samchain/econo-pairs-v1 huggingface dataset:
Particular attention should be paid to abrupt repricing moves in risky asset prices, in the wake of rising interest rates. This situation could put some non-bank financial actors in difficulty, especially the ones using leverage, as illustrated by the Archegos’ default at the end of March 2021. Likewise, given the role played by Russia and Ukraine in the supply of energy and more widely some commodities, rising prices and volatility in commodities markets have led to a major increase in the magnitude of margin calls for derivatives, in particular for energy and agricultural products. Such margin calls have generated liquidity strains for commodity market participants, which require strong vigilance notably to ensure that any possible default should remain idiosyncratic and does not develop into a systemic chain. The banking sector has proved resilient so far and has contributed to soften and not amplify shocks. Given the uncertainties about the macroeconomic and macrofinancial outlook, it is important that banks’ capacity to absorb shocks is maintained going forward and possibly strengthened. Hence the relevance of a timely, fair and definitive implementation of the Basel 3 accord. With the Basel III agreements in 2017, we indeed reached thebest possible agreement to promote financial stability at the international level. With the publication last October of the Commission’s proposal for a new banking package to implement it, the European Union made a decisive and very balanced step.

In this regard and despite recent criticism, inflation targeting continues to be the most appropriate monetary regime to coordinate inflation expectations in both mature and emerging economies, not only providing transparency but also taking due consideration of time lags and uncertainties in the process of monetary policy implementation. In fact, the combination of short-term flexibility with the permanent commitment to price stability embedded in the framework makes it particularly suitable to the current environment. While disinflation will possibly be fast in mature economies, creating adequate conditions for monetary counter-cyclical actions in different countries, in emerging economies disinflation will probably be slower, particularly where the authorities have not prevented inflation from escalating recently, or where they did not retain a vigilant attitude. In any case, inflation targeting is the most suited framework to coordinate the public’s inflation expectations, particularly in an environment marked by growing uncertainty. BIS Review 147/2008  3
This, too, we hope will support credit availability. It is too soon to assess the impact of all these changes on the resilience of the financial system and on credit creation. We will monitor the results of these actions very carefully, and we will be prepared to amend our judgements in the light of experience. The key point here is that we are applying judgement to our decisions on regulation and within a framework that quite explicitly defines and seeks to balance our objectives of resilience, the primary objective, and, subject to that primary objective, supporting credit conditions and economic activity. To be clear, in this world of judgement-based regulation, we will not get all the calls correct, not least because the future is uncertain. But, I am a lot more comfortable that we have a framework in which we can apply judgement more consistently and be held to account for those judgements in a more open way. There is one further element to the package of reforms, namely the measures proposed by the Commission chaired by Sir John Vickers, which the government intends to place into legislation in the near future. I fully support the Vickers proposals. The key plank of this is to ring-fence commercial from investment banking and, in doing so, define the scope of commercial banking that can be inside the ring-fence. This will be a major structural change for the banking system, and will have important implications for us as regulators.

We will get a much clearer focus from splitting prudential and conduct regulation for banks and insurers, from introducing macro-prudential regulation to help to protect the financial system as a whole, and from  4  BIS central bankers’ speeches  focusing our regulation on applying judgement in a transparent way. Firms that mess up should, and will, be allowed to fail, but it must not be at the cost of damaging the financial system and economy. Ringfencing commercial and investment banking will help to achieve that objective. And, out of these reforms I hope we can encourage a banking system that is more open to competition and serves the public more effectively and, more broadly, a financial system that delivers the public policy objective of financial stability. Thank you. BIS central bankers’ speeches  5
Zeti Akhtar Aziz: Towards a more efficient payment system – electronic payments Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Mobile Digital Signature Symposium 2008 – "Towards a More Efficient Payment System: Electronic Payments", Cyberjaya, 3 June 2008. *  *  *  It is my honour and pleasure to be here today at this Mobile Digital Signature Symposium 2008 to deliver an address at this important forum. This forum takes place at a time when developments taking place in the global economy are resulting in fundamental changes to our lives. While the global economy has benefited from an extended period of high performance and strong growth, it now requires greater agility to adapt to the rapid changes that has occurred. A major emerging international phenomenon is the rising inflationary pressures. We are now living in an environment characterised by rising prices, with energy and commodity prices prevailing at record highs. Energy and commodity prices which have risen steeply have been driven by demand and supply factors and reinforced by market conditions. Clearly, the global factors that have influenced these international prices are beyond our control. Individually and collectively, we therefore need to adjust and adapt to these new conditions. Increasing efficiency and adopting new business processes needs to be explored to reduce costs.

In addition, solutions need to be developed to enable users to integrate easily with the payment offerings. Secondly, the product range, the range of services would need to be expanded to cater for the different payment needs of consumers and business sectors. Thirdly, the pricing framework, the formulation of a transparent and cost-effective pricing framework is important to provide the incentive structure that would spur the adoption of electronic means of payments. Fourth, is the consumer awareness. Programmes need to be implemented to inculcate the behavioral change among consumers. There needs to be trust and confidence in the electronic payment systems. The fifth area relates to the standards, the setting of common standards to address the interoperability of systems including standardising the payment messaging format is vital to the wider acceptance of electronic payment. Finally, is the need to ensure the security and integrity of the payment system which thus requires the supporting regulatory and legal framework to be in place. Among the series of initiatives that have been implemented to promote the greater use of electronic payment relates to the leadership role of the Government in the migration to electronic means of payment. As most individuals and businesses have payment transactions with the Government, the role of the Government in accepting electronic payments has provided an important catalyst for the adoption of electronic payment on a national scale. In this regard, Bank Negara Malaysia has been in active partnership with the Government to drive the electronic payment agenda.
See www.bankofengland.co.uk/publications/speeches/2009/speech374.pdf  BIS Review 85/2009  3  difference between landing in the red rather than the black. In that sense, stress tests are not something it is possible definitively to “pass” – though experience suggests they are somewhat easier to “fail”. On thresholds, determining the optimal level of capital for a bank is an area which has been chronically, and perhaps surprisingly, under-researched. Policymakers have repeatedly ducked this question. Aggregate amounts of capital in the financial system have been fixed at the same levels which prevailed at the time of the first Basel Accord. And academics have, to my knowledge, no definitive quantitative answer to the optimal capital question. Longer runs of data, while interesting, are far from definitive. Over the past 150 years, capital ratios among US commercial banks have fallen roughly by a factor of ten (Chart 7). Is the optimal capital ratio to be found from experience in the 1990s – roughly, 5%? Or from the interwar years – roughly 10%? Or from the latter half of the 19th century – between 20% and 40%? Answering those questions will mean reassessing the validity of the Modigliani/Miller (MM) theorem in today’s capital markets. 3 MM states that firms’ debt/equity ratios are essentially irrelevant to their total cost of capital. Why? Because a rise in leverage generates offsetting movements in the cost and risk of banks’ capital, in a frictionless world leaving the riskadjusted cost of capital unchanged. By revealed preference, owners and managers of banks have rejected the MM hypothesis.

The second is a measure of gambler’s luck in gearing up those assets. In effect, ROE is skill multiplied by luck. So which has been the dominant determinant of banks’ ROE, historically and recently? Chart 2 looks at the decomposition given by equation (1) for UK banks over the period since 1920. Movements in leverage have clearly been the dominant driver. Since 2000, rising leverage fully accounts for movements in UK banks’ ROE – both the rise to around 24% in 2007 and the subsequent fall into negative territory in 2008. Chart 3 looks at the same decomposition across a panel of 70 global banks at the end of 2007. The vertical axis measures return on assets and the horizontal axis leverage. The curves are iso-ROE lines, drawn at 5%, 20% and 40%. The distribution of points lies along a downward-sloping curve. Two implications follow from this. First, the downward slope is consistent with global banks targeting a ROE, perhaps benchmarked by peers’ performance. The Bank’s market intelligence in the run-up to crisis suggested that such “keeping up with the Jones’s” was an important cultural influence on banks’ decision-making. Second, Chart 3 suggests that banks kept up in this competitive race by gearing-up. Banks unable to deliver sufficiently high returns on assets to meet their ROE targets resorted instead to leveraging their balance sheets. During the golden era, competition simultaneously drove down returns on assets and drove up target returns on equity.
On the other hand, the need of private businesses to carry out new investments has been low, against the backdrop of a moderate demand for goods and services and the existence of spare capacities in production. Fiscal policy has been stimulating during 2011. For the first ten-month period of the year, budget deficit posted ALL 30.9 billion or about 33.0% higher than a year earlier. The performance of budget deficit has been determined by the sluggish increase in expenditures and revenues by an annualized rate of 3.9% and 1.4%, respectively. The stimulating fiscal  BIS central bankers’ speeches  1  policy has been winding down steadily following the first quarter of the year, as also shown by the decelerated increase in public spending and budget deficit. This fiscal stance has contributed to maintaining the level of public debt under control. The Bank of Albania assesses the latter as one of the most essential indicators of macroeconomic stability at home. In this context, we encourage fiscal authorities to take appropriate measures, in order to ensure long-term sustainability of public debt. Foreign demand has supported the Albanian economic growth, notwithstanding the concerns surrounding the global economy and especially our trading partners. Albanian exports continue to grow, albeit at decelerated paces compared with the previous year. Exports grew 27.3% in the third quarter of the year, while imports grew 8.6% over the same period. Trade deficit increased 6.8% in the first nine-month period of the year.

WC-FINC aims to reduce the average financial exclusion level in ASEAN to 30% by 2025, and increase the level of infrastructure readiness in ASEAN to 85% (currently at 70%), based on agreed measures of financial inclusion outcomes and preconditions. Particular emphasis is given to capacity building and peer learning. An especially interesting part of this journey has been ASEAN’s incredible diversity which provides a rich and broad canvass for drawing lessons from every country on specific challenges faced and measures pursued to increase financial inclusion. For some of us, the geographic barriers to financial inclusion are the most urgent, for 1/3  BIS central bankers' speeches  others, cost or knowledge and trust are more significant barriers. In different ways, we all have something to learn from each other’s experience on strategies that worked or did not work so well. This is why we are here today. This Forum on financial inclusion was organised in response to technical assistance requests and learning needs of ASEAN countries based on a survey conducted by WC-FINC last year. There was particular interest in Malaysia’s experience and so we volunteered to host this first Forum, but clearly, we are also eager to learn from others. The Forum focuses on 5 key areas which represent core pillars of a holistic financial inclusion system. The first is the development of a national financial inclusion strategy and monitoring mechanism which are crucial to ensure that strategies are well targeted, coordinated and executed.
In my view, a key part of the successful resolution of the Swedish banking crisis in the 1990s was that the impaired assets were assigned realistic and conservative values. Removing the suspicion that bad surprises may linger around the corner is essential to restarting a market. It is a matter of confidence. Similarly, the lack of confidence in the banks’ balance sheets cannot be improved by creating opaque accounting rules. The book value of a bank will increase if we assign book values above market value, but will it restore confidence? Again, to regain confidence, the balance sheets of banks should reflect realistic values. Accounting rules should force banks to disclose what their assets are worth and not allow problems to be hidden. Lack of confidence arises over concerns about a bank’s actual financial situation. If market participants have to recalculate reported valuations, then the return of confidence will be more difficult to achieve. It is therefore important that accounting is transparent and internationally harmonised. We should also keep in mind that accounting rules are not only about preserving financial stability in the short run. Changing the accounting rules could make communication more uncertain and less transparent. Another tool for telling stories about the future is stress testing. Stress testing can thus be a very valuable and effective tool in restoring confidence. However, this requires that the stress tests are both credible and adequately disclosed. The Fed’s stress tests of US banks earlier this year present a good example of how this tool can be used.

Bond yields have, consequently, been low by historical standards, a phenomenon which has substantially facilitated private investment. This in turn, will not fail to have a highly positive effect on growth. A third benefit of the Euro is the removal of exchange rate risk and transaction costs for intra Euro area trade. This has promoted trade integration among Euro area countries without diverting trade with other countries. Indeed, it appears that business cycles tend to be more and more synchronized over time, an evolution which allows for greater efficiency and  BIS Review 115/2007  1  sustainability of the common monetary policy. This shows that monetary union is a self sustaining process: real convergence is to some extent a result, as much as a precondition of economic integration. Another benefit of the Euro is the boost it gives to financial integration in Europe. In many segments, European financial markets have reached the depth and liquidity which, up to now, were the preserve of dollar markets. This stimulates productive investment, helps in restructuring and, more generally, allows a better allocation of savings and sharing of risks. The current market turmoil is a clear test for this achievement and while the problems affecting the Euro markets have been comparable to those affecting the other major markets, the strength of the Euro shows, to some extent, that it has become a safe haven in our globalized financial world. The Euro is becoming extremely attractive, as a vehicle, a transaction, an investment and a reserve currency.
On the contrary, the significant contraction of domestic demand, in particular for imported durable goods and inventories, spontaneously and quickly undid the incipient external deficit of the second half of 2008 and interest rates in Chile dropped. The Chilean economy has continued to show a very solvent net external position. BIS Review 93/2009  3  Figure 2 CPI and selected inflation measures (annual change, percent) 0  10  8  8  6  6  4  4  2  2  0  0  -2  01  02  CPI  -2  Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09  CPIX  CPIX1  CPI minus foods and energy  Sources: National Statistics Bureau (INE) and Central Bank of Chile. As we have pointed out on earlier occasions, persistent movements of the exchange rate may have inflationary consequences that must be taken into account when deciding on the monetary impulse. Anyway, our floating regime admits intervening in exceptional cases, whenever an overreaction of the exchange rate is detected that is giving misleading signals to the financial markets. In addition, although there is no obvious misalignment of the current real exchange rate from its long-term fundamentals, the present inflationary scenario may accommodate a nominal depreciation that does not compromise our price stability objective. In fact, imported inflationary pressures influence medium-term inflation, so if the recent appreciation of the peso persists, inflationary prospects will certainly moderate, which, as I just stated, has implications on the conduct of monetary policy.

Many emerging economies have successfully applied the lessons learned in past financial crises, capitalizing them as increased financial resilience and a reduced impact on growth than developed countries. One feature of world financial markets’ behavior of the past few months has been the increase in long-term interest rates on public instruments. These movements can be linked to an environment of reduced risks and expected increases in fiscal debt certificates, and to the fact that, for the first time in several months, there is incipient debate about the convenience of a not-so-expansionary monetary policy, given the medium-term inflationary risks. In the local financial markets, the interest rates on long-term Central Bank notes have also risen— albeit with swings—above the levels that prevailed at the time of our May Report. The steepening of the yield curve coincides with what has occurred in international markets, and may be signaling an increase in the markets’ appetite for risk. It may also be that they respond to more idiosyncratic factors, especially because of the big momentum showed by the local bonds market this year to date. The pass-through of MPR cuts to lending rates in recent months has been evident. While the latest data suggest that it may have moderated, transmission should continue, particularly as macroeconomic uncertainties phase out. The annual growth rate of credit volume has slowed, in a context where lending standards are still tight and there is less demand for credit due to a more cautious attitude among economic agents.
As I mentioned earlier, the emphasis in compensation practices on short-term performance over longer-term sustainable returns was a key vulnerability revealed during the crisis that helped motivate imprudent behavior. Currently, senior bankers are paid mainly in cash and deferred stock grants. This structure creates incentives to take actions to maximize a bank’s share price, rather than to minimize the risk of the bank’s failure. While compensation practices today feature a larger deferred component, greater emphasis on deferral in the form of long-term debt—which can also be recognized as TLAC—could better align senior managers’ interests with the long-term safety and soundness of the firm.16 As I see it, this approach could have two benefits. For one, it would reduce the incentives for risk-taking. For another, if TLAC debt holdings were at risk of conversion to equity in the event of failure, I believe senior bankers would be incentivized to cut dividends or raise equity capital earlier to reduce the risk of failure. Having a regime in place that creates strong incentives for management to steer aggressively away from bad outcomes would be better than one in which management has incentives to temporize in the face of rising risks. 6/8  BIS central bankers' speeches  Some banks have experimented with such compensation schemes, and I would encourage more to do so. But, this type of reform may also need a push from the regulatory side. Banks may be reluctant to adopt such pay structures on their own for competitive reasons.

On the other hand, the fiscal stimulus is estimated to have trended downward in the third and fourth quarters, albeit budget revenues and expenditure have continued to record high growth rates. The constant expansion of the aggregate demand has led to an increasingly higher utilisation of production capacities. The unemployment rate fell to 13.6% in the third quarter, down by 1.1 percentage points from the same quarter in the previous year. However, the gradual convergence of the economy toward its equilibrium is yet to be accompanied by upward inflationary pressures, sufficient enough for the return of inflation to target. Our accommodative monetary policy stance has reduced the costs of financing for the private sector, has boosted crediting in the domestic currency and has contributed to the improvement of the borrowers’ financial situation. In the last months, financial markets have performed relatively calm, amid low interest rates, controlled risk premia and the exchange rate set on a stabilisation trend. Banking system Year 2017 was positive in terms of the expansion and soundness of banking activity in Albania. A quick glance at the performance in the 10-month period corroborates this conclusion. Banking sector’s assets expanded further during the period, at 4%, in annual terms. The financial situation of the sector and activity capitalisation improved. Due to the considerable fall of loan provisioning, the financial result improved notably compared to the previous year. Also, the RoA and RoE indicators doubled at 1.6% and 16.3%, respectively, from 0.74% and 7.8%, in the previous year.