samchain/econo-pairs-v1 huggingface dataset:
The opportunity to improve and enhance these tools based on their results should be considered, as well as the possibility of requiring higher capital and liquidity levels or more detailed contingency planning. Locally, we look forward to learning from other’s experience and improve our own work on impact evaluation and continuous assessment of the implementation of the Basel III reforms in Chile. In the near future, it is also relevant to note that part of the pending issues our country has in closing regulatory gaps relates to strengthening the local financial safety net through the development of a financial resolution framework (including a proper deposit insurance scheme) and implementation of Emergency Liquidity Assistance framework for the Chilean financial sector. Looking ahead, it is also important to bear in mind the challenges associated to digitalization and new business models in the financial sector. Modernizing financial regulation and risk management also entails identifying potential risks and defining a regulatory perimeter that addresses the increasing pressure of digital developments (such as those of new business models developed by Fintechs, stablecoins, Central Bank Digital Currencies, Decentralized Finance, among others). Linked to it, operational resilience and cybersecurity have become a relevant issue for the financial industry. 15  In this sense, regulation aim to set minimum standards that can guarantee the adequate functioning of financial services when it comes to face operational and cyber risks. Lastly, it is also key to assess the risks posed to and by financial institutions data infrastructure and data use.

2  Our best response is to continue strengthening regulation and supervision regimes aimed at avoiding future crises. And central banks have a crucial role to play because there are clear complementarities between financial and monetary stability, which, as is the case of Chile, are often formally recognized in central banks’ official mandates. Before referring to what we have done on this matter in Chile, let me briefly describe our experience with the Global Financial Crisis and our macroeconomic policy response to it. While we were still enjoying the commodity boom of the 2000s, we were hit by the spillover effects of the crisis and its aftermath, namely the tightening of domestic lending conditions, capital outflows, a reduction of the external demand for our exports and a decrease in the price of copper, which is still the main source of external income for the Chilean economy, and in particular an important source of revenues for the Treasury. The price of this critical commodity fell more than 60 percent in just five months. Exports fell almost 20 percent in two years, a strong shock for an economy where exports accounted for more than 40 percent of GDP. A similar drop experienced public revenues, with those coming from copper production falling 23 percent in 2008 and 50 percent the following year. Despite the severity of the shocks, economic performance and the resilience of the financial system have been better than in comparable situations in the past.
Unlike commodity prices – and world prices more generally – over which the United Kingdom has no direct control, an exchange rate represents the relative price of two currencies and is thus affected by monetary policy decisions at home and abroad. The timing of the depreciation, however, and its subsequent relative stability makes it natural to attribute the fall not to changed expectations of monetary policy at home and abroad, but rather to the perceived real impact of the crisis on the UK economy. Prior to the crisis, the United Kingdom was consistently running a moderate current account deficit. At some stage, that deficit needed to be closed, most probably through a higher national savings rate. The natural counterpart to that would be a real depreciation of sterling in order to improve UK international competitiveness, boosting net exports and leading to a re-balancing of the composition of output away from meeting domestic needs and towards internationally tradable sectors. Moreover, the crisis has probably also resulted in a loss in net foreign earnings by some parts of the financial sector, necessitating an even larger decline in the real value of sterling to re-balance the economy. In order to get a handle on the likely impact of the depreciation of the exchange rate, we can follow a couple of approaches. One approach is to compare inflation rates here with those in other jurisdictions with stable exchange rates.

We can bring all this together by asking what has been the net contribution to inflation of higher global prices, the exchange rate depreciation and the movements in VAT over the past few years. A range of estimates is shown by the blue swathe in Chart 9. The green swathe then just shows the corresponding inflation generated from other sources, such as pay and producers’ profit margins. It can be seen that this has been running at very low levels, especially over the past year and a half. It is worth emphasising that this is, in essence, merely an accounting exercise, attributing inflation to various proximate causes. The green swathe does not provide an estimate of what inflation would have been if commodity prices, the exchange rate and VAT had all remained at their 2007 levels. If that had been so, consumers would have had more to spend on domestically produced output, pushing up prices. And producers utilising imported inputs would also have had less incentive to bear down on other costs, including wages. So, in the absence of the movements in global prices, sterling and indirect taxes, inflation might have been somewhat higher than indicated by the green swathe. But these effects would have to be quite powerful for inflation to be materially above target in those circumstances.
Since the onset of the financial crisis in 2007, the prolonged slump in global growth and valiant efforts by central banks have pushed interest rates even lower. As a small open economy, Switzerland cannot decouple itself from these global developments. On the contrary, exceptionally low interest rates around the globe have farreaching consequences for our economy. In the past, Switzerland has invariably had lower interest rates than its trading partners, namely the euro area countries, as shown in slide 3, where the blue shaded area depicts the difference between short-term interest rates in euros (yellow) and Swiss francs (red). This interest rate advantage primarily reflects the lower average inflation rate in Switzerland compared to other countries, although political stability, sustainable fiscal policy and credible monetary policy also play a role. Investors have therefore traditionally been willing to hold Swiss franc investments at lower yields. This interest rate advantage was for a long time the ‘natural’ state of things in Switzerland. However, in the wake of the financial crisis, this advantage came under mounting pressure. Monetary policy easing on the part of the European Central Bank resulted in a narrowing of the EUR/CHF interest rate differential. In 2014, yields on short-term government bonds in Switzerland were, at times, even higher than in Germany. This caused upward pressure on the Swiss franc to intensify. 2 From a monetary policy perspective, Swiss franc appreciation calls for monetary policy easing, since the exchange rate has a substantial influence on inflation and economic developments in Switzerland.

For the UK that is now around 140%, 35 percentage points lower than in 2009. But is that a good number in macroprudential terms? The virtues of credit – facilitating consumption smoothing, house purchase, investment and risk management mean that more credit is not always bad. And the credit intensity of an economy can increase as intermediation becomes more efficient. But at 140% of GDP it is high by historic standards and higher than the G7 average. One useful leading indicator of financial crises in the past has been the credit-to-GDP gap – that is, the gap between the credit-to-GDP ratio at a given point in time and its trend. For the UK that gap now stands at minus 25%. Does that suggest that credit in the economy is 25% below where it should be? The problem of course is that the credit-to-GDP gap measures the stock of credit in the economy relative to an historic average. For the UK, that average includes a sustained build-up of private non-financial credit from 115% of GDP in 1989 to 175% of GDP in 2009. For this reason we have not attached too great a weight on the credit-to-GDP gap to date. Looking at the flows rather than the stocks, private non-financial sector credit growth has begun to increase but is growing slowly in historical terms at around 2.5%. Of course, it is worth emphasising again that history is not something I necessarily want to repeat.
And in some cases there is also a willingness among central banks themselves to adopt a looser interpretation of their existing mandates. This tendency has strengthened noticeably of late. In our case, for example, there have been a series of motions in parliament calling on the SNB to do more with regard to climate protection. The same applies to the issue of inequality, ever since the use of central bank balance sheets to tackle the global financial crisis has increasingly raised questions regarding the redistribution of wealth. Time and again, there have been initiatives from politicians demanding that central banks directly finance government tasks. For example, a popular initiative was recently launched in Switzerland seeking to amend the Federal Constitution to give the SNB a direct role in financing the national pension scheme. How is the SNB to deal with these demands? All these concerns – from climate protection to the redistribution of wealth and securing pension provision – are important matters that are Page 9/16  rightfully being raised. That said, I am convinced that attempting to solve these issues with monetary policy instruments would entail a significant threat to the effectiveness of monetary policy over the medium to long term. The SNB naturally has to take into account the influence that changes in the economic structure have on inflation. For example, climate change can have an effect on potential growth, and this has to be considered when setting the monetary policy stance. However, the mandate of a central bank must not be overburdened.

However, this is not an easy task by any mean. Rating agencies should satisfy several criteria in order to be eligible. These criteria, as you might already be aware of comprise experience, freedom from external influence, publicly available assessments, requirements to disclose assessment models and approaches, sufficient resources and finally validation or recognition by supervisory authorities in our countries. Third but certainly not the least, the new system poses a challenge to all banks to improve their capacities in order to comply with the new framework to successfully compete and survive. Banks should start adopting a more dynamic and forward looking approach to the evaluation of risk and  provisions since under a risk sensitive approach there is always the risk of pro-cyclicality1, which means bank capital ratios are likely to fluctuate more over the course of business cycles. In spite of the above challenges, in Albania we have already started addressing some of these issues. First, by making sure that we have consolidated the achievements of our supervisory function by completing the requirements of Basel I. We are glad that the good progress has been confirmed also by the FSAP assessment during their mission in February-March, this year. Certain recommendations related with requirements about consolidated supervision, will be followed very attentively; Second, we have been pushing already our supervisory process and the banks, toward a more risk oriented attitude.
This initiative of the private sector sets out the terms under which the 18 largest dealer banks, which represent 90% of derivative activity, would stay cross-border derivative contracts temporarily when a global bank fails. This is a fundamental step to closing off the risk that foreign counterparties take their money and run. By agreeing to a short stay, cross border resolution becomes much more realistic and achievable. Once this agreement is concluded, other market participants must be brought onto similar terms to those of the 18 big dealers, and FSB members must deliver on their commitments to establish regulatory requirements for contractual stays. There is more to do. Resolution plans must be finalised; we must systematically remove remaining legal and operational impediments to resolvability, we must think through mechanisms to ensure firms have adequate funding in resolution, and we must ensure resolution regimes for systemic non-banks are as effective as they are for banks But make no mistake. Brisbane will be the watershed in our collective effort to end Too Big to Fail. 2  BIS central bankers’ speeches  Building an open, global financial system Fixing the fault lines behind the last crisis isn’t enough. The second objective of the G20’s efforts is to rebuild trust in an open, global financial system. Trust between financial institutions. Trust between regulators. Trust between industry and finance. And most fundamentally, trust between the public and the financial system. That trust is essential to maintaining a truly global financial system that integrates all major economies.

4  For example, see Chung et al (2011), “Have We Underestimated the Likelihood and Severity of Zero Lower Bound Events” and Vice Chairman Janet Yellen (2011), “The Federal Reserve’s Asset Purchase Program”, remarks at the Allied Social Science Associations Annual Meeting, Denver, Colorado, January 8. 5  TIPS are designed with a floor of zero on the cumulative inflation adjustment that they can realize over the life of the security. Thus, the prices of securities that are similar to each other in most ways but have different amounts of accrued inflation can be used to derive a measure of the value of this floor, which can then be translated into the probability of deflation. 2  BIS central bankers’ speeches  time, though, breakeven inflation rates have risen back to levels more consistent with the FOMC’s mandate, and the perceived risk of deflation has diminished notably. One criticism that has been directed at the LSAP2 program is that it was unable to restore vigorous growth to the economy. I think this is a reasonable observation but not a strong criticism. It is true that the support to growth provided by the asset purchases appears to have been countered by other factors that have continued to weigh on growth. However, the LSAP2 program was never described as such a potent policy tool that it could ensure a return to robust growth and rapid progress toward full employment in all circumstances.
Through a series of large-scale asset purchase programs (LSAPs), the Federal Reserve’s balance sheet expanded to include more longer-term Treasury securities and two additional asset classes, agency debt and agency mortgage-backed securities (MBS).1 Agency MBS currently represent more than 40 percent of the System Open Market Account (SOMA) domestic portfolio.2  Furthermore, in order to maintain the size of the SOMA’s agency holdings, the New York Fed’s Open Market Trading Desk (the Desk) continues to reinvest principal paydowns on agency MBS and agency debt into agency MBS each month.3 In my remarks today, I will share some reflections on LSAPs at the ZLB and the flexibility that access to the agency MBS market gives the Federal Reserve to execute such programs. Before I begin, however, let me remind you that the views I express are my own and do not necessarily reflect those of the Federal Reserve 1 / 10  BIS central bankers' speeches  Bank of New York or the Federal Reserve System. Large-Scale Asset Purchase Programs Currently, all the major advanced-economy central banks are either at or close to the zero lower bound.

In November 2008, there were significant dislocations in many financial markets, especially in the markets for the U.S. federal housing agencies’ securities. 23 In addition, the housing market was a focal point of the financial crisis. To help support the housing market and improve conditions in financial markets, the FOMC announced an LSAP program on November 25, 2008, that consisted of purchases of agency debt and agency MBS.24 The stated purpose of this program was to “reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally. "25 Research suggests that this program reduced “abnormal pricing” in agency MBS— the component of the spread considered to be due to market dysfunction—by about 70 basis points over its first six months.26 In that same time period, the spread of agency MBS repurchase agreements (repos) to Treasury repos fell from more than 200 basis points to near zero. In the framework noted above, this LSAP worked primarily through the market functioning channel. However, research also suggests that borrowing costs were lowered more broadly 27 6 / 10  BIS central bankers' speeches  through a portfolio balance effect.27 Overall, the Desk’s purchases, aided by the lowering of fed funds to the ZLB in December 2008, resulted in lower mortgages rates, which in turn reduced the cost of home purchases and allowed existing borrowers to refinance at more attractive terms.
Therefore we moved last year to open up the Singapore market further to foreign banks. We hoped that this would spur efficiency and innovation among the local banks, and push well-run banks to seek scale and expand at home and abroad. We were convinced that unless we opened up, this transformation would never take place. There is no substitute for real competition. We did not want the liberalisation to weaken our banks and destabilise the financial system. So we are not taking a big bang, laissez faire approach. Instead, we are phasing the liberalisation over five years, and opening the market to financially strong, committed foreign players. At the same time, we are motivating the local banks to strengthen themselves. We have raised disclosure standards to international norms, and we now require banks to publish details of their nonperforming loans and inner reserves, which were previously closely guarded secrets. We are also raising corporate governance standards, which lie at the heart of the improvements required in Asian banking systems. We instituted nominating committees on bank boards, comprising a majority of independent directors. Their remit is to ensure that persons appointed to the boards and  BIS Review 76/2000  8  to key executive positions are selected for their expertise, and their ability to contribute to the bank and to the interest of all shareholders. Most important of all, we are requiring the banking groups to make a clear separation between their financial and non-financial businesses.

Over the last three years, we have systematically reviewed every part of the financial industry. We have freed up the use of compulsory savings in the state retirement fund scheme, demutualised and merged the stock and futures exchanges, deregulated brokerage commissions, opened up all areas of the financial industry to new entrants, and taken steps to develop the bond market. I will focus on two specific changes, to illustrate the trade-offs and considerations in designing our liberalisation programme. The first is the review of our policy of not encouraging the internationalisation of the Singapore dollar. The second is our decision to open up the domestic market to foreign banks, while giving impetus to local banks to strengthen themselves. Singapore dollar non-internationalisation policy We have long maintained an explicit policy not to encourage the internationalisation of the Singapore Dollar. Being small and vulnerable, we are especially wary of large and volatile capital flows distorting our exchange rate, and thus damaging our real economy. Our international trade is 3 times our GDP, higher than any other country in the world. If our exchange rate moved up and down like the Japanese Yen against the US dollar, we would be in deep trouble. Singapore has no capital or exchange controls. Anyone can move funds freely into and out of Singapore, whether in $ or foreign currencies. The non-internationalisation policy does not try to prevent currency speculation per se, or to limit the flow of capital into and out of Singapore.
Impact on financial stability  Like other central banks, the Bank of Algeria faced the need to strengthen the surveillance of systemic risk, particularly in relation to the volatility of hydrocarbon prices in international markets and the interconnectedness of financial institutions within the banking sector. To address these concerns, banking legislation, as amended in 2010, has extended the central bank’s mandate to include the objective of financial stability. With this amendment, the financial stability mandate becomes of equal importance to the price stability mandate. In practice, it is worth noting that the contribution of monetary policy to monetary and financial stability in Algeria is crucial in view of the dominance of the banking sector in the financial system and its potentially important role in the development of financial intermediation. This contribution is of particular importance in the context of persistent excess liquidity in the money market since 2002. To strengthen the operational framework of financial stability, and following the introduction, in 2010, of new accounting rules of international standard, risk assessment rules with regard to new financial products and the introduction, in 2011, of new regulations regarding liquidity risk identification, measurement, management and control, the Council of Money and Credit (the monetary authority) promulgated in 2014 a new prudential framework to ensure conformity of the prudential rules to the new Basle norms and standards.

Within this new regulatory framework, the minimum tier one capital adequacy ratio is set at 9.5 percent, exceeding the minimum ratio recommended by the Basle Committee, and the adequacy ratio, based on regulatory equity, is set at 12 percent. An assessment of financial soundness indicators at end 2015 shows that the Algerian banking sector soundness is relatively well preserved despite the boom phase of the credit cycle in the context of the ongoing external shock. Capital adequacy ratios remained comfortable in 2015, standing at 14.5 percent in relation to tier one capital and 17 percent in relation to regulatory equity. The quality of banks’ capital, essentially comprising tier one capital, and the substantial increase in the required minimum  2  BIS central bankers’ speeches  capital for banks and financial institutions, implemented in December 2009, significantly contributed to maintaining financial soundness indicators at a comfortable level. By end 2015, the banking system remained well capitalised and profitable. Return on equity and on assets strengthened to 24.6 percent and 2.2 percent respectively, in a situation of still comfortable liquidity. However, the acuity of the impact of the external shock in terms of banking liquidity contraction, following its relative stability in 2014, is such that some banks no longer met the requirements in terms of short term liquidity ratio in 2015.