samchain/econo-pairs-v1 huggingface dataset:
But the different national government bonds will tend to trade on essentially the same yield curve, with the focus of the market being concentrated, even more so than at present, on spread relationships. 31. This of course raises the interesting question -- spread over what? Who will provide the benchmark issues? Moreover, the intensified focus on spread may produce two further results. First, there will be even greater incentives than at present for national governments, who will BIS Review 110/1997  -6-  remain responsible for their own debt management, to converge in their techniques for issuing and marketing their debt. It will be interesting to see whether this will generate greater co-ordination amongst debt management authorities in managing their debt programmes, including, for example, their auction timetables. 32. A second effect in this area flowing from the concentration on spreads may be greater interest in developing a diversified, deeper corporate bond market in euro, as has long been present in the United States, but much less so in other countries. If this happens, it could be a considerable boon to corporate borrowers as a whole because it would extend the range of financing opportunities open to them. 33. A second area where financial market activity in the euro is likely to generate new opportunities is in the short-dated money markets. Foreign exchange traders do clearly face some contraction in their activity, as an inevitable consequence of currency unification.

Indeed, any decision to instead rely on morerestrictive interest rate policies to achieve financial stability at the expense of poorer macroeconomic outcomes must pass a cost–benefit test. And such a test would have to clearly illustrate that the adverse economic outcomes from more-restrictive interest rate  3  I should note that increases in interest rates since last spring have increased discount factors and thus lowered the present value of pension fund and other fixed nominal liabilities. For instance, see Fitch Ratings (2013). 4  BIS central bankers’ speeches  policies would be better and more acceptable to society than the outcomes that can be achieved by using enhanced supervisory tools alone to address financial stability risks. I have yet to see this argued convincingly. Macroprudential tools Let’s discuss some of these macroprudential tools. One simple but important tool is enhanced monitoring. Even before the recent financial crisis, central bankers were well aware of the key role played by stable financial markets in economic activity. Since the crisis, however, the analysis of financial stability issues has been greatly expanded and given a more prominent role in the FOMC’s deliberations. We comb through reams of data looking for evidence of incipient risks to financial stability. The Federal Reserve also has revamped its approach to bank supervision substantially to expand the focus on macrofinancial risks. Traditional bank supervisory tools are being used more intensively, and new tools have been developed. Bank capital stress tests are one wellknown addition to our supervisory toolkit.
This won’t a silver bullet – investment funds may face  15  See December 2019 Financial Stability Report , and speech by Alex Brazier (2019): Stability, Agility, Opportunity See December 2019 Financial Stability Report 17 See speech by Christopher Woolard (2020): The role of investment managers in the post Covid-19 recovery 16  10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10  other obstacles to investing in unlisted equity and the needs of unlisted companies will vary depending on their current ownership structure and size. But it would certainly be a step in the right direction. To reinforce it, we will also need to examine whether there are obstacles to insurance companies and pension funds making investments in unlisted equity, whether that’s directly or through funds structures of the sort I described. On the insurance side, there is little case for compromising on the resilience of insurance companies and protection of their policyholders. But we need to examine whether, within that level of safety, regulations strike the right balance in encouraging asset allocations to equity. The upcoming review – announced by the Chancellor – of certain Solvency II regulations may be a good opportunity to look at that issue. The Government expects to publish a Call for Evidence in the Autumn.18  On the pension side, it is notable that funds typically offer a daily price of their assets.

3  See Chancellor of the Exchequer: A Plan for Jobs 2020 See speech by Jon Cunliffe (2020): Financial System Resilience: Lessons from a real stress 5 See letter from FSB Chair Randal Quarles to G20 Finance Ministers and Central Bank Governors: July 2020 4  3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  Since central banks acted, markets have opened up again, allowing companies to raise finance. Britain’s companies issued more than £ of new bonds since March. A second response was also needed. The seizure of corporate debt markets meant that larger companies that normally enjoy market access were suddenly faced with uncertainty about access to that finance when it was most needed. They turned, as a precaution, to banks to bolster their cash positions. What followed was not a run on the banks driven by fear about the banks, but a run to the banks driven by fear on the part of businesses about their own access to finance. In a complete contrast to what happened in the 2008 financial crisis, bank lending shot up. Net of repayments, banks lent £ in March – more than 30 times their normal monthly net lending flow as large companies drew on committed credit lines. That threatened to overwhelm the capacity banks have to lend to the wider population of businesses. The Covid Corporate Financing Facility (CCFF), owned by the Treasury and operated by the Bank of England, was designed to alleviate that pressure.
•  Furthermore, we also decided that at least until the end of 2016, we will continue to fully meet the demand of banks for liquidity in our refinancing operations – of course, against adequate collateral. •  Finally, we have suspended the weekly operations to absorb the liquidity injected under the Securities Markets Programme. We took these decisions to enable our accommodative monetary policy stance to better feed through to the wider economy. Weak credit growth in the euro area, particularly to small businesses, has been a major headwind for the recovery. Indirectly, it has been a continuous drag on inflation over the recent past. In fact, despite significant reductions in policy interest rates and, overall, more contained macroeconomic risks, bank-intermediated credit growth remains subdued and lending rates for small businesses are well above the levels usually observed in similar phases of the business cycle. To address this challenge, our TLTROs are tailored to incentivise bank lending to the real economy in the euro area. The TLTROs will provide long-term funding to participating banks. This should ease their financing costs, allowing banks to pass on such attractive conditions  2  BIS central bankers’ speeches  to their customers. This will ease credit conditions and stimulate credit creation. Moreover, the growth of our balance sheet as a result of a significant take-up in our TLTROs will put downward pressure on interest rates in the money markets. This will contribute further to lowering the banking sector’s funding costs.

Equity financing is a key driver of innovation: it is better suited to the uncertainty and offers long-term returns associated with innovative projects. The euro area is seriously lagging behind in this respect: equity only accounts for 80% of GDP, compared with 122% in the United States. Integrated capital markets also require effective supervision. Here again, milestones have been reached thanks to the outcome of the recent review of ESAs towards enhancing their role. Concerning the supervision of financial markets, ESMA will as a first step contribute to furthering convergence of supervisory practices. Yet in the longer run, the scope of its direct supervisory powers should be expanded starting with the supervision of wholesale markets. Regarding the insurance sector, a particular attention was paid to strengthening the supervision of cross-border activities through EIOPA. I welcome also the enhanced EBA role on AML-CFT issues, an area where progress in the European framework is absolutely needed. Finally, the Capital Markets Union needs robust market infrastructure. Thanks to EMIR II, Europe has given itself powers – via ESMA – to directly supervise third country CCPs which have a systemic footprint vis-à-vis the EU. This being said, EMIR II is not the end of our journey. Much more needs to be done regarding either the role of the ECB or ESMA’s prerogatives over EU CCPs.
Let me outline how this balanced policy approach might work in practice. The Fed could sharpen its forward guidance by pledging to keep policy rates near zero until one of two events occurs. First, this policy would account for the liquidity trap risk by communicating that we intend to keep the federal funds rate at exceptionally low levels as long as the unemployment rate is above a 7 percent threshold. Reductions in the unemployment rate below this level would represent meaningful progress toward the natural rate of unemployment and might be a reason to lessen policy accommodation. Second, this policy would account for the risk of higher inflation – that is, we would be committed to pulling back on accommodation if inflation rises above a particular threshold. 1  4  Evans (2011). BIS central bankers’ speeches  I would argue that this policy’s inflation-safeguard threshold needs to be above our current 2 percent inflation objective. My preferred threshold is a forecast of 3 percent over the medium term. Now, calling for tolerance of inflation up to 3 percent may seem shocking coming from a conservative central banker. However, the most recent research shows that improved economic performance during a liquidity trap requires the central bank, if necessary, to allow inflation to run higher than its target over the medium term. Such policies can generate the above-trend growth necessary to reduce unemployment and return overall economic activity to its productive potential.

These CoCos can be converted into CET1 equity or written off in order to absorb losses in current operations. When accumulating the necessary bail-in instruments and high-trigger CoCos, banks have the opportunity to replace existing instruments with the required higher-quality instruments. The further strengthening of resilience through the accumulation of high-trigger CoCos, as foreseen by the regulations, is important and necessary. One reason for this is the big banks’ loss potential, which continues to be substantial relative to their capitalisation. Given their Page 1/3  Berne, 15 December 2016 Fritz Zurbrügg  News conference  significance to the Swiss economy, it is important that the big banks remain adequately capitalised, even in the event of such losses occurring. A second reason is the critical assessment by the markets as regards the resilience of banks, both in Switzerland and worldwide. By strengthening their resilience, banks can convince the markets of their soundness. The likelihood of share price collapses and sharply increased premia for credit default swaps, such as those observed at some banks this year, would thus be reduced. In addition to a strengthening of resilience, it is also essential that the big banks further improve their resolvability. This requires both sufficient holdings of bail-in instruments and the formulation of credible emergency and resolution plans. Emergency plans are aimed at ensuring that, in the event of imminent insolvency, functions that are important for Switzerland can be maintained.
Looking beyond the regulatory viewpoint, the trend towards greater development of the capital markets could be further encouraged if headway is made in creating a Capital 10/11  Markets Union which, together with the culmination of Banking Union, would allow a better allocation of risk within the Economic and Monetary Union. These changes in the structure of financial markets, in conjunction with the emergence of new technologies, clearly represent a challenge for banks, particularly in the current context of low profits among Europe’s banking systems. In any event, at this point in time the ultimate impact of new technologies on the structure of the financial system is highly uncertain, as it will depend on various factors, including the future regulatory treatment of new players. Conclusions To conclude, Spanish credit institutions have improved significantly in terms of their solvency, profitability and asset quality in recent years. Despite this progress, the Spanish banking sector still faces important challenges, challenges which it largely shares with other euro area banking systems. The most significant of these challenges are: (i) stepping up the pace of sales of unproductive assets; (ii) strengthening capital and liabilities suitable for internal recapitalisation; (iii) building the sector's reputation by avoiding the risk of inappropriate conduct; (iv) confronting the challenge of making profits without undue easing of lending standards; and (v) utilising new technologies, which are both a major challenge for the sector and an opportunity for institutions that can harness them.

Nurturing a sophisticated, technologically advanced workforce that is capable of contributing to the competitiveness of our society has to be one of our highest goals and most rewarding objectives. These are achievable ambitions. They would not guarantee that the future will look as good as the recent past, but they will improve the probability it will. The hardest of these are those where the politics are hard. And this is why it’s so important that we work to strengthen the constituency in the United States for good fiscal choices and good trade policy choices. Education is an important part of this. And the work of the Economic and Financial Education Alliance of Puerto Rico can play a valuable part in creating a stronger foundation for future economic growth in Puerto Rico and in the country. Thank you. BIS Review 25/2005  3
In our 2021 Discussion Paper on ‘New Forms of Digital Money’, we explored the financial stability risks and impact on the banking sector of the emergence of non-bank digital monies. Modelling of an illustrative scenario suggested that retail deposit outflows into digital money would affect banks’ funding and could lead to higher bank lending rates, although the impact was expected to be modest. This modelling was based on assumptions, set to be highly cautious[9], about the amount of non- bank digital money households and businesses might want to hold and hence the scale of possible outflows from retail bank deposits. Page 8  We cannot, of course, know ex ante, how households and businesses would respond to a digital pound and how much they would want to hold. We therefore propose that to manage financial stability risks, initially at any rate, the digital pound would need to be designed in a way that enabled some restrictions to be placed on amount an individual or business could hold. We propose a limit of between £ and £ per individual as the appropriate balance between managing risks and supporting wide usability of the digital pound. A limit of £ would mean that three quarters of people could receive their pay in digital pounds, while a £ limit would allow almost everyone to receive their pay in digital pounds[10], keeping outflows from the banking system broadly within the assumptions set out in the Bank’s earlier modelling work.

See for Example ‘Central bank digital currencies: foundational principles and core features series of reports  . ’ (2020) and the  on digital currency aspects (e.g. financial stability, system design) published in 2021. 17. These are likely to involve testing individual components of the digital pound architecture (against standards built on the considerations set out in our Technology Working Paper). Project Rosalind , being run out of the London Centre of the BIS Innovation Hub is one example of the kind of work we envisage. That project is currently running a tech sprint and expressions of interest are open until 10 February.
Although we have seen significant improvements in the macroeconomic indicators, the levels of interest rates still remain high. This is a major concern to the Bank of Zambia and we have continued to engage banks through the Bankers Association of Zambia on this issue. Ladies and Gentlemen, it is worth mentioning here that one of the challenges that banks continue to face is the high levels of non-performing loans due to poor credit culture amongst some borrowers. It is therefore important that credit worthy customers are distinguished from  BIS Review 30/2010  1  high risky borrowers in the banking sector. The Bank of Zambia through the Financial Sector Development Plan has in this regard established the credit reference bureau. The credit reference bureau will enable lenders to make decision based on information specific to each borrower ensuring that risk assessments of potential borrowers are not affected by the habits of other borrowers. Therefore, the pricing of risk will be more reflective of borrower’s particular circumstances. Further, the Bank of Zambia has made it mandatory for banks and other financial service providers to use the credit reference bureau before a loan is provided to any customer. Consequently any loans approved without passing through the Credit Reference Bureau will attract regulatory action. The Bank of Zambia also places great importance on the need to have knowledgeable consumers who play a key role in creating a competitive and fair business environment.

Ladies and Gentlemen, as most of you would recall, high levels of inflation and interest rates as well as bank failures were a central feature of the Zambian economy during the early 1980’s and the mid-1990s. However, since then strides have been made in achieving low levels of inflation and interest rates and a stable financial sector. As a result, inflation has fallen from 138.3 percent at the end of December 1993 to 9.9 percent in December 2009. The lower levels of inflation have had a direct bearing on consumers as their incomes are not significantly eroded. Furthermore, the Bank of Zambia has strengthened its supervisory framework by amending legislation and capacity building in the supervisory process. This process has allowed the Bank to ensure that only fit and proper persons are allowed to enter the financial sector in order to ensure that banks are run professionally and that depositors’ funds are not abused. In order to further cushion depositors in case of bank failures, the Bank is in the process of introducing a Deposit Protection Act and a Deposit Protection Scheme. This will not only create a safety net for depositors but will enhance confidence in the banking sector. Notwithstanding these positive developments, there has been a marked increase in customer complaints, mostly emanating from the banks’ pricing structure, especially on commissions, fees and service charges. Given the prevailing liberalised economic environment, interest rates are determined by the market.
I’d like to give you a few examples. For a long time, the functional areas of banking and insurance were silos. So were the regulations and indeed the regulators! After all, they mirrored the different business realities I have just described. Here in the UK, the creation of the FSA to oversee both of the areas - and other parts of the financial system as well - is a huge step forward. It helps in developing a regulatory framework which meets business realities on the one hand and public policy requirements on the other. Whatever the complexities it may generate, I believe we are already seeing great benefit. And similar developments are taking place in other countries as well. Now although the integrated structure of regulatory authorities is making significant progress in some countries, the nature of the regulations themselves are converging only slowly. There is as yet no real equivalent to the Basel Accord in the insurance area: no common prudential template for insurance supervisors exists yet internationally. That said, I fully recognise and applaud the work of the International Association of Insurance Supervisors in setting out best practice and promoting co-operation between supervisors. That’s a very helpful base for further work in future. We have to wish them well. But, the current position is that approaches to insurance regulation can vary widely from country to country. On top of that, there is sometimes fragmentation of markets and regulatory responsibilities, notably in the US. Unfortunately that complicates progress towards international agreement.

The starting point here will be to try to understand the nature of these vulnerabilities better, and their potential impact on the financial system. BIS Review 29/2003  1  Vulnerabilities: comparing banking and insurance My first observation relates to the different “customs and practice” of the two industries. In the banking world, obligations have historically tended to be for amounts which are clearly specified - either in money terms or according to some agreed formula - in advance. The event triggering delivery of the obligation is unambiguous. Often it’s simply expiry of a set time period; and the timetable for payment once the obligation becomes due is fixed (and typically short). In the non-life part of the insurance world, on the other hand the amount to be paid is often a matter of interpretation of the contract. There might be greater scope for debate about whether the triggering event has actually occurred or whether any associated conditions have been met - even whether payment is due. And any payment due may not be made, at least in full until negotiations on these points have been completed. The fact that well-established channels may exist to resolve any disputes - including if necessary the courts - doesn’t get around the fact that uncertainty regarding the timing and quantum of payment is injected into the process. Bankers find it hard to reconcile these realities of the insurance world with the way they manage risk and undertake their business.