samchain/econo-pairs-v1 huggingface dataset:
In effect, more prudent and better-managed banks have been denied the market share that would have been theirs if mismanaged big banks had been allowed to go out of business. This strikes me as counter to the very essence of competition that is the hallmark of American capitalism: Prudently managed banks are being victimized by publicly subsidized competition from less-prudent institutions. A student of existentialism is tempted to recall Nietzsche’s lament that, “He who is punished is never he who performed the deed.”12 An acerbic devotee of H.L. Mencken might be given to recite his dictum that while “injustice is relatively easy to bear; what stings is justice.”13 I do not doubt for a New York minute that the savvy big players who “performed the deed” did so  11  See “Oil and Gas CEO Pay Beats Other Industries,” by Dana Mattioli, Wall Street Journal, May 12, 2011. Also see http://graphicsweb.wsj.com/php/CEOPAY11.html. 12  See Daybreak: Thoughts on the Prejudices of Morality, by Friedrich Nietzsche, Cambridge, U.K.: Cambridge University Press, 1997. 13  See Prejudices: Third Series, by H.L. Mencken, New York: Alfred A. Knopf, 1922. 4  BIS central bankers’ speeches  with confidence they would be protected by the authorities who might find “justice” difficult to impose. In solving the crisis at hand during the Panic, it appears that the most imprudent of lenders and investors were protected from the consequences of their decisions; the sinners were rescued and the virtuous penalized.

My concerns over regulation-induced economies of scale and the implications for industry consolidation apply to all the size classes of banks, given the extensive list of new or enhanced requirements created by Dodd–Frank and their associated compliance costs. As it affects community banking, my concerns are tempered somewhat, though not completely alleviated, by the small-bank exceptions that have been granted to several of the new law’s more costly requirements. 14  See “That Which is Seen, and That Which Is Not Seen,” in Essays on Political Economy, by M. Frédéric Bastiat, London: Provost & Co., 1872. BIS central bankers’ speeches  5  Unfortunately, the same cannot yet be said for the case of regional banks. The act indicates that all banking organizations with more than $ billion in assets should be subject to enhanced supervision. Some of the related regulatory proposals have already been distributed for comment. Still other proposals for new, stricter “enhanced supervision” rules for these banks will be unveiled soon. Yet, few really believe a $ billion bank poses a systemic threat to our $ trillion banking system. Nor is a $ billion bank qualitatively similar along risk dimensions to the very largest ones that exceed $ trillion in size. The top 10 banking organizations have a cutoff point of $ billion. I posit that this group should constitute the primary target for enhanced supervision. Interestingly, despite its large share of industry assets, this group holds only about 20 percent of the small-business loans on bank books.
Despite the significant shifts in macro-economic relationships and in policymakers’ preferences arising from a rise in market power, the net effect on the (level and variability) of the optimal interest rate path is more modest. At root, that is because of the trade-off inducing nature of mark-up shocks. Third, the presence of market power and higher mark-ups also has implications for the level of output in the economy which could provide additional incentives to generate inflation. Monopolistic competition implies that output is inefficiently low relative to its (perfectly competitive) social optimum. For sufficiently small deviations from the steady state, the policymakers’ loss function can be re-written to reflect that inefficiency:  16  All speeches are available online at www.bankofengland.co.uk/speeches  16  𝐿𝑡 = 𝜋𝑡2 + 𝜆𝑥𝑡2 − Ʌ𝑥𝑡  (14)  where  Ʌ=  1 (1 − 𝜃)(1 − 𝛽𝜃) 1−𝛼 2 𝜖 𝜃 1 − 𝛼 + (𝜍 + 𝜑)𝜖  (15)  The optimal targeting rule is also then altered to become:  𝜋𝑡 =  1 𝜑 + 𝛼 −1 1 −1 (𝜎 + ) − 𝑥𝑡 𝜖2 1−𝛼 𝜖  (16)  The additional constant term reflects the well-known inflationary bias under discretionary policy, first articulated by Barro and Gordon (1983). Output at a sub-optimally low level increases the incentives of a discretionary policymaker to run looser monetary policy to push output towards its social optimum, thereby generating an inflation bias.

Overall, then, while the theoretical and empirical evidence suggests it is possible higher market power and mark-ups may have come at some cost in lower investment and innovation, the evidence is not overwhelming and certainly would not imply that the aggregate effect is large. A second relationship explored recently is between market power and the labour share. 15  Autor et al (2017)  find a negative empirical relationship using measures of market concentration among US companies. And Díez et al (2018) and De Loecker and Eeckhout (2018) identify a weakly negative relationship between 15  The relationship between labour, capital and profit shares is discussed in Barkai (2017). 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  mark-ups and the labour share. If we run regressions similar to those in Díez et al for UK-listed companies (Table 3), we also find a negative relationship between mark-ups and the labour share. 16  The analysis presented here, and much of the recent literature, is based around estimates that suggest a secular rise in firm-level mark-ups. Some caution is advisable when drawing conclusions from these results. First, some macro-economic evidence points to falling, rather than rising, company mark-ups/margins (for example, Chen, Imbs and Scott (2009, 2004)). Second, some mismeasurement may be at play in the estimation of mark-ups (for example, Traina (2018)). These uncertainties in the measurement of mark-ups should be borne in mind in interpreting what follows.
Now that we have demonstrated that we have monetary control even with a very large balance sheet, I would hope that this issue has been put to rest. As I noted earlier, I am a committed advocate for enhanced transparency and we are always looking for ways to improve. But, of course, there are limits. One could argue, for example, that a live broadcast of a Federal Open Market Committee meeting would be more transparent. But, such a broadcast would do considerable harm by constraining candor and debate over the appropriate monetary policy decision. I believe it would likely lead to less informed decisions and, consequently, poorer execution of our monetary policy responsibilities. Similarly, disclosing in real time who was borrowing from the Federal Reserve’s Discount Window would likely undercut the efficacy of the window. Banks might be reluctant to borrow if it were immediately made public because such borrowing might be construed in the market as a sign of weakness. 19 Stigmatizing Discount Window use by banks would make this tool less effective as a lender of last resort backstop for bank liquidity needs. While there obviously is a point of diminishing returns in terms of increased transparency, I think it’s reasonable to evaluate what further steps the Federal Reserve could make in this direction, judging whether additional steps would enhance versus diminish the effectiveness of our tools and policies, and our ability to achieve our objectives.

But this is mainly because more monetary policy stimulus has been required during the current economic cycle in order to push the U.S. economy towards the Fed’s dual mandate objectives. I believe that if we had not responded as forcefully, the recovery would have been slower, the unemployment rate would have been higher and there would have been a greater risk of deflation. While it is much too soon to claim success, the U.S. economy today is in a relatively good place compared to most other countries. The economic expansion is in its seventh year and we have made considerable progress relative to our employment and inflation objectives. Also, the tools that we designed to control monetary policy even with a very large balance sheet have been shown to be effective. In December, when we raised our target range for the federal funds rate to 25 to 50 basis points, we also raised the interest rate we pay on bank reserves to 50 basis points and the rate we pay on our overnight reverse repo facility to 25 basis points. Not only have these new tools been effective in moving the federal funds rate up into the middle of its new target range, but the entire complex of money market rates has moved up as well. Also, the fears expressed by some that the Federal Reserve’s very large balance sheet would lead to runaway inflation have proven to be unwarranted.
Nonetheless, these developments will likely lead to some tightening in credit conditions for households and businesses, which in turn will weigh on spending. It is still too early to gauge the magnitude and duration of these effects, and I will be closely monitoring the evolution of credit conditions and their potential effects on the economy. The Federal Reserve has a dual mandate to promote maximum employment and price stability. These goals are intrinsically linked-price stability is essential to sustaining maximum employment over the long term and for the economy to reach its full potential. Right now, while there are some indications of gradual cooling in the demand for labor, the labor market remains very tight. Job growth continues to be robust. Job openings far outnumber applicants. And at 3.5 percent, the unemployment rate is near 50-year lows. That brings us to inflation. Inflation soared to a 40-year high of 7 percent last June, as measured by the personal consumption expenditures (PCE) price index. It has since  1/4  BIS - Central bankers' speeches  moderated to 5 percent, and the most recent data indicate that this trend of slowing inflation is continuing. Still, inflation is well above the FOMC's longer-run goal of 2 percent. This inflation target is an important bedrock principle for the FOMC. It provides a "North Star" for policy decisions and helps to improve the public's understanding of our goals and actions.1 We are committed to attaining-and maintaining-a sufficiently restrictive policy stance to achieve our 2 percent longer-run goal.

Once the current crisis is over, strengthening banking regulations will be absolutely necessary as a means of compelling banks to adopt a more circumspect approach. BIS Review 65/1008  1
Yields on bonds with high credit ratings are also very low in Switzerland. At the beginning of June, ten-year Confederation bonds attained a new all-time low, at around 0.5%. Thirty-year bonds were trading in the market at yields of under 1%. For short to medium-term maturities, yields were in negative territory, in some cases very negative. The low interest rates continue to be reflected in robust growth in lending and rising real estate prices. As a result, the imbalances on the Swiss residential mortgage and real estate markets have increased further. Following my presentation, my colleague Jean-Pierre Danthine will take a closer look at the risks for financial stability in connection with the mortgage and real estate markets. SNB monetary policy Let us now return to the SNB’s monetary policy. The debt problems in some euro area countries have deteriorated seriously over the recent period. Accordingly, the euro has lost value against most countries since May. This has led to increased upward pressure on the EUR/CHF exchange rate. Even in this difficult environment, we have consistently enforced the minimum exchange rate of CHF 1.20 per euro. To defend the minimum exchange rate, we purchased foreign currency. This has led to a further expansion in Swiss franc liquidity and the SNB balance sheet. Even when the minimum exchange rate was first introduced, we drew attention to the fact that its enforcement could have significant consequences for our balance sheet.

Dimitar Radev: Recent achievements in resolving Bulgaria's banking sector issues Address by Mr Dimitar Radev, Governor of the Bulgarian National Bank, at a forum of the Association of Banks in Bulgaria on the occasion of the 25th anniversary of its foundation, Sofia, 24 May 2017. * * * Dear colleagues, First of all, I would like to congratulate you on the occasion of the 25th anniversary of your Association. During this, sometimes turbulent, period the Association proved itself not only as a branch organization supporting its members in their banking business, but also as a reliable and reputable partner to public authorities and institutions, including BNB. We highly appreciate this role. It was also demonstrated in the best of ways in the implementation of the measures in the banking sector after the turmoil in 2014. In the short period after it we went together a long way. As a central bank, we focused on improving supervision and building a reliable institutional framework for resolving banking sector issues. Undoubtedly, however, our most important joint effort was the asset quality review and the stress test conducted last year. An exercise unprecedented in its scale that was a real challenge and a test not only for the central bank, but for our banking system as a whole. Only two days ago, our achievements in the banking sector were a subject of an objective and independent discussion.
A lack of dynamism is even more evident in the euro area, where growth forecasts have been revised downwards and point to a very weak pace of recovery. Among the emerging economies, growth continues to be high in Asia, in contrast to the poorer performance of some Latin American economies. At the global level, inflation continues to hold broadly at moderate levels and no significant inflationary pressures are discernible. This behaviour of prices justifies keeping monetary policy loose in the advanced economies, in line with the stance adopted at the start of the crisis. Nonetheless, in the United States and the United Kingdom, where recovery is moving more briskly, we are already witnessing the first steps of the withdrawal of the exceptionally expansionary, non-conventional measures introduced at critical junctures of the crisis. But we cannot yet refer to a change in tack in the monetary policy stance of these two countries. Rather, what is involved is an incipient return to a somewhat more neutral monetary stance. And as these countries’ central banks have insisted, the change will be gradual and in step with the progress of each economy so as to avoid jeopardising the recovery. The conduct of the Federal Reserve and the Bank of England is in significant contrast to that of the European Central Bank, which currently faces a very different growth and inflation scenario. The fragile recovery that began around mid-2013 in the euro area has progressively lost momentum in 2014.

The position of banks is evaluated in two scenarios: a baseline scenario, taking as its starting point the European Commission’s forecasts, and an adverse scenario, approved by the European Systemic Risk Board, the European Union’s macroprudential surveillance body headquartered at the ECB. The stress test horizon of three years (2014–2016) is formulated using banks’ consolidated balance sheets at the close of 2013. Minimum thresholds have been set that banks must meet in respect of core capital, according to the Basel III Accord. These stand at 8% for the asset quality review exercise and for the stress test baseline scenario, and at 5.5% for the adverse scenario. Those banks below these thresholds will have two weeks to submit capital-raising plans, which should envisage coverage of the shortfalls identified. They will have six months to cover capital shortfalls identified in the asset quality review and in the baseline scenario of the stress tests, and nine months to cover shortfalls estimated under the adverse scenario. 3)  Allow me to refer, finally, to the Single Resolution Mechanism. Political agreements were reached last May between the European Parliament and Council to set up this Mechanism, comprising a network of national resolution authorities, the new Single Resolution Board and the Single Resolution Fund. The Regulation creating the Single Board and Fund was published on 30 July; since then work has continued on the elements that will enable the Mechanism to come on stream on 1 January 2015.
And the required adjustment still has a long way to run – few of the largest banks in the United Kingdom managed to reduce their leverage ratios through 2008, which remain at historically high levels. Third, interconnections between institutions create potential fragilities across the system, as we saw last September. Fourth, the risks associated with large-scale proprietary trading are probably harder to control in limited liability companies. So we need instruments to prevent the size, leverage, fragility and risk of the financial system from becoming too great. The resulting “macro-prudential” toolkit will contain a number of instruments to reduce risk, both across the system and over time. It must not be put together in a hurry. And I share the concerns of many of you that we are a long way from identifying precise regulatory interventions that would improve the functioning of markets. As far as individual banks are concerned, we face some uncomfortable choices about the structure and regulation of our banking sector. If some banks are thought to be too big to fail, then, in the words of a distinguished American economist, they are too big. It is not sensible to allow large banks to combine high street retail banking with risky investment banking or funding strategies, and then provide an implicit state guarantee against failure. Something must give.

Although the present economic environment looks quite favorable, these broader macroeconomic policy challenges make it even more important that we build on the substantial progress we have already made in strengthening risk management and the resilience of critical market infrastructure. Our success in meeting these challenges will help ensure that our financial system proves as resilient in the future as it has in the recent past. Thank you. 4  BIS Review 18/2004
Page 5 of 19 This chronic deficit has been shared by all governments and parties in power for over forty years, despite some temporary improvements in the late 1990s and early 2010s. Aside from the much greater 'ratchet effect' of spending in France than in other countries, this French malaise is reflected in – and partly explained by – two symptoms of a more political nature. Two symptoms of the French malaise First, we are multiplying the number of commitments to budgetary targets, but so far we never adhere to them. Management of public finances is deemed to have evolved into a more multi-year process - which is a good thing - with the adoption of public finance planning acts from 2009 onwards, but also as a result of the requirements of the EU Stability and Growth Pact since 1999. However, when it comes to executing the process, the comparison with Germany is cruel indeed: our German neighbours systematically outperform their forecasts and commitments, while we systematically do worse than ours. Page 6 of 19  These persistent and significant shortcomings severely damage our credibility in Europe and in the eyes of all French citizens. I would like to applaud the determination currently being shown at the "Assises des finances publiques" (round table conference on the public finances) in Bercy. Some people are calling for more ambitious targets, but a first real revolution would be to stick to existing ones.

This will provide a clear division of responsibility. Could the discussion about new banking sector regulation be a case of the pendulum swinging back towards the regulatory optimism that I described earlier? The picture is probably more nuanced. The banks have shown a striking ability to adapt, a skill which they hardly intend to relinquish. It must be acknowledged that no regulation can prevent financial institutions from encountering difficulties. A new regulatory framework must therefore ensure that banks have the ultimate responsibility for the risk undertaken. Regulatory compliance will then also be in their own interest. Conclusion In my address this evening, I have sought to gather together some historical threads relating to the design of economic policy through our recent history and at the same time provide some glimpses of developments in the field of economics. Views on macroeconomic management have changed in this period – influenced by economic developments and events. Perhaps the policy response during the financial crisis also reflected a swing of the pendulum towards increased regulatory optimism. On the other hand, the financial crisis required full deployment of instruments. Measures were far-going and some were unconventional. In some countries, the bill to be paid is substantial. In their prize-winning work, Kydland and Prescott raised the question of discretion versus policy rules. Today, we have perhaps opted for “both, please”. An economic policy that is conducted blindly according to a rule, or only oriented towards solving day-to-day problems, can have adverse effects.
For example, suppose a CBDC or the digital euro is easily and widely accessible across borders or in countries facing financial instability. In such cases the citizens could substitute local currencies with the digital euro and make the domestic financial situation even worse. This is the scenario we must avoid. UNCERTAINTY Finally, we must all ask ourselves in what kind of financial reality we want to end up in because it could be a world of indirect currency competition pursued by private companies only as a matter of industrial and technological race. But, at the same time, we could end up in a world where payments are safe, easy to use and settled instantly - both domestic and international and with negligible costs. But will we end up in a world where our privacy is protected and our trust in the system is preserved in times of crisis? Are we going to put our trust solely in computers, protocols, artificially generated outcomes or centralized private companies' algorithms with a global reach? Or do we want public institutions to do their job, protect our interests when no one else will, and be there when we need them? CENTRAL BANKS - LEADERS OF CHANGE Our mandate is to continue to provide trust in money in the digital age. To be a vital part of this new digital world, a new reality. We must not stay aside and observe while the "The Times They Are A'Changin'" and external factors move our whole world in a strange direction.

Miguel Fernández Ordóñez: Procyclicality in the banking activity Speech by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the Conference on Procyclicality and the Role of Financial Regulation, organised by the Bank of Spain and the Financial Stability Institute, Madrid, 4 May 2009. *  *  *  Good morning ladies and gentlemen. First of all I would like to welcome you to the Bank of Spain. Also, let me thank you all for your presence here today to discuss on one of the most difficult and relevant topics affecting financial regulation: procyclicality in banking activity. Let me also thank the BIS Financial Stability Institute, and in particular its Chairman, Mr. Josef Tošovský, for all the support and good advice received during these last few weeks during the preparation of this event that we have co-organized. We are very pleased to have as speakers in this conference a large group of excellent professionals who are directly involved in financial supervision and regulation. A high level meeting like this one is a major opportunity to start building up a common and efficient framework in order to face the procyclicality issue. Cyclicality can be considered an inherent part of economic activity. Banking activity is no exception; it is also affected by the upswings and downturns of the real sector cycles. Not only history proves this, but current events do also. Any doubt about this has been violently resolved after the summer of 2007.