samchain/econo-pairs-v1 huggingface dataset:
Getting over Covid  Speech given by Andrew Bailey Governor of the Bank of England  Resolution Foundation 8 March 2021  I am grateful to Lauren Barnes, John Barrdear, Philip Bunn, Andy Haldane, Jonathan Haskel, Karen Jude, David Latto, Clare Macallan, Nick McLaren, Marko Melolinna, Sophie Piton, Alex Rattan, Kate Reinold, Michael Saunders, Fergal Shortall, Brad Speigner, Silvana Tenreyro, Matt Tong, Jan Vlieghe, and Chris Young for their assistance in helping me prepare these remarks. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction It’s a great pleasure to be participating in a Resolution Foundation event today. I wish I could say what a pleasure it is to be at the Foundation, but that has to remain a hope for the future. I am going to talk today about the future, the post Covid future as the economy recovers from this traumatic experience. If I had to summarise the diagnosis, it’s positive but with large doses of cautionary realism. To summarise, after starting with some description and assessment of the Covid shock to the economy, I am going to draw out four important points:   Covid has been both a demand and supply shock to the economy, and the recovery therefore has to be in both elements, unusually so for recoveries I think. Absent a dual recovery, dealing with the issues that arise will be more difficult.

Employment, total hours worked and unemployment all tend to be highly persistent, so a rise in unemployment means – based on history – that it will be higher a year from now. That said, the UK labour market has adjusted relatively quickly to large shocks in the past (Broadbent, 2012). In normal times, around 9% of workers change jobs every year, but the tendency to persistence provides evidence from the past of the effects of a mismatch between the skills of job seekers and those required by hiring firms. As I noted earlier, some of the sectors hardest hit by the pandemic employ more young and low-skilled workers, who may find it hard to move between sectors (Haldane, 2020). That difficulty will be amplified if the jobs involve different tasks. Bank staff have analysed the task content of different jobs to quantify the extent of task reallocation required in various scenarios. In a relatively extreme scenario where the pattern of consumer spending is unchanged from 2020 Q3, staff estimate that the extent of the task reallocation over coming years would be higher than in the recent past, but much less than occurred during the 1980s and early 1990s. That was a period of 4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  significant structural change during which the share of employees working in the manufacturing sector fell from 26% to 16%. There are two important points I would emphasise here.
In the context of the euro area this is due to the absence of a fiscal union, the different fiscal positions of the individual countries, and the different, but on the whole high, levels of their debt burden. Against this backdrop, Bulgaria's fiscal position continues to be solid, with its second lowest debt-to-GDP ratio in the EU. However, the country's fiscal position faces some serious potential risks arising from the severely disrupted budgeting process over the last two years and the trend, emerging in this period, towards continued loosening of fiscal policy. The issue is not so much the high expenditures which were needed and largely unavoidable, especially during the Covid-19 crisis, but rather their quality. The higher expenditures in that period, which led to a higher deficit, were meant to be targeted and temporary, and this was the right approach. Within the strongly fragmented budgeting process, however, these targeted and temporary expenditures mostly became allencompassing and continuous, and tended to increase further. In this case risks occur along two lines. On the one hand, the persistent and progressive loosening of fiscal policy could bring us back into the long-forgotten times of high deficits, growing debt, and liquidity difficulties of the budget. This would in turn adversely change the internal structure of budget expenditures, with increasing debt service expenditures, especially in the context of rising interest rates, at the expense of investment and social expenditures.

It is likely that a significant portion of these moneys is managed out of Hong Kong. In fact, over 40 Mainland companies providing fund management, securities and futures, insurance, and other services have already established a presence in Hong Kong to manage the funds flowing out of the Mainland and engage in fund advisory businesses. 13. So, the implications from the gradual liberalisation of Mainland China’s capital account are clear. Hong Kong is bound to be a key destination as well as the management hub for the gradual increase in the portfolio flows from Mainland China. This trend will present huge opportunities to financial institutions, private banks, fund managers, and other financial service providers looking to tap these funds. 14. Having said that, one should expect that the process of financial liberalisation in Mainland China will be a gradual and controllable one, in a manner that will fit the Chinese saying of “crossing the river by feeling the stones” so that one can adjust the speed and tactics of crossing the river without fear of falling in and getting drowned. It is, however, important to realise that this process has already begun: this is something that global financial firms, especially asset managers, should not ignore in their business planning process. The wider external use of the RMB 15. RMB. 2  Now, let me move on to the second important trend: the wider external use of the  BIS Review 153/2010  16.
François Villeroy de Galhau: Central banks’ response to the “tragedy on the horizon” Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the SUERF – Online Conference, 14 October 2020. * * * Ladies and Gentlemen, I am very happy to join you today for this discussion that, although virtual, will be very real in terms of the strength of the ideas put forward. I am grateful to Michala Marcussen for offering me the opportunity to give this speech on such a dense topic: central banks’ response to the “tragedy on the horizon”. Faced with an unpredictable shock, the past eight months have driven the global economy into uncharted territory. However, one danger is certainly looming larger at the moment : our lasting addiction to public debt. Let me be clear: in the face of the unprecedented covid-shock, a massive and one-off recourse to public debt financing was both inevitable and desirable. However, we have entered this crisis with public debt levels, which were already very high in most countries, with few notable exceptions. The continuous rise of public debt, along with climate change, represent two of the main long-run challenges that we face today. In his famous 2015 speech, Mark Carney spoke of climate change as the “tragedy of the horizon”. With this, he meant that this tragedy is inevitable if we do not act, but it is in the long term, possibly leading to a “status quo bias”.

Let us instead develop a coherent and integrated system that relies upon the classical elements of defense, but none of them exclusively: perimeter security to keep the adversary outside of the environment; defense in depth to safeguard our most critical assets; sophisticated intelligence to understand the adversary’s tactics; robust surveillance to monitor for intrusion and ensure environmental integrity; rapid response to fend off attack; effective collaboration with allies to enhance information sharing and collective security; and a strategic reserve to respond deftly in the event of loss. Make no mistake: as it relates to the wholesale services of the Federal Reserve Banks, we aspire not merely to a commercial standard of resiliency, or even a supervisory standard, but something approaching national security grade. We proceed on this trajectory from a position of strength, reflecting a record of experience that has endured the most severe terror attack in our nation’s history, a financial crisis of historic proportion, and an array of extreme weather events. But in this sphere, either intentionally we are progressing, or inevitably we are regressing: there is no idleness. Thank you for your generous attention today. I’d be pleased to respond to a few questions. 5/5  BIS central bankers' speeches
On the asset side, central banks have increased their holdings of government bonds and bonds issued by private enterprises and institutions. These holdings are matched on the liabilities side by increased deposits from private banks in the form of central bank reserves. The stock of central bank reserves in the US and UK is now five times larger than it was before the financial crisis. In the euro area, reserves have doubled in size. These figures provide a good illustration of the extent of the measures implemented. Such large increases in central bank reserves may evoke associations with historical examples of extensive government money printing. But this comparison only goes so far. Historically, money has usually been printed to finance government budget deficits. The increased money supply then had a direct effect on the economy through purchases of goods and services. The result has often been high and uncontrolled inflation. Quantitative easing is different. In the same way as traditional monetary policy, the way quantitative easing is able to influence the wider economy is through lower interest rates and higher securities prices. The transmission mechanism of quantitative easing to the real economy operates through several channels. First, the central banks’ purchases have supported their communication concerning future policy rates. When central banks purchase long-term government bonds, this is in itself a signal that policy rates will be kept low for a long time. This also pushes down interest rates on other securities.

4 Negative interest rates As I mentioned earlier, it has long been assumed that interest rates had to be positive. That barrier has now been broken by a number of central banks. They now operate a policy of negative rates with a view to bringing short-term market rates below zero. Two approaches are being used to achieve this. Chart: Sveriges Riksbank interest rates Sweden has chosen the first approach. The policy rate itself is a negative 0.35 percent. This is combined with normal liquidity management without excess reserves in the banking system. As a result, the shortest money market rates are also negative. 5 The central banks in the euro area, Switzerland and Denmark have chosen a different approach. Policy rates are zero or marginally positive, while the reserve rate is negative. At the same time, there are substantial excess reserves in the banking system. The reserve rate is a negative 0.75 percent in Switzerland and Denmark and a negative 0.2 percent in the euro area. 6 Maintaining large excess reserves is a deliberate policy. These central banks have supplied liquidity to the market and intentionally used the excess reserves to push down the overnight interbank rate towards the reserve rate. The central banks of Denmark and Switzerland have achieved this by purchasing foreign currency to counteract an appreciation of the exchange rate. By also permitting short-term money market rates to become negative, they have made the domestic currency less attractive.
It is notable that the market requires very different levels of return for assets with the same rating – under the current rules all of this difference is deemed to be risk-free and can be recognised as capital up-front, but it is quite plausible that some of it reflects other risks such as operational ones. Third: the assumption that market moves tell us nothing about credit risk. Under the current system, when the market sells off assets there is approximately zero impact on insurers because the sell-off is treated as being driven solely by liquidity concerns. In other words, when the prices of assets drop in the market the assumption is that there is no information in this about the outlook for future losses. Now in broad terms this is in fact a feature of the regime, not a bug – we want insurers to be able to ride out market shocks, and it is safe for them to do so as long as they have the right cash coming in to meet their commitments to pensioners and other policyholders. However, the current construct is at the most generous possible extreme of the assumptions that can be made in this area; contrary to this assumption, it may sometimes be the case that asset prices are falling because new information has arrived in the market that does indicate that future losses are going to be higher than previously expected – or at the very least that uncertainty over future losses has increased.

Appreciating the distinct qualities of FSVC’s assistance and taking into account the enhanced capacities of Albanian institutions to take in this assistance effectively, I deem that this cooperation should be supported and forego the concrete realization of future development objectives. In this context, the assistance may be tailored to support the design of a holistic project; not channeled in certain segments of its development, but focused, especially, on its implementation phase. This would require the FSVC and the Bank of Albania or the ADIA to define respective programs and other necessary requisites so that foreign experts may provide longer term assistance to ensure consistency of the training content and quality. This process would be carried out also by a thorough ex-post assessment of these projects. Finally, I avail myself of this opportunity to thank the US Government and other donors, USAID Mission in Albania, FSVC’s Board of Directors and its staff in Tirana for raising the necessary financial resources to support this cooperation program. I would like to reiterate the commitment of the Bank of Albania for a fruitful and effective cooperation. Thank You! 2  BIS central bankers’ speeches
But interest in this market at the retail level has been slow to develop. The paper is predominantly held by banks for liquidity purposes and a small part is held by institutional investors. There are a number of reasons behind this lack of retailer interest. First, at least until recently, the real interest rate has been low and sometimes negative, and so the yield of Exchange Fund paper has not been attractive. Second, as issuer, the Hong Kong Monetary Authority does not have the capacity to market the paper at the retail level. And, quite understandably, the banks who are recognised dealers and market makers are not keen to market the product for us in view of the possible impact on their deposit base. Third, there is no convenient market infrastructure, in terms of both market information and mechanisms for participation, through which retail investors can access that market. 1  BIS Review 84/1999  They may be other reasons. But to the extent that these three reasons are significant, our plan here to list the longer term paper, what we call the Exchange Fund Notes, on the Hong Kong Stock Exchange, and have trades settled through the established securities clearing system of CCASS, at a time when there is a significant positive real interest rate, should effectively address them. According to this plan, Exchange Fund Notes will be listed on the Hong Kong Stock Exchange on 16 August 1999.

According to the Ernst&Young’s Fintech Adoption Index, one-third of consumers utilize at least two or more fintech services and they are becoming increasingly aware of FinTech as a part of their daily lives. The FinTech Adoption Index for services offered by FinTech organizations under five broad categories – money transfers and payment services, financial planning tools, savings and investments, borrowing and insurance, indicates that money transfers and payment services are continuing to lead the FinTech change, with adoption standing at 50% in 2017 and 88% of consumers anticipating of doing so in the future. Thus, the global payments industry is currently undergoing a paradigm shift driven by rapid advances, the influx of new technologies and evolving consumer behavior as digital generations come of age. The emerging FinTech enhances the transformative power of digital payments via innovation. The irruption of digital payments relates to its many opportunities. Embracing payments digitalization has the potential to substantially reduce the costs, increase the efficiency and enable broader access to payment services. With the rise of new payment digital technologies developed by the FinTech, and increasingly adopted by banks, consumers and merchants nowadays have a wide range of payment products to choose from. Innovation developments, such as instant payments, payment initiation services, person-to-person mobile payments and contactless proximity payments have the digitization process accompanied by innovative solutions in their essence. The payment innovations and digitization process also have an impact on the transformation of payment market infrastructures.
A resilient and innovative banking system will support the efficient allocation of capital and therefore technical progress and growth. Financial markets are fundamentally about risk-taking: credit risk, liquidity risk and market risk are basic components of even the safest and soundest banking systems. As a society, we need risk taking as part of the process of allocating capital to competing ends. And people who take risks – at least with their own money or their own careers – need to be rewarded (appropriately!) for that risk or they won’t take it. So we are not in a world where, as a matter of policy, we want to eliminate financial risk. The key is for financial risks to be properly appraised, priced, managed and provisioned. And we should discourage some of the cross-subsidisation of different types of risk taking if we want risk capital to be appropriately allocated. That includes any perceived public subsidy, which is what the ICB recommendations are about. We also want to avoid profits being made  2  The Forum, City AM, page 20, September 14 2012 (http://www.cityam.com/forum/why-britain-s-banking-rulesaren-t-restricting-our-economic-recovery)  BIS central bankers’ speeches  5  out of dishonest practices such as insufficient provision of information, the deliberate mis-pricing of risk or other market abuses. The new Financial Conduct Authority will have an important role to play in that. The regulatory reform process will inevitably take time. And while the process is developing there are risks arising from the uncertainty that it brings. We need banks to raise more equity capital.

There are large sums of money arising from savings or other cash balances which must be (re-)invested somewhere. Returns from the safest sovereign assets have been driven to very low yields. And even some risky assets – like bank debt – are getting scarcer as a result of policy actions, directly or indirectly. Where are asset managers putting the money? BIS central bankers’ speeches  3  Chart 4 Financial market volatility(a)(b) Interest rates (RHS) CDS premia (RHS) Equities (LHS) Foreign exchange (LHS)  Per cent  100  Basis points  300 250  80  200 60 150 40 100 20  50  0  0 07  08  09  10  11  12  Sources: Bloomberg, Chicago Mercantile Exchange, NYSE Euronext, JPMorgan Chase & Co. and Bank calculations. (a) Three-month option-implied volatilities. (b) Average of FTSE 100, S&P 500 and Euro Stoxx 50 for equities. Average of three-month short sterling, euro-dollar and Euribor for interest rates. Average of five-year on-therun iTraxx Europe main and CDX North America investment-grade for CDS premia. Average of three month € $ $ Yen per $ and € for foreign exchange. There has been a renewed search for investible assets going on. Not the old, indiscriminate, invest-in-anything-with-a-high-return-and-ask-no-questions “search-for-yield”. It has so far been a much more calculated hunt. Not so much for return on capital but return of capital. Credit and liquidity risks are now being much more thoroughly appraised. In particular, investment firms have been avoiding the least liquid products.
Whether your firm is a lender or a borrower, you must be ready to transact any new or refinanced lending on a non-LIBOR basis next year, a point underscored in a joint statement by US regulators last week. For firms with further to go, that could mean: spending time understanding the new non-LIBOR products; completing governance processes; or adapting systems. 6  https://www.bankofengland.co.uk/news/2020/september/fca-and-boe-joint-statement-on-sonia-interest-rate-swap Other than for risk management of existing positions. For sterling market milestones, see https://www.bankofengland.co.uk/-/media/boe/files/markets/benchmarks/rfr/rfr-working-grouproadmap.pdf 7 8  3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  But whatever it is you need to do, make sure you’re not left behind. Help is available from your banks, trade associations and industry working groups.9  2. Adopting the ISDA fallbacks for existing derivatives  Redirecting new business away from LIBOR is the critical step for securing the future. But we must ensure that LIBOR-linked business from the past is made safe too. The vast majority of that business, by value, lies in the hundreds of trillions of dollars of LIBOR derivatives contracts stretching beyond end-2021. Leaving those contracts without clarity when LIBOR ends is unthinkable – but so is the idea of negotiating over each contract individually to achieve that. That’s why ISDA, supported by the Financial Stability Board (FSB), has worked with market participants and regulators over many years to identify a fair and robust mechanism for these contracts to convert to risk-free rates.

The conclusion of this process and the launch in October of ISDA’s protocol to insert these fallbacks into existing contracts provides the means for LIBOR users globally to plug a glaring risk in their derivative positions.10  And they are doing so, in large and ever-increasing numbers. As of this morning, nearly 1,700 legal entities around the world had adopted the protocol – from huge global banks and corporates, to local building societies and property firms. The list covers all twenty of the largest traders in sterling swap markets by volume. And both LCH and CME, the world’s largest swap clearing venues, have committed to adopting the same measures in their own rulebooks. But there’s much more left to do. Derivative exposures are not just the domain of large banks – they also hedge real economy risks. It’s therefore encouraging to see big household names like Unilever and Tesco, Vanguard and Aberdeen Standard, among the early adopters. But we need to see this coverage expanded to much more of the investment community and to the non-financial corporates who use these markets, as well as completing sign up by banks. If your firm has not yet assessed whether to sign up to the ISDA protocol, or discussed plans with your trading counterparties, this should now be a top priority. And if you determine the protocol is not the right approach for your particular circumstances, you will need to make clear alternative plans to mitigate the risks.