samchain/econo-pairs-v1 huggingface dataset:
7  Chart 3 shows the implicit subsidy to the top 4 UK banks. At the height of the crisis it reached almost £ per year but has now shrunk dramatically. BIS central bankers’ speeches  5  The foundations are laid. The next stage of reform should build a system that serves households and businesses to its full potential. Such a system must be supported by pillars of diversity, trust and openness. Diverse Although banking remains the most important business by some margin, the increase in the relative price of bank-based intermediation has encouraged a shift towards market-based intermediation. Virtually all net credit growth since the crisis has been in bond rather than bank finance.8 Non-bank financial sector assets have grown by 130% over the past decade and are now equivalent to 120% of global GDP.9 Managed properly, that represents a welcome increase in diversity within the global financial system. If banking again comes under stress, these markets could act as a safety valve. For there to be diversity under adversity, the connection between banks and markets must be appropriately sized and durable. I noted how pre-crisis links meant that the collapse of subprime spilled over into the core of the system. The post-crisis connection must be wired differently, but not severed completely. Banks are needed to overcome the information asymmetries that prevent direct market access for smaller borrowers. But with the right standards an appropriate boundary between banking and securitisation can be drawn and financing capacity increased.

To protect against risks that banks think are low but are in fact not, a global definition of a simple leverage ratio has been agreed. In the UK, the Bank of England has just recommended powers to set a simple leverage ratio for domestically-regulated banks, building societies and investment firms. This will enhance the resilience of banks against risks that are hard to model.4 And it will ensure off-balance sheet exposures are properly capitalised. 3  Table 2 shows that the risk weighting of trading book assets has more than doubled. Despite accounting for only 5% of overall risk weighted assets, trading assets contributed more than one third of the overall increase in RWAs resulting from new regulatory requirements. Banks have responded by shrinking trading books. Chart 2 shows that across all advanced economy SIFIs, the share of such assets on bank balance sheets has almost halved. 4  Chart 2 shows that, for more than a decade before the crisis, average risk weights declined and, as they did so, banks increased leverage. This trend was central to the erosion of confidence in risk weightings. Since the crisis, average risk  BIS central bankers’ speeches  3  Retention and capital requirements for securitisations now have more closely aligned incentives between originators and investors. New requirements for money market funds have closed the gap between retail investors’ perceptions and their exposures. International standards are agreed to capture properly and limit off-balance sheet exposures.
The inherent flexibility of a managed float regime such as the one pursued by the NBR does, however, have its clear limitations, which should not be overlooked – this does not imply, by any means, that the central bank acts in a discretionary manner, taking the exchange rate wherever it wants. The abuse of flexibility can be as harmful to the proper functioning of the economy as the abuse of rigidity. In fact, the inflation-targeting regime implemented by the NBR is a mix of rules and discretion with the aim of formulating a coherent and effective monetary policy. As regards the current differences in the countries’ approaches to euro adoption, for some it might seem odd that Bulgaria, which lags behind in terms of real convergence, is considering joining the euro area sooner than Romania. It is only natural for our neighbour to contemplate euro adoption as the only sound exit from the present currency board. By contrast, in Romania, as well as in other countries pursuing a floating exchange rate regime, the approach is different, since euro adoption is more complex. This is by no means to say that Romania does not envisage joining the euro area, but merely that a comprehensive preparation is of the essence to cope with the related challenges. The Latin dictum festina lente is, in my opinion, quite suitable in the case of euro adoption as well. With respect to real convergence, many have been asking themselves “How fast is fast enough?”.

Poland and Hungary stand at around 67 percent (both posting values of no more than 45 percent in 2000), Czechia at 86 percent (from 61 percent in 2000) and Bulgaria at 47 percent (against 24 percent in 2000). As a matter of fact, Romania boasts the fastest growth rate in the group of peer countries with similar trends. Can we, therefore, say that this is proof of a successful catching-up in real terms? Furthermore, can we claim that having a flexible policy framework (including a managed floating exchange rate) helped us in this respect? Allow me to assert that more time is needed in order for these questions to be appropriately answered. However, a general remark can be made: the EU and NATO anchors helped us all make progress as concerns real convergence. The second lesson derives from the answer to the following question: did the strategic decisions on the exchange rate regime and monetary policy framework matter? It is known that some countries in the region (Romania, Poland, Czechia, Hungary) opted for flexible exchange rate arrangements and adopted inflation targeting, while others (Bulgaria and the Baltic states) resorted to a fixed exchange rate regime under a currency board. At first sight, it seems that the latter group of countries are better prepared in terms of euro adoption (the Baltic states have already taken this step but they, being much smaller and more open economies, are a special case), given the fiscal discipline pursued and the nominal convergence stage in those economies.
You don’t have to think about, well, why am I doing this exactly? Well, we’re trying to serve the public interest, keep the economy on an even-keel, and execute on our mission as the New York Fed. The New York Fed is a little different than the other Reserve Banks because we’re really the operational arm of the Federal Reserve System for many, many different things. So, it’s sort of interesting. We do policy, and we do operations. Very unlike most central banks around the world, where the policy and operations are all in headquarters down in Washington. In the Federal Reserve it’s split, with the New York Fed doing a lot of the operational activities of the Federal Reserve System. It’s a pretty cool place. Check us out! Dr. Olajide Oladipo: I will surely do. The Federal Reserve has been around since 1913. How would you compare the 1929 Depression to that of 2008? President Dudley: Well, very different outcome. In 1929, the stock market crash led to a widespread banking panic, where people basically tried to get their money out of banks because they were afraid the banks were going to fail. And of course in the process of trying to pull all those deposits out of the banks, the banks didn’t have enough money, so a lot of banks actually did fail. And in fact, in 1933, FDR declared a national banking holiday where all the banks were closed for a period of time.

In fact, if you could tell me that we could just stay here for the next 20 or 30 years, I would be very happy with that. So, things are going pretty well. What’s driving the economy? I think in the local economy in Queens, it’s very dependent on transportation, very high level of transportation employment, in part because of La Guardia and JFK. Those industries are doing quite well. Tourism is important to this region, so New York City has really benefited from tourism. And the fact that people want to live in cities now as opposed to live in suburbs or more rural areas is also helping a lot. In terms of actual employment in this area, you have the transportation component. Healthcare is also very, very important. A lot of uncertainties on that front. Maybe we’ll get some resolution of some of those uncertainties today. Also business and professional services is a very important driver of growth in this area. Dr. Olajide Oladipo: Thank you. From your perspective, which sector do you think is actually propelling the growth? President Dudley: Well, I think – one thing that’s been really good for New York City over the last few years, it’s become much more diversified as an economy. In the old days, New York City was sort of rise and fall, depending on how the financial services industry was doing, especially the securities industry. And what’s happened in the last few years is the securities industry employment has been pretty flat.
The reserves policy adopted by the Bank Council bears the hallmark of common sense, aiming for a gradual rise in the level of monetary reserves so that the relationship of reserves to GDP does not deteriorate over time. This approach is consistent with the fact that, at present, we only have a moderate level of reserves. Those who believe that the SNB has surplus monetary reserves overlook the fact that Switzerland's central bank constitutes a form of insurance with respect to the monetary stability of the country. Like all kinds of insurance, the National Bank – faced as it is with expanding markets and increasing risks – must be able to rely on its reserves growing in tandem with the economy. If they did not do so, its ability to operate on the markets would be weakened. In this respect, it is the country's long-term interests that must not be lost sight of. The debate on the Cosa initiative (under which SNB profits would be used for the AHV/AVS, the Swiss old age and survivors' insurance scheme) is another example of a political move that could lead to a weakening in our monetary credibility. This initiative would hinder us in fulfilling our mandate, and last year I had the opportunity of explaining to you in detail why this is so. Allow me to briefly reiterate these reasons.

This would mean that last year's results were good, but no more than that. To hope that the SNB could distribute considerably more than CHF 1 billion in profits over a sustained period is tantamount either to forcing it to take more risks in managing its reserves, or to cutting back the level of funds set aside as currency reserves. In other words, its position on the markets would be weakened. Given our current level of reserves, this would be unwise. Dear shareholders Dear guests The Swiss National Bank must retain the confidence of the population and the markets if it is to conduct its policies effectively. The Cosa initiative is playing with fire. It constitutes a permanent  4  BIS Review 34/2006  invitation to press never-ending financial demands. It places the SNB at the centre of a permanent political debate which threatens both its credibility and the effectiveness of its policies. That is why good sense dictates that it be rejected. The SNB needs the support of everyone in this tricky phase and, in particular, the support of its shareholders. I would like to thank you for your attendance today, and for your continual interest in our activities. BIS Review 34/2006  5
The arrangement will be phased out in the course of autumn. Norges Bank eased its collateral requirements to facilitate banks’ borrowing access in the central bank. That will be reversed. Moreover, we have earlier announced that Norges Bank will reduce the share of banks’ access to loans from the central bank backed by bank bond collateral. The interest rate is now extraordinarily low. The Executive Board considered raising the key policy rate at the monetary policy meeting on 23 September, but decided to leave it unchanged. Norges Bank has previously noted that if developments continue as expected, it may be appropriate to increase the key policy rate earlier than projected in the June Monetary Policy Report. 3. The financial crisis and economic policy – lessons  In Norway, there is a division of roles in economic policy. Wage formation, the tax system and economic regulation should contribute to well functioning markets and promote the efficient use of labour and other real economic resources. The government budget – growth in public spending – influences the real exchange rate and the size of the internationally exposed business sector in the long term. The fiscal rule enhances the predictability of petroleum revenue spending in the Norwegian economy even when the budget is actively used from one year to the next to stabilise economic developments and even when the automatic stabilisers are allowed to operate. A smooth phasing in of petroleum revenues dampen krone fluctuations and reduce the risk of abrupt and major shifts between internationally exposed and sheltered industries.

Let me discuss these scenarios in turn. The Phillips curve provides a useful framework for assessing the impact of growing economic slack and inflation expectations on price developments. In its most basic form, this theory posits that the inflation rate depends positively on the expected rate of inflation and negatively on the degree of slack in the economy, as measured, for example, by the difference between the supply potential of the economy and aggregate output, in other words the output gap. With euro area GDP falling at an annual rate of 4.8% in the first quarter of 2009 and unemployment rising to 9.2% in April, there is little doubt that spare capacity is high. This should exert downward pressure on prices. But how strong is this downward pressure, and can it determine deflationary risks for the euro area? Precise estimates of the Phillips curve for the euro area are subject to controversy. They vary depending on the specification, the precise measures of the output gap and expectations used, and the time frame considered. However, the general indication from the existing studies is that, on average, relatively large and persistent changes in the output gap are needed to affect euro area inflation. 5 In comparative terms, these changes are much larger than, for example, in the US and the UK. A simple plot (slide 9) of the evolution of various measures of the output gap against that of inflation for the euro area confirms that  5  See, for example, Musso, Stracca and van Dijkx (2007).
BIS central bankers’ speeches  9  The international data on consumer prices are relatively rich: we have annual numbers for over 70 countries, most of them back to 1960 17. In all, across countries and years, there are 3,300 separate post-war observations. In only 70 of these – barely 2% of the sample – has inflation actually been negative (Chart 12a); the majority of these “deflations” (46 out of 70) have lasted no more than a year, many of these shorter episodes coinciding with falls in oil prices; of the 24 deflations lasting two or more years, 20 have been in economies with fixed exchange rates, most of those emerging economies; among countries with freely floating exchange rates, only Bahrain and – somewhat more famously – Japan have experienced protracted deflations, both of them twice (Chart 12b). This is not a common occurrence. A credible monetary policy reduces the persistence of movements in inflation Why might deflations be rarer in countries with floating exchange rates, and in emerging economies, and should this provide any reassurance today? Yes, I think – to a degree. One plausible reason for this pattern is that countries with fixed exchange rates give up autonomy to control their own rate of inflation. Instead, domestic inflation is determined by (i) inflation in the country to which their exchange rate has been fixed (most often the US) and (ii) forces affecting their real exchange rate.

BIS central bankers’ speeches  1  Following the financial crisis, of course, the developed world has been in exactly that position: the neutral real rate of interest has been extremely depressed, official interest rates have been pushed to the zero lower bound and central banks have employed unconventional means of easing monetary policy. Were it to occur right now, sustained deflation would therefore pose more of a risk than at times when the neutral real rate was higher. But, in my view, those risks are nonetheless relatively contained. For one thing I think the evidence suggests that unconventional policy is effective: even if they don’t circumvent it entirely, asset purchases help soften the constraint of the zero lower bound. Second, with the financial system gradually improving my guess is that the neutral real rate of interest is more likely to rise than fall over the next couple of years. Third, and most importantly, I think the chances of a sustained and widespread deflation are in any case low. That’s certainly what the international experience suggests. That experience is substantial: we have annual CPI data since 1960 for over 70 countries, a total of over 3,000 data points. In only 70 cases (barely 2% of the sample) have consumer prices actually fallen and in the majority of those inflation was positive the following year.
Moreover, capitalizing on their extensive network of over 3,000 branches, banks have widened the arrays of services to include distribution of corporate bonds or debentures, unit trusts, IPO shares and other debt instruments. Such efforts pay off with tangible result. Within four years, banks’ ratio of net interest- and non-interest income to average number of employees rose from 0.8 to 2.6 million baht per person per year in 2003. We also witness improvement in the area of customer access. Crowded customers at micro-branches speak volumes for the success of banks’ strategy to approach customers outside their office hours. In response to more sophisticated demand, banks introduced new channels of services such as internet banking and tele-banking to satisfy the technology savvy demands of emerging new generation of customers. These efficiency gains have been achieved without forsaking comprehensive risk management. On the contrary, banks have begun to move away from collateral-based lending to risk-based approach. At the same time, financial literate Board of Directors has bolstered its oversight function to ensure that banks are managed in a sound manner. In the area of credit risk management, credit scoring has been widely applied in the retail loan originating process, whereas internal credit rating models have been used for significant corporate loan portfolios. Moreover, banks also have in place security measures, contingency plans and auditing standards within their system of internal control to monitor reputational risk, strategic risk and other risks.

Thomas Jordan: Monetary policy in times of crisis. Why central banks talk to one another Summary of a speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Energie-Apéro Etavis, Zurich, 14 May 2012. The complete speech can be found in German on the Swiss National Bank’s website  *  *  *  Mandates differ from one central bank to another. So, too, do the economic structures and business cycles of different central bank territories. These factors speak in favour of an autonomous monetary policy for each currency area. This monetary policy autonomy has proved its value for Switzerland – also in the latest crisis. Nevertheless, central banks do work with one another in a number of different ways. They exchange knowledge on a continual basis, thereby helping to improve the foundations upon which their own monetary policy decisions are made. Central banks are also able to access foreign currencies by concluding swap agreements, allowing them to better counteract liquidity shortages on the international money market in times of crisis. Finally, joint measures can have a strong psychological impact since they signal to financial markets and economic agents that the central banks are speaking with a single voice. Autonomy and cooperation are not mutually exclusive. On the contrary. In a crisis, good cooperation supports and reinforces the effects of autonomous monetary policy measures.
Page 7  The objective is to extend the current Bank of England and FCA regulatory regimes for e-money and payment systems to cover the use ‘stablecoins’ for payments[7]. The powers in the Bill will extend not only to the systems for transferring such coins between parties to make payments, but to the issuance and storing of the coins. The Bank will have responsibility for such payment systems which are systemic or likely to become systemic. This will apply whether such systems exist to make payments for real things or for crypto assets should the latter activity become systemic in scale. We intend early next year to consult in detail the regulatory framework that will apply to such systemic payment systems and the services, like wallets, that accompany them. In doing so, we will be guided by the principle of ‘same risk, same regulatory outcome’ set out above. In the case of stablecoins used as money to make payments, the regulatory outcome has been expressed by the Financial Policy Committee of the Bank as an expectation that stablecoins used in systemic payment chains should meet standards equivalent to those expected of commercial bank money. And that's in terms of stability of value, robustness of legal claim and the ability to redeem at par in fiat[8]. Some of the likely foundational features of the regulatory regime on which we will consult are already clear.

The starting point should be our existing regulatory frameworks – for investment products, for exchanges, for payments systems and other financial functions – and the level of assurance we require that the relevant risks have been managed. Technological change and different business models may mean we have to find new ways to deliver that assurance. We should be under no illusions that this will always be an easy process. For example, as I have said, it remains for me a very uncertain question whether use of the permission-less blockchain could deliver the necessary level of assurance for activities that are integral to the stability of the financial system. Our approach as regulators should be open – by which I mean we should be prepared to explore whether and if so how the necessary level of assurance – equal to that in conventional finance could be attained. But we should also be firm that where it cannot, we are not prepared to see innovation at the cost of higher risk. This is very much the approach we are looking to take in the UK for the extension of the regulatory framework to the use of crypto technologies and business models in finance. The Financial Services and Markets Bill, currently in Parliament addresses the regulation of payment systems using “digital settlement assets” defined as “digital representations of value” – in other words digital tokens representing money.