samchain/econo-pairs-v1 huggingface dataset:
Take up of the IMF’s liquidity lines has been disappointing in large part because of stigma. As a country with a sound balance sheet, but concerned about potential liquidity problems arising from spillovers from shocks in the rest of the globe, what signal does requesting liquidity support from the IMF convey? Some members of the IMF have resisted more widespread use of these liquidity facilities because of concerns about moral hazard. Is there a way to address both the stigma and moral hazard issues? 6. Lessons from central bank liquidity insurance  These are precisely the issues the Bank of England has had to deal with in the context of central bank liquidity insurance facilities. The Winters Review 10 conducted into the Bank’s published liquidity facilities highlighted the risk of these facilities becoming stigmatised – usage being taken as a signal of fundamental solvency problems. If that led banks to self-insure against extreme “tail” liquidity risks, that would be inefficient for the financial system as a whole. The Bank has reduced the stigma associated with its liquidity facilities by offering greater predictability of access on more favourable terms. This improved access to liquidity has been enabled by the fact that supervision is tougher on capital and liquidity requirements, banks undergo regular stress testing, and credible resolution tools (including ring fencing to protect depositors and bail-in to protect taxpayers) are being put in place. These reforms are recent and not yet fully tested under the most difficult circumstances.

BIS central bankers’ speeches  Charts and Tables Chart 1: Evolution of the global financial  Chart 2: Composition of IMF resources  safety net as a percentage of external liabilities (1980–2014) Per cent of global external Per cent of global external liabilities liabilities 14 3.5 Regional Financing Arrangments Swap Lines  12  3.0  IMF Temporary  10  2.5  IMF Permanent Self Insurance: FX Reserves (LHS)  8  2.0  6  1.5  4  1.0  2  0.5  0  1980 1984 1988 1992 1996 2000 2004 2008 2012  0.0  Sources: IMF, central bank websites, RFAs, Lane and MilessiFeretti (2012) and Bank calculations. GAB – General Arrangements to Borrow NAB – New Arrangements to Borrow Source: IMF and Bank calculations. Chart 3: Regional FX over- and underinsurance (2014)(a)  Sum overinsurance  Sub-saharan Africa  Middle East and North Africa  Latin America  Central and Eastern Europe  Sum underinsurance  Asia  $ billion 1000 900 800 700 600 500 400 300 200 100 0  Sources: IMF and Bank calculations. BIS central bankers’ speeches  9  (a) Degree of insurance is measured against the standard IMF metric. Chart 4: Access to regional financial arrangements bigger than 0.5% of regional GDP (2014)  Sources: National Sources, IMF and Bank calculations. 10  BIS central bankers’ speeches  References Brooke, M et al (2013) Sovereign default and state-contingent debt, Financial Stability Paper No. 27.
Risk accumulated in institutions that operated at the margin of the explicit safety net, such as mortgage affiliates of thrifts, structured investment vehicles and the GSEs. These changes within U.S. financial markets were complemented by a rise in global financial integration as technology and deregulation made it easier for savings to flow across international borders. As a consequence of this basic evolution of our financial system, a large share of financial assets ended up in institutions and vehicles with substantial leverage, and in many cases these assets were being funded with short-term obligations. And just as banks are vulnerable to a sudden withdrawal of deposits, these non-banks and funding vehicles are vulnerable to an erosion in market liquidity when confidence deteriorates and concerns about default risk increase. These changes in the structure of the financial system were probably not the only causes of the financial boom that preceded this crisis, but they may have amplified the dimension of the boom and they were important to how the crisis unfolded and to how policy has responded. In many respects, financial innovation over this period outpaced the system’s capacity to measure and limit risk, to manage the incentive problems in the securitization process and to provide for an appropriate degree of transparency through meaningful disclosure. Once the performance of the underlying assets began to deteriorate, these weaknesses in the system magnified the uncertainty about the scale of potential losses and added to the intensity of pressures that accompanied the crisis.

The debate about putting more activity through central counterparties is an example. Frankly, it could have taken place a decade ago, and it is a crying shame that it didn’t. The reason it didn’t was that no one came into work thinking that it was their job to think about that and that they had a responsibility for taking a system wide perspective and actually doing something. 2  See Tucker, P M W (2010), “Shadow Banking, Financing Markets and Financial Stability” at BGC Partners Seminar, London, January 2010. 4  BIS Review 145/2010  Institutions are now being created around the world – the Financial Stability Oversight Council in the US, the Systemic Risk Board in the EU, the Financial Policy Committee in the UK – which I earnestly hope will bring that kind of perspective to our work. And the final area is leaning against the credit cycle when it threatens stability. The zeitgeist embraced the seductive idea that either there wasn’t a bubble or if there was a bubble that there was nothing you could do about it. Which was dangerous nonsense, as events have proved. This is not about fine tuning the credit cycle. But we do need to be prepared to take the punchbowl away before the party gets completely out of control. That was the view 50 years ago. Forward to the past.
3  FSA DP09/4: Turner Review Conference Discussion Paper, “A regulatory response to the global banking crisis: systemically important banks and assessing the cumulative impact”. 4  BIS Review 144/2009  Second and beyond liquidity planning, recovery can involve derisking. This might mean laying off risk, shedding positions or even selling businesses. Once in distress, banks absolutely must be prepared to shrink their franchise in order to sustain themselves. That may entail having businesses set up within groups in a way that would facilitate sale, if necessary. Sometimes what a group regards as its core franchise will not map exactly into what the authorities think of as the essential economic services it provides. That is obviously for discussion between firms and their regulators, who need to be ready to exercise powers to force risk-reduction and recapitalisation where necessary to preserve the soundness of the enterprise and the stability of the system. “Derisking” is all about the capital resources of banks in the face of idiosyncratic or widespread stress. There is, therefore, a read across from the “Living Wills” exercise to the question of how much capital banks should hold. Almost no amount of capital is enough if things are bad enough. Which is why contingent capital might potentially be an important element in banks’ recovery plans, as the Governor set out recently in Edinburgh. 4 This would not be the kind of hybrid capital that mushroomed in the decade or so leading up to the crisis.

A second generation of crypto tokens is emerging, to address some of the current challenges related to network congestion, transaction time, energy costs, money laundering risks, and importantly, price stability. Some of the best minds in the field are applying their creative energies to make crypto tokens mainstream. Not all developers and programmers in the crypto world are anti-establishment anarchists. Many may have been 10 years ago, but a growing number are married and have kids now! They know the value of stability. The litmus test will be public trust and acceptance. Basically, the history of privately issued money has not been an inspiring one. Will people put their faith in Money that is not backed by a trusted public institution like a central bank dedicated to protecting its value? Perhaps – if an algorithm can mimic the reaction function of a central bank and preserve the value of the crypto token better than central banks can do with respect to fiat currencies. We have to wait and see. The good, bad, and ugly of crypto tokens Whether crypto tokens become Money or not, they are here and they pose a variety of issues – the good, the bad, and the ugly. Let me start with the good. As many have pointed out, far more significant than the crypto token is the underlying blockchain technology that these tokens help to power. The blockchain has two distinct characteristics that hold promise. First, it is a distributed ledger.
To give these measures teeth, key elements of the Senior Managers Regime should be extended to all firms active in wholesale FICC markets, including dealers and asset managers. That means all senior managers would have clearly defined responsibilities and would be answerable for training, certifying and monitoring the material risk takers they supervise. The FCA should oversee compliance, redeploying resources to focus on Senior Persons. In turn, these individuals would be on the hook for promoting compliance within their organisations. Incentives will be aligned. For the best in the industry, this won’t be new. This is just how you run your business. But for others, who free ride on your reputations: the Age of Irresponsibility is over. Third, regulators should extend the coverage of market abuse regulation to include every major fixed income and currency market. And criminal sanctions should be updated, with market abuse rules similarly extended and maximum prison terms lengthened. Finally we need global standards for global markets. I welcome the FICC Markets Standards Board’s intent to be as global as possible in its membership and influence. All major Central Banks and market participants have begun working on developing a new single Global Code for FX. I would encourage IOSCO to consider complementing these efforts with a similar initiative to cover FICC markets as a whole when they meet in London next week. The FSB will engage with these processes and work to improve the alignment between remuneration and conduct risk across the globe.

This inherent risk can only be managed if all market actors, public and private, recognise their responsibilities for the system as a whole. The City has a special responsibility given London’s pre-eminent position in global markets, which is why it has already brought so many ideas and such energy to advance financial reform. 2 Financial reform is re-building real markets Reform is strengthening the resilience of major banks. Their capital requirements have increased ten-fold and their liquid assets are up four-fold. These banks’ trading assets are down by a third and intra-bank exposures by two-thirds. Reform is ending the scourge of Too Big To Fail. The combination of eliminating the implicit public subsidy and increased capitalisation will correct the distortions caused by the structural under-pricing of risk on banks’ balance sheets. And by making a further shift to market-based finance inevitable, it is increasing choice and competition – real market forces. Reform is also improving risk transfer by untangling the complex web of derivatives that meant failures like Lehman triggered chaos; and by creating simple, transparent and comparable securitisation markets. This reform agenda has increased the effectiveness of FICC markets and reinforced their social licence. 1  See Haddow, A, Hare, C, Hooley, J and Shakir, T (2013) “Macroeconomic uncertainty: what is it, how can we measure it and why does it matter?”, Bank of England Quarterly Bulletin, Q2. See also Bloom, N, et al (2014), “Really uncertain business cycles”, mimeo.
One consequence is that the Icelandic Treasury’s future pension payments burden is negligible compared to most other industrial countries. Of course this represents an enormous economic and social strength for Iceland. The pension funds’ huge assets also impose a great responsibility on their management, who must invest these resources securely and profitably. Furthermore, relative to Iceland’s economy, the pension funds are now at a size where they can have a massive impact on developments in the domestic financial sector. In recent years, Icelandic pension funds have been consistently investing part of their disposable funds in foreign securities. They have considerable scope for making foreign portfolio investments, which by the end of March were estimated at almost 30% of their total assets. Holdings are mainly in foreign equity funds, but they have also invested in mixed funds and individual corporations. Pension funds have also been major players in the domestic equity market. At the end of March 2006, their  BIS Review 46/2006  3  estimated holdings exceeded 200 b.kr. and constituted 16% of their total assets. At the end of 2004, pension funds owned an estimated 12% of all equities listed on Iceland Stock Exchange. Corporate lending by pension funds has also grown rapidly. It is vital for pension funds to exercise the utmost care in their domestic equity investments, and to be cautious about wielding the power that these investments grant them. Likewise, diligence in corporate lending must be an important consideration for pension funds, to avoid an inordinate degree of risk.

The reasons are large year-classes approaching retirement age, increased longevity and a lower birth rate. Conditions are quite different in Iceland, where age distribution is changing more slowly than in most countries with similar economies. Iceland’s retirement pension system is based on all working persons saving a proportion of their wages in a fund which is then used to pay their pension. Taxes therefore does not need to be raised even if there is a proportional rise in the number of pensioners. In addition to pension funds, some pensions are paid through the national insurance benefit system and there are also voluntary supplementary pension savings schemes. Iceland’s pension system thereby fulfils what has been considered international best practice in this field [the three-pillar system]. Total assets of Icelandic pension funds were equivalent to 120% of GDP at the end of 2005. No other pension system in the world is on such a strong footing. At the end of 2004, when total assets of Icelandic pension funds corresponded to more than 100% of GDP, the figure for the Netherlands was just over 100% and for the US 80-90%. In the overwhelming number of industrial countries, total assets of pension funds were equivalent to less than 20% of GDP, and the ratio was even lower than 10% in many countries, including Germany, Italy, Belgium, Austria, Sweden and Finland. By comparison, assets of Norway’s Government Pension Fund (Petroleum Fund) last year were equivalent to 60% of GDP.
In the decades prior to the crisis, such radicalism came to dominate economic ideas and became a pattern of social  6  As Michael Lewis has remarked, “Success is always rationalized. People really don’t like to hear success explained away as luck – especially successful people. Lucky [to] live in the richest society the world has ever seen, in a time when no one actually expects you to sacrifice your interests to anything.” Lewis (2012). 7  See for example Corak (2013), who finds that the elasticity of a son’s adult earnings with respect to his parents’ earnings – the “intergenerational elasticity” – rose from 0.3 to around 0.55 between 1950 and 2000 in the US, indicative of a decline in social mobility. Corak has also shown that the intergenerational earnings elasticity tends to be higher in more unequal countries; a phenomenon termed the “Great Gatsby Curve” by Alan Krueger (2012). 8  Government spending has increased in most countries around the world since the 1960s, reflecting increased spending on social protection, education and healthcare (IMF, 2014). And, looking forward, all OECD countries face increased budgetary pressure due to expected increases in age-related healthcare, long-term care and pensions (OECD, 2011b, Table 1.1). Merola and Sutherland (2012) analyse long-run fiscal sustainability in the context of these budgetary pressures. 9  E.g. Putnam (2001). 10  For a similar list see Shanmugaratnam (2013). 2  BIS central bankers’ speeches  behaviour. 11 As Michael Sandel argued, we moved from a market economy to a market society.

Miguel Fernández Ordóñez: The monetary policy strategy of the Eurosystem Speech by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the Second Summit Meeting of Central Banks on Inflation Targeting, Santiago de Chile, 14 November 2007. *  *  *  Ladies and gentlemen, Let me thank Governor Corbo for his kind invitation to speak at this Second Summit Meeting of Central Banks on Inflation Targeting, hosted by the Central Bank of Chile. It is for me a privilege and a great pleasure to be here in Santiago and to have the opportunity to address this distinguished audience. I would like to begin my intervention today by recalling two important events that took place in 1999. In that year, the Central Bank of Chile adopted a full-fledged inflation targeting strategy with a floating exchange rate. This monetary regime has served Chile well, providing a coherent and transparent framework that is credible in society at large because all the economic agents clearly understand the policy objectives and the rationale for decisions. 1999 was the same year that the Governing Council of the European Central Bank took up the responsibility for conducting a single monetary policy for the entire euro area, after a prolonged period of intensive preparations and successful economic convergence.
Nonetheless, while responsible finance has flourished in many local communities, its next phase of development requires responsible finance to be brought into the global mainstream, to become a core building block in our efforts towards forging a more sustainable financial architecture going forward. Similarly, decisions and solutions to finance need to also be considered on a global scale and not confined to any community or nation. 2  BIS central bankers’ speeches  Of equal importance, the benefits of finance should be extended across all segments of society. Despite the size and scale of our financial sectors in the global financial system, many households and businesses still remain excluded from formal financial services. Globally, as many as 2 billion adults do not have access to a bank account . Perhaps even more revealing are the findings that financial exclusion is not limited solely to developing or low-income economies. Even in advanced countries such as Japan, 3.4% of adults remained financially excluded, while in the United States, over 8% of households are unbanked and 20% remain underbanked . There is thus a still much important impact that finance can bring about. Indeed, in various parts of the world, such greater access is already making a significant impact, particularly for small and medium enterprises, with its market size estimated to double to almost USD14 billion by 2019 from USD7 billion in 2015 . There is, however, still scope for such access to be expanded to bring about more balanced and sustainable growth in the global economy.

Mojmír Hampl: The EU banking industry Speaking points by Mr Mojmír Hampl, Vice Governor of the Czech National Bank, at the European Economic Congress “Section: Banking Industry in the EU”, Katowice, 15 May 2012. *  *  *  “Dzen dobry” – this is unfortunately the only thing I can credibly say in Polish, so the rest will be in my imperfect English. Thanks to the organizers for the invitation and for the opportunity to participate in such a distinguished panel. It is my first time here and I can only hope not the last one after I finish my presentation. Given the time constraints I will focus on a just a couple of quick points to stimulate the debate. My key point is: Let’s not repeat the same mistakes again and again. What I mean is this: Since the onset of the current crisis there has been a constant push for a more pan-European, or “federal-like”, approach to the regulation, supervision and potentially also resolution of the financial industry in the EU. The famous de Larosière report and all its consequences, such as the three new pan-European supervisory agencies, are just direct results of this push and this way of thinking. Some may recall that the Czech authorities were quite reluctant to accept this approach and also the final compromise which brought these agencies into existence, and we believe we had good reasons for this.
Former Governors, former and current Board members, as well as a great contingent of excellent economists and professionals have contributed to the design of monetary policy, a better understanding of our economy, and to administering an institution to which the country has entrusted great responsibility and to which we have an enormous obligation of excellence. Thank you very much. 4  BIS Review 156/2009  Table 1 Evolution of the central banks' autonomy index and inflation (*) I. Late 1980s Autonomy index Political Economic  Average inflation (1989)  Economies Advanced Emerging Developing  5.3% 18.6% 22.5%  0.39 0.27 0.27  Total 0.59 0.38 0.45  0.48 0.32 0.35  II. 2003 Average inflation (1989)  Economies Advanced Emerging Developing  Autonomy index Political Economic  2.1% 7.0% 8.4%  0.74 0.47 0.29  Total 0.81 0.75 0.67  0.77 0.61 0.48  (*) Countries with annual inflation above 100% were deleted from the sample. Sources: Arnone et al. (2007) and IMF. Figure 1  Drop in inflation and change in the autonomy of the central banks*  % drop in inflation  -0.2  -0.1 0  0.2  0.4  0.6  -0.3 -0.5 -0.7 -0.9 -1.1 Change in independence index  (*) Drop in inflation corresponds to the percent variation of average inflation between periods 1980-1989 and 2000-2008. Change in the independence index corresponds to the change in Arnone et al. (2007)'s autonomy index between the late 1980s and 2003. Sources: IMF and Arnone et al.

Also, it would be useful if the Fund could develop its own in-house view of a benchmark risk scenario which then can be used, or shared with members, in stress-testing the vulnerabilities of their economies and financial sectors. I probably have used up my allocated time. I hope my remarks have been useful. Again, I would like to thank the Independent Evaluation Office for the invitation. Thank you. 2  BIS Review 95/2006