samchain/econo-pairs-v1 huggingface dataset:
Therefore, I would like to insist that a new European approach to smaller institutions is paramount. Now, having regard to the European nature of supervision and resolution, the Eurozone should move swiftly to sort out this unlevelled playing field. And, let me be clear on this, I would urge consistency in finalising the Banking Union, covering EDIS and smaller institutions. The disconnection between truly pan-European supervision and what still is, largely, a national burden is untenable. Finally, the coronavirus has, as I mentioned, fundamentally changed our lives within a short period. The current situation reveals our limited ability to deal with systemic risks. The pandemic will inevitably trigger widespread economic problems, and the health of the financial system will unavoidably be affected. The reforms made during the past decade seem to have increased the resilience of the financial system, which, helped by other 2  policies given the size of the shock, has continued to provide financing to the real economy. Obviously, lessons will emerge. This kind of shock is to some extent new, as it has not been generated by the financial system itself, and that will help us improve regulation. In this respect, several academics think that the current resolution framework is not wellequipped to deal with systemic crisis. And several elements could be adjusted in order to make resolution more efficient in these very specific circumstances.

In particular, the use of resolution tools like the bail-in when financial markets are in distress could exacerbate those turbulences and reduce the ability of other banks to obtain external financial resources. Or, in the case of the sale of the business, it could create a problem of fire sales that may additionally reduce the prices of the assets, generating losses for the rest of the institutions. In these circumstances, there should be a powerful, usable and credible backstop that could be activated even preemptively. The stability of the financial system and the potential for systemic risks to alter the functioning of that system have long been important topics for central banks, and I would like to encourage some additional consideration to this broader approach. Some episodes, including the Spanish experience during the Great Financial Crisis, suggest that the propagation of shocks is especially relevant for mid-sized entities and that the swift and orderly resolution of the problems is the vaccine against contagion. So, allow me to finish my presentation where I started: the current crisis management framework has been crucial in advancing the Banking Union and it has proven most useful in resolving very relevant events. However, the experience allows us to draw lessons that should be incorporated into the framework to contribute more effectively to maintaining financial stability and to ensuring the functioning of the Banking Union.
It has taken us several years to become convinced that we should see the exchange rate primarily as one of several inflation indicators. I think we have every reason to keep to this approach. Closing comments Finally, let me give some general reflections on clarity and flexibility. It is sometimes asserted, with quite varying overtones, that the Riksbank is much too restricted by principles. We should act more pragmatically. This is maintained by those who think we should have a higher interest rate and who point to the ECB variant of pragmatism, as well as by those who think the interest rate should be lower and who see the Fed's pragmatism as their ideal. This is a debate which in essence is based on misunderstandings. The constraints within which the Riksbank works, allow a monetary policy which is both flexible and pragmatic. We can certainly extend our target horizon, monitor risks of problems in the financial sector or act early in order to avoid major subsidence in the economy further ahead. But this places requirements on us to motivate our actions clearly and substantially. It is, therefore, in this context – by setting very high standards as regards clarity and openness – that we beg to differ. In essence, I think that demands made on us that we should be more pragmatic in some general way – and not keep to our way of reasoning with a target, with guidelines, etc. – are meaningless.

Likewise, the capitalisation of domestically focused banks hardly changed in 2010 and remains good in relation to both risk-weighted assets and total assets. However, the fact that capitalisation is high overall does not take into account that the regulatory capital requirements do not fully capture certain risks. For example, the interest rate risk and credit risk associated with potentially adverse developments in the real estate and mortgage markets are not taken into account, or only partially accounted for. Yet these risks are especially pronounced in the current environment. On the one hand, interest rate risk for all domestically focused banks continues to remain at a historically high level. Since there is a maturity mismatch between assets and liabilities, a rise in interest rates would result in losses for the banks. The overall high level of interest rate risk is driven by Raiffeisen and cantonal banks. On the other hand, credit risk at domestically focused banks continued to increase. This is because the mortgage lending volume, which is closely linked to developments in the real estate market, continued to grow. The situation in the Swiss real estate market has deteriorated slightly since last year’s Financial Stability Report was published. Even though they varied widely, most real estate price indices suggest that prices also rose substantially in 2010.
It has recently become slightly easier for the banks to issue at longer maturities both in Sweden and other parts of Europe. In the United States, too, the issue volumes in the commercial paper market have increased. The Swedish mortgage spreads have also declined. We can thus see positive effects of the measures taken, although there appears to be a long way to go before the crisis has run its course. However, looking ahead to future crises – and I do not believe that we can entirely avoid crises occurring in the future – it is desirable that we acquire a better preparedness. If there is one thing we have learned from this crisis it is that we need to have in place regulatory frameworks for managing banks in distress. Such regulations should include several different aspects, everything from a deposit guarantee system to insolvency procedures for banks. 4  BIS Review 149/2008  Above all, the crisis has pointed to the need for cross-border cooperation. We have seen examples of this in Europe. This type of cooperation on crisis management should begin in “peace time”. Contacts that have been cultivated already and a common parlance may be decisive factors in determining how efficiently a crisis in a cross-border institution is handled. It is also important to hold joint crisis exercises, using different scenarios.

The predominant view has probably been that one should not use the interest rate to try to counteract a credit boom that is expressed in rapid price increases on houses or financial assets. This view is based on the fact that it is difficult or almost impossible for a central bank to determine whether a credit boom has its base in the real economy or whether it is due to unrealistic expectations of continuing price increases. Instead of trying to deliberately burst the bubble, one should use monetary policy to counteract the negative effects that may result if it bursts. The disadvantage of this reasoning is that the negative effects when the bubble bursts may be fairly substantial – which to a large degree is illustrated by the current financial crisis. It is also difficult to deny that the long period of low interest rates in the world prior to the crisis may have contributed to an unreasonably high build-up of credit. With hindsight, this view does not appear so controversial. Does this mean that monetary policy can and should be used to prevent financial crises? I believe that monetary policy can be a complement to other measures when overly large risks appear to be building up in the financial sector, but that the main responsibility must lie with other methods of regulating the relationship between capital and risks. The emphasis here is on regulatory frameworks and supervision.
It also suggests that, rather than just their size, a more accurate measure of the impact of asset purchases is what they do to bond yields. Combined, and by design, the dual shifts in Chart 9 would leave those yields unchanged. This conclusion is all the stronger once you recognise – as seems to be the case in the data – that the MD line is subject to shifts not just to its position but also in its slope. The effects on bond yields of a given quantum of asset purchases appear to vary. In particular, it seems to be exactly during these episodes of acute market illiquidity – the three I singled out are circled in Chart 10 – that these purchases seem to have been the most effective at tempering any rise in yields. Page 19  Chart 10: Asset purchases seem to have larger effects when markets are illiquid  Sources: Bloomberg Finance L.P, Refinitiv Eikon, Reuters and Bank of England calculations. Chart shows the change in 525 year gilt yields, averaged across maturities, over two-day windows around announcements (see Joyce et al (2011)  ),  except when there are confounding events within this window. October 2011, February 2012, and March 2020 use a narrower window, as MPC announcements coincided with other central bank announcements or major political news. Purchase surprise is the change in the expected target stock of QE purchases among market participants surveyed by Reuters (QE1–QE4) and market intelligence (QE5).

It slopes downwards because – all else equal – the willingness of the private sector to hold reserves is meant to decline as the yield on competing assets like bonds goes up. And when the central bank buys bonds, paying for them with newly-created reserves (shifting the Ms line to the right), their yields therefore decline. In “equilibrium”, for those extra reserves to be willingly held, the competing assets have to become relatively less attractive – hence the decline in yields. Another, perhaps more intuitive, way to think about the effect is that purchasing government bonds directly raises their price (this is the same as a decline in yields). Monetary expansions of this sort therefore raise the supply of central bank reserves, simultaneously lower the level of interest rates and bond yields and, depending on the slope of the “IS” curve, boost demand and subsequently inflation[6]. Page 12  Chart 7: Open-market asset purchases by the central bank raise the supply of reserves and push down interest rates  ‘M’ is real money balances and ‘r’ the real interest rate. This model describes the equilibrium in the money market between supply of and demand for money balances, according to Keynes’ theory of liquidity preference. It underpins the LM curve. The IS-LM model can be a useful way of thinking about monetary policy, and in particular QE. Chart 7 does have its drawbacks, however, or at least some important oversimplifications.
An increase in capital flows in the form of foreign direct investments (and especially the establishment of branches of multinational corporations) and international trade liberalisation favour fragmentation of the production process, consisting in its division into parts located in different countries. Fragmentation of production is also enabled by enhanced transport and information transfer as well as their lower costs (i.e. the decrease in transaction costs). The fragmentation of production is grounded in international differences in the endowments of factors of production and - as a result - in prices of these factors. Multinational corporations divide their production among many different countries in order to minimise costs and make use of advantages of local markets, such as inexpensive labour force or a favourable location. Research and development, on the other hand, and the part of the production process that requires the use of the most advanced technologies and with the highest value added, are often located in the home country, also due to poor protection of the proprietary rights in developing countries. Such a conduct allows the company to benefit from comparative advantages related to different production locations. Moreover, it enables the use of international differences in exchange rates, interest rates, and government subsidies supporting selected types of economic activity, as well as of different structures of customs tariff rates and varying features of internal markets in particular countries, for the purpose of maximising profits. Research 22  17  Based on the data of UNCTAD.

The problems are tackled by strengthening Eurostat and allowing it to make methodological visits in the member states, to discuss budget issues. A new high level group with a mandate to advise Eurostat will be established. As Eurostat monitors the member states’ compliance with the agreed practice, the high level group also, indirectly, advises the member states. My view is that all the reforms in this area of the Stability and Growth Pact go in the right direction since they encourage fiscal prudence. However, given the complicated process and the short time since the Pact was changed, it is too early to determine whether the changes have been a complete success. Changes in the preventive arm Changes in the preventive arm have been made in the area of medium term objectives (MTO) for the budget balance. Member states are divided into groups depending on their debt level. Stricter MTOs are required for countries with higher debt. The MTOs for the euro area and the ERM2 countries range from a deficit of 1% of GDP to balance or surplus depending on the debt level. The countries that have not achieved their MTOs are supposed to follow an adjustment path to the objectives. The path requires more consolidation in good times. For the euro area and ERM2 states, the adjustment requirement is a yearly improvement of the cyclically adjusted deficit net of one off effects by 0.5% of GDP.
If short-term traders are structurally long, their dynamic hedging may have the effect of dampening market movements, producing zones of local stability. But where, as a group, they are structurally short, their dynamic hedging can sometimes amplify price movements, increasing volatility, if the market proves illiquid under stress. While I have set this out in a rather general way, it isn’t fanciful. There are examples of it going back over nearly twenty years: some involving the explicit writing of options; some implicit writing of options; and some arising from trading strategies that mimic optionality. For example, the 1987 equity market crash was exacerbated by the prevalence of portfolio insurance, a trading strategy akin to delta hedging an option: sell when prices are falling. A dynamic variant of a ‘stop loss’. Similar strategies are now a key feature of some Principal-Protected hedge fund investments, via so-called Constant Proportion Portfolio Insurance (CPPI). To preserve the nominal principal, the ‘guarantor’ will sell units in, say, a fund of funds as its value falls, and vice versa. I guess some assumptions are made about underlying liquidity, and that these are reflected in how such strategies are effected. 2  BIS Review 50/2005  In 1994, and again in 2003, hedging the negative convexity of US mortgage-backed securities amplified the rise in dollar bond yields, with some violence.3 The underlying factors here, of course, are that US mortgage borrowers have an option to prepay, so they are long options on mortgage interest rates.

Encik Abu Hassan Alshari Yahaya: Future proofing compliance – responsibility and response-ability Speech by Mr Encik Abu Hassan Alshari Yahaya, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the 9th International Conference on Financial Crime and Terrorism Financing (IFCTF) "Future proofing Compliance: Responsibility and Response-ability", Kuala Lumpur, 5 October 2017. * * * It is a great pleasure for me to be here today among industry leaders and experts. As we approach the end of this conference, I would like to thank all of you for your participation and contribution in making this year’s IFCTF a success. I believe that the various sessions and the topics discussed in the past two days have provided significant insights and understanding towards strengthening our risk management and capabilities to mitigate the vulnerabilities from threats of money laundering and terrorism financing. I would like to commend CONG and AIF for the continuous effort and initiatives in enhancing the capacity and capability of the financial industry, to improve the industry’s response to financial crime and terrorism financing. As highlighted yesterday, countries are still facing fundamental challenges towards effective implementation of AML/CFT measures. Weak legal, regulatory and supervisory framework and inadequate risks understanding would have cascading effects, not just on compliance with international standards, but towards effective implementation of AML/CFT measures in achieving the intended outcomes.
So the Bank of England, together with the Government, has set up the Funding for Lending Scheme (FLS) which provides banks with access to finance for up to four years at below prevailing market rates for term funding. Crucially, the more banks lend to UK households and businesses, the more they can borrow from the Scheme and the cheaper is that funding. That provides a powerful financial incentive for banks to supply more credit. More than 20 banking groups, including the five largest lenders to the UK real economy and covering nearly 80% of all such lending, have so far signed up. Since the Scheme was announced bank funding costs have fallen by around 100 basis points (see Chart 1). Not all of this is attributable to the FLS – the announcement by the ECB of Outright Monetary Transactions has also played an important role. But it is noteworthy that UK bank funding costs have fallen by more since June than have European bank funding costs (see Chart 2). The effect of the FLS will be seen in the lending data only after some months because of the time it takes for banks to change their lending strategies and for data to be collected and published. The FLS can be only a temporary scheme. The window of opportunity which it provides must be used to restore the capital position of the UK banking system.

Speeches  Published Date: 27 May 2022  Welcome Remarks by Mr Edward S. Robinson, Deputy Managing Director (Economic Policy) & Chief Economist, Monetary Authority of Singapore, at the 9th Asian Monetary Policy Forum on 27 May 2022  1 Good morning, MD MAS Mr Ravi Menon, President NUS and Chairman of the ABFER Council, Professor Tan Eng Chye, fellow central bankers, distinguished speakers, ladies and gentlemen. Together with my co-organisers, Professor Bernard Yeung and Professor Steve Davis, I am pleased to welcome you to the 2022 Asian Monetary Policy Forum. 2 In its ninth year now, the AMPF comes at an especially opportune time for macroeconomists to advance the discussion on emergent issues in the global economy. After the Great Moderation, the world has experienced a series of severe shocks, each presenting a stern test for policymakers. 3 The two most recent disruptions—the COVID-19 pandemic and the Russia-Ukraine conflict—have raised fresh issues for monetary economics and international finance. Soon after the Lehman crisis, Queen Elizabeth, during a visit to the LSE, posed an inconvenient question: “why didn’t anyone see this coming?” Conceivably if Her Majesty made another visit today, she may very well ask the same question about global inflation. A comprehensive research agenda to address this query would require pulling together at least four strands of concerns. 4 The first is about the need for a careful identification of each economic shock.
Re-establishing market functioning ultimately relies on the behaviour of market participants. The central bank can support this process, but in the end it is the private sector that creates and maintains the market. Designing the appropriate tools to support and provide a backstop for market functioning is an important agenda for the global central banking community. As the example of the recent Bank of England interventions demonstrates, we are still in a learning-by-doing phase of this process. Concluding remarks Where does this leave the conduct of monetary policy in a context of financial stability operations? I will conclude with two points I see as key. First, it is important to keep such financial stability operations distinct from monetary policy, both in terms of communication and operationally. To the extent that such operations distort the intended monetary policy signal, they paradoxically risk interfering with monetary policy transmission, even as they are intended to support the market functioning on which that transmission relies. Second, while respecting the need for separation between monetary policy and financial stability operations, policy makers also need to recognise the unavoidable interactions between the two. After all, an injection of central bank reserves owing to a financial stability operation can have monetary implications via the portfolio balance channel just like QE. And, by design, financial stability operations will have implications for asset prices and financial markets and institutions that influence the overall stance of financial conditions, and thus highly relevant in deciding the appropriate level of Bank Rate.

Nonetheless, the point made here holds: if asset purchases are intended to complement the setting of Bank Rate by supporting the transmission of monetary policy decisions reflected in the changing Bank Rate, then these asset purchases will take place in parallel with Bank Rate changes, rather than once the scope for Bank Rate changes has been exhausted,