samchain/econo-pairs-v1 huggingface dataset:
Only recently, the Fed and the Bank of Japan have announced a numerical inflation goal. The second element: central banks should be independent on legal and operational grounds. Indeed, the independence of central banks is enshrined into primary law in a number of advanced and emerging countries and has been key for a stability oriented monetary policy. For crisis management, the so-called Jackson Hole consensus 2 of the 1990s and early 2000s foresaw only a limited role for central banks. Following the logic of the consensus, monetary policy should react to financial imbalances only to the extent that they affect the inflation forecast. Yet, as asset price build-ups are often accompanied by relatively contained inflation rates, 3 “ex-ante” monetary policy reactions were considered difficult. Effectively the consensus implied that central banks would only intervene “ex-post” to counter potential deflationary risks and risks to financial stability. The dot-com bubble of the beginning of the century was an illustration of such strategy. The ECB with a special emphasis on monetary developments The ECB’s standpoint differed from the Jackson Hole consensus. We have always emphasised that focusing on money and credit developments provides for a medium- to long-term perspective. It was believed that the monetary pillar would release warning signals and hedging against the building up of financial imbalances. 4 Indeed, as of 2005, on the basis of its monetary pillar, the ECB has repeatedly warned on the observed strong credit growth and the accompanied under-pricing of risk.

In my view, a future European financial architecture should include a fully-fledged financial market union which rests on three pillars. •  First, a European banking supervisory authority with sufficient instruments and competencies to implement on a level playing field the regulatory framework in the euro area. This authority should in particular have the competence to order the closure and the resolution of non-viable institutions. The resolution of non-viable banks should no longer be a rare exception in Europe. Here we can learn a lesson from the US where 464 banks were closed since 2008. 8  •  Second, a resolution authority and a coherent regulatory framework for the resolution of systemically important banks. The costs of a resolution shall ultimately be borne by a fund. This fund needs to be financed by the financial sector itself to unwind systemically relevant financial institutions without relying on public finances and ultimately taxpayers’ money. •  Third, deposit insurance should be organised or at least further harmonised at the European level. While it is clear that moving towards a financial market union cannot be achieved overnight, it is important to stress that we need all of the just mentioned three elements. The banking supervision can only work efficiently if it has access to the relevant information, for example on the deposits. It can only act effectively if it has the adequate instruments in its toolbox, such as the closure of a non-viable bank.
In a more broad-based market downturn, though, we would be concerned that a repricing of financial assets could trigger sudden and large redemptions from these funds, possibly resulting in forced asset sales, which could amplify stress in less liquid markets. This would have wider implications in the form of impaired market liquidity and possible spillovers to the real economy. While leverage in the euro area fund sector is low on average, there are also pockets of high leverage among some types of alternative funds, and these need to be monitored closely. Even if leverage of UCITS funds is not excessive, it can still add to the procyclical selling of assets if a fund tries to keep its leverage constant during periods of stress. I hope that gives you a good perspective on our current assessment of financial stability risks. I look forward to hearing your own views on these and other vulnerabilities for the euro area financial system. 2/2  BIS central bankers' speeches

The reliability of the mark-to-model approach, however, relies heavily on assumptions and on the availability of reliable data. Data on tail events (events that occur rarely, but have major repercussions) would be particularly beneficial for the calibration of models. There is, however, by definition hardly any data on such events. This begs the question as to whether the dangers associated with tail events are being correctly assessed using the available models, or whether model risks pose a problem. Thirdly, it is unclear whether the finance industry’s capital buffer – in the form of equity capital – is adequate to weather particularly bad storms. Like airbags in a car, equity capital is only rarely called into action. Yet, the more serious the accident, the more generously the bags should be filled with air. In the current economic environment, many market participants are highly leveraged, in other words, they have a low ratio of debt to equity capital. Low levels of equity capital can be compared to a thin airbag – they only protect against moderate shocks. It would only take a loss of 2–3% of the balance sheet total, for instance, for Swiss big banks to use up all their equity capital. Of course, a loss of this magnitude is highly unlikely. After all, the Swiss big banks are well-diversified, have sophisticated risk management models in place and have high risk-weighted capital ratios. This notwithstanding, such a loss cannot be ruled out.
This is a question that in itself does not concern the choice of whether or not we should have electronic trading. All business is settles, whether this is done through a traditional market-maker system or by electronic trading. Those buying fixed income instruments want to be sure of receiving what they have bought an those selling want to receive the money they have been promised, regardless of the trading form. On the other hand, it is clear that it would be desirable to take the opportunity to design a new system that would provide a good means of handling settlements. This is particularly important as the increased volumes hoped for, which are the whole point of the new system, will create increased risks in terms of settlement. Today settlement on the fixed income market is done by means of net settlement in VPC. This works well in many ways and the routines are perceived as manageable by the market players, as far as I understand it. However, the system is nevertheless obsolete and involves risks. If one of the parties involved failed to meet its payments during the daily settlement, for instance, if one party was forced to make a suspension of payments or simply lacked sufficient liquidity, the situation could become troublesome. The existing routines can be called into question. One can imagine situations where settlement is not achieved, which could have consequences for the liquidity of the banking system. From the point of view of financial stability, this is an unsatisfactory situation.

•  This means that you will be able to make payments through FAST as long as you know the payee’s mobile number. BIS central bankers’ speeches  3  •  May I suggest to the industry to go one step further and explore an “all-in-one” addressing system? •  This means being able to pay someone through FAST using also the payee’s email address, social network account, or other proxies. Unified Points-of-Sale Let me move on from card issuance to card acceptance. In Singapore’s retail payment scene, multiple Points-of-Sale (POS) terminals at the payment counters are a common sight. They are a source of clutter and inconvenience. And as more stores and restaurants introduce self-checkout facilities to improve productivity, these multiple terminals have become a source of confusion as well. Our vision is a unified POS – a single terminal, preferably mobile, that can read all kinds of cards. This will: •  allow merchants to enhance efficiency by simplifying front-to-back process integration; and  •  enhance the shopping or dining experience of customers. A unified POS requires merchant acquirer systems to be able to communicate with one another. This interoperability can be achieved through standardisation. The technology exists but it requires some effort and some cost. I am pleased that The Association of Banks in Singapore has formed a working group to look into standardising the POS applications to operate efficiently and seamlessly. I commend them for their resolve to address a long-standing bane in our retail payment scene.
When Lehman Brothers failed in 2008, it had OTC derivatives exposures alone of $ billion with thousands of counterparties. It should have come as a surprise to no-one that the financial bullwhip effect from Lehmans’ failure was far more painful than from LTCM. Yet it did. That is because, at the time of Lehman’s failure, no data existed to monitor meaningfully this network risk. Like the supermarket inventories of the early 1970s, the inventory list of bilateral exposures among the world’s biggest banks was dog-eared, sparsely populated and out of date. Over the past three years, a variety of initiatives have sprung up to fill this vacuum. One key plank has been better quality and more frequent data on links between the key global financial nodes – a full matrix of bilateral exposures, on and off balance sheet, between the world’s largest financial firms. The Financial Stability Board is orchestrating efforts in this area.36 In time, this will become one of the bedrocks of effective risk management across the global financial system. Having standardised LEIs will make constructing that counterparty matrix far simpler. A second plank of reform has been to put such data to use in helping insulate the global financial network against the failure of one of its key nodes.

When it then became clear that we and the Brits intended to remain on one side, our colleagues quite simply decided to postpone a number of important issues where we had strong views, including the monetary policy framework with inflation targeting, transparency, etc. This also applied to various payment system issues, where our position was weaker on the outside. If we now say “no” to membership, if not for good but at least for the foreseeable future, the situation will worsen further, as I have described already. I think this would be very unfortunate. BIS Review 39/2003
An aspect in the contemporary global Islamic finance that is fundamental is the “principled centred” nature of Leadership in Islam, that involves "trust" (amanah), and with that comes "responsibility" (taklif) and "accountability" (mas'-u-li-yah 1 ). My remarks today will discuss the positive elements that Islamic finance brings to the global financial system, its prospects for enhancing international integration and the potential to strengthen the socio economic aspects of Islamic finance. Optimizing benefits of Islamic finance In evolving the international dimension of Islamic finance an important aspect is the optimization of the oasis of benefits and opportunities Islamic finance has the potential to provide. Islamic finance implicitly embraces strong core values and universally beneficial characters. The fundamental requirement of Islamic finance is that it is confines its activities to that which is supported by an underlying economic transaction thereby avoiding emphasis on speculative purposes. The Islamic principles require that the financial transaction be accompanied by genuine trade and business related transactions. This provides for a high level of disclosure and transparency. This thus prohibits the commoditisation of risks, which effectively leads to its proliferation through multiple layers of leveraging and disproportionate distribution. It reduces the potential for information gaps and for mispricing of risks and thus avoids the elements that could contribute to uncertainty and disruptive market conditions. The Islamic financial system derives its strength and stability from its faculty to uphold Shariah principles.

One could also conceive, in principle, of a housing market that involved much less of it. Suppose that, instead of putting deposits in mortgage-issuing banks, we all had equity investments in companies that owned residential housing – and that, instead of owning the houses ourselves, we were simply tenants of these corporate landlords. That would be a “model” with no mortgage debt at all. But it’s not immediately clear it would make net wealth any higher, housing any cheaper or, for that matter, the macro-economy more stable.8 Returning to the real world, regulators would rightly be concerned if mortgage debt started growing rapidly again, especially if it was accompanied by other signs of loosening credit supply and greater risk-taking. It was in response to early signs of this sort that the FPC decided in 2014 to cap the share of new mortgages banks were allowed to issue at high multiples of a borrower’s income. However, the fact that the level of UK mortgage gearing is higher than it was a generation ago, or that it’s lower than in the Netherlands, is of less significance. And the aim of the 2014 measures was not to reduce 8 In fact we know that under certain conditions, originally set out by Modigliani and Miller (1958), it would make no difference to anything – this is just an extension of their famous result concerning corporate finance (which I also mention below).
In parallel, given the elevated uncertainties across financial markets - which faced an increase in interest rates for the first time in more than a decade – we have intensified communication with markets and the public, to clarify our strategy of monetary policy. This strategy is based on three important principles:  First, normalisation of monetary policy stance was and remains necessary for inflation to return to the target in a steady manner. The purpose of this normalisation was to curb the pass-through of rising international prices to the general, steady surge in prices in the Albanian economy. In this context, this normalisation was in line with the reaction undertaken by all other central banks in the course of 2022, and in the current year. Second, the speed and intensity of normalisation has followed a gradual and prudential process, led by new information and in harmony with the direction of fiscal policy, as well as with developments in the financial market. In this view, I would like to highlight that our monetary policy stance has been - on the one hand  2/8  BIS - Central bankers' speeches  - consistent with the return of inflation to the target, and - on the other hand – prudential, in order to have the least possible effect on both economic activity and financial stability.

Second it showed up the limitations of the models which underpin the valuation and rating of structured products and the excessive weight that had been given to them not just by the naive or unwary, but by some of the most sophisticated players in financial markets (including many of the sponsoring banks who underestimated the risks they were running in retaining super senior tranches). Third, it illuminated the adverse incentives that had been allowed to develop in the distribution chain for credit products including the strong incentives for originators to put quantity above quality, for the rating agencies to expand their scope as widely as possible, and for banks to use off-balance-sheet vehicles to finance structured credits. It may also reveal some flaws in the compensation schemes in banks. In some cases these incentives arose despite regulation, in others they were the consequence of faults in the regulatory system. Finally it showed again how measures of risk used by companies and regulators can be pro-cyclical, encouraging more risk taking at the top of the cycle and potentially exacerbating the downswing. In the last few weeks, markets have been calmer. Liquidity pressures in short-term funding markets have eased, helped in part by the co-ordinated action by central banks to address elevated funding rates over the year end (Chart 3). And, as losses have been declared it has proved possible for a number of firms such as UBS, Merrill Lynch and Citigroup to attract new capital including from Sovereign Wealth Funds.
With regard to the Eurosystem’s relationship with European Community institutions, the Treaty states that the President of the ECOFIN Council and a member of the European Commission may participate in the meetings of the Governing Council of the ECB, with the right to express their views but without voting power. The President of the ECB attends hearings at the European Parliament at least four times a year to discuss the activities of the Eurosystem and is also invited to attend the informal euro-11 Council meetings. I should like 5  BIS Review 60/1999  to stress that the participation of the President in these meetings serves the purpose of exchanging information and views, while fully respecting the independence of the Eurosystem. In the field of the international representation of the ECB, formal and informal agreements have been reached with the IMF and the OECD and in the context of the G7 and the G10. At the end of last year the IMF granted the ECB observer status, full membership being restricted to individual nations. Nevertheless, this observer status will allow the ECB to participate in the relevant work and assessments by the IMF of economic policies in the euro area and beyond. The international role of the euro Clearly, the introduction of the euro has had important implications for international capital markets.

Clearly, the disappearance of 11 national currencies and the introduction of the euro as a major international currency had an immediate impact on the turnover and focus of attention in the global foreign exchange markets. This has been reflected, for example, in rather active and liquid euro/dollar trading in the foreign exchange market since the launch of the new currency. However, there are also indications that the euro has further potential to grow in other markets as the surprisingly slow development of euro/yen trading suggests. The euro can also be expected to become an attractive currency for the investment of official reserves. One of the key elements to further international portfolio diversification in favour of the euro is the creation of a large, liquid and integrated capital market in Europe that began with the launch of the euro. For short-term instruments, we are now dealing with a broad and liquid European money market that ensures very similar short-term interest rates for comparable instruments and credit risks. The development of this market has been strengthened by the Eurosystem’s operational framework of open market operations, which is mainly based on reverse transactions, and the implementation of the new TARGET real-time gross settlement system in participating countries. At the longer end of the maturity spectrum, market integration was jumpstarted by the redenomination of outstanding government debt in euro and by the convergence of interest rates to narrower spreads following the elimination of the exchange rate risk.
Traditional surveys of market participants or the general public tend to be biased in their sampling and framed in their responses. As in quantum physics, the act of observing can itself alter behaviour. These realities may call for exploring non-traditional means of revealing people’s preferences and sentiments. To give one recent example, data on music downloads from Spotify has been used, in tandem with semantic search techniques applied to the words of songs, to provide an indicator of people’s sentiment. Intriguingly, the resulting index of sentiment does at least as well in tracking consumer spending as the Michigan survey of consumer confidence. 51  And why stop at music? People’s tastes in books, TV and radio may also offer a window on their soul. So too might their taste in games. Indeed, I am interested in the potential for using gaming techniques, not just to extract data on people’s preferences, but as a means of generating data on preferences and actions. Existing models, empirical and theoretical, often make strong assumptions about agent behaviour. Theoretical models are based on axiomatic assumptions. Empirical models are based on historical  49  Rotemberg (1984), for example, discusses the statistical rejection of rational expectations models for consumption and labour demand. 50 Tuckett and Nyman (2017), Shiller (2017) and Nyman et al (2018). 51 Sabouni (2018). 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  behaviours. These restrictions may, or may not, be borne out in future behaviour.

As for the audit role, we will have to provide internal control assurances to the ECB on all the functions we will be carrying out on their behalf. All of this, of course, has important implications for essential support functions such as information technology and human resources. I need only mention the fact that euro area membership entails considerable electronic reporting obligations and the maintenance of several statistical databases. The Bank is gearing up to take on these new, more specialized functions, and I would like to note that it is only able to do so with confidence because it has a substantial core of qualified and dedicated professionals in all these areas. 6  BIS Review 16/2006