samchain/econo-pairs-v1 huggingface dataset:
Elvira Nabiullina: Speech at congress of Association of Banks of Russia Speech by Ms Elvira Nabiullina, Governor of the Bank of Russia, at congress of Association of Banks of Russia, 28 May 2021. * * * Good afternoon, dear congress attendees, The pandemic is slowly but abating, there are signs that life is returning to normal, and in-person conferences are gradually coming back. All the same, we are lacking in real-life communication, so I am very glad to welcome you here today. Of course, there are changes taking place not just in how we communicate. We can see that the actions taken as part of our anti-crisis agenda are gradually being replaced by those on a development trajectory, as before. With account for the fact that the pandemic has had a serious impact on society, on the economy as a whole, and on the financial sector, we must think about the future, and about how the financial sector will help the development of the economy. Last year, the banking sector made a positive contribution amid pandemic conditions. It supported the economy, its clients, and, I am sure, will be able to further support the development of the economy. I would like to take this opportunity to thank the entire banking community for their wholly responsible behaviour during the pandemic. It is thanks to you, really, that we managed to greatly mitigate the negative effects of the pandemic.

This is because we understand that these implementations require that IT systems be developed because almost everything is now tied to IT. We want banks to be able to do this at the same time. There are exceptions when there are extraordinary situations or risks. Or when banks, due to the fact that this is an easing measure, a preferential regime, ask us to introduce these new changes faster. Sometimes we just let them choose: they can remain on the old system or migrate to the new system. This is more difficult for us, but we understand that it is easier for banks to work this way. In our opinion, this increases predictability of the implementation of all our changes in regulation. I would like to say that, together with you, we are trying to remove bottlenecks, to reduce costs where possible, so that banks of varying sizes have the opportunity to work and benefit their customers. For example, for a long time there have been discussions, on all the platforms and during meetings, of banks’ access to funds from the budget, state-owned companies, and today Mr. Aksakov spoke about this, about a draft law. We hope that it will indeed be adopted, and that this topic will no longer require constant discussion. We understand how serious it is from the point of view of ensuring an equal playing field regarding access to state and state companies’ funds. All the more so because they form a significant part of banks’ equities.
These include the possibility of premium competition in the non-life sector, longevity risk in the life sector, and the possibility, albeit diminishing, of an influenza pandemic. The chart on the left on slide 12 portrays the performance of the insurance sub-sectors relative to the Dow Jones EURO STOXX. Whilst the impact on the reinsurance sub-sector of the damage caused by natural catastrophes is evident, other sub-sectors appear more resilient. The chart on the right on slide 12 shows the median expected default frequency and average subordinated debt spread for euro area insurance companies. Both measures of risk in the sector have reached new lows since 2001, indicating that market participants see an improving resilience in the sector. The current Review contains for the first time a specific section dedicated to assessing developments in the global hedge funds sector. The pace of growth of the capital under management of global hedge funds, which had moderated in the course of 2005, fluctuated rather sharply in the first months of 2006, partly due to the mixed performance of most strategies in the last quarter of 2005 and improved results in the first quarter of 2006. After several quarters of reduced inflows into the hedge fund sector, and an outflow in the last quarter of 2005, inflows re-bounded in the first quarter of 2006 as shown by the chart on the left on slide 13.

In addition to these forecasts, alternative scenarios on the inflation outlook and the global economy are discussed in the Risks section of the Inflation Report. You can examine the Report for details. While concluding my remarks, I would like to thank all my colleagues, who contributed to the Report, primarily those at the Research and Monetary Policy Department as well as the members of the Monetary Policy Committee, and thank every one of you for your participation. 10  BIS central bankers’ speeches
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.

Of course we followed what they were getting up to very closely, and always stood ready to help when we were called upon by the markets to do so, as we occasionally were, intervening on our own initiative only to ensure that the public interest was properly respected. For the most part we took the view that market participants know better than we do what will work and what won't; it is after all their salaries if not their jobs that are on the line. Where public policy issues were involved, we established a tradition of extensive consultation right across the relevant sections of the market - a tradition which the FSA has certainly maintained. In the UK's relatively well-developed markets - particularly the wholesale markets - we recognised early on that where intervention was judged to be necessary - in the interest of market transparency or of prudential or behavioural conduct for example - it needed to be informed by those who properly understood the subtleties of the market if we were to reduce the risk of unforeseen consequences which could either frustrate the purpose of the intervention or unnecessarily obstruct market innovation. In some instances this approach, which I suppose might be described as market-sensitive, involved encouraging the market itself to address the particular issue in question as a preferable alternative to official action.
A priori, there is no right or wrong approach here, since the design and character of the macroprudential instruments chosen must take account of the special features of the banking system in the individual country in question. What approach has Switzerland chosen? In the area of financial stability, it has opted for an approach in which responsibilities are clearly allocated to existing institutions. The principle adopted in the case of the structures and tools is “as much as needed but as little as possible”. In my view, this regulation approach is well suited to our country. Concentrations of power are not in line with the culture of balance and limitation of powers which is fostered in our country – a culture which has served it well. Thus, contrary to the international trend, microprudential banking supervision here has not been transferred to the central bank, remaining the responsibility of the Swiss Financial Market Supervisory Authority, FINMA. A lean approach was also chosen for the macroprudential area, with the new responsibilities clearly divided between the two institutions. FINMA is responsible for measures of a more structural nature, such as the increased capital requirements which systemically important financial institutions are required to meet in order to alleviate the “too big to fail” issue. The aim of these instruments is to improve regulation of and incentives for individual institutions. Consequently, it makes sense that FINMA, which is experienced in supervising institutions, is responsible for this area. Conversely, the SNB takes on a key role when it comes to cyclical measures.

The fall in market interest rates has also played its part in narrowing the net interest margin, since the cost of liabilities, and especially of deposits, which are the main source of funding for Spanish banks, tends to be less sensitive to changes in market returns than the remuneration of assets. 9/29  Indeed, regarding assets, the remuneration of variable-rate loans, which make up most of the stock of outstanding credit in Spain, adjusts to the new market prices as the reference indices are updated (which generally occurs with a lag of less than one year). Further, interest rate falls also pass through to new lending, which likewise gives rise to a cut in the average remuneration of assets. Regarding liabilities, the zero level of interest rates has acted as a lower bound for the cost of deposits. The reason for this downward stickiness in the cost of deposits is that negative interest rates in these instruments could reduce the supply of funds, especially in the case of households, as they may prefer to hold cash, which has zero but not negative remuneration, rather than deposits. However, as regards other bank liabilities, such as debt securities, interest rate decreases pass through to their cost without the zero level acting as a lower bound. Indeed, the average cost of some financing instruments, such as covered bonds, fell to negative values in the summer. The impact on costs is particularly important against a background in which banks have to meet regulatory MREL requirements.
In the short term, many of the uncertainties obstructing the economic outlook – and especially the manufacturing sector – are man-made – and even one-man made. Contingencies that not so long ago appeared as tail risks, such as the possibility of an escalation of trade tensions or a disorderly Brexit, have become looming threats. But uncertainty also pertains to long-term structural trends. Over the past decade, the world economy has steadily recovered from the global financial  Page 2 sur 11 crisis. But it has not returned to its pre-crisis normal. Interest rates remain at historical lows, due to a historically low level of the natural rate of interest R* ii. In the short run, this analysis – uncertainty as the first trigger of the present slowdown – should guide our ranking of policy answers. Monetary policy plays its role, but it should not – less than ever – be the only game in town. It should not even be the first game in town. The first response would be for government-driven uncertainties to be addressed directly by governments, by removing the self-induced threats to world growth. Failing that, a second answer is for fiscal policy to step in. Fiscal stimulus from countries with fiscal space would both stimulate aggregate demand, and, with targeted, quality investment, increase long-term growth. iii Wage increases in countries that have long relied on wage moderation could also help in bolstering aggregate demand and inflation. And pro-growth reforms would raise R*. Monetary policy provides a third response.

Central banks have an operational independence but they do not decide their own mandate. The mandate given to the Eurosystem is clear: our primary objective is price stability. However, our mandate states that we “shall contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system” x. Careful attention to the dynamics of the indebtedness of households, firms, and financial intermediaries would also be in line with the intellectual tradition of the Eurosystem. Since its inception, the ECB has always given special attention to broad financial aggregates in setting the course of monetary policy. It was emphasised by its monetary pillar and is now emphasised by its monetary analysis. Restricting attention to measures of liquid liabilities such as M3 has probably little justification today in view of the little direct relevance of monetary aggregates for price developments. But the relevance of broader and more varied credit aggregates is beyond question for both price and financial stability concerns. Together with asset prices, they could constitute the base of a revised credit and financial pillar. xi  2.2  The Separation Principle becomes less relevant with a multifaceted monetary policy  The link between monetary policy and financial stability raises two questions. First, what are the quantitative effects of monetary policy instruments on financial stability?
Within the tolerance range around its reserves target, a bank has no incentive to pay more than Bank Rate for an additional unit of reserves, or to charge less than Bank Rate for lending an additional unit of reserves, and the demand curve is relatively flat. The length of the flat portion of the curve depends on the size of the tolerance range set by the Bank. If the tolerance range is very small, market interest rates will be relatively sensitive to variations in  6  If the system as a whole already has excess reserves (relative to the commercial banks’ collective target), the Bank can drain reserves by issuing short-term Bank of England bills. BIS central bankers’ speeches  3  the supply of reserves. That is because small variations in supply could potentially move banks into using the deposit or lending facility. If the tolerance range is very wide then banks have little or no incentive to distribute reserves around the market to meet their targets precisely. Alternative frameworks for setting interest rates This system of reserves targets is just one of a number of systems that would be used to implement the policy rate. Indeed, as a system for influencing market rates, these arrangements could be seen as overly complicated. Since March 2009, when the Bank embarked on its asset purchase program known as QE, we have been implementing Bank Rate in a rather simpler fashion. The Bank’s asset purchases were financed by creating additional central bank reserves.

The clearing spread for the narrow set would remain 10bps (bidder 6, as the cheapest narrow bidder, would be allotted only £ against his bid for £ The clearing spread for wider collateral would be 19bps £ would be allocated to bidder 1). That results in a stop-out spread (the difference between the clearing spreads for wider and narrow collateral) of 9bps. The stop out spread remains at 9bps until the point at which £ is allocated to the wider set. At that point, bidder 6 is no longer filled, and the clearing spread on the narrow set rises to 12bps. Bidder 1 receives £ out of the £ he has bid, and so the clearing spread remains at 19bps on wider. But the stop out spread is then 7bps (Chart 5). At the point where £ is allocated to wider, the clearing spread on narrow is still 12bps (bidder 6 is unfilled, and bidder 5 gets £ against a bid of £ but the clearing spread on wider falls to  16  8  Strictly, the stop-out spread is not defined if the allocation is 100% to one type of collateral. BIS central bankers’ speeches  17bps (bidder 1 is fully allocated and bidder 2 gets £ The stop out spread falls to 5bps (Chart 5). Continuing this process, and tracing out the spectrum of stop out spreads and the associated proportions of the funds allocated to wider collateral, results in the auction demand curve.
Andrew Bailey: Financial reform Remarks by Mr Andrew Bailey, Executive Director for Banking Services and Chief Cashier of the Bank of England, at the Lord Mayor’s City Banquet, London, 21 September 2010. *  *  *  My Lord Mayor, Ladies and Gentlemen. Can I thank you Lord Mayor on behalf of the Bank of England for inviting us to contribute to your regulatory Banquet. Adair and I first met in our current roles when he was literally I think in his first day on the job, which was incidentally the weekend of the resolution of Bradford and Bingley. It is a great relief that the experience of that weekend did not cause him to have second thoughts, because we have all benefited from the leadership that he has provided since then. On the subject of the time of year, I should add that being here in September, enjoying your hospitality Lord Mayor is a distinct improvement on some recent Septembers when we were recovering banks. An evening at Mansion House beats the pizza and all night session at the Bank of England by a very long way. I am going to speak tonight about why the public interest in the stability of the financial system matters to all of us. Calmer times are the necessary environment for the task of rebuilding financial stability. It is a task that belongs to all of us, and it is certainly not just the task of regulators, central banks, or the authorities more generally.

Debt convertible into equity on the downside would also be helpful in that it would be a dampening mechanism – equity capital would be automatically replenished, but only when this was needed. Transparency There were many areas where a lack of transparency contributed to a loss of confidence, which intensified the crisis. One particular area was the case of over-the-counter securities such as ABS, CMBS, RMBS and CDOs and their associated derivatives. There was a lack of transparency in a number of different dimensions. A.  Valuation. CDOs and other securitized obligations were complex and difficult to value. This reduced liquidity, pushed down prices and created increased uncertainty about the solvency of institutions holding these assets. B. Prices. The lack of pricing information led to a loss of confidence about accounting marks. Sometimes identical securities were valued differently at different financial institutions. C.  Concentration of risk. Because there was no detailed reporting of exposures, market participants did not know much about the concentration of risk. This led to a reluctance to engage with counterparties, which, in turn, pushed up spreads and reduced liquidity further. The SCAP exercise was an example where increased transparency helped to generate a better outcome. We disclosed our stress test methodology and the results for each of the nineteen largest bank holding companies. This transparency increased confidence and made it easier for the banks to raise more capital.
Another thing was that economic policy had reached the end of the road, inflation was clinging tightly to an annual level of 8-10 per cent in Sweden, growth was poor and unemployment was showing a tendency to rise. When the deregulation of the financial markets got off the ground in Sweden, the process was rapid – in 25 years we had moved over from being one of the most regulated financial systems in the western world to being one of the most free! However, the process was not exactly painless. The consequences of the macroeconomic imbalances built up during the period of regulation, combined with the Swedish banking system's incapacity to manage risk in its lending when credit granting was deregulated were dramatic, to say the least. We experienced this at the beginning of the 1990s, after the bank crisis and after abandoning the fixed exchange rate regime. During the difficult years at the beginning of the 1990s, with what was for Sweden record-high unemployment, a risk of the central government debt running riot and stubbornly high inflation expectations, despite a low inflation rate, there were not many people who dared to hope for such a rapid positive development as that we saw during the second half of the 1990s. The central government finances are now in good condition, the current account has showed a surplus for several years now, inflation expectations are at a stable level of 2 per cent and unemployment is down to around 4 per cent.

If so, then the firm becomes subject to more legal and regulatory requirements, some of which may be inconsistent with those applicable elsewhere. The result of the geographic expansion then is to increase the risk of possible compliance problems and to make the management of a global business that much more difficult. Deregulation within individual countries is also something of a two-edged sword. Clearly it affords greater business opportunities to a firm, but it also raises challenges in managing compliance risk across a firm’s business units. For example, as a result of the passage of the Gramm-Leach-Bliley Act in the US, a single firm can now engage in commercial banking, investment banking, and insurance activities. The implication for the compliance function is that it must not only keep on top of issues  BIS Review 76/2006  1  within each of these diverse business lines but also the interactions between them - for example, in policing potential conflicts of interest across the firm. Somewhat similarly, the overall compliance challenge for the firm is more than just the sum of the challenges from financial innovation, from globalization and from deregulation. There are interplays between these developments that add additional layers of complexity to the compliance challenge. Level of scrutiny The second broad consideration I mentioned is the increased level of scrutiny of compliance in the U.S. and in other major financial markets - scrutiny that is driven by major industry and political events that have changed the legal and regulatory environment over the past five years.