samchain/econo-pairs-v1 huggingface dataset:
When setting up these transactions, firms should be prepared for questions from supervisors about the substance, as well as form, of their proposals. Treatment of liquid assets. Similarly, the letter of the regulation allows firms to account for the value of the liquid assets in their liquid assets buffer on a "hold to maturity" basis rather than on a trading basis, under which their reported value would be updated daily in line with market conditions. This is an important concession for firms who do not have a trading book but it means that market value gains and losses on the portfolio remain undeclared until the assets are sold. This practice raises the risk that – especially if gilt yields should rise – market price movements in liquid assets buffers could lead to unrealised losses. If this were to happen then the firm may be unwilling or unable to sell the assets. For which firm would want to sell liquid assets and declare unrealised losses at a time of liquidity stress? If the firm has access to the repo market, it may be able generate liquidity through repo. But there may be limited liquidity available in the repo market, so the liquidity of the liquid assets buffer would be impaired. Of course, if the assets in the liquid asset portfolio concerned carry very low risk, and their possible market value changes are small, "hold to maturity" accounting should not be of any concern to a well-run firm or a well-informed supervisor.

The appropriate level of risk is something we are currently discussing with firms. Liquidity horizon. Finally, we are aware of banks seeking out funding that matures just beyond the time horizon used to calculate regulatory liquidity requirements. These include the Liquidity Coverage Requirement’s (LCR) 30-day window. If a firm subject to the LCR accepts a deposit that can be withdrawn by giving less than 30 days’ notice, it has to hold a certain amount of high-quality liquid assets as insurance against the deposit being withdrawn during stress. As yields on high-quality liquid assets are relatively low, this can drag down profitability. But a bank can evade this by obtaining a deposit that matures after 30 days, since these deposits generate no requirement for counterbalancing high-quality liquid assets. I recently saw a term-sheet for an evergreen 35-day call account. In previous times, the market-standard notice period was one calendar month. Why the shift from one-month to 35 days? The traditional one-calendar-month call account is only sometimes LCR-friendly – during a 31-day month – whereas the new 35-day product always is. 21  All speeches are available online at www.bankofengland.co.uk/speeches  21  But how much additional liquidity has been obtained by extending the funding profile by five days? And how strong is liquidity risk management beyond the narrow requirements of the LCR?
Consistently with this view, we believe that it is essential that payments be able to flow freely throughout the TARGET system. 25. Why do we devote this effort for preparing for the euro? The reason is very straightforward. London’s pre-eminent position as an international financial centre rests on the fact that it provides broad and liquid markets for the full range of internationally-traded currencies and for the vast array of different instruments and facilities denominated in them. The euro will undoubtedly become a major internationally-traded currency, and it is therefore certain that it will be traded extensively in the London markets. The euro thus represents an opportunity, rather than a threat, for the London markets, and it is important that the London markets prepare in good time the systems and infrastructure needed to take advantage of this opportunity. London as a financial centre after EMU 26. The reason why we are convinced that the euro represents a major opportunity for the London markets relates essentially to the strengths that the London markets have displayed over the years:  •  London is a global financial centre rather than just a European centre, with much of its business generated around the world, not just within Europe. BIS Review 110/1997  -5-  •  London has always thrived on financial innovation, and has a strong track record of capitalising on new opportunities. •  The euro may very well bring greater financial activity to the main Continental financial markets.

This made it less probable that the global economy would remain weak for a number of years. Recent developments in Brazil have contributed to some recurrence of unrest in international financial markets. Once again there has been an international flight to securer assets but it has been more limited than last autumn. There has, however, been a substantial depreciation of the Brazilian currency. It is still difficult to tell just how crisis in Brazil may affect the world economy. The future course in Brazil, with the attendant risks of knock-on effects in Latin American and other parts of the globe, will depend on what the national authorities do to construct a sound foundation for the economy. It has been shown, not least by our own economic experience in the early 1990s, that changing from a fixed to a floating exchange rate does not by itself provide a lasting solution to economic problems. What is needed is rather a comprehensive programme for enhancing confidence, with budget policy as not the least important component. A clear target and a consistent approach in monetary policy BIS Review 14/1999  –4–  can also contribute to economic policy’s credibility. But it does seem likely that developments to date in Brazil will tend to subdue growth in Latin America and even to some extent in the OECD area as a whole. Despite the unusually long duration of the US economy’s upward phase, the situation there is still buoyant. Growth in the closing months of 1998 was very strong.
Mr Heikensten examines different aspects of the new economy and its implications for monetary policy  Speech by Mr Lars Heikensten, First Deputy Governor of the Sveriges Riksbank, to The Riksdag’s Standing Committee on Finance, Stockholm, on 24 February 2000. *  *  *  The new economy, our topic today, is a concept that people are using frequently without always taking the trouble to explain what they mean by it. As interpretations differ somewhat, the discussion is liable to be a little confused. According to the definition most people seem to have in mind, the new economy is a result of a favourable shift in trend productivity that has raised the potential growth rate. This shift is attributed in turn to the development and spread of information technology (IT). Another common explanation for the higher productivity growth is the stronger competition that has resulted from deregulations and an increasingly integrated global economy. Moreover, in that much of the discussion of the new economy originated in the United States in the light of the good economic performance there in the 1990s, emphasis has been placed on the importance of a good macroeconomic environment. My starting point today is the US economy. My primary aim is not to present a comprehensive picture of developments there but rather to highlight the issues that these developments have raised and initiated the debate on the new economy. While my discussion will centre on the advances in IT, for the US economy there have been other beneficial factors.

One important reason is considered to be that various types of structural adjustments, in business as well as in society in general, were needed before the benefits of electricity could be reaped efficiently. At factory level, for example, more flexible production processes enhanced productivity when, instead of running much of the workshop in a cumbersome manner from a single large electric motor, smaller power units were developed for single machines. Thus, since it takes time to work out and implement various types of organisational changes that are most appropriate for the new techniques, there is liable to be a considerable time lag before general purpose innovations have an impact. This time lag unfortunately also makes it difficult to single out the factors that underlie technical advances and growth. What has happened in the United States in recent years also illustrates another consequence of the new economy. Besides the strong trends for productivity, capital formation and employment, which have BIS Review 18/2000  2  resulted in a more positive appraisal of potential growth, share prices have risen dramatically and saving has fallen to low levels. A major question at present is how stable this situation will be. Summing up, then, there are a good many signs that IT may have contributed to a more favourable productivity trend in the United States, particularly in recent years. But there have also been many other changes, such as increased competition and the emergence of deep and efficient markets for venture capital.
Consequently, an increase in credit supply resulting from a relaxation in this incentive compatibility constraint provides both an indirect boost to output contemporaneously and a direct boost through a higher capital stock in the following period. There are two policy instruments. The first is monetary policy, which operates by changing the deposit rate and the associated loan-deposit spread. The second is a (lump-sum) levy/subsidy on the banking sector, which can be used to manipulate the amount of capital that banks carry forward into the next period. Of course, this is not how macro-prudential policy is expected to function in practice. But the model acts as a useful metaphor for thinking how policies that alter the buffer of capital available to banks might affect the dynamics of the economy and the conduct of monetary policy. Both monetary and macro-prudential policies affect the incentive compatibility constraint (1) and are therefore essentially alternative ways of expanding the supply of credit and with it the volume of investment. With sticky prices, a reduction in the policy rate by the monetary authority lowers the real deposit rate, raises the loan-deposit spread, increases equilibrium leverage and raises the quantity of loans. And a change in available bank capital as a result of the macro-prudential authority’s decisions translates directly into a higher volume of loans at the existing leverage ratio. But monetary policy also has an independent effect on aggregate demand by encouraging intertemporal substitution in consumption. This is not operative with macro-prudential policy.

In fact, the spill-over effects transmitted from one region of the world to another via interest rates, exchange rates and equity prices, for instance, can be mitigated through closer regional integration. By reducing the relative degree of economic and financial openness of the regions concerned, such integration can be an effective instrument to shield them from external shocks, thereby obviating the need for trade or capital restrictions. The European experience shows that regional integration can be beneficial in this respect. The euro area weathered well the economic slowdown and financial market uncertainties arising from the series of balance of payments crises seen between 1997 and 1999. Likewise, provided that the current economic slowdown in the United States does not develop into a hard landing, the euro area is expected to record in 2001 above-potential growth for the second year in a row. To be sure, sheltering domestic economies from external shocks was not the primary consideration of European integration when it was initiated almost 50 years ago. Nor were the creation of the euro and the setting-up of the European Central Bank (ECB) objectives at that time. These are, in fact, only the latest developments in a long process of regional integration that started and is continuing with a strong political commitment.
To give you some figures, non-financial corporation debt ratios grew rapidly during the last expansion up to close to 120% of GDP in mid-2010, clearly above the average values in the euro area, which stood at around 80% of GDP at that time. Similarly, the household debt-to-GDP ratio rose up to almost 85% in the same period, 20 pp above euro area levels. BIS central bankers’ speeches  1  2.2. Supply-side frictions  Turning now to the supply side, there exist some frictions that tend to exacerbate the negative pressure on credit exerted by the contractionary demand factors. One significant friction in this regard is the existence of asymmetric information between lenders and borrowers, a circumstance that limits the ability of the lenders to assess correctly the actual level of risk posed by a given borrower or a project. This friction normally intensifies during periods of crisis and, for reasons well known, is comparatively more relevant in the case of small and medium-sized firms as opposed to large companies. The comparative disadvantage of small firms in accessing financing relative to their larger competitors has, in fact, been one of the most pervasive features of the recent crisis, despite the mitigating impact provided by the special facilities activated by many of the public institutions represented here today. Another factor that significantly restrained credit supply conditions until recently was the financial fragmentation of the euro area that emerged as a result of the tensions in the European sovereign debt markets.

And those risks will grow, unless we put global banks and markets on a sounder footing. Suppose, for example, that UK-owned banks’ share of global banking activity remains the same and that financial deepening in foreign economies increases in line with historical norms. By 2050, UK banks’ assets could exceed nine times GDP, and that is to say nothing of the potentially rapid growth of foreign banking and shadow banking based in London. Some would react to this prospect with horror. They would prefer that the UK financial services industry be slimmed down if not shut down. In the aftermath of the crisis, such sentiments have gone largely unchallenged. But, if organised properly, a vibrant financial sector brings substantial benefits. Today financial services account for a tenth of UK GDP and are the source of over 1 million jobs.5 Two thirds of those are outside London, including jobs in asset management in Edinburgh, transaction processing in Bournemouth and insurance in Norwich. Being at the heart of the global financial system also broadens the investment opportunities for the institutions that look after British savings, and reinforces the ability of UK manufacturing and creative industries to compete globally. Not to mention that financial services represent one of the UK’s largest exports. More broadly, London’s markets serve a vital global role. London acts as Europe’s window to global capital; is a centre of emerging market finance; and can play an important role in the financial opening of China.
The lessons that can be drawn from a comparison with the French experience may seem limited since, in the 1980s, France was facing capital outflows, whereas emerging economies are now often facing speculative capital inflows. However, I believe that, while the challenge has become more demanding, successful financial liberalisation for EMEs still rests on the same two key conditions that applied to France: •  Building a resilient domestic financial system while or before opening the capital account. •  Shaping appropriate institutions and policies. I will illustrate these two conditions in the reminder of my speech. BIS Review 64/2007  1  1. A successful liberalisation requires to strengthen the domestic financial system while, or sometimes before, opening the capital account  I will briefly remind you why and how this can be done. First, why? This is because an efficient financial sector ensures both a better financing of and a better protection for the economy. On the one hand, it ensures a better financing of the economy by broadening the investor base and enhancing their ability to make use of diversified financial instruments. Not only does competition within the financial sector contribute to limiting the cost of capital but it also fosters innovation and thus allows for more efficient risk management. For example, securitisation provides financial institutions with instruments to manage the composition of their balance sheets and thus contributes to buttressing credit distribution while supporting the development of financial markets.

And rapid growth of non-bank payment providers could have profound implications for the business models of banks, challenging their revenue streams, altering the economics of credit provision and changing the risks to financial stability. 5  The Faster Payments Scheme launched in May 2008 and allows payments to be made 24 hours a day, seven days a week. 6  Further information on the One Bank Research initiative can be found here: http://www.bankofengland.co.uk/ research/Pages/onebank/agenda.aspx  BIS central bankers’ speeches  3  New payments technologies also pose practical challenges, such as ensuring they interface effectively with legacy IT systems in banks and payments infrastructure. What does all of this mean for the future of RTGS? Because of the changing context I have described, the Bank of England has decided the scope of the blueprint should be broad. We need to understand these trends, whilst recognising that there is considerable room for debate about the impact of the current wave of technological innovation. We need to think about to whom we give access to the advantages of central bank money with its unique qualities of finality of settlement. Trying to predict the future is a risky business, but when we make decisions about investment in systems that will last for a decade or more, they need to enable the kinds of changes that users will demand. So we need to make sure that we have “optionality” built in so that we can cope with different states of the world.
We necessarily take asset prices into account, both in our forecasts and in our policy decisions, but insofar as we cannot influence them directly we have to be satisfied with seeking to offset their effects on demand and inflation through other channels of the transmission mechanism. And the same is true, in a broader sense, of external demand shocks, which national or regional central banks cannot themselves directly affect, so that they must try to compensate for them through offsetting changes in domestic demand growth. What all this means, in turn, is that the most monetary authorities can hope to achieve is to maintain overall macro-economic stability; we cannot pretend that this means stable conditions for every sector of the economy, still less every individual producer. Now let me be clear, I'm not pleading impotence! Monetary policy can have very powerful effects on overall macro-economic stability. But it is important that the limitations of monetary policy - what it can and what it can't hope to achieve - are clearly understood. Otherwise expectations are likely to be disappointed, and disappointed expectations may lead to building pressure for alternative policy actions, which may not in the event be in our longer-term economic interest. Against that - rather long-winded - background I turn to the uncertainties in the present world economic situation.

For the moment, the signs of output deceleration in the emerging world are moderate and consistent with September’s forecasts. Manufacturing production is down in some economies, and distrust has increased. Worth noting is the slowdown in Brazil and, to a lesser extent, in China (figure 2). Considering forecasts of slower global growth and its effects on the inflationary outlook, a number of central banks at both developed and emerging economies have begun to increase the monetary impulse. 2  BIS central bankers’ speeches  In Chile, these events have had limited effects. The financial market is showing somewhat tighter conditions echoing the situation in the global markets, which can be seen also in other emerging economies (figure 3). In recent months, Chile’s sovereign and corporate long-term debt premiums increased 50 and 70 basis points, respectively, mainly from August and coinciding with a reduction in investments in local bonds by international investors. After being stable for a long period, the cost of short-term bank credit rose to spreads around 110 basis points lately – 45 basis points more than in September. It is worth noting, however, that the local banking system has a diversified credit base. It recently reduced its funding from European banks, but compensated with increased funds from the United States, Canada and Asia. The higher volatility has also affected stock, fixed-income and currency markets, a phenomenon that is also present elsewhere (figure 4).
In 2014, payment cards were used for more than 47 billion transactions in the European Union, that is to say a level almost identical to the overall combined number of transactions involving credit transfers and direct debits, respectively the second and third most used payment instruments. In France, payment cards were used in more than 50% of all non-cash payments transactions, amounting to nearly 9.5 billion operations in 2014, compared to only 3 billion transactions in 2001. The specificity of card payments is that they occur for transactions of a relatively small amount € in average in France), making it the strongest alternative to cash for proximity payments. This situation is the result of years of efforts made by market stakeholders to build a secure, efficient and convenient payment instrument. The French community was at the forefront of such evolution with the early adoption in 1992 of chip for payment cards, which has been followed by the introduction and the subsequent widespread adoption of the EMV standard. This latter evolution has been the cornerstone of the uptake of payment cards by allowing fast and secure transactions through Europe. This predominance of payment cards may nonetheless be at stake nowadays, with the conjunction of three main trends that have a disruptive effect on the market: new solutions, new behaviors and players, new regulations. First, innovative payment solutions based on SEPA schemes are very likely to emerge.

But this is not the case at present, as banking activity levels are still low, and precisely this is the second source of pressure on the income statement. The third one is the significant volume of non-productive assets (NPLs and foreclosures) remaining on banks’ balance sheets although, as I mentioned earlier, the data shows a positive trend with a significant decline over the last two years. In a period of far-reaching changes in the banking sector, it is important for banks to improve their efficiency, so as to remain viable competitors. Banks could do this through various means, for example redesigning their networks, redefining their capacity and efficiency, enhancing their geographical diversification, and increasing specialization in certain market segments. From this perspective, a number of analysts and market participants expect a greater degree of consolidation in the Spanish banking sector. The start-up of the Single Supervisory Mechanism and the gradual disappearance of barriers against banking integration at the European level facilitate a new operational framework for banks, when defining their strategies through the Eurozone and the area covered by the Single Supervisory Mechanism. 4  BIS central bankers’ speeches  Conclusions: growth perspectives Now, to conclude: According to most analysts, public and private alike, the Spanish economy is expected to continue growing at sustained rates in the medium term. In particular, GDP might increase at a rate around 2.8% in 2016 according to the consensus. This figure is well above the estimated rate for the euro area average.