samchain/econo-pairs-v1 huggingface dataset:
Occasional tremors in financial markets had been evident over the past year or so, and again in July this year. It was impossible to tell whether they constituted a gradual release of pressure on risk premia that had become overly compressed, or whether they signalled a more disruptive movement to come. On August 9 the question was answered. As if to highlight the global nature of the crisis, the unexpected revelation by a French bank that its investment funds could no longer value their exposures to US sub-prime mortgage loans produced a sharp reappraisal of the risks they were taking by investors around the globe. The returns demanded by investors on all risky assets rose – from packages of bank loans to plain vanilla company shares – so the prices of those assets fell. And in some markets for complex financial instruments, investors realised that perhaps they did not understand as much about the nature of the risks involved as they should. So not only did asset prices fall, but the markets in some of these instruments virtually closed. There were no buyers. This freezing of capital markets led to a chill in banking systems around the developed world. Banks that had relied on selling packages of loans in securitised form found that they couldn’t sell them. Investment vehicles that held securitised loans have found it difficult to finance their holdings by borrowing.

As with road traffic congestion, one way to tackle that would be to place direct restrictions on excessive message traffic – for example, by setting maximum order cancellation ratios. The US Securities and Exchange Commission (SEC) are considering this option. So too are the authorities in Europe under the draft proposals contained in MiFID II. These are welcome moves. New trading topologies also run the risk of turning the miracle of higher liquidity into a mirage in situations of stress. One potential response would be to strengthen market-making commitments. The past few years have seen a dilution of some of those commitments. For example, in 2008 the New York Stock Exchange relaxed its market-making commitments on maximum bid-ask spreads. One upshot was that, during the Flash Crash, the prices of some stocks hit zero and others $ – so-called “stub quotes”. Following the Flash Crash, the SEC moved swiftly to ban stub quotes. This effectively re-introduced a requirement for market-makers to ensure price continuity. It has also been considering enhanced market-making obligations or incentives to improve the resilience of market liquidity in situations of stress. In Europe, MiFID II is looking at the scope for strengthening market-maker commitments for similar reasons. This would be a welcome turning-back of the trading clock – a clock otherwise at risk of running too fast. Strengthening circuit-breakers across exchanges can also help to restore market order in situations of stress.
Timothy F Geithner: The Bretton Woods institutions in the 21st century Remarks by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, before the Bretton Woods Committee, New York, 10 June 2004. *  *  *  It is a pleasure to join you for this meeting of the Bretton Woods Committee. This is a great and accomplished organization. Although the international financial institutions are one of the most important legacies of the great statesmen of the last century, the task of supporting them is not always easy. The Committee has been effective in this role, not just by helping to explain the accomplishments of the International Monetary Fund and the World Bank to an occasionally skeptical public, but also by helping to shape the debate on how these institutions need to change. The Fund, from its inception, was burdened by a mismatch between the aspirations of its architects and the authority and instruments they gave the institution to pursue those ambitions. Its authority over the policies of its members was limited. Its resources were small, and the facilities established to deploy those resources were modest relative to the problems they were designed to address.

It will be followed around a year later by a polymer £ note featuring Jane Austen. The decision to move to polymer for these notes follows a three-year review and a broad public consultation exercise. Our research has shown a compelling case for polymer notes. Polymer notes bring three main benefits: •  They stay cleaner than paper banknotes because they are resistant to dirt and moisture;  •  They are more secure because they incorporate advanced security features that make them difficult to counterfeit;  •  And they are more durable, lasting at least 2½ times as long as paper banknotes, ensuring that notes in circulation remain of high quality. Because replacements are needed less often they are both cheaper over time, and more environmentally friendly. These advantages mean that a switch to polymer is a natural step in the evolution of banknote design. But you don’t have to take our word for it. Nearly 13000 people have told us what they thought, in surveys and at over 40 events up and down the UK, and 87% – the vast majority – were in favour of polymer notes, especially once they had a chance to see and handle prototype notes. After that public consultation, we’re confident that the switch to polymer will have broad public support.
In the context of the financial turmoil of the Middle Ages, in around 1355, Nicholas Oresme, a French scholastic philosopher, wrote his visionary Treatise on the origin, nature, law and alterations of moneyii in which he asserted that the currency does not belong to the “prince” but to the people, and therefore should not be manipulated. But it took several more centuries for trust in money to be "dematerialised": to move from trust in a physical medium - gold and silver, and metallic currencies - to trust in an institution. The 19th century, with the industrial revolution, saw the  Page 4 sur 10 expansion of banking and finance, and the creation of many central banks. It was a first decisive step: a dedicated guardian was put in charge of issuing banknotes, as a first “immaterial” currency. The second decisive step, mainly from late 20th century, was to make central banks independent from political power: in the 1980s and 1990s most central banks enshrined their independence in their statutes, including the Eurosystem in order to ensure the stability of the single currency. The Eurosystem also defined a target for inflation, as did the Fed in 2012, a few years after Ben Bernanke strongly advocated for it. But independence – which I cherish – does not mean isolation.

The total cost is even higher when we take into account the cost incurred by the payer and payee in delivering and depositing cheques. It is estimated that cheque processing cost Malaysia about RM768 million5 per year. This amount is huge and a sheer wastage. Correcting distortion between paper-based and electronic payments Despite the cost incurred in processing cheques, cheques have not been priced directly to reflect its costs except for the stamp duty of 15 sen per cheque. On the contrary, electronic payment services such as the Interbank GIRO (IBG) are priced above cost at about RM2 per transaction. Such price distortion does not incentivize the adoption of the more efficient electronic payments on a mass scale. In advanced countries such as Australia, Norway and Sweden, electronic payment services are priced lower than cheques consistent with their respective cost of production. The correct price signals that reflect the real cost of cheques and electronic payments had facilitated a broad shift from the use of cheques to the use of electronic payments. We need to correct this price distortion between cheques and electronic payment services, Bank Negara Malaysia has announced a new pricing strategy for payment services in March this year where the price of IBG and cheques are aligned closer to their cost of production. With effect from 2 May 2013, the transaction fee for IBG conducted via internet and mobile banking was reduced to 10 sen from RM2 previously.
Nonetheless, probably the most important factor is that the banking sector is one of the most highly regulated sectors in society and is subject to strict supervision. A bank cannot operate without a licence, and banks are required to satisfy a number of requirements relating to capital adequacy and liquidity management, all of which limit bank lending and money creation. Norwegian banks cannot behave as Stockholms Banco did in the 1600s. By ensuring that banks are solid and sufficiently liquid, regulation and supervision also underpin trust in the money we use. The financial crisis in autumn 2008 was triggered by the collapse of an under-regulated financial institution – the Lehman Brothers investment bank.10 In the years preceding the crisis, Lehman’s equity was less than two percent of its assets. With so little capital supporting loans, it does not take more than a puff of wind to bring down a house of cards. New forms of payment and new forms of money Trust is necessary, though not sufficient, for money to function as a universal means of payment. It must also be efficient and safe to use. When you make a payment in a shop using a bank card, one of the largest systems we have is set in motion. Payments move back and forth between banks. Banks settle the payments by transferring money between their accounts at Norges Bank. Your payment then becomes available in the recipient’s account, normally a few hours after the payment process was initiated.

This money is created by banks, not by Norges Bank. Chart 1 shows the money supply and the supply of banknotes and coins in Norway since 1960. In Norway, the money supply mainly comprises deposit money in banks. 6 In the early 1960s, banknotes and coins accounted for a fifth of the money supply. Current accounts and cheques were already becoming commonplace. Since then, banks’ deposit money has increased dramatically, and today, banknotes and coins make up less than 2.5 percent of the money supply. In other words, virtually all the money we use has been created by banks. 3/9  BIS central bankers' speeches  So how do banks create money? The answer to that question comes as quite a surprise to most people. When you borrow from a bank, the bank credits your bank account. The deposit – the money – is created by the bank the moment it issues the loan. The bank does not transfer the money from someone else’s bank account or from a vault full of money. The money lent to you by the bank has been created by the bank itself – out of nothing: fiat – let it become. The money created by the bank does not disappear when it leaves your account. If you use it to make a payment, it is just transferred to the recipient’s account.
After cutting the base rate for overnight lending – the fed funds rate – to zero, the majority of the committee decided to expand the money supply by purchasing MBS, notes and bonds. When we buy something in the marketplace, we pay for it, and this has resulted in significant liquidity floating about the U.S. economy, much of it going unused. As mentioned earlier, $ trillion of excess reserves from private banks is on deposit in the 12 Federal Reserve Banks, where it earns a paltry 0.25 percent, rather than being lent to job-creating businesses at rates bankers would prefer. Additionally, some $ trillion of excess cash is parked on corporate balance sheets – above and beyond the operating cash flow needs of the business sector – and copious amounts of cash are lying fallow in the pockets of nondepository financial institutions, such as private equity and other investment funds. A running discussion in the marketplace centers around whether the FOMC will decide to engage in further quantitative easing, especially given the most recent economic weakness in the U.S., against the backdrop of the well-known problems in Europe and slower growth in China and other “emerging” economies. I shall turn to that in a few moments. First, I want to go back to the 12 Federal Reserve Banks. Different growth patterns in the 12 Federal Reserve districts Here is a map of the 12 Federal Reserve Bank districts.

In this context I define the “new economy” as an increase in the potential growth of the economy. In the last few years, the growth of the American economy has surpassed most forecasts. Not only has the rate of growth been high in historic terms during the present upswing - around 3.5% per year on average since the end of 1991 - it has besides been very stable and unusually long lasting. At the same time, unemployment has fallen to near 4%; levels this low have not been witnessed since the 1960s. However, in distinction to previous booms, there has been no increase in the rate of inflation and the underlying rate of inflation has been more than halved since 1991, from over 4% to 2%. Public finances have improved considerably, from a deficit of 5% of GNP in 1991 to an expected surplus of around 1% this year. Looking at productivity per hour worked in American business, which is perhaps the best measure of how good a country’s growth potential is in the longer term, this has risen sharply, by over 2.5% on average since 1997; this figure can be compared with an average growth of productivity of around 1.5% over the period 1974-96. A substantial part of the improved productivity of labour can be explained by very high investments - so-called “capital deepening” - not least in computer equipment. In spite of the fact that unemployment has continued to fall throughout the period, the growth of productivity has been impressively high.
The reaction function approach is arguably more robust to uncertainty about the structure of the economy than alternatives that seek to characterise policy by the first-order conditions of the policymaker’s objective function, although that robustness comes at the cost of not being formally the ‘best’ rule for a given model structure. See for example Levin and Williams (2003). 16  BIS central bankers’ speeches  It has always been the case that, because the economy is subject to unforeseen disturbances, the precise path for Bank Rate cannot be preordained.24 But “data driven” means more in the post-crisis world. The economy’s performance will, over time, reduce some of the uncertainty about its supply side and underlying inflation dynamics. Although great uncertainties remain, we are arguably better informed about the dynamics of exchange rate pass through, the prospects for some recovery in productivity growth and the resilience of the UK financial system. Risks to the outlook and uncertainties about the economy are occupational hazards of monetary policy making. The MPC’s job is to assess them constantly and set policy accordingly. There will be no pre-commitments beyond an unwavering focus on conducting policy in a manner consistent with our remit. That means we’ll do the right thing at the right time on rates. Doing the right thing requires taking into account a powerful set of forces, part secular, cyclical, domestic, and global.

So there is a ground. We may asses that the shareholder in Slovenia is currently in unfavorable condition and is unable to financially support the bank in Macedonia. Not only financially, but also from a functional point of view. We have not yet made that assessment, but we could. It is an argument that we could use at any time if the shareholders from Slovenia do not perceive the situation here realistically and do not take the right decisions for their bank in Macedonia. The Euro area is out of recession. You were the most optimistic, even more than the government, and projected growth of 2.2 percent for this year. Do you remain at this projection or will it go up? The latest projection is still 2.2 percent, although we make a reassessment every month. Currently, developments are somewhat more favorable than those we have taken into account in our projection of 2.2 percent. It is true that at the very beginning we came out with the highest estimate for the economic growth this year. The data available so far suggest that we would be the closest to the actual development, which could be even better. In the beginning, in the first and second quarters, growth in the Macedonian economy was driven by some factors that were not very much related to the situation in the euro area, but our expectations for the second half of the year were that the European economy will recover, and that it will contribute positively to growth.
These biases in behaviour are similar in spirit, but different in form, to those of primitive man. Both generate negative sentiment towards strangers or the “out-group”. In ancient times, biases were based on the physical identity of strangers; they were overt and visible. Today, many biases are based on the social identity of strangers; they are often covert and subtle. Where primitive man had conscious biases, modern man often has unconscious ones too. 14 That these biases are sometimes covert, rather than overt, does not diminish their importance for society. Unconscious biases are likely to be just as prevalent, and sometimes as pernicious, as conscious one. And precisely because they are harder to detect, sometimes even among those exhibiting these behaviours, unconscious biases are more likely to go unnoticed, and thus unchallenged, than conscious ones. As conscious biases were violent and visible, unconscious biases are silent and invisible. The Sneetches is, at one level, a children’s story with a moral message. At another, it is a case study in social identity theory, a parable for modern times. Even in advanced economies with little fear of conflict or infection, with laws against discrimination and with social norms favouring diversity, we all remain Sneetches. Our biased minds are in part a neurological hangover from our hunter-gatherer past and in part a sociological side-effect of our multicultural present. Either way, these biases are embedded in our brains and behaviours. Diversity as a social good Saying that behavioural biases among individuals are understandable is one thing.

Nothing is lasting without institutions.” The ECB is, in my opinion, a remarkable illustration of the lucidity of the conceptual founder of the Community: the institutional construction is solid and has proved to be remarkably effective in attaining its goals. This ten-year period has been short compared with the duration of the deepening of the European Union, which is an historic endeavour. But this relatively short period of time has been rich in successes. These accomplishments call for celebration, for reflection and also for continuous efforts as regards the future. In the first place, celebration. My predecessor, our dear Wim Duisenberg, in his speech to celebrate the establishment of the ESCB ten years ago, referred to “the road we have to travel in the future to make the euro a success, which means to make it a stable currency”. What can we say now, after ten years? I can sum it up in five sentences. Since day one, the single currency has fully inherited the degree of credibility and confidence that was the privilege of the most credible national currencies before the euro. The credibility was such that the medium and long-term market rates of the euro were at the same low level as those experienced by the most reliable national currencies before. In spite of a series of global shocks resulting from the prices of oil and commodities, yearly inflation since 1 January 1999 has been 2.1% on average.
Firms are navigating statutory changes and a suite of new regulations that are still evolving and being implemented;2 responding to investor pressures for higher returns in a rising rate and more competitive environment; and seeking to capitalize on fundamental technological advances, while managing the risks associated with cybersecurity and greater competition from potentially disruptive new entrants. One recent observation is that the largest firms in the U.S. appear to be growing increasingly similar in terms of their underlying business models and strategies. This has implications for balance sheet structure, earnings profile, and organizational structure. For example, some firms traditionally focused on capital market activities, are shifting into lending activities, while other more traditional banks, are expanding capital markets activities. In both cases, this serves to diversify the individual firms, while also making them more similar in terms of the business strategies they pursue, the products they offer, and the customers they serve. If firms are responding to the same exogenous forces, this might not be surprising. Indeed, similar observations were made in the late 1990s as the deregulatory forces that culminated in the Gramm-Leach-Bliley Act (GLBA) led to predictions of a few “financial supermarkets” that would offer the full range of financial services to all customers. More recently, industry analysts and commenters have pointed to the range of capital and liquidity regulations that may be pushing firms toward the same target state business model where large firms provide a wider range of financial services.

We examined a range of balance sheet and income statement items, market indicators, and organizational structure data to draw some preliminary conclusions. The results, reported in the appendix, are generally supportive of the notion of greater homogeneity among the largest banks, but a more rigorous assessment of these preliminary conclusions would be a fruitful area of investigation. Why Do We Care? I now turn to a final question – does this matter for supervisors and regulators? I think it does. I will consider four potential reasons why this shift is relevant for the official sector’s concern for 3/5  BIS central bankers' speeches  safety and soundness and efficient financial intermediation: a firm’s risk management approach, the evolution of supervisory focus, the development of macroprudential risks, and allocative efficiency of financial services. I’ll begin with our core microprudential focus on ensuring that banks develop and implement the appropriate risk management infrastructure for their evolving risks. While this is more linked to the changes in business models than greater similarity, the underlying drivers are the same. As banks respond to environmental factors by expanding into new activities or shifting their strategic focus, they naturally face new risks and must adapt their risk management infrastructures along with their evolving business models.