samchain/econo-pairs-v1 huggingface dataset:
Of note, the long-standing U.S. tier 1 leverage ratio also requires the same amount of regulatory capital for all assets, but the SLR has been more binding given its higher calibration and more expansive coverage of exposures. The SLR is currently the binding capital requirement for some dealers, and it has significantly increased the amount of capital that needs to be held against low-risk assets. This has resulted in significant adjustments in the composition of dealer balance sheets. For example, the imposition of the SLR has been cited as an important factor in the shrinkage of dealer repo financing activity. In contrast, the risk-based capital standards and new liquidity standards are unlikely to be important for Treasuries and repo backed by Treasuries because Treasuries are treated as posing less risk to the banks that hold them and count as high-quality liquid assets. For the corporate bond market, the most relevant factors are probably the increase in the Basel risk-weighted capital ratio, the Comprehensive Capital Analysis and Review (CCAR) stress tests – which subject the dealer trading book to additional global market shocks that include a sudden increase in general risk premiums and credit risk combined with significant market illiquidity – and the Volcker Rule, which prohibits proprietary trading for a number of asset classes including corporate bonds, but not U.S. Treasuries. However, for both markets, other non-regulatory factors are also important.

Even if one were to read the evidence as supporting the notion that liquidity has become somewhat more costly, this does not imply that we should simply unwind recent regulatory requirements. First, as I discussed, there are non-regulatory factors that could be more important factors. Second, even if a connection could be made to regulatory causes, the costs of any reduction in liquidity or increase in liquidity risk might be low relative to the benefits of the regulations. As I noted at the outset of my remarks, recent regulatory changes have been designed to produce a safer and sounder financial system. Higher capital and liquidity requirements have made major financial institutions less prone to failure. This can be seen in the sharp fall in credit default swap spreads for major dealers in recent years. Moreover, other steps have made the financial system more robust to the failure of a systemically important firm. For example, the shift to central clearing of over-the-counter derivatives through central counterparties (CCPs) has reduced bilateral risk exposures, and significant progress is being  2  The Federal Reserve’s large scale asset purchases presumably have also played a role by removing a large volume of Treasury securities from the marketplace. BIS central bankers’ speeches  5  made on how to resolve the failure of a systemically important financial firm in a way that does not threaten the entire financial system. 3 As I see it, the prior regime did not sufficiently foster financial stability, a necessary condition for sustained economic growth.
5  For example, O’Hara (2004). 4  BIS central bankers’ speeches  Frictions in pricing arise from the process of matching buyers and sellers. Here, the role of market-makers is key. The market-maker faces two types of problem. One is an inventorymanagement problem – how much stock to hold and at what price to buy and sell. The market-maker earns a bid-ask spread in return for solving this problem since they bear the risk that their inventory loses value. 6 Market-makers face a second, information-management problem. This arises from the possibility of trading with someone better informed about true prices than themselves – an adverse selection risk. Again, the market-maker earns a bid-ask spread to protect against this informational risk. 7 The bid-ask spread, then, is the market-makers’ insurance premium. It provides protection against risks from a depreciating or mis-priced inventory. As such, it also proxies the “liquidity” of the market – that is, its ability to absorb buy and sell orders and execute them without an impact on price. A wider bid-ask spread implies greater risk in the sense of the market’s ability to absorb volume without affecting prices. This basic framework can be used to assess the impact of the changing trading topology on systemic risk, moving from analysing market microstructure to market macrostructure. Take the effects of fragmentation. That heightens competition among trading platforms, offering differing execution options and wider access to participants. This would tend to attract liquidity providers, including cross-market arbitraging HFT.

Christian Noyer: Monetary policy and the crisis – some lessons for the future Keynote address by Mr Christian Noyer, Governor of the Bank of France, at the ParisEuroplace Financial Forum, Tokyo, 16 November 2009. *  *  *  Central banks have been very active over the last two years in containing the impact of the financial crisis. Monetary policy has made an important contribution to stabilizing financial markets and the real economy. Today, however, I will not talk about our response to the crisis, whether by conventional or unconventional measures. I will rather focus on the longer term and address two questions: "Was monetary policy the cause of the crisis?" and "How can it contribute to preventing future crisis?" These are two different questions. And they call for differentiated answers. While I doubt very much that monetary policy played a major role in triggering the crisis, I also believe that it can – and should – help in the future to better contribute to financial stability. Was monetary policy the cause of the crisis? One major success in the two last decades has been the achievement of price stability in most industrialized and many emerging economies. This success has rightly been ascribed to the monetary policy framework almost universally adopted in the world, which, beyond national differences and specific features, is based on two common pillars: Central bank independence and price stability as a primary objective.
The Asset Purchase Facility, operated by the Bank for the Government, will purchase up to £ billion worth of commercial paper, corporate bonds and similar securities, with the aim of increasing the liquidity of these instruments, reducing the cost of capital to businesses and stimulating increased debt issuance. As we estimate that illiquidity presently accounts for getting on for half of the 5½ percentage points interest rate spread of investment-grade corporate bonds over government debt, these actions, if successful, could have a powerful impact on the cost and availability of funds to corporate borrowers. The first purchase under this facility was made last Friday. In the first instance, purchases are to be financed by government borrowing. But, subject to the agreement of the Chancellor, this facility can also be used by the Monetary Policy Committee to undertake further easing of monetary policy in pursuit of the inflation target. That is likely to prove useful now that Bank Rate is nearing its floor. In that case, purchases would be financed by the creation of so-called central bank money – effectively IOUs drawn on the Bank of England. At such point, we might also want to expand the range of assets purchased under the scheme to include government debt. The purpose of these actions would be twofold: to push down the yields on a wider range of assets than usual; and to increase the supply of broad money (bank deposits plus banks' own reserves) in the economy. Both should help to boost nominal spending.

Of course, since interest rates cannot fall below zero, we are running out of room for further cuts. But it must not be forgotten that even if Bank Rate remains where it is, the recent cuts in Bank Rate will continue to provide a building boost to demand through this year and beyond – we don’t have to keep on cutting rates in order to provide a stimulus. Second, in November, the Government announced a temporary cut in VAT and an acceleration of spending on public investment projects, which should help support demand in the near term. Third, and most importantly, to supplement the measures taken last October, the Government has launched a five-point plan to ensure an adequate supply of credit to households and business. This comprises measures: to reduce uncertainty about the adequacy of bank capital by capping the losses on their holdings of risky assets; to facilitate  2  BIS Review 19/2009  bank funding through the attachment of state guarantees; to boost the availability of funds to business through direct purchases of company debt; to raise the availability of mortgage finance to households by halting the running down of Northern Rock’s mortgage book; and, finally, to establish a concordat with the banks under which they will maintain an adequate flow of credit to the real economy.
Developments in other countries are just as important for the krone as developments in the Norwegian economy. Capital flows freely and flows can change rapidly. This can spill over to exchange rates and interest rates as well as output and employment. There is a cost involved for businesses in hedging against fluctuations in the krone. A krone that is stable - but too strong - also entails social costs in the form of low activity. Likewise, a krone that is stable - but too weak - is a source of high inflation. Norway is running a current account surplus as a result of sizeable oil and gas exports. Owing to high oil prices, the current account surplus is rising this year. An increase in the current account surplus will normally result in higher net demand for the domestic currency. In Norway, however, the additional foreign exchange revenues that accrue to the Norwegian state as a result of high oil prices will be invested in foreign securities through the Government Petroleum Fund. As a result, they will not have a direct impact on the balance in the Norwegian foreign exchange market. Oil companies hold a large share of their financial capital in foreign currency, and higher revenues in these companies therefore results in an increase in capital outflows. The effects of changes in the current account on net demand for the Norwegian krone can be illustrated by adjusting the basic balance for transfers to the Petroleum Fund and oil companies’ estimated cash surplus.

Financial markets in the first quarter of 2012 were serene, reflecting relatively low premiums of liquidity and inflation risks. The interest rate in the interbank money market has followed swiftly the recent key interest cuts. The transmission of eased monetary policy signals is also observable in the deposits market, while it is expected to be transmitted in the future also in other market segments, conform to the time lag of the transmission mechanism. In the primary market, government security yields showed upward trend reflecting developments in relevant structural factors of the demand and supply, without signalling added risk or inflation premiums. Verified developments insofar, change the basic projections for economic developments in the future. Year 2012 is expected to be influenced by unfavourable developments in the global economy, which may affect the Albanian economy as well. Foreign demand is expected to provide lower contribution over the course of the year, impacted by economic slowdown in our trade partners. Fiscal policy orientation towards further consolidation of fiscal parameters limits the space for a substantial fiscal stimulus to foster the economic activity. Under these circumstances, private domestic demand remains determinant for aggregate demand increase in the future. Overall, analyses suggest a better performance of private consumption and spending, helped also by the eased monetary policy stimulus. Estimates of the Bank of Albania suggest that, in the course of the year, demand growth below the potential of the economy will continue to exercise low inflationary pressures from the demand side.
Ladies and Gentlemen, it is in this regard that the Bank of Zambia and Professor Collier with the support of the UK Department for International Development partnered to hold this international symposium whose objectives include: (i)  enhancing understanding of advantages of central bank independence among central bankers, Government, banks, non-bank financial institutions, the business community, academics and other stakeholders;  (ii)  drawing lessons and sharing experiences of central bank independence in developed, emerging and developing countries;  (iii)  appreciating the political, economic and legal aspects of operationalising greater independence for central banks; and  (iv)  exploring ways of enhancing fiscal and monetary coordination. Ladies and Gentlemen, the selection of papers to be presented and discussed at this Symposium will provide a platform for sharing ideas required for practical solutions aimed at improving the Bank’s service delivery. As we tackle issues of inflation, exchange rates, and other key macroeconomic indicators, let us use this forum to outline some of the past developments and challenges that lie ahead of us as we aim to taking Zambia’s financial sector to higher heights. Lastly, let me say that while we can all learn from what other central banks have done, each country should establish the legal framework for its central bank, and allow for its evolution, in ways which best fit that country’s own history and institutions. I have no doubt that the symposium will be thought-provoking and highly participatory.

Let me comment on some of these four aspects and touch on how we intend to fulfil our mandate to support the ESRB. Conceptual issues of systemic risk Systemic risk analysis is nothing new to the central banking community, including the ECB. One reflection of this fact is the series of triennial central bank conferences held under the G10 Committee on the Global Financial System between the mid-1990s and early 2000s. Even the European Monetary Institute, which was the forerunner of the ECB, contributed to systemic risk work in this context, alongside the US Federal Reserve, the Bank of England, the Bank of Japan and many other central banks. 4 For instance, from the outset, the ECB drew up a research agenda on financial stability and systemic risk. 5 In addition, in 2004 we started to publish a Financial Stability Report (FSR) twice a year. The main objective of this Report is to help identify, at an early stage, potential vulnerabilities and to raise awareness among market participants with a view to promoting preventive and remedial policies. Each issue also contains several special features offering a wealth of further insight into financial stability and systemic risk. This background suggests that the ECB is a logical choice as a provider of analytical support to the ESRB, but it should not obscure two major challenges we are facing. First, the phenomenon of systemic risk is extraordinarily complex.
Indeed, this gap in the regulatory framework has been demonstrated in the recent period of financial turbulence, where a number of countries have found it necessary to take extraordinary measures with regard to banks and other financial institutions in order to maintain financial stability. Today, I will try to sketch the broad features of such a resolution framework. In brief, it is a question of finding a system that makes it possible to close banks quickly and efficiently at a low cost to the deposit guarantee system, while making shareholders and uninsured creditors bear the responsibility for their investment decisions. But it must also allow for special measures to be taken in the exceptional situation where the failure of a bank risks destabilising the financial system as a whole. Also in such situations the government needs to have a strong negotiating position against the shareholders. But, first, how did I arrive at this conclusion? Well, from an analysis of the role of the banks in the economy and the safety net which has been built up around the sector. And from some  BIS Review 62/2008  1  experience from dealing with real crises. To get the right perspective, I think it is useful to start at this end. What is so special about bank failures? Bank failures have always been a problematic issue for governments.

This will be the theme of the round table in the third session that will close this symposium. *** I thank you for your attention and hand the floor to Antoine Frachot who will assume the role of moderator for the first session. BIS central bankers’ speeches  3
I think there is a broad agreement on the fact that interest rate decisions are state-dependent rather than time-dependent and as a consequence, both the frequency and the amplitude of the policy changes are mainly driven by the underlying state of the economy. As far as the Eurosystem is concerned, the more gradualist approach is nothing but the reflection that the economy of the euro area has been less affected by cyclical fluctuations than the US economy. Moreover, recent research carried out by the Eurosystem on inflation persistence tends to show that the degree of inflation persistence in the euro area is quite moderate while the degree of price stickiness is considerable and higher than in the United States. This finding may provide another justification for a gradualist monetary response to cost-push shocks as: first, the impact of an inflation shock will be small as agents anticipate a low persistence of this shock and therefore will maintain their expectations of future inflation at low levels; in turn, the negative response of the output gap will be limited implying a less persistent response of the real rate. 5. As a result, the Eurosystem monetary policy has won European citizens’ confidence in and acceptance of the new currency  Finally, the euro has been readily accepted by economic agents and is now part of European consumers’ daily lives. Surveys confirm that the general public has confidence in the euro, as a solid currency, and in the Eurosystem as their Central Bank.

Is the central bank forward-looking or rather “behind the curve”? These are actually some of the recurrent criticisms I have heard about the Eurosystem’s monetary policy: too obscure, too narrow-focused, too late. One can build up (see Figure page 7 of the Annex) a forward-looking Taylor-type rule for the ECB’s minimum bid rate. As an overall assessment, the Taylor-type rule closely matches Eurosystem’s monetary policy decisions. Under the proviso that this rule provides a good benchmark, it is quite unclear why the Eurosystem has attracted so much criticism: in particular, the output stabilisation “objective”, as encapsulated in a standard Taylor rule, has not been overlooked by the overriding objective of price stability. In that regard, one should be aware that, in the euro area as elsewhere, price stability aims at providing the highest sustainable growth and employment in the longer run; finally, the decisions have been taken in a timely fashion, the Eurosystem conducting its monetary policy in a forward-looking and pre-emptive way. However, the same figure shows that policy decisions deviate from the Taylor rule benchmark. Actually, being rule-based doesn’t imply being rule-bound and monetary policy decisions are not taken on the basis of mechanical rules. I already mentioned the Eurosystem adopted a full-information approach, which besides the usual array of economic and financial indicators also gives a key role to monetary analysis not factored in usual Taylor rules. Identifying in real time the nature of monetary developments and their implication for future price developments represents however increasing challenges.
After client on-boarding, the ongoing contact between the insurer and the insured is limited to premium payment and processing of claims. Many people do not see a need to meet their insurance agents regularly to review their coverage. Some, I am told, even shun calls from their agents. New insurance apps can transform the insurer-policyholder relationship into a broader partnership. The insured person can benefit from various lifestyle information, healthy living tips and other information, emerging trends, advisories on new products and various service options. These can include transactional services such as the option to buy additional insurance based on new needs – all done digitally. Claims can also be an automated self-service process, with expedited settlement based on digital submissions of proofs. The use of Chatbots can also support a customer by providing on-demand standard reports or for other procedural or contract information. I read that in some countries, new InsurTech players now offer universal all-in-one “plug and use” insurance cover. They use AI-enabled insurance platforms that allow a person to key in his details – like his health statistics, occupation, business and personal travels, his car, family, home and home possessions, pets and so on – and get all the insurance that he needs under one policy that can be flexibly adjusted across the difference risk coverage over his life cycle. What this does is to make the customer experience more pleasant and fuss-free.

This can be described as the difference between what a family will need to maintain its level of consumption should a breadwinner, or one of the breadwinners, passes away, versus the amount of financial resources including life insurance coverage. A Geneva Association report1 in 2014 estimated that for the US alone, the life protection gap was a staggering $ trillion. In 2012, the LIA estimated the gap in Singapore to be about $ billion2. Patrick mentioned this as one of the priorities for LIA and highlighted that a follow-up “attitudinal study” will be conducted. I understand that LIA’s 2017 Protection Gap Study will be released later this month. The case for adequate life insurance protection is a strong one. So why is there such a large protection gap? Let me highlight a few possible reasons. 1/5  BIS central bankers' speeches  (1) One factor is that life insurance involves the rather unpleasant topic of death, a morbid subject that many avoid. (2) Another common feedback is that many people find it difficult to properly ascertain their insurance coverage, given the difficulties in projecting long-term financial needs. (3) Yet another perception is that life insurance policies are both expensive and complex. There is also a belief that agents would rather sell more lucrative investment-linked policies compared to term life policies.