samchain/econo-pairs-v1 huggingface dataset:
In the meantime, inflation is uncomfortably high, and an absolute precondition for maintaining our support to demand is the credibility of monetary policy. Over the next few quarters, the Committee’s most important judgment call will be put to the test. We will all discover whether inflation declines rapidly from 5% towards 3% as the effects of the price level shocks wane. Finally, let me stress that the gloom should not be overdone. The record is that flexible economies with sound macroeconomic regimes recover from almost any crisis. The UK will recover. Meanwhile the MPC will continue to underpin demand, consistent with getting back to the 2% inflation target and so with sound money. BIS central bankers’ speeches  3

“A desirable monetary policy is characterised by inflation under normal circumstances being close to the inflation target in a two-year time perspective while at the same time the paths for inflation and the real economy do not exhibit excessively large fluctuations.” Given this reasoning, I think it is possible to identify some important characteristics of a good interest rate path. Firstly, the interest rate should be set so that inflation remains close to the 2 per cent target. If inflation were to deviate from target from the start, we should normally choose a path for the repo rate that brings inflation back on target within two years. Moreover, this path should be chosen so that inflation is close to target even beyond the two-year horizon. This way of conducting monetary policy helps reduce uncertainty and anchor inflation expectations around the target. The interest rate should also be set to achieve as far as possible a stable, sustainable development in the real economy, as long as this is compatible with the price stability target. Let us say that the  11  See, for instance, Giavazzi, F., and F. S. Mishkin (2006). 12  See also Rudebusch, G.D. and J.C. Williams (2006). 13  See the box ”Uncertainty regarding future interest rate movements” in Inflation Report 2006:1 for some examples of how to produce such uncertainty intervals. 14  See the memorandum "Monetary policy in Sweden” which can be downloaded from the Riksbank’s website, www.riksbank.se or ordered as a printed document.
And, in response to a terrorist attack or other significant national security event, is your bank proactively searching its payment activity to see if it has potentially relevant information? One question that I get asked from time to time is if law enforcement can share more information about the activity reported in SARs. I believe law enforcement is always looking for ways to enhance the effectiveness of its information sharing. I want to recognize FinCEN’s efforts to share more information via its public website and in its reports to Congress about the information it collects from the industry through SARs. The New York Fed also tries to do its part. It hosts three major conferences every year in which the FBI, FinCEN, local law enforcement, and financial firms discuss financial crime—especially terrorist financing, money laundering, and cyber-crime. We do our best to act as a liaison between banks and law enforcement officials. We’ll keep at it. Conclusion Stepping back, I’d encourage you to consider as well what your firm’s response to financial crime says about its purpose and culture. What does it say about the role of the financial services industry in society? And, to get personal for a moment, how does that response make you feel about where you work and how you make a living? From where I sit, gaps in AML and other payment system defenses make a terrible impression because of the terrible things funded through illegal payments.

A few years ago, the television show 60 Minutes covered an undercover operation that captured on video fifteen out of sixteen Manhattan lawyers offering advice on how an African official could secretly move funds into the country. 14 The investigator posed as an adviser to an African minister of mining who managed to accumulate millions of dollars for personal use— expensive real estate, a jet, and a yacht. In the end, no firms actually took on the client. These were just preliminary meetings. And they were a set-up. No actual crimes were committed. Still, only one lawyer out of sixteen told the undercover investigator to get lost. What an eyeopener. As a lawyer and a central banker—and as a New Yorker— I found this report deeply troubling. Where Do We Go From Here? So that’s where I see us today. Where do we go from here? Let me share some ideas, which are not mutually exclusive. Build Good Habits For starters, let’s be honest about “looking the other way.” Many financial institutions have, at times, turned a blind eye to evidence of money laundering, sanctions evasion, corruption, kleptocracy, and plain theft. Over time, some institutions become weak links in our system when they take on riskier clients, perhaps in order to chase profit, without developing the ability to manage those relationships in a responsible way. Often these relationships start small: one lowvalue, ethically suspect transaction.
  For a small number of you, we will need better information and visibility going forward to bring you in line with others. We will start that discussion with you now.   For those going in to TPR, it will be a gradual evolution. These firms have had extensive interaction with the PRA’s supervisors over the past three years – we have seen substantial preparations by  9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  these firms as part of their authorisation submissions and we have worked together with firms on a large number of thematic reviews.   And, for those considering coming to the UK to operate, it provides clarity on our approach so you can consider how best to meet our expectations. For our regulatory colleagues around the world, we look forward to continuing to build our open and supportive relationships. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10

Outside the UK, the model of independent regulators with mandates making rules is common practice in most other jurisdictions. The need for operational independence is reflected in the Basel Core Principles for banking supervision.8 All jurisdictions represented in the Basel Committee implemented the Basel 3 reforms through regulators’ rules or guidelines rather than primary legislation, with the exceptions of the EU, with its very specific supranational structure, and Switzerland, with its unique federal structure. Details of the FPC’s objectives and primary responsibilities are set out in section 9C of the Bank of England Act 1998. In particular, the FPC is charged with ‘the identification of, monitoring of, and taking of action to remove or reduce, systemic risks with a view to protecting and enhancing the resilience of the UK financial system’, but this does not ‘require or authorise the Committee to exercise its functions in a way that would in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term’. For a more detailed discussion of the FPC’s mandate, see my colleague Alex Brazier’s May 2019 speech, ‘Citizens in service, not people in power’, available at https://www.bankofengland.co.uk/-/media/boe/files/speech/2019/citizens-in-service-not-people-in-power-speech-byalex-brazier.pdf.
But of course the existence of this safety net blunts the policyholder incentive to distinguish between a high risk and a low risk insurer at the point of taking out a policy. Paradoxically the stronger the safety net, the stronger the other two regulatory pillars need to be to hold it up. The less the market and policyholders discipline a firm, the more the regulator needs to do it for them, including by policing financial standards. Pillar 2: intervention and risk management Pillar 2 contains a range of qualitative measures, but broadly speaking they can be divided into the ladder of intervention, and requirements for good risk management, including the prudent person principle. These are both intimately connected to how we define capital adequacy. The ladder of intervention is critical to preventing gambling for resurrection: it formalizes and defines the power to intervene before the interests of shareholders and policyholders diverge, in the same way that debt covenants protect creditors by giving them the ability to intervene in clearly defined circumstances under which their interests will diverge from those of the providers of equity capital. The role of regulatory capital in relation to the ladder is to buy time for that intervention.

Beyond a certain level, concentrations and other exposures to irreducible uncertainty simply make it impossible to say that any feasible level of capital is adequate to play the part it needs to in delivering policyholder protection. That is not a viable business model for a regulated financial firm and the remedy lies not in higher capital – which will do little if anything to address that irreducible lack of confidence in adequacy – but in restructuring the balance sheet and business model. A balanced approach I have discussed how capital requirements interact with other factors that vary across the sector and between firms – the strength of market discipline, the ladder of intervention, ease of exit – and also given an example of an important source of lack of resilience that cannot be remedied with capital: the susceptibility of balance sheet and enterprise risks to modelling. Arguments about the level of capital need to be rooted in these factors: it is not enough to assert that, if only we didn’t have to hold so much capital, our policies could be so much cheaper, we could supply so many more of them, and we could expand our investments. If only it were that simple. I recognise that there is an opportunity cost to higher regulatory capital: capital that supports the risks in existing business cannot also be used to support acquisitions or expansion into innovative fields. But price is not the same as value.
In this regard, I urge the industry to take advantage of the knowledge and experience of the panel of experts assembled here at this conference, to better understand and prepare for the implications of the review of the FATF 40+9 Recommendations, and the expectations on financial institutions and boards of directors moving forward. For Bank Negara Malaysia, the enhancement to the nation’s infrastructure to combat financial crimes will remain as one of our key priorities. In this regard, our role as Malaysia’s primary financial regulator will continue to focus three broad areas. The first is to deter and prevent criminals from abusing the financial system to be the conduit for illegal activities by ensuring the continued effectiveness of Malaysia’s legal and other relevant infrastructure, systems and processes in combating financial crimes. Secondly, is to ensure all financial institutions continue to strengthen their defences against such threats and risks via our regulatory policies as well as risk-based supervisory and surveillance activities; and thirdly, to strengthen collaboration between the financial industry with other domestic and international stakeholders in AML/CFT initiatives to protect the integrity and stability of our financial system, including implementing capacity building programmes, such as this Conference.

Wage costs are expected to increase this year by just over 4.5 per cent, which is higher than the Swedish economy can manage in a longer perspective. If the social partners do not succeed in accommodating the Municipal Workers’ Union’s wage demands, there is a risk of increased inflation. Another challenge for wage formation is the government’s employment target, which entails 80 per cent of the working population having a job. Achieving this requires reforms to increase the labour supply. Moderate wage demands could hasten the adaptation to the higher rate of employment. The explanation for this is that in a small, open economy like Sweden, the profit share of the value added is determined by international conditions and the prevailing production technology. In the short term, the labour market situation and negotiating strength can affect the relative profit shares and wage shares in the economy, but in the long term a high rate of wage increase will only lead to lower employment and production without affecting real wages and profit shares. More moderate wage demands, on the other hand, together with measures to stimulate the labour supply, will lead to higher 2 employment without a long-term decline in real wages. Conclusions Finally, as I mentioned at the beginning, monetary policy cannot directly affect production’s potential, long-term growth rate. The task of monetary policy is to stabilise the economy by changing the instrumental rate if inflation deviates from the 2 per cent target one to two years ahead.
How can we expect emerging economies to participate fully in an open global system without the confidence that they won’t again be side-swiped by the failure of a large foreign bank? That confidence is growing as we make the system safer. Consistent, full and timely implementation of global standards is necessary to continue to build the cross-border trust on which an integrated system can be founded. Once the safety of the system is secured, the costs of openness will be contained. The road will be clear to secure the substantial benefits of openness in supporting trade and investment. Conclusion The Brisbane Summit marked the point at which the post-crisis system of prudential regulation was settled. That system, built on safer, simpler and fairer foundations than the one that led to disaster is able to serve households and businesses right across the globe. That we have reached this point is a triumph of the optimists over the world-weary arguments of the pessimists. The mutual trust and co-operation that has allowed authorities to get to this point is a vivid reminder of what can be achieved when countries work together. But as I said at the outset, just avoiding a repeat of past failures can’t be the height of our ambitions. Having built that level of co-operation it would be a travesty to stop at the foundations.

The first wave of losses led banks to tighten margin requirements, effectively reducing financing available to the non-bank financial system, causing those institutions to deleverage through asset sales, driving a death spiral of falling asset prices and rising margin requirements. Such dynamics have now been mitigated through agreed minimum haircuts for securities financing transactions and the net stable funding ratio for banks. A simpler financial system As the crisis highlighted, opacity hides frailty. Why was subprime not contained? How did $ in credit losses ultimately cause well over $ in market losses? Because complexity obscured the link between ultimate creditor and debtor, it allowed false assumptions to develop that, when disabused, prompted panic. The mortgage originated by a bank was repackaged by a SIV, that financed it through ABCP, that was bought by a MMF, into which a retail investor placed their savings. It occurred to no one in the chain that the absence of a monitor would influence credit performance. The whole model was based on continual rollover. When subprime losses exposed the misalignment of incentives between loan originators and investors in asset-based securities, the whole system collapsed, imploding core funding markets for banks. Risks that had ostensibly been moved outside the banking system or diversified away were in fact just hiding and, when crisis struck, they came crashing back onto the balance sheets at the core of the system. This complexity is being addressed.
It is one thing to try to make global financial integration safer and to mitigate unwanted spillover effects – which might involve some retrenchment, as it did in this country and many others after the crisis – but it is another matter entirely to bring about a large-scale reversal of the global financial integration of recent decades. Most likely, such a reversal would seriously undermine real economic integration and the benefits associated with it. We are going to discuss these issues and others that pertain to the current state and future prospects of global economic integration. After Jaime’s keynote speech, we will have two sessions with substantive presentations and discussions on different aspects of the topic. This afternoon, we aim to take stock of recent trends in global and regional economic and financial integration, assess country responses to these trends, and discuss how the responses in turn affect the level of integration. This includes macroprudential and capital flow management measures. We will probably hear something about how the challenges have been addressed in this country. 2  Tomorrow we turn to the international monetary and financial system. Part of that discussion will aim at identifying potential reforms that would better allow individual countries and the global economy to reap the benefits of economic and financial integration and avoid the risks associated with it. We will then wrap up with a policy panel. Looking at the programme, I am particularly pleased to note the high level of the speakers.

At the same time, we know that competition may come at the expense of efficiency if it leads to a large number of services which are not coordinated. Maintaining a coordinated payment system while also ensuring a level of competition which can sustain and develop dynamics and innovation can be a difficult balancing act. As mentioned, it can be said that our experiences in Norway have been fairly good. In our view, coordination that promotes positive network effects should be encouraged. Competition considerations should primarily be safeguarded through objective and publicly known criteria for access to the network which makes it possible for new competitors to become established within the common infrastructure. How shall we assess new participants wishing to establish proprietary systems alongside the common infrastructure? This matter was discussed by the Banking Law Commission - which provided for the possibility of institutions other than banks and other financial undertakings to establish systems for payment services if licensed. The present bill does not address this question. It will be reverted to at a later time when the formulation of the regulation of institutions is addressed. Norges Bank has provided its view on these matters in earlier submissions to the Banking Law Commission’s fourth report. At that time, we supported the Commission’s proposal for opening for new participants in this area, by pointing out that such new systems for payment services will not be based on account agreements.
This is true of both large and small currency areas. In smaller currency areas, an increase in exchange rate volatility can present monetary policy with additional, substantial challenges. In both the neighbouring countries of the euro area and the member states themselves, negative deposit rates and quantitative easing programmes have therefore been implemented to influence monetary conditions. Furthermore, the central banks of the Czech Republic, Denmark, Sweden and Switzerland are prepared to intervene in the foreign exchange market as necessary. This range of unconventional measures has extended the monetary policy options for the various central banks. My final message is that, despite the expanded set of monetary policy instruments available, the options are not unlimited. First, the effects of monetary policy measures can wane with duration and dosage. This is particularly the case if the solution to structural problems requires adjustments to economic policy. Monetary policy is no replacement for such adjustments. Second, the benefits of unconventional monetary policy measures always come at a potential cost. These costs must be continually evaluated and monetary policy adjusted if the long-term costs outweigh the short-term benefits. Third and finally, for small open economies in particular, monetary policy cannot cushion the impact of every negative development in the global economy or the international financial markets. Favourable conditions for the economy and a high degree of adaptability among companies play a key role in a country’s ability to overcome crises and disruptions.

chart 7). Before the onset of the global financial crisis, the euro area was regarded by financial markets as a more or less homogeneous unit. Hardly any distinction was made between country risk within the euro area. This was reflected in the fact that the government bond interest rates of most member countries were practically the same as those of the country with the lowest yields, namely Germany. During the course of the financial crisis, concerns over the stability of the euro area led to increasingly large divergences between the sovereign yields of the large member countries. Yields rose not just on Italian and Spanish bonds, but also on French sovereigns. In this environment, the growth and inflation outlook for the euro area again deteriorated. At the end of 2011, the ECB therefore reversed two of its interest rate hikes, those of April and July 2011. Market uncertainty resulted in renewed inflows to the Swiss franc, causing it to appreciate against a broad range of currencies (cf. chart 8). In 2007, one euro cost CHF 1.65 – by August 2011, the exchange rate had fallen to almost parity. The Swiss franc also gained markedly against the US dollar, which at the time was not regarded as safe haven due to discussions about the debt ceiling. In 2007, a dollar cost CHF 1.25 – in autumn 2011, it temporarily fell to 75 centimes. A rapid and substantial appreciation was also taking place against the other major currencies, with no end in sight.