samchain/econo-pairs-v1 huggingface dataset:
Nigel Jenkinson: Developing a framework for stress testing of financial stability risks Comments by Mr Nigel Jenkinson, Executive Director, Financial Stability, Bank of England, at the ECB High Level Conference on “Simulating Financial Instability”, Frankfurt am Main, 12-13 July 2007. I am very grateful to Adrian Penalver, Prasanna Gai, Geoff Coppins and Piergiorgio Alessandri for input and helpful comments. *  *  *  1 Developing a rigorous, coherent and robust framework to analyse the resilience of the financial system to withstand strain presents many well-known and formidable challenges. Financial system behaviour is very difficult to model, particularly under stressed conditions when strategic interactions between participants and risks of spillover and contagion come to the fore. And, thankfully, episodes of stress are rare, so history offers only limited assistance. 2 We are currently witnessing a period of major change in financial markets. The global financial system is evolving at a tremendous pace, fuelled by rapid innovation and crossborder integration, and supported by lower macroeconomic volatility. Innovation and integration may have a profound impact on the behaviour of the financial system under pressure. In particular, risks may have been dispersed more broadly through credit risk transfer and increased participation in capital markets. The resulting reduction in credit risk concentration may have strengthened the robustness of the financial system to withstand small to medium shocks. But equally, greater market integration has strengthened the ties between financial firms within and across borders, both through direct exposures and through common exposures to asset markets.

Financial System Risks in the UK – Issues and Challenges (John Gieve) (July 2006) www.bankofengland.co.uk/publications/speeches/2006/speech280.pdf . BIS Review 81/2007  1  To deliver these objectives effectively, the aim is also to use a rigorous and consistent analytical framework which integrates behavioural responses, interactions and feedback effects, to ensure that the system-wide implications are fully captured 5 So where is current practice against that ideal? A typical or traditional “macro” stress test has the stylised form set out in Chart A. The first stage is to put together a coherent stress scenario, typically using a macro-econometric model (which may include some assumed endogenous policy response). By mapping important propagation channels, an estimate of likely financial sector credit losses is produced; for example, by modelling the impact of the macro stress on corporate and household balance sheets and gauging the consequent impact on the probability of default and likely recovery rate on banks’ credit exposures. Market losses are estimated by judging the impact of the macro stress on different asset classes. Total bank losses are calculated by aggregating credit and market losses, perhaps including an additional allowance for the impact of the stress scenario on net interest income and on funding costs.
The high increase of the number of branches relative to agencies shows that banks are not interested only in providing the service of collecting deposits but also in providing other products like crediting to the economy. These developments, besides their positive contribution in enhancing the financial intermediation speak for a better perception of the investing potential from banks, in Albania. An outstanding development is mainly related to the client service, which is accompanied through electronic terminals by the increasing number of electronic cards in circulation. Banks offer already debit and credit cards in co-operation with international companies such as Visa and MasterCard. Six banks provide the ATM service and the number of ATMs reached 108 by the end of February 2005. The banking system results to have a profit level, which has been increasing to Lek 5.1 billion. Return on equity (ROE) was estimated at 21 percent while credit quality is only 4.2 percent, from 4.6 percent in the previous year. These positive developments on the banking system were accompanied by a sound macroeconomic environment. For several years the economy is growing at 6 percent while inflation was kept under control within the two-to-four percent targeted range of the Bank of Albania. The fiscal consolidation has been on track while current trade deficit has been financed mainly by remittances and foreign direct investment inflows. The Bank of Albania has played a crucial role in providing this macroeconomic environment.

This is also in line with expectations in the money and foreign exchange markets. The interest rate was last raised in March. In line with the forecast in the March Inflation Report, there are prospects of another interest rate increase in the second quarter – at the monetary policy meeting in May or June – and a further increase thereafter. 2  BIS Review 39/2006  Conclusion Increased globalisation and the ensuing terms of trade improvements have exposed the Norwegian economy to a significant upward income shock. This has amplified the domestic upswing. So far, however, strong growth impulses have not led to major imbalances in the labour market or strong upward wage and price pressures. This may be seen as an indication that the macroeconomic framework, most notably the fiscal and monetary policy regimes, has been quite successful so far in shielding the Norwegian economy from excessive fluctuations. More importantly, as long as we adhere to the macroeconomic framework, it will shield the economy when oil prices eventually fall and our terms of trade are reversed. Thank you for your attention! BIS Review 39/2006  3
AMCESFI is structured as a collegiate body in which the senior officials from the aforementioned institutions participate. It is entrusted with the oversight of the financial system as a whole, acting in an advisory capacity with respect to the proposed macroprudential measures put forward by the sectoral authorities. 5  The need for coordination in this field is also very necessary at the supranational level, and in particular in Europe since the creation of the Banking Union, which centralises at the European Central Bank (ECB) the supervision of the significant banks in the 21 EU countries.3 In this respect, although decisions on macroprudential instruments in Europe are in the hands of national authorities, the ECB scrutinises these national banking authorities’ proposed macroprudential policy measures to ensure that they are consistent across the euro area countries. In particular, the ECB is empowered to tighten the measures applied by national authorities to specific instruments envisaged in Community banking legislation. The European Systemic Risk Board (ESRB), on which the heads of the EU central banks and regulatory and supervisory authorities for banks, securities, insurance and pension funds sit, has been in place since 2011. The ESRB, whose Advisory Technical Committee it is my honour to chair, has macroprudential oversight functions and is empowered to issue opinions, warnings and recommendations on matters relating to the emergence of systemic risks, and the suitability of macroprudential measures proposed at the national level.

For example, if banks do not have sufficient solvency levels, they may not be capable of passing changes in money market interest rates through to their customers, or may pass them through excessively. In this respect, financial stability may be said to be a de facto pre-requisite for ensuring price stability. 11  Macroprudential policy can also increase an expansionary monetary policy’s room for manoeuvre if the latter is beginning to induce excessive risk-taking by certain agents or markets. In this case, the activation of macroprudential instruments, which are more selective and can affect certain agents alone, may enable the expansionary monetary policy stance to be maintained, by smothering the increases in risks in specific sectors. This is particularly important in the euro area, where monetary policy is determined at the supranational level by the ECB taking into consideration the area as a whole, whereas macroprudential policy remains under the national remit. But nor must we exclude situations in which the objectives of the two policies may clash. For example, in the expansion prior to the international financial crisis, the relatively expansionary monetary policy stance contributed to the accumulation of macrofinancial disequilibria. Had these macroprudential tools then been in place, they could have been activated to counter some of the monetary policy effects on the risks to the financial system’s stability. In short, we cannot ignore the interaction between these two policies.
Furthermore, under the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, Hong Kong is also the designated green finance centre in the area. 12. We also have a strong presence of banks and other financial intermediaries with experienced specialists in green finance, and international institutional investors based in Hong Kong who have made strong commitments to green investments. 13. So there is already strong momentum and an ecosystem here. But there is more that we can do. HKMA’s latest initiatives 14. This brings me to my third point on HKMA’s initiatives – the HKMA’s commitment to fully support green finance to combat climate change. As a bank regulator, one of the largest asset owners globally, and key promoter of market development, we can make use of our various roles and take meaningful actions to support and nurture green finance. We have already been taking a number of concrete actions to drive awareness and development of the market: for example, we co-hosted major conferences last year with the International Capital Market Association, which determines the Green Bond Principles and Social Bond Principles, and with the People’s Bank of China to raise awareness and knowledge of green finance in Hong Kong. To grow the market on green bonds, the HKMA has also been actively reaching out to potential green bond issuers. Building on these efforts, and to further promote green and sustainable finance in Hong Kong, the HKMA announced three further sets of measures in May: 15.

We all are aware from our own history that some kind of instrument and mechanism has always existed to  BIS Review 36/2007  1  facilitate trade and other endeavours. What is abundantly clear, however, is that given the increased mobility of the citizens within the respective SADC member countries between cities and rural areas and at times between member countries, the need for payment instruments and the attendant mechanisms to facilitate safe and efficient remittances is arguably the relatively newer phenomenon. It is therefore the expectation of the Bank of Zambia that the 2007 SADC Payment Systems Regional Conference will discuss some of the most important trends and other strategic priorities confronting banks, payment system businesses, merchants and other service providers involved in the delivery channel for payment and other financial services. This is imperative as it would facilitate the drawing up of a development agenda of future priorities and contextualise the future of payment system oversight. Ladies and Gentlemen, since the establishment of the CCBG a decade ago, methods of effecting payments and other financial transactions have quickly become sophisticated with a trend towards execution in real time electronic media. All this is taking place because consumer confidence is growing in these instruments and mechanisms, which have been supported by growing confidence in SADC member countries’ economies in general and stability of the national financial systems in particular.
The number of guarantees approved during the period amounted to 1,668 with a total value of Rls 644 million against loans to the tune of Rls1.6 billion granted by banks under the umbrella of the program, which benefited about 1,113 small and medium enterprises. This is in addition to loans provided by the Saudi Credit and Savings Bank, for financing young people and small enterprises, as well as the Centennial Fund, and Abdul Latif Jameel’s “Finance Program” that provides material support for youth’s projects and training courses. Dear audience, In conclusion, I wish to emphasize that the status of small and medium enterprises in the Kingdom still needs a lot of care and an appropriate environment to perform their required roles in the economy, especially in the field of Saudization of jobs. This important symposium may, hopefully, discuss this topic from its different aspects and provide the necessary recommendations to assist competent authorities in making appropriate decisions for this important sector. Thank you all for listening and wish you success. BIS Review 171/2010  3

And in this area, the most important things we can to reduce the risk of systemic financial crisis are to strengthen the shock absorbers in the financial system, both in terms of the financial cushions available to absorb losses and the capacity of the financial infrastructure to manage stress. In terms of the financial cushions, the challenge is to sustain a level of capital and liquidity that is large enough to withstand a more adverse financial and economic environment than we have experience recently. Here the job of the risk management discipline is to try to compensate for failure of imagination, to counteract the gravitational effect on measured exposure produced by recent history, and to try to anticipate the adverse effects on market liquidity that may come with a shock. This requires a healthy skepticism about models, discipline and care in the face of competitive pressures, and humility about what we can know about the future. In the world of infrastructure, the challenge is not just about the strength of the physical infrastructure, the capacity to handle volume, operational resilience, and vulnerability to single points of failure. Here the challenge is about the softer infrastructure, as well, such as the arrangements for resolving a credit event or the close out or liquidation of a complex fund or institution. The Federal Reserve is involved in a range of important initiatives on both fronts, working closely with the lead supervisors of the major global financial institutions and market infrastructure operators.
Jon Cunliffe: The outlook for countercyclical macroprudential policy Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at The Graduate Institute, Geneva, 10 November 2015. *  *  *  In 1909, Albert Einstein received his first honorary doctorate from the University of Geneva. In 1905, in his mid-twenties, Einstein published four papers which ushered out the Newtonian age of physics and changed forever our view of the Universe in which we live. It is an interesting experiment to think what Einstein might have accomplished had he chosen the world of economic policy rather than physics. Would he have brought to our world the same brilliant simplicity and achieved the same lasting change in our understanding? Economic policy of course is rather different to physics even in central banks. We may aspire to the same rigour, the same evidential base, the same level of proof. And we may apply many of the mathematical tools. But our world is more indeterminate and shot through with the vagaries of human behaviour. As policy makers, we have on a daily basis to take decisions on the basis of both imperfect information and imperfect understanding. The subject I want to talk about today, the credit cycle and how policy makers charged with financial stability should take it into account, is a very good example of this world. The concept itself is a difficult one.

No: the transformation of the Banque de France is a modest but real illustration of such a reform; for years we have been lowering costs and providing greater services, while maintaining our territorial  Page 8 of 9 presence. I am not saying that efficient public management is easy, but I guarantee that it is possible. Better budgetary control will then be compatible with better financing of the most productive expenditures, which must be prioritised - these difficult choices are obviously a matter for democratic debate. The comparison with our neighbours only seems to indicate that in France, for example, spending on pensions, or "economic affairs" (subsidies and tax credits) is much higher.iv Some futureoriented expenditures (most investments - even if some of them are less useful - but also spending on education and research) have a crucial effect on growth, both in the short term and in the long term. France cannot and must not settle for a potential growth rate of 1.2/1.3%v if it aims to return to full employment and lower its debt in the coming decade. Focusing the debate on the quality of public spending  *** I would like to conclude with two authors who are not very “budgetary”. First, La Fontaine, The Swallow and the Little Birds: "To instincts not our own we give no credit, and till misfortune comes, we never dread it". Let us finally aim to anticipate our budgetary difficulties, in order to reduce them.
If two people have telephones they can at least call each other, which has a value. For every new telephone owner that is linked to the telephone network the benefit of having a telephone to those who are already connected increases as the number of people that can be reached has now increased. This reasoning about telephony can easily be applied to payment services where everyone wants to be able to send payments to and receive payment from everyone else, for example a service for payments between private individuals (P2P). The reasoning becomes more complicated when we talk about payments from consumers to companies (P2B). Payment service markets with two distinct sets of customers for payment services and payment flows in only one direction are usually called two-sided markets. The market for point-of-sale payments (POS) is one such two-sided market. The payments on this market go from the private customer to the company and not the other way. The card market is only attractive to merchants if there are a sufficiently large number of consumers with cards. Similarly, it is only attractive for consumers to have cards if it is possible to use  BIS central bankers’ speeches  3  them in a sufficiently large number of shops. A new payment service on a two-sided market must solve this “chicken and egg” problem, that is ensure that sufficient numbers of consumers and merchants start using the service. Launching a product that is not fundamentally based on existing payment services thus entails major problems.

The labour market is also expected to strengthen, with the unemployment situation improving for the rest of the year. Against this backdrop, MAS shifted to a policy of modest and gradual appreciation of the $ in April 2004. This policy stance was assessed to be supportive of economic growth, while ensuring low and stable inflation over the medium term. Let me now turn to other aspects of MAS’ work during the past year. II  Regulation and supervision  First, in the area of regulation and supervision, we issued the “Objectives and Principles of Financial Supervision in Singapore” monograph earlier this year. This will help the financial institutions we regulate and supervise better understand the desired outcomes of our supervision. Let me say a few words specifically on risk-based capital. We issued details of changes to the capital adequacy requirements for Singapore-incorporated banks in May 2004. We believe the new requirements are prudent but competitive, and more sensitive to the banks’ actual risk profiles. These changes will give the banks greater flexibility to manage their capital while maintaining a prudent buffer against future shocks. The Basel Committee on Banking Supervision finalised the New Basel Capital Framework last month. We intend to adopt the New Framework at the same time as the G10 countries. We will continue to work closely with the Singapore-incorporated banks to assess the impact of the New Framework and determine how best to adapt the proposals for Singapore.
In addition, the general public too is kept informed of matters relating to consolidation through regular press communiqués to ensure maintaining the transparency of such policy measures as well as the public confidence. BIS central bankers’ speeches  9  Meanwhile, the Technical Assistance Team is entrusted with several duties including evaluating the consolidation proposals, studying and recommending solutions on technical aspects, particularly on legal, accounting, banking and tax, formulating guidelines to facilitate the consolidation process and arranging funding through the “Sri Lanka Deposit Insurance and Liquidity Support Scheme” (SLDILSS). The service of this internal Technical Assistance Team is highly rewarding, since, if such assignments were to have been outsourced, it would have taken a longer time period in addition to having to incur exorbitant consultancy fees. Step 3: Preparing the master plan for financial sector consolidation The Master Plan on the financial sector consolidation was prepared by the Consolidation Unit with the objective of developing a strong banking and NBFI sector with enhanced resilience to internal and external shocks in order to cater to the growing demands of the economy. Let me now explain the key components of the Master Plan. First: Institution-wise strategies We have designed a comprehensive strategy for the banks and NBFIs to transform their institutions to cater to the future needs while maintaining the stability of the system. Under this broader strategy, we have sector-specific strategies, designed separately for state banks, other domestic private sector banks, foreign banks and NBFIs.

Basis 4: Transition of the burden of financial crises from shareholder to tax payer Ladies and gentlemen, the history of global financial crises taught us that nature of crises have been changing and along with that the burden of such crises have shifted from shareholders to tax payers. The history of systemic financial sector crises dates back to the 18th century, to the banking sector crisis named as the South Sea Crisis in UK in 1720s. After the inception of the formal banking system, USA has reported a series of crises in their banking system from 1792 to the latest, the Subprime Crisis in 2008. During initial periods, the impact of these crises was local and their spillover effects were negligible. With the evolution of the global banking business, banks have gradually started to link with the other banks in tandem with the improvements in global trade and capital market developments. With this interconnectedness, a crisis in one particular bank or banks in a particular country began to spread and create crises in the regional and global financial markets. The first ever global financial crisis erupted in 1857 in the US. However, until the world’s biggest slump, the Great Depression during 1929–33, Governments wanted financial systems to become stable by themselves, while the Governments’ involvement with banks was limited to raising funds from banks for developing infrastructure and other public spending. There was no lender of last resort to look after the crisis-ridden financial institutions.