samchain/econo-pairs-v1 huggingface dataset:
The depth and quality of the responses demonstrate that many banks and industry associations understand the far-reaching significance of the New Accord. I would like to offer the Committee’s sincere thanks to the many organisations and banking associations here in the United States, Canada,  2  BIS Review 46/2003  and elsewhere that invested considerable time and resources in the consultations. You shared important views through comment letters, gathered data for impact studies, and engaged in discussions such as those that will be held here over the coming days. If you’ve been following our work since the first consultative paper was released in 1999, you will know that the proposals have evolved and improved considerably thanks to the industry’s candour, its creativity, and its drive to innovate. At the Committee’s meeting in Madrid earlier this month, all members acknowledged our responsibility to consider carefully your concerns and those of the broader industry. What is most important to the Committee is the quality and consistency of the new Accord. At the same time, we recognised the need to provide banks with as much certainty as possible while they plan and prepare for the adoption of the new rules. The members of the Committee agreed on the importance of finalising the New Accord expeditiously and in a manner that is technically and prudentially sound.

Future Work: Full Credit Risk Modelling The Committee will spend the next few months considering these and other themes carefully and finding ways to balance the complexity of the New Accord against the need for appropriate sensitivity to risk; to ensure that the assumptions supporting the rules are appropriately conservative, but not excessively so; and to apply the rules consistently to protect and promote competition in the global banking market. But when the ink dries on the New Accord, rest assured that the Basel Committee will not be adjourning. Just from the comment letters we received, we can already identify a wide range of issues ahead to continue to find new ways to advance risk management, to promote greater transparency, and to strengthen the stability of the financial sector. I’d like to conclude by mentioning just two of the potential items on our agenda for future work once the New Accord is implemented. The first would be to consider the benefits of full credit risk models in the calculation of minimal capital requirements. In theory, a bank’s capital requirements would then reflect to the greatest degree the economic benefits of diversification in its balance sheet. In fact, the Committee did at one point evaluate whether advanced banks should be permitted to estimate the degree to which their assets might behave similarly or default together in the New Basel Accord. As you know, we decided that we are not quite there yet.
Against this background, I would like to organise the rest of my remarks today around three issues. First, why do we find ourselves in the current, low inflation predicament? I sustain that inflation fluctuations have been somewhat surprising ever since the beginning of the Great Recession. In part, they were the result of adverse exogenous shocks. To some extent however, they were also connected with unwarranted variations in markets’ expectations of the future stance of monetary policy. Second, I will argue that the Governing Council meeting at the beginning of June is important not only for the decisions that were actually adopted. It is important also for the clear signal that we provided about the determination to do more in the future, in the event of additional downward pressures on inflation. I will develop these two points which deal with the way our recent policy decisions will produce effects. The third question is: how would the ECB react, should the risks of a protracted period of low inflation materialise? At this point in time, this is essentially a scenario analysis – and specifically an analysis of a low probability scenario. Outright purchases of a range of financial assets would be effective in this situation, but structural reforms would also be essential to spur economic growth. 3  See Giannone, D., M. Lenza, H. Pill and L. Reichlin (2011): “Non-standard policy measures and monetary developments”, ECB Working Paper Series No. 1290; De Pooter, M., R.F.

The Governing Council is unanimous in its commitment to using also unconventional instruments within its mandate should it become necessary to further address risks of too prolonged a period of low inflation.” With this statement, the ECB has left no doubts about its resolve to avoid any downward turn in the euro area inflation developments, because such developments would be extremely harmful. With interest rates at their effective lower bound and persistently timid growth prospects, lower than expected inflation rates would increase the real value of debt, slowing down the deleveraging process of borrowers, both public and private. If a low inflation outlook became entrenched in the expectations of firms and households, the real interest rate would rise, leading consumers and investors to postpone their expenditure plans. A vicious circle of lower demand and lower prices could ensue. How would the ECB react, should the risks of a protracted period of low inflation materialise? But what exactly could the ECB do in the face of a protracted period of low inflation and economic stagnation? As I have already mentioned, the ECB stands ready to deploy additional unconventional instruments, should the likelihood of this scenario increase. The policy response would involve a broad-based asset-purchase programme. The experience of other countries with such programmes testifies that they can be effectively designed.
The U.S. monetary policy framework that exists today has proven reasonably good at laying the foundation for price stability that is a necessary condition for sustaining growth at full employment over time. Although the world of central banks is still characterized by substantial diversity in the regimes they operate under, the actions of central banks reveal on average a much greater appreciation of the benefits of price stability and a greater willingness and ability to achieve it. These gains in inflation performance have been supported by a range of factors. Luck in the form of smaller shocks, technological change, other policy actions that contributed to more rapid economic integration and greater flexibility in how economies adapt to change, and greater financial resilience have all contributed to this improvement in inflation outcomes. But monetary policy seems likely to have played a decisive role, and part of that improvement reflects the sustained improvement in the institutional framework within which central banks operate. Credibility, particularly in monetary policy, takes time to establish, and can be easily compromised. It comes not just from what you say you will do as a central bank, but from what you actually do over time, and the results of those actions. It depends importantly on the competence and courage of those asked to lead central banks, on their capacity to be flexible and creative in response to our rapidly changing world, on their ability to communicate effectively and to acknowledge uncertainty.

The institutional arrangements that seem most relevant to monetary policy credibility and competence involve the degree of independence afforded the central bank, the design of the mandate or objectives given the central bank, the regime or instruments adopted by the central bank to pursue that mandate, the structure of the decision making process, and the degree of communications and transparency. I want to talk about this broad complement of the institutional foundations of a credible central bank, and I’ll do so in part by talking about the history of the central bank of the United States. For reasons that are simple and compelling, independence is a critical part of the foundation for a credible central bank. Independence comes in many forms, and some of the most important dimensions of independence are hard to discern from the legal underpinnings or the formal structure of the institution. Central banks with many of the formal or legal attributes of independence can make bad policy choices. Central banks without formal independence can make good policy choices and achieve sustained improvements in macroeconomic outcomes. What does independence mean and how do we know it when we see it? Why is it important and how does it affect the quality of monetary policy choices and outcomes? In its most basic sense, independence is the freedom to pursue a defined monetary policy objective without consideration of political or private interests, and without fear of subordination to other economic policy objectives.
Together with staff from the Secretariat of the Basel Committee on Banking Supervision and its member agencies, they have selected timely topics, invited speakers who have sparked our discussions, and encouraged informed public discussion and debate on these matters. At this half-way point on the conference agenda, I would like to take a few minutes to share with you the very good news that the Basel Committee reported last week on Basel II. I’d also like to add some thoughts from my perspective on the some of the issues you are discussing and especially their relevance to the new international capital framework. II. Summary of 12 May 2004 press release  As you will probably know, the full Committee met just last Tuesday, actually in a conference room not far from the auditorium where you are meeting. Tuesday’s meeting may have been one of the most historic for the Basel Committee. Three results make this meeting especially significant in my view. First, and most important, we achieved consensus on the remaining outstanding issues that we faced in our efforts to revise the international capital framework.

I believe that it will lead to a more optimal implementation of the new framework. Furthermore, possible concerns about competitive equality can be alleviated thanks to the existence of temporary capital floors. The third significant result of last week’s meeting is that the Committee agreed on the way forward for the implementation and evolution of Basel II. The framework and timetable have been agreed. Yet we have much hard work still ahead of us, as the implementation of the rules will be a challenging task and also because we have recognised that the Basel II approach is intended to be evolutionary. At our meeting, the members of the Committee discussed several implementation issues that we will “iron out” in consultation with other supervisors and the industry. This includes finding ways for home and host jurisdictions to coordinate and cooperate when applying the new rules to banking organisations that are active in multiple jurisdictions. More than ever before, supervisors will need to work together to reduce the regulatory burden on banks and to conserve supervisory resources. We also face some difficult technical matters. For example, the Committee’s press release noted that we must determine acceptable methods for banks to estimate a key driver of credit risk. Banks that adopt the advanced internal ratings-based approach to credit risk will be required to estimate how the loss-given-default parameter for borrowers may vary when the economy experiences a downturn.
This is particularly true for sovereign credits where there is BIS Review 50/2000  2  widespread support for finding an alternative to the current OECD/non-OECD distinction. In other words, OECD membership would no longer be relied on for setting regulatory capital for sovereign or bank claims. Notwithstanding this support, many commentators have offered modifications to the Committee’s proposed standardized framework, which several observers have suggested does not go far enough toward risk differentiation. The Committee has taken this concern to heart, and is actively evaluating whether it would be feasible to incorporate additional risk weights into the standardized approach, and, if so, how this should be done. As we work toward greater risk differentiation among claims that are rated, we will continue to give extensive thought to the treatment of unrated claims, given that the penetration of external ratings remains low in most countries. It is difficult to avoid creating incentives to remain unrated while at the same time retaining continuity with the existing Accord’s treatment for these credits. Further work would be needed to develop a standard for unrated claims that would be more risk-reflective but, unfortunately, few commentators offered significant suggestions in this regard. Procyclicality The Committee has considered what some observers have noted is the potential for introducing greater cyclicality in a more risk-sensitive capital framework. That is, the capital requirements for loans to troubled borrowers will tend to increase at just the point when such trouble is becoming apparent.

William J McDonough: Update on the major initiative to revise the 1988 Capital Accord  Speech by Mr William J McDonough, President and Chief Executive Officer of the Federal Reserve Bank of New York, before the 4th Annual Supervision Conference of the British Bankers Association, held in London, on 19 June 2000. *  *  *  I am pleased to be with you to provide an update on the major initiative to revise the 1988 Capital Accord. Last June the Basel Committee on Banking Supervision, which I have the privilege of chairing, released a Consultative Paper proposing a new capital adequacy framework. My comments today will focus on the industry’s response to the proposal and the areas that will require the Committee’s attention going forward. Given the progress already achieved, it is my belief that the Committee will be prepared to release a second Consultative Paper early next year. I will also briefly discuss three essential aspects of the safe and sound operation of any banking organization - good corporate governance, rigorous internal controls and effective risk management. I will conclude with some thoughts on the critical role of banks’ board of directors and senior management. Current Accord The primary tool of capital regulation currently is the set of minimum ratios that were devised in 1988 by the Basel Committee. The 1988 Capital Accord has truly become a global standard for banks worldwide.
And how far, in any case, would we be able to avoid importing US monetary policy even in the absence of the Link? The experience elsewhere in the region does not give ground for much optimism. The third question is how far the Link is fuelling deflation, and how far this is detrimental to our economy. Internal price deflation is indeed a part - and a necessary part - of the process of adjustment imposed on the economy under the Link when there is a fall off in external demand. It is also, incidentally, a feature of our longer-term economic integration with the Mainland of China. It is the counterpart of currency depreciation under a floating regime, except that the adjustments that it forces to take place tend to involve less overshooting, less instability, and more lasting restructuring. Price deflation brings pain to those who see the value of their assets shrink dramatically, and, as we know, there are many in Hong Kong who are, sadly, in this position. But there are many more who have seen their purchasing power increase, as prices for the whole range of goods and services steadily decline. And the effect, equivalent to that of devaluation, on adding to the attraction of Hong Kong as a regional centre, and as a destination for tourists, can only be positive. The concern comes when price deflation, as part of the adjustment process under the Link, turns into the kind of spiralling deflation that inhibits investment and fuels recession.

Significant resources have been devoted by the Bank in the last two years to achieve these objectives. One of it was the relicensing process. We had reassessed a total of 839 money changing companies and remittance service providers and issued new licences to those that met the necessary requirements. We have also provided time for companies to improve their operations. These companies had demonstrated that they are able to comply with the required rules. For those that qualify the licensing processes, improvements in their operations could be achieved within a reasonable timeframe. We have also made it clear to the industry that companies found to be carrying out unauthorised activities will be firmly dealt with through enforcement actions. Out of the 839 licenses issued earlier, the relicensing process had reduced a total of 365 licenses as a result of revocation, merger, voluntary surrender of license or industry players themselves decided to convert to become an agent of a larger entity. We have significantly increased our interactions with the industry to help companies understand the regulatory requirements that must be observed. These engagements have also helped the Bank better understand the practical issues that are faced by the industry and we have responded accordingly to some of these issues. I can assure you that we will continue to work with the industry to find solutions to legitimate issues raised by the industry but the industry must act responsibly and with the public’s interest in mind. Enforcing compliance will continue to be an important focus of the Bank.
The sector has so far shown itself resilient to the financial consequences of the severe shock represented by the Covid-19 pandemic. But equally, the supply of insurance seems in the round to meet demand from the economy. Moreover, we do not think about capital requirements in isolation, but as part of a three pillar regulatory regime (comprising capital, risk management, and disclosure). Today I want to talk a little about how we think about capital adequacy within that broader framework, and specifically the interplay with strength of market discipline, the ladder of intervention, and the way that firms structure themselves. In the light of those factors, how do we judge when the level of capital is ‘just right’? The three pillar regulatory regime Last year I talked about what the insurance sector does for the wider economy[3], which itself defines our mission in insurance supervision: the protection of policyholders and the stability of the supply of financial services to the wider economy. Broadly speaking, those services are the pooling of risk, provision of secure retirement income, and long term investment. The safety and soundness of individual firms is a primary objective, but is not really an end in itself, it is a means to fulfilling our mission.

At the same time, solid domestic savings rates rationalize the needs of the economy for external funding, which means reduced exposure to sudden changes in the capital flows dynamics, i.e. reduced sensitivity to shocks from the external sector. The latest economic crisis clearly illustrates the risks of excessive indebtedness and excessive dependence on external financing, which further emphasizes the importance of domestic savings, which has proven to be a more stable source of funding. Having in mind all the benefits of saving, it is my pleasure to conclude that Macedonian citizens are cultivating a savings culture in the banking sector. In the last 10 years, total deposits have grown at a rate of around 8%, on average, on an annual basis, which contributed to an increase in savings1 by about 10 p.p. at the level of 55% of GDP in 2017. The fact that the deposit growth was registered in conditions of the global crisis and more economic and political shocks proves the high confidence of the citizens in the banking sector, which remained stable, sound, highly capitalized and liquid throughout the entire period, showing high capability for successful handling of shocks. Higher growth in the denar deposits and the acceleration of growth of the long-term savings is especially positive, which strengthens the banks' capacity for long-term placements and the support for investment projects. The deposit growth provided a solid basis for increase in the lending activity and deepening of financial intermediation2 by around 8 p.p.
And such a winding down was necessary, too, since great macroeconomic imbalances had emerged, reflected most clearly in an unacceptable current account deficit and inflationary pressures. It is therefore inevitable that the output gap will narrow in order to bring down inflation, and that national income will drop even further in order to achieve a significant reduction in the current account deficit, which is far beyond a sustainable long-term level. High interest rates can be painful, not least for the households and businesses that have been imprudent in their consumption and investments recently and have relied too heavily on the facilities of credit institutions. It is out of the question for the Central Bank to base its interest rate policy on the actions of the least prudent members of the community. This can only be based on provisions made in laws and the joint declaration by the Government and the Central Bank this March, i.e. to promote price stability. This is the guiding aim of central bank activities in industrial countries around the world, because it creates a climate for economic growth and greater well-being for citizens. In a world of free capital movements and greatly enhanced access to credit compared with earlier times, businesses and households, and credit institutions too, must find their bearings for themselves. Understandably, many people complain about high interest rates, but the lively debates in recent weeks have often revealed excessive faith in the effect that an interest rate cut would have on economic developments.

BIS Review 95/2001  1  All this was reflected in the Maastricht Treaty. The European Central Bank, which formally began operation in the middle of 1998, enjoys extensive independence and is subject to requirements for transparency and accountability. Even though Sweden is not yet a member of the EMU, it amended legislation on its own Central Bank which now largely fulfils the Maastricht terms. The Bank of England’s legislation does not entirely fulfil the terms of the treaty, but it was granted greatly increased independence a few years ago. Denmark has still not amended its central bank legislation, although this will need to be done in the event of Denmark joining the EMU, not least to give legal sanction to its independence. Price stability is the main objective The Maastricht Treaty set a single objective for the European Central Bank, namely ensuring price stability. Price stability was not defined in the treaty, however; this was done by the ECB itself, which specified it as an annual rise of under 2% in the Harmonised Consumer Price Index. A separate treaty on stability and economic growth stipulates that EMU members should aim for long-term fiscal balance or a surplus, and a public sector deficit of less than 3% of GDP. The decisive viewpoints behind the formulation of the European monetary framework were also dominant in many other parts of the world.