samchain/econo-pairs-v1 huggingface dataset:
3 Recent Disruptions and Potential Reforms in the U.S. Treasury Market: A Staff Progress Report, Inter-Agency  Working Group for Treasury Market Surveillance, November 8, 2021. 4/4  BIS central bankers' speeches

In the financial sector the new fintech companies are challenging the traditional banking business models and providing services in all functions of finance, from payment systems, to saving, borrowing, managing risks and financial advice. This has important implications for productivity and competitiveness and for further deepening the interconnectedness of the global economy. II. Central banks have reacted to the global financial crisis in three main ways:   Highly expansionary and unconventional monetary policy. Central banks were already applying near-zero interest rates in 2008. But interest rate policy was not effective under the “zero-lower bound”, which is basically the Keynesian liquidity trap at near-zero interest rates. Accordingly, it was necessary to develop new policy instruments, the so-called “unconventional monetary policy”, mainly quantitative easing and forward guidance. The result has been a huge increase in central bank balance sheets. In terms of GDP, the approximate size of the balance sheet of the central banks before the crisis was 12% in the Eurosystem, 5% in the US and 20% in Japan. These numbers have increased between four and five times,  3/6  and are now at around 40% in the Eurosystem, around 4.4 trillion euro, 24% in the US (4.4 trillion US dollars), and almost 100% of GDP in Japan (5.2 trillion Yen).  Tighter financial regulation and supervision. Pre-crisis regulation was based on microprudential regulation and supervision. The crisis revealed this framework to be no longer effective to ensure financial stability in the new context of globalised and highly interconnected financial markets.
Furthermore, it is at the core of central banking to prioritise macroeconomic objectives over the central bank’s own finances. Moreover, this situation could make it possible to resolve most of the problem in the auction, in a more permanent way than was previously envisioned. Preparations for the auction are now well underway, and the date and format will be publicised soon, so that the auction can take place in the first half of the year. Other things being equal, it should then be  2  BIS central bankers’ speeches  possible to move relatively quickly towards lifting capital controls on residents, as the current account surplus, foreign exchange inflows, and robust foreign exchange reserves provide ideal conditions for it. On the other hand, it is important to reach successful conclusion regarding offshore krónur before general liberalisation of controls on residents can take place. Now I would like to turn to longer-term issues regarding monetary policy and its relationship to other aspects of economic policy and prudential policy. In its reports entitled Monetary policy after capital controls and Prudential rules following capital controls, published in 2010 and 2012, respectively, the Central Bank described the new monetary policy framework and prudential rules that will be necessary to preserve financial stability and support monetary policy after the capital controls are lifted.

Lower returns in the new normal 8. First, lower returns in the new normal. There has been increasing acceptance that the era of low yields is not just a cyclical phenomenon, but is in fact the New Normal. In advanced economies, policymakers are faced with conflicting challenges as they seek to maximise economic growth on the one hand; while having to pursue fiscal consolidation and financial sector reform on the other. Meanwhile, emerging economies will grapple with tighter financial conditions and by implication, slowing growth when unconventional monetary policies are unwound. The outlook is highly uncertain as the normal cyclical recovery template cannot be applied to structural deleveraging episodes such as the one we are currently in. Although bond yields are expected to rise from their current low levels, it is likely that insurers will have to settle for much lower returns from fixed income investing in the years ahead than that achieved in the pre-crisis period. Over the next 20 years, the slowing demographic outlook for the world will also exert pressure on economic growth and lower the expected returns for most asset classes. Shortage of long duration assets 9. Next, a shortage of long duration assets. Asia has often been singled out as the bright spot in the global insurance industry, as rising incomes and lower than average  2  Allianz Global Investors estimates. 3  OECD Global Insurance Statistics. 2  BIS central bankers’ speeches  insurance penetration in many markets offer rosy opportunities for growth.
Perhaps the cliques that existed in parts of the FX market in the past have proved more adept at self-perpetuation than might have been hoped, particularly where they extended across both sell- and buy-side. Or remuneration schemes may have continued to reward those who make particularly large profits – even if the same behaviour can also lead to particularly large losses – rather than those who deliver a higher average return with fewer fireworks. Whatever the reason, times are changing in the FX market – and fast. And that’s what makes me optimistic about the future, and the role all of you here today can play in it. The FX market of tomorrow, and why embracing diversity will no longer be an option  I want to focus on three key drivers of change: technology; broadening market participation; and culture. The most profound of these for the economics of the industry is technology. Technological advances have fundamentally changed the face of trading and revolutionised the structure of the FX market. These days, only a minority of FX trades involve people actually talking to one other. And a growing number don’t even need someone to click a mouse, as algorithmic and high frequency trading techniques take over from manual trading. That is particularly true for vanilla flow trading. To take just one example, an estimated 70% of orders on EBS – a key inter-dealing platform for spot FX – are submitted by algorithms9.

But we have to ask what sort of operational risks might be involved. What sort of governance framework will banks need to ensure proper accountability? Could it lead to new ethical or other issues? For example, could the use of AI in credit scoring result in unfair treatment for certain groups of customers? Will AI output require additional “human” perceptive oversight? 25. To help banks, the HKMA recently issued two circulars, one on high-level risk management principles on the use of AI, and the other on the related consumer protection issues. We tried not to make these overly prescriptive, as this is a new area. The fact is that banks and ourselves are learning together. We all still need to explore exactly how technology should be implemented and overseen in practice. 26. The HKMA is conducting research in AI applications to help everyone. We are publishing some results today, in the form of an information sheet of facts and figures from an industrywide survey. One key finding is that almost 90% of our retail banks have already implemented, or are planning to implement, AI in their business applications. We will publish a series of reports in the coming months to provide more insights into the application of AI in the financial services industry. 27. We also want to work more with banks and the technology sector on developing regulatory technology, or RegTech. We all know that data analytics and machine learning can help the industry perform compliance work more accurately and more cost-effectively.
This is precisely the spirit of "Pillar 2" of the Basel framework. Supervision can and must be responsive, intrusive - including with on-site inspections -, exercised by highly qualified professionals, and applied forcefully. This is not wishful thinking: we have been practising it for decades at the ACPR, and for years now in the SSM. I would like to pay tribute to the ACPR's expertise and to the acclaimed work of its 1,050 women and men: it is indeed a certain "French-style supervision" model that inspired European-style supervision, under Danièle Nouy, the first Chair of the SSM, and which is still in place today under Andrea Enria. This active supervision is one of the greatest success stories of our European Banking Union. The SSM demonstrates the benefits of bringing all players under one main authority only, rather than under regional supervisors, with clearly defined responsibilities and coordination. This also allows for comparisons and for thematic on-site missions to be carried out. Page 6 of 9 Furthermore, our active supervision demonstrates the strong value of regular stress tests, including on interest rate risks, which are also applied to smaller institutions. The European Banking Authority (EBA) conducts an EU-wide bank stress test every two years, taking into account the latest macro-financial developments: in 2023, the stress test scenarios are typically based on a sharp rise in short and long-term interest rates.

This is a reflection of the unusual and difficult economic conjuncture that we have been going through, combined with the challenge of determining the scale and nature of, for instance, loan forbearance. This is particularly evident in areas like commercial property lending where there is a hump of loan refinancing to come and a quite sharp tiering of performance among assets. Second, the euro area, and the possible impact of disorderly break-up, should that happen (and in saying this, I offer no view on whether it will happen), could have a sizeable impact on many banks. But here the FPC faces another very difficult judgement, namely what scale of so-called tail risk – the losses from low probability but high impact events – do we wish to see covered in the capital held now by banks? In other words, how much insurance should come from capital providers? The broad answer is a lot, but that does not tell us how much,  BIS central bankers’ speeches  3  and in the limit there are utterly catastrophic risks for which it is not sensible to hold capital as the answer. Third, when we look at the low market value of some banks relative to their book value, how much of this should we attribute to lending margins being considerably lower than they were expected to be? Net interest margins are squeezed in the current environment.
However, some are still dragging their feet and are yet to adjust their rates. While we commend the banks that have responded positively, we call upon those who have not done so to act in a positive and prompt manner in order to make credit more affordable to the majority of our people. This in turn will lead to the growth of the productive sector and in particular Agriculture and the SME sectors, which are the engine for economic growth of our country. Finally, let me extend my gratitude to the Board of Directors and the Managing Director of Stanbic Bank for inviting me to be with you on this auspicious occasion of the opening of this branch. It now gives me great pleasure and honour to declare Mulungushi Branch of Stanbic Bank Zambia Limited officially open and I thank you for your attention. 2  BIS Review 152/2009

In implementing the road map, it is vital that all stakeholders in the payment system understands the significance of payment systems, their impact on financial stability and take ownership and leadership. Most central banks at some point or other have been owners, operators, catalysts, overseers and users of the payment system. Over the years, central banks have given up their ownership and  2  BIS Review 66/2006  operator’s role and, in some cases, even the catalyst role. Banks and financial institutions and even the corporates should play an important role in shaping the national payment system in Sri Lanka. Let me conclude now by giving an important message. Payment reforms help to adopt best practices by all stakeholders. With or without payment system reforms, banks and financial institutions should be able to meet their payment obligations. Some of the benefits enjoyed by banks and customers over the years will no longer be there under the CIT system. The public too has to make adjustments in their payment practices and ensure that there are funds in their accounts when cheques are issued. All stakeholders should change their past practices and fall in line with reforms which are aimed at improving facilities. Once again, I thank the Royal Bankers Club for inviting me and extend my good wishes for all its future activities. BIS Review 66/2006  3
This figure was in contrast to the rise of almost 160,000 in Social Security registrations in the same period in 2019. In any event, the Social Security figures provide a partial view of the consequences of the current crisis on the labour market. An even larger contingent of employees, some 3.4 million, have availed themselves of temporary lay-off arrangements (known as ERTE by their Spanish name). As you are aware, ERTEs entail the formal maintenance of the contractual relationship, pending the resumption of activity, although there is no actual employment benefit. Moreover, 1.3 million self-employed workers have applied for the benefit for the cessation of activity. 7  No indicators (other than some qualitative ones) are available yet for Q2, meaning it would be premature to project the decline in GDP in this quarter. In any event, given that the number of weeks affected by the lockdown is much greater than in Q1, a significant acceleration in the fall in GDP is to be expected.1 Beyond the short term, estimates of the duration and depth of the effects of the shock on the economy are still subject to much uncertainty. In principle, if these uncertainties clear over the coming months, a rebound in activity into the second half of the year might be expected. But that will depend broadly on two types of factors. The first relates to the future course of the illness.

Reforming and adapting financial regulation remains an urgent priority. G20 Leaders have agreed on detailed principles and a roadmap. The newly formed Financial Stability Board has the difficult task of steering regulatory reform. We are very fortunate that the FSB, as well as the Basel Committee, has been enlarged and become a true reflection of the world economy. As you may know, the European Union is moving towards the creation of a new European Systemic Risk Board (ESRB) which will be responsible for macro-financial supervision and will draw extensively on the resources and expertise of the Eurosystem. In France, the Government has decided to create a single authority responsible both for banking and insurance supervision, with very close links to the Central Bank. This will enable us to look at the state of and developments in the financial system from a truly systemic perspective. Much remains to be done. Let me outline the main objectives. In the current circumstances we should (1) try and keep up the momentum in the pursuit of reforms, (2) achieve balance in the implementation of the agenda; and, (3) ensure consistency between our regulatory actions and macroeconomic policy. Keeping up the momentum Over the last few weeks, major international banks have announced impressive quarterly profits. It is striking that these performances were achieved only a few months after some of those same institutions came very close to failure. This might give the impression that the financial sector has recovered its balance and that no further reforms are necessary.
If economic developments lead the FOMC to seek additional policy accommodation, it has several policy options open to it that would involve the SOMA portfolio, as noted by Chairman Bernanke in his testimony last week. One option is to expand the balance sheet further through additional asset purchases, with the just-completed purchase program presenting one possible approach. Another option involves shifting the composition of the SOMA portfolio rather than expanding its size. As noted earlier, a sizable portion of the additional risk that the SOMA portfolio has assumed to date came from a lengthening of its maturity, suggesting that the composition of the portfolio can be used as an important variable for affecting the degree of policy stimulus. Lastly, the Chairman mentioned that the FOMC could give guidance on the likely path of its asset holdings, as the effect on  7  Liquidity in Treasury bills has worsened to some degree. However, our holdings in that sector are minimal, and hence the deterioration likely reflects other factors, including the decline in the supply of Treasury bills. 8  The Federal Reserve’s holdings of Treasuries have removed a large amount of Treasury collateral from the market, which may have contributed to downward pressure on general collateral Treasury repo rates. However, repo rates do not appear unusual relative to other short-term interest rates, and most market participants point to declines in the supply of Treasury bills, rather than the coupon securities that the Fed purchased, as the primary driver.

These changes likely supported economic growth and the creation of employment relative to what would have been realized in the absence of the program. 4 Second, the LSAP2 program appears to have raised inflation expectations from unusually low levels and reduced the threat of deflation. The downside risks to inflation had become quite threatening by last summer. Breakeven inflation rates had moved to levels that were well below those consistent with the FOMC’s mandate, even for forward measures covering periods beginning several years ahead. In addition, the pricing of deflation risk, as computed by looking at Treasury inflation-protected securities with different amounts of accrued inflation, reflecting fairly substantial odds of deflation over the next several years. 5 Since that  1  Estimates of the contribution of additional risk coming from the increased size of the portfolio range from 60 percent to 80 percent, while estimates of the impact of its longer duration range from 20 percent to 40 percent. 2  See, for example, Chairman Ben S. Bernanke (2010), “The Economic Outlook and Monetary Policy”, remarks at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, August 27. 3  One would expect market prices to incorporate nearly all of the effects of the programs in advance rather than during the actual implementation of the program. Thus, the period before the November implementation is the most relevant period for assessing the program’s effects.
Andrew G Haldane: Risk off Paper by Mr Andrew G Haldane, Executive Director, Financial Stability, of the Bank of England, 18 August 2011. *  *  *  The views are not necessarily those of the Bank of England or the Financial Policy Committee. I would like to thank Aashish Pattani, Ben Broadbent, Srishti Chhabra, David Gregory, Priya Kothari, James McBride, Lewis Webber and Nicola Worrow for comments and contributions. Four years on from the start of the Great Recession, the world economy is cloaked in uncertainty. The story so far is well understood. Over-extension of private sector balance sheets – in particular among banks – sowed the seeds of the crisis. Those private sector risks have since been socialised, either directly through support for the financial sector or indirectly through lower aggregate output in the economy at large. That socialisation has caused balance sheet risk to migrate from the private to the public sectors. Today, these public sector balance sheets strains are most visible in Europe where a number of countries remain under the sovereign searchlight. But outside Europe, two of the world’s three largest economies – the United States and Japan – have been the subject of ratings action. And sovereign CDS spreads among advanced countries are at their highest-ever levels. Four years on from the start of the Great Depression, the world economy was also cloaked in uncertainty.

In view of such initiatives, with a worldwide and immediate scope, you will agree with me that international coordination is not an option but an obligation. 3/3
A technical paper prepared by the Basle Committee on Banking Supervision and released by the G-10 Governors on September 8th discusses a very similar approach. In both cases, the basic approach includes the following components: • setting the Year 2000 project as a strategic objective to be managed at the highest level; • making sure that staff at all levels recognize the importance of the project as a business issue, not just a technical one; • identifying all applications, operating systems and equipment affected by the Year 2000 problem, and developing appropriate plans and schedules that can be monitored at the highest level within the organization; • determining what needs to be done and making the necessary changes; • testing each system to be sure that it works, not only as an independent application, but in concert with related systems within the institution, and with those of correspondents and customers; and, lastly, • putting Year 2000-compliant applications into production. The Basle Supervisors’ paper does a good job of laying out the full scope of the challenge, and I commend it to your attention. The paper should serve as a strong wake-up call. There still is time to address the problem, but now there is urgency in making the difficult choices. In the mere two years that are left, the challenge will be to minimize business and systemic impacts as much as possible.

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