samchain/econo-pairs-v1 huggingface dataset:
17  Of course, this maturity distribution could change as part of the Committee’s ongoing assessment of the economic outlook and the efficacy and costs of asset purchases. 6  BIS central bankers’ speeches  issuance of coupon securities.18 We have a larger presence in the market for longer-term securities, with SOMA holdings making up about 35 percent of securities with four or more years to maturity. The Committee carefully assesses the total amount, pace and composition of its purchases in part because it is aware of the potential for large-scale asset purchases to contribute to financial market dysfunction. Some on the Committee have listed financial market disruptions among the potential risks that they will consider as they evaluate the current purchase program. There is a finite supply of Treasury securities and agency MBS available to purchase, in terms of both total outstanding amount and how much is available for purchase in the market at any given time. If the Federal Reserve were to become too dominant a buyer or holder, it could reduce the tradable supply of these securities and discourage trading among market participants, leading to diminished liquidity and price discovery. A significant deterioration in liquidity could lead investors to demand a premium for transacting in these markets, ultimately raising borrowing costs and undermining the program’s policy goal.19 With this concern in mind, the Desk closely monitors how our implementation of asset purchases impacts financial market functioning.

Of course, buyers in a TBA transaction understand that sellers will look to exercise their option of delivering these relatively less valuable pools, and the price of the TBA contract will reflect the expected value of these securities. Market participants who wish to trade in MBS with more favorable prepayment characteristics do so in the “specified pool” market, where specific agency MBS are traded at prices quoted as a spread above the corresponding TBA. In other words, TBA prices serve as a benchmark for pricing all agency MBS. The standardized nature of TBA contracts helps make a large segment of the agency MBS market effectively homogeneous and thus highly liquid – an important characteristic for implementing large-scale purchases of agency MBS.8 Within the TBA market, the “production coupons” are the contracts in which the bulk of newly issued agency MBS are delivered and most trading occurs. The coupon rates on the production TBA contracts are linked to the primary mortgage rate. As a highly stylized example, say a mortgage originator plans to securitize a group of mortgages with an average primary mortgage rate of 4 percent. The originator pays a fee of about 50 basis points to Fannie Mae, Freddie Mac or Ginnie Mae, in return for a guarantee on the principal and interest payments of the underlying loans. The originator is also required to retain at least 25 basis points to cover costs associated with servicing the loan.
8  BIS central bankers’ speeches  Figure 7 International reserves to GDP (percent) 60  60  50  50  40  40  30  30  20  20  10  10  0  0  Brazil Colombia Israel Malaysia Mexico 2003  2004  2005  2006  2007  Peru 2008  Thailand Chile 2009  2010(*)  (*) Growth forecast and last available data of international reserves as from the IMF. For Chile, GDP growth forecast from December 2010 Monetary Policy Report. Sources: Central Bank of Chile and International Monetary Fund. BIS central bankers’ speeches  9

The goal of this Regulation is to ensure a more rigorous regulatory treatment of issuance and transactions with some types of crypto-assets and the crypto-asset service providers will be subject to authorisation and control. The long-term trends in Europe are related to achieving a greater integration and autonomy of the European payment system. In its centre are positioned the instant payments and application of common technical and business standards across Europe. Bulgaria is an active participant in these processes. EU initiatives for development of retail payments are in the process of implementation on our domestic payments market. A still open question is whether the changes in the people’s payment habits will stay as a permanent feature and will set a direction for the forthcoming technical developments in the payments sector. In this very dynamic area the EU regulators will continue playing an active role. I wish interesting and productive work to all the participants in today’s financial forum. 2/2  BIS central bankers' speeches
In 2014 alone, $ billion was spent in share buyback, bringing the cumulative amount to $ billion since 2009. As we all know, share buyback may buoy share prices and boost earnings per-share in the short run, but will not improve a company’s productivity and competitiveness, nor create any new jobs. 13. Thirdly, with the US financial system awash with liquidity from QE and with feeble domestic demand, excess liquidity soon found its way to emerging market economies (EMEs), such as China, Brazil and Russia, in pursuit of higher returns. Between the outbreak  2  BIS central bankers’ speeches  of the global financial crisis and the peak in 2014, total inflows to EMEs were estimated to be some $ trillion, with roughly $ trillion of it destined for Asia. In the face of the massive inflows, EMEs experienced currency appreciation, an increase in money supply, an expansion of the credit bubble, overheating in the economy and asset markets, etc. 14. Fourthly, the tide will eventually turn. Currently, with a strong US dollar and the imminent normalisation of US interest rates, EMEs are confronted with capital outflows, currency depreciation, and sharp falls in energy and commodity prices. Their economies and asset markets are coming under varying degrees of downward pressure, which will adversely affect the US and other advanced economies. EMEs have grown much larger in the past decade or two. In particular, China’s GDP ballooned from $ trillion in 2000 to $ trillion in 2014.

First, and foremost, zero interest rates and QE have inflicted big losses on the savers and individuals, funds and institutions reliant on interest incomes. Deposit rates in the US have dropped by 3 percentage points from an average of about 3.5% in 2007. As interest incomes approach the zero mark, many depositors, especially low- and medium-income households and retirees have had to cut their spending. And, while it can be said that “a saver’s loss is a borrower’s gain”, this has not been the case for every borrower. For example, because of negative equity or bad credit scores, many US families are stuck with hefty mortgage rates. In Hong Kong, deposit rates have also dropped by about 2 percentage points since 2007. With total deposits of about $ trillion currently in our banking system, you may wish to think about the potential loss to savers. 12. Secondly, most US families are still in the process of de-leveraging after the global financial crisis and as a result, growth in consumer demand remains lukewarm. On the corporate front, notwithstanding low borrowing costs, many US companies have been reluctant to invest domestically in expanding capacity and enhancing productivity. In fact, annual growth in business investments in the US has averaged only 3.7% since 2009, well below the average of 5.8% in the past economic expansion cycles. At the same time, many US corporations have spent their cash pile to buy back their own shares.
Of course that leverage needs to be well managed. The rise in yields in late September – 130 basis points in the 30-year nominal yield in just a few days – caused a significant fall in the net asset value of these leveraged LDI funds, meaning their leverage increased significantly. And that created a need urgently to delever to prevent insolvency and to meet increasing margin calls. The funds held liquidity buffers for this purpose. But as those liquidity buffers were exhausted, the funds needed either to sell gilts into an illiquid market or to ask their DB pension scheme investors to provide additional cash to rebalance the fund. Since persistently higher interest rates would in fact boost the funding position of DB pension schemes[1], they generally had the incentive to provide funds. But their resources could take time to mobilise. The issue was particularly acute for one small corner of the LDI industry – pooled funds. In these funds, which make up around 10-15% of the LDI market, a pot of assets is managed for a large number of pension fund clients who have limited liability in the face of losses. The speed and scale of the moves in yields far outpaced the ability of the large number of pooled funds’ smaller investors to provide new funds who were typically given a week, in some cases two, to rebalance their positions. Limited liability also meant that these pooled fund investors might choose not to provide support.

And in a stress, that can lead both to sudden spikes in demand for liquidity – either to support the financing of leveraged positions or as deleveraging leads to forced sales – and a corresponding contraction in liquidity supply, with potentially systemic consequences. Leverage is of course not the only cause of systemic vulnerability in the non-bank system – as we have seen with liquidity mismatch driving run dynamics in money market funds (MMFs) and open-ended funds (OEFs) during the dash for cash. [4] But it is important where any form of leverage is core to a non-bank’s business and trading strategy. Indeed what happened to LDI funds is just the latest example of poorly managed non-bank leverage throwing a large  rock into the pool of financial stability. From Long Term Capital Management in 1998; to the 2007 run on the repo market; to hedge fund behaviour in the 2020 dash for cash; and the failure of Archegos in 2021. These episodes highlight the need to take into account the potential amplifying effect of poorly managed leverage, and to pay attention to non-banks’ behaviours which, particularly when aggregated, could lead to the emergence of systemic risk. I see systemic risk from leverage in the non-bank system arising through two different channels of contagion: to markets – both those non-banks invest in and those they borrow from; to counterparties – who either provide cash, or take the other side of instruments that are used to provide synthetic leverage.
A crucial point is to avoid any tax distortions that might mean these products are penalised more than liquid and risk-free investments. This level playing field in terms of taxation should also apply to the companies that are financed: in other words we need to avoid making debt financing more attractive than equity financing… and we know we have a long way to go on this. The second avenue for fostering equity financing is to boost cross-border capital flows within the euro area. One of the great paradoxes of the single currency bloc is that investment is too low while savings are generally in plentiful supply: the region has a high current account surplus, of more than EUR 300 billion per year, or over 3% of GDP for the 12 months up to end-September 2015. The problem is that these savings cannot circulate freely between member states due to financial fragmentation. This situation has serious consequences. It generates a growth lag, as excess savings in core countries are unable to satisfy the demand for investment in the periphery. It also makes the euro area more fragile, as national shocks cannot be smoothed by fiscal transfers – due to the lack of a fiscal union – or by stable, longterm private sector capital flows. By way of comparison, in the United States, 39% of shocks  BIS central bankers’ speeches  3  are absorbed by capital flows between federal states and only 13% by government transfers.

In one of his books he wrote: “If prices rise, the rate of interest is to be raised; and if prices fall, the rate of interest is to be lowered; and the rate of interest is henceforth to be maintained at its new level until a further movement of prices calls for a further change in one direction or the other.” Just over three decades after his address in Stockholm, Sweden had to leave the gold standard in September 1931. The objective of monetary policy was declared to be to use “every available means to maintain the Swedish krona’s domestic purchasing power”. In this way BIS Review 58/1998  -2-  the Riksbank was the first central bank to declare openly that its monetary policy norm was price stabilisation. Notwithstanding this long tradition, after inflation’s rising trend in the post-war era, Swedish economic policy’s reorientation toward price stability did not begin until the late 1980s and early 1990s. That was a decade or so after such realignment had been initiated in other countries. By then, Sweden had experienced twenty years of inflation that averaged 8 per cent a year. That was the longest inflationary period since the early nineteenth century. In contrast, in the one hundred and forty years from 1830 to 1970, inflation in Sweden had averaged an annual rate of 2 per cent. So one can say that in the present decade we have been re-establishing our roots. Sweden’s policy realignment in the early 1990s was, however, more painful than anyone could have foreseen.
This implies that living standards in the euro area, in terms of real GDP per capita, continued to improve and developed more favourably than indicated by relative real GDP growth rates. At the same time, what is worrisome is that the gap in population growth has been even larger with regard to growth in the working age population, which manifests that Europe has a more acute problem of population ageing. IV. Economic growth in Europe: the role of institutions and values  IV.1. Market structures and economic institutions  Policy-makers in Europe have recognised the structural weaknesses of the European economy and have put together a range of reforms and policy measures seeking to remedy the deficiencies identified. The revised and refocused Lisbon strategy, which aims at making the EU “the most dynamic and competitive knowledge-based economy in the world” by 2010, outlines the main areas where policy action is needed (see European Community (2004) and Sapir et al. (2003)).

BIS Review 43/2007  3  reductions in working hours per person employed in the euro area can certainly help explain the widening of the gap in the level of output per capita between the euro area and the United States. Table 2 shows how the rate of change in labour utilisation can be decomposed into the rates of change of the four variables I referred to. The decomposition is useful because it helps to better understand the relative contribution of developments and factors affecting labour utilisation. Some of these factors can be influenced by policies and changes in economic institutions in a way that can contribute to improving the economy’s growth performance. Since the mid-1990s, labour utilisation in the euro area has increased, also relative to the United States. This has contributed positively to euro area growth and to narrowing the growth gap with the United States. However, despite this improvement, the level of labour utilisation – as opposed to its rate of change – in the euro area remains much lower than in the United States. This fact reflects a lower labour force participation rate, a higher unemployment rate, and lower average working hours per person employed in the euro area. The figures in Table 2 show how labour utilisation, and thus GDP growth, in the euro area have been supported by an increase in the share of the working age population that is employed (labour force participation has risen significantly and the unemployment rate has declined somewhat).
I understand that some of your work depends on responses by us – I can assure you that we will be making our best endeavours to react quickly and make any remaining decisions or give necessary guidance as soon as we are able. As Governor Mark Carney noted in his speech in September, the PRA will not hesitate to withhold approval for inadequate or opaque models. The responsibility to meet the Solvency II Tests and Standards rests solely with firms and their senior management. Although the Bank will continue to work with firms as they finalise their models, be under no illusion that each model will be assessed comprehensively and objectively against the full Tests and Standards, and that those failing to meet the requirements will not be approved. We have to get this right and can’t allow weak models to go into live. 2  BIS central bankers’ speeches  IMAP firms must ensure that they have contingency plans in place so that they are still able to meet the 1/1/16 implementation date in the event that their model fails to be approved. For all firms, there are important deadlines to be aware of in relation to reporting and nonIMAP approval permissions, which will be discussed in the sessions later today. We are implementing new IT and data collection systems and will be ready to accept the submission data required under the directive from June 2015.

We believe this benefitted policyholders and left the industry in good shape to weather the recent financial storms of the Great Recession. Those are also desired outcomes that lie at the heart of the Solvency II Directive and so I want to leave you in no doubt that we will implement the Directive in a full and robust manner so as to continue to deliver the level of financial resilience consistent with the safety and soundness of firms and policy-holder protection. Another difference in the UK is that we are anticipating more internal model applications than any other EU country, which is not unexpected given the scale and diversity of the UK industry. This creates an unprecedented challenge for the industry, and for the Bank, in ensuring that models are of a high quality and that they meet the Solvency II requirements. It also creates some logistical challenges which you need to be aware of. If there are a lot of you trying to get approval, and only one of us, don’t expect that you can all present us with your models at the last minute and expect a one-to-one service. If too many firms leave their preparations too late, then we will have to prioritise – if you want to be sure, then get in as early as you can. Naturally, a significant proportion of our work relates to internal model approval, given the complex nature of many models and the detailed requirements of the Solvency II Tests and Standards.
Thus, even in an economic boom, employers can hold back wage increases without the risk of losing valuable labour. Of course, these changes in wage formation may vary considerably in different economies. But they interact with each other due to the global 2 Read more at: https://www.riksbank.se/sv/finansiell-stabilitet/det-finansiella-systemet/betalningar/  3 The risk of unemployment is one of many factors behind wage expectations. The experience of unpleasant mac-  roeconomic events characterises the behaviour of different age categories, as discussed, for example, by Malmendier and Nagel in “Depression babies: Do macroeconomic experiences affect risk taking?” (The Quarterly Journal of Economics 2011)  3 [5]  market for goods and to a growing part of the service sector also being traded globally. The increase in the number of self-employed people, the many part-time positions and the changed wage composition are factors that tend to crop up as explanations for low wage growth in other economies but which I consider to be less important for understanding wage formation in Sweden. On the other hand, what is special for Sweden is that we have become many more on the labour market. The number of persons between 15 and 74 in the labour force increased by just over half a million between 2006 and 2016. This increase is largely due to high immigration but the labour force is also growing due to changed rules and reforms on the labour market and to tax, benefits and pension rules.

Instead, I’d like to focus on some of the more awkward questions which confront us as a regulator with prudential and competition objectives. Five years on from the introduction of our competition objective it’s a natural moment to do this. But before turning to those questions, I have to ask you to indulge me for a few moments in picking out what to me are the most significant things we have done to advance our secondary competition objective during the first five years of its existence. I will limit myself to three:   First, the structures we have put in place to encourage the entry of new banks: our New Banks Unit, which engages with prospective new entrants and provides a nursery for newly authorised banks; our ‘mobilisation phase’ which allows new banks to get going in a live environment but before being released into the wild; and our ‘wind-down’ approach to setting PRA buffer requirements for new banks in order to avoid penalising early stage growth. I don’t think it’s a coincidence that we’ve authorised 17 new UK banks in such a short period.1    Second, bank capital. I have long been troubled by the difference between some standardised and modelled capital requirements, particularly for mortgages. And there are remaining tensions on capital which I will come back to.
But the SMR is not an end in itself – the accountability it delivers should contribute to safety and soundness. Firms should therefore expect us to make more use of the SMR to deliver supervisory priorities. There is no magic to this: we will simply ask, when we set out those priorities, which senior manager is on the hook to deliver them, and what will happen if they do not? We want to know who is on the hook if things go badly wrong, and have recently asked firms to spell this out in developing areas such a crypto-assets, operational resilience and algo-trading. And enforcement cases have shown that we can, and will, take action against Senior Managers if our red lines are crossed. However, we are not an enforcement-led regulator: in my opinion, the real prudential value of the regime lies in creating opportunities for preventative or remedial action through supervision. Which brings me to my third example: pay. This has been another area of massive reform. No pay system is perfect, but I remain convinced that the 100% cash, paid out up-front bonus systems which existed for risk-takers in some of our largest firms before the crisis were an important part of what broke the financial system. The new system of deferral, malus and clawback is much safer. So we are not planning to come up with some new approach at this stage – seven year deferral is long enough, and has a pleasingly biblical ring to it.

And that would generate risk premia and additional volatility in financial markets. The challenge in achieving price stability Implementing a symmetric mandate in current circumstances is not an easy task. I see three challenges in the current situation First, in finding the optimal mix of non-conventional instruments. Central Banks in general, and the ECB in particular, have been quite innovative. New methods of forward guidance have been developed that have proved very efficient in the euro area in bringing down the short end of the yield curve. The main question, in my mind, concerns the best combination of the other  2  BIS central bankers’ speeches  instruments: negative deposit rates and asset purchases. There is no certainty that they can be implemented together in a consistent way. Asset purchases are expected to act both through changes in asset prices and a flattening of the yield curve. They inject central bank liquidity that forces banks to hold excess reserves in significant amounts. However, the negative rates create a sort of tax on those reserves. The apparent rationale is that negative rates would push banks to grant new loans or buy assets, therefore reinforcing the impact of asset purchases. But since loans create deposits, and the sellers of assets receive liquidity that they need to deposit on bank accounts too, there is simply no way this liquidity can disappear until the central bank decides to withdraw it.