samchain/econo-pairs-v1 huggingface dataset:
The Bank promotes stability in sterling payments in four ways: through its operation of RTGS; through the provision of liquidity insurance to the banking system; through its supervision of CHAPS, the other recognised payment systems, CREST and Central Counterparties; and through the prudential supervision of banks by the PRA. As discussed at the Open Forum in November, where there are coordination or market failures the Bank can and has used its unique position to shape financial markets for the public good. 7 The Bank of England has a long history of using its convening powers to solve collective action problems, not least the introduction of RTGS itself in the mid-1990s. Around the same time, the Bank also had to step in to take over the design and construction of the UK’s securities settlement infrastructure CREST, after the collapse of the Stock Exchange’s TAURUS project. We were strong supporters of the Continuous Linked Settlement 8 initiative, which since 2002 has played a major role in reducing settlement risk in foreign exchange transactions. More recently, the Bank has taken opportunities to modernise and innovate in response to the changing external environment. For example, the Bank has overhauled its framework for liquidity provision and is preparing to introduce polymer banknotes. 7  The Open Forum session on the role of central banks in financial markets can be watched here: https://www.youtube.com/watch?v=SJCilk1XdZ0&index=12&list=PLslyOrpjJ0z38nDN-8fCiDKpCDpKMKZc9. 8  Further information on the Continuous Linked Settlement system can be found here: http://www.clsgroup.com/Pages/default.aspx.

And rapid growth of non-bank payment providers could have profound implications for the business models of banks, challenging their revenue streams, altering the economics of credit provision and changing the risks to financial stability. 5  The Faster Payments Scheme launched in May 2008 and allows payments to be made 24 hours a day, seven days a week. 6  Further information on the One Bank Research initiative can be found here: http://www.bankofengland.co.uk/ research/Pages/onebank/agenda.aspx  BIS central bankers’ speeches  3  New payments technologies also pose practical challenges, such as ensuring they interface effectively with legacy IT systems in banks and payments infrastructure. What does all of this mean for the future of RTGS? Because of the changing context I have described, the Bank of England has decided the scope of the blueprint should be broad. We need to understand these trends, whilst recognising that there is considerable room for debate about the impact of the current wave of technological innovation. We need to think about to whom we give access to the advantages of central bank money with its unique qualities of finality of settlement. Trying to predict the future is a risky business, but when we make decisions about investment in systems that will last for a decade or more, they need to enable the kinds of changes that users will demand. So we need to make sure that we have “optionality” built in so that we can cope with different states of the world.
It goes without saying, however, that as a result of the rapid development of technology, especially in the ICT area, which drastically lowered the cost of the said exchange, the international integration of trade, investment, financial and other services is now more advanced than it has ever been before. The Economic Policy Committee of the European Union 3 points out four factors that have lead to the rapid development of globalisation over the past years: •  multilateral trade liberalisation; the average customs duty has been lowered by ca. 30%  •  successful economic reforms in many developing countries, especially in China and India  •  the technological advancement, especially in the ICT sector and transportation, which has significantly lowered the cost of trade. To give you and example, fees for sea, land and air transportation, telephone calls and satellite calls went down by 21%, 30%, 95% and 88%, respectively. •  the technological advancement has blurred the borderline between what can and what cannot become subject to international trade. Globalisation may create new macroeconomic interdependences to replace the traditional ones that we know from the books on economics. The majority of economists, politicians and investors may still not quite keep at pace with the “seismic changes” that take place in the economy 4 . However, if we really are witnesses to “seismic changes” in the economy, it may be worthwhile to have a closer look and think about their meaning. Globalisation and its impact on the economy may be viewed from different perspectives.

Additionally, an important feature of development of the financial market is the gradual fall in significance of intermediation of the banking sector with a simultaneous increase of significance of the market intermediation 15 . As a consequence, the central bank’s channels of influence on the economy are changing. In the past the bank loan channel was deemed more important; it is now loosing its significance in relative terms. Until recently, the investment rate in the economy was to a large extent dependent on the domestic savings rate, which by the way was contradictory to one of the fundamental assumptions of some economic models of the full integration of capital markets. The economy was featured by the so-called home bias i.e. greater inclination of domestic investors to invest in domestic assets rather than in foreign assets 16 . The latest research 17 suggests that home bias over the past years could have dropped significantly, at least in the OECD countries. The decrease may be attributed to the very  11  Chen N., Imbs J., Scott A. “Competition, Globalization and the Decline of Inflation”, CEPR Discussion Paper No. 4695, 2004. 12  Melick W., Galati G. “The Evolving Inflation Process: an Overview”, BIS Working Paper No 196, 2006. 13  Hannoun H. “Internationalisation of financial services: implications and challenges for central banks”, Conference of the SEACEN Governors Bandar Seri Begawan, Brunei Darussalam, 4 March 2006. 14  McKinsey Global Institute, $ Trillion and Counting: Taking Stock of the World’s Capital Markets, February 2005.
The largest firms must be prepared for a rapid and orderly resolution under the US Bankruptcy Code.6 Among other things, these firms must now also ensure that critical activities or services provided to the market will not be disrupted in the event they find themselves in recovery or resolution. Moreover, if an institution fails, there must be sufficient tools to manage its failure in a way that reduces the chance that its failure will cascade systemically through the financial system. In other words, if one institution gets a cold—or worse—it should not become an epidemic. The Fed’s use of Section 13(3) during the crisis was not uncontroversial. Concerns were expressed about moral hazard—that the Fed was somehow “bailing out” troubled institutions and that this would only lead to excessive risk taking in the future.7 As a result of this concern and others, Congress amended Section 13(3) to prevent the Fed from engaging in the kind of institution-specific lending that was directed at Bear Stearns and AIG. Going forward, the Fed may only lend under Section 13(3) as a part of a broad-based program directed at providing liquidity to the financial system and not to aid an individual failing firm.

The SNB’s mandate is still to ensure price stability. The minimum exchange rate has decreased the deflationary and recessionary risks associated with a massively overvalued currency. It is entirely in line with our mandate. Furthermore, there is no risk of inflation in Switzerland for the foreseeable future. However, the SNB does recognise that the long period of low interest rates we are experiencing constitutes a danger to the stability of the financial system. The domestic credit and real estate markets are vibrant and there are concerns about the possible build-up of imbalances, which could eventually lead to price corrections and substantial losses in the Swiss banking sector. There is no doubt, however, that, in the current context of global economic indications of downside risks to the Swiss economy, current interest rate levels and the minimum exchange rate are vital. Any concerns about the housing market must, therefore, be addressed by alternative means. The SNB thus advocates the introduction of a “countercyclical capital buffer”, a macroprudential tool targeted at the specific situation we are experiencing. If the SNB’s recommendations are implemented, the banks will be legally obliged to meet specific equity capital requirements as soon as certain indicators on the real estate and mortgage markets show signs of unsustainable growth. The concept of central bank independence is widely recognised in our country. The fact that an independent monetary policy best serves the interests of the country is rarely disputed.
But we are sensitive to the fact that certainly over the past two or three years price pressures in both product and labour markets have been less than we would have expected based on earlier experience, given the strength of demand. You might explain this in terms of more intense competition and lower margins in product markets; or in terms of an increase in the rate of productivity growth, perhaps related to the application of new technology, such as we have seen in the US; and you might explain the recent relatively benign real earnings growth in terms of the more flexible functioning of labour markets. But we cannot be sure of the explanation, nor of how large or persistent the relevant effects will prove to be. We are nevertheless sensitive to these possibilities; we do indeed try to allow for them in our forecasts and in our policy judgements, based upon careful scrutiny of all the latest information that we have. But the process remains necessarily judgmental, and that, of course, leaves us vulnerable to assertions that we don’t give sufficient weight to this or that factor. That, some of our critics maintain is why inflation has been below target for much of the past two years. In fact the undershoot has been marginal – given the uncertainties - and can just as well be explained by the unexpected strength of sterling’s effective exchange rate, reflecting the weakness of the euro, which has both directly dampened the price level and constrained external demand.

There are really three key areas: •  First, there is uncertainty about what in fact is happening on the supply-side of the economy, that’s to say how rapidly can aggregate demand be allowed to increase before it begins to run ahead of supply and put upward pressure on inflation or, alternatively how rapidly must demand increase in order not to run below supply-side capacity and cause inflation to fall significantly short of the inflation target. The target is, of course, symmetrical;  •  Secondly, and specifically in relation to the labour market, at what point does the growth of employment or the fall in unemployment lead to a rate of increase in pay settlements, or earnings growth, which would subsequently lead to accelerating inflation in goods and services markets; and  •  Thirdly, what is happening or is likely to happen to the rate of growth of aggregate demand in the economy anyway. Now, as I said earlier, there is not a great deal that we – through monetary policy – can do directly to affect the first two of these areas of uncertainty, which relate to the supply-side of the economy. The major challenge for us in these areas is in assessing – or quantifying – their impact. And that’s not at all easy because, while the effects gradually become apparent over time, many of the relevant developments cannot be directly observed or measured; nor therefore can they be predicted with any great confidence.
First, given the length of the foreclosure process, realised losses on the sub-prime mortgages which underpin securities may not total much more than $ billion so far. Second, if projecting forward the rate at which delinquencies are cumulating on recent vintages of subprime mortgages, we can estimate that losses on the securitised loans might ultimately exceed $ billion. Thirdly, using the sub-prime ABX indices to “mark-tomarket” sub-prime securities, can produce figures of $ to 400 billion. Against these figures, international banks have so far announced writedowns (net of hedging) of $ to $ billion. •  Although these are huge numbers, they amount to less than 1% of the total assets of the Large Complex Financial Institutions (LCFIs) in the US and Europe. In relation  2  BIS Review 24/2008  to GDP, even the higher estimates would be comparable to the losses in the Savings and Loans crisis. 2 •  But the securitisation model has not just made it difficult to scale the problem; it has added a large measure of uncertainty and opacity to the distribution of losses and that is a key factor in the continued reluctance to lend and the closure of most ABS markets. The current worries on the future of the monoline bond insurers reflected in their CDS prices in Chart 6 are exacerbating the uncertainties about individual banks’ exposures. The third factor is the dislocation of the investor base for ABS. Since the summer many of the main buyers of ABS have withdrawn from the market.

First, financial inclusion is an international agenda that has captured the attention of many governments which has national importance The 2.5 billion unbanked and underserved remains a global challenge. A significant portion of them are from countries with predominantly Muslim population, thus there is an urgency to address imbalances among the “ummah”. For comparison, 2.5 billion people is equal to the population of China and India combined or is equal to 8 times the population of USA. Financial inclusion can only be achieved with the collective effort of all countries. Peer-topeer learning and sharing of best practices can help countries leapfrog the trial and error stages in designing and implementing financial inclusion policy, without having to reinvent the wheel. For example, when we introduced microfinancing, we made a tour to Indonesia to learn about how Indonesia actually implemented microfinancing. With that knowledge, we implemented microfinancing in Malaysia and it has been very successful. When we wanted to introduce agent branch banking, we went to Mexico and Brazil to learn on how they actually use agent branch banking as effective means to expand financial services. We learnt and implemented some of the measures on financial inclusion. We avoid unnecessary mistakes and reduce cost in implementing of those policies.
AIG needed liquidity and it needed it that day. In the early days of the intervention, when we knew precious little about AIG, but knew that it needed billions of dollars, we were truly facing a binary choice to either let AIG file for bankruptcy or to provide it with liquidity. It is worth noting that this choice fell to the Federal Reserve because Congress had equipped it with an ability to lend to a non bank like AIG in extraordinary and exigent circumstances. Given AIG’s situation on September 16, 2008, and given what had transpired over the preceding days and months, how could we responsibly not have lent pursuant to our statutory authority? With authorization from the Board of Governors under Section 13(3) of the Federal Reserve Act, the Federal Reserve Bank of New York had the ability to provide liquidity to AIG by making a fully secured loan. The decision to activate the authority and lend was clearly justified on the merits but was difficult because of the collateral consequence, the moral hazard resulting from AIG’s rescue. Within hours of the policy determination, the Federal Reserve took over the term sheet originally created by a private sector consortium of commercial banks. In the aftermath of Lehman’s bankruptcy, the consortium was no longer prepared to lend to AIG.

Increased global engagement in Shariah matters among scholars, practitioners and regulators through international discussion platforms, together with the massive flow of knowledge, ideas, technology and people across borders also cumulatively foster a greater global understanding on the practices in Islamic finance. Innovation has fundamentally transformed the global financial landscape at a rapid pace and is undeniably a driver to sustain growth and to secure the competitive advantage of financial market participants. In the context of Islamic finance, the broadening of the frontier of product development can be further propelled by intensifying exploration, research and development initiatives and through intellectual discourse and engagements. It is duty-bound for us to continuously expand the dimensions of Islamic finance, hence contributing towards improving financial stability and economic prosperity in the interest of the local and global community. I am confident that this conference and the opportunities presented for deliberation on the research papers will be a fruitful one. I wish all delegates and participants a successful conference. With the lafaz Bismillahir Rahmanir Rahim, it is my pleasure and honour to declare open the 2nd Foundations of Islamic Finance Series Conference. BIS central bankers’ speeches  3
International Capital Flows in the Post-crisis World, September 2019 CENTRAL BANK OF CHILE  Monetary policy framework and its effectiveness Institutional investors provide a natural base for financial market deepening and market-based FX-risk coverage instruments Main financial assets holders (*)  Derivatives market activity  (percent)  (annual transactions, percent of GDP)  100 90 80 70 60 50 40 30 20 10 0  7  1998  2001  2004  2007  2010  2013  2016  6 5 4 3 2 2008 2018 2008 2018 2008 2018 2008 2018 2008 2018  1  Bank Bds. 0  Sov. Bds. Pension funds  Corp. Bds. Mutual funds  Term-dep Insurance Co.  Stocks Other  Emerging Economies  Latin American Economies  Chile  (*) Other includes other investment funds, stock exchanges, and stock brokers. Source: Central Bank of Chile, based on data from the Superintendence of Pensions, CMF and Santiago Stock Exchange. The ability to overcome the fear of floating was helped with the buildup of capacities for companies and financial intermediaries to manage the risks associated to a more volatile FX. Consequently, derivatives markets were deepened as well as institutional investors provided a natural base for financial market deepening and Page 10 of 12  Central Bank of Chile September 2019  market-based FX-risk coverage instruments. The Chilean financial market has transited from being largely dominated by traditional banking to being composed by several other market participants, including Pension Funds, General Fund Administrators and Insurance Companies; among others.

International Capital Flows in the Post-crisis World, September 2019 CENTRAL BANK OF CHILE  Non-bank lenders  Household debt issued by NBLs has increased as a share of total consumer debt  15  Retailers CCAFs NBLs  13  Real annual growth of loans  Nonbank credit (*)  (real annual change, percent)  (percent of bank consumer loans)  Car dealerships S&Ls  F&Ls Bank  60  Retailers  Car dealerships  F&Ls  CCAFs  S&Ls  50  11 9  40  7 5  30  3 20  1 -1  10  -3 -5  0 13  14  15  16  17  18  13  14  15  16  17  18  (*) Based on individual financial statements, including for bank consumer credit, which is used as the denominator. Source: Central Bank of Chile based on data from the SBIF, CMF and Suseso. The steady growth of the nonbank portfolio is a potential source of vulnerability, given that most of these lenders are outside the consolidated debt perimeter. In terms of arrears in the nonbank consumer portfolio, retailers recorded a slight improvement relative to end-2018, to 3.8%. In contrast, for the CCAFs, delinquency has increased steadily since 2013—when they began to use accounting criteria more similar to the banks—and it is currently more than double the rates for the rest of the nonbank consumer lenders.
It is now clear that rating agencies’ models failed in the recent past as a result of wrongly basing their ratings on the correlations observed during good times. In my opinion, the recent methodological changes, imposing stricter rating caps (above the rating of the sovereign), in particular for EMU countries, amount to treating crisis times as structural changes making the new methodologies based again on extreme assumptions. Thus, the error is the same, this time in the opposite direction. Policy-makers timely acknowledged the fragilities in the design of the EMU, identifying the most crucial reforms needed. These will increase the robustness of the euro area economies against adverse shocks. Rating agencies do not fully recognize the ongoing process. Instead, they decide to change their procedures exactly at the moment in which the institutional framework of the EMU is responding to the very same conditions that motivated such move. In this regard, it is important to emphasize that EMU countries are about to be equipped with a banking union, which will contribute towards breaking the link between sovereigns and the banking/financial system. Further relevant institutional changes include the creation of the European stability mechanism, the Fiscal Compact, the new role of the ECB in eliminating runs on sovereign debt (through the Outright Monetary Transactions programme) and a comprehensive set of EU regulations aimed at avoiding fiscal and macroeconomic imbalances. Therefore, rating agencies are moving countercyclically with the EU institutional advances and risk becoming irrelevant.

This means there is a fiscal honeymoon in the first year of higher prices that creates the illusion for policymakers that there is additional room in the budget to spend. It is only during the next year or two as costs adjust and indexation mechanisms start to work that the painful reckoning comes due. Caution is therefore needed when any additional fiscal support measures are designed. Ongoing research at Eesti Pank has attempted to estimate the extent to which an unexpected rise in inflation would affect fiscal balances in the euro area using data from the mid-1990s to 2021, and has found that inflation has a sizeable positive effect on the fiscal balance as a percentage of GDP7. The positive effect comes both from the expenditure side of the budget and from the revenue side. This is particularly true when there is a significant positive inflation surprise, meaning when actual inflation turns out to be higher than expected. Governments in Europe increased their spending in 2022 so they could fund energy subsidies, invest in their defence forces and provide the help needed by Ukraine. Despite this extra spending though, the fiscal picture has remained relatively benign in most countries and in the euro area overall. This also applies to Estonia, where preliminary data suggest that the fiscal deficit for 2022 will be around 1.2 per cent of GDP. This benign outcome can in large part be ascribed to the high inflation that we saw last year.