samchain/econo-pairs-v1 huggingface dataset:
The UK’s financial sector can be both a global good and a national asset – if it is resilient. It is not for the Bank of England to decide how big the financial sector should be. Our job is to ensure that it is safe. The UK can host a large and expanding financial sector safely, if we implement a reform agenda that extends well beyond domestic banking. That is not to suggest that the focus on reforming domestic banks has been misplaced. Following the crisis, it was imperative to fix first the fault lines at the core of our system, with initiatives ranging from rebuilding the capital of major UK banks and building societies, to changing the structure of compensation and the responsibilities of senior officers. In tandem, some major banks are working to change their cultures.6 But reforms of domestic banking are far from sufficient for a global hub like London. Now is the time for a greater focus on what’s needed for resilient international banking and robust global markets. This will require sustained international engagement. Unlike in the early days of the FT, the UK can no longer dictate standards. Rather than ruling the waves, we must spur collective action through a demonstrated commitment to openness and the promotion of better ideas in Europe and at the G20 via the Financial Stability Board (FSB).

During the 1980s inflation averaged 7% a year, and it is only since the inflation target regime was adopted in late 1992 that inflation has returned to both low and stable levels. Britain tried most types of monetary regime: targeting monetary aggregates both narrow and broad; shadowing an exchange rate target, and an explicit exchange rate target through membership of the Exchange Rate Mechanism. None was pursued for long, and none carried real credibility. It was following our exit from the Exchange Rate Mechanism in 1992 that the opportunity arose to put in place a new monetary framework based on an explicit target for inflation and a floating exchange rate. The aim of the MPC is to keep both inflation and inflation expectations at the target level of 2½%. It is no small part of a central bank’s role to create confidence and credibility in the belief that it will respond to any change in economic circumstances in order to maintain a broad degree of economic stability. In the economists’ jargon, the public must believe that the central banks “policy reaction function” is consistent with stability, and if it is predictable, then announcements on interest rates should not come as news. The economic data will have led to expectations about the likely course of interest rates which, in most instances will prove a reasonable guide to the course of policy. A clear sign of the success of the MPC will be when we are no longer news.
Figure 4: Ratio of Capital Funds to Total Assets of LCBs 8.0  Per Cent  7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0  2000  2001  2002  2003  2004  2005  Sep06  per cent  Figure 5: Non Performing Advances to Total Advances of LCBs 18 16 14 12 10 8 6 4 2 0 2001  2002  2003  2004  2005 Sep-06  It would also be noted in the year 2006, several important measures were taken to strengthen and improve the efficiency of the financial sector, improve risk management, enhance access to finance, strengthen the payment and settlement system as well as supervision and regulation. Banks were required to include market risk in the computation of capital adequacy to ensure that they are adequately capitalised to meet any adverse fluctuations in market prices and are not vulnerable to any unanticipated shocks. Prudential norms for classification and valuation of bank investment portfolios were further strengthened. To improve the safety and efficiency in the payments and settlements systems, the Central Bank also drafted a payment system policy in consultation with the National Payment Council to declare a public policy regarding the regulatory framework. As is well known, the Central Bank manages the Employees’ Provident Fund (EPF). It does so by receiving member contributions, maintaining member accounts, investing funds and paying benefits to members. The total assets of the EPF grew by 13 per cent to Rs.439 billion during the 12 months ending June 2006.

Having both the public and 2/3  BIS central bankers' speeches  private sectors on the same platform would help to cement the shared responsibility mindset and synergise our efforts in addressing the ML/TF/PF risks. Finally, let me thank the APG Secretariat for coordinating this Workshop. Special thanks as well to all speakers, moderators, and participants that took their time to be with us for the next three days. With that, I wish all of you a successful and productive Workshop ahead. 1 RUSI, 5 years of growth of Public-Private Partnership to Fight Financial Crime, August 2020 2 FATF Guidance on PF Risk Assessment and Mitigation 3 UK National Risk Assessment of Proliferation Financing 4 Mitigating the Unintended Consequences of the FATF Standards  3/3  BIS central bankers' speeches
We will achieve the closest to a co-operative solution if we avoid large surprises between policy makers. While trade multilateralism is at risk, monetary and financial multilateralism stands fast, fortunately. This means continuing to favor dialogue and exchange of information among central banks, and to be very clear about our monetary policy regime choice. We should cherish the “great convergence” of policy objectives of the last fifteen years. Among major advanced economies, we now have domestic inflation targeting around a 2% medium-term objective. We are ruling out any currency war, as clearly stated in the unanimous communiqué of our Bali meeting earlier this month: “We will not target our exchange rates for competitive purposes”. On capital flow management (CFM) measures, we should support the ongoing reflections undertaken within the relevant international bodies and give priority to practical and pragmatic solutions – IMF type – rather than dogmatic purity. Last, as the G20 Eminent Persons Group (EPG), led by Tharman Shanmugaratnam, rightly stressed in its recent report, we need to put in place a reliable Global Financial Safety Net before the next crisis and co-ordinate its different layers. This should include an “IMF standing liquidity facility”. The global financial safety net is the best insurance we can get against the risks created by economic divergence and it comes at a limited cost.

2/4  BIS central bankers' speeches  Any new form of digital money in order to succeed will need to be trusted as a store of value and as an accepted means of payment. Stablecoins must therefore promise, credibly and consistently, to be fully interchangeable with existing forms of money. In other words, they must be anchored in and thus maintain confidence in the monetary system. It is with this objective firmly in mind that the Bank of England’s Financial Policy Committee has set out its expectations to inform the design and regulation of stablecoins, and thus lay a clear foundation for sustainable innovation by setting out the public interest. The FPC’s first stablecoin expectation relates to the principles and expectations that payment regulation should aim to achieve. In this regard, UK authorities are already considering the regulatory approach for payments, including in response to both systemic and non-systemic stablecoins. The FPC’s second expectation relates to the use of stablecoins as money. This recognises that the Bank’s existing payments regulatory regime alone would not be sufficient to ensure the safety of a new form of digital money. Certain key features of the banking regime would also need to be reflected in any regulatory model meeting the FPC’s second stablecoin expectation. The Bank’s view is that these include: legal claim, capital requirements, liquidity requirements and eligibility for support from a central bank during a stress, and a separate backstop to compensate depositors in the event of failure.
And even if that were possible, the burden of debt, denominated in nominal terms, would rise relative to income. These countries, then, are heavily dependent on the pattern of spending elsewhere and would benefit greatly from an expansion in domestic demand in countries with stronger balance sheets. The main lesson from the experience of the imbalances is that national policy frameworks alone were unable to prevent domestic demand from growing at an unsustainable rate. Intertemporal budget constraints do not exercise the same discipline as constraints that are immediately binding. So unsustainable paths of spending and precarious stock positions developed. As a result, abrupt, and costly, adjustment at some point in the future was always likely. Markets can enforce inter-temporal budget constraints only over a long-time horizon. As a result, countries can pursue inconsistent policies for long periods, and a range of imperfections in the financial system encourages them to do so. An example of those imperfections is that opportunities to insure against exchange rate fluctuations are limited – markets are incomplete. Exchange rates can move in surprising and unpredictable ways. Over the past twenty years, the ratio of the highest to the lowest dollar-yen exchange rate was almost 2 to 1, and the same was true of the dollar-euro rate. The difficulty in insuring against such swings means that this volatility can induce large fluctuations in output with unnecessary costs incurred in the relocation of resources and employment.

Fixed, or managed, exchange rate regimes may help to limit the real economic costs of “excessive” volatility that reflects short-lived shifts in market sentiment, but if they impede desirable adjustments of real exchange rates, they contribute to unsustainable patterns of spending. There are other reasons why emerging economies, in particular, have managed their exchange rates. Perhaps the most important is that pushing down on the exchange rate is a means to pursue a strategy of export-led growth. Another motive, important in the wake of the Asian financial crisis, was to build up large precautionary balances of foreign exchange reserves as a way of insuring against sudden reversals in capital flows, especially of shortterm bank lending, that proved so damaging in the 1990s. 2  BIS central bankers’ speeches  Such policies distorted saving and exchange rates, and created large capital flows unrelated to the distribution of profitable real investment opportunities. Given imperfections in financial markets in both borrowing and lending countries, such capital flows can lead to a degree of fragility, such that, when adjustment comes, there is a high probability that it will be abrupt. For example, the distortion from a “too important to fail” implicit subsidy to the funding costs of banks in the industrialised world led to excessive leverage in these countries. Creditors were prepared to lend at lower rates and on a greater scale than they would have without the implicit subsidy. In other countries, financial repression artificially raised saving rates by making borrowing too costly.
6 In a nutshell that is why, over long periods of time and across wide ranges of countries, well-functioning finance has supported wealth-creation and well-being. The other, more obvious, way of capturing why finance matters is to see what happens when it goes wrong. Then it can quickly take large chunks out of the capital our societies have, over time and at great cost, painstakingly accumulated. That crumbling of capital, in its broadest sense, is the reason financial crises have been about as costly as any event societies have ever faced historically, war and revolution excepting. Capital, for these purposes, has more than one face. The collapse of capital during financial crises shows up, most obviously and immediately, in measures of financial capital (the values of bonds and shares) and physical capital (the accumulation of buildings, houses, plant and machinery). And because we assign monetary values to these concepts, and obsess about them in the media, these losses of capital are clear and visible. Yet it is another form of capital that may matter every bit as much to wealth and well-being in society – social capital. There is neither a standard definition, nor a simple means of measuring, social capital. In general, social capital refers to the relationships, trust and  3  Carney (2015). 4  For example, Levine (2005) and Beck (2012). There is also evidence finance fosters entrepreneurship (Guiso et al (2004)) and reduces poverty and inequality (Beck et al (2007).

Two weeks after each meeting, the Bank publishes minutes, which make it clear whether there was a lack of consensus in the Committee. Publication of the minutes is required by law. An account of the implementation of monetary policy is provided in the Annual Report. All committee members are free to express their personal views on economic issues and monetary policy. In Sweden, too, interest rate decisions are made by a board of experts – the Executive Board. The members work full time, and participate in the daily operations of the central bank. An inflation report expressing the Executive Board’s collective view of the inflation outlook is published four times a year. As in the UK, special emphasis is placed on the individual responsibility of the Executive Board members. The individual members’ voting and assessments are disclosed. Any lack of consensus regarding the inflation outlook and setting of interest rates emerges from the minutes that are published from two to four weeks after each monetary policy meeting. Grounds are given for decisions on interest rates, but no press conference is held immediately after monetary policy meetings. The Executive Board does not directly announce its stance regarding interest rate movements in the period ahead, but this is implicit from the uncertainty associated with the projection, which Sweden’s Riksbank also illustrates by means of a fan surrounding the inflation projection. The Executive Board reports twice a year to the Swedish parliament, the Riksdagen.
Conceivably, too, such a failure could have such serious consequences for the liquidity of - or price level in some particular sector of the financial markets, that concerns would arise for the liquidity, or solvency, of other bank or non-bank institutions that were known, or believed, to be heavily exposed to that market. In this sense size does matter - and, whether or not one chooses to describe the risk of this happening as systemic, there is no doubt that a sufficiently large disturbance originating in the non-banking activity of one financial institution could put others in difficulty. This possibility must be of concern to financial regulators, including central banks, concerned with the stability of the financial system as a whole. It certainly in my view provides macro-prudential justification for regulatory oversight of the activity of (large) non-bank financial institutions, and of the non-banking activities of banks - quite apart from micro-prudential regulation in the interests of consumer protection. It provides justification, too, for some form of consolidated prudential oversight of multifunctional financial groups and for monitoring large exposures, both intra-group and to outside counterparties. Where a problem of this sort does arise, it may well justify technical central bank intervention to help contain it - for example by facilitating payments and settlements to minimise market disturbance.

They only move the time-consistency issue one step back - the policy rule may be abandoned, the central banker fired, the contract reinterpreted or rewritten.3 The other approach says that real central bankers do not and need not worry about time-inconsistency; they “just do it”, (Bennett McCallum, 1995). Central bankers should simply resist the temptation to deviate from the time-inconsistent policy, and private agents will eventually come to accept that resolve. Attractive as such a solution may appear to central bankers, it fails to answer the challenge posed by the game-theoretic result of Kydland and Prescott. And it fails to explain why it is that some countries in some periods just do it and others do not. Central bankers who have the determination and strength of purpose to “take the punch bowl away just when the party is getting going”, in McChesney Martin’s memorable phrase, clearly have the “right stuff” - so why don’t they “just do it”? 4 A deeper explanation of how this problem can be overcome requires an analysis of what might be called the “technology of collective decisions”. Individual agents can make contracts because they believe that the legal system is external to both parties to the contract. But it is difficult to write contracts that commit future collective behaviour. Collectively, we can either meet our previous commitments or we can ignore them.
The development of interest rates abroad and the krona exchange rate Let me begin with the forecast for economic activity abroad, which I think in some respects has been given too much significance in the discussion of our forecasts for, for example, the krona exchange rate. As I see it, changes in interest rates abroad relative to Swedish interest rates say more about the current exchange rate for the krona than about the future development of the krona. The fact that interest rates increased more in Sweden than in the euro area in the first half of 2010 is thus an explanation of why the krona strengthened against the euro in the same period, but high Swedish interest rates relative to those in the euro area will not necessarily lead to the krona strengthening in the period ahead.8 My belief that too much importance has been attached to forecasts of policy rates abroad does not mean that financial prices abroad are of no interest. On the contrary, developments in 2010 illustrate that long-term Swedish rates often appear to be strongly affected by developments abroad, and especially in the United States, without these shifts being motivated by changes in economic activity in Sweden. We need to improve our understanding of international financial links of this kind. Can assessments stop short at the end of the forecast horizon?

Although I hope that the analysis will eventually develop to the extent that it is possible in a reasonably reliable way to take account of this type of risk in our forecasts we are not there yet. My view is that it may sometimes be justified to consider this kind of unforecastable risk  8  According to the theory of uncovered interest rate parity, the market expects the krona to weaken against the euro in the period ahead if Swedish interest rates are higher than those in the euro area. Uncovered interest rate parity also explains why the krona strengthened at the same time (and not afterwards) as Swedish interest rates increased relative to those in the euro area in 2010. However, the empirical support for uncovered interest rate parity is weak and there are many examples of deviations from the theory. For example, the krona strengthened more against the euro in 2010 than implied by uncovered interest rate parity. I refer to my speech “Many dimensions to well-balanced monetary policy”, dated 26 January 2011, for a more detailed discussion of the development of interest rates and the krona exchange rate in 2010. 8  BIS central bankers’ speeches  in our monetary policy decision-making. Ignoring such risks completely is, in my view, the same as saying that they do not exist, and that is a position that I would not want to defend.
While these entities differ in size, purpose, and mission, the common threats associated with cybersecurity represent a universal concern. Indeed, in my regular meetings with supervisory colleagues and supervised institutions, cybersecurity is almost always at the top of the risk list. Frequently cited challenges by local institutions include: attracting and retaining information technology talent, as these skilled individuals are in high demand and implementing a sufficiently robust vendor management program for technology services outsourced to third-party providers. While we expect firms to adequately manage a number of financial and operational risks such as credit risk, market risk, and operational risk, the nature of the cybersecurity risk differs in one key aspect – motivation. A cybersecurity attacker might be a nation-state or hacker with the intention to disrupt or damage a critical infrastructure sustaining the U.S. and global economy. Or, the attack may be financial in nature, where the perpetrator is engaging in fraud and seeking to profit. These motivations suggest that the cyber threat is more intentional than other risks. This intentionality coupled with the resources of some perpetrators raises the stakes significantly and makes cyber defense much more difficult. We recognize that addressing the cyber threat is a complicated and expensive undertaking, but it is an essential one. All banks, from the largest globally systemically important to the small community banks, are vulnerable to this threat and need to take the appropriate steps to identify, protect, detect, respond, and recover.

Yet the good results can be explained quite logically, since they arise from a combination of particularly favourable factors. First, I would like to mention the remarkable ability of the private sector to adapt to the challenges presented by the globalisation of markets. Thanks to reorganisation efforts in the export sector, results in foreign trade have improved substantially. Over the past ten years, our exports have grown by more than 80%, or five times as fast as the gross domestic product. We now run a surplus in goods trading in addition to our traditional surplus in the area of trade in services. The success of strategies geared to quality and high-tech content are demonstrated by the vigorous growth recorded by exports in high added-value areas such as electronics, watchmaking, chemical and pharmaceutical products. Alongside this we should mention the growth in the exports of services, particularly in the areas of finance and tourism. Overall, our net balance from trading in goods and services has increased from CHF 17 billion to CHF 37 billion in 10 years, in other words, from 4.6% to 8.3% of GDP. Clearly, far from threatening our expansion abroad, globalisation has led to an expansion in our markets from which our companies have been able to derive extensive benefits. The prosperity of our foreign trade depends to a large extent on the good shape of the global economy, whose performance has been very good over the past few years.