samchain/econo-pairs-v1 huggingface dataset:
I urge banks to put in the necessary efforts. Insofar as we are concerned, I think we have developed, in a limited way, such ability and will, as in the past, share with the banking community our analyses so that banks can continually adjust their operations to meet changing market and regulatory needs. Technology risk The third set of forces arises out of banks’ increasing use of, or rather reliance on, technology. We have seen a spate of fake bank websites and attempted email scams over the past year: indeed, the rate of discovery of such cases relevant to Hong Kong has averaged about 1.4 per month over the past 13 months. It should be pointed out that we have no report of any customer in Hong Kong having been taken in by these attempts at fraud. Nevertheless, the proliferation of fake websites indicates that careful precautions and constant vigilance are necessary. And a further area of technology-related crime - ATM skimming fraud - has had its victims, both in Hong Kong and overseas. Increased security and heightened customer awareness, we believe, have helped defeat this form of crime: there have been no new cases in Hong Kong for seven months. Even so, the elementary, “low-tech” nature of these frauds demonstrates also that there are many dimensions of the banks’ vulnerability to technology. In addition to protection against technology-related crime, the IT framework of banks also requires business continuity planning (or BCP).

What about the longer-term risks facing the banks in Hong Kong? Or, to put the question in a larger context, what are the longer-term processes shaping the banking sector that carry risks as well as opportunities? We in the HKMA have identified a few of these in an internal exercise that is still ongoing but I would like to share with you today our preliminary views on five of them. They are: •  structural shift in the banking sector  •  China risk  •  technology risk  •  diversification risk  •  changing international standards. In the remainder of this talk, I shall deal with each of these areas in turn, focusing more on how we think banks in Hong Kong should tackle these processes and risks, and less on our corresponding supervisory responses or strategies, which in any case are still being developed. My main message is that, while banks need to focus clearly on the short-term risks I have already outlined, we should not lose sight of the more fundamental forces that will shape the landscape of the banking sector in the years to come. If they do not take these forces into account, individual banks not only face growing risks, but they could be in danger of losing their competitiveness. Structural shift in the banking sector First, the structural shift in the banking sector.
News conference  Zurich, 17 December 2020 Fritz Zurbrügg  Introductory remarks by Fritz Zurbrügg In my remarks today, I will begin with the developments in the Swiss banking sector environment. I will then provide an assessment of the current situation at the two globally active big banks, Credit Suisse and UBS, as well as at the domestically focused banks. Finally, I will talk about the impact the coronavirus pandemic is having on the use of cash. Banking sector environment  Economic conditions for the Swiss banking sector continue to be difficult. As already mentioned by my colleague Thomas Jordan, while global GDP has recovered somewhat since the downturn in the second quarter, in most countries economic activity remains well below its year-back level. As a result, credit risks in particular have increased worldwide, with ratings of corporate bonds deteriorating significantly over the course of the year. In comparison with the real economy, the situation on the global financial markets has eased considerably more since the spring. Risk premia on corporate bonds rose markedly after the outbreak of the pandemic, but have since largely declined again. Stock prices have also recovered from their downturn in February and March. The steep recession has thus far had very little impact on the Swiss credit and real estate markets. Lending volume in the mortgage market and prices in the residential real estate market continued to rise in the second and third quarters of 2020. Furthermore, the number of bankruptcies and value adjustments on existing loans has remained low.

Although their profitability continued to decline in the first half of 2020, this development was driven by a further narrowing of the interest rate margin. There has been hardly any increase in value adjustments and write-downs. Moreover, domestically focused banks are not reporting any significant rise in impaired loans at present. Despite the  Page 2/4  Zurich, 17 December 2020 Fritz Zurbrügg  News conference  economic downturn, mortgage lending volume and residential property prices have also continued to increase over the last six months. However, this does not mean that domestically focused banks will remain unaffected by the economic consequences of the pandemic. Experience shows that there is typically a lag before the impacts of recessions on banks become evident. In the baseline scenario, the profitability of domestically focused banks is likely to come under further pressure. First, the anticipated deterioration in credit quality is expected to lead to increased value adjustments and write-downs on loans to Swiss companies. Second, the interest margin is expected to narrow further due to the persistent low interest rate environment. While domestically focused banks should remain profitable in aggregate, against this background, some of them are expected to incur losses. Uncertainty about the future course of the coronavirus pandemic remains high. In this context, the increased vulnerability of the domestic mortgage and residential real estate markets presents an additional risk factor for the banks.
This is exactly what the UK and other European countries aimed to do in joining the Exchange Rate Mechanism. Sharing a currency also helps promote integration. It does so by eliminating one of the barriers between markets, improving transparency of pricing and increasing competition. Sharing a currency can also help to increase the mobility of labour and capital, raise trade in goods and services, and improve the flow of technology and ideas.4 In these ways, members of a currency union can exploit more fully comparative advantage and ensure greater dynamic efficiency. Set against these benefits are the potentially large costs of giving up an independent monetary policy tailored to the needs of the region and a flexible exchange rate that can help absorb shocks. A flexible exchange rate acts as a valuable shock absorber when domestic wages and prices are sticky.5 For example, suppose demand for a country’s exports falls. All else equal, its output will fall, unemployment increase and current account deteriorate. With an independent currency, exchange rate depreciation can dampen these effects by improving competitiveness, and monetary policy can become more accommodative, supporting demand and employment. However, if the country were part of a currency area with its foreign market, its exchange rate would by definition not change, putting the full weight of adjustment on wages and unemployment – a significantly more protracted and painful process. In addition, the responsiveness of monetary policy to weak demand in that country would be diluted by the needs of the broader membership.

The current economic situation Before the war, the world economy was on a path of gradual recovery, following the most acute phase of the pandemic, although the recovery was already flagging from the second half of 2021 owing to global bottlenecks and the increase in inflationary pressures. The gradual path of recovery in activity prior to the Russian invasion of Ukraine was, in any case, highly uneven across geographical areas and sectors of activity. Thus, while some economies had already regained or even surpassed their pre-crisis levels of activity, others had not. Spain, despite having one of the highest levels of vaccination in the world, was among the latter. At the end of 2021, Spain’s output was still 3.8 percentage points (pp) below its pre-pandemic levels, while in the euro area as a whole this gap had already closed. One factor that would explain the difference in progress is the sectoral composition of activity. In particular, the recovery tends to be more delayed in those countries, like Spain, in which services that are highly dependent on personal interaction, such as those linked to tourism, account for a large share of the economy. Economic developments in Spain, and in the rest of the world, have been affected by upward inflation surprises since the second half of 2021, driven in particular by energy and food, although there has also been a slight rise in underlying inflation. Between December 2020 and March 2022, the annual increase in consumer prices rose from -0.6% to 9.8%.
If you invest in either of these, you are not promised all of your investment back, though of course you expect to make a return. A debt investor ordinarily expects the full return of their investment, but viewed from a corporate restructuring perspective this is not assured. I will come back to this. Investment in debt and equity can be managed on a collective basis, as asset management. You may remember the Woody Allen quote that a stockbroker is someone “who invests your money until it’s all gone”. Cruel I know, but it illustrates the difference between deposits, debt and equity. Turning back to banks, they have deposits, debt and equity on the liabilities side of their balance sheet. The problems of the pre-crisis period in this area of bank liabilities can be summarised quite easily: they had too little equity to absorb losses, and particularly so given the major expansion of balance sheets (more leverage of the equity); they had issued forms of hybrid debt-equity that were supposed to absorb losses after equity but could only do so if the bank became formally insolvent, something that could not be allowed to happen in view of the threat to the financial system; they had taken on a very large increase in short-term wholesale market funding which was assumed by the providers to have the characteristics of  BIS central bankers’ speeches  1  deposits. Moreover, short-term wholesale funding was footloose, more so than retail deposit funding. What have we done to deal with these problems?

TLAC and MREL are comprised of debt-instruments and equity. The key point here is that this important reform requires a very clear distinction among debt contracts between forms of subordinated debt contracts which will bear losses in resolution first and deposit and other senior funding contracts on the liabilities side of the bank balance sheet. This may seem like a very simple point, but past arrangements meant it was unclear, and the moral of the painful story is “don’t leave the providers of debt funding in any doubt about their creditor status.” The lack of clarity about the instruments on the liabilities side of bank balance sheets and the order and mechanisms by which they would absorb losses was an important issue in the crisis. Looking ahead, clear disclosure of creditor hierarchies at a legal entity level will be a critical component of the resolution regime, so that all creditors know where they stand before resolution occurs. Let’s turn now to the other side of a bank’s balance sheet, the assets side. The massive increase in balance sheet size pre-crisis accompanied what came to be known as the “search for yield”, which could be re-named the “search for risk which turns out to be unsustainable”.
Other episodes, by contrast, such as the “new economy” crisis had a more far-reaching impact, albeit of varying intensity and duration in the different geographical areas. Unfortunately, these experiences are no precedent for diagnosing the potential scope of the current episode, which exhibits many new features, including the fact that it is especially concentrated in the Western heartland of the industrialised countries. The recent past has seen turbulence in Asia, Latin America and eastern Europe. Now, in contrast, the shocks are mainly affecting the United States and the more developed European countries. Let me thus take an eminently European perspective as I examine more closely some of the main features at play here. This approach will also help me to look at its implications for euro monetary policy, which I believe is the most logical way to address the possible impact on the Spanish economy. I wish to begin by emphasising the non-existence in the euro area of the sub-prime mortgages that are accepted practice in the United States. Therefore, in the first analysis, the rise in doubtful assets in the United States should affect only the European financial intermediaries that acquired securities linked to sub-prime mortgage loans originated in that economy. However, the propagation of contagion is not confined to the influence of this channel alone, but rather is transmitted through a wider range of shocks.

2  BIS Review 45/2003  Third, it is extremely difficult to anticipate the future path of interest rates. That is because the Monetary Policy Committee sets rates in response to news in the economy, and that news is inherently difficult to forecast. Each month the Committee makes a careful assessment of the outlook for inflation, and it is that which will guide our decisions on the appropriate level of interest rates. It is over 3 1/2 years since interest rates were last raised - the longest such period since Bank Rate was held constant at 2% through the 1940s. At some point reducing the present degree of monetary stimulus will be necessary in order to keep inflation on track to meet the target. The timing of any such decision will reflect our judgment of the outlook for inflation. Listening to our business contacts and learning from our visits around the UK is an important input into that judgment. To retain the unrivalled degree of stability that we achieved during the “nice” decade will be an even more difficult challenge for the future. The present monetary and fiscal frameworks provide a seaworthy policy vessel, but, as all sailors know, fog, especially statistical fog, can be dangerous. So we must hope that Lady Luck will continue to smile on us. BIS Review 45/2003  3
In such decision-making situations it may be appropriate to implement measures that can reduce the uncertainty and stave off particularly adverse outcomes for the economy. This now implies a more active monetary policy than normal, both in interest rate setting and through liquidity policy measures. When setting the key policy rate, we must also take account of developments in premiums in money market rates, other bank funding costs and bank deposit and lending rates. Weight has been given to moving forward the reduction in the key policy rate so that lending rates for households and firms can gradually be reduced. Norwegian banks, households and some businesses have increased their borrowings considerably in recent years. It is important that the necessary deleveraging does not take place too abruptly. Lower interest rates, combined with liquidity measures, may curb the impact of the financial crisis on output and inflation. At the monetary policy meeting on 29 October, Norges Bank’s Executive Board decided to reduce the key policy rate by 0.50 percentage point to 4.75 per cent. The Executive Board's assessment was that the key policy rate may lie in the interval 4-5 per cent in the period to the publication of the next Monetary Policy Report in March 2009, unless the Norwegian economy is exposed to new major shocks. Thank you for your attention!

In light of the current global and domestic developments, a common concern is that we may see a large and abrupt surge in risk premia, triggered or amplified by uncertainty about political actions or a shift in risk perception. At the same time, we are worried about the possible amplification of stress in financial markets through deleveraging and forced asset selling in a situation where asset prices are falling. Now that the banking sector is shrinking and becoming more resilient, our radar is shifting to the non-bank financial sector, which is more lightly regulated. In particular, we need a better understanding of the role of asset managers and of the broader vulnerabilities inherent to investment funds. The asset management sector now plays a much larger role in financial markets than it did ten years ago. It may harbour leverage and liquidity risks that could amplify any potential shock from a reassessment of risks in financial markets. I will now look in more detail at some longer-term developments and potential risks in the asset management sector. Risks associated with liquidity, leverage and interconnectedness in the investment fund sector One of the most notable developments since the financial crisis has been the rapid growth of asset management in the euro area and at global level. In the euro area, investment funds have been growing steadily, with total assets expanding by roughly 170% between 2008 and 2017 1, reflecting both continued net cash inflows and rising asset valuations.
Øystein Olsen: The conduct of monetary policy Introductory statement by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the hearing before the Standing Committee on Finance and Economic Affairs of the Storting (Norwegian parliament), Oslo, 29 May 2012. *  *  *  Please note that the text below may differ from the actual presentation. The statement is based on Norges Bank’s Annual Report for 2011, Monetary Policy Report 1/12 and the Executive Board’s assessments in the period to the monetary policy meeting on 10 May. I would like to thank the Chairman of the Committee and thank you for this opportunity to report on the conduct of monetary policy in connection with the Storting’s deliberations on the Government’s Financial Market Report. My statement here today is based on the Bank’s Annual Report, but also on the Executive Board’s assessments for the period to the most recent monetary policy meeting and new information. Norges Bank’s conduct of monetary policy is oriented towards low and stable inflation. The operational target of monetary policy is consumer price inflation of close to 2.5 per cent over time. At the same time, monetary policy shall contribute to stabilising developments in output and employment. When I was here last year, the key policy rate had just been raised to 2.25 per cent. Inflation was low at around 1¼ per cent, but there were prospects that growth in advanced economies was recovering and that both capacity utilisation and inflation in Norway would pick up.

The ECB operations during winter contributed to boosting liquidity and reducing risk premiums in the European banking system and in the sovereign debt market. 2  BIS central bankers’ speeches  Financial market turbulence has flared up again recently, with particular focus on the macroeconomic situation and budget developments in Spain and other countries in southern Europe. The political unrest in Greece and growing fears of a Greek government debt default have curbed risk appetite in the markets. Yields on Italian and Spanish government bond have increased, while US, UK and German government bond yields have fallen to historically low levels. International equity indices have declined, particularly in Europe. BIS central bankers’ speeches  3  Despite a prolonged downturn abroad and financial market turbulence, activity in the Norwegian economy is remains robust. Capacity utilisation has been close to normal over the past year. GDP for mainland Norway expanded by 2.4 per cent in 2011 according to preliminary figures. Prices for Norwegian export goods are favourable relative to import prices. The oil and construction industries are booming and both employment and the supply of labour are on the rise. Unemployment is low and fairly stable. At the same time, house prices are moving up and household debt is still rising faster than household income. On the other hand, some segments of the export industry are feeling the adverse effects of developments in Europe and a strong krone.
Another striking feature is the fact that the international flows are currently dominated by private capital, which is in sharp contrast to what is has been two or three decades ago when official capital flows used to play a key role. This trend has been greatly supported by the liberalisation of capital flows, both in the advanced countries and in the emerging markets. The belief has prevailed that in a long run, free movement of capital is welfare enhancing, as it leads to more efficient allocation of capital, faster economic convergence of less developed countries, better consumption smoothing, and diversification of financial portfolios. Even though these benefits are undisputed, free capital mobility has also created many challenges. On the macroeconomic level, for example, we have observed many currency crises followed by painful stabilisation periods. These crises have often been preceded by periods of fast capital inflows, aggravating vulnerabilities in the domestic financial sectors of the emerging market economies. These financial weaknesses have then functioned as an important transmission channel for macroeconomic shocks, leading to “twin crises”, i.e. a vicious circle of currency depreciations and failures of financial institutions. The Asian crises in 1997-1998 and the recent experience of Argentina are examples of such modern twin crises. Another challenge related to the massive and liberalised capital flows lies in the area of international fraud and money laundering. The detection of such activities is a crucial preventive policy objective. Money laundering enables criminal activities to grow and cause further damage, the most serious case being terrorist financing.

Ravi Menon: Harnessing capital for Asia’s growth Opening address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Deutsche Bank Access Asia Conference “Harnessing Capital for Asia’s Growth”, Singapore, 25 May 2011. *  *  *  The Asian Century: what can go wrong? Mr Rob Rankin, distinguished speakers, ladies and gentlemen, good morning. 1. According to Deutsche Bank’s forecasts, China’s economy will become the largest in the world in 2022. India is projected to become the world’s third largest economy by 2015. Pundits have dubbed the 21st century the “Asian Century”, much as the 20th century has been described as the “American Century”, and the 19th century the “British Century”. 2. But Asia’s rise is not a pre-ordained outcome. History has shown that straight-line extrapolations of growth do not always hold; more recent history suggests that they are the exception rather than the norm. 3. Two thousand years ago, at the height of the Roman Empire, Asia ex Japan accounted for more than half of global GDP, while Western Europe accounted for less than 10 per cent. The picture was not very different for the next 1500 years or so: Asia ex Japan was typically three times larger than Western Europe. 4. Then came the Renaissance and the Industrial Revolution in Europe. By the start of the First World War, it was the turn of America and Europe to account for more than half of global GDP. Asia less Japan was less than 15 per cent.