samchain/econo-pairs-v1 huggingface dataset:
In common with supervisors in the more developed markets, we face the challenge of limited internal resources and expertise with which to implement the IRB Approach. Moreover, banks and supervisors are often competing between themselves for the relevant expertise. In addition, the support to supervisors in Asia from external parties, such as academia, vendors, consulting firms and rating agencies, is more limited than in the developed markets. Finally, both banks and supervisors face a very steep learning curve in familiarising themselves with  2  BIS Review 120/2007  the basic concepts and techniques on which the IRB Approach relies, and need to become more conversant with these types of risk management technique. A particularly important issue to consider that is highly relevant to today’s event is the standards that bank supervisors will apply in deciding whether or not to approve a bank to use the IRB Approach. To ensure that the capital charges computed by the IRB systems are sufficient for banks to withstand the credit risks they have incurred and to absorb the potential losses resulting from borrower defaults, the estimates of the risk components must be accurate in capturing the relevant aspects of risk. As a consequence, validation of banks’ estimates of the risk components, and the underlying internal rating systems, is crucial to the implementation of the IRB Approach. This is one of the greatest implementation challenges confronting bank supervisors in Asia, where the development and understanding of the IRB Approach by banks is generally still at an early stage.

While there is a case for Asian regulators to perhaps concentrate their Basel II implementation efforts initially on the Standardised Approach, they would eventually like to see their banks, those large ones in particular, adopt the IRB Approach over time as adopting the IRB Approach can substantially enhance the quality of risk management of banks. Moreover, Asian regulators including the HKMA find ourselves in the position of playing host to many large and internationally active banking groups that propose to adopt the IRB Approach globally, including their operations in our jurisdictions. In consequence, we need to develop plans for the adoption of the IRB Approach in our domestic banking  BIS Review 120/2007  1  environment. In doing so, we need to balance the readiness of the industry and other supervisory priorities versus the desirability of implementation of the IRB Approach. On readiness of the industry, we believe that there are three key challenges facing banks in Hong Kong and probably other jurisdictions in Asia. First, the adoption of the IRB Approach by banks does not merely involve the use of sophisticated quantitative tools, but also corresponding advances in banks’ risk management practices, culture, internal control and corporate governance. This is essentially the underlying and overarching principle of the IRB and other advanced approaches provided under the Basel II framework.
It is critical that banks readily exploit the current relatively favourable conditions to meet capital adequacy objectives and improve their funding profile. Similarly, to promote sustainable growth and to support confidence and competitiveness, governments need to continue their efforts towards restoring sound fiscal positions and improving competitiveness. Many governments have already made significant steps and the efforts must continue unabated. Finally, a fourth concern relates to the risk of persistent market fragmentation. The ECB has used conventional and non-conventional measures to restore the transmission channels of monetary policy and make sure that the impulse stemming from it is transmitted more uniformly across the 17 economies of the euro area. The large size of the Eurosystem’s refinancing operations and the resulting expansion in its balance sheet are a reflection of the impairments which still hamper the proper functioning of capital markets in the euro area. Today, it is of utmost importance to address these impairments, otherwise we will loose the benefits of the freedom of capital movements which was why monetary union was needed in  BIS central bankers’ speeches  7  the first place. There will be no lasting recovery of growth if European households and corporations cannot tap a common pool of savings. To operate smoothly, be more resilient to crises and better support long-term growth, Economic and Monetary Union has to become a true financial union. I will list here some of the key features of the much-needed “Financial Compact”.

It is senior management’s hope that the facilitation that will be given in these workshops will go a long way in addressing the identified teething problems. It is extremely important that you all realize from the very outset that you will be the anchors for the success of this process for your respective departments. For this reason, it is imperative that you understand in full the processes that will be discussed in this workshop. Senior management’s expectation is that you will acquire the necessary tools to enable you facilitate the proper completion of the Context Establishment and Risk Identification exercises within your respective departments. Ladies and Gentlemen: Allow me to give you a brief background on the implementation of the Risk Management Framework at the Bank of Zambia. You will recall that starting in October 2006 through April 2007, the Risk Management Department embarked on a programme of sensitizing all the members of staff and the Board of Directors on the establishment of the risk management framework at the Bank. Given that these workshops had coverage of 99% of all Bank of Zambia staff, I am more than confident that most of you were participants in those workshops. The end of this series of workshops, marked the end of Phase I of the implementation programme of the Risk Management Framework at the Bank. Following the end of the risk sensitization workshops the next stage required the implementation of the framework in the business areas.
I fully share the assessment put forward in these reports and I would like to stress here the special responsibilities of central banks, due to their position at the heart of financial systems: their role as liquidity supplier to the economy, their close and constant contact with credit institutions, their contribution to banking supervision and to the safe and efficient functioning of payment systems, and at least for some of them, their contribution to the safe and efficient functioning of securities clearing and settlement systems. To sum up, an institutional framework in which the Eurosystem’s responsibilities for monetary policy in the euro area are coupled with extensive supervisory responsibilities of NCBs in domestic markets, and with reinforced co-operation at an area-wide level, seems appropriate to tackle the changes triggered by the current financial trends and the introduction of the euro. Two points of particular relevance for the financial regulatory framework Let me conclude on this important topic by stressing two points of particular relevance for the European financial regulatory framework: -  There are still some barriers to further integration of EU capital markets. In this regard, the Eurosystem welcomed the objective of the European Council meeting in Lisbon in March 2000, to accelerate completion of the internal market for financial services, and to set a tight timetable so that the Financial Services Action Plan can be implemented by 2005. This Plan is regularly reviewed by European authorities, and progress is being made.

This is a unique and highly symbolic event for Europe. As regard France, the early changeover of non-cash payments in 2001, and the rapid introduction of banknotes and coins in euro in early 2002, proved to be a success and entirely in line with the scenarios devised in consultation with all the involved parties (the banking sector, cash-in-transit companies, the Police and the Army, retailers and the general public). In France, almost 70% of non-cash payments were in euro at the end of December 2001. Since 1 January, all transactions have been conducted in euro, and no major incidents came to light, thanks to the early use of non-cash payments by the general public throughout the second half of 2001. This was also a key factor in the rapid acceptance of the banknotes and coins by the public. Similar success has been witnessed in all European countries, thanks to national efforts and the co-ordination by the European Commission and the Eurosystem; a month and a half after the  introduction of euro banknotes and coins, more than 95% of cash transactions in the euro area are now being carried out in euro. Although the practical changeover to the euro might be considered as an outstanding achievement, we should nevertheless remain vigilant on the following issues: ·  First, price stability. Although some increases in prices of a certain number of consumer goods have been reported, it is likely that, overall, the effect on price stability will be marginal.
In the years before the crisis, resource utilisation was probably higher than the HP gap indicated at that point. This view is also suggested by the fact that GDP growth was high, employment was increasing rapidly, underlying inflation was rising to above 2 per cent, and that household borrowing and house prices were similarly rising rapidly. (Figure 1. GDP gaps in September and in real time). This is a widely known problem that occurs internationally, and not just here. Orphanides says that one should not use the GDP gap as a measure of resource utilisation, due to the uncertainty in estimates of the gap. He shows, for instance, that the International Monetary Fund’s (IMF) calculations of the GDP gap for the United States at different points in time have yielded conflicting results with regard to resource utilisation and that these have therefore led to incorrect economic policy recommendations. He draws the conclusion that one should focus more on GDP growth than on the GDP gap, which, he claims, may provide more robust decision-making data. 2 There are also other ways of measuring resource utilisation. A common method is to use a production function where potential GDP is determined by potential labour productivity and the potential number of hours worked. Other possibilities include using so-called UC  2  See, for example, Orphanides, A. (2010) “Monetary Policy Lessons from the Crisis”, Central Bank of Cyprus, May 2010.

Central banks must also avoid misperception and for that reason, they should not rely on a limited set of indicators but should use a comprehensive and rigorous analysis aimed at picturing the economy as a complex and permanently evolving system. Central banks also have the difficult task of identifying shocks hitting the economy and of addressing them appropriately by assessing their potential implications in terms of risks to price stability. Model analysis, monetary analysis, model -based forecasts are additional useful tools employed in this context. This is precisely the approach taken by the ECB, which developed its two-pillar-strategy in order to help to sort through the wealth of potentially conflicting statistics. Conclusion Let me now briefly conclude my remarks by asking the question: what information do we really get from asset prices, and particularly from inflation - indexed securities? Financial markets do indeed play a critical role in the process of setting monetary policy. In effect, the influence of monetary policy on the real economy and ultimately on prices is largely transmitted through asset prices. As pointed out by Blinder, the economic activity is not directly affected by the changes in the key policy rates, but rather by long-term interest rates and, where relevant, through wealth effects. In short, monetary policy affects the economy through its interaction with long-term expectations, which in turns affect asset prices and then economic activity and inflation. But central banks also rely on financial markets for information to help explain their monetary policy decisions.
But these banks have been hit by a series of powerful shocks. (i) Monetary policy The first is the shift from centralised control of the economy to a market-based system. Instead of directing money to meet enterprises’ deficits - a job which required a large branch network and hordes of bureaucrats - the aim is to influence the behaviour of the economy by using indirect instruments of monetary policy to guide interest rates and the exchange rate, and to conduct the prudential supervision of the new commercial banks. But many of the bureaucrats find it difficult to work out which bits of information they need and how often, and prefer instead to demand a substantial volume of data without prioritisation. Some of the staff of eastern European central banks, used to passing on raw data which can be checked against enterprises’ targets, find it difficult to analyse information with the aim of learning something about the behaviour of markets, consumers or firms. The simple questions, “Why are we doing this?”, “What does this mean?” can be too hard to ask. New goals, however well-enshrined in the constitution and law, do not change culture overnight. BIS Review 33/1997  -5-  The second culture shock has been the move from a monobank to a two-tier banking system. The old system had two separate monetary circuits - one for cash (used mainly by individuals) and the other in transfers between bank accounts (used by enterprises).

Mr. Davies looks at whether contemporary forces are eroding distinctions between central banks and pushing them towards some common model Text of the London School of Economic and Political Science Annual Lecture on Central Banking delivered by the Deputy Goveror of the Bank of England, Mr. Howard Davies, on 4/3/97. Central bankers are famous for their obsessive concern about credibility and consistency. By that token, I should be drummed out of the club I have only recently joined. Because when the Governor stood here a little over a year ago, he assured the audience that he was delivering the fourth and last in the series of LSE Bank of England lectures. But, in keeping with the usual practice of successful television shows, I am here tonight to open a new series. The LSE seemed to think you would prefer that to filling the schedule hereafter with repeats. This new series picks up where the last left off. In 1996 the Governor noted there is nowadays a broad consensus that the raison d’être of central banks everywhere is the pursuit of monetary and financial stability; but he observed that once you go beyond that level of generality, each central bank is unique - in terms of its constitutional position, the range of its activities, its size, structure and organisation. Many of these differences are the result of history. The question I plan to address tonight is whether contemporary forces are eroding these distinctions between central banks and pushing them towards some common model.
What is more, in general French and European banks benefit from rising interest rates thanks to their diversified model, their broad deposit base and their large loan portfolio. We have in the euro area no "Sorgenkind" or "problem child", such as Crédit Suisse. As President of the French prudential authority (the ACPR), I can in particular attest to how solid French banks are nowadays. Whatever your field of activity, you will therefore find in Paris a convenient and safe harbour, with all facilities and fast connections to other major cities, in Europe and beyond. It has also attracted regulatory bodies, which can only be viewed as comforting neighbours after recent turmoil elsewhere. The EBA (European Banking Authority) moved to Paris in the wake of Brexit, thereby joining ESMA (European Securities and Markets Authority). Having a "regulatory hub" will facilitate cooperation between European agencies, in a world that requires such enhanced cooperation between authorities. Allow me to conclude with two topics you'll touch in your discussions this afternoon. As regards technology / innovation in the financial industry, you are all aware that French national regulators are recognised for their credible action and for being at the cutting edge of technological developments. I would also like to highlight one course of action at the Banque de France.

In Guetzkow, H (ed.) “Groups, leadership and men” Pittsburgh, PA: Carnegie Press. Banerjee, A (1992), “A Simple model of herd behaviour.” Quarterly Journal of Economics, 107(3), 797–817. Bar-Eli, M, Azer, O, Ritov, I, Keidar-Levin, Y, Schein, G (2007) “Action bias among elite soccer goalkeepers: the case of penalty kicks”, Journal of Economic Psychology, vol 28 No 5, pp 606–621. 12  BIS Review 36/2010  Bikhchandani, S. Hirshleifer, D. and Welch, I. (1992), “A theory of fads, fashion, custom and cultural change as informational cascades.” Journal of Political Economy, 100(5), 992–1026. Caballero, R and Krishnamurthy, A (2008) “Collective Risk Management in a Flight to Quality Episode.” The Journal of Finance Vol. 63 No. 5, October 2008. Dale, S, Orphanides, A and Osterholm, P (2008) “Imperfect central bank communication versus distraction”, IMF working papers 08/60, IMF. Fischer, S (1994) “Modern central banking”, in Capie, F. Fischer, S. Goodhart, C. and Schnadt, N. (eds) “The future of central banking”, Cambridge, Cambridge University Press. Gigerenzer, G and Edwards, A (2003), “Simple tools for understanding risks: from innumeracy to insight”, British Medical Journal, vol 327, pp 741–744. Gigerenzer, G and Todd, PM (1999) Simple heuristics that make us smart, OUP, New York. Haldane, A G (2009), “Rethinking the Financial Network”, http://www.bankofengland.co.uk/publications/speeches/2009/speech386.pdf. available  at  Kahneman, D, Slovic, P and Tversky, A (1982), “Judgment under Uncertainty: Heuristics and Biases”, Cambridge University Press. Keynes, JM (1936) “The general theory of employment, interest and money”, London: MacMillan (reprinted 2007). Knight, F (1921) “Risk, Uncertainty and Profit.” Houghton Mifflin, Boston.
Several stylised facts in macroeconomics – such as the idea that deeper recessions are followed by stronger recoveries, and the idea that productivity can be relied upon to increase over time around a long-standing trend – have been long since disproven by the nature of the recovery in the UK. And questions remain about the how the economy operates in the wake of the Great Recession that make the setting of monetary policy more challenging. In the rest of this speech I would like to put forward some thoughts on how one should approach decision taking in the face of such uncertainty. I will highlight three themes: proceeding with caution, considering all of the outcomes and retaining flexibility. I do so as a member of the Monetary Policy Committee, though you should note that what follows are my own views and may not necessarily represent the views of the committee as a whole. I don’t think other members place quite so much weight on tyre tread depth as an indicator, and they probably wouldn’t thank me were it to be deemed a bellweather for interest rate decisions in the future. 1. Proceed with caution  It is now 81 months since Bank Rate was cut to its current level of 0.5%. It has taken a lot of hard work since then to generate the recovery we are now experiencing.

Retain flexibility  Of course one can never know exactly what the future holds. So when the time does come to raise Bank Rate, it will be important to retain the flexibility to change course if needs be, either by tightening policy more quickly than originally envisaged or by being prepared to loosen again. Were it required to respond to unforeseen events, the MPC would have two tools at its immediate disposal: Bank Rate and QE. Past experience gives us a good dataset from which to gain an understanding of how changes in policy rates transmit to the economy. Based on a rich literature of international estimates over the period since inflation targeting began, the peak impact on inflation is generally estimated to occur with a lag of between 18 and 24 months, although it begins to  5  See Shafik (2015) and Broadbent (2015) for more on this issue. 6  Though should proposed legislation pass, the number of MPC meetings per year will reduce from 12 to 8, in line with the recommendations of the Warsh Review (Warsh, 2014)  7  The market curve represents the mean of the priced distribution of interest rates. Consideration of risks can cause this whole distribution to move relative to true expectations. Risks can also affect the shape of the distribution, though Dison and Elliot (2015) found that the shape of the distribution is currently being heavily influenced by the proximity of Bank Rate to the effective lower bound.
In the crisis in Southeast Asia, which is the most spectacular example of such a financial crisis in recent memory, the real value of foreign currency loans often rose when domestic currencies depreciated sharply. This kind of dramatic event only occurs when asset prices rise higher than the levels justified by underlying economic factors. This kind of situation in an asset market is what is known as a bubble. It might be worthwhile at this point to stop and reflect for a moment on the fundamental relationship between monetary policy and asset markets, on the one hand, and product and commodity markets on the other. The purpose of explicit inflation targeting policy that has been introduced in Sweden and many other countries in the last decade is to address recurrent overheating in product and labour markets. It might be said - even if it is strictly speaking not quite correct - that the aim is to avoid the “bubbles” that tend to appear in these markets from time to time. Generally speaking, inflation targets have hitherto proved their worth in this respect, and inflation targets appear today to constitute a credible basis - a nominal anchor - for price and wage formation. However, no corresponding anchor exists in asset markets. This means that there is nothing to prevent the prices of various assets rising to levels higher than those justified by economic fundamentals owing to psychological factors, or “irrational exuberance” if you like.

Recently, a Task Force on Climate-related Financial Risks that operates under the Basel Committee on Banking Supervision looked into the effects of physical and transition risks on banks. This task force, which I have the honour to co-chair with the Federal Reserve System’s Kevin Stiroh, concluded that climate-related risks can be captured in risk categories that are already used by financial institutions and reflected in the Basel Framework, for example credit risk, market risk, liquidity risk and operational risk. This is a key insight which saves us from inventing all kinds of new risk categories. The existing ones will do. However, the task force also concluded that we still need an enhanced toolbox that can better measure climate risks. This is why the ECB is encouraging banks to enhance both the quantity and the quality of their climaterelated disclosures, and to become more transparent about their overall exposures to climaterelated risks. Banks are still in the early stages of incorporating climate change into their risk frameworks; risk identification and risk limits around climate-related goals do not yet actually feature in their risk management processes. This needs to change. Euro area banks need to drastically improve their capacity to manage climate-related and environmental risks and start acknowledging how these risks can drive others, including credit, market, operational and liquidity risks. Crucially, we have no need to await regulatory developments before formulating our expectations for the management of climate-related risks.