samchain/econo-pairs-v1 huggingface dataset:
BIS central bankers’ speeches  3  Firms, markets and infrastructure The resilience of the system depends on that of its component parts and on how they are connected. In the real world, that means firms, markets and infrastructure. It means looking for and addressing vulnerabilities or faultlines in all three. And it entails choices, trade offs, about how far to make individual firms robust and how far to strengthen the system by reducing spillovers from a distressed firm to other firms and markets. Amongst firms, plainly banks are a priority. As monetary institutions, they are special. Their deposit-liabilities are money. And that enables them to provide committed, on-demand lines of credit, ie liquidity, to households and firms in the real economy and to traders in financial markets. Firms of all kinds are able to economise on the stock of liquid assets they would otherwise need to hold.3 But banks can provide those liquidity-insurance services only if depositors are confident that they can convert their deposits into cash (central bank money). That does not mean that every bank must be completely safe, but it does mean that the resolution regime must be equipped to preserve their core monetary services whether by resurrection or the transfer of transactions-deposits to a healthy competitor. In talking about banks, I must stress that it is the economic substance that matters, not the legal form.

All reporting institutions are invited to provide comments and views on the draft which may be organized through relevant licencing authorities, self-regulatory bodies, industry associations or directly to Bank Negara Malaysia; and 2. second, I would also like to take this opportunity to remind all reporting institutions, that Bank Negara Malaysia is increasing its supervisory and enforcement of AML/CFT compliance, in which we intend to pursue more deterrent action including taking appropriate enforcement actions under the AMLA, for any identified non-compliances, beginning 2020. As such we urge all reporting institutions present today to engage and discourse any compliance issues with the wide ranging of experts that we have lined up for this conference. With that, I wish everyone a fruitful discussion ahead and Selamat Menyambut Hari Kemerdekaan. 3/3  BIS central bankers' speeches
Fourth, on asset bubbles and the linked exchange rate system: the monetary policy objective of Hong Kong is exchange rate stability, rather than to target asset prices or inflation. Asset bubbles are not unique to economies with fixed exchange rates. Economies with floating exchange rates experience similar problems. In any case, it is difficult to tell ex ante whether there is an asset bubble. On the other hand, most research studies find that monetary policy is too imprecise and blunt to be used as a tool for targeting asset prices. Fifth, on the Hong Kong dollar being undervalued: there is no evidence. Recent empirical research by the HKMA and the IMF show that there is no evidence of currency misalignment for the Hong Kong dollar at present. Given the flexible and adaptive nature of the Hong Kong economy, wages, prices and other economic variables would adjust so that any misalignment in the real effective exchange rate would be corrected. Even a flexible exchange rate is not immune to sustained currency misalignment. Exchange rate  BIS Review 139/2007  5  movements are affected not only by economic fundamentals but also by market dynamics. A flexible exchange rate is arguably more prone to currency misalignment, particularly for small and open economies which are more vulnerable to changes in capital flows. Sixth, on widening the exchange rate band: the simple answer is no. It would only serve to undermine the credibility of the linked exchange rate system and invite speculation on the likelihood of further band-widening.

And I believe that the best way of managing risks is for those concerned, not just the authorities responsible for the maintenance of systemic monetary and financial stability but more importantly also those actually assuming risks, whether as investors or as financial intermediaries, to be alert to them, and to understand that they may have peculiar characteristics. Then there are importantly those innocent parties in society, who are often hard-pressed to make ends meet or struggling to acquire a dwelling place, who could be further disadvantaged if there were monetary and financial instability, should the risks materialise to the extent of causing a shock of systemic dimension. Sub-prime crisis The FIRST such issue is the sub-prime crisis in the United States. The use of the word "crisis" is not an exaggeration on my part, notwithstanding the absence so far of anything approaching a crisis in Hong Kong. It is the word that is increasingly being used in the developed markets and in international finance when talking about the current difficulties in the United States and Europe that originated from sub-prime mortgages. At the risk of oversimplifying something that is really quite complex, let me make a few observations that might help understand what is going on. First, sub-prime mortgages are really mortgages extended to those who are, to put it bluntly and simply, not credit worthy. And as mortgages are assets on the books of the lenders, subprime mortgages are really sub-standard financial assets.
BIS Review 7/2009  9  TED-spreads Difference between interbank rates and government bond rates (TED-spread) 500  500 Euro area  450  USA  400  Sweden  BNP Paribas  Lehman Brothers  Secure liquidity prior to the year-end  350  450 400  Bear Sterns  350  300  300  250  250  200  200  150  150  100  100  50  50  0 Jan-07 Apr-07 Jul-07  0 Oct-07 Jan-08 Apr-08 Jul-08  Oct-08 Jan-09  Sources: Reuters Ecowin and the Riksbank  Outcome up to 16 January. Exports as a proportion of the total balance of resources Per cent 50  40  30  20  10  0 90  10  92  94  96  98  00  02  04  06  BIS Review 7/2009  5-year rates Per cent 6.00  6.00  5.00  5.00  4.00  4.00  3.00  3.00  2.00  2.00  1.00  1.00  0.00 01 January 2008  0.00 01 April 2008  01 July 2008 Sweden  01 O ctober 2008  Euro area (Germany)  01 January 2009  US  Note: Refers to government bonds with approx.

In reality, the capital drawdown banks would have faced, had the COVID shock happened in 2007, would have been a function of their 2007 balance sheets – so the loan losses may well have been higher than those we pencilled in for banks as part of the illustrative scenario. 6 In the first quarter of the year, major UK banks expanded their net lending to businesses by £ (compared to a reduction in net lending of £ by these banks in 2019 as a whole. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  outweighed by the losses they would suffer from the broader economic damage that would result from a widespread withdrawal of credit. No financial system of course can be infinitely resilient. Given its function of providing credit and risk mitigation to firms and households, the banking system is exposed to the real economy. There is inevitably some level of damage to the economy that the banking system cannot weather. Over the coming months we will learn more about how well the post crisis reforms work under stress. One particular area of attention will be the usability of the capital and liquidity buffers intended to absorb a tail event shock. The results of the FPC’s desktop stress test reinforces the message that the clue, as they say, is in the name: the buffers exist precisely to buffer a shock like this. All elements of the buffers banks now have are intended to be usable in stress.
Turning next to the new Basel liquidity requirement, the new standard will likely necessitate a significant adjustment in behavior for those banks that historically relied on short-term wholesale funding and those that had negligible buffers but instead had relied on the Federal Reserve and the Federal Home Loan Bank System to be their liquidity backstops. However, the transition costs are likely to be quite manageable because, as was the case for the capital standards, there are many margins available for adjustment. Before I assess the transition costs of the liquidity coverage ratio (LCR) standard, a few words about what the LCR is intended to do and how it operates. The notion behind the LCR standard is that large, internationally active financial institutions should have a liquidity buffer that enables them to operate for 30 days in a stress environment without having to rely on government support, including central bank liquidity backstops. Banks would have to have sufficient liquid assets that they could sell to be able to meet outflows stemming from deposit withdrawals; bank debt that matures and is unable to be rolled over; and drawdowns from committed credit and liquidity facilities provided to financial firms and other entities. The size of the required liquidity buffer depends, in part, on the maturity of the bank’s assets and liabilities, the stickiness of its deposit liabilities, the amount of irrevocable liquidity backstops and composition of its assets.

Fourth, the measure of risk-weighted assets – the denominator of the capital adequacy ratio – is constructed to better capture the risks that banks are taking in their activities. For example, the risks weights on trading account assets and for counterparty exposures have been increased substantially to reflect the lessons of the crisis. Note that due to better capture of the underlying risks, at least initially, aggregate risk-weighted assets in the system are likely to increase. This is not because the inherent riskiness of bank balance sheets has increased, but rather because that riskiness will be better captured. In addition to the 4.5 percent minimum common equity standard, there is also a new capital conservation buffer requirement equal to 2.5 percent of risk-weighted assets. If a bank were to incur losses and fall deeper and deeper into this buffer, increasingly tough limitations would come into play in terms of the bank’s ability to make capital distributions by paying dividends or buying back shares. This capital conservation buffer is designed to forestall the type of behavior that we saw during the crisis – banks continuing to dissipate capital by paying out dividends in order to demonstrate that they were strong. Instead, banks will have an incentive to raise additional equity to exit the buffer and its restrictions on distributions.
For microprudential supervision, the proposal is based on the so-called Twin Peaks model which separates prudential supervision (one peak, to be in the PRA) from conduct of business and consumer and investor protection (the other peak, to be in the Consumer and Markets Authority). One of the very important features of this approach is that it doesn’t mean one peak is less important than the other, that is not a consequence of financial stability being a necessary condition for good conduct of business. Rather, it should enable each regulatory body to be focussed on its own objective, because it requires different skills and experience to undertake the two peaks. Of course, great attention needs to be given to ensuring the boundary between the two peaks is robustly defined, and there is effective and efficient cooperation between the two authorities. But, my view is that done properly it will improve the system of regulation. As far as microprudential supervision is concerned, we are clear that it should not be a regime in which firms cannot fail. A successful industry of any sort needs to have means by which unsuccessful firms can fail without an unacceptable cost to the public, and where appropriate means by which firms can recover from serious problems without having recourse to a formal resolution process. Banking still suffers from the too big, too complicated, too interconnected to fail problems. This has meant that public money has had to be used to prevent disorderly failures.

Some temporary retrenchment is probably not undesirable at this point, as cross-border banking – and perhaps financial globalisation more generally – far outpaced developments in public frameworks. The issue of global liquidity provision to banks needs further exploration. And finally, if countries are increasingly taking unilateral action to protect themselves, someone – probably the IMF – must monitor the process. Going forward, some ground rules might have to be considered so that we are not faced with too serious unintended consequences for the global system. Thank you very much. BIS central bankers’ speeches  5
But, given the extent of the loss of confidence in the Asian case, organising private financial support meant in practice persuading existing creditors that their assets would be better protected if they were prepared to leave them in place, especially if other major private creditors agreed to do the same, and if official support were made available in parallel. But in this case, too, difficult judgements have to be made. There is a danger that, if private creditors have in effect to be coerced into staying put, they will immediately cut their positions elsewhere, while they still could, thereby adding to the international contagion. In fact, in the critically important case - because of its size - of Korea, the promise of massive official support failed to restore market confidence. And when it became apparent that the official bilateral financing was in practice available only as the very last resort we - again with the central banks as the immediate intermediaries - had to turn to the commercial bank lenders in the major creditor countries and persuade them to extend the maturity of their loans. Like most U-turns, it was a dangerous moment. But the banks’ constructive response went a long way to stabilising the immediate situation in relation to Korea - and thereby to the region as a whole. The creditor banks are also now in negotiation with Indonesia’s bank and commercial non-bank debtors.

I will argue that the new set of liquidity requirements is expected to have an impact on how monetary policy is implemented in normal times. It is important to understand how this new requirement may impact the current operational framework, especially for the Eurosystem, and the functioning of money markets. The second issue regards lending of last resort. It is commonly accepted that central banks have to act as lenders of last resort (LOLR) towards banks during a crisis period, when liquidity can dry up. But it is also well known that such intervention can generate moral hazard in the banking system, lead central banks to take unwarranted credit risk and, in some extreme cases, interfere with their primary mandate – price stability. Are the new liquidity ratios, in combination with the revised capital ratios, sufficient to prevent the central bank from becoming the lender of first resort? Based on recent academic research, to which researchers of this university have significantly contributed, I will argue that liquidity regulation can ensure that central bank intervention remains exceptional, and be designed in a way that is compatible with sound incentives in the banking system. Rationale for liquidity regulation I would like to begin by briefly highlighting the micro- and macro-prudential benefits that will derive from a new set of liquidity standards. In particular, they should lead to an increase in individual credit institutions’ liquidity buffers, and reduce the risks posed by maturity transformation. The recent financial crisis provided a dramatic illustration of how liquidity risk materialises.
Atchana Waiquamdee: Brief look at financial market indicators Opening remarks by Dr Atchana Waiquamdee, Deputy Governor for Monetary Stability, Bank of Thailand, at the Workshop on Financial Market Indicators, Bangkok, 7 June 2007. *  *  *  Good morning, and allow me to welcome you to Bangkok, and to this morning’s Workshop on Financial Market Indicators. The issue we are about to discuss today, namely the use financial indicators, itself is not a new topic. Especially in more developed financial markets, the use of financial indicators has been integral to the well-functioning of markets. In those cases, utilizing financial market indicators in the policy-making process is nothing new. In many of the emerging markets of Asia, however, this has not been the case. Financial indicators in the emerging markets have been more difficult to come by, and even much more difficult to interpret – due largely to gaps in market development. Yet, as the financial markets of Asian economies began to gather both depth and breadth, more and more financial market indicators are becoming readily available for policy use. Since the availability of the indicators in emerging markets is rather recent and the fundamental conditions in these markets are still very dissimilar to those of the more matured ones, the use of financial market indicators in emerging markets for policy purposes merits much thought and attention. So what exactly are we talking about when referring to financial market indicators?

Mr. Chairman, in a strange and a paradoxical sort of a way, it is somewhat “fortunate” that the current financial crisis shocked (and indeed, almost ruined) the worlds financial system, at the present stage of evolution of the worldwide financial landscape. If, on the other hand, this crisis had not impacted us at this time of history and consequently we had happily progressed at the same pace for a further 10 years or so, and then in 2017 or 2018 this shock had hit us, can anyone imagine the magnitude of the disaster at that time? In fact, I am quite sure that, if that eventuality had taken place, this crisis would have been too much for the world’s financial system to bear, and the resulting catastrophe would have crippled the world’s financial systems, as well as the world’s political, security and social systems with disastrous consequences. Perhaps some keen film maker might even consider doing a simulation of such a scenario, and then making a gripping and horror filled movie, allowing those of us with horror appetites to experience such a dreadful tragedy! Mr. Chairman, while we are putting into effect various initiatives to improve our processes and procedures to respond to the crises, we must also be conscious that we should not throw the baby out with the soiled bath water. Yes, the bath water has been terribly muddied and needs to be replenished. However, at the same time we must realize that the baby although rather dirty, is still quite wonderful.
This means large welfare losses for both the individual and Swedish society, and that a well-needed injection of resources to the Swedish labour market risks being lost. Integration work is therefore important to turn this trend around. Integration work should emphasise the importance of education as there has been a large immigration of groups lacking basic education. The possibilities to find work are affected to a great extent by the level of education the job seeker has. Upper-secondary school education is usually a basic requirement when recruiting staff and, according to the Swedish Employment Service, most jobs that do not require an upper-secondary school education have disappeared forever from the Swedish labour market. A worrying development is that the percentage of unemployed with only secondary school education has increased substantially in the age groups below 35 years. This is because a large percentage does not obtain complete grades at upper-secondary school. So it is not surprising that the Swedish Public Employment Service points to the fact that there has been a rapid inflow to the labour force in recent years of people in groups that have difficulty finding jobs quickly. This increase is partially linked to people being transferred from the Social Insurance Office to the Swedish Public Employment Service. At the same time, the Swedish Public Employment Service has been given the main responsibility for people who have immigrated to Sweden.

Figure 1 Unemployment calculated according to Okun’s law7 Per cent of labour force 14  14 Outcome  13  13  Okun 1 (differences, 1980-) Okun 2 (differences, 2001-)  12  12  11  11  10  10  9  9  8  8  7  7  6  6  5  5 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 2007  2008  2009  2010  2011  2012  2013  2014  Note: The difference version of Okun’s law captures the relationship between GDP growth and the change in unemployment. The figure shows unemployment forecasts based on estimates of this relationship in two different time periods. Source: The Riksbank  According to the historical relationship between changes in GDP and changes in unemployment, the change in GDP between the first quarter of 2009 and the third quarter of 2011 should have led unemployment to increase by 1.5–2.5 percentage points above the actual increase. The functioning of the labour market is decisive. Actual unemployment is not only influenced by economic activity, but also by structural factors that shape the functioning of the labour market. These structural factors influence both the decision to enter the labour market and companies’ decisions to hire and fire.
In the early days of the crisis, we saw biased actions which led to arbitrage of negative effects. Globalization requires the financial infrastructure to be everywhere similar in shape, contents, and human and technological capacities. It should operate under similar standards and practices and have the proper flexibility to precede the financial novelties. Second, the last crisis calls for the pre-emptive and forerunning nature of supervision and legal regulations in general. I believe a regulatory framework is genuinely effective and successful when it intertwines the simplicity and transparency of a rule-based approach with the flexible and far-sighted characteristics of a principle-based approach. At any case, this is indispensable to make banks accountable, to convince the supervision inspector on the risk characteristics and on the transformation of new different on- and off-balance sheet products, before they exceed a certain threshold in terms of magnitude and exposure. The Bank of Albania is making efforts in terms of identifying the aspects that need further improvement. In this undertaking, we will take into account the similar developments in the region and broader, to preserve the market competitiveness and the convergence in supervisory practices. Third, I believe that the crisis requires the existence of an international institution which should guide the financial stability, assess the systemic risk and determine the quantitative indicators measuring it. In this process, it is important that the regulatory norms be transparent to everyone.

The policy rate hikes already implemented are being transmitted forcefully to the euro area financing and monetary conditions. However, the lags and strength of transmission to the real economy remain more uncertain. I would draw from this three policy conclusions: a. In the usual alleged time lag of one to two years for monetary transmission, our economic situation makes it likely that we are presently closer to the upper range. And hence the commitment I reaffirm today to bring inflation back towards 2% by 2025, is consistent with the full transmission of the monetary tightening that will have been put in place by summer 2023. Page 13 sur 14 b. Against this backdrop of significant transmission “in the pipe“ and still to come, a deceleration in the size of the policy steps (from 50bp to 25 bp) was wise and cautious. We obviously keep our hands free, but we add the capacity of observing and monitoring the pass-through of our substantial and exceptionally rapid past hikes. Persistence is now more important than speed; the duration for which we will maintain rates is now more important than the precise terminal level we will reach. Or in other words, for interest rates as with ballistics, “longer” is becoming more significant than “higher”. c. Hence, our next rate decisions should not monopolise attention; we already have completed most of our rate-hiking journey, and we are clearly in restrictive territory.