samchain/econo-pairs-v1 huggingface dataset:
Christian Noyer: Possible ways of improving the process of rating Speech by Mr Christian Noyer, Governor of the Bank of France, at the Symposium on financial ratings, organised by the Cercle France-Amériques, Paris, 12 December 2007. *  *  *  Ladies and gentlemen, It is a great pleasure and honour for me to speak at this conference organised by the Cercle France-Amériques and close the rich and lively round table discussions and the previous speeches on rating agencies and the financial crisis. In the current state of turmoil, rating agencies have attracted a large amount of criticism. My intention is not to enter into this discussion, but rather to make a few remarks on the rating process itself and the possible ways of improving it, in the light of the recent events. Preliminary remarks An essential function of financial markets is to collect and process information. This information is used to assess the risk and return on the various assets, and therefore to help price discovery and more generally to take investment and financing decisions. However, the process by which this information is factored into prices is complex. Economic agents do not all have the same access to data and processing capacities. There is therefore an asymmetry of information on the markets, which is at the root of well known market failures: adverse selection (whereby lower quality investments are more readily financed than “good” projects) and moral hazard (which encourages investors to take excessive risks).

Thomas Jordan: Review of the Swiss economy and global economic outlook Introductory remarks by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Media News Conference of the Swiss National Bank, Berne, 13 December 2012. *  *  *  The Swiss National Bank (SNB) is leaving the minimum exchange rate of CHF 1.20 per euro unchanged. The Swiss franc is still high. An appreciation of the Swiss franc would compromise price stability and would have serious consequences for the Swiss economy. Consequently, the SNB will continue to enforce the minimum exchange rate with the utmost determination. It is prepared to buy foreign currency in unlimited quantities for this purpose. In addition, the SNB is leaving the target range for the three-month Libor at 0.0–0.25%. If necessary, it stands ready to take further measures at any time. Essentially, the SNB’s conditional inflation forecast is unchanged from its September forecast. In the short term, price movements will again be subdued by a somewhat weaker economy in the euro area. In addition, the impact which past appreciation of the Swiss franc is having on the price level is rather stronger than had originally been expected. From mid-2013 onwards, the path of the new conditional inflation forecast is almost identical to that of September. The forecast is based on an unchanged three-month Libor of 0.0% over the next three years. Given this assumption, the Swiss franc weakens over the forecast period. Nevertheless, forecast inflation remains low for the next few years.
Part 1: The digitalisation of financial services and their potential impact on Europe’s market infrastructure •  Technical innovations in financial services will be among the key focal points for the Eurosystem over the next few years;  •  In my article, I address four key topics where innovation in financial services will have to be tackled in the coming years:  A)  pan-European instant payments;  B)  person-to-person mobile payments;  C)  the emergence of new (non-bank) service providers;  D)  distributed ledger technology (DLT). A)  Pan-European instant payments  •  In 2015, the Euro Retail Payments Board invited the European Payments Council to develop an instant payment scheme for euro payments based on the SEPA credit transfer;  •  the implementation of this scheme is foreseen by November 2017;  •  By that time, end-user solutions for instant payments in euro should be made available at the pan-European level by the payment service providers;  •  This means that by November 2017 the European financial market infrastructure has to be ready to clear and settle instant payments on a pan-European scale;  •  As an operator of market infrastructure, the Eurosystem is exploring how to support the settlement of pan-European instant payments.

But the economic lessons of the past remain relevant. Openness comes with challenges. And as the world grows increasingly interconnected, these challenges will not only be more numerous, but they will also be more varied. Today, the Thai economy again faces challenges from the external front. The main challenge comes in the form of global financial imbalances; another challenge is the threat of high and variable oil prices. By global financial imbalances, I refer to the pattern of savings and investment allocation across the world. At the present, the US economy saves very little relative to its investment needs. Asian and oilproducing economies save more than their domestic investment opportunities. The European Union saves just enough. As a result, the US economy has been borrowing a large sum from Asia and oil producers. The magnitude of capital flows from the rest of the world to the US economy is not sustainable; it is a matter of time before the flows eventually reverse. And, in the process, the US  2  BIS Review 64/2007  dollar will depreciate against various currencies, including the Thai baht. The issue here is not only when the correction will take place, but how fast and how disruptive. Thailand, like many emerging market economies with small and shallow financial markets, is particularly vulnerable to fast-moving international capital. Such rapid movements of capital flows, if vastly out of line with the underlying economic fundamentals, can have negative impacts on the export or import sectors depending on the direction of exchange rate movement.
4  BIS central bankers’ speeches  mortgage and real estate markets? In my opinion, the answer is no, since, in a longer-term perspective, mortgage rates are still at very low levels. And imbalances on the mortgage and real estate markets remain high. Chart 7a illustrates this using the relationship between developments in real estate prices and rents, while chart 7b does the same using the ratio of outstanding mortgages to GDP. In addition, despite a slight rise in mortgage rates, there are a number of other channels through which the prevailing low interest rate environment could further increase the risks to financial stability. I would now like to look at three of these risks in greater detail. Risks to financial stability First, in the real estate market, there is an increasing focus on movements in the prices of residential investment property. Both private and institutional investors, such as pension funds and insurance companies, can boost the demand for real estate investments even further, either through the search for yield, or because of a lack of other investment opportunities. Yields on real estate investments continue to be well above those on alternative investments, as shown in chart 8a, which compares yields on ten-year Confederation bonds with those on investments in residential real estate.5 This yield difference could cause demand to stay high for the near future, thereby pushing prices up even further.

From a financial stability perspective, the resulting squeeze on profits could ultimately lead to banks having insufficient reserves with which to increase or maintain their capital levels. This reduces the resilience of the banking system and increases the risks to financial stability. In sum, I can say that particular attention needs to be paid to financial stability in an environment of persistently low interest rates, especially when combined with negative interest rates. Therefore, the slightly slower momentum currently being observed on the mortgage and real estate markets is welcome, but we should nevertheless remain alert. Conclusion In a number of respects, the current situation is unusual for Switzerland and its economy. The significant overvaluation of the Swiss franc and the very low, or even negative, interest rates pose a major challenge for economic agents and authorities – in particular the SNB. Yet, as I have explained, our monetary policy has not changed fundamentally. As a small economy that is strongly interconnected with the rest of the world, Switzerland is heavily dependent on economic developments abroad, and will remain so. These developments can explain the current strength of the Swiss franc, but they are also part of what has driven the exceptionally low interest rates in Switzerland. Neither the strong currency nor low interest rates are new phenomena. Rather, they are traditional characteristics of the Swiss economy, which have had a positive effect on living standards in the past.
Banks got used to an implicit and costless government guarantee, which kicked in when things went wrong. Sound and prudent management was often considered less important. Banks could boost their profitability by investing in riskier assets. That way, they could reap higher returns, knowing that the risks would be borne by others, by taxpayers. 2/9  BIS central bankers' speeches  And neither shareholders nor investors provided the necessary checks and balances. They lacked incentives to monitor banks’ risks. They often expected outsized returns, knowing that the banks would need to take equally outsized risks to earn these returns. But they didn’t care too much; investors too lived in a world where profits were gained by the few but losses were imposed on the many. Funding costs of systemic banks were too low, which allowed them to grow even larger, making them “too big to fail”. At the end of the day, banks and their investors had little incentive to act in a sustainable and forward-looking manner. So banks must be able to fail for all the reasons I just mentioned. Making banks fail again When’s the right time? Against this backdrop, the aim of all the regulatory reforms was not just to make banks more resilient. They also aimed to make banks fail again. But don’t get me wrong here. Failure is the least desirable option, of course. Above all, we need healthy and well-functioning banks. But still, sometimes banks do fail.

Do the banks have enough capital to absorb any losses in either scenario? And the crucial question that follows is, of course: what if they don’t? Well, let’s take a brief look at the upcoming stress test. This year, the European Banking Authority, EBA for short, will conduct a stress test involving the largest banks in the EU. This test includes 37 banks from the euro area which are directly supervised by the ECB. To obtain a fuller picture, we will, in parallel, stress-test most of the remaining large banks in the euro area, using the same scenarios and methods as the EBA. In respect of capital shortfalls, the stress test is not a pass-or-fail exercise. The banks do not have to meet certain thresholds. Instead, we supervisors will decide on a case-by-case basis whether banks have a capital shortfall, taking into account their individual risk profiles and their individual capital needs. 7/9  BIS central bankers' speeches  At the end of the day, stress tests may deal with hypothetical scenarios, but their results can have very real consequences for the banks. They inform the work of supervisors, and they inform market expectations when the results are published, as they will be in the case of the EBA’s stress test. They are also a moment of truth for the banks. More generally, stress tests help supervisors and banks to spot and remove weak points in banks’ resilience early on. If this is not done, problems can quickly mount up.
Yet, a strong economy and a sound fiscal position at least provide the means to devote resources to help address these ongoing problems. This turnaround of New York City illustrates that reviving a city in trouble is indeed possible. There are some useful lessons from New York City’s experience. First, it is often darkest before the dawn. Cities in fiscal distress are like individuals suffering from addiction: they often have to hit bottom and reach out to others for help before they can begin to recover. New York City hit bottom in 1975, and that created the impetus for reform. Second, in such situations, cities often have to give up fiscal control for a time. Accepting a Control Board and operating under its mandates was a painful, but necessary, step toward rebuilding the city’s fiscal health and regaining access to financial markets. Third, when sound reforms are implemented it still takes a long time to achieve fruitful results, so it is important to stay the course. Fourth, although a strong economy, good fiscal position and transparency in government will not automatically solve every problem, they provide a strong foundation. So, what does the future hold for New York City? An important aspect of a city’s vitality is the ability of its residents to develop the skills necessary to be successful and to achieve their dreams. A big asset for the city is its access to affordable education.

At the end of 1975, New York City faced perhaps its darkest moment and greatest challenge of the modern era when it ran out of money to pay for basic services. The city’s persistent deficits caused the financial sector to lose confidence in the city’s ability to repay its debts, and the city lost its ability to borrow. Yet, this moment—when the outlook appeared bleakest—turned out to be an historic turning point for the city. The reforms that were subsequently imposed by the state and federal governments through the Emergency Financial Control Board were quite tough in many ways. There was plenty of pain to go around, and just about every stakeholder―including city officials, lenders, city workers and residents, to name just a few―shared in the sacrifice. The city’s extraordinarily large level of short-term debt was refinanced into long-term debt owed to the newly formed Municipal Assistance Corporation (MAC). To make this debt marketable to the public, MAC was given control over the city’s sales tax. Revenues from that tax were 2/5  BIS central bankers' speeches  dedicated to repayment of the MAC debt, and the city could keep only what was left over. Fundamental to the deal was the creation of the Emergency Financial Control Board, which was empowered to monitor proposed city budgets to ensure that they were in balance. This change alone was very consequential: taxes increased and spending fell sharply over the latter half of the 1970s.
Higher federal deficits in the wake of the financial crisis required Treasury to increase the amount of issuance for some time, but the deficit has now shrunk to a level closer to historical norms, bringing the required level of additional issuance, also known as “net issuance,” down in tandem.4 However, gross issuance, defined roughly as the sum of the issuance required to refinance maturing debt and the net issuance required to fund the existing deficit, continues to be very high by historical standards. For example, in 2014, the U.S. Treasury issued just over $ billion on a net basis, whereas there was $ trillion in total gross issuance taking place over the year. A deep and liquid secondary market, where traders buy and sell existing securities at an agreed-upon price, is a crucial attribute of the asset class, and primary dealers and other market participants also play an important role here. Strong liquidity in the secondary market facilitates smooth price discovery and ensures that investors can adjust their holdings of Treasury securities at minimal cost. The attractiveness of Treasury securities to investors, in turn, helps minimize the cost of issuance to the U.S. Treasury and facilitates the Federal Reserve’s ability to implement monetary policy. The secondary market for Treasury securities operates on an over-the-counter basis – that is, not on an exchange.5 Historically, secondary market trading has fallen into two categories: trades between dealers and customers, and trades between dealers.

Traditional broker-dealers generally carry net long or short positions in Treasury securities from one day to another, an activity that requires capital. Dealers hold Treasuries for a variety of reasons, including to support the liquidity needs of their customers, to hedge exposure in other fixed-income products, and to meet their obligations as primary dealers to participate in U.S. Treasury auctions and the Federal Reserve’s open market operations. Many argue that the ability and willingness of dealers to  7  A CLOB protocol aggregates all executable bids and offers across participating liquidity providers in a single order book that is available to all market participants. In a liquid market, the continuous visibility of quotes and the interaction of multiple bids and offers are likely to enhance the price discovery process and market transparency. In contrast, a request-for-quote protocol, where a request for liquidity typically is submitted to only a limited set of providers, by its nature imposes a degree of market segmentation that may impede the price discovery process as compared with a CLOB protocol, but is arguably better suited to handle large block trades and illiquid securities. 8  Momentum detection is a strategy that attempts to predict short-run price changes based on patterns in realtime market data. Statistical arbitrage is a trading strategy that typically relies on identifying mean reversion from historical relative pricing relationships between correlated assets. Spread trading seeks to profit from a simultaneous purchase and sale of two closely related fixed-income assets.
Distinguished participants, on behalf of Bank of Zambia, I would like to thank the organizers and presenters of this workshop for recognizing the important role that Islamic commerce and finance plays in an economy like ours. It is my hope that all delegates will engage fully in these discussions and make the most of the wealth of knowledge generated in the house. Ladies and gentlemen, It is now my honour and privilege to declare the Islamic Commerce and Finance Workshop officially open. Thank You. 2  BIS central bankers’ speeches

Ben was among the first to highlight their potential significance for monetary policy. Another example of Ben’s tendency to go against the mainstream is his critique of the use of rational expectations in macroeconomic models. When the rational expectations revolution transformed the field of macroeconomics in the late 1970s, Ben remained sceptical. He criticised the assumption that economic agents form their expectations based on a perfect understanding of how the economy works. These models did not address the question of how economic agents derive this knowledge in the first place. More recently, the literature has begun to develop models with forward-looking agents that have a limited understanding of how the economy works. This research programme is very much in the spirit of Ben’s early criticism. Page 3/4  A final example of Ben’s willingness to challenge the accepted wisdom of the day is his reservations about inflation targeting. When one central bank after another started to adopt inflation targeting in the 1990s, Ben became one of the most prominent critics of this new monetary policy strategy. His concern was that inflation targeting would lead central banks to focus single-mindedly on price stability. In doing so, Ben feared, they might lose sight of their ultimate goal of promoting economic well-being more broadly. Ben is widely recognised as one of the world’s leading macroeconomists. However, his research interests go far beyond that. Ben is a polymath, something that has become rare in modern academia. His writings cross academic boundaries between economics, philosophy, history and religion.
In short, in just one year, since May 2010, the EU has embarked on a radical overhaul of its economic governance, while managing the sovereign crisis. This is a great achievement, especially considering the multiplicity of actors involved and the creativity of the response, which also had to take account of public opinion. BIS central bankers’ speeches  3  Positive developments Looking at aggregate numbers, it is very difficult to understand many of the concerns expressed on the euro area. The euro area is the only major currency area with its external accounts in balance, and which therefore does not depend on external finance. This is an essential element of robustness. For outside investors, it provides a strong guarantee of long term solvency. Its aggregate fiscal balance (with a deficit of 6.3% of GDP in 2010) is the most favorable of all advanced economies (10.5% for the United States, 9.6% for the United Kingdom and 7.7% for Japan). The same holds true for public debt, which stands at 92% of GDP, close to that of the United States (93%), and much lower than that of Japan (200%). Looking at national fiscal situations, most analysts would acknowledge the magnitude of the efforts undertaken. Yet, some tend to take a very pessimistic view about future outcomes. In short, their argument is that the euro area, and more specifically, its periphery, will be unable to return to normal growth anytime in the foreseeable future.

Between 2000 and 2008, Greece and Ireland posted cumulative labor productivity growth rates, as measured by the output per employee, of 14.7% and 10.2% respectively. Both significantly outpaced that of Germany (6.1%). This is exactly what you would expect in an integrated economic and monetary area and this process should continue in the future, provided that appropriate policies are implemented. Economic convergence will therefore boost growth and support the return to debt sustainability. It is true that, looking at nominal developments, a different picture emerges. During the same period, nominal wages grew by a total of 42% in Ireland and 52% in Greece, compared with only 7.4% in Germany. There has to be a regime change in the way in which nominal wages and prices are set in some parts of the euro area. As central bankers, we have been putting forward this argument for years. Strong reforms are now being pushed in labor market legislation as well as in wage determination in the public sector in many countries. What about banks? I would like to end with a few words about the banking sector. Revenues for the twelve biggest European banks grew, in aggregate terms, by 8.6% in 2010 (as compared to 2.5% for the main US banks). As a result, European banks’ Core Tier 1 ratios stood at between 8.5% and 15.3% at the end of 2010 (corresponding numbers for US  4  BIS central bankers’ speeches  banks were between 8.4% and 13.3%).