samchain/econo-pairs-v1 huggingface dataset:
Mr. Yam looks at the future of Hong Kong as a financial services centre for China and the Asian region Speech by the Chief Executive of the Hong Kong Monetary Authority, Mr. Joseph Yam, JP, to Coopers and Lybrand Financial Services Conference in Hong Kong on 28/10/97. I have been asked to speak on Hong Kong’s role as a financial services centre for China and the Asian region. As you know, many of the economies of the Asian region, including of course the mainland of China, have been undergoing a rapid process of financial liberalization. This has brought tremendous benefits to the region, through providing the mechanisms for channelling savings into investments, domestically and internationally, thus promoting growth and development of the region. The process has brought substantial risks to the region as well, as clearly you have witnessed in the past few months when financial turmoil spread in the region. 2. Notwithstanding the financial problems now being faced by the region, the balance of opinion is still firmly that financial liberalization is of long-term benefit. The correct response to such problems is clearly, at least for the immediate future, to take the right medicine and implement the necessary economic adjustment programmes, prescribed if necessary by the International Monetary Fund. Indeed, this has very much been the focus of recent attention when one looks at individual economies in this region that have been subject to financial turmoil. But prevention is always better than cure.

As illustrated on the slide, in December, the weighted average of the reserve requirement ratios were remarkably raised by differentiating the ratios such that they are lower for longer maturities (Table 1). Moreover, the reserve requirement base has been expanded to include funds received by banks through repurchase agreement (repo) transactions from foreign and domestic customers, except for those funds received from repo transactions with the Central Bank and those among domestic banks. Finally, with the decision we made yesterday, TL reserve requirement ratios were re-increased for the short-term deposit/participation fund and other liabilities. Hence, the weighted average reserve requirement ratio calculated by taking the share of liabilities into consideration has increased by 4.4 percentage points since 23 September 2010. At this point, I would like to inform you about our evaluations regarding the effects of our recent decisions. The change in required reserves is expected to affect the credit market through cost and liquidity channels. With the said regulations, nearly a total of TL 22.5 billion a will have been withdrawn from the market. According to the recent data, this amount equals to approximately 5.8 percent of TL-denominated credits excluding financial sector. We believe that the monetary tightening implemented by increasing in the weighted average of reserve requirement ratios would more than offset the expansionary effects of the interest rate reductions. Therefore, we expect that the net impact of the monetary policy decisions we have taken recently will be tightening.
The second criterion states that companies that through their acts or omissions are responsible for unacceptable greenhouse gas emissions can be excluded. This conduct-based climate criterion has yet to result in any exclusions. One of the issues that has proved demanding is whether a basic norm for ethically acceptable emissions can be defined. Another issue has been whether it is unethical to emit considerably more than the industry average if the emissions are part of an emission trading system. The Ministry of Finance provided important clarification of the application of the climate criterion in this year’s annual white paper on the GPFG. The clarification provides a solid basis for moving forward on the criterion. Conclusion The impact of climate change is already substantial. In 2018, extreme weather events affected about 60 million people.5 At the same time, the number of fatalities after severe storms and flooding has decreased in recent years. This is partly due to better disaster risk management. Chart: Lower Manhattan, 30 October 2012 The picture shows a Lower Manhattan in darkness after Hurricane Sandy made landfall in October 2012. One building obviously had a backup power system when the power supply failed – the headquarters of the investment bank Goldman Sachs. Let us take this as a reminder that contingency solutions must also be put in place for the economy, and not just to deal with power cuts. Extreme weather, policy measures and technological innovations have financial consequences for households, businesses and investors.

The overall risk, including climate risk, has been reduced. The Norwegian economy is also exposed to abrupt changes in operating parameters for oil and gas production through spillovers from offshore activities to the wider economy. We have long known that Norway’s offshore petroleum activities would be gradually reduced. If global climate policy proves to be stricter than currently expected, the decline in offshore activity may occur sooner and more rapidly than previously assumed. This will have consequences for Norway’s industry structure. Even though it is likely that the biggest changes in oil-related industries lie some years ahead, climate risk may also have an effect on the oil sector in the short term. There are perhaps signs of this effect in recent years’ oil stock prices. Chart: Valuation of oil stocks The price-to-book (P/B) ratio is lower for international oil companies than the average P/B ratio in the stock market, and this gap has widened in recent years. There may be several reasons for this, but we know that investors’ climate risk awareness has increased in the same period. Measures to influence industry structure are not within Norges Bank’s remit. However, if the decline in the oil-related sector were to occur abruptly, the spillovers to the wider economy could be considerable. Monetary policy is adjusted to changes in output, employment and inflation and can therefore support overall activity and employment in a period of restructuring. The responsibility for the restructuring itself lies elsewhere, not least with the business sector.
Any deviation would cause problems on the other policy measures, in particular the monetary policy and such a deviation may lead to change the direction and path ahead. If I may reiterate, fiscal support is very critical for monetary policy to be effective. It is therefore clear that the 2007 budget is a forward looking stage setting document which not only has extended the fiscal policy measures to assist sustainable growth in a number of ways but also provides a way forward through a well focused policy coordination. Although a temporary deviation from the path ahead may not be crucial, it is essential to closely monitor the program, (preferably on a monthly or quarterly basis) to ensure that all actors get back on the track during a shorter period and ensure that all are moving towards the right direction. 4  BIS Review 7/2007

Policy frames in the European Union Before discussing economic policy in Sweden in the event of a transition to the euro, something should be said about the European frames which this policy would have to comply with. These frames already affect the conditions for Sweden’s policy and will presumably do so even more in the future. Of the economic policy processes in the European Union, the most prominent are contingent on the Stability and Growth Pact from 1997. The primary purpose of the Pact is to ensure that budget policy in the member states is conducted so that no country encounters serious problems with debt because that could lead to costs for the Union as a whole and, in the worst case, to other countries being forced to bail out the ‘sinner’. The Pact contains binding rules and in well-defined extreme cases could even result in sanctions. In addition, there is a number of processes or rules whereby peer pressure and benchmarking are used to speed up the EU’s structural reforms. The central policy instrument is the general economic policy guidelines, which can be likened to a budget statement. Other instruments are, for example, the Luxembourg, Cardiff and Lisbon processes. All the above applies to Sweden, whether or not we adopt the euro, though the terms of the Growth and Stability Pact do differ in this respect; the rules for sanctions, for instance, do not apply as long as we are outside the euro area.
BIS Review 3/2007  1  Flexible approach by CBSL In the process of adopting Basel II, CBSL will endeavour to adhere to the Basel criteria as far as possible and to retain the spirit of the Accord. However, certain modifications have been made and will also be made in the future to suit local conditions. Since Basel II provides a menu of approaches for the measurement of risk to suit the level of sophistication of the banks, it is suggested that the banks in Sri Lanka adopt the simplest approaches, initially. Credit risk For the measurement of credit risk under pillar I, we have requested banks to adopt the Standardised Approach, which is very similar to the existing framework or Basel I and requires very little modifications to the existing risk management systems by banks. The key to the success of this Approach is the rating of counterparts. The banks should, as far as possible, encourage developing a culture of credit ratings. CBSL will consider the representations made with regard to reducing the risk weight applicable to below BB-rated entities initially in order to inculcate the rating culture, but this should not be taken as the norm as we expect higher ratings to be considered for the purpose. The Basel II Framework provides a preferential risk weight of 75% for claims that fall within the regulatory retail portfolio. The qualifying criteria for retail and SME loans that would fall within this portfolio have been modified to suit the local conditions and agreed with the banks.

In the last rounds of interviews with our regional network, an increasing number of companies reported that wage growth in 2006 will be higher than budgeted early this year. The level of unemployment that is consistent with stable real wage growth is uncertain and probably varies over time. We have assumed that increased economic integration across countries, both in the form of an increase in inward labour migration and intensified competition in product markets, may have a dampening effect on wage demands for a given level of unemployment. In the period ahead, a tight labour market is expected to result in higher real wage growth. Nevertheless, it is assumed that labour inflows will have a dampening impact on wage demands, so that real wage growth will be a little lower in the next few years than in previous periods of equally low unemployment. The upward pressure on price and wage inflation given the level of current resource utilisation, as reflected in the output gap, is estimated to be lower than in the previous expansion even though the unemployment rate is at approximately the same low level. This is due in part to high productivity growth in recent years. Growth in disposable income has been high in recent years. Lower interest expenses and relatively high real wage growth have resulted in an increase in household purchasing power. The rise in house prices may also have fuelled growth in private consumption.
Page 20 of 27  Figure 13 Contributions to revisions to 2021 GDP growth (1) (percentage points) 3.0  Increased fiscal transfers  Better beginning of year and agents' adaptation  Third pension fund withdrawal  Other (2)  2.0  1.1  1.0  0.7  0.4 0.3  0.0 1 (1) Built using midpoint of forecast range of March and June 2021 Monetary Policy Report. (2) Includes external sector and mining. Source: Central Bank of Chile. Figure 14 IMACEC scenarios consistent with 2021 GDP growth range (*) (index; 2013 average =100; seasonally adjusted series) April level + Common minimums 2020 average Growth 2021=9.5%  125 120  2020 Growth 2021=7.5%  2021 Growth 2021=8.5%  Considers that the economy remains in February’s level  115 110 105 100 95  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  (*) Colored area indicates period during which the benefits approved under the Common Minimums Agenda will be in place. Source: Central Bank of Chile.

Page 24 of 27  Jan-21  Table 1 Domestic scenario (*) (annual variation, percent) 2021 (f)  2022 (f)  2023 (f)  2020  Mar-21 Report  Jun-21 Report  Mar-21 Report  Jun-21 Report  Mar-21 Report  Jun-21 Report  GDP  -5.8  6.0/7.0  8.5/9.5  3.0/4.0  2.0/3.0  2.5/3.5  1.75/2.75  Domestic demand  -9.1  11.7  15.5  3.1  1.5  2.7  1.6  Domestic demand (w/o inventory change  -7.9  11.0  13.3  2.8  1.7  2.8  1.4  Gross fixed capital formation  -11.5  9.2  11.4  4.9  3.2  3.3  2.0  Total consumption  -6.8  11.5  13.8  2.2  1.3  2.7  1.2  Private consumption  -7.5  12.2  15.1  2.3  1.3  2.8  1.0  Goods and services exports  -1.0  3.5  1.1  4.3  5.4  3.7  4.2  Goods and services imports  -12.7  21.4  23.2  3.6  2.7  2.9  2.5  Current account (% GDP)  1.4  -0.9  -0.8  -1.6  -1.1  -2.4  -1.9  Gross national savings (% GDP)  21.2  19.1  20.0  19.3  20.1  18.9  19.8  GFCF (% of nominal GDP)  20.9  20.5  19.9  21.2  20.4  21.6  20.8  (f)=Forecast. (*) Source: Central Bank of Chile.
And the rising level of consumer debt means it would be reasonable to expect greater losses on it in our future stress tests. That might mean the system has a bit more difficulty passing future tests. If that were the case, a further strengthening of the defence line would be needed. We have already, in recent months, taken steps to strengthen banks’ defences against losses by raising the capital buffers they are required to hold on all their lending. 12  12  That was achieved by increasing the ‘Countercyclical capital buffer’ that banks must hold against their UK-related lending, from 0% to 0.5% of risk-weighted assets, and expect to raise it further, to 1%, in November. 14  All speeches are available online at www.bankofengland.co.uk/speeches  14  And to make sure this defence line is kept robust in the face of rapid consumer credit growth, we are accelerating this year’s test of banks’ consumer credit loans. By September we will have assessed whether the rapid growth has created any small gap in the line. If it has, we’ll plug it. The third of our three defence lines is direct restrictions on high loan to income mortgage lending. Lenders should not extend more than 15% of their new loans at or above 4.5 times the borrower’s income. And borrowers are subject to an affordability test that effectively varies that loan to income limit for their 13  individual circumstances.

Personal Contract Purchase (PCP) plans accounted for one in five new car purchases in 2006. Now they finance almost four in five (Chart 13). At the aggregate level, PCP is the new cash purchase. The Financial Conduct Authority, which regulates car finance, has expressed its concerns about a lack of transparency, potential conflicts of interest and irresponsible lending in parts of the car finance industry. It will explore and address those practices. 9  The Bank of England’s role is to manage any risks to the wider economy from this growth. And those should be kept in perspective. On average, those taking out PCP plans tend to have higher incomes and more savings than the population as a whole. 70% of PCP borrowers have above average income (Chart 14). Arrears rates on banks’ car finance deals are lower than on other forms of consumer credit. Moreover, the true burden of car finance to households overall is much lower than it seems at first glance. 9  Financial Conduct Authority (2017) ‘Business Plan 2017/18’. https://www.fca.org.uk/publication/business-plans/business-plan-201718.pdf 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  PCP plans commit the car buyer to around three years of fixed monthly payments with an option - not an obligation - to make a final balloon payment at the end of that period, to own the car outright (Chart 15). If those optional balloon payments are excluded, this car finance debt accounts for only 1.2% of aggregate household income.
Of course, fixed income and equity markets have different characteristics but perhaps a more important distinction is the role of heterogeneous beliefs and how this might be reflected in asset prices. The economics profession has made great strides in its use of expectations in models but one of the short cuts required to produce these great strides was the simplification to homogenous beliefs. For much of the period leading up to the crisis this simplification was of no consequence. However, as we now understand from sophisticated analysis of models with heterogeneous beliefs, it can produce high valuations for certain set of assets and large abrupt moves in certain market prices when leveraged positions are unwound.10 How does this unwind express itself in real time in the views and actions of market participants? First, the views tend to become even more dispersed, as do the views regarding what the central bank should do about it. Second, market participants become more suspicious of each other and rumors can spread like wildfires. Many participants take defensive actions which if one is tracking market prices at a daily frequency add tremendously to the inherent noise in high frequency market moves.11 More importantly, when the probability of a failure of a counterparty starts to increase the signal in market prices becomes a mixture of fundamentals and assessments of the likelihood of government intervention.

I believe this has broadened my own horizons and enabled me to interact with many different people from different cultures all over the world – creating and cementing many valuable friendships. The second reason is that the theme of this year’s book fair – READING TOWARDS A SUSTAINABLE ECONOMIC FUTURE – touches squarely on my own professional responsibilities as Governor of the Bank of Zambia. Our main pre-occupation at the Bank of Zambia is to help Government attain a sustainable economic future by working to keep increases in the average prices of goods and services low, the price of money (i.e. interest rates) low, and maintaining a stable exchange rate and financial system. This is the best way in which we can assist the Government as it works to advance the welfare of the Zambian people. Needless to say, one of the key pre-requisites for the Government in achieving this goal is the need to develop an educated and enlightened citizenry, which can effectively contribute to the development process. From the Bank of Zambia’s own perspective, the experience of central banks around the world is that effective communication with the public is a very important part of the success of central banks in achieving their objectives of price and financial system stability. The written word, although not the oldest form of communication, is perhaps the most powerful and enduring form for communicating and exchanging ideas. It is therefore indispensable in the work that we do.
Our forward guidance is clear as to the sequencing: “we expect [the key ECB interest rates] to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases.” There is no doubt within the Governing Council about this sequencing. In all events, we should not consider raising interest rates until we have reached a sustained adjustment in the path of inflation. Page 6 sur 8 4/ The fourth instrument is the provision of liquidity to financial institutions. In October 2008, we introduced the fixed-rate full allotment policy in all our regular refinancing operations. The maturity of this liquidity provision was then extended with the launch of 3-year longer-term refinancing operations (LTROs) and, later, targeted longer-term refinancing operations (TLTROs). In September 2017, a total of EUR 760 billion is still lent to euro area banks through TLTROs, which at over 7% of euro area GDP is substantial. III. Supplementing monetary policy in Europe For the future, we can be confident, because our monetary policy is effective and recovery is robust. But our confidence must be without complacency, because monetary policy cannot be the only game in town: it must be supplemented by national reforms, and by a strengthening of the euro area. We have been saying this for a long time, but now is the time to act.

BIS Review 150/2007  3  Observed inflation December 2007 2004 Q1  Inflation  2005 Q2  Q3  Q4  Q1  2006 Q2  Q3  Q4  Q1  2007 Q2  Q3  Q4  Q1  Q2  Q3  Q4  0.06 0.87 0.91 1.38 1.35 1.06 1.18 1.10 1.23 1.33 1.22 0.46 0.09 0.52 0.63  Inflation forecast of September 2007 with Libor at 2.75% and of December 2007 with Libor at 2.75% 2007 Q1  Forecast September 2007, Libor at 2.75% Forecast December 2007, Libor at 2.75%  4  2008 Q2  Q3  Q4  Q1  2009 Q2  Q3  Q4  Q1  2010 Q2  Q3  Q4  Q1  Q2  Q3  Q4  0.66 1.20 1.50 1.38 1.57 1.69 1.75 1.80 1.85 1.91 1.96 2.00  1.62 2.14 1.54 1.56 1.51 1.47 1.46 1.46 1.48 1.51 1.53 1.55  BIS Review 150/2007
A paraphrase can be used to describe the role of states in banking crises – states have had to become owners of last resort. But before the money goes in, make sure that the bank’s managers go out. You simply cannot rely on the same people who jeopardised the bank in the first place. It is also a signal to the markets that things are about to change in the way that the bank is run. Of course, the bank should continue to be run on purely market-based terms, even though the state may become a major, or even the only, shareholder. Another thing you must ensure, before you join the ranks of investors, is that the bank’s assets are conservatively valued. Otherwise, you risk overpaying and instantly transferring taxpayers’ money into the hands of existing shareholders. Diluting the owners’ share of the bank – or, in some cases, even taking over the bank completely – also ensures an equitable upside for the taxpayers over time. And this is important, as capital injection does not mean permanent ownership. The idea, of course, is to exit the bank as soon as this is possible in an economically justifiable manner. A good restructuring plan turns the odds of such an exit in your favour. That is the third lesson. Profit maximisation should be the guiding principle in this restructuring process. Maximising profits, in turn, hinges on banking skills. So make sure the restructured bank is run by the most skilled professional bankers you can find!

In short, the European Supervisory Authorities will provide supervisory authorities with the means to question other Member States’ supervisory practices and prudential decisions. Imagine what that could have meant for the UK, the Netherlands and Iceland in the Icesave case. Of course, this new European supervisory structure means loosening up national sovereignty of supervision. But if we want more effective supervision and crisis management, it is either that or forsaking economic integration. And given the benefits the single market offers, I do believe you would agree with me that forsaking economic integration is not an option. Principle 2: Act swiftly The new European supervisory structure is also relevant for crisis management in other ways. Apart from establishing European Supervisory Authorities, it also includes setting up a European Systemic Risk Board. The role of this risk board is to monitor the more macrooriented aspects of the financial system, seeking to identify the build-up of risks in the system as a whole – so-called systemic risk. The buzz-word is “macroprudential” supervision. And when such systemic risks are identified, the risk board delivers risk warnings and recommendations to the authorities in the country or region in question. For instance, a good set of first recommendations from the systemic risk board would be to urge certain European countries, including my own, to consider loan-to-value ratios and restrictions on foreign exchange lending. Listening to such warnings may prevent a crisis from occurring.