samchain/econo-pairs-v1 huggingface dataset:
But I disagree with those who want to go much further, for reasons which are at the heart of what we are doing. First, because to argue for much higher capital on top of what has been done since the crisis is to argue that what is being done on resolution and loss absorbency is of little use. This misses the point that resolution is about being able to stabilise and then where necessary close or restructure failing banks. In other words, resolution is a much more extensive approach, and in my view very necessary. The design of international policy measures to end too big to fail is now largely complete for banks, but substantial work remains to put these into effect in terms of resolution plans. Second, understanding how banks take and manage risk, the controls they have and the quality of risk management, is at the heart of the job of a prudential supervisor. That’s what we do every day, and the standards of this work have been raised extensively since the crisis, which was very necessary. Now, it is possible I suppose to argue that a focus on oversight of risk management should be pursued alongside a sole focus on a non-risk based capital measure like the leverage ratio. But in my view that is a flawed argument because the prevailing capital regime has a strong influence on how firms take and manage risk, in other words it creates the incentives.

And I know that this is how the vast majority of people do behave, because I observe it. The senior managers and certified persons regime is also not purely, or in my view even primarily, a tool of enforcement. Our job is always to apply forward-looking judgement to prevent problems occurring; and the new regime will ensure that the incentives on senior managers in the roles that they perform align with that approach. But, just as Parliament has recognised that it is not the PRA’s role to ensure that no firm fails, likewise we should not expect the Regulators to prevent all failures, or misconduct, by individuals. The PRA’s enforcement powers are a necessary part of its toolkit, and we will use those tools when the circumstances warrant it. But they are not our primary mode of operating. Also, the Government announced last week that – subject to agreement by Parliament – it plans to extend the Senior Managers regime to other firms across the industry. This is a further step in the right direction. There is no doubt that one regime will be better than many. Lastly on the senior managers regime, there is one other very important broad reason for putting it into place. On and off I have been involved in regulation for over twenty five years. During that time a few regimes have come and gone, and there have been debates about selfregulation versus a regime more purely in the hands of public authorities. This debate strikes me as a gross over-simplification.
If, on the other hand, the real interest rate is below the natural rate, the monetary policy stance is expansionary, which may lead to the generation of inflationary pressures and, normally, for a time, higher economic growth than the economy can sustain without the emergence of imbalances. The intrinsic difficulty of this conceptual framework is that its central feature, the economy’s natural rate of interest, cannot be observed in reality, but only, in the best of cases, estimated indirectly. Accordingly, the central bank needs to analyse a broad range of indicators in order to infer the state of the economy, so as to be able to determine the appropriate monetary policy stance. This conceptual framework worked satisfactorily during the 1990s and the early years of the current century, a period known as the “Great Moderation”, characterised by stable growth in the advanced economies and relatively low levels of inflation. However, the economic and financial crisis that began in 2007-2008 forced central banks to adopt innovative policies and, on occasion, to navigate “uncharted waters”. This is the subject I wish to talk about in the final part of my speech. The monetary policy challenges arising from the crisis The magnitude of the crisis that began in 2007-2008 led the central banks of the main developed economies to design and implement expansionary monetary policies of unprecedented magnitude and scope. The crisis had a significant effect on banks and other financial intermediaries, leading to a contraction in credit and, therefore, in economic activity.

The Official Credit Institute’s programmes, aimed at smoothing small and medium-sized companies’ access to credit, have attempted to correct this market failing. Further work along these lines should be pursued, improving where possible the workings of these programmes and increasing their volume if necessary. Yet I must urge credit institutions to be responsible, as I have on previous occasions. Evidently, at a time such as the present, they must be particularly careful and, naturally, not  2  BIS Review 27/2010  extend credit to companies that are not solvent; but nor must they forget that should they fail to lend but a single euro to companies that are solvent, they will only be making things difficult for themselves. Another example of progress in financial reform backed by broad Parliamentary consensus has been the approval of legislation whose aim is to restructure the financial system at the least cost to taxpayers and in the shortest time possible, observing the constitutional distribution of powers, so that all institutions in the system are in a position to provide credit to households and firms when the recovery arrives.
So when we talk about promoting insurers’ safety and soundness, and protecting their policyholders, this is what we have in mind. The PRA has squeezed much into its short life since it began supervising insurance companies in 2013, not least the enormous undertaking of implementing Solvency II, and knitting insurance supervision into the wider Bank, where there are obvious connections with areas like monetary analysis. And today, the Bank of England’s Independent Evaluation Office has published its thinking on the PRA objective which is unique to insurance, of contributing to the protection of policyholders. All this makes now the ideal time to refresh our approach to insurance supervision. I will begin by taking stock of insurance regulation. These are the rules and standards which apply across the board, and have been recently the subject of ongoing and lively debate. Now that Solvency II has applied, how do we take it forward? From there I would like to explore our approach to insurance supervision – the day-to-day business of 1  understanding, assessing and challenging the 469 firms we are responsible for. In particular, how do we at the PRA think about policyholder protection? 1  This is a consolidated view of insurance groups – there are approximately 600 insurance entities, including solos that are part of groups. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  And what is the point of all this?

In fact, the PRA’s resourcing model already works to focus our resources on those areas of most concern. We categorise each regulated firm according to its size and the potential harm customers would suffer should it fail. The majority of firms we regulate are assigned the lowest category, reflecting the low level of risk they pose to our objectives. Firms in higher categories receive more supervisory and specialist resources, and decisions for those firms are approved at more senior levels within the PRA’s decision – making framework. The IEO have challenged us to look at this system again and we will do so. Our Executive Director for Insurance Supervision, David Rule, will take forward discussion of all of these issues with the Prudential Regulation Committee. We will then revise our Approach to Insurance Supervision document to explain any changes we decide to make. In doing this we will of course need fully to factor in our third objective, to facilitate effective competition – 12  which was also recently reviewed by the IEO . Although this is a secondary objective, it is given a high priority in the PRA and is also quite rightly a topic in which the Treasury Select Committee takes a strong interest. Our competition work spans banking and insurance, but there has been much more public debate about the former.
Underlying price pressures in the euro area are expected to remain subdued, reflecting the broad-based weakness in aggregate demand and the modest pace of the recovery, as well as subdued monetary and credit dynamics. Medium to long-term inflation expectations continue to be firmly anchored in line with price stability. The risks to the outlook for price developments are expected to be still broadly balanced over the medium term, with upside risks relating in particular to higher commodity prices as well as stronger than expected increases in administered prices and indirect taxes, and downside risks stemming from weaker than expected economic activity. The ECB’s monetary policy stance continues to be geared towards maintaining the degree of monetary accommodation warranted by the outlook for price stability. It thereby provides support to a gradual recovery in economic activity. Looking ahead, our monetary policy stance will remain accommodative for as long as necessary. In line with the guidance provided in July, the Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time. This expectation is based on an overall subdued outlook for inflation extending into the medium term, given the broad-based weakness in the economy and subdued monetary dynamics. In the period ahead, the ECB will monitor all incoming information on economic and monetary developments and assess any impact on the medium-term outlook for price stability.

Future wage formation is yet another risk factor that the Riksbank has to consider. There are some encouraging signs that wage formation is moving in the right direction, even though the parties have gone in for a certain amount of bidding. This tends to be a process that conveys a varying degree of realism. It is important to bear in mind that wage formation is not just a matter of the level of wage agreements. The outcome for wages is also conditioned by the wage drift that mirrors labour supply and demand. The less efficiently the labour market works, the sooner bottlenecks arise that generate increased wage drift. Tendencies to labour shortages in certain sectors are already discernible, despite the high unemployment. Conclusion: monetary stance well balanced; changes in the spectrum of risks A monetary policy that aims for sustained price stability is not at odds with good economic growth. This presupposes that the supply side functions so well that growth does not give rise to inflationary impulses. But if the structure of the economy is such that only moderate growth is feasible, demand and accordingly the monetary stance must be adjusted accordingly. The alternative is demand growth that exceeds what the economy is capable of producing without inflationary bottlenecks. Accelerating inflation is a threat to sustainable growth and may even result in serious economic setbacks, as history has taught us.
Mr. George speaks on the advent of the euro, and its possible impact on Europe and the Mediterranean region Speech by the Governor of the Bank of England, Mr. E.A.J. George, at the FT Euro-Mediterranean Capital Markets Conference in London on 26/3/98. I’m delighted to take part in this conference which has been organised by the British Government during its term of Presidency of the European Union to promote and strengthen financial and economic ties within the partnership between the European Union and its Mediterranean neighbours. It is a very happy accident of fate - to me as a central banker at least - that this country should hold the EU Presidency at this particular time, as Europe prepares to take the definitive step to monetary union. Earlier this week in Frankfurt the Council of the European Monetary Institute finalised its “convergence report”, which we published yesterday, at the same time as the parallel report by the European Commission. The Commission also published its recommendation to EU Finance Ministers and Heads of Government that 11 EU member states should move to monetary union, in a first - tidal - wave, from January 1st next year. Without seeking to anticipate the decision to be taken by the Heads of Government under Prime Minister Tony Blair’s Presidency in Brussels during the first weekend of May, the odds are that monetary union will go ahead on that basis. It is an historic moment.

This is in line with the growth in the activities of the two existing cross border PvP links recorded by us. Since 2010, the combined average daily turnover of the links with Malaysia and Indonesia has doubled, reaching a new record of $ billion last month. This is equivalent to an annual growth of about 23%. Other economies in the region, especially those with significant FX transactions, can similarly be benefited from a reduction in settlement risk and increase in efficiency in the settlement of FX transactions by establishing a PvP link with the USD RTGS system in Hong Kong. 9. The HKMA will continue to watch out for opportunities to collaborate with Asian neighbours to develop infrastructural solutions to meet growing regional demand for more efficient and robust settlement solutions. 10. Lastly, I would like to thank BOT again for the Bank’s commitment and professionalism leading to the successful launch of the PvP link. Based on the solid foundation laid through this project, I keenly look forward to working with BOT in other areas of central bank cooperation to contribute further to regional financial stability and prosperity. 11. Thank you. 2  BIS central bankers’ speeches
The currency board arrangements are not just another monetary policy regime. They are a “frame of mind”, a way to view and tackle the economic, political and social processes. Some Western analysts and researchers fail to understand this. But I am sure the contributions by my colleagues from the BNB will clearly illustrate during this conference that the currency board is something more than just a monetary policy regime. Following a dramatic banking and financial crisis in 1996–1997, the economy was stabilised by the introduction of the currency board arrangements, in combination with the strong fiscal  BIS central bankers’ speeches  1  discipline, the liberalisation and privatisation of the Bulgarian economy, and the use of a broad range of macroprudential instruments. The current global crisis is not the first one successfully weathered by the Bulgarian economy. In only two decades we have endured the Asian crisis, the Russian Crisis, the “dotcom bubble” burst, the U.S. subprime crisis and the failure of Lehman Brothers, before the euro area financial and sovereign debt crisis came in. But the recent crisis has served as perhaps the biggest “litmus test” for the optimality of our monetary policy regime. We believe that a small open economy, which is not rich in certain commodities or natural resources, cannot succeed in pursuing the so-called independent monetary policy. All these issues will be elaborated today by deputy governor Hristov who will share our experience with you during the afternoon session of this conference.

But since the end of 2008, the BNB focused on the capital and liquidity relief for banks while also allowing them to ease lending. As a result of these conservative and countercyclical policies of the BNB, and the rather prudent behaviour of the banks themselves, today Bulgaria manifests a very stable banking sector, with outstanding capital adequacy and liquidity ratios. Four years after the Lehman Brothers collapse, the banking system of Bulgaria remains one of the few in the EU where no single bank needed to be rescued or supported with taxpayers’ or central bank money. Merging the monetary and macropdudential mandates (including banking supervision) under the auspices of the central banks is currently being implemented in some of the “older” EU Member States. The macroprudential oversight of the financial system is being introduced only recently at the EU level. While these new concepts are now being embraced by central bankers and politicians worldwide, the simultaneous pursuit of both monetary and banking stability, from a true macroprudential perspective, has been the order of the day for the BNB for more than a decade now. Through our own painful experience with a crisis in 1996–1997, we became fully aware of the systemic importance of the financial system. Thus a key element behind the success of the overall policy mix in Bulgaria is that our central bank is entrusted with the tasks and responsibilities to regulate and supervise the banks in the country, with the goal of ensuring the stability of the banking system.
When all is said and done, the primary objective of a credit rating BIS central bankers’ speeches  3  is to estimate the probability that a borrower will service its debt in full and on time. This probability depends on two factors – the ability to pay and the willingness to pay – which, as history has shown us, are not necessarily one and the same, as could maybe be seen in the examples of Finland and Argentina. Sometimes it seems as though rating agencies exceed their mandate and act as though they are purveyors of some sort of Good Housekeeping seal of approval for economies and governments. For example, one could ask what the Republic of Iceland’s probability of default is, since the country didn’t default during the financial crisis. 1 While it is pointless to debate this fact with them, it actually, seems to me that a number of improvements have taken place in the wake of the crisis. Upon closer examination, much of what rating agencies take into account is clearly related to developments in both ability and willingness to service debt. Among the factors they consider are debt levels and guarantees, GDP growth potential, the size and structure of the economy, and other factors that affect vulnerability to shocks, institutional quality, governance and policy continuity, and political risk. This gives some indication, of course, of which factors are a drag on Iceland’s credit rating at present, and how they could be addressed.

But if we can preserve stability and GDP growth next year while demonstrating that we can at least begin lifting the capital controls without compromising stability and confidence, our chances for a higher credit rating should improve markedly. Thank you. 1  4  For further information, see: the Governor’s comments at a panel discussion held at a BIS symposium entitled A world without risk-free assets? Bank for International Settlements, Basel, 8–9 January 2013. See: here. BIS central bankers’ speeches
The move toward a tougher capital and liquidity regime undoubtedly receives the greatest attention in terms of the measures being implemented to make large banks safer. However, there also are a number of other important changes being made to supervisory practices in the United States and elsewhere. One noteworthy example is the more widespread use of horizontal stress tests to ensure that banks have adequate capital. This is a very important development, because it makes the evaluation of capital more forward-looking. The issue is not just how much regulatory capital a bank has currently but how that bank’s capital level is likely to evolve over time in adverse economic circumstances. In the United States, another important change is that we are refocusing our supervisory practices to identify structural weaknesses and to push firm managements to remedy their shortcomings relative to “best practice” standards. Horizontal reviews across the large banks are being undertaken to identify firm-specific deficiencies. At the Federal Reserve, we are placing greater emphasis on understanding banking organizations’ business models and strategies – in other words, better understanding the specific markets and activities from which the banking organizations make money over time and the nature of the risks they take in this process. Strong risk management practices within organizations are particularly important, as risk managers must be empowered to stand up to those in the front office and prevent activities and practices that create risks or incentives that are incompatible with bank safety and soundness.

But there is good reason to believe that a mutually reinforcing combination of strong demand, weak supply and expectations of a rising market could lead to a period of sustained and very powerful pressure on house prices in the UK. The extent to which that will jeopardise financial stability depends on whether that pressure actually results in more transactions at higher prices, whether that in turn leads to an increase in household indebtedness and where that debt is concentrated. These are, of course, all linked. The laws of supply and demand must, in the end, apply also to housing even in the UK. House prices cannot grow faster than earnings indefinitely. While households may be prepared to spend an increasing amount of their income on housing, there is a level at which house prices are simply not affordable. Ultimately – given purchases are in the main financed by long term mortgage lending – it is the price and availability of mortgage credit, including maximum loan-to-value and loan-toincome ratios, offered by lenders that determines the point at which affordability constraints bite on house purchasers and so how far they can stretch to match rising prices. At present, affordability constraints do not seem to be having a braking effect on the rise in prices. But prices are still below their 2007 levels in most regions and the house-price-toearnings ratios a multiple below its pre-crisis peak. If prices continue to grow faster than earnings, affordability will increasingly be an issue for purchasers and for lenders.