samchain/econo-pairs-v1 huggingface dataset:
Yet at that time, financial crises were a phenomenon felt to be confined to emerging markets. Advanced economies, it was thought, knew better. This, too, would come back to haunt us. Resolving emerging market crises was one thing, redesigning the international financial system to forestall them quite another. Working alongside HM Treasury colleagues (including Sir Jon Cunliffe – another whose path I have lost track of), an intensive programme of international reform began with the aim of preventing a  10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10  repetition of these emerging market crises. As part of the Bank’s contribution, under Eddie and Mervyn’s guidance, I worked with the Bank of Canada to produce a blueprint for international monetary reform.13 This blueprint proved controversial, as it proposed restrictions on the IMF’s ability to extend credit to countries in crisis. That jarred with IMF orthodoxy, including the then-Deputy Managing Director Stan Fischer, who at the time was proposing the IMF become an international lender of last resort.14 It also jarred with US orthodoxy. Under Larry Summers and Tim Geithner, the US Treasury had overseen the emerging market bailouts from Mexico in 1994 onwards. In 2002, I was asked by Tim Geithner (now at the IMF) to go to Washington to work on international financial system design, alongside two former US Treasury colleagues, Nouriel Roubini (now better known as Dr Doom) and Brad Setser. There were no prizes for spotting the odd one out.

Separation, it was said, avoided reputational contamination of monetary policy from financial firm failure. This, however, came at one obvious cost: it severed, institutionally, any link between the micro and macro, the brain and the hands. This would come back to haunt, not just the Bank but the world, a decade later. After the separation of the Bank from the Financial Services Authority (FSA), the new financial services regulator, the Bank found itself with too little international resource. This was unfortunate because the Asian financial crisis was raging. Two new international divisions were set up to plug this gap – one on the monetary policy side headed by Andrew Bailey (another whose progress I have lost track of), the other on the financial stability side headed by me. I moved to set up the new division on Monday 10 August 1998. The following Monday, Russia defaulted on its debts and devalued the rouble, triggering another emerging market-cum-global crisis. The next day I briefed Eddie George on the Russian crisis. Eddie spoke Russian, had worked in Russia and had an astute working knowledge of the Russian economy. I was in week two. I wasn’t long into my briefing before eyebrows were raised. The next few years brought crises aplenty as they spread contagiously through emerging markets. Spotting these crises, their unique dynamics, the way markets turn, the blend of politics and economics, is part instinct, part science. The emerging market crises at the time enabled me to cut my teeth on understanding financial crises.
Chart 10: External positions and assets prices indicators y/y growth rates of stock market indices  Current account deficit in % of GDP Region  CEE  SEE  SRB  Baltics  ROM  HUN  CRO  MKD  BIH  SLO  BUL  POL  15.0  5  10.0 0 5.0 -5  0.0 -5.0  -10  -10.0 -15  -15.0 -20.0  -20 2007-2004  2012-2007  2015-2013  -25.0  AVERAGE(2009-2012)  -25  IIP, net as % of GDP Region  CEE  AVERAGE(2013-2016)  Real Estate Prices, y/y change in % SEE  Baltics  0  BUL  CZR  EST  CRO  LAT  LIT  HUN  POL  ROM  SLO  MKD  SRB  12  -10  10 8  -20  6 -30  4 2  -40  0 -50  -2 -4  -60  -6 -8  -70 2007-2004  2012-2008  2015-2013  average 2010-2013  average 2014-2016  Source: International Monetary Fund, Balance of Payments Statistics, WEO October 2016 Database, Eurostat. Despite the absence of sizable inflows, relatively high external financial exposure of the region underlines the risks in case of global tightening of the financial conditions in the context of tightening of the US monetary policy or a “surprise” tapering by ECB.

In addition, there has been an important shift from the traditional high net worth clients investing in individual hedge funds to funds being invested in hedge funds via diversified pools and formal fund of funds structures. These pooled assets, coupled with liberalizing regulatory developments have opened up hedge funds to a more diverse universe of investors, including a wide range of institutional and retail investors. Currently, the total size of funds invested in hedge funds via pooled structures is estimated to be approximately USD 300 billion or nearly a third of the underlying hedge fund industry. Remarkably, annual growth rate estimates of the pooled funds suggest that their expansion has proceeded at a more rapid pace than the underlying hedge fund industry. This implies that a significant portion of new assets flowing into hedge funds does so via collective asset management pools. In a competitive environment, the Swiss financial sector has succeeded in leveraging its position as one of the world’s leading asset manager to secure an dominant position amongst collective asset management pool operators in the hedge fund industry. Though many of the early formal funds of funds were registered under Luxembourg, Cayman Island or Bermuda law, Swiss financial firms today manage a significant part of the world’s alternative asset management pools.
When wage formation is decentralised, monetary policy will instead influence wage growth via market mechanisms, by stabilising aggregate demand. The existing monetary policy guidelines will function effectively whether wage bargaining is at a centralised, local or individual level. There is a fine balance in the division of roles between fiscal policy, wage formation and monetary policy. This balance will be disturbed if the objective of monetary policy is changed or broadened. Should monetary policy give particular weight to asset prices? House prices in Norway have risen sharply and probably excessively. The level of house prices in Trondheim in central Norway was an eye-opener for the American Nobel Laureate Georg Akerlof, who happens to be of Swedish ancestry. At a family gathering, he was told that a distant relative had bought a house in Trondheim at a price equivalent to more than USD 1 million, providing a source of inspiration for his and Robert Schiller’s book “Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism”. 5  4  OECD Interim Economic Outlook, (March) 2009. 5  Georg Akerlof and Robert Shiller (2009): “Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism”, Princeton University Press. BIS Review 119/2009  5  Self-reinforcing mechanisms in financial markets, which lead to slower credit flows and falling asset prices in downturns and the inverse in upturns, pose a challenge to monetary policy.

The vitality of the manufacturing, financial and construction sectors, which have fuelled economic growth in our country over the past few quarters, is likely to diminish, particularly in view of the expected slowdown in global demand. Growth in Swiss GDP will probably amount to a little over 2.5% in 2006 (this is a cautious forecast), falling back slightly in 2007 yet remaining in the vicinity of 2%. Consumer prices rose 1.4% in July, marginally above our figure for core inflation, which at 1.2% is the highest since April 2002. However, these rates are well below the level of 2% that we consider the upper limit for price stability. For 2006 as a whole, we expect the average rate of inflation to remain below 1.5%, and this is unlikely to change much in 2007. With respect to monetary policy, the healthy economic outlook in both the world and domestic economies, together with the high level of capacity utilisation in manufacturing, require us to further pursue normalisation of the target range for the three-month Libor. This is particularly necessary in view of the significant relaxation in global monetary conditions – due to the depreciation of the Swiss franc against the euro – that has occurred since our last monetary policy assessment in mid-June. BIS Review 78/2006  1
Fourth, to ensure that those CCPs are not themselves Too Important To Fail – resolution again, plus rules to allocate losses amongst bank clearing members and others so that a distressed CCP can recover without going into resolution. Fifth, to ensure that the reregulation of banks does not simply cause the systemic risks associated with excess leverage and liquidity mismatches to be reinvented outside banks – the shadow banking reforms. And sixth, to make securitisation safer and more efficient – a complicated raft of reforms, including overdue steps to remove mechanistic reliance on Credit Rating Agency ratings. Cumulatively, those reforms will change the face of global finance – for the better. But no doubt there will also be effects that have not been anticipated, resulting in a need for running repairs – a point to which I will return. The work to produce the reforms has also revealed conceptual gaps and flaws in the inherited regulatory framework that will, sooner or later, need to be addressed. That is where I shall begin. The capital framework: going concern v. gone concern loss-absorbency Perhaps most important, policymakers have focused more closely than ever before on what happens when a bank or dealer fails. Regulatory policy needs to work backwards from that, since banks are regulated in order to reduce the costs of failure.

But uncertainties arise not just because there will always be unexpected events, changes of technology and taste. We also continually review and update our views on the underlying relationships between countries, firms and people. And of course we are constantly learning more about the past not least as the statistics get revised. We try to emphasise those uncertainties by always publishing our forecasts in the form of fan charts which show not just a central projection but a probability distribution around it. If you go back a year to May 2006, our central projections for Q2 2007 were for growth of about 3% and inflation of around 2%. But we also showed about a one in four chance that growth would be a percentage point or more away and that inflation would be half a percentage point from the central projections (Chart 2). It follows that there is also a range of uncertainty around the right path for interest rates. The story of the last year has been that growth has been stable (between 0.7 and 0.8% each quarter) and kept quite close to that central projection but only on the basis of substantially higher interest rates than our forecasts were based on; inflation has been higher than we projected again despite the successive rises in rates. You might expect this range of uncertainty to be reflected in a range of independent forecasts, but you would be disappointed. Most forecasters operate models much like ours and, of course, they use the same data.
18 It is possible that the interval between the reviews could also be slightly longer, as monetary policy objectives probably have quite a long “durability” and perhaps do not need to be reviewed quite so often. Such regular reviews would probably not lead to substantial changes over time, which has not been the case in Canada either. But now and then, the conclusion may be that a change to the monetary policy objective would be preferable, which would of course be entirely appropriate. The important thing is that the remit is formulated via objective and scientific examination and scrutiny and not determined by short-term political motives or subjective opinion moulding in the media. Before any system of regular reviews is introduced, legal aspects must of course be considered. As far as Sweden is concerned, this means, for example, that both the remit and its terms must be compatible with EU law, which states, among other things, that the central bank shall maintain price stability. Although this puts restrictions on the possible remits of central banks, there are nevertheless some degrees of freedom as regards the exact policy formulation. That the central bank should aim at maintaining price stability defined in one way or another is of course only natural. The terms of the reviews must also consider that the central bank shall perform its remit without influence from the Member State’s parliament, government or any other body.

Our third core purpose - the promotion of the efficiency and effectiveness of the financial system in serving the interests of the wider economy - was more unusual for a central bank, but arose from a long-standing tradition of catalytic involvement in the development of our financial system, including, in its international dimension in particular, encouragement of the role of the City. These three core purposes have been essentially carried over into the new statutory framework introduced through the Bank of England Act of 1998. There are certainly some very important changes in the more precise nature of the Bank’s role. In relation to monetary stability, the Bank, through its new Monetary Policy Committee, now has independent responsibility for the operation of monetary policy and for achieving consistently low inflation as defined by the Chancellor. And in relation to financial stability, responsibility for banking supervision has passed from the Bank to Howard at the FSA - which helps to explain why I have retained more of my hair ... than ... I might otherwise have done! But, notwithstanding these important changes, our core purposes remain. The Memorandum of Understanding between the Treasury, the Bank and the FSA, in particular defines our respective responsibilities in relation to financial stability and provides a structure for the necessary close cooperation between us. In the terms of the MOU the Bank is responsible for the overall stability of the financial system as a whole.
Indeed, under the Alternative Story, there could well be challenges for monetary policy, which in its modern mode operates essentially by using Bank Rate to regulate aggregate demand relative to aggregate supply, exploiting a short-run trade off between growth and inflation so long as inflation expectations are well anchored. If aggregate supply were to become endogenous in the way I have described, the short-run trade off might well be less pronounced for a while. That would make it harder to judge inflationary pressures from gauging the amount of slack in the economy; and harder for the Bank to achieve our 2% inflation target by broadly steering demand conditions. In that scenario, it would matter enormously that wage and price setters continued to act on the basis that CPI inflation would remain in line with the 2% target over the medium term. For me, both the Orthodox and Alternative Stories are plausible. In that sense, I think the outlook is ‘bimodal’ – in terms of there being two main stories. The Orthodox Story, to which I gave most weight in my November vote, required a small tightening. The implications of the Alternative Story for policy were less clear. I concluded that it was essential for the MPC to act in a way that was most likely to keep inflation expectations anchored.

A second, rather obvious and by now familiar conclusion is that, in a narrow sense, it may have become more difficult to identify where risk resides, although we should not make too much of that as interest rate, currency and equity risk has been transferred around the financial system via derivatives for almost two decades. For me, it is more interesting that, in big picture terms, many banks have in effect concluded that they are better at, or will be better rewarded for, managing market risk – and its sister, counterparty credit risk – than managing ‘buy and hold’ credit risk; and that if they are going to hold illiquid assets, they should provide a higher return than bog-standard loans. This suggests that stability relies on the liquidity of capital markets – primary as well as secondary markets – proving durable under stress. Indeed, contacts suggest that one of their main worries is that something – they don’t know what – could cause primary markets to shut for a few months, leaving them holding loans and warehoused portfolios needing to be marked down over quarterly reporting dates. Another theme is reliance on secondary markets to shed complex forms of market risk, especially when it is hard to be confident about the robustness of correlation assumptions incorporated into some pricing models and risk measures. Although there is a spectrum of opinion, many take encouragement from the way the system has weathered a series of shocks in recent years, including lately the Amaranth episode.
The composition of financial institutions will also show much greater diversity: with banks, insurers and takaful operators offering higher value-added services to serve the more sophisticated customers, with more developed venture capital industry and angel funds providing risk capital for innovative firms, and with development financial institutions stepping up to widen the base of financial services to all Malaysians. In addition, new and existing forms of financing that have thus far remained at the fringes of the financial system such as factoring, leasing and credit companies are expected to become more significant. Spurred by new technologies, such as greater adoption of electronic invoicing and receivables  6  BIS Review 146/2010  exchanges, it will generate more competition to the traditional players while enriching the product offering, particularly to the SME segment. The evolution of the financial sector will also focus on the new growth areas that will catalyse Malaysia’s transition to a higher value added economy. These include areas of financing such as for green technology, infrastructure development, education, and entrepreneurship and innovation. These are key focal points that will yield increased national productivity, drive innovation and stimulate the formation of businesses. It is anticipated that a significant portion of new frontier industries will be spearheaded by young, innovative SMEs that would require substantial investments in research and development, and for the commercialisation of the research and development. To support these endeavours, a more diversified financial structure, involving new financing modalities will be essential.

An online portal for registration will open tomorrow morning, with attendance determined shortly thereafter by a ballot. 11 Debate on social media is already underway, 12 and there will be live webcasts available on the day. The Open Forum is open to everyone, because the UK’s markets matter for everyone. Our goal is to discuss the prospects for market functioning, where regulations might overlap or conflict, and whether enough has been done to build the real markets the UK deserves. Markets that merit social licence and reinforce social capital. In the best traditions of Harvard, we should use the compass of Veritas, so that, when we too are dust, others can build on our legacy, as so many have on that of Southwark’s John Harvard. 11  See www.boeopenforum.co.uk. 12  See #BoEOpenForum. BIS central bankers’ speeches  7
Jessica Chew Cheng Lian: The insurance broking sector – threshold of an exciting but challenging future? Keynote address by Ms Jessica Chew Cheng Lian, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the 3rd Asia Insurance Brokers’ Summit, Kuala Lumpur, 3 March 2015. *  *  *  It is my great pleasure to be a part of this 3rd Asia Insurance Brokers’ Summit which is being held for the first time in Malaysia. I would also like to take this opportunity to congratulate MITBA as they celebrate 40 years in service of insurance and takaful brokers in Malaysia. In that time, the domestic insurance industry has seen significant change – beginning with an overhaul of the legal and regulatory framework when the industry was brought under the regulatory oversight of Bank Negara Malaysia, followed by a series of successive reforms that have served to strengthen the industry and promote its healthy development to first and foremost meet the needs of individuals and businesses. This continues to be a journey that the Bank and industry are committed to taking forward, mindful that as the Malaysian economy is progressively transformed, so too will demands of the industry evolve. Throughout this journey, associations like MITBA have played an important role in helping members adjust to the changing environment, by providing a platform to examine issues, make representations, communicate with stakeholders, and implement collective responses.

The insurance industry found itself in a position of having to defend its activities from being subjected to the same fate of the wide-ranging regulatory reform that has consumed the banking sector following the crisis. The loss of confidence in financial intermediaries has been particularly damaging. Consumer confidence and trust in financial intermediaries have fallen to all-time lows and continuing discoveries of misconduct have done little to restore confidence. Consumers are unfortunately prone to painting all intermediaries with the same broad brush and asking themselves how far they can trust their financial service providers. As a result, conduct issues are coming under significant scrutiny globally, and the expectation of professional conduct is no longer taken for granted by consumers and regulators alike. This general shake-up of the industry that followed the crisis has meant that insurance brokers, swept up in the tide, must confront the very basic ethos of their business. They must make serving the real economic interests of businesses and helping individuals secure their financial futures the heart of their business. They need to be concerned about  BIS central bankers’ speeches  1  the social and environmental impact of the business decisions that they make. And they must commit to providing a fair deal to their customers and building enduring long term relationships. The environment has become far more unforgiving of anything less.