samchain/econo-pairs-v1 huggingface dataset:
31.05.2022  Crypto-assets: a financial authority’s view Masters in Finance Closing of the Speakers Series, ESADE Pablo Hernández de Cos Governor  Good afternoon. I am delighted to be here today to address an audience of recent Masters graduates. Not only as recognition of the growing importance of furthering our education in such a changeable world, but also because it affords me the opportunity to talk about cutting-edge themes with those who will play a leading role in the future of our society. Among the many topical issues I could have selected for my address, I believe crypto-assets are the most suitable choice. Among other reasons, because young high-earners who study or work and live in big cities are precisely those who best fit the typical crypto-asset investor profile in Spain.1 Despite being a somewhat misleading term, so-called “virtual currencies” have already been part of our lives for over a decade now. However, only in recent times a series of factors have emerged that seem to be underscoring their ultimate potential to end up playing a significant role in the financial system.

Let me now turn specifically to financial regulation. To the extent that financial regulation contributes to procyclicality and excessive risk-taking, supervisors could design their regulation in a counter-cyclical fashion to reduce procyclical behaviour of financial institutions. Reflecting this thinking, discussion to date on the role of financial regulation to address procyclicality has focused on four areas. The first is to reduce procyclical tendencies of the Basel II capital regulation by aligning capital requirement more with a longer-term perspective of risk. On this, key measures under discussion include: (1) building capital buffers by capital conservation measures; (2) reducing procyclical effects of minimum capital requirement by adopting through-the-cycle risk parameters to achieve a less pro-cyclical capital ratio; (3) promoting forward-looking provision that can cover loan losses that are not yet incurred but expected, with supporting accounting rule and valuation; and (4) using additional capital charge for the large and more complex banks based on indicators of systemic relevance. The second area of focus is the use of macroprudential supervision. The aim is to use prudential measures, when needed, to restrain the build-up of risk either in the overall financial markets or in specific asset class. Examples here include use of loan-to-value ratio on real estate loans and margin requirements for derivatives and securities transactions. Also, a recent idea of using leverage ratio to help take account of the unknown risk beyond those identified by the risk-adjusted capital regulation also falls into this category.
But I feel acutely the loss of working relationships and external stimuli – the chance conversations, listening to very different people with very different lived experiences, the exposure to new ideas and experiences. These losses will grow with time. At some point, they will offset the benefits of avoiding South-West trains. Although it is hard to measure, I feel home-working probably has reduced my capacity for creative thought. No modern-day classic novels lie unfinished in my office drawer – or at least not ones penned by me. And the past six months have certainly depleted my social capital: I do not feel I know anyone at work better than six months ago and most a little less well. Everyone I know would I think say the same. Conclusion Let me conclude. Covid has re-shaped our working lives, our economic contributions and our well-being, certainly in the short-term but probably in the longer-term too. Whether this change is for the better is one of the key questions of our time, as workers, businesses, policymakers and citizens. The evidence so far on these issues cannot at this stage be more than illustrative. There is a balance to be struck between events which distract and events which fire the imagination. For me, the 0-5 model of homeworking strikes this balance in the wrong place, as with hindsight did my pre-pandemic 5-0 model.

It is balanced and reasonable: the risk sensitivity of the prudential framework has been preserved thanks to a large-scale retention of the internal model approach, which was one of our main concerns. Moreover, trust in the internal models will be strengthened by greater oversight, while the increase in capital requirements will remain moderate and spread out until 2027. Banks were rightly calling for long-term strategic visibility for their regulatory framework: they now have it. The agreement that we have negotiated relies on a strong commitment to implementation by the main jurisdictions, including the United States. The European Union must of course keep its word with regard to implementation and the timetable. Additionally, we are confident about the rapid completion of the current discussions on the standardised approach to market risk. The first version of  Page 2 of 6 the text, published in 2016, would have entailed ex post an unjustified and excessive increase in the capital requirements for market activities. The ACPR has since then actively participated in the work of the technical Market Risk Group of the Basel Committee. The new rules proposed in the document currently submitted for consultation should permit a return to the impacts initially sought ex ante, i.e. an average increase of 20% to 30% in the minimum capital requirement for market risks. Beside regulation – thus clarified – and microprudential supervision, macroprudential policies now round off in many countries the financial stability trifecta.
The Riksbank has chosen to publish minutes of Executive Board meetings after an interval of 6–8 weeks; the minutes are to reflect the discussion and indicate how the members voted. The clearly independent status that has now been assigned to the Riksbank has much to do with this choice. The minutes make it easier for policy evaluators to follow the formation of monetary policy and assess the actions of Board members. This is a democratic interest. Moreover, the fact that the voting will be published probably increases the members’ motivation to form a personal opinion about the difficult matters that have to be considered. I also believe that access to the minutes can help people to understand the choices that have to be made in the formulation of monetary policy and demystify what the Riksbank is doing. It is arguments of this type that made my British colleague Mervyn King declare, with reference to the work of the Bank of England’s Monetary Policy Committee, that ‘Divided we stand, united we fall’. I want to emphasise that these matters are by no means simple. It seems to me that a clear analytical framework, combined with a high degree of transparency, has provided a good foundation for Swedish monetary policy in recent years. But with an Executive Board consisting of six members, each of whom is in a position to voice an opinion on monetary policy, it is probable that from time to time the Riksbank will be criticised for being indistinct.

It means that all EU countries — and thus non-euro countries such as Sweden — are bound by the rules for fiscal policy and its surveillance after the move to Stage Three. Each country is to strive for budgetary positions close to balance or in surplus in the medium term. This is intended to allow the automatic stabilisers free play while keeping the government deficit inside the 3 per cent limit. In this way the Pact provides for some flexibility in fiscal policy, which may be particularly important when there is no recourse to exchange rate adjustments. If the budget deficit exceeds the 3 per cent limit, sanctions can ultimately be imposed on the country in question if the problems are not tackled. It is only in exceptional circumstances that this may not apply. A surveillance procedure has been established for monitoring developments; national stability programmes are to be presented at regular intervals, showing how the goals are to be fulfilled. This process is perhaps as important in practice as the threat of sanctions. The establishment of clear rules and sanctions is intended to support the forces in each country that favour a disciplined fiscal policy. The sanctions do not apply to non-euro countries and they submit convergence programmes instead of stability programmes. So what has happened so far? The assessment of convergence or stability programmes from all the EU countries this spring shows a mixed picture.
Once again, the time perspective is important here. The long-term view that should underpin any analysis of the sustainability of the pension system is perfectly compatible with the fact that many of the reforms needed to improve employment and, above all, productivity in the economy can only bear fruit after a relatively lengthy period of time. 2  BIS Review 51/2009  These two pillars of the strategy are evidently important. And tackling the problem of the impact of population ageing on the pension system in the long run will also require reforms. Further, these pension system reforms will complement the structural reforms mentioned earlier, in particular those relating to the labour market, and the reform to maintain healthy public finances. It is this matter which is central to this Committee’s mission. It has been working intensely in this connection over the past decade, particularly on how to modify the pension system’s current parameters to ensure its long-term sustainability. That brings me back to two other key aspects of the strategy to be agreed: the speed and scope of the changes to be made. Although the emergence of the first deficit in the system may appear a long way off, it should be borne in mind that the reform planning and implementation horizon is also long. Accordingly, the reforms should be discussed without delay so that, following their gradual implementation, they may prove fully effective when population ageing begins to exert a more virulent effect. Pension system reforms must also be sufficient.

John C Williams: Opening remarks – “Racism and the Economy: Focus on Health” Remarks (via prerecorded video) by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at “Racism and the Economy: Focus on Health”,9 September 2021. * * * As prepared for delivery Good afternoon, and welcome everyone. I’m John Williams, president and CEO of the Federal Reserve Bank of New York. I’m here to kick off what is now the eighth installment of a landmark series on the topic of Racism and the Economy sponsored by the 12 Federal Reserve Banks. These events examine structural racism’s toll on the economy and identify potential actions that can improve economic outcomes for all segments of society. There is no facet of our society immune to racism, health included. So, this afternoon, we will be looking at key issues around race and the economy through the lens of health—a focus never more urgent and critical. Before we move on with the program, I’d like to share more broadly why this is so important for the Federal Reserve, what we’re learning, and what we’re doing. And with that, I must give the standard Fed disclaimer that the views I express are my own and do not necessarily reflect those of the Federal Open Market Committee or anyone else in the Federal Reserve System. Having poor health is a challenge on many levels. We’re keenly aware that health can be a huge driver of economic inequality.
Her articles and research cover topics such as mutual support of qualitative and quantitative methods in the field of intelligence or topics related to the debate in the intelligence community about intuition versus structured technique in prediction and decision making in conditions of risk and uncertainty. She is a supporter of structured methods and statistical, cybernetic and mathematical analysis in the development of prediction systems. One final thing about her background, which I am certain many of you will find interesting, is that she is a Marine Corps Black Belt Mixed Martial Arts Instructor. She has led the Marine Expeditionary Unit training in martial arts and trained over 200 Marines and certified 60 to the next higher belt. So all in all, a very impressive background and track record. Professor Sundri Khalsa is visiting the Research Institute of the University of Bucharest. Professor Marian Preda, the Rector of the University, wrote me about this visit. He pointed out that, in addition to being a specialist in the development of applications of quantitative and statistical methods for predictive information activity, Professor Khalsa has been working recently on matters of blockchain and cryptocurrencies, as they  1/2  BIS - Central bankers' speeches  influence strategic and national security issues. This is an area that has emerged at the overlap between (a) monetary and banking phenomena, (b) information technology advances, and increasingly salient (c) geopolitical and geo-economic developments.

Obviously, it is part of our mission here at the National Bank of Romania to monitor, understand and assess these and related phenomena which may affect - both positively and negatively - the Romanian monetary system and banking system and more generally our economy. That being said, the reason we have invited her here today is related to this specific aspect of her more recent work. So far we have seen blockchain and cryptocurrencies mostly discussed and assessed from the perspective of information technology and economic theory. We are interested at the same time to see how the cryptocurrency problem is also perceived from the perspective of an analysis largely rooted in the experience of intelligence studies and practice, and of an expert in strategic decision making in conditions of risk and uncertainty. We are also interested to see how such an expert is framing the problem of cryptocurrency as a massive economic challenge to the national economies, a problem requiring a strategic assessment of the alternatives; to see how an expert in structured analysis may present the issue in a systematic, methodical way. Last but not least, we are interested in the evaluations which are emerging out of this exercise, including the opportunities as well as the warnings. Hence the title of the presentation: "Bitcoin Versus Central Bank Digital Currency (CBDC): The Most Important Economic Decision Nations Have Ever Faced. Analytical Frameworks for Comparative Assessment and Strategic Decisions." In terms of how we are going to proceed, the event will have two parts.
It should be borne in mind that in a floating exchange rate regime, economic agents operate in an environment of exchange rate risk. Nevertheless, as repeatedly emphasized by the Central Bank, exchange rate risk is a manageable risk and economic agents should establish the mechanisms that will ensure the efficient management of this risk. Liquidity management Excess liquidity, which was created by the Central Bank’s purchases of government securities worth of YTL 14 billion from state-owned banks and banks transferred to the Savings Deposit Insurance Fund (SDIF) in order to meet their liquidity needs following the February 2001 crisis, as well as the intensive foreign exchange purchases during the 2003-2005 period, persisted in 2006. The Central Bank, withdrew the excess liquidity in the market mainly via New Turkish Lira deposit operations in the Interbank Money Market within the CBRT and Repo transactions in the Repo and Reverse Repo Market of the Istanbul Stock Exchange, on an overnight basis. Accordingly, overnight interest rates were constantly realized around the borrowing rate of the Central Bank. Hence, the borrowing rate of the Central Bank has continued to be an indicator for money markets.

Equity and bond financing have gained in importance relative to lending from banks. This diversification of funding is positive for financial stability, since the dominating role of the banks in providing loans is reduced. From the issuers and also the investors’ viewpoint the existence of active markets ensures good competition, leading to efficiency and favourable loan terms. To sum up, the Swedish financial sector contains many different types of institutions and markets and competition is strong. This is fine, because our crisis taught us the problems of being overly reliant on the banking system. The tendency is that the other institutions take markets shares from the banks, for instance in providing channels for saving. But since many of those institutions form part of bank groups, the bank groups’ overall share of the financial system is not reduced to the same extent. Recent developments in the composition and structure of financial services In addition to the developments in the institutions and markets, we are also witnessing new trends in financial services. Mutual funds, money market funds, equity funds etcetera are growing rapidly. Depositors seek higher yields than those offered by bank deposits and they invest in various securities and asset funds. Banks and other asset managers, including hedge funds, make large profits from this business. The effects on financial stability are unclear. On the one hand, the growth of the funds means more liquidity to the equity and securities markets so they can provide more financing of investments hence reducing the reliance on bank lending.
On this opportunity, I wish to quote the three premises which, according to Donald Kohn 4 , the Federal Reserve Vice Chairman, are necessary to justify the activities undertaken by central banks to pursue this aim:  1  Borio C., Lowe P. Asset Prices, Financial and Monetary Stability: Exploring the Nexus, BIS Working Paper, No. 114, July 2002. 2  See references at the end of the speech. 3  Rybiński K., Globalizacja w trzech odsłonach, Difin, Warszawa 2007. 4  Kohn D., Remarks by Donald Kohn at Monetary Policy: A Journey from Theory to Practice, An ECB Colloquium held in honor of Ottmar Issing, 16 March 2005. BIS Review 134/2007  1  •  a central bank must be able to identify bubbles on an asset market in a timely fashion with reasonable confidence as to the adequacy of the findings of its analysis,  •  there must be a fairly high probability that a modestly tighter policy will help to check a further expansion of speculative activity on a given asset market,  •  the expected improvement in future economic performance must be sizeable and bigger than expenses disbursed by the economy as a result of conducting those activities.

Our approach will be explicitly forward looking. And we have no hidden agenda. Where we judge changes that are already under way to regulation, firm-level controls, market structure and technology are sufficient to restore fairness and effectiveness, we will say so. Where we do not, we will make recommendations on the most important priorities for change. A defining characteristic of our Review is a recognition that improving fairness and effectiveness is a shared responsibility between individuals, firms, the market as a whole and the public authorities. As I said at the outset, we believe that markets – when they work properly – are the best source of dynamism, prosperity and progress. So I expect that a key part of the Review’s final recommendations will consist of firm- and market-led initiatives. With that in mind, we will draw on input from an independent panel of senior market practitioners, chaired by Elizabeth Corley of Allianz Global Investors, and bringing together senior representatives of internationally active market participants and investors, market infrastructure providers, major corporate users of financial markets, and independent members. The final recommendations of the Review will be made by me and my co-chairs with the support of the excellent team we have assembled. But we hope the Panel will help launch and take forward those parts of the final recommendations requiring active market ownership. Where firm-led solutions are not enough to improve fairness and effectiveness, targeted interventions by the authorities will also be part of the Review’s toolkit. Where might the solutions lie?
For example, it is not possible to argue at a given monetary policy meeting that “of the 25 basis points I feel the repo rate should be raised, 5 points are aimed at dampening risks linked to household debt and housing prices. The remaining 20 basis points are aimed at stabilising inflation and economic activity in the short run”. Monetary policy decision-making just does not work like this. Moreover, the Executive Board consists of six individuals. Each of them has very likely had his or her own view of what role the risks linked to debt and housing prices have played in their decisions. It is therefore not possible to respond to the question of how much the Riksbank has leaned against the wind with a quantified measure. But what I am quite convinced of is that none of those deciding on the repo rate has had as their main reason, much less their only reason, that monetary policy must lean against the wind. The second question is whether the policy of leaning against the wind has had any tangible effect, given that consideration to risks linked to the development of household debt and housing prices, as I said, has played a fairly subordinate role in policy-making. I am convinced that the policy has played an important role, despite the element of leaning against the wind being much more modest than the critics claim.

At the presentation of the last report on financial stability, we expressed our conviction that the financial system needs to be made more resilient to possible shocks. This is all the more valid if we consider the hundreds of billions of taxpayers’ money that had to be spent worldwide on stabilising the financial system over the past few months. The focus is on the need for improvement in the “shock absorbers”: capital and liquidity. The crisis has shown that the current regulation in these areas is no longer sufficient in the case of the big banks. Their level of capital is inadequate when set in relation to their risks. In the area of liquidity, events have occurred that were not taken into account in any of the big banks’ scenarios. The reform of the capital adequacy regulation for big banks, drawn up by the SFBC with the support of the SNB, represents an important step in the right direction – for the area of capital. It specifies an increase in risk-weighted capital together with the introduction of a leverage ratio. The leverage ratio is a supplementary instrument and does not call into question the principle of risk-sensitivity with regard to the capital regulation. An essential constituent of the reform are countercyclical mechanisms whereby, in good times, banks are required to considerably exceed the minimum requirements for capital and the leverage ratio. This ensures that a buffer is created to absorb losses during crises.