samchain/econo-pairs-v1 huggingface dataset:
But is it not time to ask the question of whether the implicit government guarantee afforded to the banking systems of the major industrialised countries is itself not part of the problem. One of the factors contributing to the scale of short-term debt flows to emerging markets is the moral hazard implied by the financing of banks in the developed world. It is certainly crucial that international rescue packages do not lead to moral hazard in the provision of finance to emerging markets. But an important lesson for the G7 is that moral hazard starts at home. In the resolution of crises less progress has been made. The IMF can, and has, provided financial assistance without which the cost of recent crises to the affected countries would have been even greater. But the stumbling block has been how “to involve the private sector”. Although the statement by G7 finance ministers to the Cologne Summit in June set out both “principles” and “tools” for involving the private sector in crisis resolution, much remains obscure. Unilateral debt moratoria can be damaging in terms of future access to capital flows. But there will be circumstances in which a debtor country and its creditors could benefit from a joint resolution of temporary payments difficulties, and procedures are needed to prevent some creditors from free-riding on others. The following four elements in crisis resolution merit some consideration. They have no particular status, but are issues that need to be faced.

In line with the cyclical situation, this policy has provided its stimulus through the key interest rate cut and ongoing liquidity injection into the banking system. We have also revised the banking system regulatory basis from the viewpoint of easing it, in order to stimulate lending by the banking system. I avail myself of the opportunity to reiterate that the banking system remains profitable, liquid and well-capitalised. Safeguarding the stability of this system will always be on our focus. BIS central bankers’ speeches  1  Third, reducing uncertainties and risk premiums in the economy is an important priority. As I have already stated, these uncertainties stem, to a great extent, from the foreign market, but a part of them stems from the Albanian economy. Without intending to make a list, I will mention just a few: •  Reducing informality should be a primary objective. Besides outflows in public finances, informality brings hidden costs in terms of diminishing competition, inefficiency in terms of lack of balance sheet transparency, and artificially increased financing costs to businesses. •  Fostering the financial system infrastructure protection is another aspect deserving attention. The Bank of Albania signed and has already made effective a cooperation agreement with the People’s Bank of China, which also provides for the possibility to obtain liquidity in case of need. An important step in this regard is the agreement between the Deposit Insurance Agency and the European Bank for Reconstruction and Development to increase the deposit insurance coverage.
We must also consider the coherence of the intervention with the rest of the economy. A sufficiently bulky intervention could sustain a more depreciated nominal exchange rate, even if fundamental forces point to appreciation. However, these pressures to appreciate will take the form of higher inflation as they will drive demand for national goods to grow too fast. In the medium term, the real exchange rate is the same, but inflation is higher when the foreign 4  exchange rate adjustment mechanism is locked. Some emerging economies that have tried to avoid the nominal appreciation of their currencies are seeing a faster acceleration of inflation because the acceleration of expenditure squeezes internal production capacity. As I said, currencies are appreciating around the world, even in Asian and Latin American countries that have intervened in the market and adopted other types of financial measures to contain this appreciation (figure 7). In fact, interventions may have attenuated somewhat the nominal exchange rate appreciation, but at the end what we are seeking is to affect the real exchange rate, and the evidence on the matter shows that, on average, there is no obvious connection between the level of the countries’ interventions and the behavior of their real exchange rate (figure 8). In Chile, the latest intervention occurred in April 2008, with visible effects on the exchange rate.

Our history and that of the region is paved with stabilization measures based on the exchange rate, which generated severe setbacks, and ended in balance of payments crisis, financial turmoil and economic disasters. For this reason, we have evolved into a floating exchange rate regime, which permits to better reconcile the stability of the Chilean economy with the volatility of the external scenario. This is not the time or the place for a lengthy discussion on the subject; suffice it to recall that every economic crisis in Chile over the past fifty years – except the recession of 2009 we are leaving behind with unprecedented vigor – have been associated to exchange rate misalignments and rigidities. Furthermore, a very significant element to explain why the emerging economies were spared the worst effects of the recent global crisis was that their currencies floated, which allowed them to absorb the shocks, eliminated the invitation to investors to wager against currency weakening and opened room to relax monetary policy and provide liquidity. However, although a floating exchange rate has many advantages for economic and financial stability, it may happen that, at times of high uncertainty or excessive optimism, financial flows could persistently push the real exchange rate away from its medium- and long-term fundamentals, with negative effects on the economy. In such situations, the Central Bank may intervene in the foreign exchange market with the purpose of mitigating or eliminating these imbalances.
The existence of fraud, perpetrated for some time, appears to have been demonstrated. Consequently, high-tech firms participating in banking activities can pose risks similar to those entailed in banking. As has been proven, the technological complexity may actually hinder the detection of potential instances of fraud. Furthermore, these examples suggest that the financial supervision and regulation architecture may not be up to addressing the risks that these emerging players pose. Once again we should remember the “same activity, same regulation” principle, since they may entail equivalent risks. The volume of business and interconnectedness are other factors to bear in mind. These require us to adopt a global view. If companies grow too much, conduct significant cross-border business or have critical interdependencies, we must also consider the same systemic dimension as we already do for the banking sector. For decades we have been demanding that banks manage conflicts of interest, stressing the importance of appropriate governance arrangements, and requiring transparent corporate structures, compliance with legislation at consolidated level based on uniform criteria, coordination among supervisors focusing on the same corporate structure, etc. Let us not therefore make the same mistakes as in the past. If a new crisis takes us by surprise, it should at least be original. Allow me to clarify that we, the supervisors and regulators, are not against innovation or it being spearheaded by new players. Innovation is what drives us forward. Without it, the changes reflected in the report presented today wouldn’t be occurring. True, regulation often hinders the development of innovative solutions.

It is therefore a trailblazing piece of legislation at global level, aiming to avoid regulatory fragmentation across Member States vis-à-vis cryptoassets not qualifying as financial instruments or currencies. The regulation aims to improve transparency in relation to issuance, operation, organisation and governance of cryptoasset service providers; bolster consumer protection; and incorporate measures to prevent market abuse. It also aspires to cover the wide range of existing cryptoassets, including the aforementioned stablecoins. Let me conclude by thanking you once again for this invitation. The report published today accurately diagnoses the situation facing our financial sector. I think it is fair to point out that banks share this diagnosis and, broadly speaking, they are aware of what lies ahead. This does not make the challenge any less difficult, but is a necessary first step towards turning their intentions into actions. As I stated during another appearance, any challenge can be viewed from two opposing standpoints: either as a threat or as an opportunity. Whether it is perceived as one or the other often depends on the attitude adopted and the willingness deployed. Thank you. 5/5  BIS central bankers' speeches
Recent developments suggest that the expose of inflationary pressures is being shifted in general on the falling direction. The higher transmission of the recent increasing trend of the raw material prices in the world market composes a risk in terms of the increasing direction of consumer prices. The performance of exchange rate, of inflationary expectations and the country fiscal position, shall continue to condition the balance of risks in future. 2  BIS Review 122/2009  The expected relaxation of these occurrences in terms of a well-stabilised financial environment shall provide the needed spaces for the growth of monetary stimulus in the economy. BIS Review 122/2009  3

And all these dynamics have been taking place in an era of digitalisation and rapid development of new technologies, in which massive information flows call for an internationally agreed response that allows the benefits of innovation to be reaped while ensuring that the potential risks are mitigated. Together, these developments amount to a new policy frontier that requires the promotion of mutual understanding and broad coordinated policy efforts, in much the same way as when the world first confronted the problem of managing increased trade and financial flows. However, this need for further coordination comes at a time when inward-looking populist and protectionist policies have re-emerged in some countries in combination with a greater emphasis on bilateral relations, somewhat questioning the current multilateral rules-based framework. I am certain that all these topics will feature highly in our discussions over the next two days. But before opening the full conference, allow me to start by recalling the underpinnings of the Bretton Woods agreements, the economic benefits they have facilitated and the limitations that have become apparent over the years. I would then like to discuss why reforms are key to the survival of multilateralism, with some ideas for a way forward to tackle current challenges in an increasingly interconnected and digitalised global economy. The benefits of multilateralism The Bretton Woods agreements of 1944 were the cooperative response to the unilateral actions taken in the early 1930s that led to a period of historic global economic contraction.
Ladies and gentlemen, Non-bank financial institutions are a significant component of the financial sector as their assets constitute a significant proportion of the total financial sector assets in most countries in the region. Similarly, microfinance institutions play a critical role in poverty alleviation and economic empowerment of marginalized communities in our region. As such these institutions are systemically important as they can exacerbate the fragility of the financial system particularly where there is lack of effective regulation. Over the past few years, we have seen a trend where these institutions have increased in numbers in our region; some have been established as part of financial conglomerates while others are on a standalone basis. Sadly, our supervisory and regulatory structures for this sector in the MEFMI region have remained rather incoherent and somewhat underdeveloped to handle the challenges that have been identified with this sector. The trend makes it more important than ever for supervisors in the region to get together and talk about matters of common interest. I am pleased to note that over the past few years, the region has taken a proactive stance towards promoting harmonisation of regulatory and supervisory frameworks and the integration of financial systems. Through MEFMI, SADC, COMESA, the East African Community (EAC) and the West African bloc, member central banks are working together to promote effective supervisory standards geared towards achieving long term goals of financial inclusion and financial stability.

The familiar types of subordinated debt can absorb losses only if a bank is put into liquidation, and so really has no place in regulatory capital requirements as we cannot rely on liquidation as the only resolution tool. It has been a faultline in the design of the financial system as a whole that banks issued securities that counted as capital for regulatory purposes, and on which they could therefore leverage up, but with institutional investors treating them as very low risk investments backing household pension and annuity savings. By contrast, contingent capital would be debt that converted into common, loss-absorbing equity if a bank hit turbulence. It is, in effect, a form of catastrophe insurance provided by the private sector. Why should long-term savings institutions and asset managers be prepared to provide such insurance? One possible reason is that if enough of them were to do so for enough banks, it might well help to protect the value of their investment portfolios more generally. If ever it needed to be demonstrated, the current crisis has surely put it beyond doubt – not only for our generation but for the next one too – that serious distress in the banking system deepens an economic downturn and so impairs pretty well all asset values. By taking a hit in one part of their portfolio by providing equity protection to banks, institutions might well be able to support the value of their investments more widely.
Irrespective of the uncertainties currently surrounding the timing and pace of policy normalisation in the euro area, it will eventually gain momentum and the impact on the emerging EU economies, to which I will come back later, should not be underestimated. It is debatable if the forthcoming normalisation process involves going back to the pre-crisis normal or rather moving forward to a “new normal”, characterised by lower interest rates and possibly by larger central bank balance sheets. What is certain is that future policy actions of central banks in CEE countries will definitely depend on the way monetary policy normalisation unfolds in Europe. What happened in the emerging economies that are part of the US dollar sphere of influence following the FED’s policy normalisation is quite relevant. Higher interest rates in the developed world would trigger a capital flight away from emerging economies, thus generating depreciation pressures. The response of policymakers in emerging economies will depend on the specific strengths and weaknesses. Where adequate policy buffers are in place and investor confidence is elevated, market mechanisms, countercyclical macroeconomic and prudential policies may be relied upon to tackle a slowdown in capital inflows. Where there is less room for manoeuvre, tightening monetary and fiscal policies may be required to lower financing needs and attract additional inflows. Where foreign reserves are adequate, they may be used to moderate or smoothen exchange rate depreciation.

This is especially evident today in the environment of the anaemic growth and low inflation that require pursuing the expansionary stance of monetary policy, yet at a price of jeopardizing financial stability through the search for yield behaviour that might create new asset bubbles. To tame these risks, the tight stance of macroprudential policy is needed. Still, it remains to be seen how effective macroprudential policy can be in taming the risks that emanate from a long period of ultraloose monetary policy. The macroprudential ammunition at the disposal of central banks is another potential source of concern. The CRR/CRDIV has provided us with various tools: supply-side (such as capital and liquidity buffers) and demand-side instruments (such as LTV, LTI or DSTI ratios). However, one should be very careful not to err in calibration of those instrument, whether on the side that leaves insufficient coverage (effectively producing policy inaction) or on the side that creates too much of a burden (exceeding the net benefit of macroprudential policy in the medium term). Conclusion I hope this overview comes as a stimulus for further theoretical ad empirical research, regardless of the degree of agreement on the specific issues outlined in this speech. Therefore, I am looking forward to this conference. Hopefully, we will leave with answers to at least some of the questions raised and with a strengthened sense of obligation to continue with demanding work. Thank you. 8  BIS central bankers’ speeches
Challenges arising from global policy spillovers Let me now turn to the challenges arising from the global policy spillovers, in particular to emerging economies. With cross-border inter-dependence and contagion being very much a phenomenon of this new environment, such global policy spillovers are rapidly transmitted to other parts of the world through economic and financial flows. While the repercussions of the global economic and financial disruptions have been well recognised, less discussed have been the consequences of the global policy spillovers. Significant and continuous spillovers have emanated from the wide-ranging policies in the advanced economies, including the unprecedented monetary easing, the fiscal stimulus then consolidation, the repair and resolution of the financial sector, the initiatives to reduce public and private sector indebtedness, and the consequences of the global regulatory reforms. The highly accommodative global monetary environment has generated higher global liquidity. While contributing to the resumption of credit flows, it has exacerbated the recent surges in capital inflows to emerging economies. These inflows have resulted in significant strengthening of currencies, rising asset prices, stronger credit growth, and for some, overheating conditions in the economy. These inflows have, however, been punctuated by reversals in capital flows, following deleveraging activities mainly by the banking groups in the crisis-affected countries. Deleveraging by sovereigns and by households, in particular the United States, have also reinforced this trend.

Michael C Bonello: The challenges facing Malta's banking system Speech by Mr Michael C Bonello, Governor of the Central Bank of Malta, at the Second Annual Conference of Finance Malta, Valletta, 29 May 2009. *  *  *  Introduction This conference about Malta’s financial services industry is being held in the midst of the most severe global financial crisis since the Great Depression and whose consequences for the real economy in terms of output and employment losses are proving to be the most devastating in living memory. It is a crisis, therefore, which cannot but have repercussions on a small, open economy like Malta’s that is highly integrated with the world economy through trade and finance. These circumstances present challenges for the domestic banking system, and in addressing them it is important to recognise the implications for the economy at large. A sound, adaptable and innovative banking system is a prerequisite for sustainable development. The birth of a modern banking system Malta’s recent banking history has indeed tended to mirror policy shifts in the broader economy. The nationalisation of the major banks in the 1970s was itself recognition that the centralisation of economic activity could not be achieved without state control of financial resources, including credit flows. Lending rates were set by the minister of finance while the central bank controlled deposit rates. Nominal interest rates were kept artificially low, often resulting in negative real interest rates.
An article in the Monetary Policy Report published in July 2013 presents a conceptual framework for taking into account financial imbalances in the monetary policy assessment. 3  For a review and categorisation of various points of view on the question of how monetary policy should give consideration to financial stability, see Smets, Frank (2013). 4  See Svensson (2011). 5  In Canada, inflation has also been below the target for a period of time, but before this situation arose, unemployment had fallen back to its pre-crisis average. New Zealand had an inflation rate in the lower end of its target interval of 1–3 per cent during a few quarters before they began to say in early 2013 that they did not want to see increased financial stability risks as a result of developments in the housing market. They have not, however, expressly spoken of a trade-off between bringing up inflation and subduing developments in the  2  BIS central bankers’ speeches  The situation in Norway has been similar to ours, in that inflation has also been clearly below the target for a relatively long time, from the beginning of 2011 until the middle of 2013. Since spring 2010, Norges Bank has often discussed the build-up of imbalances linked to a low interest rate as a factor that is included in its monetary policy deliberations. But there are clear differences here, too. Throughout this period they have had a resource utilisation that was close to or even above the normal level.

We have also seen some peaks in transaction volumes as well as more frequent and higher margin calls. Furthermore, many infrastructures have had to cope with the default of a major participant, notably in the context of the demise of Lehman Brothers in September 2008 and the corresponding spill-over effects on its subsidiaries. Fortunately, EU market infrastructures were able effectively to overcome these challenges without any major operational disruptions. In particular, the Eurosystem’s TARGET system – which is not only the backbone of the large-value payment infrastructure for the euro, but also plays a central role in providing settlement services for 36 retail payment systems and 33 securities settlement systems that are connected as ancillary systems – has proven to be  BIS Review 74/2009  1  stable and resilient. Nonetheless, I would like to mention three key stylised facts which illustrate the impact of the current turmoil: First, the values processed in TARGET in the last quarter of 2008 showed an unusually high increase of 13% compared to the first three quarters (see Chart 1). When looking at the average values settled in different time bands during the day, the main difference between the third and the fourth quarter of 2008 relates to the values settled in the last hour of operations.