samchain/econo-pairs-v1 huggingface dataset:
Risk modelling became high fashion for the pointy-heads, haute-couture for the anoraks. The past two years have rather changed all that. The sub-prime market has played the role of the child in the fairytale, naively but honestly shifting everyone’s perceptions about how threadbare the financial system had become. The madness of crowds, as Charles Mackay so vividly put it, became visible to all. The resulting unravelling of the Golden Decade has been little short of remarkable. 2  BIS Review 18/2009  Asset prices have collapsed – for example, world equity prices have lost more than threequarters of their gains during the Golden Decade. Prices of banks’ shares have fared even worse, losing almost 60% of their value and are now lower than at the start of the Golden Decade. In the face of these falls, risk management systems across virtually all institutions have been found badly wanting. A survey of 500 risk managers by KPMG in October last year found that 92% intended to review their risk management practices. Estimated losses within the financial sector since the start of the crisis lie anywhere between a large number and an unthinkably large one. Today, managers of risk – the authorities just as much as banks – find themselves struggling to preserve their dignity, with risk management systems a combination of sack-cloth and fig-leaf. This year, stress-testing conferences like this one are more doghouse than catwalk.

3  Ibid. BIS central bankers’ speeches  1  As income increases and wealth accumulates, the demand for modern services is likely to grow faster, as they have higher income elasticities. Thus, we expect that demand for financial services in Asia – such as wealth management – will rise more than proportionately to the increase in household income. For instance, assets under management attributed to mass affluent and high net worth investors in Asia is expected to expand by 60% to reach USD 176 trillion by 2020. 4 7. These positive economic factors will continue to drive the growth of Asian financial institutions and Asian capital markets. Today, five of the top ten largest banks in the world by market capitalisation are Asian banks. 5 Primary market capital-raising in Asia via IPOs is the highest in the world. In the debt market, capital raised via Asian bond issuances have also doubled since 2009 after having achieved record sales in each of the past three years. II. Asia’s capital markets are ripe for closer integration  8. The strong growth of Asian economies and financial markets has created the conditions that are driving greater financial integration in the region. In China, home to the largest bank in the world by assets, banks and asset managers have acquired sufficient scale domestically to expand and look abroad to grow their businesses. Since 2012, the total amount of RQFII quota awarded by China has more than doubled for qualified foreign institutional investors to purchase mainland RMB-denominated securities.
If the increase in petroleum revenues is used domestically, this would correspond to almost all the annual growth in the mainland economy in a normal year. If the private sector of the economy is also expanding, and the economy is already close to its capacity limit, this policy would swiftly lead to strong pressures on economic resources. This would result in a rise in wages and prices. This policy would also lead to unstable conditions in the foreign exchange market. When oil prices then fell again and central government expenditure dropped, the economy would experience a very strong contraction. The Government Petroleum Fund was established in 1990 with a view to safeguarding long-term considerations in the use of petroleum revenues. The idea behind the Petroleum Fund is that the cash flow from an increase in the oil price should accrue to the Fund and be invested abroad and that the increase in the oil price should not affect the wider budget. Thus, rather than affecting the domestic economy, the increase in the cash flow would be invested abroad through the Petroleum Fund. Similarly, a fall in the oil price would not affect the domestic economy, but would result in lower accumulation of foreign assets. By building up the Fund, the aim of ensuring that several generations will enjoy the benefits of our petroleum wealth is also taken into account. In March 2001, the fiscal guideline and new guidelines for monetary policy were introduced.

2  BIS Review 13/2003  If we look at the period from 1986 and compare developments in nominal oil prices with the return on a fund managed according to the Petroleum Fund's investment strategy - a global portfolio containing bonds and equities in a 60-40 distribution - we see that the fund would have yielded a far higher annual return. What about the risk? How is it affected by a conversion from oil to financial wealth? History provides us with a clear, if somewhat surprising answer. A conversion from oil to financial wealth increases the return and at the same time reduces the risk. This is because wealth under the seabed (somewhat simplified) only consists of one asset, petroleum, while broadly invested financial wealth is highly diversified in many instruments whose return fluctuates at different rates. Today the distribution between financial wealth (the Petroleum Fund) and petroleum is about 20-80. If we venture to base our assessment on historical relationships, it is fairly clear that we have, relatively speaking, too much oil in our portfolio and that the current conversion to financial wealth is to our advantage. We have no guarantee, of course, that history will repeat itself, but relying on the opposite requires considerable courage. The Petroleum Fund can be invested in two main types of instruments; bonds and equities. The international bond market is about the same size as the equity market. Government bonds are a relatively safe investment, but the return is low.
In the forecast of inflation that we will be presenting in the Inflation Report to be published next week, we will no longer be basing our forecast on the assumption of an unchanged repo rate. The point of departure instead is the policy rate expected by the market in the period ahead, as reflected in implied forward interest rates. With this point of departure - and taking into account the different risks that we envisage - it is reasonable to believe that inflation one to two years ahead will approach our inflation target of two per cent. When the Executive Board convenes to discuss monetary policy on Wednesday next week, future inflation prospects will of course will the decisive factor for our decision. It is likely that we also will have a discussion regarding how we should view the continued rise in house prices. Personally, I do not think that there is any immediate hurry to raise the repo rate, something that the Executive Board also communicated in August. But it is clear nonetheless that this is the next natural step if the current outlook remains unchanged. When it may become appropriate to modify the currently very expansionary monetary policy depends, of course, as usual primarily on economic developments in the period ahead and on the assessment of future inflation. 4/4

Mark Carney: Fortune favours the bold Lecture by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, to honour the memory of The Honourable James Michael Flaherty, P C, Dublin, 28 January 2015. * 1. *  *  Introduction  It is a pleasure to be in Dublin and an honour to give this Iveagh House lecture in memory of Jim Flaherty. Jim’s attitude and actions typified the Flaherty family motto: Fortune Favours the Bold. Born the sixth of eight children in La Chine, Quebec; Jim Flaherty worked odd jobs and won a hockey scholarship to put himself through Princeton. Successful in private and public sectors; he rose to become Attorney General and Minister of Finance of his province before becoming Canada’s 37th Minister of Finance. Once there, his accomplishments were legion, ranging from creating and enhancing support programs for the disabled and care givers to setting the country back on the path to fiscal balance after the crisis and ensuing recession. His tenure as Canadian finance minister was shaped by that crisis and its aftermath. It was my honour to work with him as Canada weathered the storm. And many of you worked closely with Jim as Ireland negotiated agreements with the Troika and devised policies to rebuild its battered economy. I am confident he would be proud of the progress Ireland has made. I suspect he would be more than a little frustrated with the euro area, however.
The value of dubious transactions in the financial system continued to decline last year, and this is a stable trend of recent years. The slides show data over several years. Cashing-out transactions halved, while illegal overseas withdrawals shrank by 20%. These are last year figures. The development of digital technologies increases potential cyber-risks. We are controlling cyber resilience of financial organisations. The Bank of Russia continuously monitors cyber-attacks and operates a system of information exchange and support for market participants. As regards the protection of households against fraud, our objective is to minimise the period of time between the moments when a Ponzi scheme or an organisation that illegally provides financial services is revealed and liquidated. This requires large-scale monitoring. Last year, we established two special-purpose centres in our Krasnodar and Khabarovsk branches, which helped us detect fraudulent entities more promptly. Last year, we revealed 168 Ponzi schemes, which is 25% more than the year before. We are working together with law enforcement agencies, including regional authorities. It is law enforcement agencies that bear responsibility for putting an end to the activity of such illegal entities. Illegal lenders pose the greatest threat to the public. Under the guise of microfinance organisations (that is why microfinance organisations often face criticism), they offer loans which are sometimes secured against housing, and afterwards demand that borrowers repay enormous amounts of money. Illegal lenders usually operate via the Internet and we must stop their activity.

They include rising petrol prices, ruble depreciation on the back of both capital outflow from emerging markets and a tougher geopolitical environment, and the decision to raise VAT. Our monetary policy was aimed at anticipating and preventing these risks. Our key rate influences future rather than current inflation. As a result, we raised the key rate by 0.5 percentage points. This was sufficient for inflation to deviate slightly from the target at the lower bound of our forecast and to promptly resume its movement towards the target. Moreover, it was the prompt response that allowed us to avoid a significant rise in the key rate. This showed, in particular, that our monetary policy tools have the effect we planned to achieve, address challenges, and allow us preserve a stable environment that favours economic development. The May and April data suggest that monthly price growth (seasonally adjusted) across all core groups of goods and services has already declined to our target level. Annual inflation is set to return to target in the first half of 2020. Now that the proinflationary factors we needed to address have largely faded, we believe it is possible to resume rate cuts in the second or third quarter. Financial stability As you know, both internal and external risks may emerge. One of the tools the Central Bank has at its disposal to control external risks to financial stability is foreign currency reserves.
In other words, the problem is often not so much about the “people” or the “bad apples”, but the “bad barrels” – that lead to shocking behaviour. The ethical challenge for us as leaders in the corporate and public sectors is to build this conducive culture. The need is to cultivate the situational environment and broader system that encourage genuine professionalism and integrity of the people in the system. Let us focus on these three elements of (a) system; (b) situation; and (c) people. (a) System Let us begin at the highest level, the system. This represents the values and assumed beliefs that underpin an organisation and the financial sector in general. The baseline standards of 2/5  BIS central bankers' speeches  acceptable conduct and behaviour are articulated formally through laws and regulations. In Malaysia, the legal and regulatory frameworks for the financial sector are stewarded by Bursa Malaysia, Securities Commission Malaysia, the Companies Commission Malaysia and Bank Negara Malaysia. Various efforts have been, and are, taking place on the professionalism and integrity fronts. The Bank recently issued the enhanced corporate governance standards for the financial sector – calling for a culture that reinforces ethical, prudent and professional behaviour. I understand that the Securities Commission is currently finalising a revised Malaysian Code on Corporate Governance which will be applicable to Bursa-listed firms. Just this month, a Code of Conduct for the Malaysian Wholesale Financial Markets was issued by the Bank.

The capitalist system depends on owners of capital to promote sustainable value creation through market discipline. Is it simply short-term profits that matter? Are there other social or environmental purposes that must be safeguarded? To this end, the Securities Commission’s Malaysian Code for Institutional Investors articulates the stewardship 3/5  BIS central bankers' speeches  role that shareholders ought to play. Ultimately, shareholders need to clarify that – we need more than just the bottom line – immediate profit is not everything. (b) Situation Let us move on to the second element – the “situation”. The system of values creates and maintains various situations. The situation represents the environment or immediate setting in which financial industry professionals operate. This is a broad subject. Today, I wish to focus on two types of situational incentives. Firstly, remuneration structures. And secondly, the attitudes toward speaking up. Remuneration plays a significant role in influencing behaviour, including ethical choices. Admittedly, the task of designing and implementing a remuneration system to encourage professionalism and integrity is not straightforward. However, the intuition is simple and attainable: financial institutions should avoid the folly of rewarding A, while hoping for B. In other words, we cannot hope for or expect ethical behaviour so long as we continue rewarding people for acting otherwise. In this regard, the Bank is currently phasing in requirements consistent with international standards to align remuneration with prudent risk-taking – with a focus on material risk takers.
This shift represented not a change in policy but a response to changed circumstances. 4  BIS Review 138/2010  One of the prerequisites for lifting the capital controls without causing exchange rate instability is a sufficiently strong external balance – preferably a surplus. That prerequisite has already been met to the extent that the Central Bank has initiated regular foreign exchange purchases in the market. Excluding the estates of the failed banks, there is a sizeable trade surplus. When winding-up proceedings conclude, there will be a net debt to non-residents; however, it will probably not be large enough to eliminate the underlying surplus. The fundamental problem lies not with the current account balance but with capital movements. Residents’ payments on foreign loans will probably exceed inflows of new borrowed funds or other investments as long as Iceland’s access to foreign credit markets is  BIS Review 138/2010  5  constrained and economic recovery is delayed. However, Landsvirkjun’s recent bond issue indicates that foreign credit markets are not entirely closed, although few firms are in a position to obtain foreign credit and the terms are far from favourable. It would arguably be wise to commence capital account liberalisation while the real exchange rate is relatively low. With a relatively low real exchange rate, owners of ISK assets en masse are less likely to view the removal of capital controls as a selling opportunity, and it is more likely that foreign investors will view it as an opportunity to acquire krónur from those wishing to sell.

To an outsider, that may not sound significant – indeed, some might reasonably ask why the Committee wasn’t already doing this – but it is notable if only as an idea that the Committee had previously considered and rejected on more than one occasion. Indeed, in his authoritative history of the Committee’s early years, Charles Goodhart notes that, as far back as 1983, there was discussion whether the Committee might also monitor the practical application of agreements. At the time, though, this was seen as somewhat awkward and a step too far. That the Committee now has just such a mandate shows that the commitment to consistent international regulation is undiminished – indeed, it is stronger than it has ever been. Let me conclude by once again welcoming you to Basel, particularly those of you who have played a role in the Committee’s earlier years – we hope that returning here brings back many good memories. For the current Committee members, it is a wonderful opportunity to learn from the wisdom of those who have grappled with these issues before us. We also hope to hear some different perspectives, from the banking industry, and from academia, on the challenges and opportunities that face the Committee. I am therefore looking forward to some productive – and hopefully provocative – discussions this morning. BIS central bankers’ speeches  3
In this respect, the crisis may well turn out to be a catalyst for a paradigm shift, transforming the global financial landscape for the better. •  Fourth, the process of globalisation that we have experienced in recent decades has been driven by an increase in global trade following the integration of emerging market economies into the world economy and the liberalisation of financial markets. This high degree of global economic integration has also been a major factor in the global financial turmoil and the highly synchronised downturn that we have been experiencing. This experience must not lead to protectionism. Although protectionist measures may seem attractive in the short run, they will only exacerbate the downturn, delay the recovery and reduce income potential for everyone. •  Fifth, the government’s role in the economy and the question of what should be left to the markets will be key. The crisis has given governments a more prominent role in the economy. Governments have become heavily involved in the banking sectors of a number of countries, and in some countries they have also taken on a significant role in other sectors, such as the car industry. Summing up: Have the parties involved learnt their lesson? •  The swift action taken by governments to rescue the banking sector and stimulate the economy has been key in stabilising the financial system and the economy.

Even if neurological differences exist, they should not be exaggerated. For example, research has suggested these gender differences are typically smaller than the differences in brain wiring that exist within each gender. Or, put differently, neuroscientists have challenged the notion that brains are either “male” or “female”. Instead, most brains are transgender, a property known as “mosaicism”. 53 Our androgynous brains are also far from static. They evolve and re-wire over time in response to experience and circumstance. Neurologists call this property “plasticity”. 54 The malleability of our brains means that differences in the environment facing the sexes can have a lasting impact on their behaviour. Indeed, some studies have suggested that, once allowance is made for these environmental factors, behavioural differences between the sexes effectively disappear. For example, differences in the relative competitiveness of the sexes tend to be equalised once environmental factors are take into account. 55 And differences in mathematical performance  46  This is measured as the fraction of high-tech industry output relative to that in the economy as a whole. 47  Florida (2002, 2011). 48  For example, Charness and Gneezy (2012). 49  Coates (2012). 50  For example, Lagarde (2014), Davies (2015). 51  For example, Ertac and Gurdle (2011). 52  Ingalhalikar et al (2014)  53  Joel et al (2015)  54  Brooks (2011) . 55  Wozniak et al (2009), Cardenas et al (2014).
Monetary policy  In order to deter foreign currency lending and, implicitly, to strengthen the traditional channels of monetary policy transmission, the NBR actively used as an instrument the minimum reserve requirements ratio on foreign currency liabilities. This ratio continued to be raised during 2004-2006, its level increasing by 5 percentage points each time in August 2004, January 2006 and March 2006 to 40%. Additionally, the NBR extended the scope of minimum reserve requirements to foreign currency-denominated liabilities with residual maturity of over two years, as follows: (i) starting February 2005, on the liabilities incurred subsequent to this date; (ii) starting July, on the liabilities incurred prior to February 2005. The high restrictiveness thus imposed on the minimum reserve requirements ratio on foreign currency-denominated liabilities of credit institutions was kept in place until 2009, when the knock-on effects of the economic crisis on Romania prompted the central bank to implement a countercyclical monetary policy. B. •  •  Prudential regulation In 2003, prior to Romania’s joining the European Union, the central bank issued norms setting forth certain conditions for granting loans to households, such as: –  capping the indebtedness level at 35% of the net income for mortgage loans;  –  requiring from borrowers a down-payment of 25%;  –  providing real and/or personal collateral equal to at least the amount of the loan requested for consumer loans that are not intended for goods purchasing;  –  capping the LTV ratio at 75%.

So far we have had less room to influence domestic monetary conditions due to a high degree of euroisation, while having to ensure monetary and financial stability, often a very challenging and expensive task for a nonmember of the euro area. Also, the ECB's monetary policy has had a dominant influence, leaving us no room for manoeuvre. Of course, it goes without saying that in this new role we will continue to be dedicated to maintaining price stability and financial stability as well as to perform all tasks we have performed so far in line with the common procedures of the Eurosystem, where applicable. Finally, let me thank and congratulate each and every one of you who participated in the complex process of currency changeover. In the earlier phases of the process Croatia had to prove itself ready for the introduction of the euro, whereas in its final phase it had to ensure that the changeover proceeded smoothly, easily and to the satisfaction of citizens and businesses. I am grateful to and would like to congratulate our colleagues in the private sector, especially banks, on bearing the brunt of the work and being well-prepared for the conversion so that it unfolded so smoothly in the first day of January. I would also like to express gratitude to my colleagues in the public sector and our friends at the European Commission and the European Central Bank, and, finally, to Croatian citizens, for the way they have accepted our new currency.