samchain/econo-pairs-v1 huggingface dataset:
In this FS Report, we emphasize that in recent times the Chilean financial system has seen no major disrupting events, and the information at hand indicates that it is in a good position to withstand the impact of stress scenarios. Both domestic and external payment systems have operated normally, while credit risk indicators have remained low. However, recent developments indicate a gradual increase in the latter. One important risk is that, if the economic slowdown continues as it has for some years, this deterioration might deepen. On the external front, the risks identified in the FSR are similar to those I just described for the Monetary Policy Report. Note that global uncertainty is still high, so going forward, the risks of revisions to the world economic outlook cannot be ruled out. Note also that possible increases in long-term interest rates in international markets, besides entailing a forex effect, might be transmitted to local rates and translate into higher funding costs for local agents. As I just said, the cost of local short- and long-term financing reached record lows, in line with market expectations for the MPR and the environment of low long-term external rates. In this context, institutional investors made moderate changes in the composition of their portfolios. In particular, the assets in layer 1 mutual funds continued to grow relative to the other funds; Life insurance companies continued to increase their positions in real estate investment; and pension funds increased their exposure in local bonds.

On the external side, euro area exports should continue to benefit from positive global demand conditions in 2005. I admit, we have seen some moderation in global growth rates following a period in which the world economy has experienced its strongest dynamism in many years. We view this moderation, however, as an orderly return to sustainable, and still robust, rates of growth. On the domestic side, investment has thus far been subdued, partly due to weak construction investment. Looking ahead, investment should be supported by the global environment and the continuing very favourable financing conditions in the euro area. In addition, improved earnings and greater corporate efficiency gained through business restructuring should support investment. As regards consumption, we see scope for it to strengthen further, particularly once employment prospects have improved more visibly. As with any assessment of the future, this outlook is surrounded by some uncertainty. In particular, there are risks to growth prospects stemming from unfavourable developments in oil markets. In this respect, let me emphasise a number of characteristics of the recent rise in oil prices. First, it is evident  BIS Review 66/2004  1  that recent oil price developments differ somewhat from previous oil price shocks, as they have been partly driven by buoyant global demand, and not only by constraints on the supply side. Second, oil prices, in real terms, have remained at a much lower level than in previous episodes. Third, the oil-intensity of production is lower in the euro area than it was in the past.
Zeti Akhtar Aziz: Transforming the East Asian insurers – time for action now Keynote speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 26th East Asian Insurance Congress “Transforming the East Asian insurers – time for action now”, Kuala Lumpur, 30 October 2012. *  *  *  It is my great pleasure to join you this morning at this 26th East Asian Insurance Congress. It was almost 24 years ago in 1988 that Malaysia hosted this event. Since that time, the global and regional financial and economic landscape has been dramatically transformed. During this period the world has also experienced more than a hundred financial crises, with the recent global financial crisis being the most severe. This has prompted wide ranging financial reforms by the international community to strengthen the resilience of the financial sector. The enhancements to the regulatory and supervisory frameworks have also had a far reaching and fundamental impact on how insurers manage risks in their businesses. In this highly dynamic and more challenging global environment, the insurance industry has continued to evolve and develop with the broadening of the product range and greater diversification of the distribution system. In Malaysia, the insurance industry, including the Takaful sector has also progressed significantly during this period, both in terms of growth and development. In this more recent decade, the penetration rate, as measured by the number of life policies to total population, increased significantly to 55 percent, from 31 percent in 2000.

This is prospectively very positive. A couple of years ago I asked around London who were the best analysts of banks. Pretty well all those named were current or past equity analysts. A measure of success of our reforms will be that some leading analysts will concentrate on debt rather than equity, on the downside risks: credit analysts. They will be needed. Maybe there are some already. The upshot is that withdrawing the safety net from banks will require the other parts of the financial system to be sound, because they will have to stand on their own feet. It is sometimes pointed out that the insurance industry – other than AIG – did not benefit from state support. But, of course, insurance companies holding bank debt were the direct  BIS central bankers’ speeches  1  beneficiaries of state support for the banking system. Regulators of insurers – including, in this country, prospectively the Bank of England through the Prudential Regulation Authority – will need to take the changed regime for banks into account. We no more want insurance to be part of a “socialised” financial sector than banking. Finally on the “whats”, a world in which bank debt is perceived to carry risk is a world in which, as I have said before, it may be helpful for banks’ management to be remunerated partly through subordinated debt rather than just equity. Management would then have a clear personal incentive to focus on and contain tail risks.
The unease on the financial markets has also contributed to falling long-term interest rates in Sweden, the euro area and the United States (see Figure 2). How does this fit together? Well, in turbulent times investors flee high-risk investments such as shares and turn instead to safe assets like government bonds from countries with a low credit risk. As a result, the price of bonds increases and interest rates fall. Basically, the financial unease is due to the problems with public finances, above all in southern Europe, and in these countries government bond rates have instead increased substantially (see Figure 3). This is because investors, as in the case of shares, believe that it is increasingly risky to invest in these assets, so prices fall and interest rates increase. There has also been a significant fall in commodity prices recently, which is partly because the emerging economies have also been affected by the international turbulence (see Figure 4). Strong demand from the emerging economies has been an important driving force behind the upturn in commodity prices in recent years. In parallel with the unease on the financial markets, there has also been a considerable decline in confidence in the world economy (see Figure 5). So what is it that is causing so much unease? Let’s begin by looking more closely at the situation in Europe.

When we look back at how things went in a few years’ time we should be able to continue to say that, despite the uncertainty abroad, “Sweden was OK!”  BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  BIS central bankers’ speeches  13  14  BIS central bankers’ speeches  BIS central bankers’ speeches  15  16  BIS central bankers’ speeches  BIS central bankers’ speeches  17  18  BIS central bankers’ speeches
A more positive alternative is to mutualise debt with more robust countries: this is, of course, the post-war Marshall Plan, but it necessitates a global or European solidarity that is unfortunately uncertain. However we do it, we will have to bear higher public debts for longer, even though the burden will be lighter if interest rates remain very low. And this brings me to monetary policy. 3/ How to use monetary policy? Here again, let’s begin with what is most certain: inflation should remain weak during the period; it had already fallen to 0.6% in France and 0.7% in the euro area in March. Of course, supply is restricted; but demand will only recover gradually, and oil prices are expected to remain low. Therefore, over the long term the Eurosystem will have to contend with, if not necessarily a risk of deflation, then at least inflation that is too low for the definition of price stability (close to 2% over the medium term), especially given that annual inflation has been running at only 1.3% for a decade. This will thus mean that we not only have the possibility, but also the obligation to maintain very low interest rates and ample non-conventional instruments, including public and private sector purchase programmes, long into the future. This low inflation – particularly if it is persistent – is fuelling some far more speculative and complex thinking on post-crisis monetary policy.

3 However, as in the case of the impact of consolidation measures on growth prospects, one could argue that the alternative to requiring a higher level of capital adequacy would be even worse. Without such requirements for banks with a low degree of capitalisation, there is a risk that the crisis will spread to other banks through poorer access to market funding. Although we ourselves do not belong to the euro area, we are still highly affected by developments there. Sweden is a small, export-dependent country and our most important export markets are in Europe. It is therefore of crucial importance to the Swedish economy that the euro crisis is managed in an orderly way. Can crises be avoided with different fiscal and monetary policies? As the European drama has unfolded, many observers have asked how we can prevent similar crises from occurring in the future. When, like me, you come from a central bank, it is natural to ask whether a different monetary policy had been able to prevent the crisis. Some analysts have identified the low interest rates that prevailed in many countries, and above all in the United States, for some years before the crisis as an important cause of unsustainable increases in indebtedness and property prices.
This is a normal ‘life cycle’ allocation of assets, where people entering retirement seek to reduce the risk in their investments, and aim for some stability in income. This coming shift in asset allocation towards bonds over the medium to long term is itself expected to add to the downward pressure on interest rates. 10. And low interest rates are themselves leading to increases in savings rates, particular among older people. It is debated between economists: whether low interest rates lead to  BIS central bankers’ speeches  1  higher or lower savings. But we are seeing how in some countries, older people responding to low interest rates not by going out and spending more, but by saving more so as to be able to assure themselves of a the level of income that they desire in retirement. 11. So we are in a situation where there are self-reinforcing forces. People are getting older, they expect to live for longer, they are saving more and they are allocating more of their funds to bonds. Interest rates remaining low as a result. Older people saving more as a result of low interest rates. The structural gap between savings and investment remains, in turn keeping interest rates low. A self-reinforcing cycle that we are going to have to live with for some time to come. 12. There is a second major factor that adds to this, which is the slowdown in the underlying growth of economies around the world.

While lacking a term structure on its own, this reference rate is robust and based purely on transaction data. 17. In early May, TMA completed a consultation with the industry on several technical refinements to HONIA. This is part of its ongoing initiative to further enhance the robustness of its benchmarks. It is now reviewing the feedbacks received, and will consider how best to put in place the relevant enhancements. 18. When these enhancements are done, TMA will work with the industry to promote development and trading of HONIA-based financial products. Later on, it will also try to promote trading in the OIS market, and hopefully develop an OIS curve from HONIA. But this would have to depend on market conditions. 19. While HONIA serves as an alternative to HIBOR, there is currently no plan to discontinue HIBOR. HIBOR has been in place for many years and is still widely recognised by market participants as a credible and reliable benchmark. Similar to a few other jurisdictions in the region, Hong Kong will adopt a multiple-rate approach. In other words, HONIA and HIBOR will co-exist in the market and market participants are free to choose between them. Meanwhile, TMA will continue to strengthen HIBOR to ensure that it remains in compliance with international standards. 20. Of course, we are facing the irony that if HIBOR remains, market players may see little incentive to develop and trade HONIA-based products. However, I encourage all market participants to start exploring how to incorporate HONIA into their business.
However, it must be noted that the economy desires much lower lending rates than so far recorded to make credit affordable and effectively contribute to expansion of economic activity. The external sector has continued to score remarkable improvement as lately reflected in a the resilience of the Kwacha against major foreign currencies, and the country posting in 2006, an estimated overall balance of payments surplus of US $ million compared with a deficit of US $ million in 2005. For instance, the Kwacha appreciated by 12.0% against the US dollar while the local currency gained by 10.4% against the South African Rand during the period end-December 2006 to 21st September 2007. This improvement largely occurred due to increased export, which mainly arose from continued high copper prices and complimentary higher export volumes coupled with the buoyant growth in non-traditional export earnings. The maintenance of an appropriate monetary policy, in the wake of a higher than expected inflation outcome in the first quarter of the year, also contributed to the resilience of the Kwacha. The developments in the Kwacha should not only enhance competitiveness of the country’s exports, particularly the non-traditional exports but should overall have a positive bearing on inflation developments in the coming months. Esteemed colleagues, the financial sector has continued to enjoy stability and growth this year, characterised by improved banking services and emergence of new products. The overall financial condition and performance of the banking sector has been assessed as satisfactory.

Another challenge, ladies and gentlemen, to a growing economy such as ours is the need to ensure availability of growth-supporting infrastructure. Inclusive of these are good trunk and feeder roads, communication facilities and sufficient and affordable energy supply, particularly electricity. Furthermore, current regional integration initiatives coupled with globalization, in part entail that Zambia has to appropriately re-position itself in the region. This will be with a view to create greater opportunities for expanded trade in the region and international markets as well as empowering the local business players. These and other challenges are for all of us as partners, to tackle by playing our respective roles with the aim of achieving stronger economic growth rates that will have a notable bearing on improving the standards of living of our people. Chairperson, as per the usual tradition, the topics for this Seminar, have been carefully selected aimed at not only educating and informing but also sharing views. Please as you discuss, you are encouraged to be broad not to confine your contribution to the topics  BIS Review 113/2007  3  presented you. We will welcome views on various issues within the Bank’s mandate. You are further encouraged to interact with members of staff outside the Seminar sessions. Let me again pay tribute to the Media for the interest it has shown and subsequent active role it has continued to play in the economic affairs of our country and in particular matters related to the mandate and functions of the Bank of Zambia.
Moreover, however, unemployment in Spain has historically shown very marked cyclical changes: in episodes of crisis, the unemployment rate has easily exceeded 20%. This means that each recession expulses extensive groups of workers from the market, particularly those with less work experience, low skills and, generally, those on temporary contracts and, therefore, with a lower degree of protection. True, the marked temporary employment ratio in the Spanish labour market shows its most damaging effects in periods of crisis. But it also has adverse economic effects in expansionary phases (e.g. in terms of firms’ and workers’ human capital investment decisions). In addition, insofar as the temporary employment ratio is essentially affecting the young, whose unemployment rate is very high, this Spanish labour market shortcoming also influences key decisions in people’s life cycle such as those relating to household formation. For all these reasons, reducing the high duality of our labour market is, in my view, an inescapable objective. Thus, employment protection mechanisms should be reviewed under the prism of squaring employee protection with flexibility needs, but, above all, with the aim of achieving a fairer distribution of protection among workers with a different contract status. We should also recall how, before the current crisis, almost 43% of the unemployed had been seeking a job for more than a year and that around 30% had been looking for more than two years.

In Spain’s case, in a setting in which the state of alert affected the last two weeks of Q1, we witnessed the biggest-ever contraction in GDP historically in a single quarter, namely a quarter-on-quarter rate of 5.2%. This decline was one of the most pronounced in the euro area, and was in response to several circumstances. These included a relatively greater severity of the lockdown measures (given, too, the greater intensity of the pandemic) and the presence of certain structural factors in our economy that make it more vulnerable to a shock of these characteristics. The most significant factor here is perhaps the high weight of the tourism-related sectors, which have been particularly affected by the social distancing measures. The reduction in hours worked, estimated at 5% in Q1, was also the biggestever in the time series and highlights the marked impact of the various measures affecting movement on the labour market in the early stages of this crisis. Admittedly, the restrictions on movement were gradually eased as from early May. But the state of alert ran for much of Q2, whereby a notable increase in the decline in GDP and in employment in this period is to be expected. The latest Banco de España macroeconomic projections, published in June against a background of unusually high uncertainty, posted estimates of quarter-on-quarter declines in activity in a range between -16% and -21.8%. And the information since available tends to confirm that the decline in economic activity in Q2 as a whole will have been in this range.
We have increased the required equity capital held by banks – the first loss absorbing element of their liabilities. We have required that hybrid debt – equity instruments have automatic and transparent triggers which are not exercised only by an event that cannot happen. In the UK, banks have set the trigger for conversion to equity high enough at a 7% common equity tier one capital ratio to seek to ensure that conversion happens well before the bank has run out of capital. This is the right thing to do. We have introduced liquidity regulation designed to enable banks to withstand the loss of more footloose, short-term wholesale funding, which has gone alongside a sharp shrinkage by banks in their use of that funding. In the UK, we are introducing structural reform or ring-fencing which will provide for an internal separation inside the major banks so that the so-called qualifying EU customer deposits must be inside the ring-fence. Being inside the ring fence does not I should emphasise protect against all risk; indeed, the crisis saw the failure of a number of banks that were predominantly of the same nature as a ringfenced bank will be. But it does keep the balance sheet on which most customer deposits will appear in the large UK banks in a more simple state, and that should be conducive to effective governance and supervision without being burdened with great complexity, and also facilitate recovery and resolution actions should they be necessary.

First, greater clarity on liabilities should encourage more appropriate matching with assets in a way that was absent in the run-up to the crisis – some assets suit a deposit contract, some do not. Second, resolving failed banks without the use of public money depends on a very strong delineation of bank liabilities to make clear what can be bailed in. This is a key to unlocking the answer to the too big to fail problem. Third, as the Bank of England announced in December, we are now in a position to clarify the expected steady state regime for bank capital and because we can distinguish going concern capital  BIS central bankers’ speeches  3  and thus loss absorbency from resolution or gone concern absorbency, we can put a lower number on the former. Clarity is therefore a good thing when it comes to balance sheets. Put like that, the wonder is that so much was unclear in the previous system. And, finally, the same principle holds for assets under management. Make sure investors know the characteristics of the assets they hold and that they are not promised access to their investment on terms or with a promise (explicit or implicit) that is out of line with what financial markets could deliver. Thank you. 4  BIS central bankers’ speeches