samchain/econo-pairs-v1 huggingface dataset:
A broad-based transition to more robust overnight risk-free rates can provide the safe descent from Libor we set out to achieve, to a more resilient and transparent financial system. [10] Active and liquid underlying markets underpinning overnight rates have demonstrated resilience and we expect liquidity to move to these markets. [11] But there are also specific and limited use cases where forward-looking term rates may help facilitate this journey. We have seen constructive engagement in the UK. In 2018 the RFRWG surveyed the sterling market – and to be honest, we received a mixed response on the role of term rates, but with a small majority supporting a limited role for them. [12] The UK authorities have been supportive of the development of forward-looking term SONIA rates for limited use in cash markets. These rates have now been available for use in sterling contracts since January. [13] But while a narrow majority of the market made the decision to support the development of those rates, a broader consensus has firmly endorsed the limited use case for such rates. It has done this through the RFRWG but also through the FICC Markets Standards Board (FMSB) that has published a proposed market standard that considers limited use cases where there is a robust rationale for use of forward term SONIA, to meet specific needs, such as in trade finance and Islamic finance products. [14] Let me be clear – forward-looking term rates can support transition.

Well the summit, or summits that are the cessation dates for Libor are now clearly on the horizon with the FCA announcing earlier in the year that Friday 31 December 2021 will be the final publication date for panel bank sterling, Japanese yen, Swiss franc and euro Libor rates along with a number of lesser used US dollar tenors. The remaining US dollar tenors will cease in mid-2023. These summits have been on the horizon for over a decade and have been well signposted but they are now clearly visible, but as any climber will tell you the hardest part of mountaineering is often the descent. It can often be more treacherous than the climb. So with the market having definitive dates for the end of Libor – I am going to focus my comments today on descending safely – remembering the important role benchmarks play in the financial system and why financial firms and borrowers would be well served in choosing the most robust alternative reference rates that meet their use case. Transition from Libor was always going to be challenging given its widespread use, but to those looking for an easy descent by substituting Libor for credit sensitive rates that do not address all of its fundamental weaknesses, they risk much of the good progress that has been made. While these rates may offer convenience as a short-term substitution, they present a range of complex longer term risks.
This could be promoted further if complemented by  6 Minouche Shafik, “A new heart for a changing payments system”, speech, Bank of England, London, 27 January  2016. For more about the early days of clearing cheques, see the Cheque and Credit Clearing Company, “History of the cheque”, https://www.chequeandcredit.co.uk/information-hub/history-cheque/clearings-early-days. 6 [15]  common Nordic payment solutions or by making payments between existing domestic schemes feasible.7  Lessons learned Drawing conclusions based on a period spanning millennia can only be strongly subjective. Yet, certain factors stand out to me as constants during the history of payments. Some may even be more relevant than ever, one could argue. Allow me now to elaborate further on my four basic lessons, before I turn to our ongoing work to develop the current infrastructure. Trust and uniformity of money is essential Firstly, for money to work properly it needs to have the trust of its users. Otherwise, buyers and sellers will look for other mediums of exchange. This increases transaction costs, hampering trade and economic activity. Historically, trust has benefitted from a credible issuer, that is, from money being a claim on a party that everyone expects to honour its obligations. This speaks in favour of giving the right to issue money to the state with its powers of taxation. This is also what happened in most countries with the Bank of England as an early role model. In addition, I also believe in the value to society of having one commonly agreed monetary unit in a given jurisdiction.

The preparatory steps that we have decided to take will provide a basis for deciding whether the Riksbank should enter into contractual negotiations with the Eurosystem. In practice, we will analyse thoroughly a number of key issues, ranging from the consequences for monetary policy and financial stability to governancerelated aspects and possible contingency solutions. This entails also further study of potential requirements stemming from the Swedish protective security legislation. Now, this is not something that will happen overnight. A first transaction using Swedish kronor on T2 or T2S is likely to happen perhaps seven or eight years ahead. The work following a decision to proceed – negotiation with the Eurosystem, implementation, testing, etc. – will take several years. Yet, my message to Swedish banks listening to or reading this is, I would like to bring the message across that this is no small task, neither on our side or yours. We will invite for further dialogue around this in due course. Serving society beyond interbank infrastructure In addition to the just mentioned development plans for the next generation of payments systems, we also conduct work that more directly focuses on end-users rather than wholesale payments. E-krona: maintaining the public’s access to central bank money Against the background of declining cash use in society, the Riksbank began work in 2016 on analysing opportunities and challenges associated with issuing a Swedish krona in digital form to the public: an e-krona. When we started this investigative work, we were very much alone.
As you may know, after a while Stockholms Banco began issuing more banknotes than they had cover for in precious metals. After a while, distrust of Stockholms Banco began to spread and people wanted to redeem their banknotes for precious metals. We now had Sweden's first bank run, which one might say was Sweden's first financial crisis. Stockholms Banco was taken over by the Riksdag (Swedish parliament) and later became the Riksbank. It must be said that the banknotes were very popular and highly-valued as long as people trusted in their worth. Compared with coins, they weighed very little and could easily be carried around. They were also considered to be worth more than the corresponding amount in coins. It was not until 1904 that the Riksbank was given a monopoly on issuing banknotes. Prior to this some commercial banks issued their own banknotes. The banknote monopoly meant two things. Firstly, it resolved the trust problem. Unlike commercial banks, a central bank like the Riksbank cannot normally go bankrupt. The holder of a banknote issued by the Riksbank can always be certain that it has a worth corresponding to its nominal value. Secondly, the banknote monopoly established a unique payment standard that is set by the state; in Sweden the legal tender is banknotes and coins issued by the Riksbank. The use of having a uniform standard for payments, and having this standard accepted by all, saves time and energy for individuals to expend on other things.

These advocates say that this would make it easier for the central bank to implement an efficient monetary policy with a negative interest rate. 10 This reasoning is based on the central bank being prevented from setting a negative interest rate to the extent considered necessary to stimulate economic activity. Personally, I am not convinced that this problem would arise in Sweden and I would once again like to say that the Riksbank has a statutory requirement to issue banknotes and coins. I see e-krona primarily as a complement to cash. 10 The idea is as follows. If the central bank introduces a negative interest rate, economic agents will choose to  hold cash, which does not have an interest rate, instead of deposits with the banks. This means that the central bank's policy loses impact at the level where the agents begin to prefer cash. This is often referred to in academic research as the “zero lower bound” problem. 8 [10]  The issuing of e-krona together with a positive interest rate on e-krona could affect financial stability in the banking sector. Today, the banking sector functions as a system of communicating vessels. If a consumer or a company withdraws money from a bank, this money comes into another bank, either as a deposit or as payment for a product or service.
During the spring the turmoil reaped its most startling victim so far. Bear Stearns, the fifth largest investment bank in the US, was forced to suspend payments after being unable to arrange short-term financing. It hardly needs to be said that Bear Stearns was heavily exposed to the subprime market. Conditions on the credit markets temporarily eased after Bear Stearns. Although tensions continued, the market began to slowly return to more normal conditions and credit risk  BIS Review 125/2008  1  premiums decreased sharply for a while. Confidence seemed to be returning to the financial markets. However, the turmoil gained renewed strength during the late summer when Lehman Brothers was forced to apply for bankruptcy protection. Since then a number of banks in Europe and the United States have experienced severe problems. Banks and financial institutions that were forced into being sold or nationalised include heavyweights such as Fortis in Belgium, Merrill Lynch and AIG in the United States, and Hypo Real Estate in Germany. The financial crisis had progressed from being a subprime crisis in the United States into a global confidence and liquidity crisis. Where can we find the explanations? In light of current events, the obvious question is how do we explain the situation? What we see is largely the result of an extended period of vast expansion of credit and growth of the financial industry's assets, which with hindsight has proven to be unsustainable.

2  BIS central bankers’ speeches  The adaptation of the Spanish economy to the euro was incomplete Turning now to the Spanish economy, our adaptation to the new rules of play derived from, or imposed by, monetary union has been insufficient and belated. Our membership of the euro area compelled us to desist from long-established practices among economic agents who regarded exchange rate devaluation as the “normal” means of resolving the problems of competitiveness caused by inflation and did not consider fiscal discipline as vital for maintaining economic growth. True, in the years before we joined the euro area, we took steps to adjust economic policy rules to a low-inflation environment and set in train some reforms so it would function more flexibly. Two factors were particularly important in achieving this goal. First, the anchoring of inflation expectations, which required fulfilment of the price stability convergence criteria. And second, in the area of budgetary policy, the enactment in 2011 of an initial Stability Law laying the foundations for preventing excessive budget deficits. The transition to Monetary Union was also easier because the peseta/euro conversion rate agreed in 1999 was quite competitive as a result of the devaluations which had taken place between 1992 and 1995 during the functioning of the European Monetary System. However, those devaluations were a clear sign of the difficulties awaiting countries that make exchange rate commitments if these are not accompanied by price and cost discipline.
It is possible that the boost to the nation’s productive capacity from higher capital spending and greater labor supply will be higher than anticipated, leading to faster growth and greater revenue. But, on the other side, the revenue projections might also turn out to be overly optimistic as households and businesses react to changes in the tax code by adjusting how they conduct their activities in a way to minimize their tax liabilities. This might especially be true as people look to take advantage of the lower top marginal pass-through rate that is available on sole proprietorships, partnerships, LLCs and S corporations compared to wage income. Debt service costs will undoubtedly be boosted by higher levels of federal debt and higher interest rates. In fiscal year 2007, federal debt service costs totaled $ billion on $ trillion of federal debt held by the public. By fiscal year 2017, although federal debt held by the public had nearly tripled to almost $ trillion, debt service costs were $ billion, only modestly above where they were 10 years earlier. Over the past decade, the sharp decline in short- and longterm interest rates has kept a lid on debt service costs—that lid is now being lifted. Although the future path of interest rates is highly uncertain, the most recent 10-year projections of the Congressional Budget Office (CBO) illustrate where debt service costs are heading.

In strict inflation targeting, all policy actions are aimed at hitting an inflation target. In flexible targeting, policymakers balance deviations from both the unemployment and inflation targets. Usually, the policy prescriptions from the two targets are not in conflict. Above target unemployment is typically associated with muted inflationary pressures, and accommodative policies are appropriate to reduce both gaps from their respective targets. At times, however, conflicts can occur. When they do, a flexible targeter does not accept a large miss in one target in order to hit the other perfectly, but instead accepts moderate misses in both in order to minimize the total loss. A corollary is that any flexible inflation targeter has to accept the idea that optimal policy may involve inflation running for a time above the long-run target if that is a consequence of policies designed to bring unemployment more in line with its target rate. 3  For example, the economy may have experienced some permanent loss of potential output during the recession partly because of reduced capital deepening with lower rates of investment and partly because of other factors. In addition, extended unemployment insurance benefits and difficulties in matching workers with jobs may be temporarily pushing up the natural rate of unemployment. 4  See Board of Governors of the Federal Reserve System (2011). 5  See Evans (2011).
to promise to keep interest rates low for longer in the future. Such commitments, if credible, lower longer-term interest rates and provide economic stimulus even if the current interest rate remains unchanged.9While forward guidance is a useful instrument, recent research has highlighted that its effectiveness can be improved if combined with other non-standard monetary policies.10 Research in both academia and in central banks has therefore re-examined alternative monetary policy tools, including so-called quantitative easing (QE) policies. And here the newly developed models with financial frictions have been useful.11 Earlier studies based on the assumption of frictionless financial markets had concluded that QE is completely ineffective. The renewed focus on financial frictions clarified that this conclusion is unwarranted, once it is recognised that financial intermediaries are subject to leverage constraints.12 Large-scale asset purchases can ease these constraints and increase investors’ risk-bearing capacity, leading to a portfolio rebalancing towards risky assets and to strengthened lending activity for banks. All in all, research has confirmed that central banks are not powerless at the effective lower bound. Provided they are willing to explore non-standard policy avenues, they can continue pursuing their price stability mandates even in the most adverse circumstances. The evolution of policymaking The policy response by central banks and governments has evolved along the two main lines suggested by research.

As short-term interest rates approached the effective lower bound, central banks on both sides of the Atlantic undertook a number of unconventional measures aimed at influencing the whole constellation of rates that are important for the financial decisions taken by households and businesses. Forward guidance helped guide market expectations of future short-term rates. QE involved direct intervention by central banks in markets through large scale asset purchases to influence the yield curve beyond the very short term. A large body of empirical research has substantiated the success of these policies in supporting the economy and inflation, both in the euro area and in the United States.13 But central bank policy moves extended beyond just measures to counteract the impairment of the transmission mechanism caused by financial frictions. The ECB also acted in various ways to prevent self-fulfilling expectations from delivering socially undesirable outcomes by coordinating expectations onto “good” outcomes. One such policy initiative was our lender-of-last-resort intervention during the financial crisis. Revisiting the Bagehot principles set out a century and a half ago in the light of the ongoing crisis,14 the ECB lent freely to solvent financial institutions against sound collateral, penalised by a haircut. We did so in multiple ways: our liquidity operations moved to a fixed rate full allotment basis with unprecedented maturity of four years, and we widened the eligible collateral accepted in our operations.
Second, I would like to discuss the economic challenges we face and what it takes to address them. I am acutely aware that the focus of policymakers lies elsewhere for the moment. But let me be quite clear: economic success is also part of the solution in other fields. Therefore, mitigating economic risks deserves to be high on the political agenda. The ECB’s monetary policy: working and still flexible It was about three years ago that inflation started moving away from the ECB’s medium-term inflation aim of below, but close to, 2%. Since October 2013, inflation has been below 1%. Throughout 2015 headline HICP inflation in the euro area was very low or even negative, remaining under the influence of low commodity prices, and euro area annual HICP inflation was estimated at 0.4% in January this year. In parallel to this trend, we had to continually revise our outlook for inflation: while at the start of 2015, our staff was forecasting inflation to reach 1.5% in 2016 and 1.8% in 2017, in December they projected a rate of only 1% for this year and 1.6% for 2017. Against this backdrop, the ECB decided in December to act again. Our assessment of the monetary policy stance had two parts. First, we noted that the measures put in place since the summer of 2014 had been very effective. The monetary stimulus that they introduced led to a broad-based easing of financing conditions, stimulated credit provision, and has since provided substantial support to the euro area recovery.

The Central Bank’s short-term foreign liabilities were close to zero at year-end, where they in fact remain. The Bond Market Bond market reforms were continued in 1997. In 1996, the Central Bank decided to withdraw from the long-term market and reached custodian agreements with three securities firms following a bidding process. The Bank handed over to the firms a part of its securities portfolio and at the same time ceased to be a market maker in government bonds, government notes and housing bonds. The experience from these agreements is positive and they were BIS Review 42/1998  -4-  renewed in March 1997. The new agreements were more extensive than the earlier ones, and in their wake two banks announced that they would engage in market making for certain classes of government securities in the same manner as the custodial firms. It is not unlikely that such custodial agreements will become unnecessary and that the Central Bank will no longer need to be involved in ensuring adequate market making in the long-term market. Both the Treasury and the State Housing Authority began to reorganize the classes of bonds they issue, with the effect of improving the price determination of government guaranteed bonds and raising turnover in the secondary market. The Central Bank’s Monetary Policy Instruments In 1997, the Central Bank began preparing changes to its monetary policy instruments.
This makes me more confident that job growth in January was temporarily depressed by unusually bad winter weather. Other labor market indicators, such as initial claims for unemployment insurance benefits and the employment components of both manufacturing and nonmanufacturing business surveys have also shown improvement recently. Although there is still uncertainty over the timing and speed of the labor market recovery, I do expect that job growth will increase considerably more rapidly in the coming months. We should welcome this. A substantial pickup is sorely needed. Even if we were to generate growth of 300,000 jobs per month, we would still likely have considerable slack in the labor market at the end of 2012. So, why is the economy finally showing more signs of life? In my view, the improvement reflects three developments. First, household and financial institution balance sheets continue to improve. On the household side, the 2008–09 rise in the saving rate appears to have stabilized in the 5 percent to 6 percent range. Meanwhile, the amount of money they need to service their debt (for mortgages, cars, credit cards, etc.) has fallen sharply to levels that prevailed during the mid-1990s. Debt service has been pushed lower by a combination of debt repayment, refinancing at lower interest rates and debt write-offs. Financial institutions have strengthened their balance sheets by retaining earnings and by issuing equity. As a result, some measures of bank credit are beginning to expand again. Second, monetary policy and fiscal policy have provided support to the recovery.

And we also need to identify the needs in the areas of monetary and prudential policies, where the CEF’s member countries have urged it to continue expanding its activities. This is a full agenda, and I am sure it will not be the last time we get together to exchange views on these issues. I believe strongly that we stand to gain immeasurably from considering these challenges on a regional basis. We can learn from each other’s experience; we can engage at times in a joint dialogue with the external actors in the region; and perhaps our political leaders can find some opportunities to launch reform initiatives in parallel – for example, in developing structural reforms to help promote a flow of new capital to, and within, this region. In this spirit, I look forward to very fruitful discussions – now in Tirana and in the future! 2  BIS Review 162/2009