samchain/econo-pairs-v1 huggingface dataset:
In this context, we also welcome the ongoing work by international organisations, including the IMF and World Bank, on the design of efficient and effective insolvency regimes worldwide. It is, of course, difficult to establish international standards in this area, because the approaches adopted by different countries reflect not only different legal traditions but also different policy choices, most especially on the extent to which the system should favour debtors or creditors. Indeed, this is a debate that is live in several countries, including the UK where new measures were announced last month in the Queen’s Speech, and I am sure is occupying minds at this Congress. But the IMF work argues, rightly in my view, that any insolvency regime, whether debtor- or creditor-oriented, will enhance financial stability effectively only if it protects value for the benefit of all interested parties and the economy in general; and this requires the allocation of risk among market participants to be done in a way that is predictable, equitable and transparent. Financial sector restructurings Let me turn now to my second area: financial sector restructurings, and I would like to start by noting the importance of confidence in the smooth running of a financial system. Confidence is important in most industries, but it is at the heart of the financial industry. It is confidence that permits banks to operate, as a matter of course, with gearing many times capital, and with a maturity mismatch between their assets and liabilities, often concentrated in short-term or sight deposits.

I recognise, of course, that more progress has been made in the corporate context than in the area of financial institutions or sovereign debts; and I think that reflects great credit on many individuals and organisations represented at this Congress. So I will start by offering a few thoughts on corporate workouts, linking these to the Bank of England’s long-standing involvement in the London Approach and our responsibility for the maintenance of financial stability. I will then turn to look at how the desirable features, incorporated into the agreed principles governing international corporate workouts, might be applied to financial restructurings; and finally in a similar way look to whether these principles can be carried across into the field of sovereign workouts. This raises the issue of the role of the various different parties to debt restructurings, including the official sector. By drawing out some common themes, I hope to put INSOL’s work on the corporate sector into the broader context of differing approaches to resolving debtor difficulties. Corporate workouts Let me start then with corporate workouts; and let me begin by saying a few words about the Bank’s interest in this issue. As I noted a moment ago, it arises mainly from our financial stability responsibility, although I would argue that our role in promoting the efficiency and effectiveness of the financial system is also relevant.
Speculative activity is a major source of vulnerability not only for the financial market but also to the real economy, which if left unattended, could lead to devastating financial crises. Arguments expounding that these activities provide liquidity are delusional, and at best deflective. 2. Secondly, the outcome of the Principles is to level the playing field among market players. This means a market that cannot be distorted by any institution or individual. All participants, either large or small will have fair access to the market, without fear of being subjected to market collusion and manipulation. It ought to create an efficient, competitive and transparent market that will contribute to economic prosperity. 3. Thirdly, the outcome of the Principles is a strengthened regulatory framework. The Principles of transparency, accountability and good governance will promote market discipline. The Principles will serve as guidepost for us to effectively supervise and regulate the market and is necessary, given the increasing complexity of the financial market, exacerbated by the disruptions arising from technological innovations and greater interconnectedness. Achieving these three outcomes is central to our development strategy and policies for the financial market. Together with the various FMC measures and initiatives already announced, we have laid the foundations to redirect the growth and development of the ringgit foreign financial market from the offshore to the onshore market. After all, a thriving, open and robust onshore financial market is a prerequisite for a stable financial system and sustainable economic growth.

As part of the FSB-led and co-ordinated effort, the central bank Committee on Payment and Settlement Systems and IOSCO are beginning to work on this area of resolution. They must make a clear distinction between measures to procure, on the one hand, Recovery from distress and, on the other hand, Resolution. Orderly resolution is what is needed when a CCP is bankrupt, when we all need somehow to avoid the chaos that follows a standard liquidation of assets and closing out of positions. The issue, always, is where do the losses go? The answer cannot be the taxpayer. In the banking sphere, the answer, broadly, is bond holders and other unsecured, uninsured creditors. In the CCP sphere, it is probably the clearing members, as they would be the principal creditors in an insolvent liquidation. The technical issue is how to achieve that in a way that minimises disruption and value destruction and enables essential CCP services to be maintained. This is a key agenda item going forward. It will involve achieving greater clarity in the related area of the optimal “waterfall” of margin, default fund and CCP owncapital resources in absorbing losses. 4. Margin requirements and macroprudential policy  Earlier this year, US Treasury Secretary Geithner called for the world’s major financial authorities to agree minimum initial margin requirements for uncleared OTC derivative contracts, on the grounds that we must avoid a race to the bottom and incentives that make it attractive to clear bilaterally rather than via a CCP. I agree.
Here is Chancellor Denis Healey, writing in his memoirs3 about a spat with the Prime Minster of the day:  3  2  Healey, D (1989), The time of my life, Michael Joseph London. BIS Review 11/2004  ‘At this time my own relations with Jim were shaken by an incident just after the Party Conference. On October 6 I had asked him to let me raise interest rates by another 2 per cent to the then unprecedented level of 15 per cent…He refused. I said I wanted to take the matter to Cabinet that morning. ‘All right’ he replied ‘but I will not support you.’ Nevertheless I insisted…’ In the event this did not prove necessary: Callaghan backed down, leading Healey to comment wryly that ‘This was the only time I have ever used the threat of resignation to get my way.’ The new framework has taken the politics out of interest rate decisions without sacrificing democratic accountability or oversimplifying the policy process. It is an elegant institutional solution to the lengthy debate between those who favoured untrammelled discretion and those who advocated rules (such as monetary targets); one, moreover, which manages to respect the constitutional priorities of a parliamentary system. Achievements Performance over the six years since the Bank became independent has been impressive. Against the target of 2.5% for RPIX which ran from 1997 until December 2003, average inflation was 2.4%.

Every month I may have a fairly well developed view not just about this month’s interest rates, but about where interest rates are likely to need to go in the future, to achieve the inflation target. But that view may - indeed should - change in the light of new information, better research, another set of forecasts, perhaps a different view of the risks. In that sense every month is a fresh decision. What doesn’t change is what we are trying to achieve. This clarity about aims is what gives us the flexibility to learn, so important if we are to avoid major error. (ii)  Effective communication  Maintaining this clarity through effective communication is critical. The MPC aims to be as open and straightforward as possible. Sometimes this involves lengthy explanations of rather arcane issues. A recent example is the change in the inflation target. As you probably know, in January the Chancellor replaced the target of 2.5% as measured by the RPIX by a 2% target as measured by the new CPI. We have used speeches, Parliamentary appearances and short articles to set out as clearly as possible the nature of this worthwhile but essentially technical change, in order to underline one simple message: that the change in target in no way weakens the commitment to price stability, and indeed has no material implications for monetary policy.
Accordingly, before the Fed raises rates we should have a great deal of confidence that we won’t be forced to backtrack on our moves and face another painful period at the zero lower bound. And once we start, at least initially we should raise rates slowly to make sure the economy can weather less accommodative financial conditions. In sum, we should be exceptionally patient in adjusting the stance of U.S. monetary policy – even to the point of allowing a modest overshooting of our inflation target to appropriately balance the risks to our policy objectives. Let me now explain how I get to this conclusion. Conflicting signs in the labor market To judge the success of policy, you have to know when you’ve actually reached your targets. Knowing when we hit our inflation target is straightforward. After all, a 2 percent increase in PCE prices is an easily identifiable number. But full employment is a far more nuanced concept. As the FOMC’s annual January “Statement on Longer-Run Goals and Monetary Policy Strategy” recognizes, maximum employment can be influenced by a large number of structural factors that can change over time and may not be directly measureable. In light of this uncertainty, the Committee considers many factors in gauging maximum employment. Judging the degree of slack along these many dimensions is a difficult and complex task. But it is one that is critical for the conduct of monetary policy – we must have a good idea of what constitutes achievement of our full employment target.

Some inflation targeting central banks – Norway, New Zealand and Sweden – are now publishing charts which show how they expect to change policy rates to achieve their targets 6 . Should the MPC follow this trend? If you follow press reports of our regular Inflation Report forecasts, you might be forgiven for thinking we already have. But actually no: our forecasts take market expectations for interest rates as their starting point, and we leave commentators to draw their own inferences. We have maintained the position that we do not give hints about future interest rate changes. Naturally we are looking closely at what happens elsewhere and we will want to learn from their experience – though of course, since the MPC is not a consensual body, it would be a significant complication to get it to agree an explicit path for interest rates. 6  In addition, the Bank of Canada now includes text in its monetary policy report which indicates whether or not rates will have to change from their current level to meet the inflation target. BIS Review 20/2007  5  Have we become prisoners of our past success? Let me come, finally, to the biggest, and most difficult of the issues I want to raise tonight – namely the extent to which the stability of the past decade has conditioned expectations of what the MPC can and should do, in ways which may be both helpful and unhelpful to its ability to do its job.
As for the second pillar, somewhat lower real GDP growth this year will contribute to a reduction in domestic upward price pressures. On the other hand, owing to the risk of second-round effects from past oil price increases, wage developments need to be monitored carefully. Thank you for your attention. BIS Review 28/2001  7

It is clear that the aim of central banks to make monetary policy less exciting and more boring needs to be complemented by a collective effort to bring boredom to the international monetary stage. 1  Over the past year, senior policymakers from within the G-7 are reported to have claimed that “It’s awfully important that the euro zone adopt policies that will allow them to grow faster. Their slow growth is hurting our growth” (John Snow, AFX news 24/03/04), and that “Our American friends need to put in place a determined policy to control their deficits and so that their currency does not distort commercial trade” (Nicolas Sarkozy, AFX news 25/11/04), or indeed that China’s exchange rate policy “has become a destabilizing force in the world economy, has led to major international exchange rate and trade imbalances throughout the world” (Open letter from US senators Schumer, Bunning, Durbin, Graham, Dodd and Bayh to Vice President Richard Cheney, 22/01/04). 2  BIS Review 9/2005
But I think there are good reasons for believing that demand may be presently somewhat less responsive to real interest rates than usual. Uncertainty rose sharply after the collapse of Lehman Brothers and rose again during the worst of the euro-area sovereign debt crisis. Banks and highly indebted households and businesses have focussed on deleveraging and improving the resilience of their balance sheets. Under these circumstances, it would be hardly surprising if changes in the cost of borrowing have less  10  The path for the policy rate in this scenario may seem surprisingly close to that under the previous scenario, but it needs to be remembered that the real interest rate – which is what matters for demand – is nevertheless lower here because inflation is higher. 6  BIS central bankers’ speeches  traction on demand than is usually the case. Chart 5 shows the implications of assuming the interest elasticity is just a third of the size assumed in the earlier experiments. The key point is that the policy rate under a nominal income target is now kept at the zero lower bound for more than six years, even though the output gap is closed after four. That long period of low interest rates is necessary to generate enough of a fall in expected future real interest rates to boost demand today. But a world where policy is kept loose for so long after the economy is back to normal is somewhat troubling.

Singapore's faster payment system is called PayNow. It is linked to a central addressing scheme that allows money to be sent to individuals using their mobile numbers as proxies and to businesses using their unique enterprise numbers. There is no need to share details of bank account numbers to receive payments. Linking the faster payment systems of countries is an efficient way to carry over the benefits of cheap, fast, seamless payments from the domestic to crossborder arena. Singapore has been actively working to connect our PayNow with the faster payment systems of other countries. We started with Thailand's PromptPay, with a bilateral linkage launched last year, and are now completing our linkages with India's Unified Payment Interface and Malaysia's DuitNow. These linkages allow users in Singapore and our partner jurisdiction to transfer funds directly to one another's bank accounts. But such bilateral linkages are time consuming and expensive to implement. The effort to connect each payment corridor in every region is not a trivial process. As one of our industry partners put it, three countries require three bilateral links but 20 countries would require 190 bilateral links. We need a multilateral solution to efficiently link up countries' faster payment systems. 2/8  BIS - Central bankers' speeches  The BIS Innovation Hub's Singapore Centre is developing a central platform for multilateral linkages to be built on countries' existing faster payments infrastructure. If successful, it will facilitate rapid scaling-up of retail payment systems connectivity. We call it Project Nexus.
A tolerance interval of 1 percentage point on either side of the target was included mainly to make it clear that deviations would probably occur but also that they should be limited. The target was tied to the consumer price index, the measure of inflation that was most familiar and reliable, besides being published regularly. There is a great deal to say about this — the choice of the target’s level and the choice of index — in the light of our experience and the academic literature that accumulated in the 1990s. I shall have to be brief, however, because otherwise there will be no time for the more practical issues about our procedures, which is today’s theme. So here are three short comments: •  The appropriate level of inflation is one debatable point. There are arguments for a somewhat higher level as well as a somewhat lower. With our present knowledge, this is ultimately a matter of judgement and so far there has been nothing to persuade me that there are any grounds at present for changing our target. As I see it, the most important thing is to set up a distinct target so that a given rate of inflation is anchored among all economic agents, be they households or firms, employers or employees. In this we have been very successful. •  The choice of an index is a complicated matter.

Starting from appraisals of global economic  The inflation puzzle International developments ■  ■  ■  etc  BIS Review 24/2001  Development of GDP Interest rates and exchange rates Oil prices  Swedish economy ■  The krona  ■ ■  ■  etc  Development of GDP Productivity Utilisation of resources Wages  Other ■  Inflation expectations  Inflation ■  Taxes and subsidies  3  developments, various international prices, for oil for example, the exchange rate, interest rates and what is happening in the domestic economy, we estimate a picture of economic activity and resource utilisation in Sweden. Normally it is resource utilisation that is crucial for inflation. To this we add an assessment of inflation expectations as well as estimates of factors with effects that may be more or less transitory, such as changes in interest rates and taxes. The combined result is a forecast of inflation. The large model is made up of a number of relationships, The equations for calculating exports are one example. Swedish exports are estimated as a function of, for example, global economic developments and the path of the krona’s exchange rate or some other measure of relative prices. But as some important relationships are not particularly stable, we have to make judgements on the basis of other experiences. Sometimes, moreover, there are grounds for supplementing a model-based calculation with more specific information. There may be indications that investment activity, for example, will be higher than historical relationships indicate.
Banking produces a particular form of social pollution – financial crises. We have had many hundreds of years of experience of such crises. The global financial crisis will, however, almost certainly require a re-think of their costs. The cumulative GDP costs of the crisis so far in the US, UK and the euro-area are well in excess of 25% of GDP (Chart 8). In net present value terms, they could easily end up equating to a year’s GDP or more. This suggests, pre-crisis, the misalignment between private and social incentives in banking was larger than perhaps at any time in the recent past. In the language of Jensen and Meckling, risk had been shifted by management and shareholders onto a much wider set of societal stakeholders, with significantly adverse macro-economic implications. (b)  Moral hazard  That brings me to the final of the incentive frictions. When the social costs of an activity are high, as during financial crises, there are strong incentives to cushion the effects on wider society. The global financial crisis provides no better example of those incentives, with extraordinary levels of government support to the global banking system in the form of recapitalisation, liquidity support and guarantees. BIS central bankers’ speeches  11  While these levels of support were arguably necessary to limit the costs of the crisis, they came with their own longer-term costs.

The most important of those costs was probably the adverse effects of such interventions on risk-taking incentives – in other words, the moral hazard of government insurance (Alessandri and Haldane (2009)). This is not a new issue. The historical evolution of the financial system has been a game of cat and mouse between the state and the banking system (Haldane (2010)). Because the cat has typically failed to keep pace with the mouse, the result has been a widening and deepening of support mechanisms for banks over time. Elsewhere, I have called this dynamic link between bank and sovereign balance sheets the “doom loop” (Haldane (2012)). One measure of the extent of this problem is found in estimates of the “implicit subsidy” banks earn as a result of the expectation of government support. Chart 9 plots one measure of this “implicit subsidy” to UK banks. This peaked following the bail-outs at a remarkable £ in 2009. Since then, it has fallen substantially – to around £ in 2013 – as regulatory reforms have been put in place to constrain risk-taking and the financial strength of banks has improved. But it remains in positive territory, suggesting an on-going distortion to risk-taking incentives. Public policy responses The modern company harbours a range of micro-economic frictions. In some cases, these seem likely to have generated significant macro-economic costs, in the form of sub-optimally low rates of investment and sub-optimally high degrees of risk-taking.