional trade in Asia has increased to an average of 50% of the total exports of the region as compared to 32% in 1995. The underlying structural and demographic changes in Asia are expected to reinforce this trend. In addition, as domestic demand in the regional economies increases, it will provide further impetus to intra-regional trade and to the overall prospects for Asia.

I hope that Standard Chartered Bank will lead the way in establishing affordable products and services for our small scale farmers throughout our country. I encourage you Madam Managing Director in your capacity as the Deputy Chairperson of the Bankers Association of Zambia to expand your horizon and collectively join hands with all stakeholders in addressing this problem. I thank you for your attention. 2  BIS Review 34/2009
I think that we should in Estonia seriously and comprehensively analyse factors that influence employment, including absolute or relative taxation of the workforce and costs related to hiring and layoffs. Thirdly, the balanced growth. Reforms are not an objective per se, we undertake them with the assumption that they will lead to a higher economic growth rate, higher income and improved living standard. Leaving aside the turbulent years of economic reforms immediately after the 1992 monetary reform which lasted until 1995, the average annual economic growth rate in Estonia has been above 5%. Between 1995 and 2001 the average salary increased from 2086 kroons to 5721 kroons. During the same time period real wages increased by one-third. We believe that our mean economic growth rate will continue to be about 6% per annum. The quality of the economic growth in Estonia is consolidated by growing productivity - in 1995-2001 the GDP per capita (in fixed prices) increased by almost 40%. It is also demonstrated by the remarkable interest of the private sector and its readiness to invest. Structural changes in the economy can also be regarded as quality indicators - changes in the distribution between the industrial, agricultural and service sectors. Still, in the forthcoming years we must keep a watchful eye on the external equilibrium of our economy, the current account deficit and its financing, changes in the productivity and competitiveness.

In principle, the question is whether and to what extent automatic balancing mechanisms should be invoked on the EU general fiscal stance level and be targeted at the smoothing of regional disparities with automatic income transfers from the wealthy to the less-wealthy regions - thus, in fact, compensating for the lack of the exchange rate mechanism within the single currency regime. Also in recent months the question has been raised whether or not the requirements of the Stability and Growth Pact are too rigid. By way of general comment, I should say that there are sufficiently many examples of great disparities between different regions of a federal state. Regional policy is crucial also for states with high labour mobility. Ultimately, the success of regional economies depends primarily on the efficient resource management and extensive income transfers can even slow down the adjustment process. In my view it is obvious that as long as the European Union remains to be the alliance of independent member states, there will be neither need nor possibility for any additional communitisation. Exceptions could include precisely defined circumstances when an intervention on the EU level would be justified in order to ensure the uninterrupted functioning of the internal market. Harmonisation of the fiscal policy on the macro level would be automatically accompanied with the tax rate equalisation. At that, taxation policies of any given member state reflect principal choices of their internal policy and preferences of the entire society.
This study and other recent research show that European financial integration has resulted in increasing opportunities to share risk. The paper by Ignazio Angeloni, Luc Aucremanne and Matteo Ciccarelli concentrates on determinants of inflation dynamics in different euro area countries, notably the evidence on the price-setting behaviour of firms and on factors explaining inflation persistence. A thorough analysis of aggregate inflation dynamics and of the inertia characterising core inflation is of direct relevance to the formulation of monetary policy and also contributes to the diagnosis of the causes of growth fluctuations and of the high unemployment in Europe. One general conclusion that emerges from the papers prepared for this workshop is that the divergences observed in the euro area are fundamentally the consequence of structural and not of conjunctural factors – even if current divergences may also have been influenced to a certain extent by conjunctural events. The policy implication of this general diagnosis is that more economic reforms are needed to address the structural impediments to growth and the causes of growth and inflation divergences. Of course, structural reforms are not always easy to implement, they may be politically costly, and their positive effects may not be immediately visible – which makes it difficult to communicate them and convince the public at large about their benefits. Nevertheless, only the implementation of appropriate economic reforms can address effectively and permanently the root causes of the euro area’s economic problems.

On its part, the Bank will continue to support transition activities through the RM1 billion Low Carbon Transition Facility and other funds for SMEs which will complement funds extended by financial institutions to help SMEs implement sustainable low carbon practices. By 2024, we have also required all FIs to make disclosures in line with the recommendations of the Task Force on Climate-related Disclosures (TCFD). Given that such disclosures by FIs will ultimately depend on disclosures provided by their customers and counterparties, this will have implications on demands for climate-related information from businesses. Significant efforts are also being pursued to support climate risk management and transition through the Joint Committee on Climate Change, or JC3, which is co-chaired by the Bank and the Securities Commission. The JC3 serves as an industry-regulator collaborative platform to drive and coordinate the financial sector’s response to climate change. As part of efforts to scale up transition finance, JC3 is actively exploring pilot programmes to test new green solutions and instruments. In identifying suitable pilot projects, priority will be given to climate-friendly projects that can help develop the broader ecosystem for green finance, such as carbon accounting and measurement frameworks, climate data aggregators, or green credentialing standards. Another key deliverable of JC3 this year is the upcoming publication of a data catalogue that will point users to credible sources of critical climate data needed to support identified use cases.
However, they have contributed positively to the restoration of financial stability worldwide, by helping in the restructuring of other banking systems, buying banks or pieces of banks that were experiencing difficulties. They thus contributed to stabilize markets and financial systems in a time of turmoil. Moreover, they have maintained their commitment to households and firms – both large corporate and SMEs – in the emerging markets in which they operate. We have not seen any halt in banking intermediation in those markets or any retrenchment from those markets. And finally, they are still entering new banking markets, both in Europe and in Asia. Resilient global banks do not only benefit the host markets in which they operate, in particular emerging countries. They have also been very beneficial to the home market. Wide-ranging geographical diversification has helped these banks to withstand our real estate crisis much better. They have been able to compensate the difficulties in the local banking market in Spain, resulting from a recession and the ongoing slow recovery, with much more buoyant and dynamic banking business abroad. Until now, the benefits that I have mentioned can be said to apply regardless of the legal structure chosen by the banks for their international expansion. But our large global banks have also adopted a business model which has some specific strengths that I would like to highlight. Namely that their international expansion was based on the subsidiary model, as opposed to the branch model.

To be more precise, this higher capital requirement will be applied on those which have less than 20% of their share capital or voting rights with third parties and that have wholesale funding of more than 20%. These institutions are not the globally active ones, but they are the locally oriented ones that have created the highest risk for financial stability in Spain during recent times. While our largest banks have been more a support factor than a problem, and part of our savings banks sector is sound and profitable, we have faced serious challenges regarding a number of the local savings banks. Our experience in this crisis illustrates that we should be careful not to establish over-simplistic solutions to be applied generally. Instead, we should concentrate on solving the problems where they really originated. This is precisely the goal of the measures we have adopted in Spain during the last two years. We are currently dealing with a deep restructuring process that will end up by transforming those savings banks into larger commercial banks that, in the future, could also become global banks or a part of a global foreign bank. In conclusion, we should not demonise global banks for being global. They can play an important role in the international economy. Provided they are safe and soundly managed, they can facilitate the internationalization of non-financial firms, and they can bring greater competition, efficiency and stability to the markets in which they operate.
But all this is already available. It can, of course, be said that if only everyone becomes better at obtaining knowledge, information and critical assessments, it is possible that more households than at present can actually come closer than before to the stock market’s return. Unwarranted euphoria can be avoided and share prices can be more stable. At the same time it can be said that the problems go deeper than that and have to do with how the financial system functions today. It is certainly true that in recent decades, financial deregulations, new financial products, improved data and telecommunications and the development of financial theory have led to an outstanding and rather fantastic growth and transformation of the financial system in many parts of the world. Even so, to a growing extent households face what are sometimes very difficult risk-management decisions that were not called for or even possible earlier. Many people still lack the requisite knowledge for this and it may be asked whether people in general can be expected to have such knowledge in the future. Everyone cannot be a specialist in risk management and financial theory. As I have indicated, one reason why households face a more difficult situation than before is, of course, the substantially greater exposure to the stock market that stems from disintermediation. But this tendency has been accentuated by the new pension system. It is now up to the individual to decide how a part of her/his pension capital is to be invested.

While it is still too early to look at lessons learned about resolving such problems from this round of banking difficulties, we can draw on the lessons of the past. The 1980s and early 1990s offer examples of what can be done to resolve banking problems. For example, the United States suffered oil and agriculture-related regional recessions in the 1980s and a real-estate and leveraged buyout-led recession in the early 1990s. Severe real-estaterelated problems developed around the same time in many European countries, with serious repercussions for some banking systems. Today, banks in most of these countries are much stronger, and until recently, highly profitable. What happened? I would like to suggest five steps that form a common theme in the more successful recoveries. First, banks, often with the assistance of their supervisors, ascertained the true dimensions of their credit problems. The result of the process was realistic assessments of: a total of actual losses in the portfolio that needed to be charged off; the potential additional losses, both in a “most likely” and “worst case” scenario; and the exposures that needed to be considered in “workout” mode. The workout loans were those which had sufficiently severe problems that it was time to stop viewing them as “business as usual”, but to see them as requiring special attention. BIS Review 86/1998  -6-  Second, the workout loans or exposures were assigned to the special expertise of workout specialists.