samchain/econo-pairs-v1 huggingface dataset:
One priority has been to take account of the e-banking developments I have already mentioned. A particular landmark was the guideline on virtual banks which we issued in May of this year. I will not go into the details of this except to say that it was first drafted when the dot.com frenzy was at its peak, and I believe that the cautionary notes that we uttered have stood the test of time. In particular, our guideline stressed that virtual banks must have substance rather than being a concept, and that  BIS Review 93/2000  2  virtual banks are subject to the same risks as conventional banks and should be subject to the same prudential criteria. Essentially, we were warning of the need not to be blinded by the technology. We also warned against over-aggressive pricing and of the need to strike an appropriate balance between acquisition of market share and earning a reasonable return. As with other new banks that we authorise, we would normally expect a virtual bank to be making a profit by the end of its third year. This was criticised in some quarters as being unrealistic and not in keeping with the internet business model. However, as events have turned out, it was that model that was unrealistic rather than our guideline. Under our current rules, it is not possible to establish from scratch a new locally incorporated virtual, or indeed conventional, bank in Hong Kong.

As prime examples of Old Economy dinosaurs, they would inevitably succumb to the onslaught from new competitors like virtual banks, technology firms, monoline service providers, portals and the like. The position of the banks is certainly not secure, but it is looking a bit better than it did only a short time ago. The decline of the New Economy has seen the Old Economy strike back, with even bricks and mortar coming back into fashion. The brand names of banks and the credibility which their branch networks provide are not to be underestimated as marketing tools. The ability to marry the branch network to an internet delivery channel is a powerful competitive advantage. But it is also one that could easily be thrown away unless the banks are truly sensitive to the needs of their customers. BIS Review 93/2000  4
In this regard, Asia’s needs are likely to be different from those in the advanced economies. Economies in rapid transition need responsive banking and capital markets. Bankers need to appreciate the changing needs of the economy, build new capabilities and develop new products and services, to support the needs of companies, large and small, in both mature and new industries. The financial industry needs to build up capabilities to understand the requirements of new industries in the technology and services arena, and to efficiently fund long term infrastructure needs. To sustain Asia’s growth  BIS Review 51/2010  1  trajectory, we need to further develop and deepen national financial systems and regional financial integration. MAS is studying several ideas in these areas, and we look forward to working with our counterparts in the region and with the industry to advance this. 8. Let me now share the measures that MAS is taking to respond to the challenges from the international reform agenda and the evolving new financial landscape. Our measures are based on three key pillars. Sensible rules 9. The first pillar is establishing sensible rules. MAS seeks to establish sound rules of a high standard that allows well-managed risk taking and innovation, and which emphasises the stable and sustainable development of the financial services sector. The effectiveness of a regulatory framework is not determined by whether it is stringent enough to prevent any kind of shortcoming or failure of any firm.

MAS will continue with our three pillar approach of sensible rule-making, effective supervision and partnership to achieve the desired outcome. 29. We should take advantage of the global reform agenda to strengthen our regulatory and supervisory regimes, consistent with international standards and best practices, but at the same time, doing it in a manner that is sensitive to our regional environment and needs. I am confident that with financial supervisors and the industry working together in partnership, we can further enhance the resilience of our financial system to better serve the economic aspirations of Asians going forward. I wish you a fruitful conference. Thank you. 4  BIS Review 51/2010
The first school, usually identified with Professor Paul Krugman of MIT, is best summarized by the two fashionable phrases “crony capitalism” and “Asian values.” The emphasis here is on inept domestic policies, inefficient resource allocation to politically connected individuals, unrealistic speculation - particularly in real estate - and imprudent public spending, all fuelled by over-borrowing, poor bank supervision, extreme moral hazard, and a hubristic attitude generated by several years of fast growth. The trends were unsustainable, and the Nemesis came with a loud and very messy bursting of bubbles throughout the region. Asia’s downfall, says Professor Krugman, “was a punishment for Asian sins, even if the punishment was disproportionate to the crimes.” The second school, led by Professor Jeffrey Sachs of Harvard, sees the crisis in less moralistic terms. The turmoil, he says, was a classic financial panic: a run on the banks and mass capital flight exacerbated by the maturity mismatch of many Asian banks and the currency mismatch of many Asian borrowers. This was accompanied by speculative attacks on currencies and the collapse of asset values. While this approach stresses the fragility of many of the banking systems in the region, it maintains that the Asian economies were in relatively healthy shape according to the usual indicators, and that the magnitude of the crisis far exceeded the faults and errors of individual jurisdictions. Both the Sachs and the Krugman schools have much in common. But their logic points in different directions.

Our task now is to ensure that liberalization and globalization remain productive processes, that our energies are devoted not just to short-term cures, but also to long-term preventive health. There are a number of initiatives that we might pursue, and I mention only a few of them with the aim of stimulating discussion. The first, and most urgent, is the reform of the international financial architecture to better regulate the volatile capital flows that contribute to market instability. This must include improved information and disclosure. The recent experience in this region has shown that problems were allowed to build up because of a lack of information about the full financial picture, both in terms of the destination and the source of the funds. Important steps are being taken in many Asian countries towards greater transparency in the public sector, and I am pleased to report that Hong Kong is playing a leading role in these efforts. But greater transparency among the regulators means that a serious asymmetry of information is emerging between the public and private sectors. We must now consider the need for greater disclosure on the investor side, since the virtual complete lack of information about the activities of huge global institutional investors poses risks to all participants in the markets - to other investors, to lenders, and to borrowers. A second part of this architectural reform must be improved prudential oversight of capital flows, since mere disclosure is no guarantee that behaviour will be prudent.
Through this workshop, we hope to stimulate discussion and future research in the field. Let me take the opportunity at this point to thank the BIS for their involvement in the initiation of this workshop. We have also discussed the possibility of following up the workshop with a larger conference on a later date. In these introductory remarks, I would like to raise some issues that I believe are important for enhancing efficiency in central banks. Naturally, my views on this are influenced by my own experience after having been at the Riksbank for almost 8 years, first as deputy governor and now as governor. In addition, I would like to discuss some issues connected to the benchmarking of central banks. I am very much looking forward to hearing your views on these issues as well as on the other topics on the agenda both today and tomorrow. Well-defined objectives and operational independence It is important that the objectives of public authorities are well-defined. Only then can we achieve a clear focus that enables the institution to be made accountable for its actions. Both focus and accountability are very important for efficiency. Central banks generally have several objectives. The responsibilities of Sveriges Riksbank, for instance, are laid down in legislation as maintaining price stability and promoting a safe and efficient payment system. Economic research has indicated that accountability is crucial for achieving the goal of price stability.

It also serves as an antidote to groupthink. These may be baby steps but they are, I hope, steps in the right direction. 65  Deloitte University Press (2013). 66  Please see the One Bank Research Agenda, available here: http://www.bankofengland.co.uk/research/documents/onebank/discussion.pdf. The full discussion paper is available here: http://www.bankofengland.co.uk/research/documents/onebank/discussion.pdf. 12  BIS central bankers’ speeches  (b)  Experiential diversity  A related, but distinct, dimension to diversity is the background and experience of individuals. Again, this is multi-faceted. One dimension which has attracted some attention recently is the socio-economic status of individuals. That has been found to have a striking impact on levels of educational attainment, employment and income prospects, independent of ability. Here, the seeds appear to be sown early in childhood. Studies have looked at the educational evolution of sets of children from different socio-economic backgrounds over time. Parental income and wealth has been found to be a key, if not the key, determinant of a child’s educational progression. 67 Indeed, these socio-economic effects are sufficiently large that they may dwarf factors such as a child’s cognitive ability. 68 For example, imagine testing the cognitive ability of children when two years old. How does socio-economic status then affect their educational progression? Some studies have found that a low-ability child from a high-status group will exhibit higher levels of attainment by the age of six than a high-ability child from a low-status group. 69 And, thereafter, the differences begin to widen further.
Against this background, the Commission’s recent legislative proposals on Credit Rating Agencies, which the ECB broadly supports, is also discussed by this Committee. Credit ratings have a direct impact on the market functioning and the wider economy. A sound and robust framework must thus be created. This framework should be geared towards the following objectives: to reduce market volatility; to enhance the quality of rating process; and to restore market confidence. The two issues that are of particular importance are, first, the assurance of appropriate underlying methodologies and the transparency of ratings; and second, the reduction of hardwiring of ratings in legislation and market practices. Ratings simplify complex risk assessments. But they should only be one of several inputs for investors. In particular, they should be no substitute for financial institutions and other investors to carry out their own assessment. This is the main step towards avoiding mechanistic reliance on external credit ratings. Let me say a few words on how the ECB itself uses ratings. In practice, for the large majority of marketable securities (such as sovereign bonds) the Eurosystem Credit Assessment  1  Subject to approval by Finnish Parliament. BIS central bankers’ speeches  3  Framework mainly uses the ratings issued by eligible credit rating agencies. At the same time, the Eurosystem does not mechanically rely on these assessments, as it is aware of the limitations of methodologies.

As regards the euro area crisis management instruments, we welcome the decisions of the Heads of State or Government of the euro area to strengthen the EFSF and the ESM in a number of areas. First, there is now greater flexibility in the euro area crisis mechanisms to act as backstops, thanks to the decision to accelerate the entry into force of the European Stability Mechanism, ESM, to July 2012 and for the European Financial Stability Facility, EFSF, to remain active in financing programmes that have started until mid-2013. Second, the clarification that as regards private sector involvement, the euro area will adhere to established IMF practice is also helpful in reassuring investors. Third, the decision to include an emergency procedure into the voting rules of the ESM1 is essential for effective decision making procedure, especially in crisis situations. As regards the EFSF, the Governing Council of the ECB has decided that the ECB will be able to act as agent for the EFSF in its market operations. The ECB – probably supported by a number of National Central Banks – will make its technical infrastructure and know-how available to the EFSF. The technical and legal preparations have started and we hope to complete them in January. III. Credit rating agencies  The activities of credit rating agencies, notably in relation to sovereigns as well as the EFSF, have lately occupied centre stage in the debate in Europe. Calls for better regulation have become louder.
In some countries, where systemic risks have increased appreciably, it may also be appropriate to apply macroprudential policies that enhance the financial system's resilience. Their procyclicality, however, should be avoided. Vulnerabilities and risks in the non-bank financial sector have also increased and should be monitored closely. At the same time, headway needs to be made in improving this sector's regulatory framework, in particular to address leverage and liquidity mismatches. An incomes agreement As I was saying, on the information available, there is no evidence of second round effects occurring at present, at least not on a widespread basis. Euro area wages have remained subdued. In fact, real wages have declined significantly. However, wage growth is gaining pace, underpinned by strong labour markets and the effect of inflation on wage demands, both of which are expected to continue. Profit margins have also remained moderate overall, albeit with much heterogeneity across countries, firms and sectors. Nevertheless, the pass-through of costs to final prices has also been increasing and has been higher than in previous episodes. Moreover, as I said before, the longer the current high inflation persists, the more likely these second-round effects are. To avoid this, it is essential that economic agents accept as inevitable the loss of income caused by the rise in the cost of imported commodities.

All this combined with a strengthening  7/8  BIS - Central bankers' speeches  of the European project that improves the smooth functioning of the single market, reinforces risk-sharing channels within the euro area and makes it possible to guarantee the sustainability of public finances. Thank you very much. 8/8  BIS - Central bankers' speeches
For a more detailed discussion, see Cimadomo, J. Hauptmeier, S., Palazzo, A.A. and Popov, A. (2018), “Risk sharing in the euro area”, Economic Bulletin, Issue 3, ECB. 2. Draghi, M. (2018), “Risk-reducing and risk-sharing in our Monetary Union”, speech at the European University Institute, Florence, 11 May. 3. More details on financial integration, including the latest data, can be found on the ECB’s website. 4. Some caution is necessary when interpreting these movements at present, given the potential impact of Brexit on measurement. 5. The findings of the ECB’s ongoing quantitative assessment of climate-related risks are discussed in more detail in Alogoskoufis, S. et al. (2021), “Climate-related risks to financial stability”, Financial Stability Review, ECB, May. 6. More details on the findings to date of the joint workstream of the ECB and the European Insurance and Occupational Pensions Authority (EIOPA) on the insurance protection gap will be published in EIOPA’s forthcoming June Financial Stability Report. 7. These are funds that select assets based on environmental, social and governance criteria. 8. De Haas, R. and Popov, A. (2019), “Finance and decarbonisation: why equity markets do it better”, Research Bulletin, No 64, ECB, 27 November; De Haas, R. and Popov, A. (2019), “Finance and carbon emissions,” Working Paper Series, No 2318, ECB, September. 9. Lagarde, C. (2021), “Towards a green capital markets union for Europe”, speech at the European Commission’s high-level conference on the proposal for a Corporate Sustainability Reporting Directive, 6 May.

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This was sometimes a rather time-consuming process but in the end the results were probably better than if there had been a quick “fire-sale” of the assets. It is my opinion that the use of AMCs is superior to having the bad assets remain in the problem banks. The bank staffs are no experts in the field of handling bad assets and may not obtain the best sales values. Also, the bank management needs to tackle other problems and to work hard on future strategic planning for the bank – they do not have time enough for the often very large number of complex decisions to be taken on the bad assets. 5. Conclusions Finally, can we draw any conclusions for Asia in general and Korea in particular from the way the financial crisis was handled in Sweden? BIS Review 65/1998  -6-  First, I think it is important, as I said before, to recognise the importance of macroeconomic developments. Once the fixed exchange rate had been abandoned, Sweden’s economy experienced an export-driven upturn. But it did take a long time for confidence in the Swedish economy in general to return - at least another two years. It is noteworthy that this was so despite the fact that the recovery in growth had started in the summer of 1993.

Banks that were directly involved, or had committed credit lines to other operators involved, were faced with growing uncertainty with respect to their liquidity needs and their own and other operators’ potential losses. It may be difficult for banks to manage their own balance sheets because of uncertainty as to the size of the loans they will be left holding on their books that would otherwise have been financed in the bond market. As a result, they became very reluctant to lend money to one another. Money market rates increased markedly, also in Norway. The contagion to the Norwegian money market reflects Norwegian banks’ heavy reliance on foreign funding. The eurodollar market has been a frequently used source of financing for Norwegian banks. This is both because banks provide substantial lending in US dollars, and because this market is used to procure liquidity in NOK. In the latter case, banks borrow in USD and then swap USD for NOK. BIS Review 141/2007  3  The turbulence in financial markets and uncertainty related to developments in the US housing market have led to a decline in market expectations concerning economic growth, and central bank key rates have fallen, in both the short and the long term. There is considerable uncertainty as to how long market unrest will last, and the impact it will have on the real economy.
The aim with a single point of 11  Our starting point for calibrating internal MREL for ring-fenced bank sub-groups would be 90%, with the possibility that this could be scaled down if there are sufficient readily deployable resources. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  entry bail-in strategy, as the name suggests, is only to put one entity at the top of the group into resolution, preferably a holding company which is only used for issuing capital instruments to the market and otherwise has no or limited operating liabilities. Write down or conversion of internal MREL instruments via contractual triggers will then allow operating companies lower down the group to be recapitalised automatically without putting them into resolution. But legacy non-equity capital instruments in OpCos without the requisite contractual triggers could cut across this. We do not want these to be spared bearing losses for want of a trigger. And so, we are clear that such instruments should not count as MREL beyond 31 December 2021 and if not matured by then we will work with firms to remove them if they represent a barrier to the resolution strategy. This is part of a larger effort to add to the credibility of resolution by being clear to debt investors and other stakeholders how a bail-in will work in practice.

We want debt investors to be able to price risk effectively by being clear about where they rank in the creditor hierarchy and to give them confidence that we can stick to the hierarchy in applying losses and that we will not be picking winners and losers within a class. Counting as MREL senior debt issued out of operating companies without subordination looks like a recipe for undermining that confidence. (b) Bail-in execution We also want to be clear as a resolution authority how we will conduct the resolution in a way that preserves value and distributes it fairly, ensuring no creditor worse off protections are met. To that end, we have thought hard about the valuation capabilities we need firms to have so that we can value losses and recapitalisation needs in an effective and timely way. We have just consulted on a set of principle level 12  requirements and expect to finalise policy in this space in the next few months. We believe that the bail-in valuation for a large cross-border firm is not something that can be fixed over a weekend. Valuation on that timetable will inevitably tend to overshoot on the estimation of losses, not least because a significant driver of the valuation will be the reorganisation that follows the bail-in and the restructuring costs and disposal valuations associated with that.