samchain/econo-pairs-v1 huggingface dataset:
While the current global and regional environment has since the last ten years changed dramatically, bringing with it new risks and challenges, the region has emerged strengthened with greater economic and financial resilience. Strong macroeconomic fundamentals have been sustained, and reinforced by enhanced economic flexibility. The financial and corporate sector restructuring and reform that were undertaken during the ten years have also supported these developments. Equally important is the aggressive development of the domestic financial infrastructure and financial markets. The ASEAN economies have also developed complementarities with the major regional economies in the Asian region including China, Japan, South Korea and India that has contributed to deepening of regional economic integration, reinforcing further the strong trade and investment linkages that was already present in the region. The issue before us now, is whether the South East Asian nations can rise to the challenge of sustaining its dynamism and prospects in this more challenging global environment. Allow me to elaborate on the elements that have facilitated the ability of the ASEAN economies previously to successfully adjust to shocks and to take account of the recent developments that have further strengthened their capacity and capability to deal with future shocks and thus sustain their dynamism. Improved macroeconomic fundamentals While the macroeconomic fundamentals were favourable just before the crisis, in the current environment, the external position of the regional economies has strengthened further.

There is insufficient statistical data available and it is difficult to assess where the risks will end up. At the same time, risk management within banks has developed significantly over the past ten years or so. Banks that trade in credit derivatives normally have strict routines for checking and evaluating their counterparties. Moreover, the sellers of credit derivatives are often insurance companies and pension funds, and have large equity capital to deal with potential credit losses. I would also like to point out that the large trading volumes I mentioned earlier should not be translated directly into risks. It is, of course, very unlikely that a seller of credit protection would need to compensate the entire credit risk in his portfolio. For this to happen, all of the companies concerned would have to go bankrupt at the same time, and with zero recovery. To return to the example of house insurances, this would mean that all houses insured by a particular insurance company would simultaneously burn down to the ground. This is a worse scenario than any town fire in our history. But one should not forget that various shocks in the economy can lead to substantial total credit losses. Bank crises around the world have proved this. 3. Liquidity risks  Thirdly, there is reason to be aware of possible liquidity risks. Problems may arise if the market actors rely on the market always being liquid and assume this when making their deals.
Consequently, the IMF/World Bank Financial Sector Assessment Program (FSAP) undertaken in 2002 revealed the need to enhance financial stability in Zambia by ensuring that the financial sector was adequately guided by corporate governance practices which conformed to international best practices. Ladies and gentlemen, in order to guide this process, among other things, in 2004 the Government approved a comprehensive five-year Financial Sector Development Plan (FSDP) that positioned good corporate governance as one of the pillars for promoting financial system stability. Today’s launch, therefore, is a culmination of an extensive consultative process during which the Bank of Zambia engaged the banks and non-bank financial institutions, and other key stakeholders in round table discussions. Local auditing firms, the World Bank, IFC and the IMF also contributed immensely to the production of these guidelines. In addition, the development of the guidelines took into account the standards set by the Basel Committee on Banking Supervision and the unique characteristics of the Zambian business environment within which institutions operate and the many valuable lessons we have learnt along the way. The above notwithstanding, these guidelines only define the minimum standards that the Bank of Zambia expects banks and non-bank financial institutions to adhere to. Therefore, banks and nonbank financial institutions alike are expected to strive for the highest standards possible at all times. Ladies and gentlemen, it should also be stressed that these guidelines are to be treated as a living document and thus subject to review to incorporate new developments as they emerge.

William C Dudley: Road to recovery – Hudson Valley Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the State University of New York at New Paltz, New Paltz, New York, 19 May 2011. *  *  *  Good morning. I am pleased to be in New Paltz to speak to you and meet with the business, community and academic leaders of the Hudson Valley. I particularly want to thank the Ulster County Chamber of Commerce and Community Capital Resources of the Hudson Valley, the Dutchess County Regional Chamber of Commerce, the Dutchess County Economic Development Corporation and the Orange County Chamber of Commerce who assisted us with our recent survey of small business finances. More than 100 businesses responded from the mid-Hudson region. The survey results will be published early this summer and, of course, we will share the results with you and post them on our website. Each visit to this area gives me a chance to deepen the Bank’s relationship with the people whom I represent as head of the Federal Reserve Bank of New York. Last summer I travelled through central and western New York and met with community leaders, business people, academics, bankers and government officials.
This development resulted in higher risks, since the failure to confirm a transaction jeopardises its enforceability, i.e. the possibility to net it with other transactions. This, in turn, can lead to financial intermediaries incorrectly measuring and controlling their market and counterparty risks. In the aforementioned example relating to credit derivatives, the US Federal Reserve and other leading bank supervisors had to intervene just over a year ago to oblige market participants to rapidly reduce the confirmation backlog and to promote the introduction of more efficient cross-sector procedures. Market participants should not focus exclusively on the lucrative trading aspect of future innovations, but they must also speed up the development of convincing solutions for the processing of these new transactions. Otherwise, financial stability will be jeopardised. Financial market infrastructures and banks increasingly share roles Differentiating between traditional financial market infrastructures and banks – which was straightforward 20 years ago – is becoming increasingly difficult. On the one hand, the major international banks, in particular, provide services that one would normally allocate to financial market infrastructures. For instance, their customer base is so large that it is possible for them to conclude and settle trade orders outside the stock exchange. The same holds true for the settlement of payment transactions: the larger a bank, the more payments it can settle directly through its own systems. These ‘in-house systems’ compete with the actual interbank payment system, especially if the banks’ customers are banks themselves.

By improving the quality of relative price signals, our price stability-orientated monetary policy makes it easier for policy makers and European citizens to identify the areas in which structural reforms are most needed. Beyond safeguarding price stability,  3  Today, the services sector accounts for 70% of GDP, 68% of employment and 96% of the new jobs created, but only 20% of intra-EU trade. This discrepancy reflects not only the fact that services often have an intrinsically local character, but also the many barriers and obstacles still hindering the free movement of services within the European Union. 4  See P. Hartmann, F. Heider, E. Papaioannou and M. Lo Duca (2007), “The role of financial markets and innovation in productivity and growth in Europe”, ECB Occasional Paper Series, September, as well as ECB (2007) “Financial integration in Europe”, Frankfurt a.M: ECB. BIS Review 31/2008  3  there is nothing monetary policy can do to foster the growth and employment potential of our economies. The only modest contribution a central bank can make to structural reforms is to assess their impact, and communicate in a balanced manner and through different channels and fora its views on the expected effects of reforms to the public, thereby helping to build a constituency supporting reform packages. •  As to fiscal policy, let me first stress that I have doubts on the possibility to make a deficit limit contingent on the implementation of structural reforms by national governments.
And adaptation to structural change to the economy will mean putting capital into new businesses to replace those whose business models are no longer viable. Failure of risk transfer markets in things like directors’ and officers’ indemnity and – yes – business interruption would have a cooling effect on this necessary investment. So if a protection gap were to emerge through the reactions of insurers and insured to what they have learned about contract uncertainty, we should worry about the wider impact that that might have on economic recovery. I do see a risk of a protection gap. The pandemic has highlighted risks around unintended exposures in insurance contracts and unexpected links across risk areas under extreme circumstances. Most acutely on business interruption insurance – where we have seen vastly different interpretations of how policies should respond to the restrictions placed on businesses as a result of Covid-19, and the sums involved have perhaps militated against either insurer or insured settling for a compromise outcome to claims. The high profile of disputes over business interruption claims has done nothing to dent the popular caricature of an industry that is happier to accept premiums than to pay claims. This matters: it could have an impact on demand for policies, if businesses perceive them not in practice to offer the cover they need – not just in business interruption, but in indemnity policies that cover non-specific perils.

And we should expect the aggregate impact of individual firms’ decisions in a sector that at the end of 2019 held assets in the region of £ trillion – a figure broadly equivalent to UK GDP in the same year – to be an important influence on speed of recovery and adaptation. But what does the insurance sector do for the economy? If I asked the person on the street about the role of insurance, I’d expect them – once they’d raised the common complaint about insurers putting premiums up every year and telling a story about a particular claim – to speak about the protection it provides to households and businesses against the financial costs resulting  2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  from the occurrence of various risks to their physical property, health, loss of earning power or other unexpected losses. (Though maybe not using quite those words!.) This is a very important function. Efficient transfer and pooling of risk reduces aggregate risk and by freeing individuals from risk allows them to avoid reducing consumption in favour of excess saving. And it allows businesses to put capital to work in their areas of expertise and opportunity, without having to worry about – or reserve for – risks that they are not equipped to manage or diversify, and so will not be adequately rewarded for. It has particularly high value in current circumstances. Excess saving, reduced consumption, and heightened risk aversion would be detrimental to economic recovery.
But we require action on another front, even though the effects are longer-term. I refer to education. Undoubtedly, progress in education is Spain's most important outstanding task in respect of economic growth, enhanced productivity, fairer income distribution and also the attainment of low unemployment. True, Spain has advanced in some fields here, such as university education and business schools. But we continue to take up the rear as regards the average quality of our citizens’ educational attainment, with the serious consequences this entails. It is well known that countries with a better educated population are characterised by having higher wages, lower unemployment rates and a higher labour market participation rate. For example, both in Denmark and in the United Kingdom, more than two-thirds of the population have a post-compulsory education qualification, as against only 50% in the case of Spain. In both countries, the average worker has 30% higher spending power than Spanish workers, and their unemployment rates in 2007 were 3% and 5%, respectively, less than half the level in Spain. This relationship between training and wages is explained by the fact that more highly educated workers are more efficient, and therefore obtain higher wages, and by the fact that employers always prefer to fire the least productive workers.

Yet it is still appropriate to increase banks’ resilience to losses when systemic risk increases. This is the primary purpose of the countercyclical capital buffer, which is now being introduced in Norway. The countercyclical capital buffer The amendments to the Financial Institutions Act that were approved in summer include a number of new capital adequacy standards. There are new buffer requirements in addition to the minimum Common Equity Tier 1 (CET1) capital ratio requirement. Banks that do not meet the buffer requirements will face restrictions on distributing dividend and paying out bonuses. Chart: New CET1 capital requirements for Norwegian banks The capital conservation buffer is permanent and independent of systemic risk. The systemic risk buffer is designed to act as a buffer against more persistent systemic risk and will apply to all Norwegian banks. In addition, the largest banks will be subject to a separate capital buffer requirement. The Norwegian authorities are currently formulating criteria for designating systemically important financial institutions. The countercyclical capital buffer is designed to act as a buffer against systemic risk that varies over time. The buffer rate is to be  2  BIS central bankers’ speeches  assessed each quarter, and will normally be between 0 and 2.5 percent of banks’ riskweighted assets. The requirement will apply to all banks operating in Norway, eventually also branches of foreign banks. On 4 October, a new regulation relating to the countercyclical capital buffer was approved by the Government.
Nevertheless, these regulations do not apply to all participants in U.S. money markets. Paul Tucker’s presentation will discuss a number of the broader costs and benefits of such potential flexibility for the role of central banks in democratic societies. Another important aspect of the future framework is that it should be as transparent as possible. Market participants can make better decisions if they have a clear understanding of the way the central bank operates and can anticipate its actions in a wide range of circumstances. Indeed, it is well understood that in the case of coordination failures, a commitment to maintaining liquid markets can prevent illiquidity from occurring, in some case without even having to intervene. For example, during the crisis, some money market participants did “hoard” liquidity and refuse to lend to other institutions because they were concerned that they might need the liquidity for themselves. This behavior led to a situation where liquidity was in short supply because all market participants expected it to be. 9 A central bank can help create conditions where market participants contribute to market liquidity because they believe that market will remain liquid.

There are many other considerations and trade-offs, but let me wrap up by saying that to make sure we learn the right lessons from the experience of the last few years, we surely benefit from drawing on a wide range of perspectives, including those of academics, current and former central bankers, and market participants – people like you, who “live and breathe”  9  4  See, for example, V.V. Acharya and D. Skeie, “A Model of Liquidity Hoarding and Term Premia in Interbank Markets,” Journal of Monetary Economics 58, no. 5 (July 2011): 436–47. Proceedings of Normalizing Central Bank Practice in Light of the Credit Turmoil, Carnegie-Rochester Conference on Public Policy. BIS central bankers’ speeches  this somewhat technical topic. It is also valuable to share the findings more broadly to enhance discourse on the subject. I hope that you will be frank in your assessment of the things that worked well or did not work well in the Federal Reserve’s framework, and perhaps in other systems. There is much to learn from a robust discussion of our different experiences. These lessons will be an input into our thinking as we examine the long-run framework. BIS central bankers’ speeches  5
And the smooth operation of RTGS makes a vital contribution to the Bank’s overarching mission of maintaining monetary and financial stability. In April this year we celebrated the 25th anniversary of our current RTGS service. The service has been enhanced along the way with a number of technical and policy upgrades. We were the first major central bank to broaden access to RTGS to Non-Bank Payment Service Providers (NBPSPs), of which there are already around half a dozen that hold settlement accounts in RTGS. In April 2021, we introduced a new category of RTGS account for payment system operators – ‘omnibus accounts’6. These offer the benefit of settling in central bank money to a 2/6  BIS central bankers' speeches  wider range of payment system operating models. By doing so, we can support the industry in developing faster and more cost effective services, and the potential to enhance cross-border payments globally. But we want to do more. The time is right to drive yet further resilience and innovation through the RTGS Renewal Programme. Technology is changing, the payments landscape is changing here and abroad, and the demands of users and potential users are also changing. Industry engagement as a cornerstone to our joint success Just as the arrangement of Stonehenge takes the form of supportive structures, so too does the delivery and operation of the renewed RTGS.

And this month marks just one year to go to our first key milestone on this journey: to move to the global standard for financial messaging in payments, ISO 20022 (on a like-for-like basis), in June 2022 for CHAPS. We will transition to enhanced ISO 20022 messaging in February 2023. And in September 2023, introduce a state-of-the-art core settlement engine: the heartbeat of the new RTGS service, and of the UK’s financial system. To achieve our milestones and to realise the benefits of RTGS renewal, we – and I mean all of us here today and the payments industry as a whole – must work together to be ready. We must turn excitement into action, following in the footsteps of our Neolithic predecessors to build an infrastructure for the future. An infrastructure that supports the needs of industry, the needs of their customers, and crucially the needs of the end users. The criticality and evolution of payments Payments sit at the heart of the financial system, and whilst the methods and nature of transactions have progressed considerably since the days of barley bartering, their importance has not faltered. Within the UK, payments are a crucial part of everyday life and the past decade especially has seen a transformation in how people pay for goods and services.
The second factor is a result of the process whereby expectations are formed and in the new Keynesian model it is represented by the term indicating inflation expectations. If there isn’t full information on the nature of the shocks and the structure of the economy or the central bank’s determination to ensure price stability, then businessmen have a long learning curve to embark on. This increases the danger that a shock that temporarily raises the inflation level, such as a major hike in oil prices, may end up gaining a foothold in inflation expectations rather than rapidly disappearing. That is why an effective monetary policy depends to a large extent on pegging those expectations to the goal of price stability. 2.3  Preferences  The third element of difference between both sides of the Atlantic can lie in the approach adopted by the central banks, which to some extent reflect also their mandate, in accordance with the institutional setup prevailing in each individual country. In the euro area, the European Central Bank’s mandate is enshrined in the Maastricht Treaty, which clearly emphasises price stability maintenance as being monetary policy’s primary goal. To support the implementation of that principle, the ECB has adopted a quantitative definition of price stability – namely, an inflation rate below but close to 2%. This facilitates learning by the 10 private sector and diminishes market uncertainty, thus promoting macroeconomic stability. This stability means that there are fewer variations in the interest rate.

It should be a given that the euro area’s monetary and budgetary policies should be shaped by the underlying trends and political objectives in Europe. So it is on the basis of those trends and objectives that the policies should be judged. That does not mean that the economic policies adopted on either side of the Atlantic cannot be compared. But for such a comparison to be reliable, its control variable needs to be precisely the underlying trends and policy objectives in the two areas. In other words, there must be a symmetrical comparison conducted on an equal footing, capable of allowing us to explain any differences encountered, including on the basis of the distinct characteristics of the two economies. 1  My thanks to Roberto Motto and to Adina Popescu for their help in preparing this lecture. BIS Review 135/2008  1  Today I would like to present an analytical model that should help us to understand whether, and why, economic policies – with particular reference to monetary and budgetary policies – have been different in the euro area and in the United States. This may prove useful to those, especially in Europe, who wonder why certain decisions are made on our continent, and the reason why they sometimes differ from those reached in the United States. 2. Monetary policy  It does not take a huge number of graphs or tables to show that monetary policies in the euro area and in the United States have partly differed over the past ten years.