samchain/econo-pairs-v1 huggingface dataset:
The idea behind deposit protection is to set a level below which the assurance of value holds, and above which it does not. Practice, I would suggest, points to the difficulty of this principle. In seeking to solve too big to fail we have tackled this problem by requesting an additional slice of subordinated liabilities which can explicitly bear losses by being converted into equity in the event of a resolution. I'm not talking here about AT1 securities, but what comes further up the hierarchy – what in Europe we call 'Eligible Liabilities'. The point is that for large banks we have reinforced the assurance of deposits by requiring a bigger cushion of loss absorbing liabilities. But smaller banks find it harder to issue marketable long-term debt securities that can count as Eligible Liabilities. I think the answer here lies in the world of deposit insurance. 3/6  BIS - Central bankers' speeches  The US authorities have announced a review of their deposit insurance system. In the UK, the Bank is also considering improvements to our approach to depositor pay-outs for smaller banks which do not have Eligible Liabilities. Our work has thus far focused on the speed of pay-outs. Going further and considering increasing deposit protection limits could have cost implications for the banking sector as a whole. As with all things relating to bank resolution, there is no free lunch. Two issue areas to go.

Let me end with the short version of the main points: 1: I don't believe we face a systemic banking crisis; 2: We must ensure that financial stability continues to mean that monetary policy takes into account financial conditions but does not have to aim off for instability; 3: This requires robust structures for financial stability policymaking;  5/6  BIS - Central bankers' speeches  4: Central bank balance sheets will remain larger than pre-crisis for financial stability reasons; 5: We don't know yet where central bank balance sheet reduction will need to stop in terms of the necessary level of reserves; 6: This will in part depend on the desired future size and make-up of banks' liquidity buffers; 7: Stable coins will need to have the characteristics of, and be regulated as, inside money; 8: The key question on retail digital money is can we envisage a demand for it, but we should guard against failure of imagination; and be able to accommodate it within the regulatory framework; 9: If retail digital money is part of the future, it would be better not to disturb the need to have both inside and outside money – so we cannot rule out a need for CBDC; 10: We will need to revisit the protection of inside money in the form of deposits, especially in smaller banks; 11: Stress testing the financial system is crucial, but stress tests will not always deal with Black Swans – that's why resolution and other policy intervention tools must be in place; 12: Non-Bank Financial Intermediation is a very large and heterogeneous landscape – it presents surveillance challenges of both breadth and depth; 13: NBFI leverage and inter-connectivity can be hard to map; 14: NBFI issues are often inherently cross-border in nature.
The discussion has not dealt with entry to the EU, for which the key issues have already been settled, but the next step: the euro. Nine of the ten new member states have announced their intention to introduce the euro as quickly as possible. For some of them the changeover would be entirely undramatic and opportune. For example, Estonia and Lithuania have long had currency boards anchored to the euro, whereby the currency is only issued against a certain statutorily established quantity of euro - in practice a kind of “shadow euro”. The currency boards anchored to the euro are considered to have contributed to falling inflation and a stable investment climate. Their economies have been highly flexible in terms of wages and prices and their government finances have been in order, and they have thereby been able to manage situations where developments in the Baltic countries have deviated from those in the euro area. The fact that they now also have the opportunity to introduce the euro is expected to provide further advantages for trade and price comparisons. But for some of the other new member states a hurried transition to the euro could give rise to problems. To qualify for participation in the eurozone the countries must meet the convergence criteria which lay down various requirements for inflation, interest rates, the exchange rate and government finances. The Baltic States are very close to meeting these criteria today, or have already fulfilled them. But the largest new member states have bigger difficulties.

The corresponding figures for Italy and Belgium are even more alarming. One way to reduce the dependency burden and increase the labour force is to try to get  4  BIS Review 51/2004  people that are unemployed, sick or in early retirement back to work. Historically, however, the most reliable way to steadily boost the labour force has been immigration, as has been the case in the United States, for example. Experiences and studies also show that people with the most advanced qualifications and best training most often have the greatest incentive to move, partly because the wage differential is bigger and partly because they find linguistic and cultural barriers easier to overcome. So to consolidate the welfare in the old countries, an increase inflow of highly qualified labour from the new member states would be desirable. The question is whether this is not correspondingly a disadvantage to the new member states. They have a somewhat different demographic situation, their dependency burden is lower today, but will later rise sharply and in several countries exceed Italy’s or Sweden's in 20-30 years. There is also a risk that it would be the best-qualified labour that would emigrate first. Meetings in a broader circle Having considered these prospects, I would like to provide an insight into how the enlargement changes the functioning of the EU. The Riksbank participates in a large number of EU committees.
6 There are several key factors to the improved prospects for the rest of the year. 7 First, the external environment remains generally favourable, with both major engines of global growth intact. •  In the US, recent data indicate continued economic expansion. Both manufacturing and services PMIs are up. The labour market continues to improve. There is also a modest rise in business spending, which is a key driver of growth in the US. •  In China, growth should come within the consensus range of 7–7.5%. There are some headwinds from ongoing structural reforms but targeted policy measures will provide support to the economy. 8 Second, sectors dependent on regional demand – such as financial intermediation services, business services, and chemicals – should do well. They will benefit from higher regional incomes as the pick up in exports bolsters domestic demand in Asia. 9 Third, domestic oriented sectors should stay resilient. The construction industry is supported by a pipeline of infrastructure projects while domestic corporate and consumer spending will lend support to the info-communications and other essential services such as healthcare and education. 10 However, there are downside risks to the growth outlook. This year, geopolitical risks are larger than macroeconomic risks. The MAS is closely monitoring the ongoing conflicts in the Middle East and Ukraine. Should the conflicts intensify or drag on, they could adversely impact confidence, generate financial market volatility, and increase global oil prices.

For these highly leveraged households, reducing the level of leverage will take time. They need to work with their banks and commit to debt repayment plans. 30 Hence on the whole, MAS’ assessment is that it is premature to ease property cooling measures now. It is important that we secure the gains we have made in stabilising the market and restoring financial prudence. Comprehensive measures to safeguard interests of consumers of financial products 31 On the financial regulatory and supervisory front, I will focus on measures being taken to safeguard the interests of consumers of financial products. 32 Several measures were announced recently and some will be announced soon. Let me set the context for these measures – motivating factors, overall approach, and how the various pieces fit together. 33 Three trends are shaping market for financial products. •  Low interest rates globally have spurred investors to seek better returns. •  Growing affluence and financial awareness have generated greater demand for a broader range of retail investment products. •  There has been an increased sophistication and variety in financial products offered to retail public. 34 Against this backdrop, MAS is taking a multi-pronged approach to safeguard consumer interests. First, we are enhancing regulatory safeguards for retail investors in unconventional investment schemes. Second, we will facilitate retail access to simple, lower cost products. Third, MAS will help to empower consumers with enhanced disclosure and information access. Fourth, we are raising standards of financial advice to consumers.
SPEECH DATE:  7 October 2020  SPEAKER:  First Deputy Governor Cecilia Skingsley  VENUE:  Nordea  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Post-pandemic monetary policy and the future of the interest rate as a policy tool* The coronavirus pandemic has had a dramatic impact on the economic playing field. For the second time in a little more than a decade, governments and central banks around the world have needed to take powerful measures to alleviate, as far as possible, a recession and try to prevent lasting damage to the economy. One result of this has been that an increasing number of central banks now find themselves in a situation where inflation is undershooting the target and the policy rate is at or close to its lower bound. In some economies, such as the euro area and Sweden, the policy rates have been low for a long time. But the pandemic has also meant that, for instance, the US Federal Reserve, which as recently as just over a year ago had a policy rate of more than 2 per cent, has had to quickly lower it to basically 0 per cent. Thus, one could say that the monetary policy playing field has become more even (see Figure 1).

Another observation is that central banks’ inflation forecasts now tend to lie below their respective targets, not just in the short term, but also at the end of the forecast period. This is the case with the Riksbank's and the ECB's forecasts, but also the Federal Reserve’s forecasts are below the target for two years ahead, not reaching target level until 2023 (see Figure 2).1 It appears to be the case that central banks are increasingly making the assessment that they will have difficulty conducting a sufficiently expansionary policy to bring inflation back on target as quickly as usual. * I would like to thank Mikael Apel for helping prepare this speech, Elizabeth Nilsson for translating and Emma  Bylund, Charlotta Edler, Petra Frid, Jens Iversen, Åsa Olli Segendorf, Marianne Sterner, Ulf Söderström and Anders Vredin for valuable comments. 1 The ECB’s target is that inflation should be “below, but close to, 2 per cent”. However, the long-term forecast (5 years ahead) has gradually been revised down and is currently at 1.6 per cent, which is the lowest ever. 1 [15]  However, this is not so strange. It is explained primarily by two interacting factors. One is that the pandemic has resulted in an unusually rapid and large fall in demand. It is hardly surprising that this has the consequence that inflation is falling so far that it may be difficult to get it to rise quickly enough to reach the target level in a couple of years’ time.
This strategy of relaxing monetary policy once a bubble bursts certainly makes the creation of bubbles more likely. But while the mop-up strategy worked in some earlier episodes, it failed miserably during the biggest collapse in decades. I will return to this point below. In summary, financial fragility played a crucial role in explaining the origin and magnitude of the crisis. But financial fragility was related to poor regulation more than monetary policy. Having said this, it can be still argued that the original sin in this case was a “relaxation” (loosening) of their financial stability responsibilities by some central banks and the inability of the existing supervisory bodies to adequately monitor aggregate financial stability. 2  BIS Review 76/2010  The objectives of central banks Given the magnitude of the financial crisis we faced, there is always a discussion on whether the objectives of central banks were the right ones or if they should be changed. As I mentioned before, the financial crisis was mainly related to a poor implementation of a key task of central banking. Nevertheless, it will be useful for the ensuing discussion of the challenges of implementation of central bank tasks to evaluate first their current objectives. Should the objective of price stability be changed? Broadly speaking the answer is no. For a start, central banks need to retain a clear mandate for price stability. Inflation is costly and should be avoided, and this has to be done by the monetary authority.

In the first two cases (2001 and 2002) events in international financial markets led to rapid depreciations, unrelated to country fundamentals. In the last case – 2008 – we considered it prudent to build up reserves in a period in which the exchange rate was below fundamentals and global financial markets were under extreme stress. Let me now refer to the interaction between financial and price stability from an ex-post perspective, i.e. once a financial shock (crisis) has hit the economy. From an ex-ante point of view I discussed that there are occasions in which these two objectives may not be completely aligned. From an ex-post perspective, these objectives are in general consistent, which will reinforce the need for strengthening the ex-ante dimension of financial stability. Suppose that a shock in financial markets (of a domestic or external nature; based on fundamentals or simple contagion) hits the economy. This shock will result in an increase in the cost of capital, bringing down investment and aggregate demand. The reduction in aggregate demand reduces output and therefore also reduces inflationary pressures. This example shows that dealing with this “financial shock” is usually – and I will be explicit regarding this conditionality – consistent with pursuing price and output stability. From this ex-post perspective, financial and price stability can be addressed simultaneously. The instruments that monetary policy can use to deal with these financial shocks will depend on the nature of the financial shock.
Many of them need to use instruments to manage or hedge their RMB exposures. All these RMB related financial services and products can only be developed by the markets and financial institutions because they are closest to their customers and understand their needs best. That is why it is so important for the HKMA to collaborate with our official sector counterparts in Australia to create this private-sector led Dialogue. The first Dialogue was held in Sydney in April last year, which was highly successful. I am very pleased that it is Hong Kong’s turn to host the second Dialogue and I am confident that it will be equally if not more successful. I note that today’s Dialogue has a very rich agenda and I look forward to hearing useful and practical ideas and suggestions on what the private sector can do on its own or in collaboration with the official sector to further develop the offshore RMB markets in Australia and Hong Kong. 8. Thank you very much. 2  BIS central bankers’ speeches

The priority was to create a secure arrangement that will provide both exporters and importers with a simplified way to settle their transactions with a degree of ease similar to that with which they effect payments within their own countries. From this point forward, there is no doubt that the private sector will take it upon itself to create new financial products and further deepen the real-peso market. Indeed, deepening of the real-peso market, reduction of trade obstacles and access on the part of small and medium exporters are the primary objectives of this initiative. Despite noncompulsory, the facilities and lower costs of the SML should attract exporters and importers. There will be no foreign exchange contracts, despite documentation currently required will remain mandatory. The essential alteration for Brazilian exporters will be the need to register the operation in real. With elimination of a third currency in direct transactions among companies, exporters will set their prices in the currency of their own countries. Thus, they will be better able to calculate their margins precisely, since they will no longer be exposed to exchange rate risk. At the start, it will be possible to carry out trade operations between the two countries with terms of up to 360 days. Payments of services related to trade (for example, freight and insurance) can also be made in own currencies.
Recent legislation reduces the legal liability for statements made in good faith that later turn out to be inaccurate. Supervisors have been supportive of these efforts, and I encourage each of you to consider whether substantial impediments to meaningful information sharing may exist in your own countries. The final point that I will make in this area concerns the power of leading by example. As supervisors and regulators, we should each strive to communicate frequently and openly with our constituents about our own Year 2000 programs. At the Federal Reserve, we BIS Review 85/1998  -5-  have testified before Congress on our efforts and have made available a large amount of material through the World Wide Web and numerous publications. As leaders in the financial markets, it is important that we set the right tone in promoting information sharing and transparency in our own preparations. Assessment and the Role of the Supervisor I will now turn to the role of supervisors in promoting Year 2000 readiness among the firms that we supervise. The primary effort must be to communicate the seriousness and urgency of the problem to the firms under our jurisdiction. In the United States, the bank supervisors are examining every bank operating in the United States regarding its Year 2000 program. As part of this program, the Federal Reserve conducted reviews of approximately 1,600 organizations, including a significant number of foreign banking organizations.

Critical infrastructure such as transport, water, power and telecommunications systems are also likely to be affected. Nearly all aspects of the economy in every country are therefore potentially at risk because of the widespread dependence on a country’s core infrastructure. The unprecedented scope of the Year 2000 problem means that a critical aspect of the issue is the management challenge. Substantial management resources are needed to coordinate the efforts to assess, repair, and test affected systems prior to the fixed deadline of BIS Review 85/1998  -2-  January 1, 2000. At the Federal Reserve, for example, we have created a number of management positions within our organization that are focused exclusively on different aspects of our Year 2000 preparations. A final point that underscores the need for urgent and sustained action is the increasing focus on the issue by the media, by the public and by market observers such as the rating agencies. Over the course of 1999, the extent of Year 2000 preparations by financial organizations will become the subject of ever more intensive scrutiny. As supervisors, therefore, we must do all we can to support the efforts of market participants to address the problem effectively, and to build confidence among others that this is being accomplished. While we must make it clear that supervisors cannot solve the problem, we can help mobilize others to take the necessary steps.
Nonetheless, euro area GDP is expected, at end-2022, to still be somewhat less than 4 pp below the level that would have been observed according to last year’s December projections (the latest before the COVID-19 outbreak). 7  Given the exceptional uncertainty over future pandemic-related developments, this baseline scenario has been accompanied by a more favourably defined alternative scenario. In it, euro area GDP would, at the end of the time horizon considered, be slightly higher than was envisaged in December 2019. Another, more adverse scenario was also laid down, in which the negative gap relative to the 2019 reference would be around 9 pp. Inflation fell in August to - 0.2%, and its core component, which excludes energy and food, stood at a very low level of 0.4%. The ECB’s projections point to a gradual recovery in the coming years. At the end of the projection horizon, inflation would stand at only 1.3%, some distance off our related target. Moreover, several factors tilt the risks to economic growth to the downside: uncertainty over how the pandemic will evolve; the possibility of a no-deal Brexit; and a potentially more adverse reaction by unemployment and in the dynamics of corporate start-ups and company failures once the support measures have run their course. In parallel, there has been a progressive appreciation by the euro in recent months. This introduces disinflationary pressures at a time when the euro area inflation outlook is, as I said, for a record low.

The problem is that that commitment means that the central bank is voluntarily breaching its future inflation objective, which may possibly not be credible in advance. 7  Andreeva and García-Posada (2019) estimate the impact of the TLTROs on bank lending policies in the euro area. For an analysis of the macroeconomic effectiveness of forward guidance on interest rates and on future developments in the central bank’s asset portfolio, see Arce et al. (2019). 9 See Eggertsson and Woodford (2003). 8  13  This is what we economists call “dynamic inconsistency”: a central bank could announce today that it will tolerate higher inflation in future in order to stimulate the economy, but once the economy and inflation recover, there would be an incentive for it to breach its initial announcement if it conflicted with its price stability objective. If agents doubt the central bank’s credibility, this type of forward guidance will not be effective in the first place. One way to avoid this problem is by modifying the monetary policy “strategy”, seeking to grant greater credibility and transparency to the central bank’s actions; in other words, to change the way in which the central bank’s objective is articulated and the way that the central bank pursues that objective with the tools available. To date, in their strategic frameworks most central banks have followed variations of inflation targeting, which entails targeting an inflation rate that is close to a specific number (for example, 2%) over a medium-term horizon.