samchain/econo-pairs-v1 huggingface dataset:
As asset prices fell and volatility climbed during this period, the financial condition of some dealers became more troubled. As a result, some investors in this market became worried about the risk that they might not get their cash returned in the morning, but instead might be stuck with the collateral that secured their lending. Investors responded by increasing their haircuts – that is the margin of extra collateral used to secure their funding – and reducing the range of collateral they would accept as security for their lending. Of course, these very rational reactions on the part of investors only further weakened the liquidity positions of the major securities firms. A similar dynamic occurred in the context of prime brokerage accounts. Some institutions treated the free cash balances associated with these accounts as if they were a stable source of funding. Implicitly, they assumed that these balances would be “sticky” due to the strength of broader business relationships and the cost incurred by customers in shifting the business elsewhere. However, once markets became strained, this assumption of stable funding proved to be false. Prime brokerage customers began to withdraw their free credit balances and some moved their business elsewhere. Both of these steps reduced dealer liquidity buffers and further tightened the funding noose. 1  The collapse of the shadow banking system, in turn, put intense pressure on commercial banks. Off-balancesheet items came back on to bank balance sheets and the quality of bank assets fell sharply.

With greater capital buffers, the risk of liquidity runs should be reduced going forward. It should be noted, however, that use of contingent capital instruments, or any other potential changes to our current capital regime, does not obviate the need for an improved resolution process. Second, the Basel Committee is moving forward with its work in establishing liquidity standards for large, complex financial institutions. These liquidity standards would consist of two parts. First, there would be a liquidity buffer made up of high-quality liquid assets that would be of sufficient size so that the firm could manage a stress event caused by a shortterm loss of investor confidence. Second, there would be rules concerning the degree of  7  Supervision could also be brought to bear to limit the tendency for firms to reduce their capital and liquidity when provided with a credible liquidity backstop. BIS Review 143/2009  7  allowable maturity transformation. Long-term illiquid assets would have to be largely funded by equity and longer-term borrowing, not by short-term borrowing, such as tri-party repo. Third, the Federal Reserve is working with a broad range of private sector participants, including dealers, clearing banks, and tri-party repo investors to eliminate the structural instability of the tri-party repo system so that tri-party borrowers are less vulnerable to runs.
8  BIS central bankers’ speeches  may choose to temporarily deviate from the inflation target to support the target of the committee with responsibility for macroprudential supervision.27 Riksbank’s strategy well in line with international debate Let me conclude by returning to the question in the title of my speech today. Is the Riksbank’s monetary policy strategy in tune or out of tune with the rest of the world? Right now there is an international debate on potential changes in the strategy for monetary policy that was common prior to the crisis. One of the most central questions is whether monetary policy should give greater consideration to financial imbalances. Most people agree that macroprudential policy should be the first line of defence. But an increasing number have also begun to take the view that monetary policy may need to provide support by leaning against the wind. Given this, it is difficult to understand the critics who try to claim that the monetary policy the Riksbank has conducted in recent years is strange and our own invention. On the contrary, I would say that the Riksbank’s monetary policy strategy has been well in line with the international debate. To be sure, this claim may seem strange to someone who has only followed the Swedish debate on monetary policy. And this worries me somewhat. It is not a good thing if the debate in Sweden is not as open and inquiring as the debate going on in the world around us.

That is a lesson that nonetheless is gradually withering away. Chart 2 Total debt has barely budged Global debt soared ahead of the financial crisis in 2008. In its wake, a process of private sector deleveraging started in many countries, such as the UK and the US. At the same time, however, government borrowing was increased to address the banking crisis and to cushion the economic impact of private sector deleveraging. The end result now a decade later is rather disheartening. Total debt in Europe and the US has barely budged. At the same time, in other parts of the world, Asia in particular, debt is on the rise. Total global debt has never been higher than it is today. But the debt has shifted between countries and sectors. Chart 3 High private debt in Northern Europe In Southern Europe, there have been wide swings in private sector debt over the past 20 years. From the end of the 1990s, economic growth was strong, but mainly driven by public and private debt-financed consumption and investment. The financial crisis brought it down with a crash. Expectations did not pan out. Since then, private debt in these countries has fallen sharply. Public debt has continued to rise. The countries in Central Europe stand out. Debt has risen gradually, but without wide swings. 2/7  BIS central bankers' speeches  Between these countries and Scandinavia, there are some institutional differences. Housing markets, welfare programmes and pension systems are organised differently.
That would hopefully be a positive side-effect, but the main purpose would be to rectify the problems with the CPI as a target variable which have gradually become more and more evident. Naturally, a change of target variable must be preceded by a thorough analysis of how and when the replacement would take place and what consequences it could potentially have. My aim here is simply to highlight the issue and initiate a discussion. Of course, a new target variable would not solve every problem and be the only measure the Riksbank would have to look at. We would need to continue to analyse different measures of inflation to get as complete a picture as possible. For instance, as oil prices, and energy prices in general, often vary greatly, there are reasons on many occasions to study inflation measures where these prices are excluded. However, I believe the biggest problem would still be solved if interest expenditure were excluded from the target variable once and for all. Before I continue, I would like to make a comment about the target variable in relation to wage formation. This is connected to my assertion that the significance of interest expenditure for the CPI means that an extremely low rate of increase in CPI inflation tends to be followed sooner or later by an unusually high rate of increase. As we have seen, these periods can also be fairly protracted.

And I would also like to urge you to take a little time off to visit some places of interest, while you are in this beautiful country, Sri Lanka. Thank you. BIS Review 50/2004  1
First, strengthening talent development for individuals to achieve their fullest potential. BIS central bankers’ speeches  1  •  MAS works in close partnership with the industry to provide training pathways and training opportunities for Singaporean finance professionals. The pursuit of continual learning related to financial sector competencies will help each and every one to attain mastery in their respective fields and achieve their fullest potential. •  MAS has a range of schemes to support the learning journey at all levels, from undergraduates and fresh graduates, to early/mid-career professionals, and to those in leadership positions. We have prepared a “SkillsFuture for the Financial Sector” infographic that you can find at your table which provides more information on these schemes. 9. For example, under the Finance Scholarship Programme (FSP), MAS supports early-mid career Singaporeans in developing specialist capabilities through post-graduate studies, in areas such as risk management, speciality insurance and quantitative finance. The recently launched Financial Sector SkillsFuture Study Award will also provide an additional channel of support to enable individuals to upgrade their skills through a wider range of specialist programmes. 10. Second, beyond competency-based training, cross-functional and international exposure is a key ingredient in building up leaders. We want to ensure that there are Singaporean professionals taking up leadership positions in the key financial institutions.

There are also vulnerabilities in the non-bank financial sector, which has significantly expanded its role in financing the real economy in the euro area. Total assets held by nonbanks have almost doubled over the last ten years, growing from € trillion in 2008 to € trillion in 2018, while the size of the banking sector stagnated over this period. Non-banks currently account for around 55% of the euro area financial sector. While a larger non-bank financial sector has the benefit of helping to diversify the funding sources available to the real economy, it may also entail rising risk taking in the current market environment. We are closely monitoring two developments in this context: first, non-bank financing activity is growing, in particular in higher credit risk corporate financing, where indebtedness is already higher. Second, as institutional investors are searching for yield, they may amplify the cyclical underpricing of risk, potentially also taking on more leverage and liquidity risk. In the euro area investment fund sector, we have observed increasing liquidity risk for some time. This reflects a falling share of holdings of liquid government bonds and a fall in cash holdings across the sector. We have recently witnessed cases in which funds holding considerable amounts of illiquid assets (Woodford, H2O and GAM – all UCITS funds) faced severe difficulties in dealing with large-scale outflows. These cases had no systemic repercussions – partly because the outflow triggers were idiosyncratic and partly because the market environment was benign.
However, with clarity of vision on the ultimate goals that the financial system aims to achieve, we can, by our actions and initiatives taken today, help realize our vision of the future. The Master Plan in essence provides a common vision, and template for countries in developing the Islamic financial services industry. The vision and desired objective will to a large extent depend on the desired aspirations for the economy, expected the role of the financial sector in the economy, the stage of development of the economy and the financial sector and the degree of international integration with the rest of the world. The Master Plan will also serve as a key reference document to guide countries in charting an orderly development of the Islamic financial system. The broad strategies and action plans, with the necessary milestones that need to be pursued over the medium to long term to develop an Islamic financial system can then be identified. Within the defined parameters, countries have distinct options in determining the best course of action to achieve the envisaged country vision. Experiences of other member countries can be compiled to serve as references. It needs to be recognized however, while the Plan provides the strategic direction, the implementation needs to be managed with flexibility.

It was established to promulgate the international regulatory and supervisory standards for Islamic financial institutions worldwide aimed at achieving harmonisation of Islamic banking practices, fostering best practices and securing soundness and stability in Islamic finance. Another initiative to accelerate the integration of Islamic finance was the setting up of the International Islamic Financial Market or IIFM in 2002. The IIFM provides the environment to link all the financial centres around the world that participate in Islamic finance, thereby encouraging active participation by both Islamic and non-Islamic financial institutions  6  BIS Review 49/2005  in the secondary market for Islamic financial instruments. As the volume increases, it would strengthen the inter-linkages and integration amongst the Islamic financial centres. While having a Master Plan will provide a shared vision and a common goal, it needs to be recognised that the evolution of an Islamic financial system with all its component parts cannot be achieved within a short period of time. Having the medium and longer term goals outlined however, provides a basis to ensure the short term initiatives will be consistent and coherent with the long term objective. In other words, the construction of the building blocks must move in the right direction. As part of the process, each Islamic banking institution needs to formulate its own strategic plans and short-term action plans within this longer term perspective. With the foundations built and the plans in place, the future is by no means secure.
By liquidity I mean two things. First, institutional liquidity: the continued ability of individual financial institutions to meet claims as they fall due. And second, market liquidity: the depth of markets for the sale or loan of assets or the hedging of the risks that underlie those assets. To set the scene, it is perhaps worth reflecting on how liquidity needs and processes may amplify the risks of instability—that is, their ability, in stressed conditions, to disrupt the functioning of the financial system generally, and the banking and payment systems specifically. The traditional route arises from the banking system’s role in maturity transformation between short term deposits and long term loans. Managing this mismatch whilst maintaining the confidence of depositors is the essence of the business of banking. However, the presence of this maturity mismatch means that individual banks are by their nature fragile. The connections between banks, and the potential for doubts about one bank to spread to others, mean that the failure of one bank to manage its mismatch can potentially put at risk the financial system more widely. Bagehot in 1873 summed up this link between maturity mismatch and systemic risk:  BIS Review 79/2005  1  ‘Of the many millions in Lombard Street, infinitely the greater proportion is held by bankers or others on short notice or on demand; that is to say, the owners could ask for it all any day they please: in a panic some of them do ask for some of it.

First, I can’t help feeling that it is at times such as this, when we have a relatively benign environment, that we should seek to address difficult and contentious issues of the kind I have been discussing. It is certainly true that the risk transfer markets and the financial system have coped, with remarkable success, and with few signs of instability, with the various events and shocks in recent years. But we need to be sure that we are not complacent in placing trust in the ability of the financial system to continue to absorb shocks smoothly. Second, policy makers have found it hard to discuss lender of last resort issues because they can so quickly raise the spectre of moral hazard: by giving too many clues to their likely response to instability, policy makers fear undermining market discipline and so making crises more likely. Equally, public policy makers should recognise the distinction between clarity about processes—where transparency to my mind can only be positive for confidence—and transparency about how decisions might be reached in a particular case, where constructive ambiguity remains important as a mechanism to reinforce market discipline. On the other side of the fence, banks and financial institutions have made impressive strides in coping with these realities, but may be reluctant to move explicitly to transparent best practice standards. Maybe this is for fear of giving up competitive advantage, or maybe it is a fear that regulators might seek to impose unwelcome prescription in how they manage liquidity risks.
While, it forms a basis for the accountability principle, the law does not specify the size of the deviation from the target that will require such an explanation. In other words, details of accountability mechanism are left to the Central Bank’s own initiative. Therefore, the Central Bank has established an effective and enforceable accountability mechanism by setting a symmetrical uncertainty band of 2 percentage points in both directions around the point target. As stated above, the inflation target has been defined over a very comprehensive CPI index. The CPI index also comprises of price items that are beyond the control of the monetary policy such as food, energy and administered goods. In emerging markets like Turkey, shortterm fluctuations in exchange rates can lead to unpredictable temporary fluctuations in inflation as well. Since a sudden reaction of monetary policy to factors that are beyond its control will increase volatility in macroeconomic variables, inflation-targeting central banks adopt a medium-term approach and allow temporary fluctuations in inflation as long as the expectations are under control. In this framework, the primary objective of setting an uncertainty band is to establish a measurable criterion that will enable to determine to what extent the deviations from the point target will be tolerated with respect to the accountability principle. In view of the above-mentioned factors, it has been decided to keep the uncertainty band at 2 percent for 2008 as well.

William C Dudley: Improving culture and conduct in the financial services industry Opening remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at “Reforming Culture and Behavior in the Financial Services Industry: Workshop on Progress and Challenges”, Federal Reserve Bank of New York, New York City, 5 November 2015. *  *  *  Welcome to the New York Fed and to a discussion of how culture and conduct might be improved within the financial services industry. I am pleased to see all of you here today – there is tremendous breadth of experience and responsibility within this room. We need to take full advantage of this opportunity. I encourage all participants to be candid and on-point, because the task of reforming culture is formidable. 1 Untrustworthy behavior on the scale that we have witnessed in financial services does not arise in a vacuum. Social science research makes it clear that context largely drives conduct. 2 This is not a new insight. Adam Smith observed centuries ago that, independent of personal sentiment, we often behave according to what we “[see are] the established rules of behavior.” 3 We observe the activity around us, assess the norms of conduct and generally adapt to those norms in our own behaviors. Banking is not exempt from this universal propensity.
Lastly, it is crucial that the projects are chosen so as to maximise the size of their impact on economic activity and public finances. For this purpose, it would be helpful if the funds were distributed on the basis of a structural reform plan designed to strengthen the economy’s long-term growth. Indeed, the structural improvements required by the Spanish economy could be facilitated by using some of the European funds available to introduce them. A certain volume of investment may be needed to initiate some of these structural improvements or to smooth the transition costs, as in several of the cases that I intend to refer to later on, so that the use of public funds for these purposes would in my opinion be fully justified. Accordingly, depending on the speed with which the funds are made available, their nature (loans or grants from the Community budget) and, especially, the extent to which they are used to boost growth, the impact of these funds on activity in the coming years may vary from several tenths of a percentage point to several percentage points of GDP. Thus, for every € billion of rapid-execution European grants used for productive investment, the estimated impact on GDP over the next two years would be around 0.3 percentage points. In contrast, if that same amount were used to finance current spending, the impact on the recovery would barely average 0.1 percentage points of GDP over the next two years.

The second reason for greater attention to prudential concerns is that we are in the midst of substantial changes in the structure of the U.S. financial system. The largest financial institutions in our markets are substantially larger than even a decade ago in the scope and complexity of their operations and in terms of their importance in the markets in which they operate. Hedge funds and other financial institutions that operate outside the scope of regulation or consolidated supervision now play a more important role in our financial markets. And we have seen a new way of financial innovation in credit risk transfer techniques and many new derivative instruments that have allowed risk to be measured and managed more effectively and distributed more broadly. These developments have contributed to what seems to be a significant improvement in the overall stability and resilience of the US financial system, by reducing the vulnerability of individual institutions to a broader range of potential shocks. They may also, however, add to uncertainty about how well the system might function in the context of a major systemic shock. And in this sense, they create some exacting challenges for risk management. Let me focus on three areas where this is the case: counterparty risk management with respect to hedge funds and other unregulated entities; risk management and market infrastructure issues in credit derivatives and other instruments; and stress testing and scenario analysis.
The job is to promote a financial system that can serve households and businesses not just in the good times, but also in the bad.3  The financial system of 2007 was totally unable to do that. It was too weak. Banks, in particular, had too little of their own capital on the line. As the UK and world economies turned down, major UK banks faced losses of £ But they had only £ of their own money – their shareholder capital – on the line.4 So as losses mounted, banks buckled. Credit was crunched, bringing the economy to its knees. And because there was no way to deal with failing banks without harming their depositors and the economy, the taxpayer was forced to step in with a bailout of more than £ So it’s not surprising that our efforts focussed initially on fixing these fault lines in the system. A resolution regime for dealing with failing banks is in place and banks are much stronger. They now have three times as much of their own capital on the line for the risk they take when they make a loan or a trade. 1  Based on OBR forecasts and ONS data. Financial crises often lead to a long run reduction in GDP, with a persistent decline in output relative to pre-crisis trends.

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