samchain/econo-pairs-v1 huggingface dataset:
Clearing in its simplest and original form simply refers to mechanisms for adding up each member’s claims and liabilities to the other members before settlement so only the net amount is paid or owed. The earliest clearing houses were places where banks literally put the receipts recording their respective claims and liabilities on the table at the end of the day so they could be netted off against each other. Such clearing mechanisms still operate in some payment systems though the most important payment systems that settle the highest value payments nowadays operated by central banks work on a gross basis in real time to reduce risk. (Real-time gross settlement of high value payments allows immediate, final and irrevocable settlement of obligations across central bank accounts.) However, we still talk of payments in a currency ultimately ‘clearing’ across the books of the central bank of that currency, for example as in ‘dollar clearing’ across the books of the New York Fed. Central clearing, however, does not mean the clearing inherent in payment systems but the infrastructure that allows financial market participants to manage the risks they face from their counterparties in financial contracts that can last for months or even decades.

In the UK, the Financial Policy Committee of the Bank of England (FPC) formally recognised this risk to financial stability in June 2013. It recommended that the authorities should assess, test and improve the resilience of core parts of the UK financial sector to cyber attack. The FPC has maintained oversight of this programme of work which has included a number of strands, not least the ‘CBEST’ vulnerability testing of critical financial firms and FMIs. 15  Improving resilience to cyber risk is one part of the Bank’s wider work on broader operational resilience. Operational resilience is not a technical issue, especially for the infrastructure firms that need to act as ‘systemic risk managers’. It must begin in the boardroom. The Bank has worked with supervised firms to improve governance, so that standards can be maintained or strengthened, and threats responded to, without regulatory or supervisory pressure. The Bank of Bangladesh incident also shows why, given the critical nature of the services provided by SWIFT, effective international coordination in its oversight is essential. Oversight of SWIFT is led by the National Bank of Belgium (NBB) as SWIFT is a Belgian company. However, the NBB has for many years conducted the oversight of SWIFT in coordination with other central banks, including the Bank of England. These arrangements proved important in maintaining the confidence of regulatory authorities worldwide in the aftermath of the attack. And the oversight arrangements have now been extended in scope to cover the implementation of the crucially important customer security programme.
In the spring of this year, the Committee appointed professors Charles Goodhart and Jean-Charles Rochet to carry out the second external independent evaluation, which is to be completed by the autumn of 2011. This time, the evaluators are to review Swedish monetary policy in 2005–2010 and in particular to analyse the lessons to be learned from the financial crisis. The evaluation will not only cover monetary policy but also the Riksbank’s work with financial stability and the results of this work, with emphasis on the analysis done and measures taken before and during the financial crisis. Among other things, the terms of reference of the evaluation also stipulate the need to examine whether the remit of promoting a safe and effective payment system in the Riksbank Act is formulated in such a way as to ensure that the Riksbank can effectively work for financial stability. Furthermore, the evaluators are to investigate whether the Riksbank has the instruments and competencies required to maintain financial stability. Final words To end where I started: I foresee that current trends on staffing will continue. The portion of the Riksbank staff outside the core activities will be further reduced, but the competence level will increase yet higher. Governance issues will be high on our agenda, not least trying to find suitable solutions for monetary policy, financial stability and the interdependence between them.

We will introduce a new AIDA-Lite track to support financial institutions adopting existing AI solutions in the market. We will require all AIDA applicants to work with the Institute of Banking and Finance (IBF) to actively look out for at-risk workers impacted by AI adoption, and to develop a training plan to keep them employable. To sum up, the enhanced FSTI 2.0 renews and anchors MAS’ resolve to support the financial industry in its journey … a journey of continued innovation and experimentation; deepening our local talent pool in new technologies; and 4/5  BIS central bankers' speeches  better serving our societies – here in Singapore and across the world. 5/5  BIS central bankers' speeches
But I think, too, of our relatively stable overall economic performance – despite the devastating effect on many farmers, and on rural communities more generally, of foot and mouth disease; despite the weather and the floods; despite the disruption on the railways; and despite, above all, the pressures on the internationally-exposed sectors of our economy as a result of developments abroad. In this last context, my Lord Mayor, I was struck by a recent newspaper comment to the effect that if we were living on an island we'd be in reasonably good shape. Now I have to confess that I'd always been under the impression that we were living on an island, but I let that pass. What I think the writer was drawing attention to is the fact that despite the recent global economic slowdown – notably in the United States, despite the continuing weakness of the euro, and despite the sharp rise in crude oil prices over the past year, we have in fact, in terms of our own overall economy, enjoyed another year of steady progress. GDP growth in the year to the first quarter – at 2.6% – remained above our longer term trend rate, and was above the rate of inflation, whether measured by the GDP deflator or our target measure of retail price inflation (RPIX), for the sixth time in the past eight years.

According to studies carried out at the Banque de France 1 , the disinflationary impact of imports appears to be relatively independent of import volumes: the mere existence of potential competition renders the markets, in the words of experts, more “contestable” and influences behavioural patterns. These disinflationary forces are still present. However, there are now other more powerful forces that have the opposite effect. The growth of emerging market economies and the rise in the living standards of their populations are leading to a surge in the demand for natural resources, food and energy, which logically has a strong and permanent impact on inflation. Furthermore, by strengthening the magnitude of global shocks in relation to more specifically domestic shocks and favouring the international transmission of the latter, globalisation introduces a much greater synchronisation of inflationary cycles between countries, with the ensuing risks of amplification. Overall, the effects of globalisation have ceased – probably in the long term – to be spontaneously disinflationary. The second topic that I wish to discuss concerns globalisation and financial innovation. There is, in my mind, no doubt about the long-term benefits of the financial innovation process that we have been witnessing over the past twenty years. However, we can also see that it may be accompanied by cyclical developments and structural changes that could potentially prove to be disruptive for monetary policy. Monetary and financial conditions are simultaneously influenced by central bank decisions, but are also increasingly affected by sometimes exogenous trends in asset prices and the pricing of risk.
They have imposed rigidities and inefficiencies in the setting of deposit rates and have inhibited the development of new products on the liabilities side of the balance sheet. The removal of long-standing controls is not however an easy process, and may bring with it certain risks and drawbacks. From the banks’ point of view, the obvious problem is that they may have to pay higher interest rates, or interest for the first time, on the previously regulated deposits. The effect on margins will be exacerbated if deregulation leads to a price war with banks aggressively bidding for deposits. At this point, the banking regulator may also become concerned if it appears that the banks are neglecting the management of their interest rate risk and liquidity risk. This is obviously something that is a potential concern with the impending deregulation. But the banks have had plenty of time to prepare. Moreover, the current excess liquidity in the system means that the incentive to bid too aggressively for new deposits should be reduced. Having said that, some banks will no doubt see deregulation as an opportunity to expand their customer base, and will price their deposits with this objective in mind. This brings me on to the impact of the deregulation for consumers. There has perhaps been too much of a tendency in some quarters to see deregulation as something that would bring benefits for all. This was not the view of the HKMA.

Claudio Borio will explore the operational aspects and the precautions we must take regarding the methodologies we use to measure systemic risk. Dale Gray will handle the third presentation, integrating the idea of financial risk – by using options – with macroeconomic models focusing on monetary policy analysis, then applying the tools to the particular case of Chile based on his joint research with Leonardo Luna and Jorge Restrepo. Johan Molin will share with us the experience of the Sveriges Riksbank, which has led financial stability analysis since the problems it endured in the early 1990s. This afternoon, Francis Diebold will analyze, for the financial markets of the United States and four Latin American economies, stock returns and volatilities to look for evidence of contagion and its characteristics. Charles Goodhart, Dimitrios Tsomocos and Alexandros Vardoulakis will present us the study of a heterogeneous agent model with a real-estate sector and financial fragility. Later on, Ethan Cohen-Cole and Enrique Martínez-García will present their research on the interaction of financial intermediation and banking system regulations and its effect on the optimal monetary policy response. Tomorrow will begin with the presentation of Jaime Ruiz Tagle and Marcelo Fuenzalida, who will examine, for the case of Chile, the systemic risk of household debt. Miguel Segoviano will follow, with a review of systemic risk and banking stability from a macroeconomic perspective. Then comes a presentation by Jaime Caruana, who will draw some lessons from the recent crisis and the international financial integration.
In banking, capital buffers were increased, liquidity requirements were introduced, and caps placed on leverage under a new Basel III accord. In the derivatives markets, requirements were put in place for trade reporting, central clearing, and margining. To tackle the too-big-to-fail problem, global systemically important financial institutions, or GSIFIs, were identified and subjected to higher loss absorbency requirements, more intensive supervision, and resolution planning. Implementation of the reforms – especially Basel III – progressed well, driven by a broad-based consensus on preventing a repeat of the Global Financial Crisis. The generous timelines for implementation allowed industry to adjust to the new regulatory landscape. It was only last year, in 2027, that we achieved full implementation of the final component of the Basel III reform package – the output floor. Regulatory evaluation and adjustment (2017 to 2020) During the second phase, from 2017 to 2020, the focus turned to evaluating the effects of the regulatory reforms. There was growing feedback that some reforms had unintended consequences, some reforms were at odds with others, and that the cumulative impact of the reforms had dampened economic growth. A series of reviews was undertaken during this period to assess both the effectiveness and effects of various reforms. The reviews largely affirmed that the benefits of the reforms, in terms of reducing the risk of financial crisis and its consequent economic impact, far outweighed the costs. In fact, controlling for other factors, there was little evidence that the reforms resulted in any general deterioration in the availability or pricing of credit.

The empirical evidence that has been produced by the Committee indicates that, in fact, banks with less capital headroom, and here the key word is “headroom”, tended to lend less during the pandemic. There was also a relatively larger decline in average risk weights at banks with less capital headroom, perhaps because of an attempt to defend capital ratios, and importantly also, the buffer threshold appears to have been the constraint, forcing banks to adjust their behaviour as lower capital ratios alone did not drive the results. Finally, another interesting finding is that the issue was not only one of quantity but also about prices. Banks’ proximity to buffers appears to have affected the cost of lending. The reasons behind this problem are unclear. It may have occurred because the level of uncertainty was very high for banks, and they were foreseeing that there might be losses in the future, and thus wanted to keep these buffers so they could be used to cover those losses. That is one possibility. The lack of formal guidance by supervisors on the rebuilding of these buffers might be another issue. Low profitability may also be a reason for this result or market stigma. We are now in the process of trying to understand precisely the origin of this problem. Closely related to this and a very important issue is the question of releasable buffers.
As a result, the underlying inflation indicator, which excludes energy and food, rebounded to 3.4% in April.8 Overall, in 2022 Q1 GDP in Spain was 3.4 pp below the pre-pandemic level, while in the euro area it stood 0.5 pp above its pre-crisis mark. These differences are smaller in the case  4  In particular, some services, such as hospitality and recreation and leisure, are still a long way off recovering their February 2020 employment levels. Conversely, employment is clearly above pre-crisis levels in information and communication activities and in nonmarket sectors. 5  In terms of data from the Spanish Labour Force Survey (EPA, by the Spanish acronym), public sector employment was 6.6 pp higher than its pre-crisis level, whereas private employment was 0.6 pp below. 6  The apparent discrepancy between the behaviour of activity and that of employment was particularly marked in some sectors. In agriculture, industry and construction, effective social security registrations exceeded the pre-crisis level by 0.7 pp on average in 2022 Q1, while their overall GVA remained 6 pp below that level. The divergence was particularly notable in construction: in 2022 Q1 employment in this sector was 3.8 pp above its pre-crisis level, but GVA remained 12.9 pp below that mark. 7  In fact, the HICP series dates back to 1997. Consequently, for the period prior to that the comparison is made with respect to the consumer price index.

Stress tests provide an assessment of whether the capital buffers held by banks are sufficient to absorb losses in a stress. So they are well suited to guide the calibration of countercyclical capital buffers. The Bank of England is developing a countercyclical approach to annual stress testing of banks. Rather than applying a constant level of stress from year to year, the severity of the stress would vary with the cycle. It would increase as risks build up and decrease after they have abated or crystallised. The parameters of the scenario – falls in GDP, asset prices, employment etc – would be most severe during periods of exuberance when credit and asset prices were growing quickly and the financial system was least concerned with risk. The parameters would be less severe when exuberance had evaporated and prices had corrected, which is often the time when the system is most risk averse. We aim to develop this approach over the next three years, starting with the 2016 stress test. Along with a regular assessment of data and indicators it will be a key part of a forward looking, data driven approach to setting the UK’s countercyclical capital buffer for banks. We have set out more details in a recent Bank paper.2 As always, one issue will be assessing the costs and benefits through time in so far as that is practicable. Another is where to set the countercyclical capital buffer in different parts of the cycle to enable it to be relaxed at times of stress.
47  11  All speeches are available online at www.bankofengland.co.uk/speeches  11  Looking to the Future Looking to the future, there are many potential areas where these new sources and new techniques could be expanded to improve the Bank’s understanding of the economic and financial system. From a long list, let me discuss one which I think holds particular promise. Behavioural economics has, rightly, made a big splash over the past several years in re-shaping economists’ thinking about how human decisions are made. Human decisions and actions deviate, often significantly and 49  consistently, from the rational expectations norm often assumed. Rules of thumb and heuristics dominate  human decision-making. And the expectations formed by people are often shaped importantly by history, emotion and others’ actions, every bit as much as by rational calculation. These behaviours appear to be important both for individuals (micro-economic) and for societies (macro-economic). For example, the popular narratives which develop in financial markets and in everyday public discourse have been found to be important empirical drivers of fluctuations in asset prices and in 50  economic activity. These narratives may be particularly important at times of economic and financial  stress, when emotions run high and social stories take on added significance. Yet when it comes to measuring these behaviours, at either the micro- or macro-economic level, our existing methods are often poorly-equipped. Capturing people’s true sentiments and preferences is devilishly difficult.

37  8  All speeches are available online at www.bankofengland.co.uk/speeches  8  the hours immediately after the de-pegging. By analysing trade repository data on forward contracts for the Swiss franc-euro exchange rate, some of the drivers behind these moves could be detected. 40  For example, high-frequency movements in the Swiss exchange rate can be compared to the volume of trades in forward contracts. These trades can be further decomposed by counterparty – for example, large dealer banks versus end-investors. This type of decomposition technique shows that it was the withdrawal of liquidity by the large dealer banks that caused the overshoot of the franc – a classic sign during times of 41  market turmoil. This move partially reversed once dealers resumed market-making. The trade repository data can also be used to assess whether the franc de-pegging had any lasting impact on market functioning. The Bank’s research found it did, with a persistent fragmentation in the franc forwards market. Liquidity and inter-dealer activity was structurally lower, and market volatility persistently higher, after this episode. The extra granularity of these data makes it possible to tell a quasi-causal story about the drivers behind the V-shaped movement in asset markets after the de-pegging. Using tick-by-tick and trade-by-trade data side-by-side allows identification of the triggers and amplifiers, in a way which would not otherwise be possible. A second example of research using higher-velocity data to improve our understanding of economic dynamics comes from the labour market.
Ravi Menon: Monetary Authority of Singapore’s Annual Report 2011/12 Opening remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Monetary Authority of Singapore’s Annual Report 2011/12 Press Conference, Singapore, 25 July 2012. *  *  *  Good morning. Welcome to MAS’ annual report press conference. I will focus on five key areas today. First, what is happening on the growth and inflation front; second, what does it mean for MAS’ monetary policy; third, how is MAS managing risks to our economic and financial stability; fourth, what MAS is doing to make our financial sector stronger; and fifth, how we are positioning Singapore’s financial centre for growth. Let me start with the economy. Growth and inflation Singapore economy remains on track to grow at 1–3% this year Singapore’s GDP growth averaged 4.2%1 in the first half of this year. But the growth momentum is clearly slowing. The average growth in the second half of the year is likely to be slower than in the first half of the year. This is not unexpected, and has been factored into whole year growth forecast of 1–3%. The global economy is slipping into a synchronised slowdown. The latest business surveys in all major jurisdictions have turned more negative. There is greater uncertainty in the US economy compared to three months ago, especially with respect to the labour market. The Eurozone remains mired in recession with no early end in sight. Financial market stresses have eased somewhat but the underlying vulnerabilities remain.

First, while exchange rate policy is effective against imported inflation and domestic cost pressures arising from rapid economic growth, it is less so against inflation in housing rentals and car prices. Even so, housing prices and car prices cannot keep rising rapidly in an environment of weakening economic growth. The measures taken to address supply-side issues in the housing market and public transport will also help to ease price pressures in these two areas. Second, too rapid a rate of appreciation of the Singapore Dollar can significantly hurt our economic performance, especially in light of heightened uncertainty in the external environment. In sum, exchange rate is taking longer than usual to moderate inflation, but it remains our broadest and most effective anti-inflation tool. MAS will continue to keep a close watch on developments in the global economy and price pressures in the domestic economy. The next Monetary Policy Statement will be released as scheduled in mid-October 2012. MAS remains focused on anchoring inflation expectations as economy undergoes restructuring to reduce dependence on foreign labour Looking at medium term, the domestic economic environment will remain challenging for monetary policy. The Singapore economy is making a transition towards productivity-driven growth. This will help to reduce our reliance on foreign labour and raise the wages of low-income Singaporeans. But rising wages must mean rising costs and rising prices, at  BIS central bankers’ speeches  3  least until productivity improvements kick in.