samchain/econo-pairs-v1 huggingface dataset:
And as if this was not blatant enough, all this occurred in a climate of malicious rumors about the RMB and the Hong Kong dollar, glorified by publications from the so-called in-house currency strategies and analysts, and by the usual “reliable information from authoritative sources”. Well, it did not quite work out the way they intended. They miscalculated on two counts. First, they did not factor in the need for the HKSAR Government funding this year’s budget deficit, unexpected at the time when the budget was drawn up, through a drawdown of foreign reserves. And so the currency board adjustment mechanism involving sharply higher BIS Review 85/1998  -4-  interest rates was not triggered. Second, they did not realize that the HKSAR Government was far from the sitting duck they thought we were. Committed to the free market as we may be, we took the view that free markets do not mean that markets can be freely manipulated. They need to be fair markets as well. We have a responsibility to tackle market manipulation and avoid serious market dislocations developing. So after much agonizing we acted on two fronts. First, we intervened in the stock and futures markets to deter market manipulation, by making sure that the manipulation did not pay off. Second, we followed this action through with various measures to strengthen our monetary and financial systems. On the monetary side, we introduced technical measures to modify our currency board arrangements of our linked exchange rate system to make it less susceptible to manipulation.

On 14 September 1998, he wrote: “the more I think about it, the more sympathetic I become toward the Hong Kong Monetary Authority and its stock market intervention”. David Hale of the Zurich Group also said that: “it is difficult not to sympathize with the frustrations and anxieties which compelled... the government of Hong Kong to intervene in the stock market”. And last week George Soros said in Washington, when asked what he thought of Hong Kong’s actions in the stock market: “I can’t really disapprove”. My correspondence with Alan Greenspan is still ongoing: while I continue to point out to him that we were only trying to deter market manipulation, which in any case is against anti-trust laws in the US, he still has doubts. This is because of the difficulty in distinguishing between what he calls “conventional, albeit sharp-eyed, arbitrage and speculative BIS Review 85/1998  -2-  activities” in financial markets and what I call market manipulation. I shall persevere. In my view, whilst distinguishing between the two is difficult, it is not impossible, particularly when you are close to it. Perhaps I should deploy Chairman Greenspan’s argument for the Fed’s involvement in Long Term Capital Management in justifying our case. Instead of deterring market manipulation, I could say, in Alan Greenspan’s words, that we were trying to “avoid possible serious market dislocations that could have potentially impaired the economy”. But whatever argument we use, it is my firm belief that our actions, whilst controversial, are well justified.
The vast majority of subprime loans were financed by investors through placing the loans into securities that were sold onto the market. Most of the securities derived from these subprime mortgages were deemed to be AAA rated by the rating agencies. The subprime mortgage securities differed in an important way from those based on prime conforming mortgages. For prime conforming mortgage-backed securities, the degree of credit protection for the AAA investors is fixed in advance. In contrast, for subprime mortgage-backed securities, the degree of credit protection for AAA investors started out “thin” and built up over the initial couple of years so long as mortgages did not default early in their life. 9 At the peak of the housing boom, not only was leverage high for the individual subprime borrower, but leverage was high for the investors in lower rated subprime mortgage securities. 10 This dynamic buildup of credit protection worked well so long as house prices kept increasing, but proved to be disastrous for investors in AAA subprime securities when house prices began to decline. The AAA rated subprime securities were then used as collateral against repurchase agreements. Given how safe the assets were thought to be, very small haircuts were required for these loans. In addition, the composition of repo loan terms shifted toward  8  Andrew Haughwout, Richard Peach and Joseph Tracy. 2008. “Juvenile Delinquent Mortgages: Bad Credit or Bad Economy?” Journal of Urban Economics 64 (September): 246–257. 9  Gary Gorton. “The Panic of 2007”.

A payments strategy for the 21st century  Remarks made by Andrew Hauser, Executive Director, Banking, Payments and Financial Resilience  Payment Strategy Forum “Launch of the Final Strategy”, London 29 November 2016  1  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  Thank you very much for the opportunity to speak to you today at the launch of the PSF’s Payments Strategy st  for the 21 century. I want to start by emphasising that this is not the Bank of England’s strategy – or the UK authorities’ as a whole. And that in fact is its great merit: because it has been drawn up by a genuine partnership of those who actually provide and use retail payments services, with the interests of those users uppermost in their minds. But that doesn’t mean the Bank has been ‘hands off’, or lukewarm over the direction of travel. Quite the reverse. We have a deep interest in, and responsibility for, maintaining the stability of sterling payments. First, through our statutory responsibility for the supervision of the major payments schemes. Second, by ensuring that all material payments either settle in, or are backed by, central bank money – the safest form of settlement asset. And, third, through our role as member of some schemes as a bank in our own right. It is sometimes said that a focus on stability impedes innovation. But there is no reason why that has to be true.
BIS central bankers’ speeches  17  The revenue and costs of different measures should be weighed against each other I mentioned previously that the exact implementation of different measures must largely be based on value judgements. The purpose of the measures, that is to say the outcome, is to reduce the risk of unfavourable developments further ahead. However, costs also occur in the short term when opportunities to borrow are limited, as this subdues consumption and thereby also GDP growth. When deciding whether to introduce a measure, it is thus necessary to weigh the gains, in the form of reduced risks in the longer run, against the costs, in the form of lower demand and GDP in the short run. 22 In this context another aspect of tax relief on mortgage interest can be mentioned, namely that it currently represents a cost for the state. According to an analysis carried out in June this year by the National Institute of Economic Research, the costs to the state of tax relief will increase considerably when interest rates rise: from around SEK 23 billion to 60 billion (1 per cent of GDP) in 10 years. Reduced tax relief could therefore improve the state’s finances quite substantially in the future, which would create space for reform to compensate for many of the short-term macroeconomic costs which would otherwise occur.

In the long run monetary policy is only capable of influencing inflation; a systematically higher rate of inflation, however, would not lead to higher long-term growth. The level of long-term growth is determined instead by real economic factors such as demographic changes, technology, education and the efficiency of markets. In so far as a long-term relationship between inflation and growth does exist, most of the evidence suggests that, if anything, higher inflation impairs the workings of the economy and thereby weakens output. Today there is widespread - though not yet complete - agreement on this. What monetary policy can do, on the other hand, is influence the economy’s fluctuations around the long-term trend, albeit without any lasting effects on growth. This means that if resource utilisation is low or high, monetary policy can be used to stimulate or dampen activity temporarily, but not to fine-tune the economy. With an inflation target which applies downwards as well as upwards, so that deflation as well as inflation are avoided, monetary policy can then exercise a stabilising influence and help to smooth economic fluctuations around the long-term trend. Problems arise if resource utilisation becomes so high that inflation starts to accelerate and the central bank has not intervened. People may then begin to count on inflation remaining high in the longer run. A higher level of inflation may then be established, whereas the effects on production and employment will be only temporary.
But the liquidity of other assets is less assured, and banks can suffer problems if the liquidity of their assets dries up. That could cause financial instability. The Bank of England can provide liquidity insurance to individual, creditworthy institutions and to the banking system as a whole, by accepting those less liquid assets as collateral, for a fee, in exchange for more liquid assets, including reserves.9 But such liquidity insurance must be provided in a way that takes account of the potential for “moral hazard” – the incentive for individual banks to undertake riskier activities because of the presence of a central bank backstop. The Bank’s operations must not undermine the incentives of private sector firms to manage their liquidity needs safely in the market, rather than turn to the Bank routinely. Moreover, although the Bank’s operations are collateralised, the value of the securities delivered to the Bank is always uncertain. We would never be able to protect ourselves perfectly against credit risk. 8  “The Bank’s money market framework”, Bank of England Quarterly Bulletin, 2010 Q4. 9  The Bank also stands ready to provide gilts via its permanent Discount Window Facility, introduced in October 2008. This facility is available to provide bilateral liquidity support to solvent and viable institutions, against a wide pool of collateral. BIS central bankers’ speeches  5  As well as implementing the policy rate, the SMF is also used to provide that liquidity insurance.

Within the tolerance range around its reserves target, a bank has no incentive to pay more than Bank Rate for an additional unit of reserves, or to charge less than Bank Rate for lending an additional unit of reserves, and the demand curve is relatively flat. The length of the flat portion of the curve depends on the size of the tolerance range set by the Bank. If the tolerance range is very small, market interest rates will be relatively sensitive to variations in  6  If the system as a whole already has excess reserves (relative to the commercial banks’ collective target), the Bank can drain reserves by issuing short-term Bank of England bills. BIS central bankers’ speeches  3  the supply of reserves. That is because small variations in supply could potentially move banks into using the deposit or lending facility. If the tolerance range is very wide then banks have little or no incentive to distribute reserves around the market to meet their targets precisely. Alternative frameworks for setting interest rates This system of reserves targets is just one of a number of systems that would be used to implement the policy rate. Indeed, as a system for influencing market rates, these arrangements could be seen as overly complicated. Since March 2009, when the Bank embarked on its asset purchase program known as QE, we have been implementing Bank Rate in a rather simpler fashion. The Bank’s asset purchases were financed by creating additional central bank reserves.
Such fall has been partly undone and is expected to continue to do so over the projection horizon. Trend growth projections are the same as in the previous Monetary Policy Report, that is, between 4.0% and 4.5% in the next two years. Beyond the projection horizon, a gradual return to trend growth figures approaching 5% is expected, to the extent that investment recovers and the general cost structure of the economy continues to reflect the lower energy costs. Annual CPI inflation has been negative since August, and the Board estimates it will become positive over the course of the first half of 2010 and will gradually converge to 3% in the monetary policy horizon, this time the last quarter of 2011. The progressive – yet incomplete – closing of the output gap that is expected in the projection horizon, together with higher commodity prices, explain headline inflation increasing faster than the core measures. Y-o-y changes in CPIX and CPIX1 will stay flat in negative figures for some months longer than CPI, and will converge to 3% later than headline inflation (table 3). Market inflation expectations remain at 3% in the medium term, despite low inflation expected for the next few months (figure 14). Several factors determine inflation’s convergence to the target. In particular, this projection relies on the external scenario steadily adding a boost to economic activity, with the recovering of confidence and global financial conditions gradually normalizing and allowing domestic and international demand to pick up.

Norman T L Chan: Removal of RMB conversion limit for Hong Kong residents Speech by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, Hong Kong, 12 November 2014. *  *  *  I am glad to announce that the RMB conversion limit for Hong Kong residents of RMB20,000 per day will no longer be applicable with effect from 17 November 2014. Under the new arrangement, banks will square their positions arising from RMB conversions conducted with Hong Kong residents in the offshore market instead of the onshore market. As a result, the prevailing conversion and other relevant restrictions for onshore conversion will hence be no longer applicable. The HKMA has just issued a circular to banks setting out the detailed arrangements. The HKMA has had many rounds of discussions with the banking industry and Mainland authorities on relaxing the restrictions on RMB currency conversions by Hong Kong residents. We consider that the best option is for RMB conversions by Hong Kong residents to be done in the offshore market instead of the onshore market. With the size of the offshore RMB liquidity pool in Hong Kong exceeding RMB 1 trillion, and considering the scale and depth of the RMB foreign exchange market, we do not foresee any problem for banks to square their positions for Hong Kong residents’ RMB conversions in the offshore market.
In that sense, monetary union in itself has a clear political dimension. This was only possible because euro area members had achieved a high degree of convergence in attitudes and preferences. It also happens that, in all countries in the world, Central Banks have been made independent in the last decades, and monetary policy has been, as a consequence, depoliticised. This was seen as a necessity to ensure price stability. From that point of view, the euro is no exception and the ECB's mandate is similar to those of other Central Banks. So, monetary union in Europe is well grounded, both on its technical and political pillars. Actually, the euro to day seems to me the main driver for European integration. It exists. It is a success. The institutional process is working smoothly. Sharing the same banknotes and currency has given European citizens a strong sense of common identity and joint destiny. And those who worried that monetary union would impede growth in Europe should be comforted by our recent record. Europe's growth rate to day is equal – or higher – to the US. In the six years since the creation of the euro, twice as many jobs have been created in Europe as compared to the US economy. Admittedly, we are lagging behind in terms of productivity growth, innovation capacity and market flexibility. But there is nothing which cannot be corrected provided the necessary policies are implemented with determination and continuity. This is why, looking beyond the current difficulties, I feel very optimistic.

This is not a traditional mission for a central bank: it is usually focused on monetary policy and financial stability. Yet, I believe that all these missions go hand in hand: whether we are working towards financial inclusion or price stability, the overarching goal is the same – supporting inclusive and sustainable economic growth. On financial inclusion, the role of Banque de France has always been to support the  efforts of public authorities and of the private financial sector in helping widening access to financial services. And this support is provided to help meet 3 main objectives: improving fair access , preventing inequalities of treatment and improving financial 1/5  BIS central bankers' speeches  literacy. Let me take a few examples. To help Improve fair access, Banque de France is part of the “right to an account” procedure set up by French law. If a bank refuses to open a bank account to a client, he or she can make a request to us and we will designate a bank within 24 hours. This specific bank account will provide basic services free of charge. In 2018, 50000 people made use of that right. Reducing the usage cost of a bank account is also essential for financial inclusion. And “fragile” clients, for instance because of low resources or a bad credit history, are the most likely to pay fees because of issues with their accounts – 300 euros a year on average.
That means being attentive to exchange-traded derivatives and to cash markets, whether on or off-exchange, and perhaps especially to the short-term financing markets. Where firms are concerned, we have learned to focus on maturity transformation and leverage. For markets, it is, perhaps, not quite so straightforward. In the case of intrafinancial system markets, we are interested in whether they produce chains of cumulative maturity transformation and leverage, and how transparent that is. With end-user markets, we are also interested in whether they are driven by strongly procyclical forces; whether they are especially liable to generate assets whose risks are mispriced or obscure; whether demand is dominated by leveraged investors and traders. We are interested in whether they can crater – becoming illiquid or even closing – under stress. And in whether there are ready substitutes. If not, intermediation can become impeded and end-users deprived of valuable services. Across all of these concerns, the underlying factors may be either structural or cyclical. And they go wider than the traditional focus of securities regulators on the integrity of transactions in public “end user” markets. In practice, the components of individual markets give us a list of things to focus on. A list that goes well beyond firms: products and their distribution in primary markets; the rules of the game and infrastructure for trading, including the role of market makers; the infrastructure for post-trade clearing and settlement; and asset management practices. Especially for “end-user markets”, these are subjects typically associated with securities market regulation not with mainstream microprudential supervision.

The key to progress was the joint recognition by market regulators and supervisors that earlier identification of credit losses is consistent both with financial statement users’ needs for transparency regarding changes in credit trends and with the prudential objective of safety and soundness.19 In the other direction, bank supervisors have typically insisted on the vital confidentiality of the information they receive, while securities regulators emphasise transparency. One could argue that, in many countries, the bank supervisors have done too well in this debate. That was brought home to me some years ago when, in a previous existence at the Bank of England, my then team realised that we could analyse large and complex firms most easily using disclosures made under SEC rules. As announced last week in the joint Bank of England/FSA document on how the future Prudential Regulation Authority will approach banking supervision, we plan in the future to publish prudential returns to the extent possible. Shadow banking and the prudential perimeter My second point about firms concerns shadow banking, defined to mean non-bank firms or structures that replicate the monetary and/or credit services of banks in some way, involving maturity transformation and/or leverage20. 18  See Recommendation 19, FSB Report on Implementing OTC Derivatives Reforms (2010); and the recommendations of the FSB’s Data Gaps and Systemic Linkages Group.
Indeed, this implementation is proceeding at a time of a difficult global financial and economic environment. Several countries have however, announced their timelines, with some that are moving faster and further than the Basel III standards. Asia is in a relatively stronger position to transition to the new standards. We are, however, vigilant over the global economic and financial consequences of its implementation in other parts of the world. As open economies, we are not insulated from these consequences. While the work of the Basel Committee suggests that the effect of tightening conditions on economic growth will be modest, the highly dynamic global financial conditions imply that regulators will have to continue to proceed cautiously, and on a fully informed basis, in implementing the new standards. Of importance is the need to recognise the point beyond which the costs to the real economy exceed the desired benefits of greater systemic resilience. The reform agenda has also focused on the fundamental and no less significant changes to institutional arrangements and market structures. Some of these, such as reforms involving the OTC derivatives markets and policy frameworks for systemically important financial institutions (SIFIs), are being advanced through global platforms, notably the Financial Stability Board (FSB).

Policy shifts and the proliferation of binding “one-size-fits-all” regulatory prescriptions however, goes against the grain of regulation that is proportionate to risk which has been a well established principle of sound regulation. There is therefore considerable risk to simply following new “trends” which may lead us down yet another potentially misguided path. In particular, the significant efforts made in the region over the recent decade to bolster financial sector efficiency and innovation, which in turn promotes financial integration, could be disproportionately curtailed. In addition, it has only been recently that the global attention has also turned to enhancing supervisory intensity and effectiveness as an essential component of the financial reform effort. This is a welcome move and will add a critical dimension to the consideration of future reforms by national authorities. In Asia, financial reforms were already accompanied by a significantly strengthened supervisory approach and safety net arrangements, which served to check unfettered innovation and reckless risk-taking behaviours and promote strong incentives for prudent risk management. For these reasons, our banking systems have been resilient through the global financial crisis and have continued to remain strong since, despite continued risks in the global economy. As we contemplate the raft of reforms that will continue to occupy the global agenda in the next few years, our considerations should be to pursue domestic and regional solutions that will deliver a more resilient financial system without impairing the continuous provision of efficient financial services that are vital for our economies. Let me conclude my remarks.