samchain/econo-pairs-v1 huggingface dataset:
They claim these involve too much cost. But these are the rules of the game. The fact is that we at the Riksbank have spent considerable time estimating the effects of the regulations to be introduced. Next week we will publish some our estimates of the effects in our Financial Stability Report. And our calculations show – even if they, like all estimates are somewhat uncertain – that the negative effects will be fairly limited. Above all, the costs for the banks are expected to be slightly higher. It is expensive to create new systems and establish new routines to manage risks and money flows. Holding more capital means that one ties up money that could otherwise have been lent out and generated interest income. And the same applies to holding more liquid assets; there is a cost in the form of lower interest income than one would have had if the funds were instead lent out. The banks will probably pass on a small part of these costs to their customers in the form of slightly higher lending rates. But here we are talking about changes of some few tenths of a percentage point for the average customer – perhaps slightly more for households and less for companies. One can probably also expect a dampening effect on the banks’ profits, and it is fairly natural that the required rate of return for bank shares will decline as the banks become more secure. The banks may also experience increased costs for long-term funding.

When the acute phase of the crisis is over, the memory fades with the ashes and interest in crisis prevention work and regulations for crisis management soon wanes. It is better to strike while the iron is hot. The Basel Committee has achieved a difficult balancing act. Regulations are needed to prevent crises, but wrongly-constructed or overly rigid regulations can have a negative effect on the economy if they make it more expensive or difficult for households and companies to borrow. The whole reform package is not yet complete in the sense that all of the details have been worked out. But agreements have been reached on several major issues and so far we at the Riksbank consider that the proposals presented attain a reasonable balance. Part of the compromise has involved a long period of implementation for the various parts of the regulatory framework. Some parts need not be fully introduced until 2023. It is reasonable to have a transition period in which the banks can adjust. But at the same time, one may worry that it is too long in some areas. It is important that all parts of the framework are in place before new turbulence or even new crises arise in the financial system. The  BIS Review 159/2010  1  longer time that passes, the greater the risk that interest in implementing the changes will wane. But what exactly does the Basel proposal involve? What consequences will it have? How will our Swedish banks, households and companies be affected?
While these trends tell us something about relative patterns of global interconnection, they leave unanswered the question of whether global finance is a truly integrated network. To gauge that, consider an alternative measure of global capital market integration – the correlation between national saving and investment rates. From Feldstein and Horioka (1980), we know that this correlation provides a proxy for capital market integration. For example, a savings/investment correlation of one indicates a closed capital account: all domestic investment needs to be fully financed from domestic saving. At a global level, this  2  BIS central bankers’ speeches  would signify something close to global financial autarky. By contrast, a correlation of zero implies that domestic investment can be fully financed on global capital markets. This would signal something close to perfect capital market integration. So saving/investment correlations of zero and one define the outer limits of global capital market integration. Chart 3 plots this correlation coefficient over the same 140-year period shown in Chart 1. Broadly-speaking, the two series track one another fairly closely. But Chart 3 now allows us to say things about the absolute degree of capital market integration. And what a rollercoaster ride it has been. During the first period, from around 1880 up until the Great Depression, global financial integration sat roughly mid-way between its outer limits. Integration was high-ish, but far from perfect. For around a fifty year period, from the 1930s through to the 1980s, global finance then went into hibernation.

This shows the results of a simulation of a hypothetical financial network of firms. These have differing levels of financial strength, measured on the x-axis. Think of this as a country’s level of official reserves or a bank’s level of liquid assets. On the z-axis is a measure of network interconnectivity – the scale of cross-border assets or interbank exposures. Finally, on the y-axis is a measure of systemic risk – the incidence of default across the network, whether of countries or banks. As the network becomes better integrated, for a given degree of financial strength, systemic risk remains low. We operate in a zone of systemic stability. That is because the network is operating as a shock-absorber, a network insurance device scattering risk to the four corners. So it was pre-crisis. But for a large-enough shock to financial strength, the system fundamentally changes shape. The network flips to a zone of systemic instability. That is because it is now operating as a shock-transmitter, a network incendiary device – and the greater the degree of integration, the sharper this knife-edge. So it was during the crisis. This is the robust-yet-fragile property of connected webs. The global financial crisis provided no better example. The flat earth that was the Great Moderation gave way to the fragile planet that was the Great Recession. Risk-sharing gave way to risk spreading, risk distribution to risk contagion. This was by no means an isolated incident.
As Marvin Goodfriend will discuss, part of this was due to appropriate market pricing of credit risk, but other aspects reflected segmentation in the money markets that was exacerbated by a pronounced lack of dollar liquidity. Some of this decline in money market functioning was not reflected in the effective fed funds rate as it was measured at that time. 7 The situation today is very different for a number of reasons. The Federal Reserve has the authority to pay interest on reserves. Many countries that run a “corridor” system of monetary policy implementation have had this authority for a long time and could transition from reserves scarcity to a state of more plentiful supply of liquidity while maintaining adequate control of their interest rate, as I noted was the experience for the European Central Bank. In addition, the Desk has augmented an old tool, reverse repurchase agreements, or RRPs for short, that allow an expanded set of counterparties to invest with the Federal Reserve either at a fixed interest rate or up to certain quantity. 8 With the advent of interest on reserves, RRP, and the Term Deposit Facility mentioned previously, policymakers have more tools for influencing market interest rates, and sterilization is no longer necessary to control rates with large amounts of excess reserves. Perhaps the most important development is the successful liftoff of the federal funds rate in December.

Although we don’t know yet whether the interest rate control exhibited to date with the new tools will continue at different settings of the target range, so far, things have gone as well as could have been expected. While other countries have operated a “floor” system before, no country with as complex a financial system as the United States, with its wide variety of bank and nonbank institutions, had ever attempted to raise interest rates with such a large supply of excess reserves. The success of the new tools so far has been important for instilling confidence that policymakers can control overnight interest rates at levels appropriate to meet their goals. It also means that, in future, the Federal Reserve will not have to face the same technical constraint that leads to a conflict between easing strains in broad money markets and controlling the policy rate whether it uses a floor or corridor system. This could make the Federal Reserve System more agile and better able in future circumstances to provide the elastic currency that has  6  The Term Deposit Facility was established to facilitate the conduct of monetary policy by providing a tool with which the Federal Reserve can manage the aggregate quantity of reserve balances held by depository institutions. An increase in term deposits outstanding drains reserve balances because funds to pay for them are removed from the accounts of participating institutions for the life of the term deposit.
For those of us in charge of economic policy in our countries, it is absolutely essential that we strive to address these imbalances if they exist, and at the same time that we do not create them through our decisions. Over-stimulating the economy when output gaps are narrow and inflationary pressures have risen could lead to imbalances. I trust that they are not as sizeable as those of the developed world, but in any case solving them is always costly. On the other hand, it has taught us the relevance of maintaining and improving a good macroeconomic framework. In Chile, this framework rests on four pillars. First, monetary policy management is based on a flexible inflation-targeting regime, conducted by an autonomous central bank and supported by a floating exchange rate system. Second, a fiscal policy that is accountable and predictable thanks to a structural balance rule. The significant amount of savings accumulated during the run-up of copper prices has been a crucial factor in bolstering the resilience of the Chilean economy and in providing a countercyclical fiscal boost. Third, a high degree of commercial and financial integration with the rest of the world. Finally, a sound financial system, with globally integrated, well capitalized, and adequately-regulated banks. Our countries have suffered decades as a result of mistaken economic policies. The Great Recession showed that our current state of preparation to confront and mitigate the impact of an adverse scenario is much better than in the past, and that it is the path that we must continue.

A first cost is that it may create confusion as to the objective of the monetary authorities: inflation or the exchange rate. In our case, we have dealt with this through transparent mechanisms whereby we anticipate the amounts and terms of interventions, and by maintaining a flexible exchange rate. In addition it has always been clear that the exchange rate is not an objective and the main goal of the Central Bank is price stability. A second cost is of a financial nature. Foreign reserves are invested in highly liquid and secure instruments of developed countries, whose interest rates are lower than those of domestic instruments used to finance their acquisition. Conversely, the benefits of having these reserves are the enhanced security they provide in case of an abrupt cut of external financing. These benefits are hard to measure, but it is reasonable to expect that they will decline as the availability of reserves increases, as has been occurring in Chile since 2008. Allow me to express some final thoughts. Final thoughts News during these last weeks have led us to a scenario in which the effects of the deteriorating external situation that we forecast some time back are not evident and in which inflationary pressures stemming from a higher cost of energy have resurfaced. Hence, if a few months ago it was clear that the most likely scenario for monetary policy in emerging economies was a further loosening, today it is much less clear so.
No one can seriously argue that the financial reforms have, up to now, restricted the credit supply, and hence growth, in France. At the same time, it should be stressed that the French banking system – one of the most resilient in Europe and the world – has fulfilled its role in financing the economy. Beyond the French banking sector, the Financial Stability Board has also noted an improvement in the resilience of all financial institutions at global level, with no decline in the provision of financing to the real economy.13 I’d just like to say a few words on what seems to me to be a false debate. Although the recovery has indeed been slower in Europe than in other geographical regions, this cannot be attributed to overregulation. The scale of the euro area’s difficulties can in part be explained by the fall-out from the debt crisis which has affected its members since the start of the 2010s. In addition, certain more specifically European or French problems, such as the slowdown in productivity or the lack of sufficient structural reforms, are also limiting the acceleration in growth. Lastly, for the time being at least, the regulations have, on the whole, been applied at least to the same extent in the United States as in Europe. III. Five challenges for a balanced regulatory framework That said, I will be careful not to be utopian about these new regulations.

One reassuring point is that the major UK banks and building societies were tested against precisely this scenario by the Bank of England in 2015 and demonstrated they had the resilience to weather such a shock and carry on lending to the UK economy. Conclusion Looking back over the last two years, I think that the slow healing story can still explain where we are and provide a guide to our future prospects. But the story has to be adapted in the face of more UK and world weakness than I had expected and this weakness might be signalling that there are deeper structural factors at work. Nonetheless, my central projection remains that the UK economy will continue to grow solidly and that inflation will return to target over the next few years. But, as always, policymakers need to be alive to the possible meaning of disappointments, to be very sensitive to the possibility of changing temperatures around them, and to the risk of unfortunate events. We have a range of tools at our disposal and should be ready to use them whichever risk materialises. BIS central bankers’ speeches  7
I think of the Takeover Panel, for example, or the work of people like Adrian Cadbury - under the auspices of the Stock Exchange - in developing corporate governance standards, or of the professional organisations which set and police accountancy rules. A similar approach was followed in relation to many commercial banking issues - through approved codes of conduct in relation to their dealings with customers accompanied by an ombudsman scheme. We were in this country sensitive to the need to distinguish between different aspects of financial market activity - very obviously in the case of the distinction between wholesale and retail activity - in trying to find the most appropriate ways of reflecting legitimate public concerns. Where there has been official intervention, it has, again by now well-established tradition, sought to avoid discrimination - whether between different types of financial institution or in the form of protective nationalism in favour of British-owned businesses, provided everyone undertaking a particular activity played by the same rules. That approach has not necessarily always been popular, I have to say, with some of those who might have benefited from such discrimination! But it is certainly one of the reasons for London's attraction as an international financial centre including its attraction to so many financial companies from elsewhere in Europe. And that international presence in turn contributes enormously to the efficiency of the London market - and indeed the European market of which we are very much a part.

In this regard, I wish to make special mention of the Stock Exchange Technical Committee (SETC) First Initiative, the Commonwealth Secretariat, the West African Institute for Financial and Economic Management, the Team of local Lawyers headed by Mr Eke Halloway, as well as market practitioners in neighbouring countries who have been unrelenting in sharing their experiences and expertise with us. Naming people in these situations can be invidious, but let me crave your indulgence to mention Mr Maroof Matin, the Resident Consultant provided by First Initiative, Mr Jacob Kanu of First Discount House, Mr Melvin Tucker, former Deputy Governor and other members of the Stock Exchange Technical Committee. To all of these, I say thank you very much and please let us continue to work together for a more prosperous Sierra Leone. Thank you for your attention. 2  BIS Review 107/2007
Another consequence of using HP filters to find the trend-based GDP gap is that one risks interpreting an increase in growth that is due to a temporary rise in productivity as an increase in resource utilisation. But in a situation with sticky prices an increase in productivity may actually lead to a decline in resource utilisation as the increase in productivity makes it possible to use fewer resources to produce the same volume as before. If we were in such a case to use a trend-based output gap as a base, there is a risk that monetary policy would become contractionary when it needed to be expansionary. The difficulty with the trend-adjustment method is thus to distinguish from current developments what constitutes changes in the trend and what are deviations from the trend, that is, changes in resource utilisation. Flexprice gap A theoretically interesting measure of resource utilisation that has gained increased attention in the research on monetary policy is the so-called flexprice gap. This is a measure that relates actual output to potential output in an economy with entirely flexible prices and wages. The advantage of this measure is that it has a well-defined theoretical base. To calculate the flexprice gap one tries to determine the level of output that would be attained without some of the imperfections that the real economy suffers from.

Central Bank of Chile’s Twenty-first Annual Conference “Monetary Policy and Financial Stability: Transmission Mechanisms and Policy Implications” Opening remarks by Governor Mario Marcel  Good morning and welcome to the Twenty-first Annual Conference of the Central Bank of Chile. It is a pleasure to host this event that every year gives us an opportunity to reflect and discuss about issues that have direct implications on our work as central bankers from a broader perspective. I am looking forward to active discussions through the rest of the week on this year’s conference theme: monetary policy and financial stability. Ten years have passed since the onset of the Global Financial Crisis and we are still dealing with its economic consequences. But we have learnt a lot, and a decade of hindsight about the causes and long-lasting effects has led us to rethink the way we conduct monetary policy, how to ensure financial stability, and how these two elements are, or should be, interconnected. One of the most important policy lessons from the crisis concerns the relevance of actively seeking financial stability in a context of ever-increasing financial complexity. And central banks worldwide have been increasingly involved in assuring this, since it has become clear that financial stability is a pre-condition for price stability.
Preet Bharara, Criminal Accountability and Culture, Remarks at the Federal Reserve Bank of New York’s  Conference: Reforming Culture and Behavior in the Financial Services Industry: Expanding the Dialogue, Oct. 20, 2016 (criticizing a “culture of minimalism,” in which firms “do the least amount possible to be in some kind of compliance with rules”). 8 Virtual Markets Integrity Initiative Report, Sept. 18, 2018. 9 2018 National Money Laundering Risk Assessment 6. 10 U.S. Immigration and Customs Enforcement, a division of the Department of Homeland Security, created its  Trade Transparency Unit in 2004. 11 FinCEN Advisory: Update on U.S. Currency Restrictions in Mexico: Funnel Accounts and TBML, May 28, 2014. 12 Office of Foreign Assets Control, Advisory on the Use of Exchange Houses and Trading Companies to Evade  U.S. Economic Sanctions Against Iran, Jan. 10, 2013. 13 United Nations Office on Drugs and Crime, Money Laundering and Globalization. 14 Debra Cassens Weiss, Group goes undercover at 13 law firms to show how US laws facilitate anonymous  investment, ABA Journal, Feb. 1, 2016. 15 Federal Financial Institutions Examination Council, Bank Secrecy Act Anti-Money Laundering Examination  Manual, App’x F (“Money Laundering and Terrorist Financing ‘Red Flags’”). 16 Section 314(b) of the USA PATRIOT Act is not codified in the United States Code, but is available as a historical  note to 31 U.S.C. § 5311. The operative rule appears in Department of Treasury regulations. See 31 C.F.R. § 1010.540 (“Voluntary information sharing among financial institutions”).

Rather than take you through the legislative history of this evolution, I want to refer you to the Financial Crimes Enforcement Network—or “FinCEN,” for short. Its website contains short and accessible histories of major anti-money laundering laws.3 These summaries highlight the important public goals of the Bank Secrecy Act and other anti-money laundering statutes—why they are more than just a compliance cost. One theme that emerges is the increasing reliance on banks and other financial institutions to safeguard the payment system. Our laws and regulations increasingly bring the industry into partnership with the government on combatting national security risks to the United States and financial crime. Anti-money laundering is not just a matter of historical record. Our rules continue to evolve. For example, in 2016 the Treasury Department updated its regulations to require that banks and other financial institutions verify the identity of the natural persons—that is, the “beneficial owners”—who own or control companies that hold accounts.4 The beneficial owner rule, like other “know your customer” rules, is a regulatory floor, not a ceiling. Covered firms can take the initiative to implement more stringent internal rules based on their risk. Indeed, in December 2018, the federal banking agencies published guidance that encouraged innovation in anti-money laundering compliance—pilot programs that exceed the legal minima, or at least make compliance more efficient.5 Experiments in ratcheting up internal thresholds are welcome.