samchain/econo-pairs-v1 huggingface dataset:
Until recently, only commercial banks10 had direct access to it, and alternative payment service providers (or PSPs) had to route through participating banks. That made sense in the old financial world arranged around a series of hubs and spokes, but it is increasingly anachronistic in the new, distributed finance that is emerging. So we are now making it easier for a broad set of firms to plug in and compete with more traditional providers. In July 2017, we became the first G7 central bank to open up access to our payment services to a new generation of non-bank PSPs. Since then, six have become members, processing over four million transactions over the past year. There is now a growing pipeline of twenty firms looking to join.11 Responding to demands from innovators, the RTGS rebuild will also now provide API access to users to read and write payments data, as well as implementing a system whereby each payment will be tagged with information in a standardised format across the world. This global messaging standard will speed up settlement both domestically and across borders. It is not a one-way street, however. As we extend access, we will safeguard resilience by holding settlement account holders to the appropriate standards. Along with the FCA and HMRC, who together supervise these institutions, we are committed to applying a strengthened supervisory regime for those who apply for an  9  McKinsey Global Payments (2016): strong fundamentals despite uncertain times. As well as Financial Market Infrastructure providers such as Visa.

Christian Noyer: The size of Central Bank balance sheet – how relevant (important) is it? Speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the GIC (Global Interdependence Center)/Bank of France annual seminar “New Policies for the Post Crisis Era”, Session I “Putting a Context on Monetary Policy – On Both Sides of the Pond”, Paris, 23 March 2015. * 1. *  *  A widespread increase in CB balance sheet  In all major economies, Central Banks’ balance sheets have dramatically increased in size and as a percentage of GDP. That movement was temporarily reversed in the euro area, but our balance sheet is set to increase again following the recently decided -and implemented – asset purchase programs, most notably the Public Sector Purchase Programme (PSPP). Since 2007, the aggregate size of central banks’ balance sheets over the world has tripled, reaching the amount of 22 trillion dollars at the end of 2014. Interestingly, this increase has been almost equally split between advanced and emerging economies. In advanced countries, Central Banks have acquired domestic assets. On average, their balance sheets have grown from 10 to 20% of GDP over the last seven years. In emerging economies, accumulation of foreign exchange reserves accounts for most of the expansion.
The Financial Supervisory Authority was granted broad-based powers to intervene in failing institutions, and the Government was authorised to inject capital into new domestic banks. This so-called Emergency Act thus allowed new domestic banks to be created when the old cross-border banks failed and were placed in special resolution regimes followed by winding-up proceedings. The new banking system amounted to around 1.7 times GDP, compared to 10 for the old banking system. As a result of these measures, the domestic payment system functioned more or less seamlessly throughout, and customers had continuous access to their deposits. I have expanded at some length on the measures taken when the banks failed, as there are still a number of misconceptions about the process in international discussions. There have been claims that Iceland allowed its banking system to collapse, with what now seem reasonable results, and that others should consider doing the same. The fact is that Iceland kept the domestic part of the banking system running throughout; otherwise, the consequences would have been dire. Some have claimed that the banks were nationalised. They were not. The old banks are private companies. They are in winding-up proceedings governed by law; they are not under the control of the Government. The Government has a majority stake in only one of the new banks. Others have claimed that Iceland defaulted and got away with it. The opposite is true. The credit of the sovereign was preserved, and all debt obligations have been paid on time.

In these conditions, foreign exchange swap markets can speedily be used to convert liquidity from one currency to another at spreads that closely reflect the differences in domestic money market rates in the two countries concerned. But as we saw so clearly in 2008, this mechanism has a tendency to break down in a time of a financial crisis – precisely when it is most needed. Central banks can lend out their foreign exchange reserves, of course, but there is a well-known limit to that process. Some form of global liquidity provision is therefore needed. The swap lines granted during this crisis were precisely that, and most studies seem to support the conclusion that they made the crucial difference in relieving strains in banks’ foreign exchange funding. To a significant degree, this was the domestic LOLR process replicated at the international level. We have a solution, then, at least at the conceptual level. But it is not clear that it is a robust solution in practise. The swap lines are not at present a permanent and a reliable feature of the international monetary system; for instance, they have been strongly challenged in political discussion in the US. Furthermore, there are important unresolved governance issues, such as who should decide which countries get a swap line and which do not. It is thus an important item on the reform agenda to clarify the extent to which standing foreign currency LOLR facilities for solvent cross-border banks can be set up without going through national governments.
The momentum will likely persist, with early indications that corporates with good ESG ratings are exposed to less systemic risks and are more resilient to shocks. Since the onset of COVID-19, 24 of 26 Morningstar6 sustainable index funds outperformed their closest conventional counterparts, while global sustainable openended funds registered net inflows of $ billion in 1Q 20207, over 40% more yearon-year, despite a weakening in global market conditions. Foundations, trusts, and family offices are also well placed to drive positive change through your investments and your business operations. Impact investing serves to bridge 12.  the gap between philanthropy and asset management. Allocation to impact funds managed by private equity and venture capital managers will allow investors to make a positive impact, while generating market competitive financial returns. I am glad to see that AVPN has dedicated a full day during this conference to impact investing, covering topics such as impact management and maximising social impact within 13.  family offices. While impact investing is still a nascent development, there has been good progress. Close to 100 asset managers and institutional investors have signed the Operating Principles for Impact Management, which provides a set of market standards on how to achieve measurable positive environmental and social outcomes, alongside financial returns. In May 2020, the Global Impact Investing Network (GIIN) formed a Response, Recovery, and Resilience Investment Coalition with AVPN and other networks and foundations, to coordinate efforts and direct capital to high impact solutions in response to the pandemic.

1 International Monetary Fund (IMF), 6 April 2020, World Economic Outlook, April 2020: The Great Lockdown 2 Euromoney, 7 April 2020, Coronavirus crisis offers green and social bonds chance to prove their worth 3 World Bank Press Release No: 2020/180/HNP, 27 April 2020 4 Infrastructure Asia and World Bank Press Releases, 1 June 2020 5 Global Sustainable Investment Alliance, April 2019, 2018 Global Sustainable Investment Review 6 Morningstar, 3 April 2020, Sustainable funds weather the first quarter better than conventional funds;  Morningstar, 28 May 2020, What the pandemic means for sustainable investing 7 BlackRock compilation at 18 May 2020, Sustainable investing: resilience amid uncertainty  4/4  BIS central bankers' speeches
In this sector, there remains significant untapped demand for general insurance products as a whole. The low penetration rate of 1.4% for general insurance, which is measured in terms of premiums as a share of the nation’s Gross Domestic Product, is actually symptomatic of this. Thus, agents who move quickly to improve their digital outreach will have a first mover’s advantage and are likely to gain a growing group of digitally literate Malaysians. Thirdly, conducting robust suitability assessment for customers. One thing worth emphasising repeatedly is this; financial services offered must be suitable to the needs of the customers. While the Bank’s Guidelines on Product Transparency and Disclosure attempts this by stipulating the ‘rules of the game’, we look to insurers and the agency force to ‘play’ according to these rules and seek out ways to achieve the outcome of ensuring consumers obtain financial services that are suitable to their needs. Agents should develop their individual capacity to analyse customer requirements to identify their needs and develop risk profiles to match them with suitable products or combinations of products. For example in the case of motor insurance policies, agents should create awareness on optional add-on covers that are available and underwriting factors that will affect motor insurance premiums. Appropriate profiling of a customer can be crucial in helping agents identify customised product recommendations efficiently. Finally, perhaps I should bring your attention to two upcoming developments.

The purple bars build on the contribution of pull factors to the conditional 5th percentile of capital flows in the current quarter and two quarters ahead. Pull factors are proxied by domestic financial condition indices (DFCIs), which are mean-orthogonalised by a global financial conditions index (GFCI). The coefficient on the DFCIs is estimated by panel quantile regressions. Push factors are proxied by the Bank of England’s global financial conditions index. The chart shows PPP-weighted averages across the 13 EMEs in our panel. Chart 7: For EMEs, market-based finance accounted for all the increase in foreign lending since the crisis Structure of external liabilities for emerging market economies  Sources: IMF, EPFR and Bank of England calculations  20  All speeches are available online at www.bankofengland.co.uk/news/speeches  20  Chart 8: Market-based finance flows are particularly sensitive to push shocks The sensitivity of Capital Flow-at-Risk to push factors, by source of capital flow FDI  Banking  Market-based finance  of which: investment funds 0 -1 -2 -3 -4  Median  5th percentile  -5 Capital Flows-at-Risk as a % of GDP  Sources: IMF, EPFR, Bank calculations. Notes: Chart shows the sensitivity of different capital flows to a negative "push" shock. Coefficients are standardised by each component’s share of total flows e.g. the red MBF bar shows how total Capital Flows-at-Risk would respond to a one standard deviation tightening in global financial conditions if all capital flows were accounted for by MBF.
Basel II seeks to align capital regulations more closely to banks’ current practices – it will not change the way that banks actually evaluate risk to decide whether to invest in emerging market economies. To understand this answer, we must first understand the issue that may have triggered this debate. One of the valid criticisms of the 1988 Accord concerns its rather arbitrary treatment of country risk. The 1988 Accord assigns risk weights, and hence capital charges, to sovereign governments and related borrowers, as well as to banking organisations, based on whether the country in question is a  BIS Review 33/2004  3  member of the Organisation for Economic Cooperation and Development. The “OECD Club Rule,” as it has become known, assigned a zero percent risk weight to exposures to sovereign government borrowers that were members of the OECD, which means that no capital had to be held against such sovereign exposures. In contrast, exposures to all other countries were assigned the standard 100% risk weight, which is equivalent to an 8% capital charge. The Club Rule was meant to help distinguish between higher and lower risk sovereign borrowers and their banks. In retrospect, it seems to be an unfair way to divide the world. Indeed, some OECD member governments have experienced serious economic shocks that threatened their repayment abilities, while several non-OECD member governments have performed extremely well in the international debt markets.

When the Committee set out to revise the 1988 Accord, we wanted to resolve the arbitrary treatment of country risk that the Club Rule introduced. Our solution in Basel II was to assign risk weights, and hence capital charges, to exposures to sovereign borrowers and to banks that reflected a measure of their credit risk. Banks on the standardised approach to credit risk will determine the risk weights on their exposures to sovereigns and to banks based on those borrowers’ external credit ratings. Banks adopting the internal ratings-based approach to credit risk will rely on their own sense of the credit risk involved. Basel II eliminates the arbitrary distinctions imposed by the Club Rule and sets capital requirements based on external or internal measures of credit risk. Yet some observers have assumed that a more risk-sensitive approach might drive up not just capital requirements, but also the pricing of credit for loans to emerging market countries and banks. This assumption is where the debate breaks down. Indeed, the arguments suggesting that Basel II will reduce flows of capital into emerging markets requires us to accept the view that regulatory capital drives loan pricing – something that has not been proven in any research. In fact, research and the Committee’s own discussions with banks suggest that something else drives loan pricing. When determining the price of a loan, banks consider all of the economic risks associated with a particular borrower.
And a Smart Financial Centre needs smart regulation – that promotes innovation while safeguarding public confidence and financial stability. We are still learning and our approaches still evolving, but let me share with you three aspects of our regulatory response to FinTech. First, using a regulatory sandbox to test new ideas in a confined environment. Second, harnessing supervisory technology, or SupTech as we call it, to carry out supervision in a more efficient and effective manner. Third, strengthening cyber security across the financial industry to make it safer to use new technologies and instil confidence in consumers. Regulatory sandbox MAS launched a regulatory sandbox in June last year, to enable financial institutions and FinTech start-ups to conduct live experiments with innovative financial products or services. These firms do not need to fully meet the relevant regulatory requirements at the onset. To ensure that the consequences of any failure are contained, the experiments are conducted within agreed boundaries, such as the number of clients, scope of the activity, etc. The experiment is time-bound. If successful, the entity must exit the sandbox and fully comply with all relevant regulations if it wants to roll out the innovative product to the broader market. If the experiment fails, well we all learn something. Regulatory sandboxes not only encourage FinTech innovation by providing a safe space for 4/7  BIS central bankers' speeches  experimentation. They also give regulators an opportunity to learn the risks associated with new technologies and right-size regulation accordingly.

Final remarks While the ESRB has a better chance of achieving its mandate now than it would have had earlier this decade, its tasks will be difficult and its challenges considerable. In particular regarding the issuance of risk warnings, the credibility of the ESRB will rest upon the minimisation and balancing of so-called type I errors and type II errors. Type I errors entail the possibility of identifying those risks that subsequently do not materialise, while type II errors relate to the possibility of failing to identify risks that subsequently do materialise. Identifying a long list of potential systemic risks to financial stability could minimise the  BIS Review 115/2009  11  probability of making type II errors but may lead to accusations of “crying wolf”. The opposite could lead to an important risk to the EU financial system being overlooked, which if it materialised, could harm the ESRB’s reputation. Both the rigour of the checks for potential sources of risk and vulnerability, and the quality of the risk assessments (based on the information made available to the ESRB) should have a substantive influence on the credibility and effectiveness of the Board’s work. Addressing the type I-type II error trade-off by selecting which risks merit risk warnings can only be done by combining a comprehensive and strict monitoring of all potential sources of risk with a well-informed and detailed risk assessment.
We have a demographic development towards an increasingly ageing population and a rising dependency ratio. This means that we can have a situation with many old age pensions who push up public expenditure at the same time as fewer individuals of working age contribute to tax revenue, which deteriorates public finances. Increased immigration can in this context be positive for the age composition, as those born abroad have a favourable age structure. Just over 70 per cent of those born abroad are of working age, which can be compared with around 55 per cent of those born in Sweden. A continued inflow of people born  15 [24]  abroad could therefore keep down the dependency ratio going forward, see Figure 11. 19 Figure 11. Total dependency ratio and dependency ratio for Swedish born 1.1  1.1 Dependency ratio, total Dependency ratio, only Swedish born 1  1  0.9  0.9  0.8  0.8  0.7  0.7  0.6 1980  1990  2000  2010  2020  2030  2040  0.6  Note. The dependency ratio refers to the number of children and elderly people in relation to the working age population. Children refers to people in the age range 0-19 and elderly people to those aged 65 or older. Sources: Statistics Sweden and the Riksbank  A rapid population growth generally promotes economic growth. A large population gives increased scope for economies of scale and thereby better capacity to introduce new technology that can make production more efficient.

The activation of the macroprudential tools in order to create a buffer to be used in bad times incorporates a new dimension into the interactions with monetary policy. That is an issue which, in my view, should be analysed further. At a minimum, in these cases, monetary policy and macroprudential policy should take into account their respective decisions when calibrating the use of their instruments. As for fiscal policy, it is also important to emphasise that the creation of shockabsorption capacity through macroprudential decisions should not be used as an argument for relaxing fiscal policy. In other words, fiscal policy should also 7/11  create buffers in good times to be used in bad times, through automatic stabilisers or discretionary action, in particular in countries belonging to a monetary union. Another key issue related to this discussion is that the capital buffer built up in good times is expected to be released when the phase of the cycle changes. Significantly, this decision can be even more complex than those made in the activation phase. In this respect, and given the empirical evidence we have, there is a clear issue of timing. If it is released too early, it may even accentuate the expansion of the financial cycle. If it is released too late, it may entail a significant cost to the real economy. It is also necessary to assess whether the release has to be once-and-for-all or gradual. The release of the buffers may induce negative market reactions or generate conflicts with the microprudential supervisor.
We saw that impact on a few of the big banks earlier this year. In the securitised markets, the pace can look slower to begin with but then comes in a rush. Chart 7 shows the spreads on different tranches of the ABX index, the main benchmark index for sub prime securities. What is remarkable here first is how slow the spreads were to move at all. Of course, the predicted losses on particular tranches do no move smoothly with rising defaults, but throughout 2006 the economic press was a buzz with worry about the US housing  1  In particular, the High-grade Structured Credit Enhanced Leverage Fund and the Higfh-grade Structured Credit Fund both managed by Bear Stearns Asset Management (BSAM). BIS Review 84/2007  3  market; sentiment changed several times on whether the housing downturn would lead to a general recession. Throughout this period the originators continued to write new sub prime loans and the prices of the ABX scarcely quivered. But since January the story has been quite different with two dramatic hikes in the spreads first of BBB and then of the A-rated index. In total, the spread for BBB has gone from 500 basis points at the turn of the year to over 3000 basis points. Each of these steps has left casualties.

Our knowledge is neither complete nor constant. At the other end of the spectrum, rational optimising behaviour can, in principle, generate a policy reaction function which takes into account uncertainty about the economy and the process of learning about economic relationships. Such a reaction function would describe how a central bank would respond to any conceivable shock in the future, and explain how estimates of parameter values and the weights attached to particular models would be updated. But even in very simple examples the cleverest economists find the solution of those decision problems almost impossibly complicated. Fully rational optimising behaviour is unreasonably demanding. In the words of Gerd Gigerenzer (2001), optimisation is for “Laplacean demons” not human beings – a reference to an imaginary being that “…could condense into a single formula the movement of the greatest bodies of the universe and that of the lightest atom…”10 Both approaches, for very different reasons, end up with a monetary policy rule. The simple rule is not credible because we do know some things and we can learn from the past. The complicated rule is not feasible because it places unrealistic demands on our ability to process information. Given the lack of further guidance from economists as to how to make decisions, central banks have often retreated to the position that setting interest rates requires the exercise of unfettered discretion. But this has problems of its own.