samchain/econo-pairs-v1 huggingface dataset:
Since then, ETFs have been the recent focus of much international attention, including at the BIS, the FSB and the IMF (see  10  BIS central bankers’ speeches  Chart 15 Global ETF assets under management $ billion 1600 1400 1200 1000 800 600 400 200 0 1999  2001  2003  2005  2007  2009 2011(a)  Source: Blackrock Global ETF Research and Implementations Strategy Team. (a) Data to end-May 2011  Take for example synthetic ETFs provided by asset management arms of banks. These ETFs replicate an index return using derivatives but without necessarily physically purchasing the underlying assets. Synthetic ETF providers (typically banks) might have an incentive to collateralise the total return swap with illiquid collateral that is expensive to fund elsewhere in the market. If the swap counterparty defaults on its leg of the transaction, the ETF (and hence the end investor) would be left holding this collateral, which might have very different liquidity and credit characteristics to the securities it originally planned to invest in. In particular, if the investor unwittingly takes on collateral whose value is highly correlated with the ETF provider (i.e. if there is so-called wrong way risk), then the collateral is likely to have relatively little value in the event of default. Some of these issues are discussed in the June Financial Stability Report. The examples I have cited above involve fundamentally good financial products which should improve economic efficiency and hence the welfare of society as a whole.

Indeed, recent MI has suggested that there has been some direct lending  9  And although the aggregate US corporate sector cash position is strong, it is likely to mask significant heterogeneity in the distribution of firms, with a disproportionate share of the cash held by the largest investment grade businesses. 8  BIS central bankers’ speeches  activity to mid-sized corporates in the UK by non-bank institutions such as dedicated loan, private equity and pension funds (although the absolute amounts are still very small). Chart 13  Chart 14  Issuance of sub-investment grade corporate debt by region(a)(b)  Corporate bond valuation measure(a)(b)  Sources: Dealogic and Bank calculations. (a) Emerging economies includes Africa, Caribbean, Indian subcontinent, Latin America, Middle East, North Asia and South East Asia. “Other” includes Australasia and Japan. Includes issuance in all currencies. (b) 2011 data are to 3 June 2011  Sources: Bank of America Merrill Lynch, Bloomberg, Thomson Reuters Datastream and Bank calculations. (a) Shows the difference between actual and estimated equilibrium spreads as a percentage. Positive numbers represent overvaluation, negative numbers undervaluation. (b) Equilibrium corporate bond spreads are defined as the total estimated credit component plus a five-year rolling average of the illiquidity premia. Full details of the approach used for the decomposition of corporate bond spreads can be found in Churm, R and Panigirtzoglou, N (2005), “Decomposing credit spreads”, Bank of England Working Paper no. 253.
I also want to give a very warm welcome to Stéphane Latouche. Building on his wide raging  1/4  BIS - Central bankers' speeches  experience within and outside the Bank, he will I am sure contribute to develop further the activities of our rep office with all of you, and notably deepen our bilateral ties with the MAS, notably for future innovation partnerships. As a matter of fact, innovation never stops, innovation is above all change. Financial innovation illustrates this time of rapid change, with a wave of new players, new digital assets in the form of crypto-assets, as well as new exchange and settlement infrastructures. Among those digitalisation trends, so-called "decentralised finance", DeFi, is emerging. DeFi is a set of applications offering financial services based on crypto-assets, operating on public blockchains and using smart contracts. We need as supervisors and providers of settlement services in central bank money to stay alert, explore its opportunities and address challenges it raises. II. Impact on BdF activities and stability mandate To that end we have been developing our actions along two axes that should serve as an additional basis for the dialogue and cooperation we have been developing from here in Singapour. 1.The first axis is to move beyond the first generation of crypto-asset regulation Indeed, the first generation of crypto-asset regulations does not fully address the challenges posed by DeFi. For example, in Europe, fully "decentralised" services are excluded from the scope of the MiCA regulation.

To contribute to the reflection, we are about to publish a discussion paper on the possible regulatory options for DeFi. In order to build the most appropriate framework, taking notably into account the question of proportionality, we need to feed our thinking with input from all stakeholders: financial services or crypto-assets industry professionals, IT specialists, academics, other regulators and supervisors- That is why this document will be open to a wide consultation and I look forward to listening to your reactions on it. 2. The second axis is to use DeFi innovation to serve the possible development of tokenised finance and to improve cross-border payments Our monitoring of DeFi is not just motivated by financial stability risk but also by our intuition that its innovative potential could serve the development of an ongoing trend: the tokenisation of finance. To do so, central banks and the traditional financial players need to understand how DeFi operates and master its innovative aspects in order to use them in a secure way to do something else than speculate on crypto-assets. This is what we are trying do with the project Mariana, our ongoing experiment with the MAS, the Swiss National Bank and the Eurosystem, Singapore and Switzerland BIS Innovation Hub Centres. Basically, we are building an automated market for the exchange of CBDCs based on a concept imported from DeFi. This project is really at the crossroads of a number of topics: enhancing cross-border payments, CBDCs interoperability, understanding of DeFi and the development of tokenised finance.
Many lending decisions are agreed weeks or months in advance and cannot be readily reversed. So the approach will not stem a very fast drainage of liquidity. Moreover, as one bank tightens lending conditions to restrict balance sheet growth, other banks facing similar pressure will react to limit any additional diversion of funding pressure onto their own balance sheets. The second is that a retrenchment in lending can have significant implications for the wider economy, as fewer funds are available to companies and households to support long-term investment and consumption. We are seeing some signs of that beginning to occur as highlighted in the most recent Bank of England Credit Conditions Survey. These defences suffer from a common shortcoming. While they may work well when one bank is facing funding pressure on its own, when liquidity pressures are widespread every bank will attempt to use them at the same time. The actions of one bank will work to negate those of a competitor in these circumstances as gains and losses of market share will net out. That implies an increase in the economy-wide costs of adjustment, posing increased risks to financial stability during the adjustment process. 2  See, for example, Bank of England: Financial Stability Report October 2007. BIS Review 50/2008  3  There is, however, one last line of defence left.

Moreover, new products emerged which also supported the transfer, hedging and dispersion of risks, such as credit derivatives. And the use of these instruments strengthened the inter-relationships between financial market participants across the globe: greater integration of markets went hand in hand with the acceleration of financial innovation and rapid growth of market activity. These developments helped stimulate important changes in banks’ business models. Constraints on growth were eased as funding sources widened. Many banks took advantage of new sources of wholesale funding available from securitisation – the packaging of loans into instruments which could be sold on in financial markets. In many cases, assets were routinely transferred into off-balance sheet vehicles which funded themselves through assetbacked commercial paper, with the sponsoring bank providing a back-up liquidity line. By applying this “originate and distribute” model, banks tapped a new source of funding on a large scale. More traditional and stable sources of funding, such as retail deposits, declined in importance (Chart 1). In addition, many banks saw opportunities to generate new sources of revenue and fee income by developing and deepening their activities in international capital markets. Innovation has provided banks with greater opportunities to hedge and diversify risks. For example, a regionally-based bank in country A can easily lower its geographical concentration, for example by selling credit risk to other investors who had not previously been able to access such exposures, and/or by purchasing exposure to credit risk elsewhere.
In the consultation document, we ask whether that process should go further, whether through industry-led standardisation, removing barriers to entry for new electronic trading platforms or utilities, or further transparency enhancements to practices such as new issue allocation. Or could imposing standardisation or transparency standards in excess of those already in place harm, rather than enhance, market functioning and risk transfer? Do practices such as ‘internalisation’ – where banks match off client orders internally – pose any challenges? 2. Competition and market discipline  The second structural category is competition and market discipline. Concentration in some FICC markets is relatively high both amongst intermediaries and amongst the major asset managers, and has risen further since the financial crisis. For example, the top six dealers account for over 60% of the UK interdealer FX market. In some cases, firms have also engaged in horizontal or vertical integration – raising potential conflicts of interest and concerns about information asymmetries. A number of recent misconduct cases have involved attempted collusion, abuse of market power or inadequate management or control of conflicts. The ability of FICC market participants to exercise market discipline against those engaging in misconduct may also have diminished somewhat in recent years. At the same time, the market maker system has delivered important benefits, including tight pricing and deep and near-continuous liquidity in a wide range of market conditions.

It would seem that the least that we as prudential supervisor can do is ask the pertinent questions and challenge banks to look beyond governance in the stricter, more standard sense. I have tried to identify the kind of questions we might ask. I am very much looking forward to hearing your views in the ensuing discussion, which I hope and trust will be lively and stimulating. I promise we will reflect seriously on any suggestions that you might have. Thank you. 1. Kirkpatrick, G. (2009), “Corporate governance lessons from the financial crisis”, OECD Journal: Financial Market Trends, 2009/1(1), pp. 61-87; Saghi-Zedek, N. and Tarazi, A., (2015), “Excess control rights, financial crisis and bank profitability and risk”, Journal of Banking & Finance, No 55, pp. 361-79. 2. See SSM supervisory statement on governance and risk appetite, ECB, June 2016. 3. Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders under Directive 2013/36/EU and Directive 2014/65/EU (2021). 4.
The intestinal tract is one of the body’s most energy-intensive parts. As its energy-usage fell, large amounts of energy were released to support growth elsewhere in the body. And where in the body did this unleashed energy go? It headed north to what would in time become human’s most energy-intensive organ of all – the brain. This energy surge caused the brain to grow and its neural connections to multiply. The result was an organ which, despite being only 2-3% of our body mass, today accounts for 25% of its energy consumption. This may have been one of the key evolutionary steps in human history. It is the brain, above all other organs, that distinguishes humans from other animals. Our closest biological cousin, the primates, have physiologies which are 99%-identical to ours. Where they differ most significantly is the brain. In primates, the brain uses only 8% of the body’s energies – a third of humans. It is our energy-intensive brains that put humans of an entirely different evolutionary trajectory to all other animals. To see why, note that the pace of evolutionary progress in all animals, other than humans, is determined by biology. It occurs through a sequence of slow-moving, biological mutations. This can take millions of years to bring about recognisable change. That is why almost-all animals live in an almost-identical environment for an almost-identical lifespan doing near-identical tasks to their ancient ancestors. Human biologies are no different. The appendix is a biological artefact.

I cannot see a robot replacing GSA lecturers in my lifetime. The BBC app tells me a teacher, childminder or artist has a probability of being automated of less than 10%. Even if you are an economist, it is only 15%.31 If anything, we might see the demand for these skills grow in the period ahead. It has been estimated that, between now and 2030, demand for jobs where creativity is a key skill could increase by 30-40%. Demand for jobs with high levels of social and emotional skills are forecast to increase by 25%.32 For all the jobs lost, new ones will be created in a different image, mirroring the pattern in previous Industrial Revolutions. We may also need to be more creative about how we define “creative”. TV programme-makers are creative, but so are computer program-makers. AI is about as creative an activity as you could imagine. NESTA have tried to classify the creativity of tasks. Their estimates put the number of people currently in creative professions at between a fifth and a quarter.33 Were jobs to evolve in line with expectations, that fraction could rise to more than a third in the next decade. For a great many tasks, it is probably wrong to even think of jobs being displacement. More likely, their nature and the skills required will evolve. Take medicine. Many aspects of clinical diagnosis and prescription are routine.
James Meade advanced the idea in his 1977 Nobel Prize lecture,2 and my MPC colleague, Martin Weale, spent much of the early part of his career working with Meade to develop the idea.3 Samuel Brittan, coming from a slightly different perspective, wrote an important IEA pamphlet in 1981, which argued that controlling nominal spending was what monetarists were really seeking to achieve. I even wrote my PhD thesis4 on the topic over thirty years ago. There is an important distinction between targeting the level or the growth of nominal income. The recent revival of academic interest in the issue relates to the scope for a target for the level of nominal income to provide additional traction for monetary policy when policy rates reach their zero lower bound. Some of the recent public commentary, however, has centred on the possible virtues of switching to a target for nominal income growth, so let me deal with that case first. In a normal environment, nominal income growth and inflation targets generate similar responses to aggregate demand shocks. But a nominal income target is more “forgiving” than a narrowly-defined inflation target in the case of cost shocks. An adverse cost shock simultaneously tends to raise the price level and reduce output. Stabilising nominal income requires a one-for-one trade-off in the response, whereas stabilising inflation, or the price level, requires that all the burden of the shock is transferred onto output. That is the basic case put forward for the superiority of a nominal income target over a strict inflation target.

But, given the stickiness of pay and prices, that would necessitate inefficient fluctuations in activity and employment. Now during the first decade of the MPC, such shocks were small and generally benign, with access to cheap manufactures from emerging economies providing steady downward pressure on prices. But the past few years have provided a less felicitous backdrop. Not only have we had to deal with the consequences of the financial crisis but we have also had to manage several major cost shocks. These include: a 25% fall in the sterling effective exchange rate; fluctuations in the price of oil between $ and $ a barrel; and movements down and up in VAT. Moreover, the impact of these changes has often proved hard to predict. For instance, we significantly underestimated the pass-through into inflation  1  See e.g. Bean et al. (2011). BIS central bankers’ speeches  1  of the exchange rate depreciation. So it should not be surprising that inflation has been both higher and more variable than during the Great Moderation. The question is: would outcomes have been materially better under an alternative framework, such as a nominal income target? The first thing to be said is that the idea of directing macroeconomic policy towards targeting nominal income is by no means new.
But the educational level of the consumer and above all his or her age, does have a substantial effect on the result. A 60-year old consumer will only choose a card over cash when making a purchase of, on average, SEK 179, while a 20-year old consumer would choose to pay by card for a transaction as low as SEK 60. It would appear that young people’s choice is fairly close to a cost-efficient choice from society’s point of view. The study is based on data from 2002, but there is nothing to indicate that consumers’ methods of payment have changed radically since then, although cards have continued to grow in importance. Use of cash is still at a high level in Sweden. The cost of cash management has probably risen more than the cost of card management, calculated per transaction. The costs for increasing security for cash-in-transit and ATMs have been substantial. There are many indications that the gap in socioeconomic costs between cards and cash has widened further and that the cut-off point will therefore occur at an amount lower than SEK 70. In this case, society would benefit even more from a reduction in the use of cash. Make the costs visible An important basic insight is that the costs of different types of payment exist, even if they are not visible. They affect the consumers in that goods and services become more expensive. If these choose less efficient instruments of payment to a greater extent, then the price increases will be greater.

You are all familiar with the challenges we face. But alone, none of you, none of us, would be able to find the perfect solution for regulating and supervising the financial system. No single person, no single institution and no single country has the perfect solution. We can and must learn from each other. And we can and must work together. 6/7  BIS central bankers' speeches  The banking union now allows us to do so – effectively and efficiently. Thank you for your attention. 1 Article 1 of the SSM Regulation (Council Regulation (EU) No 1024/2013). 7/7  BIS central bankers' speeches
This would be an important step towards breaking the vicious circle between banks and sovereigns; and it would be a further step towards reinforcing the foundations of monetary union. Private risk-sharing does not have to be exclusively via the credit markets and not solely in relation to the public sector. Investors can also help to share risks via the equity markets. Take a German company as an example. If the German economy is hit by a shock, this company will probably be affected too. If its owners, the shareholders, are spread across many countries, the company’s losses will be spread likewise. The more cross-border financing companies have, the less the national economy is affected by any shock and the faster it can recover. In the United States, for instance, this kind of risk-sharing works: studies show that integrated capital markets in the United States absorb 40% of the cyclical variations between the states. 4 This speaks in favour of the European capital markets union project. And also for, as part of this project, a greater harmonisation of equity markets in particular. I admit that this is an ambitious goal as insolvency law and company law, for example, would need to be further harmonised. This step would remove a few barriers to a single European capital market. Closing remarks Ladies and gentlemen, At the beginning of my speech I mentioned the Eurobarometer survey which indicated that 70% of people in the euro area want the euro as the single currency.

Against this background, the founders of the monetary union put in place a rulebook that seeks to ensure sound fiscal policy: the Stability and Growth Pact. We all know that these rules were not particularly effective. They have therefore been strengthened since the crisis and complemented by a better control of macroeconomic imbalances. But even the best rules only work if they are respected. And even the best rules may not prevent a country from experiencing economic shocks. ... but union also means community For cases where these shocks are too big to be absorbed at national level, a monetary union needs mechanisms to spread the ensuing costs over more than one pair of shoulders. And this brings me to the second question: how can risks be shared at European level without a transfer of risk occurring which distorts the incentives for the individual Member States? I mentioned this earlier: during the crisis, risks were shared especially by way of mutual guarantees and thus via national budgets. However, such a sharing of fiscal risks can reduce the incentives to pursue sound fiscal policies. In order to counter this disincentive, both the risks and the monitoring would therefore have to be shared at European level. So the Presidents of the European institutions 3 – including the ECB – are calling for stronger fiscal integration leading to a fiscal union. For the moment, I see little political will to create a European fiscal union. Fiscal risk-sharing, for the time being, therefore remains a problematic issue.