samchain/econo-pairs-v1 huggingface dataset:
No visits to the Treasury Select Committee may seem like a blessing, but we have to ensure that the accountability still holds water. On that point, frankly, I think there should have already been more accountability for how the processes of the European Union could have created such a vast cost for an industry for the implementation of a directive which has not even yet been finally agreed, and for which I cannot give you a date. Largely unseen in the banking crisis has been the shocking cost of Solvency II. The second challenge with the use of judgement in supervision is that elsewhere we have seen a preference to have many rules, but often ones which can then be gamed. Paul Volcker put it nicely in his evidence to the Parliamentary Banking Commission. He said that people ask for clear and simple rules so that they can tell when they are in abeyance, but they typically fail to add that they want to know how to get round the rule too, but that is part of the deal. At the PRA we will apply judgement rigorously; sometimes you will agree with us, and sometimes you won’t. We will be clear and transparent in our judgements, and we will be accountable. Finally on the issue of the PRA’s approach to supervision, I want to assure you that we will take supervision of insurers just as seriously as we do the other lot. It is not in our nature to do otherwise.

Andrew Bailey: The evolution of insurance regulation – a shifting scope and new frontiers Speech by Mr Andrew Bailey, Executive Director and Member of the Financial Policy Committee, Bank of England; Managing Director of the Prudential Business Unit, Financial Services Authority, at the Nicholas Barbon Lecture, London, 6 February 2013. *  *  *  Thank you for inviting me to give this Nicholas Barbon Lecture. And, thank you for giving me the opportunity to remind myself of the career of Nicholas Barbon – I say “remind myself” because a long time ago I was an economic historian. Barbon is certainly one of the founders – if not the founder – of the insurance industry in London in the late seventeenth century. He was first a builder, indeed, he wrote a tract called “an apology for the builder” in which he defended new construction in London on the grounds that cities created employment and wealth. Barbon was probably the leading builder of the time and he offered an integrated service because he pioneered house insurance. Indeed there are observations that Barbon’s business was to build, insure, and re-build your house when it fell down. These days you would be in FSA enforcement if you tried that one. But Barbon was also one of the early economic theorists in a period at the end of the seventeenth century when economic theory flourished, before it went into abeyance until Adam Smith and David Hume came onto the scene.
Macroprudential supervision, which I characterize as the top-down assessment of risks throughout the financial system, is essential because it addresses the problem of gaps in the regulatory regime and the regulatory arbitrage that such gaps can encourage. In addition, macroprudential supervision is needed because the financial system is interconnected. As amply demonstrated during the crisis, siloed regulatory oversight is problematic. Supervisory practices must be revamped so that supervision is also horizontal – looking broadly across banks, nonbanks, capital markets, payment and settlement systems and geographies. In the United States, the Federal Reserve is well suited to play a major role in such oversight because it alone has the expertise in three major aspects of the financial system – banking, capital markets, and payments and settlement systems. It also currently has oversight responsibility for most of the firms that one would view as systemically important. In evaluating what the Federal Reserve should do, it is important to recognize that the Federal Reserve’s three primary roles – monetary policy, the lender of last resort function, and supervision – are closely interlinked. Each one of these activities helps the Federal Reserve perform the others. For example, the information we collect as part of the supervisory process gives us a frontline, real-time view of the state of the financial industry and broader economy. Monetary policy is more informed as a result. Only with this knowledge can a central bank understand how the monetary policy impulse will be propagated through the financial system and affect the real economy.

Other costs have also continued to rise, reflecting an underlying theme of supply constraints and bottlenecks: the oil price has now reached $ per barrel, non-oil commodity prices have continued to rise, and the sustained rise in shipping costs that we have seen since 2020 has also continued. And those cost pressures appear to be passing through to manufactured goods. That said, some of the most extreme price pressures, for instance in the lumber futures market, do now appear to be easing. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7  Table 1: Estimates of Q2 economic performance Nov 2020 MPR  May 2021 MPR  Latest nowcast/data  GDP growth (% YoY)  20¼  21½  22¾  CPI inflation (% YoY)  1.7  1.7  2.1  Private sector regular AWE (% YoY)  4¾  7¼  8  When thinking about how these latest developments might affect the economic outlook, it’s important to keep things in perspective. The projected GDP growth rates shown in Table 1 compared with a year ago show just how unusual this period is economically, with growth of 22¾% expected in 2021Q2 relative to the trough in activity a year ago . And relative to that, the forecast revisions between the November 2020 MPR and the staff’s latest ‘nowcast’ for GDP growth to 2021Q2, while noteworthy, are relatively small. Nevertheless in the near term the signal is clearly to the upside.
15 This means developments in the US have disproportionate influence on global economic and financial conditions. Indeed, our research suggests that the influence of US financial conditions on foreign GDP has increased by a third relative to its average from 1990 to 2005, despite the US’s rapidly declining share of global GDP. Capital Flows as a % of GDP 2 0 -2 -4 Average Capital Flows-at-Risk Contribution of pull factors Contribution of push factors Total Capital Flows-at-Risk 1996  1999  2002  2005  Gross Gross outflow inflows s  Chart 10: Capital-Flows-at-Risks in emerging market economies are growing again  -6 -8 2008  2011  2014  2017  Sources: IMF and Bank staff calculations. Notes: See chart 7 for notes. Push factors are proxied by the Bank of England’s global financial conditions index. 15  Ilzetzki, Ethan, Carmen M. Reinhart, and Kenneth S. Rogoff (2019), Exchange Arrangements Entering the 21st Century: Which Anchor Will Hold? Quarterly Journal of Economics 134 (2): 599-646. 11  All speeches are available online at www.bankofengland.co.uk/speeches  11  When the Fed responds to domestic developments (such as a loosening in fiscal policy) global financial conditions and activity react strongly. This was the case during both the 2013 ‘taper tantrum’ and over the past year, as Fed communications significantly shifted expectations for US monetary policy. During both periods, Capital Flows-at-Risk in EMEs spiked (Chart 10). Financial (in)stability in advanced economies has also influenced the sustainability of capital flows to EMEs.

If history serves as a guide to the evolution of EME balance sheets, EMEs’ external liabilities could double as a share of GDP by 2030: market-based finance could then account for half of external liabilities, up from onethird today. And if investment funds keep growing as they have over the past few years they could represent 40% of market-based finance flows to EMEs in a decade’s time. 22  22  There is a systematic cross-country relationship between the size and composition of external balance sheets with levels of incomes per capita. This has been combined with current forecasts (and for investment funds recent trends) to generate scenarios for the size and composition of EM balance sheets in 2030. In early stages of development a country’s cross-border finance tends to reflect trade finance provided by banks. As global value chains develop FDI becomes more important. Finally, market-based finance increases as financial 16  All speeches are available online at www.bankofengland.co.uk/speeches  16  These flows will benefit EMEs in good times, but if domestic institutional frameworks do not evolve in parallel, they could also be major sources of instability. By 2030, the sensitivity of Capital Flows-at-Risk to push factors could triple (fourth bar, Chart 15).
If the Internet is used merely to facilitate existing banking and payment transactions, such as executing electronic bill payments or transferring funds from one bank account to another (which more or less describes what electronic bill payment really is anyway), the combination of banking and the Internet should have few, if any, implications for the conduct of United States monetary policy, or the measurement of the United States money supply. “Money,” as defined by M1, M2, or M3, would still be held in accounts at 1  Panavision Int’l, L.P. v. Toeppen, 938 F. Supp. 616, 617 (C.D. Cal. 1996). In Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161, 164 (D. Conn. 1996). The most comprehensive judicial description of the Internet can be found in American Civil Liberties Union v. Reno, 929 F. Supp. 824, 830-48 (E.D.P.A. 1996). 2  BIS Review 17/1997  -2-  banks that would be reported to the Board of Governors of the Federal Reserve System through the existing mechanisms that such funds are reported today. If, however, Internet banking evolved to the point where digital “coins,” account-based cards and PCs, or other private-sector initiatives produced electronic representations of money that began to be used and circulated like currency, the potential implications for United States monetary policy are much greater.

As Lord Penrose concluded, “the practices of the Society’s management could not have been sustained over a material part of the 1990s had there been in place an appropriate regulatory structure adapted to the requirements of a changing industry that happened to manifest themselves in an extreme form in the case of Equitable Life”. 1  Report of the Equitable Life Enquiry, March 2004. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  Solvency II has many key elements in common with the ICAS regime that followed Equitable Life and was subsequently developed by the FSA and PRA. This was no coincidence of course: the UK government, UK regulators and UK firms were heavily involved in the negotiation of Solvency II. Both regimes require firms to value assets at market prices; both require valuation of liabilities on a ‘realistic’ basis; both include the possibility for firms to determine capital requirements using their own group-wide stochastic modelling and scenario testing; and both set the same ‘1 in 200 years’ target calibration for the level of capital an insurer should hold. As an aside, this is very different to banking regulation, which is largely based on the accounting balance 2  sheet, allows a more limited scope for internal modelling of capital requirements , includes a much greater scope for supervisory capital add-ons under Pillar 2, does not allow for diversification between risk types, includes leverage and liquidity requirements and has seen a very significant increase in capital requirements and buffers since the financial crisis.
We need to cultivate and foster greater bilateral, if not, multilateral cross-border relationships with each other to develop greater liquidity in regional securities and derivatives markets. The current economic growth in Japan, Singapore, as well as in the broader South-East Asian region, gives us a window of opportunity to act swiftly to deepen and enhance trading linkages so as to strengthen Asia's competitive edge. Together, I believe we can present an attractive value proposition to global investors who are looking to Asia for growth. BIS Review 124/2006  1  Conclusion On that note, let me extend my heartiest congratulations to the Tokyo Stock Exchange on its Singapore Representative Office 10th anniversary celebration. The Tokyo Stock Exchange and Singapore have enjoyed an excellent relationship over the years and I do treasure the very important ties and partnerships between Japan and Singapore. I certainly look forward to many more years of close and fruitful cooperation between the 2 countries in future projects. I wish Tokyo Stock Exchange great success in their endeavours. Thank you. 2  BIS Review 124/2006

But this process can take too long. There is always the risk that when the dust has settled the initiative and enthusiasm, dare I say, on the part of those less affected by the crisis, may be stifled. There is also the risk that the plight of those who have been seriously affected by the crisis is not given the attention it deserves, simply because they do not have an adequately representative voice on the issues at hand at these international forums. There is no lack of ideas, but they need to be translated into actions sooner rather than later. Let me take this opportunity to outline three broad approaches mooted at different forums and supported by us. The first approach involves enhancing the transparency of markets. Timely and reliable information relevant to decision making by market participants as well as by the regulatory authorities is crucial to the effective functioning of a market. It is thus important that there should be an adequate public disclosure framework to provide information that is necessary for counter-parties, creditors and investors to assess risks properly. Not only should increased transparency be promoted in markets trading products in an established exchange. It is also perhaps time to consider whether some suitable form of transparency requirements should be imposed in OTC markets. This is not an easy task, but I believe that with earnest international co-operation, we can achieve meaningful results.
On the one hand, the objective has been to provide in the new Accord a significant expansion, within a menu approach, to the recognition of collateral, credit derivatives and guarantees. But this is balanced on the other hand by specifying legal and operational standards that must be met before relief is granted and setting capital requirements against residual risks. This may - indeed is intended to - lead to much greater incentives to acquire good quality collateral and other credit insurance. This will be positive, provided the necessary operational standards including legal robustness are observed, and provided, as I said on another recent occasion, that the processes, volumes, and end results of transfers of credit risk are reasonably transparent. I am aware, however, that some initial comment from the banking industry is that the Committee has not afforded enough recognition to physical collateral, particularly under the standard and 'foundation IRB' approaches. In this respect they think the Committee achieved too little risk sensitivity. The idea of a consultation paper is to elicit comment, but there are problems with the recognition of physical collateral that need to be considered. One is the difficulty of pinpointing accurate valuations for such collateral - much of it does not have anything by way of a valuation history. And values for physical collateral are also likely to be cyclical. When manufacturing companies are in recession, the values of related assets - plant and machinery or inventories - are likely to suffer too.

I would then like to turn to the opposite question: whether in some circumstances the new proposals will achieve too much risk sensitivity, and to discuss this question in the context of the debate about whether internal ratings will amplify procyclicality. I shall also say something about the implications of this for lending to small and medium-sized companies. Finally I would like to end by saying a few words about forward-looking provisioning and liquidity. These are, to my mind, important adjuncts to the regulation of capital and it is important that they are not overlooked in the current focus on capital adequacy. Risk sensitivity in the new Accord The common theme behind the revisions to the Basel Accord is greater risk sensitivity. This is a move we strongly support; risk insensitive capital requirements lead to some very perverse incentives and have contributed to a number of real-world problems. This has been less the case in this country, where of course the FSA supplements the crude minimum Basel requirement with tailored capital ratios, than in some other countries, but we have not been immune even in the UK. Certainly I wonder if over-investment in highly-speculative real estate development, a common precursor to a number of banking crises, would have been quite so prevalent if capital requirements had better reflected the often-volatile nature of such lending.
On top of all this, the strength of the labour market has pushed up costs through wage inflation. And recently we have seen greater volatility in financial markets: both globally and, with particular force, here in the UK. That has intensified in some market segments over recent days. As someone who joined the Bank's Monetary Policy Committee (MPC) just over a year ago, it has certainly been something of a baptism of fire. More profoundly, the past year has been difficult for all of us. Compared with twelve months ago: household utility bills are much higher than expected; the prospect of higher mortgage payments looms larger; and the outlook for economic activity looks weaker. None of this is good news. But, there is at least one constant in the face of all these challenges. The MPC remains fully committed to delivering on its mandate – to maintain price stability – by fulfilling its remit – to return inflation to the 2% target. Despite difficult circumstances, that commitment is unwavering. Monetary policy really is an anchor in these challenging times. 1/8  BIS - Central bankers' speeches  And these are not just empty words. In pursuit of its inflation target, the MPC has raised Bank Rate in each of its last seven meetings. It has brought QE to an end and started to run down its holdings of gilts accumulated for monetary policy purposes. And it has changed the nature of its communication.

In addition to voting, we engage in dialogue with management teams in a number of companies. We must remember that when we point a finger at a company, we are also pointing a finger at the laws, regulations and practices of the countries where the company legally operates. We make demands, yet we are at the same time a guest in our neighbour’s house. Excessive activism in other countries may defeat its own purpose. Scepticism towards foreign investors, and in particular towards large sovereign funds, is not an unfamiliar phenomenon. We could risk being perceived as a political fund rather than a financial investor. We have therefore chosen ethical guidelines and corporate governance principles that are based on OECD and UN principles. 31 Our experience is that the fund is perceived as a welcome financial investor – not as a political player. Former South African central bank governor Tito Mboweni told me he preferred investments by the oil fund to development assistance. “Assistance means you feel sorry for us,” he said to me, “investment means you believe in us.” 32 Conclusion The larger the visible wealth is, the greater becomes the risk that sound management principles are relegated to the background. Both John Collett and Gunter Sachs had considerable wealth, and spent it generously all their lives. At the same time, both were interested in developing more permanent values through research.
In the work that has begun on a new architecture for the financial system, measures of three kinds have been singled out as particularly important: more transparent accounting for financial institutions as well as for governments and central banks; a greater involvement of private investors in crisis management; and a reinforcement of the financial system. For work on the third category, there are in principle two different approaches or a combination of these. One involves tightening up the supervision of banks and the other the introduction of higher capital standards to raise the proportion of equity capital in the bank sector. My guess is that the future work to create a more functional banking system will be conducted along both these approaches. In the prevailing situation it is important that the international banks do not become unduly cautious. Banks should take risks but their risk-taking should be properly managed. It would be unfortunate if more countries were to start imposing restrictions on capital exports. That would exacerbate the present state of affairs. Similarly, it would be directly counterproductive to introduce some type of turnover tax, as proposed earlier by Professor James Tobin. That was tried out in Sweden in the late 1980s and simply resulted in trading being transferred to other countries. Even if agreements were to be reached between many countries, there would always be countries that refrained from joining the arrangement. Moreover, the poorer liquidity that would accompany turnover taxes might actually impair the workings of some financial markets.

We must look at the institutions active in the financial markets; monitor how borrowers and other operators who could affect the banks behave and how the infrastructure supporting the financial system functions. It is difficult to determine which problems could constitute a threat to the system. Let me take the IT bubble in 1999 and 2000 as an example. If the banks had financed the many newly-started IT companies, they would have been hard hit when the air went out of this market. This would in turn have had repercussions for the real economy. However, it was not the banks who acted as venture capitalists here. This meant that the risk of shocks in the economy as a whole was less. Another example is what happened at Barings Bank a few years ago, when one of their foreign exchange traders speculated and lost around SEK 10 billion. The Bank of England refrained from intervention and did not provide the bank with any support, although a major bank was suffering serious problems that eventually caused its failure. This is because Barings’ problems were not expected to have any serious repercussions for the system as a whole and thus were not a stability issue. As in other sectors, bankruptcies do occur. This is normal and also important for market discipline.