samchain/econo-pairs-v1 huggingface dataset:
There are some different potential solutions. I have already observed that the market itself is often capable of solving the problems. This can be achieved, for instance, by customers making demands for information on various conflicts of interest. However, the collection and distribution of information is not free. And as information contains a strain of public goods, there is a risk that the market solution will generate too little information. It may therefore be necessary in certain contexts to have regulations stipulating that information on conflicts of interest must be made public. Regulations concerning greater insight into various persons’ incentives may limit the effects of different conflicts of interest. It would help outsiders to assess the quality of the information provided. A more drastic solution would be to require that activities exposed to conflicts of interest should be managed by different companies, or even different groups. The Glass Steagall Act in the United States, for instance, required that investment banks and commercial banks must be legally separated. However, there are clear disadvantages with forcing a separation of different activities through legislation. All regulation also entails costs - both explicit and implicit costs. It is important from society’s point of view that these costs do not exceed the usefulness of the regulation. One cost of separating various activities is that it makes it difficult, or impossible, for financial intermediaries to benefit from synergies and economies of scale.

A clear example of this is contained in the conflict between traditional commercial banking and investment banking, which is my subject today. A bank that lends money to a company normally gains access during the credit application process to special information about the company - information that is not publicly available. The bank makes an investment in the information on the company and therefore usually has an information advantage in relation to other banks and outside parties. This  2  BIS Review 47/2004  investment can also mean that the bank can offer the company investment banking services in a more efficient manner. The fact that a company seeking funding in the capital market has access to bank credit is often regarded by the market as a positive signal. It means that a professional agent has analysed the company and found it creditworthy, i.e. been willing to risk his or her own capital in it. The information about the credit functions is a quality signal or a certification. At the same time, opportunities arise to make use of conflicts of interest when a bank functions as both credit-granting institution and adviser or guarantor in new issues. If the prospects for a company that has loans with the bank deteriorate, it may be in the interests of the bank to reduce some of its credit risk by aiding the company with a new share issue. In this way, the bank can pass on some of the credit risk to the shareholders.
Even if not directly, risks could come indirectly via the exposure of their clients, especially in the case of interlinked market and credit risks. The present environment also raises concerns of the close link between financial and reputation risks. Banks or their affiliates, be they fund management or insurance arms, may have sold inappropriate products to clients without doing proper due customer diligence or education. As a result, clients’ losses could lead to either bad assets and credit risk, counterparty risk, or reputation risk for banks if dissatisfied customers generate queue and protest in front of the banks, or even legal risk. In this environment of tight liquidity, and depositors have bargaining power, reputation risk and customer queue and loss of confidence could translate into liquidity risk. This brings me to the third risk implication from this global crisis, which is the liquidity risk. Indeed, tightened global liquidity will be more pronounced for economies that rely on external short-term debt. For other economies, the shift of external funding toward domestic sources and the effect on trading partners’ economies could cause a widespread contraction in credit supply. Furthermore, re-pricing of risks by investors and deleveraging has increased the risks and volatilities in global financial markets, which could in turn lead to greater risk-aversion in emerging markets. As a consequence, there could potentially be more reversals of capital flows from emerging markets, including Asia, thereby denting growth in countries heavily dependent on capital inflows.

The world’s current financial system with all its imperfections, can still deliver enormous value. Already, the bold and far reaching steps introduced by many governments and regulatory authorities as well as by the “victims” of destability, have shown us that the “baby” could recover and grow. In fact, many economies are showing signs of recovery and are seeing light at the end of their respective tunnels. In the light of these developments, we must maintain our energy levels and optimism. Even in  BIS Review 106/2009  3  the midst of the crisis, we have observed many systems that are solid, and frameworks and institutions that are strong, reliable and credible. These institutions must be recognized and encouraged to provide the leadership and direction to bring stability and credibility back, quickly. It is also time for the productive sectors of economies to re-invigorate themselves and deliver higher outputs, so as to support a faster turn-around. Mr. Chairman, it is also now abundantly clear that the world must collectively approach the present unprecedented threat. Already, the integrated actions of several governments and central banks, by virtue of the successes achieved so far, have proved this point. But there is a lot more to be done. In that endeavour, the consolidation of the thoughts and ideas of academics, activists, practitioners, regulators, and policy makers at fora such as the one you have so efficiently organized, would undoubtedly enrich this process and policy debate. These in turn, will surely accelerate the global recovery.
Christian Noyer: A founder’s perspective on the euro as a global currency Speech by Mr Christian Noyer, Governor of the Bank of France, at the joint conference “The euro at ten: the next global currency?”, sponsored by the Peterson Institute for International Economics and Bruegel, Peterson Institute for International Economics, Washington DC, 10 October 2008. *  *  *  Good afternoon. It is a great pleasure to be here today with so many friends and colleagues to celebrate ten years of the Euro as a global currency. I must confess this is not exactly my idea of a quiet and peaceful anniversary. When I was privileged to be designated as ECB's first Vice President, I would never have imagined that I would be sitting now, as a member of the Governing Council, dealing with the worst financial crisis in the last eighty years. Actually, one of the main gratification of the job during the crisis has been the quality of our collective interaction and deliberation in the Governing Council, based on our willingness, in very challenging circumstances, to share judgments and exchange views in a spirit of friendship and mutual respect. I am very proud to be part of such a group. Together, we have been able to make quick decisions and adjust flexibly to fast changing environment, without ever giving up on our mandate and our mission. Obviously, the Euro area, like the rest of the industrialised world, is going through a very rough patch.

Given the limited scope for cutting deposit rates, low interest rates tend to depress net interest income. Thus, it will become increasingly difficult to maintain the cross-product subsidy whereby banks often exploit the loan-deposit spread to cover the cost of providing services to customers. Indeed it seems reasonable to expect that the zero fees policy will gradually fade into the background and that competition for deposits will shift in part to the business of providing transactional services. In any event, Spanish banks must adapt their business strategies to the new environment and must, in particular, take measures to continue to improve their operational efficiency. It is true to say that operational efficiency is, in general, already high in the Spanish industry in comparison with the rest of Europe, as Spanish banks on average have lower cost indicators than their euro area peers, but there are considerable differences from one institution to another and there is, therefore, room for improvement. It seems particularly appropriate to reflect on the need to adjust the commercial model of Spanish banks which is characterised, despite the industry consolidation, by a number of offices per capita which is much higher than the European average. In my view, both 6  BIS central bankers’ speeches  technological progress, which allows banks to increasingly interact with customers beyond physical points of sale, and the need to restore bank profitability on a sustainable basis, are sufficient arguments to support this reflection.
The dynamics of complex systems, such as large banks or interconnected financial webs, are not well understood. That means uncertainty needs to be taken seriously if financial regulatory frameworks are to be robust. Timeliness would be a third criterion. Complex systems often exhibit a knife-edge property, with discontinuities and tipping points a naturally-recurring feature.5 Those same features have punctuated the present financial crisis. In physics as in finance, once over the cliff-edge there is little chance of full recovery. That underscores the importance of timely, pre-emptive regulatory intervention if financial disaster is to be averted. (a)  Simplicity  How do existing regulatory rules compare against these criteria – simplicity, timeliness, robustness? Take simplicity. By any standard, existing regulatory rules are far from simple. For large banks, they can be highly complex. They have become more so over time given the evolution of the Basel framework. Back in the days of Basel I, calculating a regulatory capital ratio was not especially taxing or time-consuming. It involved little more than half a dozen calculations. These calculations could be conducted on the back of a small envelope by a competent clerk. Possessing envelopes and clerks, banks, regulators and market participants were able to perform those calculations. They were transparent and verifiable. In that way, regulatory rules (Pillar I) provided a solid platform for supervisory discretion by regulators (Pillar II) and market discipline by investors (Pillar III). The Basel pillars were mutually reinforcing. Basel II changed that calculus.

(b) Timely conversion is defined as a bank’s ratio falling below the trigger level no less than one month and no more than one year before a “crisis”. The number in this column is the proportion of “crisis” banks for which timely conversion does not occur (i,e, there is a Type II error) at this trigger level. (c) For each metric, the threshold for a signal of impending distress is as given in Charts 5 to 8. 18  BIS central bankers’ speeches
Lags, trade-offs and the challenges facing monetary policy Speech given by Ben Broadbent, Deputy Governor, Monetary Policy  Leeds University Business School 6 December 2021  I’ve received helpful comments from colleagues at the Bank of England. I’d like to thank Fabrizio Cadamagnani for his help in preparing the speech. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Financial Policy Committee or the Monetary Policy Committee. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Good morning! Thank you for asking me to speak to you today. It’s a great pleasure to do so in person, something I haven’t been able to do for almost two years. Virtual meetings are all very well – and were clearly indispensable during the worst of the pandemic – but I think there’s something missing if that’s the only way in which we ever talk to each other. It’s an additional pleasure to be in Leeds. As you may know, as part of a plan to increase our staff presence across the UK we announced earlier this year we’d be setting up a new hub right here in Leeds. I’m coming here at an extraordinary time for the economy in general and for monetary policy in particular. Annual CPI inflation rose to over 4% in October, with the jump in domestic energy bills the single most important contributor to the change on the month.

This is in the nature of what’s called a “trade-off-inducing” shock, one that pushes the primary objective of policy (stabilising inflation) in one direction, the secondary objective (stabilising demand and employment) in the other. These things crop up all the time, to one degree or another. Prices of imports (especially energy) are volatile; slowdowns in productivity growth, which are common enough, can sometimes have the same effect10; so can rises in excise duties or VAT. But, in reality, these things rarely have much of a bearing on policy because, very often, their impact on inflation doesn’t last long enough. Changes in interest rates take time to work. And if a shock to inflation is gone before monetary policy could do anything to offset it there’s not much point in taking action. This hasn’t always been the case. After the Brexit referendum, for example, the MPC judged that the inflationary consequences of the big drop in sterling’s exchange rate probably would last long enough to matter at the “policy horizon” (as had been the case after the financial crisis). The Committee therefore had to balance this effect against the fact that, for much of that period, the economy was operating with a degree of space capacity. There’s a good chance that this shock too, larger though it is, will have dissipated by the time a policy decision taken now could take effect. Indeed it’s quite possible that, in a couple of years, some of these tradable goods prices will be falling, pulling down on inflation.
There is ample evidence that economic and financial informality—albeit a rational alternative for people with little choice—is a major obstacle for emerging economies to grow in a more inclusive way. Thus, while central bankers would normally emphasize that their focus is on short-term macroeconomics and price stability, there is little doubt that a more efficient, deeper and inclusive financial system would make things substantially easier for them and would provide a lasting push for development. What difference can FinTech make? [SLIDE 11] The central bank and commercial banks have been traditionally close because maturity transformation and fractional banking is in the DNA of universal banking, that is, the ability of commercial banks to provide a large set of interrelated services to the public. 7  Central Bank of Chile 29 June, 2017  In contrast, FinTech refers to those technologically enabled innovations in financial services that could result in new business models, applications, processes or products with an associated material effect on the provision of financial services.1 Thus defined, the scope of products or activities that can be catalogued as FinTech is quite broad. Moreover, products or services that are nowadays commonly or massively used could have been considered FinTech, e.g. banknotes, cheques, credit cards, ATMs, and electronic transfers. What makes a difference today is partly the speed at which change is happening and how different developments—programming, encryption, mobile devices—can combine to produce new financial services.

Slide 3  Commercial bank balance sheet Banking sector balance sheet (percent of GDP) ASSETS Loan Portfolio Commercial Consumer Mortgage Comex Cash Other liquid Derivatives  88 48 10 24 5 7 12 5  Other  9  LIABILITIES Demand deposits Time deposits External credit Debt instruments Derivatives Other  22 46 5 23 5 11  EQUITY AND RESERVES 10  All figures as of December 2016, based on individual balance sheet. Source: Central Bank of Chile based on SBIF data. [SLIDE 4] Hence, a key concern of a central bank is risk. Risk from external shocks that may threaten price stability; risk of misjudging the macroeconomic scenario and make wrong policy decisions; risk of changes in the behaviour of banks that may compromise the transmission of monetary policy to market rates; risk of liquidity excess or shortage in the banking sector; risk of bank insolvency; risk  3  Central Bank of Chile 29 June, 2017  of disruptions in the flow of funds at the interbank or retail level; risk of risk misjudgement, and, ultimately, risk of compromising trust. Slide 4  What do central banks worry about?
Niklaus Blattner: Three nations, two currencies, one economic area Speech by Mr Niklaus Blattner, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Freiburger Montags-Gesellschaft, Freiburg im Breisgau, 6 June 2005. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The Upper Rhine EuroRegion comprises Baden, the Südpfalz region, Alsace and Northwestern Switzerland. In what shape is the economy in this region? Is it as dynamic as we would like? Are the national borders that transect the region a handicap or have we come to accept them? What are the implications of the fact that the region has two currencies? Firstly, the Upper Rhine EuroRegion is economically sound. This is due not least to the capital goods sector and the pharmaceutical/chemical industry, with the latter ensuring high added value in Northwestern Switzerland in particular. However, the Upper Rhine EuroRegion does not rank among the very best in Europe. While its level of economic added value is perfectly acceptable, its growth in recent years has been significantly lower than that in other regions. The region’s situation is, therefore, no different to that of many other economic areas in Continental Europe. Secondly, cross-border integration in the Upper Rhine EuroRegion is high. The diversity of the economic interrelationships between the national regions is reflected in the brisk trade in goods, capital flow and free movement of persons.

On the fiscal front, investment in effective water management systems is urgently needed on top of reconstruction and assistance for flood victims and affected firms. This will not only restore foreign investors’ confidence, but will also enhance the economy’s productivity and its potential growth by avoiding future disruptions and making more efficient use of the country’s abundant water resources. BIS central bankers’ speeches  3  Nevertheless, the expected massive spending for such purposes will unavoidably stretch the government’s fiscal resources. At the same time, the government will have to spare some fiscal policy “bullets” in the event that the situations in the U.S. and the Eurozone worsen more than expected and lead to another global recession. Against this backdrop, mediumterm fiscal discipline is needed to ensure long-term sustainability of the country’s public finance. This means the government will have to rethink or reprioritize certain policies that may not contribute to productivity enhancement. Meanwhile, the Monetary Policy Committee (MPC) had been raising the policy interest rate over the past year, until the last meeting in October where the MPC hold the policy rate unchanged. Personally, I view the current level of our policy rate to be accommodative enough to support domestic recovery, with some room available for further easing if needed. While upside risks to inflation are not very serious at the moment, we still need to keep our eyes on inflation pressures that are likely to build up with the pick-up in public and private spending after the flood is over.
Financial arms races are scarcely a new phenomenon. How different history might have been had Chuck Prince heeded JP Morgan’s words from a century earlier: “I made a fortune getting out too soon”. Although not new, the liberalisation of financial services over the past 30 years, and the accompanying increase in financial scale, has probably increased arms-race pressures. As banks have piled on the pounds, their fights on the beaches have intensified. The stronger those competitive forces, the quicker an arms race escalates. In what follows, I discuss three examples of modern-day arms races in the financial sector: races in return, races in speed; and races for safety. These are examples from the past, present and future respectively. In each, a competitive battle for relative dominance results in an evolutionary equilibrium which is sub-optimal, individually and socially. They are latter-day tragedies of the financial commons. ************ By any historical metric, the pre-crisis period was an extra-ordinary one for the financial sector. This is no better illustrated than in the returns to financial sector labour and capital. Between 1989 and 2007, the nominal gross value added of UK financial intermediaries rose more than threefold, or by about 8% on average per year. Over the same period, value-added of the non-financial corporate sector rose by about 5½% per year. More commonly-used performance measures in banking are returns on equity and executive compensation. These rose even more dramatically over the period. Returns on equity for UK banks rose from on average 1% in 1989 to 38% by 2007.

For a fund such as the Government Pension Fund Global, it is important to be able to stick to the fund's long-term investment strategy in times of turmoil. Changes to the fund's strategy are subject to thorough analysis and political anchoring in the Storting. This governance structure has served us well, and I am sure that it will continue to do so in a more challenging world. With that, I will pass you to my colleague. 2/2  BIS - Central bankers' speeches