samchain/econo-pairs-v1 huggingface dataset:
Paul Fisher: PRA Solvency II Conference – countdown to implementation Speech by Mr Paul Fisher, Executive Director for Insurance Supervision of the Bank of England and Deputy Head of the Prudential Regulation Authority (PRA), at the PRA Solvency II Conference, London, 17 October 2014. *  *  *  Good morning and thank you for coming today. First let me introduce myself. I have been both an academic and a long-term central banker – 24 years and counting at the Bank of England. I have worked across the Bank as a specialist economist/forecaster, private secretary to Eddie George, Head of Foreign Exchange and then Markets Director, I have served 5 years on the MPC, 2 years on the interim FPC and am now pledged to the PRA Board. Insurance is not an entirely new sector to me. For many years I have been speaking with the asset management arms of many insurance firms about your businesses, in Edinburgh as well as London. One of our strategic aims is to deliver supervision as One Bank and one of my personal objectives is to maximise the synergies of insurance supervision operating as part of the Bank of England. There is a lot to be gained by us and the industry if we can do that. But since taking over from Julian Adams as Executive Director for Insurance, one thing has been very, very clear. Right now, Solvency II is the main game in town.

We believe this benefitted policyholders and left the industry in good shape to weather the recent financial storms of the Great Recession. Those are also desired outcomes that lie at the heart of the Solvency II Directive and so I want to leave you in no doubt that we will implement the Directive in a full and robust manner so as to continue to deliver the level of financial resilience consistent with the safety and soundness of firms and policy-holder protection. Another difference in the UK is that we are anticipating more internal model applications than any other EU country, which is not unexpected given the scale and diversity of the UK industry. This creates an unprecedented challenge for the industry, and for the Bank, in ensuring that models are of a high quality and that they meet the Solvency II requirements. It also creates some logistical challenges which you need to be aware of. If there are a lot of you trying to get approval, and only one of us, don’t expect that you can all present us with your models at the last minute and expect a one-to-one service. If too many firms leave their preparations too late, then we will have to prioritise – if you want to be sure, then get in as early as you can. Naturally, a significant proportion of our work relates to internal model approval, given the complex nature of many models and the detailed requirements of the Solvency II Tests and Standards.
A doubling of the GDP growth rate might not sound particularly exciting, but over time it has very major effects. An increase in the GDP growth rate from one to two per cent entails the standard of living doubling within 35 years instead of 70 years. For Sweden the stronger growth rate during the second half of the 19th century meant that we emerged from the developing country stage. A number of factors contributed to this development. Free trade was an important element. Our exports abroad were central to this process, which was of course facilitated by the development of the railway system. During the first decades after 1850, there were three main export products contributing to a very rapid export upturn; oats, iron and timber. The importance of exports of oats from the southern part of Sweden is something of a curiosity. Oats were the fuel of that time. All of the horses providing transport in industrial cities like London required oats and much of this came from Götaland. The construction of the railway, as well as investment in industry, housing construction and agriculture naturally required capital. This was mainly obtained from abroad. Sweden was a typical example of a country with an expansionary economy making use of saving in other parts of Europe. This borrowing from abroad was on a very large scale and, prior to the outbreak of the First World War, Sweden was probably the most indebted nation of the time.

Companies were cautiously optimistic in the first half of the year, but summer saw a postponement of investment and recruitment decisions. Confidence loss slowed economic growth, easing inflationary pressures. In November and December, we thus lowered the interest rates to an all-time low. 3. Under normal circumstances, changing interest rates alone would have sufficed to influence prices and economic activity. Unfortunately, the crisis proved extensive  BIS central bankers’ speeches  1  enough to disrupt the functioning of the monetary policy transmission mechanism. The ability of commercial banks to issue loans to companies and households was thus significantly reduced. This compelled us to take various non-standard measures, starting from August. We supported the securities market in order to prevent paralysation of the activities of banks; we continued the unlimited provision of liquidity loans to banks; we offered banks three-year loans on highly favourable conditions; we expanded the list of eligible collaterals for liquidity loans, and lowered the minimum reserve requirement from 2% to 1% at the end of the year. 4. Looking back, it has to be admitted that the annual growth in consumer prices was faster than expected, amounting to 2.7%. Inflation picked up mostly due to the price growth of commodities. This is confirmed by core inflation remaining below 1.5%. Inflation expectations are also in line with our long-term goal. [THE PRICE OF CRISIS-TIME MONETARY POLICY FOR CENTRAL BANKS] 1. These bold and crucial steps came with a price – the risks inherent in the central banks’ balance sheets have increased.
During this period, the Albanian banking sector continued to increase its lending to the economy, albeit at lower paces. Difficulties added to the real sector of the economy and the exchange rate depreciation by about 12% in 2009 were followed by decreased credit quality and increased bank provisions to face the credit risk. Distinguished participants, The pre-crisis phenomena and those that occurred in 2008–2010, offer a valuable experience to economic actors and public authorities of each country in our region. Not to mention all, I would like to dwell only on some of them, which I consider important for enhancing the sustainability of our economy and of the financial system in the future. First, the region needs a better balance in the factors supporting the sustainable economic growth. I think that the public authorities should assign priority to increase in investments and implementation of stimulus policies for developing the competitive sectors. In this way, the country’s export capacity would grow by creating better conditions for a sustainable improvement of the external balance of our economy. 2  BIS central bankers’ speeches  Second, closely related to the first issue, I would highlight the need for undertaking and deepening the structural reforms. This strategic objective remains a constant priority for each of our economy.

As a result, by issuing securities in a segmented TIPS market, the Treasury may keep realized yields on bill and nominal coupon securities lower than they otherwise would have been. The last noteworthy fiscal benefit from TIPS issuance is the fact that it reduces risk to the U.S. government in terms of the variability of its net financial position. The rate of inflation influences both the cost of TIPS and the government’s tax receipts. Thus, some level of TIPS issuance may reduce the variability of the government’s net financial position. This, in turn, should lead to a more regular and predictable pattern of issuance, which should help minimize interest costs. In summary, our analysis of the ex-ante costs of the TIPS program and the more difficult-tomeasure benefits suggests that TIPS issuance provides at least a modest net benefit to the Treasury. So, now I want to turn to a related question: Are there ways to increase the benefits? 6  See Fleming (2002), Krishnamurthy (2002), Laubach (2003). BIS Review 14/2009  5  I would be willing to make two modest suggestions here. First, it may make sense to emphasize longer-dated TIPS issuance rather than shorter-dated issuance. Analytically, the logic goes as follows. Inflation uncertainty is likely to increase at longer time horizons. Thus, investors are likely to pay a greater premium for inflation protection at longer-time horizons. This implies that the cost savings associated with TIPS are likely to be greater for longer maturities rather than shorter maturities.
In the Malaysian sukuk market, Islamic private debt securities now account for 50 per cent of the total private debt securities market. Another challenge to the growth of the market concerns pricing issues. For the Islamic security to be efficiently priced and credible, further initiatives need to be undertaken to develop its own indicator. For example, if a sukuk is issued based on the Ijarah principle, and uses the property as its underlying asset, the actual rate of rental may be explored to be used to determine the rate of return on the instrument. It would then fluctuate depending on the demand and supply for that property. It will then give a true reflection of the price of the underlying asset. Shariah experts, who have a full understanding of the mechanics of sukuk, are key to ensuring its proper governance. And shariah decisions, when made, should be transparent and disclosed. This will allow others to appreciate the juristic reasoning, which in turn should lead to wider acceptance of shariah decisions, particularly if they have implications on cross-border transactions. In relation to this, a guide for issuers and investors to refer with regards to shariah decisions would facilitate the development of the market. Of further importance is the attainment of the convergence of Shariah principles and interpretation to ensure market confidence among investors from different parts of the world. To achieve this, there needs to be continuous investments in intellectual capital and greater engagement among Shariah scholars.

They have also managed to achieve a very well controlled process of deleveraging by reducing their exposure to non-core businesses, in general at good prices. So their overall balance sheet situation has been substantially improved and they are now in the process of meeting in full the requirements of Basel III with core tier one ratios of 9% before the end of 2013. This is several years ahead of the schedule that was originally stipulated. By the way, I always felt that the time frame determined by the supervisors in Basel for compliance by the beginning of 2019 was always a little bit theoretical, because markets were likely to ask for more rapid implementation, which is what the French banks have done. So when I compare the French banking system with other major banking systems, be it in North America or in Europe, I have the clear conviction that the French banks are on track and are among the best performers in terms of their capital ratios. EUROWEEK: Has this deleveraging process been at all damaging to the economy, as some people say it has been in the UK and in southern Europe, by reducing their lending to the corporate sector? Or is the universal banking system such that this is much less of a threat in France than elsewhere? BIS central bankers’ speeches  3  Noyer: The deleveraging of the French banks has been partly done through the reduction of their exposure to sovereign debt markets globally.
This will aim to ensure continuity with the aforementioned framework, as well as compatibility with the IAS, permitting a far-reaching and consistent reform of the current model. Accordingly, the new circular will assist institutions in complying with the IAS; it will select the most prudent options when the international standards propose more than one, so recognising the particularities of financial institutions; and, finally, by permitting a common accounting framework, it will prevent the choice of accounting options from being a factor that may distort competition. Allow me to end this review of the challenges facing financial institutions by pointing out that their responses must be supplemented by market discipline and by the action of financial-services consumers. In effect, market discipline is an essential supplement for supervisors; market participants, by rewarding those institutions that act appropriately, generate the necessary incentives for managers to behave prudently. Yet, for market discipline to be possible, market participants need to have the necessary information. This is why the promotion of transparency is of paramount importance, to ensure that institutions report information that is reliable and based on generally accepted valuation principles in a timely and opportune fashion. This qualitative and quantitative information must enable the results obtained by institutions, the risks they are assuming and the practices employed in their management and control to be assessed. Finally, in a non-zero-risk world, the action of consumers of financial products and servces is, as I have already mentioned, very important.

However, an important point that should not be forgotten is that the financial sector encompasses a wider scope than just banks. In fact, policymakers in ASEAN have been successful in enlarging the borders of our financial markets by developing more diverse sources of funding for the economy. This is best reflected in the building of deeper and more liquid bond markets arising from the experience of the 1997 Asian Financial Crisis. We are also seeing a shift in the financial landscape through the usage of technology, something that I will elaborate more on later. Thus, the term bankers without borders, should perhaps, be expanded to be finance without borders. Yet, despite the positive outcomes from these and the continued strong need for openness, the conviction for globalisation and international banking seems to be waning. For one, post the global financial crisis, we have seen the rationalisation of operations by many international banks. 1/3  BIS central bankers' speeches  We read regularly on the prospects of trade protectionism, how globalisation has created widening inequality and how globalisation is like a train running out of control. No doubt, a key driver of the 2007/2008 financial crisis was indeed financial liberalisation going too far. Interestingly, some, including economists at the Bank of England have also begin to consider the theory of “peak finance” – that global finance has peaked and financial de-globalisation has begun, while others at the BIS have argued otherwise.
“The Landlord’s Game” was a brilliant property-based board game which, like other games at the time, had a higher public policy purpose: to educate adults and children on the perils of rising income inequality and wealth concentration. The game was a modest success. In 1935, Charles Darrow sold an adapted version of the game to Parker Brothers under the name “Monopoly”. This was a huge success. It has gone on to sell hundreds of millions of copies worldwide, earning Darrow and Parker Brothers millions of dollars in royalties. Magie earned $ for selling her patent. While the Wright Brothers’ patent will forever be etched in the history books, Magie’s has largely been lost. If nothing else, this episode shows that games can play an important role in public understanding and perhaps even in public policy. Monopoly remains as popular today as it was in the latter half of the 20  th  century. Were it virtual rather than physical, its multi-players measured in millions rather than fingers, its money from an interactive central banker rather than an inanimate piggy-banker, if people swapped stories st  as well as properties, perhaps this game could help address the 21 century’s problems too. (e) Rules and Referenda  It has been suggested by some that rules should play a more central role in the setting of monetary policy. 76  There are a number of possible motivations for doing so. One is that it makes the policy process simpler and more transparent.

In 2016 we want to see that this project has produced three high quality books on The History of Norges Bank 1816-2016, The Monetary History of Norway 1816-2016 and on selected Topics in Central Banking in an international historical perspective. The aim of the workshop is to bring together international experts from central banks and academia for informal discussions and an exchange on topics related to the writing of central bank and monetary history. We expect discussions to be active and lively and we want this workshop to kick-start research activities in these important areas. I want to thank the Graduate Institute here in Geneva and Professor Marc Flandreau in particular for their hospitality and for allowing us to spend almost two days discussing research in central bank and monetary history. Previous books about the history of Norges Bank have been written in Norwegian, and predominantly by previous central bank governors. But “the times they are a-changin”, to  BIS Review 131/2008  1  phrase Bob Dylan (Dylan, 1964), 1 and today we believe that best practice in writing central bank and monetary history is achieved by contributions from professional academic experts in relevant areas. The research should be brought up to international quality standards through the usual peer review process.
How much lower would unemployment have been with a more expansionary monetary policy? Let us assume that inflation would have been 1 percentage point higher and thus been closer to the target now. According to an empirical estimation using Swedish data, a 1 percentage point higher inflation rate leads to around 1.3 percentage points lower unemployment, corresponding to around 65,000 fewer unemployed.27 This could perhaps give rise to 4 per cent higher housing prices, according to the results from Claussen, Jonsson and Lagerwall (2011).28 Would this have increased the risks in household debt so much that it would nevertheless be better to have 65,000 more unemployed?29 Not as far as I can see. Positive with an open debate As I have discussed, much of the debate conducted has been based on the differences in opinion regarding whether household debt entails risks to financial stability and the macro economy, whether monetary policy is a suitable means for influencing household debt and whether it is worth holding back inflation and keeping unemployment up to reduce the risks of indebtedness. As according to extensive research in the field, monetary policy has little effect on household debt but large, negative consequences in the form of low inflation and high unemployment and there are more effective means that are already used, I draw the conclusion that monetary policy should not be used to try to influence debt.

At that point, any additional monetary stimulus would require non-standard measures designed either to shape agents’ expectations as to future  2  BIS central bankers’ speeches  interest rate behaviour or to change the size and composition of the central bank’s balance sheet. Balance sheet expansion through programmes to purchase public and private securities is unquestionably an exceptional measure, but it is not exclusive to the euro area, and has already been adopted by other central banks. Between 2010 and 2014 the Federal Reserve, the Bank of England and the Bank of Japan doubled the size of their balance sheets after running out of room to further reduce interest rates and after having resorted to announcing their commitment to hold official interest rates at very low levels for a sufficient time. The design and implementation of programmes to purchase public and private debt securities must not fail to take into account the institutional characteristics of the area in which they are applied. Monetary policy in the United States or in the United Kingdom acts in a fiscal union, which makes it easier to resolve potential problems associated with the allocation of any costs incurred by the central bank in its monetary policy operations. In this respect, the unique characteristics of the euro area meant that complex technical adjustments had to be made when designing the announced programme.
I will then set out what the politicians and the pension funds themselves could do to meet these challenges in the current situation. The SNB, too, has repeatedly been called upon to make a contribution. I would therefore like to outline what we can contribute – within the framework of our legal mandate – to the health of the pension system, and where our scope for action ends. Low interest rate environment – increasingly difficult to meet benefit commitments The first challenge that you as pension fund managers have faced for some considerable time now is the persistently low level of interest rates. These low rates are prevalent not only in  Page 2/8  Switzerland, but in all the major currency areas. For the pension funds, which traditionally have large holdings of interest-bearing investments, this situation naturally means lower investment income. In other words, the share of the ‘third contributor’ – the capital market – has diminished considerably. This makes it more difficult for the pension funds to meet their existing benefit commitments. In the BVG, the Federal Act on Occupational Old Age, Survivors’ and Invalidity Pension Provision dating from 1982, the entitlements of insured persons as well as other key parameters, such as the conversion rate 1 and the minimum rate of interest, 2 were defined on the basis of certain assumptions. 3 These assumptions – e.g.

Transition to a new investment financing pattern  In the context of structural excess savings over investment, which characterised the period 2000-2013, the structure of investment financing in Algeria during 2008-2014 showed a very high level of self-financing (84 percent), particularly with regard to the Government’s and the national oil company’s investments. Investment in the economy (excluding the hydrocarbon sector) has also been, to a large extent, self-financed (59.7 percent over 2008-2014), while the financial savings of private firms and households have significantly increased. In particular, the years 2010 and 2011 recorded a  BIS central bankers’ speeches  3  substantial increase in self-financing (71.4 percent and 24.1 percent respectively), which contributed to the significant recovery of investments in the non-hydrocarbon sectors. In the meantime, the relative share of medium and long term domestic bank credit in the financing of investments in the productive non-hydrocarbon sectors increased substantially between 2012 and 2014, up from 38.4 percent to 45.2 percent. Reflecting dynamic medium and long term bank financing, credit to the economy recorded strong growth in 2013 (20.3 percent) and 2014 (26.1 percent), following already high growth in 2012 (15.1 percent). Improved credit conditions, together with Government support measures with regard to credit to SMEs, which improved their access to bank credit as of 2010, have contributed to the sustained expansion of overall credits to the private sector, which recorded an average annual growth rate of 19.4 percent over the period 2001–2014.