samchain/econo-pairs-v1 huggingface dataset:
Some believe this must make it harder to succeed in competition of any kind, but in fact the opposite is true. Let me show you why our position needn't be a disadvantage, but, on the contrary, an asset. Clichés are very hard to overcome. In the case of Switzerland, as you know, we are best known for our banks, watches, chocolate and cheese. Other than this, and despite the strong presence of Swiss multinationals abroad, the world doesn't usually take too much notice of what some regard as a "small village in the heart of Europe". In international surveys, we are largely ignored, and in European statistics we are almost non-existent. Sometimes this can be an advantage. However, in a more and more globalised world, it is rather the opposite. Success depends heavily on your marketing. So, let me show you some hidden aspects of Switzerland. You will see that modern Switzerland is adjusting rapidly to the changing reality of the world economy. Let's consider a few facts. A booming economy, at home and abroad With 7.5 million people, Switzerland is indeed a small country, surrounded by the economically powerful European Union. We have no natural resources, and contrary to Singapore, we do not even have a chance of gaining new territory by raising it out of the surrounding sea. Nevertheless, we have a highly developed economy and a GDP per capita that clearly exceeds the European average. Contrary to the situation among some of our neighbours, our population is still growing, thanks to immigration.

Contrary to the pessimistic assumption that the Swiss National Bank would be forced to shadow the policy of the European Central Bank, we have been able to set interest rates according to the needs of the Swiss economy. And we will continue to do so. Summing up, we are as happy as central bankers can be with the outcome of the test imposed by the change in the European monetary system. Why joining the EU and the euro is not a realistic option And what about the European issue? As you know, we are not a member of the European Union, nor do I foresee Switzerland joining the EU in the near future. The Swiss people remain sceptical about the efficiency of the Union and are very aware of what they stand to lose in terms of political rights and economic freedom in the event of integration. But our relationship with the EU is of key importance, since Europe accounts for two-thirds of our foreign trade, as I mentioned before. In order to secure our access to the European market and to avoid discrimination, we have concluded two packages of bilateral agreements with the Union – one in 2002 and one in 2004. The present situation – with free movement of goods, capital and labour, but without monetary and fiscal integration – is probably the best solution for us. In short, our relationship to Europe is well organised and established.
Specific signals from central banks concerning the likely path of the interest rate can result in lower market rates through lower key rate expectations. Risk premiums may also decrease. The Federal Reserve, and recently the Bank of England, have also developed central bank communication by linking any introduction of monetary policy tightening to specific unemployment thresholds. In August, the Bank of England clearly stated that it does not intend to raise the key rate until the unemployment rate falls below 7 percent. But the promise was not without conditions. Significant changes in the prospects for inflation or  10  The forms of forward guidance have been referred to as either «Delphic», after the oracle at Delphi, or «Odyssean», after Odysseus, who bound himself to his ship’s mast to avoid the seductive song of the Sirens. Delphic guidance means only stating what you believe about future interest rates. Odyssean guidance also includes a binding promise about future interest rate developments (see Campbell, J. et al. (2012): Macroeconomic Effects of Federal Reserve Forward Guidance. Brookings Papers on Economic Activity, Spring 2012). BIS central bankers’ speeches  7  financial stability may lead to monetary policy tightening before unemployment falls below 7 percent. 11 In theory, the announcement of such thresholds could be particularly effective when the central bank’s normal response pattern implies that monetary policy would have been tightened before the threshold had been reached.

Banks can reduce lending volumes. Banks can also change the composition of their lending portfolio by shifting into lower risk-weighted assets, by, for example, tightening lending to enterprises and increasing lending to households. Norwegian banks are well on the way to adjusting to new and higher capital requirements, including a countercyclical capital buffer. Developments in banks’ earnings indicate that banks can increase their CET1 ratios by around 1 percentage point a year without reducing lending growth. 5  3  Basel Committee on Banking Supervision, An assessment of the long-term economic impact of stronger capital and liquidity requirements, August 2010. For an updated collection of references to studies of the costs and benefits of macroprudential regulation, see Annex 1 in IMF Working Paper WP/13/167, by Arregui et al. “Evaluating the Net Benefits of Macroprudential Policy: A cookbook”, July 2013. 4  See Norges Bank Memo No. 1 2013 for further discussion and references. 5  In the calculation there is an assumption of an annual increase in banks’ risk-weighted assets of around 4%, earnings in line with 2012 and all profits are used to increase equity capital. It is also assumed that the transitional arrangement is retained and is binding. 4  BIS central bankers’ speeches  Capital requirements and monetary policy The countercyclical capital buffer and the key policy rate are two instruments serving different objectives. The objective of the countercyclical capital buffer is to increase banks’ resilience to losses in a downturn. The primary objective of monetary policy is low and stable inflation.
Here I will explain how our analysis of market structure shaped the design of the Bank’s corporate bond purchase scheme, and how the scheme may have affected the functioning of the market. In both cases our understanding of these markets, informed by market intelligence, analysis and our own experience in previous operations, has been both tested and improved as the Bank has responded to events. Section 1 – Sterling’s headline days during 2016 The foreign exchange markets are core to the broader financial system, processing enormous volumes of transactions and relied upon by a broad range of economic participants from corporates to individuals. The structure of these markets has evolved markedly in recent years, with electronic trading playing an ever greater role, while the amount of balance sheet devoted to this activity by intermediaries has fallen. Benefits of the broader trend towards greater speed and electronification, common across a range of markets, include a reduced cost of transacting – and hence better value for end-users – but these structural changes as a whole have also led some to question whether markets are now less resilient in periods of stress. 1  2  The value of sterling fell by 17% against the US dollar over 2016 , largely as market participants digested the impact of the EU referendum decision on its long-term sustainable level.

Market Functioning Speech given by Chris Salmon, Executive Director, Markets, Bank of England  OMFIF City Lecture, London Tuesday 24 January 2017  I am grateful to Charlotte Barton, Nick Butt, Liam Crowley-Reidy, Nick Govier, Tom Horn, Rebecca Jackson, Sarah John and Nick Mclaren for their assistance in preparing this speech. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Introduction  It is a pleasure to be here this evening. The economic and political events of the past twelve months raise many questions. From my vantage point as the head of the Bank of England’s Markets Directorate, they reemphasise the need for central banks to understand the structure and functioning of core financial markets. That matters both for our role as guardians of financial stability, and to ensure the effectiveness of our own operations to implement monetary policy. Let me illustrate this with reference to developments in two very different markets. i)  The first – the sterling FX market – a large, global, highly liquid, and almost continuously traded, market, with a constantly evolving structure. Here, the challenge is to understand how those developments affect the functioning of the market. My focus will be on the lessons about market functioning from two particular episodes last year: the period immediately following the EU referendum and its ‘flash crash’ a few months later. ii)  The second market – the sterling corporate bond market – is small, local, and thinly traded, with heterogeneous underlying assets.
However, I believe all of us who have experienced this environment have emerged with a very different lesson learnt. Indeed, we cannot overstate the extraordinary potential this setting offers to an institution such as ours which has always valued, and legitimately so, the soundness of its judgement. With that conviction, we should devote most of our efforts to forging closer insertion, collaboration and coordination-based links with our European partners with an essential aim in mind: to reinforce our weight and ability to influence decision-making. This is a challenge and it is also an opportunity, but it is above all a responsibility to support, from the vantage of the Banco de España, the project for European construction. The second objective has to do with our contribution to financial and macroeconomic stability. After an unprecedented financial crisis, the reputation of economic policymakers, of central banks in particular and, indeed, of the economics profession as a whole was enormously dented. 4/5  Testifying to this were the regulatory and institutional changes set in train to prevent similar situations from recurring. However, the real test, where we place our social prestige and credibility on the line, will involve us truly being able to identify risks and vulnerabilities in due time, being able to issue warnings about them and, within our remit, being able to act to mitigate them or to contribute decisively to other players acting when they must.

To achieve this, after raising interest rates to close to the "neutral interest rate" of 2% in December, we are now embarking on the second phase towards monetary stabilisation: ideally, it would be good to reach the right "terminal rate" by next summer, but it is still too early to say what that level will be. We need to remain pragmatic and to be guided by observed data, including on core inflation, without getting fixated on overly mechanical rate hikes. We will then be prepared to remain at this terminal rate for as long as necessary: the sprint to raise interest rates in 2022 is now becoming more of a long-distance race, and the duration will count at least as much as the level. In parallel, we shall continue to focus on maintaining financial stability, helped by the strong resilience of French banks and insurers. In Europe, 2023 needs to be the year when Basel III is transposed into EU law and the Solvency II review is completed. Regarding crypto-assets, the disruption seen in 2022 is nourishing one basic conviction: France should switch as soon as possible to the compulsory authorisation of DASPs (digital asset service providers) rather than simply requiring their registration. And this needs to happen well before MiCA enters into force, to create the necessary framework of trust. 2) Less protection and more adaptation. The government can cushion the energy shock temporarily, but it cannot make it disappear.
The increase was particularly large for issues with a lower rating. For example, issues with a Baa rating increased by 500%, albeit from a very low level. From a global perspective, the growth in the bond market is contributing to the internationalisation of the euro. In 1999, international bond issues denominated in euro amounted to 40% of total worldwide bond issues. This constitutes an amount comparable with bond issues denominated in US dollars. In the same way, the integration of stock markets is progressing, although they will have to overcome barriers of the same kind as those which I have just mentioned in relation to the bond markets. A notable increase in transactions on the new European indices has been observed. Moreover, the “new  BIS Review 58/2000  6  markets”, with growth figures benefiting greatly from the establishment of the large European market, have expanded considerably. Finally, the announcement of stock exchange alliances and mergers over recent months reflects the logic of stock market integration and will accelerate the process. As I have said, the broadening of the capital markets and their greater integration are contributing to a more efficient allocation of savings. First, this development is leading to lower transaction costs and is increasing the liquidity of the traded instruments. This, in turn, will contribute, all other things being equal, to reducing the absolute level of interest rates. Second, it is multiplying investment opportunities, increasing the range on offer and fuelling competition between issuers.

Ensuring we have central bank tools that are effective: to backstop these new forms of systemic liquidity risk effectively, central banks need the right tools – to detect risks in a timely way; and to respond. In the LDI case, early warning required the use of qualitative as well as quantitative market intelligence. Effective response required the use of a buy/sell facility. Lending directly to non-banks would not have worked in this case. But it has many desirable properties for other scenarios, and is a high priority for future work. 4. Calibrating central bank tools to minimise risk: backstop facilities must be carefully designed if they are to be effective in removing the threat to systemic stability while minimising risks to the stance of monetary policy, to public funds, and to the incentives of market participants. In the LDI case, we sought to achieve that by grounding the objectives of the tool in restoring financial stability, targeting it on the parts of the market most in need of assistance, pricing it as a backstop to ensure we bought no more than needed, and ensuring it was strictly time limited, in its operation and in its unwind. The LDI operations were successful, but highlight many questions for the future. For me, three in particular stand out: Where do societies want to draw the line between public and private insurance against systemic liquidity in non-banks, and how do they ensure regulatory and central bank facility thinking develops in a co-ordinated way?
Deposits up to a specific quota are remunerated at the key policy rate, which is Norges Bank’s sight deposit rate. Deposits that exceed the quota are remunerated at a rate below the key policy rate, referred to as the reserve rate. 1 Banks that borrow overnight from Norges Bank pay the overnight lending (D-loan) rate. As shown in the chart, the reserve rate and the overnight lending rate are set respectively at 1 percentage point below and 1 percentage point above the key policy rate. 2 Interbank transactions take place throughout the day. The transactions are settled via the banks’ accounts with the central bank. Banks with deposits above the quota at the end of the day normally lend reserves overnight to banks with a negative balance in Norges Bank or to banks that have deposits below the quota. Chart: Norges Bank interest rates and market rate The interest rate on these transactions, called the overnight interbank rate (NOWA in Norway), is normally very close to the key policy rate. The interest rate corridor around the key policy rate is intended to promote reserve trading between banks and not between banks and the central bank. This contributes to an active interbank market and an efficient money market. In order to keep the overnight interbank rate close to the key policy rate, Norges Bank aims to keep banks’ total reserves below the sum of the quotas that can be remunerated at the key policy rate.

But even though the zero lower bound is not absolute, the effect of further cuts will diminish as rates approach or fall below zero. The most important limitation on how far down it makes sense to go is related to the existence of an alternative to bank deposits, i.e. cash. Negative bank deposit rates can always be avoided by holding cash instead. The disadvantage is that cash is more expensive to manage than electronic deposit money. Transport, storage and security all involve costs. For a bank participating in the settlement system, where large amounts are reinvested at frequent intervals across accounts and across banks, the costs involved in switching to cash will be considerable. Central bank deposit rates can therefore be below zero. How far below, is an open question. For many retail customers, exchanging bank deposits for cash will be fairly inexpensive. A safe deposit box can be rented for less than € a year. If bank customers choose to withdraw their deposits and hold cash, banks will lose an important part of their funding. This is probably an important reason why banks in countries with negative policy rates are reluctant to set negative deposit rates, particularly for households. If banks hold back on deposit rates, lending rates can only fall to a limited extent before banks’ earnings are reduced. A lower policy rate will probably have a less-than-normal effect on lending rates, weakening the impact of monetary policy via the demand channel.
The mood is to continue cautiously down that path, but to emphasise the need, not only for sound macro-economic policies, which everyone accepts as a sine qua non, but also for steps to accompany capital account liberalisation designed to reduce the risks of volatility. These relate in part to the process of capital account liberalisation, where there is now a good deal more stress on ‘sequencing’ - that is on liberalising potentially more stable, longer-term, capital inflows initially, rather than short-term borrowing denominated in foreign currency. BIS Review 49/1998  -4-  But they relate particularly to three key conditions for living with free capital movements. The first is “transparency”. In a broad sense a need for greater transparency is recognised in relation to public policy, to the relationship between the public and private sectors, to corporate governance, accounting standards, and so on. In a narrower sense there is seen to be a need for more reliable, and greater and more timely disclosure of, financial information generally, at the level of individual borrowing entities, but especially also in relation to countries’ true foreign exchange short-term asset and liability positions. This is especially important in relation to the foreign currency liquidity position of the monetary authorities and of the banking system.

A special Financial Analytical Unit (FAU) has been established as an autonomous part of the Czech Finance Ministry, to which all suspicious transactions must be reported. The regulators of the individual financial market segments, most importantly the Czech National Bank and the Czech Securities Commission, examine the regulated financial institutions’ compliance with the AML Act by means of both off-site and on-site supervision. The home regulators co-operate with the FAU, and also among themselves based on a mutual co-operation agreement. Co-operation with foreign supervisors is being established by signing Memoranda of Understanding. In this respect, the AML activities are  2  BIS Review 40/2003  thus following the same trend as the financial supervision in general. A crucial role is, of course, played in the AML system by the law-enforcement authorities, i.e. the police, prosecutors and judges. In previous years, one of the most sensitive measures in the AML system was the cancellation of the remaining anonymous saving-book accounts, which had a tradition of more than one hundred years in the Czech Republic. This issue, however, has now been resolved, contributing to stricter compliance with international standards in the Czech Republic. I am also pleased to tell you that the most recent progress in this area is the approval of a regulation issued by the Czech National Bank in August 2003 that specifies requirements for banks’ internal AML systems. It is based on the BIS’s “Customer Due Diligence for Banks”.
At the moment our legislation lags behind global practices. We understand what an urgent topic this is, and in order to make our economy more attractive to investors there should of course be effective mechanisms in place to counter insider trading and market manipulation. The next important issue is the bill concerning a financial Ombudsman for the rights of consumers of financial services. Recently at the State Council Presidium there was discussion about rights protection for consumers of financial services, and, of course, a financial Ombudsman could be one of the instruments used to increase the effectivity of consumers’ rights protection. We propose to bring this in gradually. And here, too, I hope I can count on support for this project from the Ministry of Finance and the government and state Duma as a whole. These bills are in the process of being finalised before submission to the state Duma. Firstly, for us it is important that a bill toughens liability for false statements in the financial sector. We are carrying out major work on improving the cyber resilience of financial organisations and combatting cyber attacks. So it is important for us, taking into account the benefits of digital technology development for the financial sphere, to provide an adequate level of security and protection from risks. Therefore it is necessary to amend the law in order to establish legal requirements for the protection of financial organisations’ information and to combat theft of their clients’ funds. We are now working on drafting this bill, too.

So, the answer to the question whether central banks have too prominent a role in the new regulatory framework is once again “no”. Given our recent experience, it would be negligent not to address systemic risk directly in order to prevent system-wide crises in the future, and  9  Crockett (2000). BIS central bankers’ speeches  5  because addressing these risks involves a set of tools and competences that naturally belong to the domain of central banks, their prominent role in this task is a direct consequence. It is also important to bear in mind that the expanded efforts to prevent future crises will, if they succeed, reduce the need for extensive crisis management in the future. Conclusion History is a great teacher. And central banks must learn from its critical episodes. The recent crisis is such an episode and is thus an exceptional learning opportunity. Central banks were active in managing the crisis with both conventional and unconventional tools. Their efforts played a major role in preventing the collapse of the financial system in the early days of the crisis, and have contributed to mitigating the economic damage of the aftermath. These actions were only possible because central banks, including the SNB, were able to act flexibly in exceptional circumstances – a flexibility which the gold initiative would severely constrain.