samchain/econo-pairs-v1 huggingface dataset:
Together they hold a total of over $ trillion of foreign reserves, which have doubled over the short period of only three years. The sheer size of these foreign reserves and the business opportunities they make available have greatly enhanced the level of sophistication in their management. Increasingly, such management is making use of advanced financial instruments and expert services offered by international investment banks, and is much more alert to shifts in short-term trends in currencies as well as in interest rates. Private-sector savings in Asia are also very substantial, given the high savings rate, which is generally in double digits and, for some, as high as 30% to 40%. Although the management of private sector savings in Asia is generally a lot less sophisticated by comparison, it is being increasingly institutionalised, along with the introduction of provident funds, and is managed by professionals, becoming increasingly active in the international markets. Over half of the new issues of US Treasury securities are now taken up by Asian economies. And Asia is now a large net exporter of portfolio  1  June 2004 figures. BIS Review 66/2004  1  capital. For nine emerging Asian economies (excluding Japan), the amount was a net $ billion in 2003. The second characteristic of Asian finance is, by contrast, the lack of sophistication in domestic financial intermediation. The effective channelling of savings into investments is crucial for the promotion of economic growth and development. This is something that developed markets with advanced financial systems take for granted.

But exchange rate and other supporting policies that promote the accumulation of foreign reserves, intentional or otherwise, are questionable in terms of their sustainability, just as we all question the sustainability of the current global imbalance, or rather, the sustainability of the US external imbalance. They are, arguably, the two sides of the same problem. From whichever side you are looking at it, a problem that is considered unsustainable will, of course, be corrected, sooner or later, and the questions we all would like to have answers to are how, and how violent or benign the inevitable market adjustment might be. I am afraid I do not have answers to these questions. But I just would like to point out, in this connection, that the style of management of foreign reserves, when the exchange rate of the domestic currency is flexible, is likely to be more proactive than is otherwise the case, in terms of for example currency allocation. Managers of foreign reserves are ultimately held accountable to the people they serve, and the amounts, as I pointed out at the beginning of this survey on Asian finance, are getting to be very large indeed. They are, possibly, large enough to make a difference to the dynamics of the global markets for foreign exchange and for major classes of financial instruments, and enough to make a lot of people with the relevant responsibilities feel uneasy.
Bank analysis suggests that such reductions in the spread over the risk-free rate played an important role in raising credit growth relative to GDP during both of the surges in the credit to GDP ratio since 1980.8 The spread over the risk free rate appears to have fallen due to three main factors – improvements in “intermediation technology”, greater risk appetite by banks, and greater access by banks to wholesale funding.9 How long should we expect these factors to exert downward pressure on the spread over the risk-free rate? Reductions in the business cost of intermediation pushed down on rates and up on credit growth relative to GDP during the financial liberalisation of the 1980s. They continued to have an effect, though to a lesser extent, during the 2000s. Such reductions will almost certainly be long lasting. The underlying drivers such as technological innovation in information gathering and rising competition are unlikely to go into reverse. Indeed, we might expect technology and competition to drive intermediation costs down further. The other factors that pushed down the spread over the risk-free rate in the upswing have proved to be much less sustainable. The increase in banks’ willingness to take risks and in investors’ willingness to provide wholesale funding both unwound sharply in the crisis. This is likely to have been one factor behind the fall in credit to GDP. Following the post-crisis repair phase, banks’ risk taking and lending spreads now appear to be at a more standard level.

I hope the WIBC Asia Summit will provide a useful platform for various stakeholders from Asia, Middle East and beyond, to explore new ideas and build networks to catalyse further growth. I wish all of you a fruitful conference. 3  An overview of infrastructure opportunities in ASEAN, KPMG. BIS central bankers’ speeches  3
Similarly, keeping a floating exchange rate policy points in the same direction, as it provides the proper incentives for prudent management of external liquidity and borrowing. It also helps in the economy’s process of real adjustment when facing a deterioration in the external scenario. In terms of both the exchange rate and access to credit, it is of high importance not to distort the incentives of financial institutions and firms to prudently administer their risks in a complex environment. To sum up, I would like to point out once again that the Board of the Central Bank of Chile strongly believes that as a country, and particularly as a Bank, we are well prepared to confront periods of stress. We are certainly not immune to the events outside our borders, and risks are very high today. We have at our disposal the necessary tools to mitigate the effects of more adverse external conditions but, most importantly, we can and will use them whenever the situation calls for it. Solid proofs of this are the measures we have taken in the last weeks. Thank you.

318 (New York: Federal Reserve Bank of New York, March) for a discussion of how adverse selection and asymmetric information along with poor incentives caused a lack of market discipline. 7  For further discussion of the efficient markets hypothesis and the crisis, see Eugene Fama’s blog, “Fama/French Forum” (shared with Kenneth French). In particular, see Eugene Fama and Kenneth French (2008), “Q&A: Market Turmoil” Fama/French Forum (Santa Monica: Dimensional Fund Advisors, December). 8  For a specific example of this phenomenon, see Richard Roll (1984), “Orange Juice and Weather” American Economic Review, vol. 74 (December), pp. 861–880. 4  BIS central bankers’ speeches  In normal times, the tension between efficient markets and actual developments is relieved by a series of these tweaked explanations without any substantial changes to underlying views. But as markets came under increasing stress it made the arbitrage and liquidity assumptions underlying efficient market explanations less tenable.9 Further, the signals generated in different markets started to disagree markedly. One of the basic quandaries at the start of the crisis was the differing perspectives from price developments in equity and fixed income markets. The fixed income and equity markets were giving very different signals about the outlook for the economy. Fixed income markets were indicating an abrupt slowdown in economic activity and through derivatives such as the ABX indices substantial credit losses on some of the newly issued structured products related to residential mortgages. The equity market in contrast reached a peak in October 2007 indicating little evidence of such a slowdown.
Thus, notwithstanding our sense of urgency, we are heading here for an evolutionary change: Athena in her helmet will not spring full-grown from the head of Zeus! And, as with all transitions from one era to another, we can expect risks and uncertainties to persist for some years to come. This makes it all the more urgent to get to work on this new architecture right away. Initial steps for a new architecture In fact, a number of significant steps are already under way. At its April meeting, our governing body, the Interim Committee (of Ministers and Central Bank Governors of IMF member countries), set the broad agenda for the IMF’s own work - and its work with others - for the near future. Five areas have been given priority by member governments: •  1  The central role to be played by the IMF in crisis prevention through its surveillance and its role in encouraging members to strengthen their macroeconomic policies and financial sectors.1  Of course, it is clear that for IMF surveillance to be effective, member countries must provide timely, accurate, and comprehensive data to the Fund. The Interim Committee underscored members’ obligation in BIS Review 43/1998  -4-  The Interim Committee suggests that the Fund intensify its work in surveillance of financial sector issues and capital flows, and focus on the risks posed by potentially abrupt reversals of capital flows, especially those of a short-term nature.

Unquestionably, the key current challenge, is to put under control excessive and persistent inflationary dynamics. Monetary policy decisions, however, have to be considered and made within the following context: Monetary policy takes roughly 18 months to affect the real economy as it is channelled through banks, households and firms and consequently impacts their decisions on credit, consumption and investment, respectively. Therefore, monetary policy does not target current inflation but the medium term inflation outlook. At the current juncture that most of inflation is cost push, stemming from energy and food prices, monetary policy attempts to re-align aggregate demand and aggregate supply so as to contain inflationary pressures. So, monetary policy has a more difficult job than when dealing with the typical demand driven inflationary pressures. Therefore, it requires a balanced approach to contain cost-push inflation but avoid having an exacerbated negative effect on output and unemployment. In addition to the balance I mentioned before, monetary policy decisions have to deal with a lot of uncertainty. The risk of a wage-price increases spiral, even though not yet evidenced in the Eurozone, would exacerbate inflationary pressures. If inflation expectations get de-anchored then inflation will persist for much longer. In such a case the pace of interest rate adjustment as well as the final rate level may have to increase. Currently no material de-anchoring has been observed even though some measures indicate inflation expectations to be slightly above 2 per cent in medium term.
Results of the comprehensive asset-assessment exercise As you probably all know, the European bank assessment exercise, covering 130 banks, most of which will be directly overseen by the SSM, essentially comprised two components. First, an asset quality review (the AQR), which basically involved an analysis of the rigour with which bank balance sheets reflect the value of different assets. The review evaluated, as appropriate, accounting classifications, collateral values, fair value calculation methods and the recognition of borrowers’ impaired creditworthiness. Second, a stress test, evaluating how solvency would fare in two macroeconomic scenarios: a baseline scenario, considered likely, and another highly adverse scenario. BIS central bankers’ speeches  1  In addition to increasing the transparency of banks’ financial position and to providing information to help ensure the effective functioning of the SSM as a supervisory authority from the outset, the analysis aimed to detect potential capital shortfalls that needed to be rapidly redressed. To do this, quantitative benchmarks were set for capital adequacy ratios – measured by the ratio of common equity tier 1 (CET1) capital to risk-weighted assets – for each part of the exercise (8% in the AQR and in the baseline scenario of the stress test, and 5.5% for the adverse scenario). The exercise was designed to high standards. This was manifest in the breadth of the field work done for the review of bank balance sheets, in the severity of the adverse macroeconomic scenario envisaged and in the wide range of risk (credit, market, sovereign, etc.) factors considered.

The third flaw in our financial system was the inappropriate corporate regime governing the savings banks, which came to account for almost half the Spanish banking sector. If the crisis has shown us anything it is that, despite the good management performance at numerous savings banks, the former ownership regime of those institutions and, in some cases, their reliance on political power, created risks that hindered their proper management. The successive reform measures taken, and in particular the legislation on savings banks and bank foundations enacted last year, are a key qualitative change, requiring that former savings banks over a certain size be transformed into (ordinary or bank) foundations and that those which maintained  BIS central bankers’ speeches  3  a significant shareholding in a bank have sufficient incentive to waive control of the bank and meet, in any event, certain conditions to ensure they are professionally and independently managed. I take this opportunity to confirm that in the next few days the Banco de España will be issuing, for public consultation, a draft circular which implements the abovementioned legislation and sets out in detail some of the requirements that the bank foundations will have to satisfy. 4. The fourth and last main flaw in the Spanish banking system was its surplus capacity, as a result of the tremendous growth in loan demand during Spain’s long period of economic expansion.
In the European Union, the recently approved Bank Recovery and Resolution Directive (BRRD) – which will come into force next year – provides for an ambitious resolution approach that fully incorporates the new bail-in culture. As of 2016, the BRRD envisages a system under which before any external funds are used to recapitalise a bank, at least 8% of its total liabilities must be used to absorb capital shortfalls. The activation of the bail-in tools would follow a hierarchical order in which neither uninsured retail deposits nor the claims of the deposit guarantee scheme would be excluded, although they would enjoy a preferential status vis-à-vis junior creditors and bond holders. Further actions may be needed in order to provide credibility to these bail-in arrangements and to reinforce the special treatment of deposits. In particular, it might be advisable, at least for the systemically important financial institutions, to add to the ex-post minimum global 8% bail-in threshold an ex-ante minimum amount of specific instruments that could be readily converted into equity immediately after the point of non-viability is achieved, e.g. through specific clauses in the subscription contracts of those instruments. This ex-ante requirement – which is now being discussed at the level of the FSB under the concept of minimum gone concern loss absorbing capacity (GLAC) – may indeed be a useful complement to the EU Directive that already permits competent authorities to instruct banks to adjust their balance sheets to facilitate bail-in pre-emptively.

Fernando Restoy: Challenges for banking resolution Closing remarks by Mr Fernando Restoy, Deputy Governor of the Bank of Spain and Chairman of the FROB (The Fondo de reestructuración ordenada bancaria – Fund for Orderly Bank Restructuring), at its conference, Madrid, 4 June 2014. * 1  *  *  Introduction  Good evening. I welcome this opportunity to share with you some thoughts on banking resolution. I cannot think of a more qualified audience to discuss this matter than that invited by the FROB for this conference, with representatives of competent authorities in the field, among others. I will organise my remarks as follows. First, I will briefly describe how I see the general global framework for banking resolution established after the crisis. Next, I will review the special features of the European case. And finally, I will concentrate on the lessons to be drawn from the Spanish experience, with a special reference to issues relating to the institutional design of banking resolution. 2  The global framework for banking resolution after the crisis  We all know that banking resolution has not achieved the status of a well-defined policy area until very recently. Actions taken by authorities in relation to failing or likely-to-fail institutions have followed a discretionary case-by-case approach, particularly with respect to the availability of public funds to protect banks’ creditors.
In Turkey, total support to agriculture has more than doubled in the last 10 years, while in other western countries it has been reduced. Turkey has a complex system of agricultural supports, which are delivered to the producers through two main channels: output-based market support schemes, and the state-owned Exert Benches (Agricultural Bank) which delivers payments based on the use of inputs. Additional measures cover the cost of general services provided to agriculture, which are financed through the budget. The present agricultural support arrangements cannot be replaced overnight, and the authorities are working with the World Bank on projects aimed at making it possible to shift to a direct income payments system in the future. The move from the present subsidy system to a direct subsidy is supported by everyone in Turkey, but the change will be gradual and will take some time. The new government that was formed after the April election seems serious about completing the above reforms, as shown by their quick action in passing the Banking Act, international arbitration, and the social security reform. With the strengthening of credibility that will come with the completion of these reforms, I believe Turkey’s disinflation program will shift into a new stage starting in 2000. While there has been considerable progress since last year’s Staff Monitored Program, a new and comprehensive effort is now needed to eradicate inflation. A comprehensive program of macroeconomic and fiscal adjustment, aimed at lowering inflation to 10% by the end of 2001.

That is, the Central Bank neither intends to use exchange rates to support exports, nor does it intend to harm Turkey’s long-term trade competitiveness. The implication of the Central Bank’s stable real exchange rate policy is that the economy’s current account balance is determined by real sector developments. Here the decline in domestic demand in recent months has made its mark. As imports decreased, the foreign trade balances improved significantly. As a result of this, Turkey ended 1998 with a current account surplus of $ million. In 1999, a small current account deficit is expected, mainly due to an expected rise in domestic demand in the second half of the year. The coordination of fiscal and monetary policies has succeeded in reducing the inflation rate from 91% in 1997 to 54% in 1998. As of August 1999, the WPI-based inflation rate stood at 54% despite an unexpected change in the price of oil and a relative loosening of the fiscal stance in the first half of the year. Since Turkey has a long history of inflation, inertia has played an important role in determining inflation. Breaking down this “inflation resistance” of the economy requires a high level of commitment on the part of the political authorities. One sign of this commitment may be their performance in the area of structural reforms. There is no doubt that the more successful the realization of the reforms, the stronger will be the credibility of the program. Now let me turn to these reform issues.
Last year, some of Puerto Rico’s banks were consolidated and many improved their balance sheets by selling underperforming assets. Both of these steps are likely to produce stronger, healthier institutions more able to make the sound lending decisions that support economic growth. 6  BIS central bankers’ speeches  All of these activities, ranging from effective monetary policy and prudent financial regulation to fostering economic literacy and measurement, complement and reinforce each other to help support a strong economy in Puerto Rico. Conclusion To sum up, the mainland economy experienced a pick-up in activity during the second half of 2010 that shows signs of continuing in 2011. The recovery in Puerto Rico has taken longer to get off the ground, but now shows signs of firming. On the mainland and in Puerto Rico, unemployment remains stubbornly high, but many indicators suggest that conditions are in place for stronger employment growth in the coming months. With government and business leaders like yourselves working together to build a better future for Puerto Rico, I am hopeful that we will soon be able to look back at 2010 and see not only the end of the island’s long recession but also the beginning of an era of growth and prosperity for Puerto Rico. Thank you for your kind attention. I would be happy to take a few questions. BIS central bankers’ speeches  7

They have succeeded in carrying out wide-reaching reforms that are compatible with our common European social model, which combines high standards of public service and relatively low levels of inequality – much lower than in the American society. Progress has been made in all four key areas: Enterprise, Employment, Education and Expenditure reduction. And these reforms are delivering results today: in recent years, GDP and employment have grown much faster in those countries. Contrary to preconceptions, France has also demonstrated in the past its capacity to meet the challenge of economic and social reform. In the 1990s, to prepare for the introduction of the euro, France pursued a competitive disinflation policy that proved highly effective. Remember that in the late 1990s, France experienced the highest GDP growth and the weakest inflation rate among European countries, along with a significant fall in its unemployment rate. Today, French reforms are heading in the right direction, [Slide 5] in particular the Tax Credit for Competitiveness and Investment (CICE) and the Responsibility and Solidarity Pact (RSP) which are designed to foster an improvement in the competitiveness of the French economy. We should obviously persevere with more reforms. But progress has also been made with the recent labour law (‘Loi El Khomri’) which, among other things, clarifies the conditions under which firms can carry out dismissals for economic reasons.