samchain/econo-pairs-v1 huggingface dataset:
Our own foreign exchange reserve was not sufficiently large to manage such extensive lending in dollars. The increased lending has meant that the Riksbank’s balance sheet grew during the second half of 2008 from around SEK 200 billion to around SEK 700 billion. We have also changed our collateral requirements so that the banks can offer more types of security as collateral and thus more easily sustain their functions in the market. We have given special liquidity assistance to Kaupthing and Carnegie to safeguard financial stability and ensure the functioning of the financial markets. We have begun offering loans with commercial paper as collateral to facilitate companies’ financing. We have also signed swap agreements with Iceland and Latvia to support crisis management in these countries. And we have cut the interest rate. Since the monetary policy meeting in February we have further extended these unconventional measures. We have decided on loans with longer maturities, with variable interest rates and with smaller supplements and we have signed a swap agreement with Estonia. The Swedish National Debt Office and Finansinspektionen (the Swedish financial supervisory authority) have also taken action to alleviate the financial crisis. The Government has raised the state deposit guarantee and extended it to cover all types of deposits in accounts, it has introduced a guarantee programme, established a guarantee fund and decided on means of capital injections to the banks. At the same time, the Government is conducting a more expansionary fiscal policy than before. I now intend to move on to describe international developments.

BIS Review 25/2009  5  Several companies state in the Riksbank’s company survey, which was carried out in December and January, that they have not experienced such a sudden slowdown in the economy as during the final months of 2008. The companies also say that they have found it increasingly difficult to finance their operations. But no clear credit crunch is yet visible in the official financial market statistics. Lending to companies increased by 0.3 per cent in January compared with the previous month and by 10.6 per cent compared with the same month last year. Our most recent forecast is that GDP will fall by 1.4 per cent this year. Towards the end of the year GDP is expected to begin to rise again. But as with international economic activity, there is a substantial risk that Swedish developments will also be poorer than in our main scenario. The GDP forecast for this year has been revised down substantially since last autumn. In September 2008 the Riksbank forecast growth this year of 0.9 per cent. It is very rare that forecasts are changed so much in such a short time. The revision is way outside the 95 per cent confidence interval that usually applies to our forecasts. It is also the reason why monetary policy has changed so radically since last autumn. The weakened economic activity is now also having an increasingly clear effect on the labour market. Employment has begun to fall and unemployment has begun to increase.
•  Policymakers will be more cautious in the short-term as they work to ensure that the market volatility and ensuing capital outflows in late 2015 and early 2016 do not have a lasting impact on market confidence. But I believe the Chinese authorities remain committed to liberalising the capital account and promoting the international use of its currency in the medium term. •  The latest 13th Five-Year Plan, announced in March this year, has made clear the aim to reduce foreign exchange restrictions for both corporates and households and encourage the use of the RMB in cross-border payments and international reserves. Progress in RMB internationalisation will ultimately depend on getting right the sequencing of domestic economic and financial reforms. A strong and stable domestic financial system is a prerequisite for further capital account liberalisation and currency internationalisation. China-Singapore financial connectivity: the journey so far Singapore’s financial linkages with China have grown strongly over the years, particularly since the appointment of ICBC as Singapore’s RMB clearing bank in February 2013. •  The offshore RMB market in Singapore has expanded, with a wide offering of RMB products, including deposits, bonds, derivatives, mutual funds, and trade financing. •  China and Singapore have set up cross-border RMB arrangements for Suzhou, Tianjin and Chongqing, enabling corporates in these areas to borrow from Singaporebased financial institutions as well as repatriate proceeds from bonds issued in Singapore. 2  BIS central bankers’ speeches  But China comes to Singapore not only to do business in Singapore.

This discussion highlights that current account surplus countries can forego, at least temporarily, the required adjustment by accumulating international reserves instead. The sustainability of these imbalances, and the extent to which they have contributed to the recent global financial crisis, is still under discussion. BIS Review 65/2010  1  The question of the reserve asset has often been at the center of the debate. But as Mark Carney has recently argued, the adjustment mechanism may be more important than the choice of reserve assets. If adjustment were rapid, symmetric, and global, and if adjustment costs were fairly distributed amongst countries, we probably would not need to gather here today. Unfortunately, this is not the world we live in now. Historically, exchange rate flexibility has often been the answer. While it is not a silver bullet, it remains true that adjustment through the exchange rate is usually faster, and in the end less costly than adjustment through prices and wages. At the same time, of course, discontent with what is often perceived as excessive exchange rate volatility has been an important source of dissatisfaction with the present international monetary system. What constitutes excessive exchange rate volatility, and whether domestic policies or the international monetary system are at the root of it, is a matter of legitimate debate. III.
Bond Price Bulletin One of the factors affecting secondary market activities in the bond market is the lack of information on bond prices. To help overcome this problem, the HKMA launched the Bond Price Bulletin at the beginning of 2006. The bulletin provides investors with convenient on-line access to information on bond products and bond prices provided by eight major banks in Hong Kong. Indicative bid/offer prices of over 200 bonds of different currencies issued by both public and private sector entities are provided by the eight contributing banks. Outlook Let me now turn to talk about the outlook of our debt market. Notwithstanding the achievements we have made so far in developing our debt market, we fully appreciate that there is nothing to be complacent and there are still many challenges facing us. The HKMA has therefore embarked on a review of our debt market development with a view to identifying measures which can be adopted to help market development. On the demand side, everybody knows that the Mainland of China is enjoying a rapid economic growth and business opportunities are mushrooming. The recent announcement by the Mainland authorities of measures to liberalise portfolio investment outflows has marked the emergence of such kind of opportunity for Hong Kong. Under these new rules, each Chinese citizen is allowed, among other things, to invest in fixed income securities overseas within certain limits.

As a euro participant, however, Sweden would be in the same boat as other member states as regards many of what appear to be likely supply shocks, for instance oil price fluctuations. As regards the lack of knowledge, there are clearly no simple institutional solutions. But this does not mean that the institutional frameworks for conducting policy do not affect the accumulation of knowledge. As I mentioned earlier, the Stability and Growth Pact has led to a rapid development of EU work to arrive at a better understanding of the interaction of public budgets and capacity utilisation. In Sweden, the acquisition of knowledge about potential growth, the output gap and so on has been stimulated in that the Riksbank has been made accountable for safeguarding the value of money and we have placed this mandate in a clear intellectual framework that calls for deeper analyses. This in turn has had consequences for how both the Ministry of Finance and the National Institute of  4  BIS Review 6/2002  Economic Research are now working on these matters. Another reason why Swedish authorities have reason to be more involved in a broad discussion and analysis of questions such as these is perhaps that euro participation could lead to the financial markets becoming less interested in analysing specifically Swedish conditions. I consider that the importance of a high level of competence in such institutions as the Finance Ministry, the Riksbank and the National Institute should be emphasised.
For example, the difference between customer-to-dealer and interdealer repo rates has been quite volatile in recent months, apparently because of growth in dealer balance sheet costs. The road ahead To summarize, in the period since liftoff, we have achieved excellent control over the effective federal funds rate, and we have done so while avoiding unintended effects on the financial system or financial stability. The policy rate increase has passed through to other money market rates, suggesting that the increase is affecting broader financial conditions as expected and intended. We still have a lot of work to do, both to observe ongoing structural changes in financial markets and to formulate and implement any necessary response in the Federal Reserve’s monetary policy operations. I believe we have thoughtfully considered these uncertainties, and I am confident that we have appropriate policy tools available to respond as necessary to them. 10  BIS central bankers’ speeches  Thank you. I would be happy to take a few questions. 1  I would like to thank James Egelhof and Patricia Zobel for their excellent assistance in the preparation of these remarks, and colleagues in the Federal Reserve System for numerous insightful comments and suggestions. In addition, I would like to acknowledge the leadership of James Clouse, William English, and Lorie Logan in the construction of this new framework and James McAndrews for his intellectual leadership on U.S. money markets. 2  For more details on implementation frameworks, see for example Ihrig, Meade, and Weinbach (2015).

BIS central bankers’ speeches  11  16  In July 2015, the FOMC announced that changes in administered rates would go into effect on the day after its policy decision. Otherwise, the intraday timing of a policy change could result in various operations being conducted with inconsistent settings. 17  ON RRP is currently offered to a broad set of counterparties; these counterparties make up a fairly large proportion of the lending community in overnight money markets. By offering this large group of counterparties an alternative, risk-free investment option, ON RRP should improve lenders’ market power and help keep money market rates near or above the ON RRP offered rate. Even if money markets were perfectly competitive, ON RRP would likely still be effective at supporting the floor provided by IOR, for example through addressing segmentation between secured and unsecured money markets. 18  The preservation of enough activity in the federal funds market to maintain the viability of the effective federal funds rate was one component of this. 19  A final operational change to improve the transmission of IOR into market rates was a revision to the interest calculation methodology that became effective in July 2015. As originally implemented, interest on excess reserves (IOER) was paid on each bank’s average balances over a two-week maintenance period, at the average interest rate.
With this in mind, a further strengthening of the capital situation and – in conjunction with this – a further realignment of the business model in order to achieve sustainable profitability, are still central challenges facing the big banks. The profitability and the capital situation of the banks with a domestic business focus – the cantonal, regional and Raiffeisen banks – were significantly higher in 2009 than the longterm average. The dip in GDP from mid-2008 to mid-2009 has so far barely had any effect on these banks, with the result that the provisioning requirement for credit risk continued at a low level in 2009. Nevertheless, in our estimation, the position of these bank categories is less comfortable than may appear at first glance. First of all, the capital situation of the Raiffeisen banks and the state-guaranteed cantonal banks needs to be put into perspective: the Raiffeisen banks can count the additional funding obligation required of members in the  BIS Review 85/2010  1  cooperative as capital until the end of 2011, and the cantonal banks are entitled to a reduction in required capital due to the state guarantee. In the absence of these concessions, the capital ratios – particularly for the Raiffeisen banks – would be markedly lower. Second, according to our assessment, the risk exposure of the domestically focused banks is higher now than it was in 2009. For one thing, the interest rate risk of cantonal and Raiffeisen banks is at historically high levels.

Large-scale support measures deployed by governments and central banks played an essential role in ensuring that the global economy, the financial markets and thus also the banks recovered sooner and more vigorously than had been anticipated a year ago. For the banking sector alone, the major industrial nations committed funds amounting to almost 20% of gross domestic product. As a result of the different measures to support the economy and the banking sector, there has been a considerable rise in the indebtedness of many countries, and also, in some countries, in sovereign credit risk. The international big banks – including the Swiss big banks – benefited substantially from these support measures, and were able to increase their profitability in 2009. At the same time, the Swiss big banks reduced their balance sheets by approximately a quarter. Compared to the previous year, their capital situation improved substantially. Their riskweighted capital ratios, in particular, have increased markedly, and are high also by international standards. This is a very positive development. However, it should not be allowed to conceal the fact that the leverage of both big banks is still high – both per se and when compared with banks in other countries. The big banks are still a long way from meeting the leverage target that will apply in Switzerland from 2013.
At the same time, in the MPC’s judgment, it did not yet herald a turn in the stance of monetary policy. I would like to expand on these developments today, including what they mean for the UK’s economic prospects. Since the Bank’s full powers came into force a few years ago, we have pursued a strategy: 1. To rebuild the resilience of the banking system;  2. To maintain an accommodative stance of monetary policy to achieve the inflation target and support the recovery; and  3. To develop and deploy a macroprudential toolkit to prevent the emergence of new vulnerabilities that could derail that recovery over the medium term. We’ve made determined progress in all respects. In particular, we’ve reached inflection points in micro and macroprudential policies, and are able to set out the requirements for one in monetary policy. In doing so, we have increased the prospects of a durable expansion. But the path of policy is not preordained, and continued progress will require both vigilance and dexterity. That’s because private and public balance sheets remain stretched. The global environment is unforgiving. And the supply side of our economy is still healing. Let me expand. 1. A resilient banking system  I will begin with the foundation upon which strong, sustainable balanced growth is built: a resilient financial system. The combination of a radical overhaul of the regulatory framework and years of determined effort has significantly strengthened the UK banking system.

For example, a “core” measure that relied exclusively on inflation in the services sector would have run above 2% in the pre-crisis era, when overall inflation was around 2%, in light of low inflation rates in goods prices. A “core” measure with a higher weight on goods prices would have shown the opposite. 22  For example, although they are uncertain, estimates of the pass-through of exchange rate movements to CPI inflation suggest that, on average a 1% appreciation reduces consumer prices by around 0.3%. Those effects take time, though they are mostly complete in around three years – consistent with complete but gradual passthrough of exchange rate changes to consumer prices. That likely reflects, among other things, rigidities in retailers’ pricing decisions. See the box on page 28 of the November 2015 Inflation Report for further discussion.
Long-term relationships with customers are being replaced by more transient transactions with counterparties. •  Raghuram Rajan observes how increasing product complexity and reliance on technology has created a detachment from the customer. •  It ultimately leads to a reductionist view of finance where “money is the measure of all worth”, a state that is hardly conducive for ethical conduct. 3  Second, compensation structures tend to over-emphasise profits as performance measures. Excessive focus on sales targets and commissions has incentivised a “trading mentality” which is often associated with too much risk taking or scant regard for client interests or the sustainability of relationships. Third, and more fundamentally, departures from ethical conduct are too easily tolerated as the norm. 2  Mark Carney, “The Future of Financial Regulation”, MAS Lecture, Singapore, 2014. 3  Raghuram Rajan, “Where Money is the Measure of All Worth” in Fault Lines: How Hidden Fractures Still Threaten the World Economy, 2010. 2  BIS central bankers’ speeches  •  In a global survey of financial sector executives by the Economist Intelligence Unit, more than half the respondents felt that their career progression would be difficult without being “flexible on ethical standards”. •  If you look at the email and chat room messages between traders involved in the rigging of financial benchmarks, they betray a lack of any sense of guilt or wrongdoing. •  In fact, traders were congratulating and complimenting each other on their manipulation.

•  And when subsequently questioned by their superiors or regulators, they offered an array of self-justifications, chief of which is “everybody does it”. But everybody does not do it. I believe the vast majority of people working in the financial industry are committed to serving their clients or customers fairly and with integrity. But the unethical actions of a few have undermined trust and created instability. Reform of the financial industry will not be complete until this issue of trust and ethics is addressed. This requires “getting the culture right”. And by culture, I mean the shared values, attitudes and norms that guide actions. There is increasing international regulatory guidance to improve risk governance and align compensation schemes with long-term sustainability and customer interests. This is necessary but not sufficient. There are limits to what externally imposed rules can do to promote the right values in financial firms. •  Because culture develops from within a firm, it invites a certain resonance from the members of that firm – in a way that will be difficult for an externally imposed set of rules to achieve. •  For the same reason, the behavioural norms that a firm’s culture and value system promotes are more amenable to internal governance and self-policing than rules that rely on external enforcement. In short, rules tell us what we can do, but values tell us what we should do.
Andrew, it has been an absolute pleasure to serve as one of your guerrillas, and I very much look forward to working hand in glove with you in our new roles. For the 1,580 banks, building societies, credit unions, insurers and major investment firms we supervise, 1  there is a simple message about my approach to the role of running the PRA . That approach is: more of the same. That means supervision which is firm but fair, using all of the latest analytical tools and techniques, together with a healthy dose of common sense. My job is to serve the public interest by focusing on the objectives given to us by Parliament: promote safety and soundness, protect insurance policyholders, and – secondary to both – facilitate effective competition. These three objectives form a complete and coherent whole and I am absolutely committed to them. But they are easier said than delivered. So I am very proud of the effort my 1,325 colleagues at the PRA put in 2  every day in pursuit of them, steadily implementing the post-crisis reforms . But as I shall explain: the end of one chapter is the start of another. Firms need to renew their business models for the new world. A mixed economy  I think that the approach we have adopted for the PRA is the right one, but I am not starry-eyed about the system we are operating. 1 2  Firm total correct as at 19 October 2016.

3  Individual Capital Adequacy Standards 4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  Of course, there is important work to finish off in Basel, and constant evolution will be necessary as firms and financial markets themselves evolve. No regime is or ever will be perfect, but I think the one we are settling on is a massive improvement on the old one. Long live the revolution! But standards can’t just stand there. To bear down on risks to financial stability, they have to be implemented. Here there is still a lot of work to do, particularly on the banking side. Banks have already made big strides in building up their levels of going concern capital, and we are close to finalising the Basel III global standard. In some other areas, implementation is only very recent. For example, with respect to accountability, we now have a robust but proportionate framework to prevent the ‘recycling’ of individuals with poor conduct records across PRA-regulated firms. We are also making sure that buy-outs of variable remuneration do not allow bank employees to avoid the proper consequences of their actions. All that helps make sure that what was originally intended is efficiently and coherently implemented. Implementation will often pass the public by. That’s OK – so long as households and businesses get a resilient and reliable service from the financial system. Ring-fencing, however, will not go unnoticed.