samchain/econo-pairs-v1 huggingface dataset:
Banks need to develop a laser like focus on wrong-way risk, where the value of collateral held as security falls in the very situation where the counterparty defaults. And to consider if attempts to realise collateral might further add to negative price dynamics. Stress testing is also needed across sectors to understand how correlations in risk exposure can lead to correlated behaviours in stress. And stress tests need to account for institutional structures, governance and processes for liquidity management, to capture examples like the LDI event above, where DB schemes had assets available but were simply unable to get them to where they needed to be quickly enough. Bank supervisors can play a role in limiting the risks from leverage in the non-bank system to the core financial system through strengthening of risk management practices of dealer banks and prime brokers. My supervisory colleagues are indeed taking steps to ensure this. [13]  Let me turn finally to the steps financial stability authorities are taking. And where, unfortunately for the policy community, the challenges we face are complex, reflecting the large number and variety of institutions involved, and as the system of marketbased finance is global, meaning effective reform needs to be co-ordinated across jurisdictions. The FPC has put vulnerabilities in the non-bank financial system at the core of its work in recent years.

We also run surveys that provide information on exposures to hedge funds. But these provide only a partial view of portfolio leverage: either because they do not provide a link between borrowing and investment activities; or because we only see part of the portfolio due to non-banks’ multi-jurisdictional presence; or because the data are simply not sufficient to assess the risk of leverage. [19]  Given the global nature of non-bank business models, it is essential that transparency and data availability are enhanced through international efforts, and that authorities have the right metrics to assess the risks of leverage. [20] It is encouraging to see progress being made, for example by the SEC. [21] Beyond improving transparency, regulators will need to consider how best to ensure leverage is well managed. These could, for example, include broad market-wide measures such as market regulations to ensure excessive leverage is better controlled by market pricing and margins. Some international work is underway. The BCBS-CPMI-IOSCO margin group has published its final report on margin practices. [22] The report recommends policy work in six areas[23] – including increasing the transparency and predictability of margin calls, evaluating their responsiveness to stress, and enhancing liquidity preparedness by clearing members and non-banks. As part of the ‘next steps’, there is already work underway evaluating the responsiveness of cleared and uncleared margin models. Finally, there are important questions about the role of central bank balance sheets.
François Villeroy de Galhau: The future of the euro area - from the "impossible trinity” to the "growth triangle" Text of the 6th Annual Tommaso Padoa-Schioppa Lecture by Mr François Villeroy de Galhau, Governor of the Bank of France, at the 6th Annual Tommaso Padoa-Schioppa Brussels Economic Forum 2017, Brussels, 1 June 2017. * * * ​I am grateful to Carine Bouthevillain, Bruno Cabrillac, Laure Carrel, Pavel Diev, Marine Dujardin, Pierre Jaillet, Eloïse Lecouturier, Céline Mistretta-Belna and Edouard Vidon for their assistance in preparing these remarks. Ladies and gentlemen, It is a pleasure to be here in Brussels and to speak in front of such a distinguished audience. For my generation of modest European architects – I was in Maastricht 25 years ago – Tommaso Padoa-Schioppa is one of those great – almost mythical – Italian figures who engaged in this “Kantian quest for European unity”1. So I am honoured to give a lecture named after him. He would certainly have been very pleased that the majority of French people clearly expressed their attachment to the euro on the occasion of the French presidential election. Giving fresh momentum to the European project is indeed one of the priorities of the new French President. And although I was invited several months ago, and although the Banque de France is fully independent of the government, I like to think that my presence here this morning is a sign that there is renewed interest for the voice of France in Europe.

Latest estimates from Statistics Iceland put the figure at 4%, which is somewhat higher than the Central Bank assumed in its updated macroeconomic forecast published earlier this month. Statistical evaluation of output growth in 2003 could still change when estimates are revised, which illustrates the uncertainty that surrounds recent and current economic developments and compounds the uncertainty about the future that monetary policy formulation always faces. Be that as it may, output growth was clearly robust and is explained above all by a rapid increase in national expenditure after two years of contraction. Private consumption growth also picked up and investment soared after a sharp recession, primarily due to the impact of the hydropower and aluminium projects that were launched during the year, along with investment in housing. An interesting comparison can be made between output growth in Iceland and other countries, especially the euro area which is often used as a frame of reference. Roughly speaking, from 1996 to 2001 growth in Iceland was two to three times higher than in the euro area. In 2002 the euro area performed better, but in 2003 growth was estimated at 0.8% in the euro area while it was 4% in Iceland. The difference is even more pronounced between Iceland and the largest euro countries, Germany, France and Italy, whose economies have been sluggish for several years. This large  BIS Review 18/2004  1  difference in growth explains much of the interest-rate differential that has prevailed between Iceland and that area.
It bears repeating that a fiscal rule framework that ensures the sustainability of public finances is absolutely necessary for the smooth functioning of the monetary union. 13  The reform should align the framework with the structural economic transformations that have arisen since the very creation of the monetary union, including the developments in long-term interest rates and the potential growth of the economies, which are fundamental determinants of debt sustainability. These developments, which have been uneven across countries, together with the high disparity of the Member States’ current budgetary imbalances, would require rules that take a more individualised approach. The current framework also needs to be simplified, for example by establishing a rule for government expenditure growth that is anchored to the government debt-to-GDP ratio. Its hitherto scant capacity to ensure that countries build up fiscal buffers in good times for use in crises must also be improved. This requires improving the design of the system of incentives governing compliance with fiscal rules and possibly strengthening the role of independent fiscal institutions such as the Independent Authority for Fiscal Responsibility (AIReF). Making headway in the expansion of the public and private risk-sharing channels in the EU is also essential. In this regard, we need a permanent macroeconomic stabilisation mechanism in the euro area that complements monetary policy. To do so, it needs sufficient resources and revenue-raising and borrowing capacity.

Zdeněk Tůma: The importance of statistics - a central banker’s view Introductory speech by Mr Zdeněk Tůma, Governor of the Czech National Bank, at the conference “Statistics - investment in the future”, Prague, 6 September 2004. *  *  *  Good morning, Ladies and Gentlemen, Let me join my distinguished colleague, Head of the Czech Statistical Office, Mr Fischer and welcome you to this conference at the Czech National Bank’s Congress Centre. One reason the Czech National Bank is co-organising this event is our own involvement in the statistical field and consequently a close co-operation with the Czech Statistical Office. Statistics is somewhat overlooked by the general public who does not perceive it as an area of primary significance, unlike matters such as privatisation, corruption, bankruptcies, problems of the banking sector, functioning of the courts, law enforcement and the other major transformation issues. The less statistics is the subject of attention-grabbing articles and reports in the media, the more systematic work it requires. Work that is often very demanding, particularly as regards to data consistency and detailed profiles. Indeed, it is the level of detail which is subject to sensitive evaluation. That is why, one of the most difficult tasks in statistics is to strike a balance between the amount of information required and the burden laid on respondents. Statistical information is used not only for passive monitoring of past developments and their disclosure in statistical publications, but also as a basis for real-life decision-making by economic agents.
This year marks the 60th anniversary of the Treaty of Rome that created the European Union and the 25th anniversary of the Maastricht Treaty that created the Monetary Union. Further progress is needed. The institutional architecture of the Economic and Monetary Union remains incomplete in a number of aspects. The crisis has exposed structural weaknesses in our construction and has forced us to address them. The repair has started with the creation of 1/2  BIS central bankers' speeches  the banking union. But the work is far from over and the challenges we face go beyond Economic and Monetary Union. They pertain to security, migration, defence, and generally all those challenges that can be addressed only by pooling sovereignty. And these challenges are greater than in the past. Today we can sense a rising wave of energy in demanding joint European action. The European Union and the euro always commanded the support of the majority of European citizens, but, often, it was only the vocal opposition that was heard. Now this silent majority has regained its voice, its pride, and its self-confidence. Only by working together can the nations of Europe overcome these challenges. The opportunity for progress is real. Values and judgement lie at the heart of all our undertakings. But they need to be supported by continuing research, ever increasing knowledge, and uncompromising examination of facts.

Mario Draghi: Response on receipt of an Honorary Doctorate from Tel Aviv University Speech by Mr Mario Draghi, President of the European Central Bank, on the receipt of an Honorary Doctorate from Tel Aviv University, Tel Aviv, 18 May 2017. * * * Ladies and gentlemen, It is my privilege to speak to you tonight, on behalf of all those whom you distinguished by awarding an honorary doctorate of the University of Tel Aviv. We come from different fields of human endeavour. Politics, policy, business, history and of course fundamental research. Our achievements are diverse. But they are all based on careful accumulation, experimentation and exploitation of knowledge. Knowledge created and fostered by universities such as yours. And I cannot but detect the profound influence of this search for knowledge in my memory of recent events. The eruption of the global financial crisis in 2008, and the subsequent sovereign debt crisis in Europe, caused a deep recession worldwide, a sharp increase in unemployment and exposed the incompleteness of some parts of the EU institutional architecture. Fertile conditions to give voice to populist and nationalistic rhetoric. But that period of crisis was also conducive to improving our understanding of economic and political forces, and to translating this new knowledge into action. The crisis has thus resulted in a form of creative destruction, where established paradigms have been critically revisited, where flawed practices have been exposed and replaced by sounder ones and where new research addressed previously neglected aspects of our societies.
BIS central bankers’ speeches  3  development of policy wordings according to the customs of what would become known as Lombard Street. The contracts written around this time – which de-coupled the insurance risk from the financing of voyages such that there was a genuine insurance element – related to popular, often expensive, commodities like woollens, iron and grain. So it is little surprise that disputes arose when adverse events took hold, particularly when risks were written across borders. In addition, it became easy to enter into dishonest practices, for example by finding multiple brokers to write the same risk and then cashing in several policies for the same insured event. This brings us to the first, to my knowledge, serious participation of the British state in the affairs of insurers: disputes. These disputes led to the involvement of the judicial system, with high volumes of cases referred to the Privy Council. When this situation became untenable, the Privy Council established a tribunal (later known as the Court of Assurances) to which seven merchants (along with a Judge of the Admiralty and one civil and one common lawyer) would report twice a week (Monday and Thursday) to resolve disputes. This group had authority from Parliament to commit underwriters to prison if they failed to meet their obligations 7. In 1575, the Privy Council ordered the Lord Mayor to compile some rules since no body of law existed to determine the resolution of insurance disputes.

By the 1970s, an era of supervision – as distinct from regulation – had begun in the UK. The more recent history of insurance regulation over the last century is a major topic in its own right, so I only propose to outline a few points. In 1923, the Industrial Assurance Act introduced a Commissioner to discharge statutory powers on behalf of the Board of Trade, with the idea of specific regulatory bodies introduced 21. By 1946, the regulatory framework had expanded to include motor, aviation and transit insurance and, significantly, the deposit system was replaced by a more sophisticated solvency margin which specified that a particular margin of assets over liabilities should be maintained. 22. A string of high-profile failures in the 1960s and 1970s – including the failure of Fire, Auto and Marine which left 400,000 (mostly motor) policyholders uninsured, and an even bigger failure in 1971 when Vehicle & General, with 1.2 million policyholders, collapsed – led to demands for further reform 23 at a time when a wave of consumer protection laws beyond the insurance sector had put regulation firmly on the agenda in any event. Relatively speaking, up until the 1970s, individuals running insurance companies attracted scarce regulatory attention. This all changed in the 1970s when conditions around the fitness and propriety of senior individuals were introduced.
Miguel Fernández Ordóñez: The Spanish experience with banking system restructuring – some lessons Opening address by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the Bank of Spain Seminar – Spanish Day, ADB Annual Meetings, Madrid, 6 May 2008. *  *  *  Good morning ladies and gentlemen, I would like to welcome the participants in the Asian Development Bank Annual Meetings to the Seminar organised by Banco de España on the occasion of the Spanish Day of this year's Meetings, which conclude today. I hope that you are enjoying your stay in Madrid. I also hope that, after so many interesting meetings and discussions we will be able to provide you with new food for thought. The stakes are high, but I think that the topics selected for the two sessions of this Seminar and the distinguished panels of participants will be up to the challenge. Indeed, I am convinced that the discussions this morning will raise a number of interesting reflections. They should help us frame a better understanding of the important economic and financial challenges facing a region like Asia, which has become increasingly relevant for the world economy. Specifically, the aim of the Seminar is to reflect on how the financial system can be an instrument to rebalance and foster growth in the region. In this context, I believe that the Spanish experience on banking system restructuring – which is widely viewed as a success story – can provide some interesting lessons.

Most have accumulated massive international reserves, well in excess of what would be needed for precautionary reasons. All in all, this paints a very different picture as compared to past episodes of global turbulence, when these economies used to be not only “influenced” by the ups and downs of the changing risk preferences in global financial markets, but simply “driven” – even “drowned” – by them, sometimes regardless of their economic fundamentals. In my view, this separation from the main stream of the turbulence constitutes an achievement in itself. From other stand point, it is certainly striking that in this period of global financial turbulence inflation is identified as the key economic challenge for emerging economies. Indeed, the rise of inflationary pressures on food prices derived from the commodity boom, is becoming a very worrying concern. The large change in relative prices that underlies this prolonged boom is having a stronger impact on developing economies, with very negative and substantial effects on the well being of the poorest portions of their populations. Therefore, as inflation creeps up the concern of policymakers deepens, not only in the sphere of macroeconomic stability, but beyond. In connection with this, the fact that monetary policies have remained focused on inflation stability in most emerging market economies is an additional novelty to mention in the context of the present turmoil.
We do not pursue a zero failure regime and we don’t have aspirations to further strengthen this protection as part of the Solvency II review. To the extent that there might be some wider benefits to reduced levels of protection, we would need to weigh these carefully against the costs to policyholders and the wider economy – especially when considered over the long terms for which many insurance promises persist. In coming to this view, we are particularly mindful of just how important the UK insurance market is, and how large the sector is relative to our economy3. The London Market is competitive, in 2/6  BIS central bankers' speeches  part, precisely because policyholders are confident their claims will be met. And as discussed, the life sector is responsible for paying retirement income to millions. This retirement income underpins a significant amount of spending, and much of it is provided in a way – via annuities – in which the investment and longevity risks are borne by insurers – so the security of that source of income and spending depends on the soundness of the life insurance sector. There is a growing degree of consensus around the world, exemplified by the work of the International Association of Insurance Supervisors (IAIS), over the financial standards to which insurance should be held.

But the pooling of savings within Life insurance companies and the willingness of policyholders to commit their savings for the long term also allows those savings to be channelled into new types of investment – ones that would be difficult or impossible for individuals to access directly, but which will play an essential part in the recovery and in meeting the challenges of the 21st century. And our data show that insurers are investing in ever more diverse and novel asset types, which often represent very long-term commitments. A willingness to innovate is to be welcomed. There is nevertheless a flipside to this novelty – the lack of a long history to guide the selection and risk-management of these assets, or to show how they may perform under various possible stress scenarios. So there are new sources of uncertainty to contend with, alongside those that insurers have been managing as their bread and butter for hundreds of years. Insurers, and we as their prudential regulator, have a responsibility to understand and respond to new uncertainties, some of which may play out over a very long horizon, to ensure that policyholders’ trust is repaid. Ensuring adequate policyholder protection is clearly a good in its own right – policyholders are consumers of a financial product, which may be very significant to them and their families, and they deserve to be protected. But it goes further. Securing policyholder protection upholds policyholders’ confidence and trust in the face of uncertainty.
Based on the experience in my own country, Croatia, I would say that we have unfortunately somewhat neglected the development of human capital in the last ten years of transition. b)  Social capital  New literature is trying to explain the complexities of various phenomena by social capital (Collier, 1998, Fukuyama, 2000). It is clear that for growth we need not only physical and human capital, but quality social capital as well. Social capital can be described as features of social organisation, such as norms, trust, networks, etc., that facilitate coordination and cooperation among the group for the mutual benefit of the group. A group can be anything from a household to the nation. In the production process it is an addition to physical capital (machines, tools) and human capital (accumulated knowledge). Social capital can enhance the benefits of both investments in physical and human capital. One may distinguish between government social capital and civil social capital. Government social capital encompasses government institutions that influence people’s ability to cooperate and get mutual benefit out of it. Examples are: the rule of law, enforceability of contracts, civil liberties. Civil  2  The original Latin saying is: Navigare necesse est, vivere non necesse est. BIS Review 43/2000  4  social capital includes: common norms, values, informal groups or networks that influence the ability of people to work together. Both of them resolve, i.e. overcome the collective action problem (the prisoner’s dilemma). Trust, as promoted by social capital, reduces uncertainty and thus reduces transaction costs.

Therefore it seems reasonable to  3  BIS Review 43/2000  argue that transition economies should pay special attention to formal education, and other forms of training and research. As the empirical evidence suggests (Flanagan, 1998), return to schooling began to rise rapidly during the transition. Relatively soon, they approximated those in many market economies. Under central planning, the main distortions in human capital formation were the overvaluation of vocational training and the undervaluing of university education. However, the transition process has quickly started to correct this shortcoming of socialism. Formal schooling need not be the main factor in developing human capital. Let me just mention that according to Lucas (1993), the most central feature of human capital accumulation for growth is learning on the job (learning by doing). For this to happen, we need both managers and workers to be constantly exposed to new challenges, to move up on the “quality ladder”. In the globalized world of today it seems that one of the best ways to be exposed to new challenges is by exporting. An old Latin saying could be paraphrased into: “Exportare necesse est, vivere non necesse est”.2 By opening up the economy, we are promoting human capital, which in turn is essential to growth. A similar approach can be used to argue for more foreign direct investments (FDI) in transition economies. FDIs bring not only physical capital, but: new organization, know-how, etc which then increase “domestic” human capital.