samchain/econo-pairs-v1 huggingface dataset:
Without that, human and financial resource allocation either side of the ring-fence will become blurred. For example, without separate debt issuance for retail and investment banking, the cost of debt for a big bank will be a blended mix. The implicit subsidy in funding costs would then remain and with it one of the main distortions associated with too-big-to-fail. Only time will tell whether cultural separation can be achieved under the existing structural reform proposals. In the go-go years, will these reforms be sufficient to prevent the grass always appearing greener on the riskier side of the (ring-)fence? This is the acid test of the structural reform agenda. Where next? Progress has been made over the past few years towards eliminating too-big-to-fail, with further progress on implementation planned. But today’s task is even more daunting than before the crisis. The big banks are even bigger. The system itself is more concentrated. And  BIS central bankers’ speeches  7  despite reform efforts, the market’s best guess today about tomorrow’s implicit subsidy is farlarger than before the crisis struck, at over $ billion per year (Chart 3). The market believes that illicit state promise is even more likely to be kept. The wrong conclusion to draw would be that existing reforms have failed or are unnecessary – quite the contrary. Rather it is that these reform initiatives, while necessary, may be insufficient to eliminate the too-big-to-fail externality. If so, what are the alternatives? Several have been mooted. Re-sizing the capital surcharge is one possibility.

The Central Bank has been active in promoting the development of the financial system and financial markets in Iceland and we have sought to adopt the methods of monetary management that have been developed in other advanced industrial countries. In 1998, we modified the instruments and operating procedures of the Central Bank along the lines that had been developed for the future European Central Bank. The Central Bank of Iceland levies a reserve requirement on credit institutions, operates an overnight facility and offers a deposit facility. The main operating instrument of the Bank is the repo rate. Auctions of 14 day repo contracts are conducted once a week. By adjusting our instruments and methods, we created a similar operating environment for Icelandic banks as those that prevail for banks in the Economic and Monetary Union of Europe. I should add that we are in the process of adapting our payments and settlement systems to the norms of our neighbouring countries. This includes, among other things, the establishment of an RTGS system for large-value payments. I mentioned that the main target of the Central Bank is the maintenance of low inflation. That is a long-term target. Our intermediate target is a fixed exchange rate. A more appropriate description of our exchange rate policy is to refer to it as a fixed but adjustable peg. Since 1995 we have operated with a fluctuation band around the central rate of plus/minus 6%.
There are connections to the fixed income market in both of these considerations. However, this does not mean that we have an opinion on which system solutions the market chooses as long as they fulfil reasonable requirements for security and efficiency. This area lies outside of our core objectives. This is why we also remained outside of the discussion on a fixed income future a few years ago. Given this, I would like to share a few, brief reflections with you. Firstly, I shall go through the advantages of electronic trading. My views on this are mainly a matter of principle. After that I intend to make some brief comments on a few aspects of the Swedish fixed income market today and in this context say a few words on the consequences that electronic trading may entail. Finally, I intend to take up a more specific question, settlement on the fixed income market. We do not consider that this functions sufficiently well from a financial stability perspective. Electronic trading, an opportunity Let me begin by pointing out that electronic trading systems are being used to an increasing extent around the world. It seems reasonable to assume that this means they have clear advantages, otherwise private players would not invest in them. However, a public authority naturally also wonders whether they involve some kind of risk. With this in mind, there has been a study on electronic trading 1 systems made within the framework of the G10 central bank co-operation.

Vahur Kraft: The euro in Estonia - the agenda and practical aspects Speech by Mr Vahur Kraft, Governor of the Bank of Estonia (Eesti Pank), at the international conference “Euro currency - French-German experience and Estonia future”, Tallinn, 30 September 2003. * I. *  *  Introduction  Based on the requests addressed to Eesti Pank information service we can say that there is a most encouraging - if somewhat surprising interest in Estonian national euro-coins among the general public - although these coins do not exist as yet. Some people are convinced that we have the euro coins already; the others would like to register in order to be the first to receive the new coins. But every coin has two sides - and in this case it means that a very significant percentage of the Estonian population are not at all eager to take leave of the Estonian kroon and replace it with the euro. They would like the central bank to proceed slowly. That puts the central bank into the unusual position of arguing for speed and decisive action instead of a conservative approach while the public is still somewhat confused by the recent results of the Swedish euro referendum. The Swedes would have liked, perhaps, to be a bit more papal than the pope - and they certainly have achievements to be proud of. But for Estonia - and with a long-term view in mind - proceeding rapidly and adopting the euro as soon as feasible would be the best.
However, they have contributed positively to the restoration of financial stability worldwide, by helping in the restructuring of other banking systems, buying banks or pieces of banks that were experiencing difficulties. They thus contributed to stabilize markets and financial systems in a time of turmoil. Moreover, they have maintained their commitment to households and firms – both large corporate and SMEs – in the emerging markets in which they operate. We have not seen any halt in banking intermediation in those markets or any retrenchment from those markets. And finally, they are still entering new banking markets, both in Europe and in Asia. Resilient global banks do not only benefit the host markets in which they operate, in particular emerging countries. They have also been very beneficial to the home market. Wide-ranging geographical diversification has helped these banks to withstand our real estate crisis much better. They have been able to compensate the difficulties in the local banking market in Spain, resulting from a recession and the ongoing slow recovery, with much more buoyant and dynamic banking business abroad. Until now, the benefits that I have mentioned can be said to apply regardless of the legal structure chosen by the banks for their international expansion. But our large global banks have also adopted a business model which has some specific strengths that I would like to highlight. Namely that their international expansion was based on the subsidiary model, as opposed to the branch model.

In most of our macro models, long-term variables, such as potential growth or the “natural rate of interest” or the non-accelerating inflation rate of unemployment (NAIRU), play a very important role. They determine, for instance, the output gap, domestic inflationary pressures, and as a consequence the structural indicators that are used to assess fiscal policy and the degree of monetary accommodation. These variables are estimated in large advanced economies like the US as if the latter were a closed economy. They are considered as independent variables for the rest of the world. 1  IMF Performance in the Run-Up to the Financial and Economic Crisis: IMF Surveillance in 2004–07, 10 January 2011. See http://www.ieo-imf.org/eval/complete/pdf/01102011/Crisis_Report_English.pdf  BIS central bankers’ speeches  1  To use some model terminology, most of our models are built on the assumption that Ῡ – which represents the long-term growth rate of the economy – is influenced mainly by domestic factors such as productivity and population growth. Similarly, r* – which represents the world interest rate for most small open economies – is assumed to be determined by long-term equilibrium conditions in the US. Given the importance of these variables for our models, a bias in their measurement would have a direct impact on the assessment of economic conditions, on the forecasts and on the policy prescription. It would seriously undermine surveillance.
Given that the non-bank private sector is likely to have been the source for much of this funding, this is likely to have squeezed broad money growth. But the counterpart to this fall in private sector deposits is a strengthening in banks balance sheets which should in turn aid the recovery by improving the availability of bank lending. So the monetary impulse still operates. One approach to help mitigate the counterfactual problem is to use event studies which consider the impact of QE announcements on asset prices over relatively short windows. 7 Gilt yields may respond to such policy announcements both because of the impact gilt purchases have on the yields at which investors are willing to hold the reduced supply of gilts – the portfolio balance effect – and because of the information the announcement may be perceived to contain about the future stance of monetary policy – one element of the expectations channel. It is possible to get some indication of the size of the portfolio effect by considering movements in the spread of gilt yields to Overnight Indexed Swap (OIS) rates, which should not be affected by changes in the relative supply of gilts. Although precise estimates vary according to the maturity of the gilts and the size of the window, summing movements in giltOIS spreads following our announcements suggests that the portfolio balance effect may have reduced gilt yields by around 100 basis points. Again, a pretty sizeable effect. 6  This excludes the money holdings of intermediate OFCs.

The impact would continue to grow as the crisis persists, since the cash flow crunch would force companies – including those previously in a good liquidity position - to shut down for failure to secure financing; either due to increasing financing costs or the banks’ reluctance to finance amid fears of growing default risk during the crisis. This could lead to companies’ bankruptcies, which, due to the chain effect between economic sectors could thus result in a contraction in non-oil GDP. The Committee’s Mandate To counter the impact and repercussions of the crisis on the national economy, the Higher Steering Committee for Economic Stimulus (The Committee), formed by the Council of Ministers Resolution (455) on 31 March 2020, and chaired by the Governor of the Central Bank of Kuwait, adopted a proactive approach to realize economic stability throughout the crisis. It laid down and initiated economic stimulus measures to prepare for the economic recovery stage that shall  Central Bank of Kuwait - Public ‫ عام‬- ‫بنك الكويت المركزي‬  -3-  follow once we overcome this crisis. Immediately afterwards, a national economic and structural reform plan needs to be launched and adopted by all the relevant stakeholders. The Committee listed several measures and governing principles to serve as a framework for all its activities, and they are as follows:  -  -  -  -  Introducing immediate remedies that provide practical and swift solutions to protect the national economy supporting economic reform and best possible resource allocation.
Finally, I would like to briefly discuss an important unresolved part of the story: the future of central bank swaps of the type initiated between the US Fed and several other central banks  8  See IMF discussion paper on “Cross-Border Bank Resolution: Recent Developments”. June 2014. 9  I have described this case in more detail in other publications and speeches. See in particular: Már Guðmundsson and Thorsteinn Thorgeirsson (2010) op. cit. Már Guðmundsson (2011) “The Fault lines in cross-border banking: Lessons from the Icelandic case”. OECD Financial Market Trends. Vol. 2011, Issue 2. Paris; and keynote address at the “Eighth High-Level Meetings for the Middle East & North Africa Region: Recent Policy Developments for Strengthening the Resilience of the Financial sector”, Abu Dhabi, 28 November 2012. 4  BIS central bankers’ speeches  around the globe during the crisis10. It should be noted, however, that there are several other arrangements around the globe which, with time and modifications, could become partial substitutes for these swaps. Examples of this are the multilateralisation of the Chiang Mai Initiative in this part of the world, swap lines among BRIC countries, and the bilateral swap network of the People’s Bank of China. But as they are currently constructed, these are not well suited to large-scale and speedy provision of liquidity in reserve currencies more or less directly to internationally active banks.

Again, the biggest strides have been taken in the realm of supervision, but a greatly improved resolution framework is also in the process of being introduced. A common deposit insurance system is not yet on the agenda, however. That might be an impediment to further banking integration and potentially a source of vulnerability. EU members outside the euro area can opt into banking union. This introduces the possibility of deep banking integration without a LOLR, which is a risky combination, as we have seen. That risk could of course be mitigated through uncapped central bank swaps and mutual acceptance of collateral, but as far as I can see, there is as yet no formal framework for this. In this connection, I note with interest the plans in this region to progress with regional banking integration by, for instance, the ASEAN. The benefits will be substantial, but we need to be mindful of the risks and learn from the European experience. As I see it, banking integration without a monetary union or alternative arrangements for FX liquidity provision is potentially very risky. That said, recent events have shown that a monetary union without a banking union is also risky. At the global level, there has been some progress on the framework for supervision, crossborder crisis management, and resolution of cross-border banks through the work of the Financial Stability Board (FSB).
Turning to the second main theme I would like to discuss, resolution is being offered up by some as not only a necessary element of the solution to the too big to fail problem (a proposition I agree with), but also as an entirely sufficient solution that eliminates the need for heightened prudential standards to reduce the probability of failure in the first place. The argument is based on the view that, in resolution, shareholders’ equity will be wiped out and that some portion of the long-term debt will be converted to equity. The prospect of this outcome will, it is argued, lead to a disciplining effect by the parent company’s long-term debt holders, who will demand higher yields now that the prospect of failure is credible. This, in turn, will help to eliminate the implicit subsidy of too big to fail. Under this theory, Title II would also limit the incentives for firms to become larger and more complex in order to gain this funding subsidy. By itself, however, Title II does not entirely eliminate the advantages of being large and complex. That is because large, complex firms are more likely to go through Title II than smaller, less complex bank holding companies, who will generally go through a Chapter 11 bankruptcy proceeding. Also, only large firms will benefit from Title II’s one-day stay on qualified financial contracts.

One of the key pillars of Title II is that, unlike a bankruptcy proceeding, the FDIC will have access to liquidity from the U.S. Treasury to help ensure an effective resolution. While this access provides significant support for an effective resolution, it will still be important for the resolution authorities to provide clarity about the timing and the amount of liquidity resources that will be made available after a firm enters into resolution. This clarity will likely be necessary in order to calm creditors and markets at the time of resolution. Under the single point of entry framework, the intent is to create a highly capitalized bridge entity so that counterparties will be willing to stay engaged based upon the improved creditworthiness of the bridge parent and its recapitalized subsidiaries. If successful, this will reduce the need for the up-front provision of external liquidity resources. Nevertheless, to make the viability of the bridge entity fully credible, market participants must believe that the bridge company has access in a timely way to whatever additional liquidity resources might prove necessary. In addition, under the Dodd-Frank Act, Title II is not the baseline or preferred approach for dealing with the failure of a large complex firm. For a firm to go through Title II, a determination must first be made that the failure of the firm and its resolution would have serious adverse effects on U.S. financial stability under the insolvency law that would otherwise apply.
As well as its own actual mandate of keeping prices stable, some people seem to be under the impression that it should be used to strengthen growth, lower unemployment, safeguard the financial system and guarantee citizens adequate interest rates”3. Yet, monetary policy can only buy time for structural reforms in the short run, while tensions are accumulating in the background. One major source of tensions refers to the wage policy. Chapter 2 of REO discusses in much detail the “European wage dynamics and labour market integration”. The main messages of this 2/5  BIS central bankers' speeches  part can be summarized as follows: a) in EU 15 wages are subdued because they respond very slowly to changes in unemployment and are closely related to inflation and inflation expectations, which are unusually low; b) in NMS wage growth responds very quickly to changes in unemployment, and inflation expectations play a lesser role; c.) average wage increases in NMS were much higher since 2012 than in EU-15; d.) about one quarter of wage growth in Europe can be explained by EU-wide and group-level factors; e.) there was a decrease in unemployment, but also an increase in involuntary part-time employment; f) migration plays a role in the faster increase in wages in the countries of origin. One hot debate topic in Europe these days –reflected in the report- is the flattening of the Philips curve.

Liviu Voinea: Europe - managing the upswing in uncertain times Speech by Mr Liviu Voinea, Deputy Governor of the National Bank of Romania, at the Conference CEPS-IMF Spring 2018 Regional Economic Outlook, Brussels, 15 May 2018. * * * Dear Governor Smets, Dear Director of the IMF’s European Department Thomsen, Dear CEPS Director Gros, Thank you for having me here. It is an honor for me to speak at the launch of the IMF Regional Economic Outlook for Europe. This report is remarkable in many respects: it is comprehensive, well-documented and clearly written, with strong messages and judicious policy recommendations. It comes in times of uncertainty, when the European economy is rebounding, but challenges remain; in particular, the business and financial cycles of advanced economies are so dissimilar to those of the new member states that a distinct analysis is warranted. The first chapter of the report is entitled “Managing the upswing in uncertain times”. The report shows that growth has recovered in advanced European economies and even picked up in the new member states, some of which are now having large positive output gaps. Moreover, growth forecasts are strong in 2018, but growth is not taken advantage of to advance with fiscal consolidation and structural reforms. This recovery has created more than 12 million jobs in the EU since 2013, exceeding pre-crisis peaks. Consequently, unemployment fell by a total of 5 percentage points in NMS and 3 percentage points in EU-15 over the same period.
In other words, looking at a cross-section of UK companies, secular innovation (for the upper 1% or 0.1%) has co-existed with secular stagnation (for the remaining 99%). The two are engaged, not so much in a secular struggle, as a secular stand-off. Technological diffusion, and hence productivity growth, has been the casualty. 67  Andrews, Criscuolo and Gal (2016). Department for Business, Energy & Industrial Strategy (2017). 69 Haldane (2017). 70 Productivity figures refer to the non-financial business sector, but other sectors for which data are not available over the full ten-year period are also omitted. 68  19  All speeches are available online at www.bankofengland.co.uk/speeches  19  There have been one or two recent studies which have been quoted as questioning the importance of this “long tail” issue for the UK. 71  These pieces use the same data used here. The problem arises not from the  data but from the (mis)interpretation placed on them by these studies. All of these studies show, very clearly, that the UK has a significant long tail problem. Appropriately defined, they also demonstrate that this tail has lengthened during the course of the crisis. To give one example, my Bank colleague Patrick Schneider recently published a blog post showing that a good chunk of the slowing of productivity growth since the crisis could be accounted for by workers in the top quartile of the productivity distribution. 72  This is entirely consistent with the tale of two companies.

Private consumption has been enhanced by wage growth and a low unemployment rate. However, it must be noted that while consumption of non-durables and services has remained relatively stable, durable goods consumption has recovered, partly due to the appreciation of the peso during the last year, and the necessary replenishment of inventories following several years of weak growth and even contraction. Something similar is observed with gross fixed capital formation in machinery and equipment. Excluding the purchase of non-regular transport machinery, this component of investment has improved in recent months. 8. In our baseline scenario, gross fixed capital formation will experience a slightly positive growth in 2017, after three consecutive years of contraction. A key factor in the negative figures we have seen the last few years is the end of the mining investment cycle, which reached its peak in 2012. More recently the deterioration of housing construction has added, as the boom triggered by tax incentives finished and a modification of loan-to-value norms reduced home sales. Going forward, our forecasts rely on an increase in non-mining and non-residential investment (mainly machinery and equipment). While mining investment will eventually return to positive territory during 2018, the gradual adjustment in residential investment is expected to continue during the following quarters (figure 5).