samchain/econo-pairs-v1 huggingface dataset:
With a minimum equity ratio of 5 per cent, for example, equity can be leveraged 20 times. Today, capital requirements for residential mortgage loans in particular are very low. The risk models employed by Nordic banks seem to apply risk weights for residential mortgage loans that are as low as between 7 and 15 per cent. Banks seeking to “put equity capital to work” are under very strong pressure to increase leverage. A risk weight of for example 10 per cent for residential mortgage loans with a minimum Tier 1 capital requirement of 4 per cent would mean that NOK 1 in equity capital could be behind as much as NOK 250 in residential  BIS Review 131/2009  5  mortgage loans. Introducing a leverage ratio requirement could have the effect of curbing banks’ debt financing and risk-taking. Banks in Canada are subject to both a strict national capital adequacy requirement and a maximum leverage ratio. Banks are required to maintain a minimum Tier 1 capital ratio of 7 per cent. The leverage ratio is defined individually for each bank. In principle, the leverage ratio should not be greater than 20. 6 Canadian banks have weathered the financial crisis well, also because of the less pronounced role played by market funding. 7  At the end of the 1800s, the equity ratio for banks in Norway was about 12 per cent. Over the years, this ratio has gradually decreased, falling to its lowest level during the banking crisis at the end of the 1980s.

Liquidity management More capital is important for the solidity of the banking sector. However, we must not forget that the turbulence first translated into a liquidity crisis, as was the case for the UK bank Northern Rock in autumn 2007 when depositors rushed to withdraw their savings. For Norwegian banks, the crisis has essentially been a liquidity crisis. Norwegian banks were affected because they became dependent on market funding. The financial crisis has revealed that substantial short-term money market funding is risky. When it comes from foreign markets, the risk of funding shortfalls increases. In the mid-1980s, Norwegian banks also borrowed heavily in foreign markets. In spring 1986 – following a sharp fall in oil prices – confidence in the Norwegian economy plummeted, and liquidity flowed out of the country as was the case in autumn last year. The funding source that is considered to be the most stable, deposits, has become less important over time. It is our assessment that the funding of Norwegian banks is a structural problem. When the financial crisis is behind us, we expect banks to give increased weight to deposits and long-term loans as funding sources. BIS Review 131/2009  13  The maturity of banks’ market funding should be longer than it was before the financial turbulence. During the financial crisis, investors were reluctant to provide long-term funding and required high risk premiums. Prospects for banks in general have now improved and risk premiums have declined. Strengthening of banks’ equity capital is helping to reduce the risk facing bondholders.
Initially we had hoped Islamic banks might be able to use our normal reserves accounts, by agreeing to forgo any interest paid – as many observant Muslim customers do on their retail bank deposits. But on further investigation this proved unworkable: reserves accounts were too intimately bound up with the concept of interest, given their core role in implementing monetary policy. And the disparity in return offered to Islamic and non-Islamic banks at higher levels of Bank Rate would have left a decidedly uneven playing field. Work therefore commenced in 2015 to assess the feasibility of establishing a standalone noninterest based facility. Recognising the limits of the Bank’s knowledge of Islamic finance, we drew 8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  on the expertise of fellow central bankers across the Middle East and Asia, including those from Bahrain, Malaysia and the UAE. In light of that research, we triaged a number of potential models to gauge which might fit best with the specificities of the UK market, legal and regulatory environment. We consulted publically on those options in 2016, and again in 2017 to fine tune our intended approach.18 Today, after a long and comprehensive process, I’m pleased to announce that the Alternative Liquidity Facility will be open for business from the first quarter of 2021.

Robert Ophèle: Micro economic analysis of companies Introductory speech by Mr Robert Ophèle, Second Deputy Governor of the Bank of France, at the Plenary Meeting of the European Committee of Central Balance Sheet Data Offices (ECCBSO), Paris, 18–19 October 2012. *  *  *  Mr President, Ladies and Gentlemen, It is a great pleasure for me to welcome you in our new conference center. I am delighted to receive so many distinguished participants to this meeting, coming from the same universe of statistical institutions or central banks – whether they are members of the Eurosystem or not – and sharing the same interest for micro economic analysis of companies. We are very happy indeed to organise this year’s ECCBSO regular meeting which will enable you to discuss in depth about the past achievements of your task forces and the prospects, drawing possibly some kind of action plans. Undoubtedly, we need to explore further a number of those issues where your Committee is fully and often very successfully involved. I am grateful that BDF can provide, in its turn, the opportunity to host this conference. As you know, Banque de France is one of the co-founders of the Committee and has always shown its commitment by actively contributing to these task forces.
We work closely with the resolution function of the Bank of England to develop and put into effect workable resolution plans. 2  BIS central bankers’ speeches  I said that I would also comment on the PRA’s approach to the governance of firms, so let me now turn to that. I will start with an observation based on experience of the crisis, namely that is uncommon and rare to find a problem in the capital or funding or business model of a firm which cannot be traced back to a failure of governance. I don’t think this is a radical statement by any means. But it does mean that fixing capital, liquidity, and other areas of risk do not on their own deal with all of the problem. Put another way, it would be unwise to do all of these things and ignore governance. Good governance is critical to delivering a sound and well-run business. At the instigation of the Parliamentary Commission on Banking Standards, we are this year implementing the new Senior Managers Regime. The key principle of that regime is to establish clearly appropriate responsibility for the governance of firms. Put like that, it is not meant to be radical or life-changing, despite whatever you may hear and read. We do want to avoid what the PCBS described as the Murder on the Orient Express outcome when firms get into trouble, which is akin to the “everyone and no-one” is responsible but everyone is connected to the event.

But the primary role of all NEDs is independent oversight and challenge of the Executive and the PRA recognises that the actual responsibilities of NEDs within the scope of the regimes differ from those of executive Senior Managers and they should be clarified and limited accordingly.
This all suggests that investors may be attaching some probability to very bad outcomes, possibly the tail risk of economies becoming stranded in a debt trap. This market view is mirrored in elevated corporate caution. Investment remains subdued and businesses continue to build cash in many advanced economies. 6 This is one reason why the so-called “equilibrium” real interest rate is negative in many advanced economies, though it has risen and is possibly now positive in others like the UK. 7 Reflecting these real dynamics, central bank interest rates have had to be set at extraordinarily low levels and supplemented by large scale asset purchases simply for monetary policy to remain neutral. 8 Escaping a debt trap requires a suite of measures including structural reforms to boost productivity. But above all an economy needs to be able to channel all available savings – household, corporate and foreign – to those sectors willing and able to spend. In many respects, recent progress in the UK shows how. 3. How the UK is escaping its debt trap  In recent years, the UK economy has shown increasing signs of normalisation. Non-financial private debt has fallen by around 30% of GDP since its peak, the economy has grown consistently above trend, and unemployment has fallen from a peak of 8.5% to less than 6% today. This performance underscores several structural features necessary to escape a debt trap. The first is an integrated financial system which channels savings from one part of the economy to investment in others.

Since the near collapse of the UK banking system, bold steps have since been taken to shore up its resilience. £ billion of new bank capital has  4  Term premia, which measure investors’ compensation for holding long- rather than short-maturity claims, are also estimated to have declined since last summer, perhaps reflecting growing expectations for central bank asset purchases. 5  For the UK, December 2008; and for the euro area, June 2012. 6  The non-financial corporate sector was a net saver in Germany, Ireland, Spain, Greece and the UK at end 2013, based on Eurostat data (ESA 95 basis). 7  The “equilibrium” rate of interest is that which equates demand with potential output, thereby delivering inflation at target in the absence of “cost-push” shocks. 8  As my colleague Ben Broadbent recently said, central banks aren’t the cause of low interest rates, but rather are actors reading a script written by others, Broadbent, B (2014), “Monetary policy, asset prices, and distribution”, speech at the Society of Business Economists Annual Conference. BIS central bankers’ speeches  3  been raised in recent years, and banks’ performance in the recent UK stress test suggest growing confidence in the resilience of the system is merited. 9 Second, the UK’s fiscal policy framework helps insure against severe systemic shocks. The UK had the space to allow its automatic stabilisers to cushion the impact of the recession.
Let me finish by adding a word of caution. Regulatory devices per se do not suffice to attain a safe and sound banking system. A proper risk management culture deeply ingrained in banks’ practices is also a necessary condition to reach that goal. Consequently, banks and regulators should work hand in hand to improve financial stability. BIS Review 35/2002  7

Monetary policy in the Euro area Against this background, the role of monetary policy has become, and is likely to remain, more accommodative in the Euro area. The ECB has played a major role in supporting economic growth using its interest rate policy – now at near zero levels – and policies designed to influence credit provisioning and risk reduction. The ECB has also reaffirmed that, if necessary, further measures will be taken to counter the risk of a prolonged period of low or negative inflation and to bring inflation to its medium term target of under but close to 2%. The possibility of a deflationary situation materializing in the Euro area is of concern as its dynamics would raise real interest rates. It would penalize investors and increase the burden of holding business inventories. It would also discourage consumption, as buyers await lower prices by delaying spending. A de-anchoring of inflation expectations carries a risk of the Euro area becoming stuck in a stagnant environment for a prolonged period of time. Basically, a deflationary scenario would be inconsistent with what is needed to support an economic recovery in Europe. The effectiveness of monetary policy in the Euro area depends on a properly functioning banking sector, since the transmission of monetary stimulus operates at least partly through the bank lending channel. In the Euro area, the debt overhang in the private sector and the balance sheet position of the banks have been hampering the transmission and effectiveness of the ECB’s accommodative policy measures.
In the event of conflicting objectives, it achieves a reasonable compromise between the stability of inflation and the stability of resource  BIS Review 112/2009  1  utilization. 1 Different central banks express this in slightly different words. The Riksbank has often used the term “well-balanced” monetary policy. 2 The forecasts of inflation and the real economy are then conditional on the central bank’s view of the transmission mechanism, an estimate of the current state of the economy and a forecast of important exogenous variables. The central bank uses all relevant information that has an impact on the forecast of inflation and the real economy. In this framework, the central bank takes financial conditions such as credit growth, asset prices, imbalances, potential bubbles and so on into account only to the extent that they have an impact on the forecast of inflation and resource utilization. Inflation and resource utilization are target variables here, that is, variables that are arguments of the central bank’s loss function. Hence, financial conditions are not target variables. Instead, they are only indicators, as they provide information about the state of the economy, the transmission mechanism and exogenous shocks to the central bank. Financial conditions then affect policy rates only to the extent that they have an impact on the forecast of inflation and resource utilization. 3 3. Financial stability as a rarely binding constraint – a pre-crisis view  What is the role of financial stability in a pre-crisis view of flexible inflation targeting?

At the same time, concerns about the possible problems for the financial market apparently made the Bank of England decide to go no lower than 50 basis points and initially, in April 2009, prevented the Riksbank from going below 50 basis points, although the Riksbank later in July lowered the policy rate to 25 basis points. 5 How does the central bank know whether the constraint binds or not? I thought that it would know by continually monitoring the state of the financial sector. In some countries, the central bank publishes a regular Financial Stability Report of the type pioneered by the Bank of England and the Riksbank. These reports include an analysis of indicators of the state of the financial sector, in particular early-warning indicators of potential future problems. They serve to assure the general public and economic agents that everything is well in the financial sector when this is the case. They also serve as early warnings of the agents' concerns and for the financial-regulation authorities when problems show up on the horizon. Early action could then prevent any financial instability from materializing, thus limiting the probability of future threats to financial stability and future binding constraints on monetary policy.
In fact, a definitive framework for analyzing capital account sustainability would be most helpful for emerging market members in their own assessments of their vulnerabilities to capital flow reversals. I think this capital account sustainability framework is important, given the Fund’s mandate on the balance of payments and the recent episode of capital account crises in emerging markets. The second point I want to raise is that the Fund should look more positively at the progressing efforts by members to increase their own immunity against the risks of financial crisis and contagion by engaging in various self-insurance activities. These activities include (1) strengthening domestic policies, institutions, and data transparency which have led to greater flexibilities in dealing with shocks, (2) improving external positions by running current account surpluses, reducing external debt, and holding larger international reserves, (3) being more careful with capital account liberalization with greater willingness to use prudential and capital account measures to check excesses and to deter speculative short-term capital flows; and (4) engaging in regional cooperative efforts, such as the Chiang Mai Initiative in East Asia, to undertake collective regional surveillance and set up liquidity facilities that can be drawn in the case of emergency. To me, these developments reflect the genuine desire by regional policymakers to work together towards a common goal of reducing the likelihood of the next crisis. The Fund can look more positively at these developments as they contribute to raising global capabilities in preventing and dealing with financial crises.

Philipp Hildebrand: The Swiss National Bank’s monetary policy strategy in the financial crisis Summary of a speech by Mr Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at the University of St. Gallen, St. Gallen, 23 March 2010. The complete text in German can be found on the Swiss National Bank’s website (www.snb.ch). *  *  *  To contain the financial crisis, central banks all over the world have chosen to take advantage of the room for manoeuvre afforded by their monetary policy strategy. The major central banks were only able to act in a flexible way – at least in part – due to their high degree of credibility with regard to their goal of pursuing price stability. The monetary policy strategy of the Swiss National Bank (SNB), too, has made it possible for the Governing Board to take conventional and unconventional measures to counter the crisis. The SNB’s approach has proven viable in the crisis. But this does not mean that we can sit back now. We must first find ways to withdraw smoothly from the measures taken to contain the crisis. In addition, we need to be sure that the Swiss economy is back on a sustainable growth path. After all, the crisis has shown that imbalances in the global financial system can occur even in an environment of price stability and macroeconomic stability. The main way to counter imbalances in the financial system is through better regulation.
The treatment of intra-bank exposures may pose challenges especially in the emerging markets where banking systems rely markedly on the parent funding (intra-bank funding will be treated as funding from external third parties and their maturity will have to be extended – netting out at consolidated level is not allowed). Other question is the treatment of liquidity transfer restrictions. Excess liquidity in one entity would not be recognized when calculating the consolidated LCR if there is a reasonable doubt about the availability of such liquidity (due to ring-fencing measures, non-convertibility of domestic currency, foreign exchange controls etc. ).This may lead to fragmentation of the liquidity management, replication of the treasury operations at decentralized level with cost implications. The growth impact of the regulatory changes is of large importance for the emerging markets, as they aim towards financial inclusion, development of financial markets, long-term sustainable growth and real convergence to the more AE’s. Two of the most important points which have been extensively discussed in the growth context are the regulatory impact on trade and long-term infrastructure finance. Trade finance has been considered as the most important facilitator of the trade flows in part of the emerging markets and hence as an important growth factor within this group of countries. Some of the estimates point to a figure of 80–90% of the world trade being reliant on some form of trade finance, like trade credits or insurance/guarantees.

For the emerging world, even more so amidst less developed capital markets, as an alternative source of growth funding. However, during the process of transition, given the still rather weak economic recovery, the reform may have some negative implications for the financial markets, credit activity and growth dynamics. The fact that these reforms were primarily tailored to the specifics of the more advanced economies (AE), where the financial crisis, originally rooted from points to a possibility of asymmetric effects for advanced and emerging economies (EE) during the transitional process. As EE’s and AE’s economies intrinsically differ in terms of the level of financial and economic development, it is to be expected for the financial regulatory reform to have asymmetric impact on both groups of countries. Possible, unintended adverse impact on emerging market might occur, both through the direct channel of transmission (via the direct implementation of the new regulation), but also through the indirect channel, as the foreign banks in the emerging market change their behavior in response to the new regulatory standards. The deleveraging process is one of the well known indirect impacts, with large consequences, particularly in the emerging Europe. As the international regulatory reform process is very complex, some of the measures have long sequencing of implementation, and for some of the reform areas there are more observations and analyses to be done to define the final contours of the new financial system, more precise assessment of the impact seems challenging.
1  Paper by Robleh D Ali, Andrew G Haldane and Paul Nahai-Williamson. 2  Oh et al (2011). 3  Oh et al (2011). 4  Ginsburgh and Weber (2011). 5  Counterparty Risk Management Policy Group (2008). BIS central bankers’ speeches  1  Compared with these industries, finance has been a laggard. But the tide is turning. Since the crisis, significant progress has been made by financial firms, regulators and trade associations in developing information systems and the common data standards necessary to underpin them. Conferences like this are evidence of that. At the same time, there is a distance to travel before banking harvests the benefits other industries have already reaped. A common financial language has the potential to transform risk management at both the individual-firm and system-wide level. It has the potential to break-down barriers to market entry, leading to a more decentralised, contestable financial sector. And it thereby has the potential to both boost financial sector productivity and tackle the too-big-to-fail problem at source. There is no technological barrier to this transformation. And private and social interests are closely aligned as improved information systems are a public as well as a private good. That public-private partnership is one reason why such good progress has been made over the past few years. So stand back for a good news story – a story of how finance could transform both itself and its contribution to wider society.

Senior Supervisors Group (2010), “Observations on Developments in Risk Appetite Frameworks and IT Infrastructure”, December. Senior Supervisors Group (2009), “Risk Management Lessons from the Global Banking Crisis of 2008”, October. SIL International (2009), http://www.ethnologue.com. “Ethnologue:  Languages  of  the  World”,  available  at  Tett, G (2012), “Guiding light needed to cut through data fog”, Financial Times, 8 March 2012. Vise, D A and Malseed, M (2005), “The Google Story”, Pan Books. World Trade Organisation www.wto.org/statistics. BIS central bankers’ speeches  (2011),  “International  Trade  Statistics”,  available  at  17