samchain/econo-pairs-v1 huggingface dataset:
New products, market practices, and especially technologies are going to emerge; some of these might create new risks that were unforeseen when the post-crisis reforms were developed. As unintended consequences come to light and new risks emerge regulators may need to make changes to regulation over time, what I am going to refer to as ‘dynamic adjustments’. Being open to making such adjustments does not mean undermining the objectives behind the post-crisis regulatory framework or changing the level of resilience in the banking system regulations are aiming for. On the contrary, it is by making dynamic adjustments that we can ensure the regulatory framework continues to deliver on the reforms’ objectives and ensures that the resilience that policy makers injected into the system post-crisis endures. To ensure this is the case we will need to follow a set of principles to guide us towards when it is appropriate to make dynamic adjustments. Principles for making dynamic adjustments  What might these principles look like? Here are my current thoughts. Principle 1: decisions about dynamic adjustments should be made with reference to the objectives of the original regulation and/or of regulators. For the Bank, prudential regulation is relevant to a number of our primary and secondary objectives: most obviously the PRA’s microprudential objectives and the FPC’s macroprudential objectives, but also the MPC’s monetary policy objectives given the role banks play in the monetary transmission mechanism. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  Principle 2: decisions about dynamic adjustments should be evidence-led.

The typical level of client initial margin for OTC derivatives held by a large clearing member is over $  34  If clients representing  half of the initial margin port, and the others are closed out and lose their entire initial margin, the loss to these clients collectively would exceed $ (Clearly we cannot know what the actual losses would be in any particular event, but we do know that the sums at risk are substantial). The financial stability benefits would have to be set against any possible costs. The risk-weighted capital ratio rather than the leverage ratio is the dominant constraint for many large clearing members. This means that for these firms a change in the leverage ratio to allow initial margin to offset exposure is unlikely to change their resilience at all. But even were a large clearing member to be constrained by the leverage ratio, the effect on capital – and hence on resilience – is small. For instance, for a typical large clearing member, the effect is to change the probability of default estimated by a model that has been used previously by Bank staff to inform discussions about the calibration of capital requirements  35  by between 0 and 8 bps. This takes the probability of default of  this typical clearing member from 1.2% to 1.28% at worst. This illustrates how different pieces of analysis and evidence could be brought together to assess objectively the case for making a dynamic adjustment to an aspect of banking regulation.
But then one must remember that the explanation for these capital ratios looking so good is largely because the banks use low risk weights in their internal risk models. If one instead looks at the non risk-weighted capital adequacy, the picture is different. The so-called leverage ratio is almost at the same level as prior to the financial crisis. The risk of a new financial crisis is thus certainly not eliminated, and we should make higher demands of the banks regarding capital, so that the banking system becomes more robust and can better withstand a crisis. The major banks’ risk-weighted capital adequacy ratios are relatively high, but the leverage ratios are at almost the same levels as prior to the financial crisis…  Note. Per cent. The major Swedish banks’ core capital ratios, Sources: The banks’ interim reports and the risk-weighted compared with non risk-weighted. Weighted average. the Riksbank  ...and relatively low in an international perspective  Note. Per cent, March 2017. Leverage ratio for European banks. Calculated according to the applicable definition in Basel III. Sources: SNL Financial and the Riksbank  4 [14]  The Swedish banks are dependent on foreign funding. I mentioned earlier that banks around the world are using funding from abroad to an increasing extent. So what about the Swedish banks? Well, the Swedish banking system’s funding in foreign currency currently amounts to around 150 per cent of GDP, which is three times as much as at the beginning of the 2000s.

2  “The Repertoire of Official Sector Inventions in the Financial System: Last Resort Lending, Market-Making, and Capital”, speech by Paul Tucker given at the Bank of Japan’s 2009 International Conference in Tokyo on 28 May 2009. Also see, “The Development of the Bank of England’s Market Operations”, a consultative paper by the Bank of England, October 2008. 2  BIS Review 83/2009  their savings. It turned out to be naïve on two fronts. First, it proved unrealistic to expect households generally to take such care. And second, it brought politics into bank rescues, because of the hardship that could still be suffered by regular depositors when their bank failed. Nearly a decade ago I became convinced of the need for 100% insurance of a meaningful amount in order, as I put it in internal exchanges, “to take politics out of crisis management”. In the wake of Northern Rock and Bradford and Bingley, the FSA moved to 100% insurance of £ That means that nearly all regular households in this country are completely protected; and when today I refer, rather approximately, to “100% insurance”, that is what I mean. 3 The Bank’s view has been that in such a system, the banking system’s contribution to the insurance scheme should be risk-based and pre-funded. The industry has been more doubtful about the idea of pre-funding and so I want to explain our thinking. A system of 100% insurance of a meaningful amount changes the landscape. First, it alters the purposes of bank regulation.
The flipside of digital services is that more activities that were previously part of the market economy can now be produced at home. A person wanting to arrange a holiday, for example, no longer needs to visit or phone a travel agent, but can research and book the whole trip herself online. The sales of hotels and flights still contribute to GDP. But the work formerly done by the travel agent, which has now effectively been outsourced to the consumer, disappears. This also raises questions for how we measure productive activity. These examples highlight the difficulties of understanding how the economy is developing – let alone estimating its potential growth rate. To be sure, we should aim to rise to that challenge and update our statistics to capture such changes. But clearly, as policymakers, we also have to be humble about what can know. And in that context, imagining that we can reliably hold the output gap around zero is simply hubris. 2  See: Olivier Blanchard, Eugenio Cerutti and Lawrence Summers, Inflation and Activity – Two Explorations and their Monetary Policy Implications”, IMF Working Paper WP/15/230 (November 2015). 3  See: Erik Brynjolfsson and Andrew McAfee, The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (W. W. Norton & Company, 2014), especially Chapter 8. 4  https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/481452/ Bean_review__Interim_Report_web.pdf. 5  See Erik Brynjolfsson and Joo Hee Oh, “The Attention Economy: Measuring the Value of Free Digital Services on the Internet”, Thirty Third International Conference on Information Systems (Orlando: 2012).

The growing importance of balance sheet considerations in monetary policy only reinforces the importance of transparency in central bank communication. 5 Finally, let me make an obvious but nonetheless crucial point, even if it goes beyond today’s topic. Transparency is a valuable good in its own right. For good reasons, central banks are powerful and for the most part politically independent institutions. Moreover, the officials who run central banks are typically appointed for lengthy terms and are difficult to remove from their positions. Transparency is a crucial element in creating democratic legitimacy for politically independent institutions whose actions can have wide-ranging consequences for a country’s citizens and its elected government. As former Fed Chairman Alan Greenspan (1996) said ten years ago, it “cannot be acceptable in a democratic society that a group of unelected individuals are vested with important responsibilities, without being open to full public scrutiny and accountability.” Transparency is of little use if markets and the public do not believe what a central bank says. Credibility is therefore a condition that is a sine qua non for a successful monetary policy. How can credibility be established? Alan Blinder (1998) summarises credibility as a "painstakingly built up history of matching deeds to words". A long history of actually matching deeds to words, of honest communication and a reputation for delivering price stability will therefore ensure central bank credibility.
(1993): “Discretion versus policy rules in practice,” Carnegie Rochester Conference Series on Public Policy 39, and Henderson, D. and W. McKibbin (1993): “A comparison of some basic monetary policy regimes for open economies: Implications of different degrees of instrument adjustment and wage persistence,” Carnegie-Rochester Conference Series on Public Policy, 39. BIS central bankers’ speeches  1  framework with both forward-looking agents and monetary policy specified in terms of the key interest rate. Under this framework, monetary policy becomes more powerful if the agents understand the reaction pattern of the central bank. When a disturbance hits the economy, the policy response required to stabilise the economy is smaller if the central bank can affect the whole term structure than if monetary policy only works through the short-term interest rate. 3 However, the importance of forward guidance depends on the degree to which expectations are forward-looking. In principle, economic agents may be able to calculate how the central bank will respond to changing conditions if they know both the model of the economy and the objectives and reaction pattern of the central bank. Expected future interest rates may then align well with the central bank’s own interest rate intentions, and there will be no need for the central bank to communicate its policy intentions. In practice, a model description of the economy is just that – a model, which always will be a simplification. The central bank’s reaction pattern may also be adjusted over time.

5  In addition to New Zealand and Norway, the central banks in Sweden, the Czech Republic and Israel currently publish interest rate forecasts. In addition, the Federal Reserve publishes the individual interest rate forecasts of the members of the Federal Open Market Committee (FOMC). 6  Norway’s sovereign wealth fund (the “Government Pension Fund Global”) is managed by Norges Bank Investment Management (NBIM) and is invested in international capital markets. 7  For details on our institutional framework, see Qvigstad, J. with I. Fridriksson and N. Langbraaten (2013): “Monetary policy committees and communication,” Norges Bank Staff Memo 2/2013. BIS central bankers’ speeches  3  [Chart:Timeline: The first years of Norges Bank forward guidance] In 2004, we started to publish our first quantitative guidance in the form of a “strategy interval” for the key policy rate four months ahead. In November the following year, we published for the first time our own interest rate forecast for the next three years. Prior to that, we had established and published criteria for an appropriate interest rate path. 8 Up until November 2005, the analyses and forecasts in our reports had been based on either a constant interest rate path or an interest rate path as implied by the forward market. At this point however, our conclusion was that it would be easier to interpret, evaluate and communicate our view of the economy when it was based on a path for the interest rate that we considered to be appropriate.
Some things could definitely have been arranged in another way both in the late 1980s and once the crisis was over us in the early nineties. BIS Review 80/1998  -3-  But the vital conclusion is, I believe, that the roots of the profound crisis stretched a long way into the past. An economic policy realignment was essential; a credible stability oriented policy had been lacking ever since the collapse of the Bretton Woods system in the early 1970s. It was high time to put this right. Making the new regime credible After the long period of high inflation, together with extensive economic problems and massive government deficits, the task of inspiring confidence in economic policy’s new direction proved difficult at first. Economic agents listened to the new approach with doubts and hesitation. As we know from other countries, however, creating confidence in a new regime with low inflation is a rather long process that takes time. Moreover, if the work of keeping inflation low and government finances in order is to be combined with low interest rates and stable growth, it is a task that never ends. In recent years the low-inflation regime has gained increased credibility. Besides a disciplined monetary policy for price stability, a major contribution to this has come from the consolidation of government finances. In just a few years a budget deficit at 12 per cent of GDP has been turned into today’s surplus.

We will see later that these areas find a strong echo in Islamic finance, which has also to deal with issues linked to lack of transparency, of a level playing field and harmonised regulation. Thus, the overhaul of regulation in conventional finance should be an opportunity for Islamic finance to tackle these issues, and to better integrate into financial globalisation. In France, in particular, Islamic finance has a role to play, which could be beneficial both to Islamic investors and to the French economy. Indeed, the French economy offers major and diversified investment opportunities for Islamic investors in the financing of a wide network of often innovative firms and projects, or in real estate. These sovereign funds, corporates or wealthy individuals should have the opportunity to invest, either directly in individual assets or projects, or indirectly through funds or  BIS Review 118/2009  1  collective vehicles. It is up to banks to offer to these investors the type of Shariah compliant products and investment or financing tools they might wish to have. Let me make a brief point on sovereign wealth funds (SWFs) and their link with Islamic finance. SWFs have attracted much attention recently but the oldest ones were set up back in the 1970s. Their expansion accelerated about a decade ago, when many emerging countries started to accumulate sizeable foreign exchange reserves, due to high oil and gas prices and to the conjunction of macroeconomic factors and foreign exchange policies.
John Gieve: Sovereign wealth funds and global imbalances Speech by Sir John Gieve, Deputy Governor of the Bank of England, to the Sovereign Wealth Management Conference, London, 14 March 2008. * * * Introduction Much of the debate on sovereign wealth funds (SWFs) has focused on political questions: do they reintroduce the failings of public ownership into market economies by the back door, will SWFs use their ownership rights to pursue political ends, and will resistance to foreign ownership lead to a new wave of protectionism. I want to concentrate today on some economic issues: why have they become so prominent recently, how does that relate to imbalances in the world economy, how are they affecting financial markets and what are the policy implications of their growth. Background But first let me set out some of the background. There is no off the shelf definition of an SWF. What I have in mind is a government investment vehicle that manages foreign assets with a higher risk tolerance and higher expected returns than for central bank foreign currency reserves. 1 The size of such funds is hard to measure, but may be in the $ trillion range. Origins of SWFs Investments by SWFs are one type of capital flow between countries so they have always been closely related to global imbalances in trade. When countries run surpluses on their current account, they generate equal and opposite net capital outflows of one sort or another and those capital flows produce an investment income.

If the Riksbank launches an e-krona with a positive interest rate, it can in some situations be very attractive for both the general public and companies to convert their account balances in the banks to e-krona with the Riksbank. The banking system could then be drained of the funding for its lending, and become unstable, which could damage the supply of credit in the economy. In addition to the questions I have just mentioned, there are a number of other questions, such as technological solutions, consumer integrity and how a solution can be adapted to suite different groups in society. As you hear, I have only been able to take up a lot of questions here. I don't have all the answers. And I don’t think anyone else has at present. The only thing we can be fairly certain of is that whatever direction the Riksbank chooses to take - whether or not to issue e-krona - it can have a major impact on the payment market, the banks’ business models, the way interest rate setting functions, financial stability, and so on. The Riksbank will investigate e-krona Now I have given my view on the situation for Sweden as one of the countries where the use of cash is declining the most and the fastest and where the general public are finding it increasingly difficult to get access to central bank money.
In the simplest New Keynesian model, these are, first, the “IS” curve, which traces a negative relation between output and the (ex-ante) real interest rate (𝑖𝑡 − 𝐸𝑡 𝜋𝑡+1 ): 1 𝑦𝑡 = 𝐸𝑡 𝑦𝑡+1 − (𝑖𝑡 − 𝐸𝑡 𝜋𝑡+1 ) 𝜎 This equation comes from the optimisation problem of households who choose consumption to maximise their lifetime utility. 𝐸𝑡 denotes the mathematical expectations operator. The term in expected output, 𝐸𝑡 𝑦𝑡+1 , appears on account of households’ desire to smooth consumption. The real interest rate enters this condition because ultimately households care about their real consumption levels and it is the real interest rate that is relevant for transferring these consumption levels, via saving, across time. The parameter 𝜎, the intertemporal elasticity of substitution, controls the size of this effect. 31  In the simplest monetary models, the natural level of output (or “trend output”, if you like), is exogenous (e.g. is determined by TFP alone).

Muhammad bin Ibrahim: Financial sector talent enrichment programme – syllabus enhancement Keynote address by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia, at the launch of the “Financial Sector Talent Enrichment Programme (FSTEP) – Syllabus Enhancement”, Kuala Lumpur, 20 July 2010. *  *  *  I am delighted to be here this morning to officiate the launching of the Financial Sector Talent Enrichment Programme – Syllabus Enhancement which will be implemented for the next 5 batches until batch 10. Today marks a milestone for FSTEP as the programme has delivered more than 680 graduates to the industry and is now poised to deliver another 500 graduates under an enhanced syllabus. The development of human capital in the financial services industry is core in promoting a well-functioning and stable financial sector. Human capital development is critical in nation building as a whole. At Bank Negara Malaysia, for many years, we have embarked on strategies to strengthen human capital development in the financial services sector. Various institutional platforms were established such as INCEIF, the International Centre for Education in Islamic Finance; ICLIF, the International Centre for Leadership in Finance; AIF, the Asian Institute of Finance; and of course, FSTEP, which is entrusted with equipping talents with the right skills and knowledge for their smooth transition into the financial services industry in Malaysia. It is such initiatives that would put the necessary foundation to promote Malaysia as a centre of learning for financial services this region.
It’s not clear at this point how the SEC’s regime will work in practice, but it seems to offer the prospect of some evolution in the regulatory framework for investment banks in the direction of convergence with those that apply to bank holding companies. That is, the proposed new CSE regime will add a consolidated approach to risk based capital and an intensified focus on the risk management regime to the traditional SEC focus on enforcement of laws directed at investor protection and market integrity. A second point is that it is important that those who run financial institutions calibrate the strength of the internal risk management architecture to the more complicated nature of the risks they confront. Even with the major improvements in capital, earnings capacity, and in the sophistication of the risk management framework, there remain many aspects of the changing financial environment which pose ongoing challenges for management. The degree of concentration at the core of the financial system means that financial institutions have to think more carefully about the implications of the failure of a major counterparty or clearing organization. The increase in the combined weight of the highly leveraged financial institutions as a group highlights the importance of both strong counterparty risk management disciplines in managing  4  BIS Review 55/2004  direct credit exposure, and understanding the impact a disorderly exit would have on other positions held by the firm.

Our approach at the Fed seeks to achieve this outcome for the major institutions for which we are the consolidated supervisor. But the basic argument for applying exacting standards for risk based capital, for liquidity management, and for operational resilience applies to a broader range of supervised and regulated financial institutions whose operations pose significant systemic implications for the financial system. This is particularly compelling in the case of the major GSEs, where the regulatory framework, capital regime and sophistication of the internal risk management framework need to be upgraded to a standard more commensurate with their risk profile and the risks they present to the system. It is as compelling in the case of the institutions - a number of them specialized financial utilities - that make up the core of the payments infrastructure. Here, because of their overall importance to the functioning of our financial system, we are working to encourage improvement in operational resilience, to ensure they meet the recently updated international standards for risk management and internal financial resources, and to strengthen the oversight framework. It is important to note that the SEC has itself outlined a framework that would provide a form of consolidated supervision of the major investment banks with a risk-based capital framework based on Basel II.