samchain/econo-pairs-v1 huggingface dataset:
These central counterparties (known as CCPs), originally developed to manage the risks in agricultural commodity contracts, to act as intermediaries, taking and adjusting collateral from both sides to a financial contract so that if one party fails during the lifetime of the contract and cannot meet its obligations, the parties with whom they have traded are protected. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  But regulators and central banks however have had quite a hand in the making of these pipes and in mandating their use and terms of access – as a way of reducing risk in the system. The CLS international payment system, for example, was created by the FX industry, after much prodding from central banks, as a way of addressing regulatory concerns about the level of settlement risk in the system following the failure of Herstatt bank in the 1970s. Similarly, in response to regulatory demands post crisis, market participants have developed the role of CCPs to enable central clearing of a widening range of financial contracts. And, in line with their role in encouraging the creation and use of these systems, authorities internationally have long taken a close interest in their regulation and supervision. In 1990 the G10 Governors established the Committee on Payment and Settlement Systems (CPSS), with a membership that was enlarged to include 25 central banks in subsequent years. In 2014, CPSS was renamed to become the Committee on Payments and Market Infrastructures (CPMI).

As CCPs are designed to be shock absorbers at the centre of the financial system, damage to a CCP presents risks to the system as a whole. In order to ensure that what has been designed as a shock absorber does not under stress become a shock transmitter, CCPs not only hold collateral from their members, they are required to hold additional default funds large enough to cover the default of their two largest members. This default fund includes the CCPs own capital. And they are able to call for further resources from their members under their recovery plans if these funds are exhausted. Notwithstanding the high level of resilience that has been achieved in this area, I think there are three important ‘prudential risk’ challenges for CCPs going forward. The first is to ensure that CCPs are prudent and require enough collateral, or ‘margin’, from their counterparties in good times to ensure they are protected in times of stress against movement in financial asset prices and in counterparty credit worthiness. CCPs use mathematical models to calculate, on the basis of past and potential market moves, the size of the risks they need to insure against. Posting margin to a CCP is a cost for a CCP counterparty and its clients. CCPs need strong internal systems and controls to ensure that over time, commercial pressures and competition from other CCPs do not lead to inadequate margining.
Joseph Yam, JP: Open and connected – Scaling new heights  Luncheon Address by Mr Joseph Yam, JP, Chief Executive of the Hong Kong Monetary Authority, at the 7th Annual Hong Kong General Chamber of Commerce Business Summit “Hong Kong: The Hub of Asia”, held in Hong Kong on 13 December 2000. *  *  *  1. I am grateful, and much honoured, to have the opportunity to speak to this 7th Annual Business Summit of the Hong Kong General Chamber of Commerce. This conference is billed as a ‘business summit’. The word ‘summit’ always makes me think of one of my favourite hobbies – hiking. Those of you who have enjoyed – or endured – some of the more spectacular mountain trails in Hong Kong will know what I mean. I am thinking especially of the steep ranges in the remoter parts of Sai Kung, but you don’t have to go far in Hong Kong before you find yourself in the middle of one of our wild and mountainous country parks. They are among the attractions that make Hong Kong such a special place. In my view, they should be included in any list of the qualities that make Hong Kong a desirable city to do business in – along with the rule of law, a low and simple tax regime, an educated workforce, and so on. If you haven’t enjoyed these mountains, I recommend you take advantage of this long-awaited fine autumn weather to try them out.

The implied productivity performance of the UK economy has, in fact, remained poor – according to the official statistics, output simply doesn’t appear to be growing fast enough to support the employment growth recorded as well as generate the rapidly rising real incomes one would like to see. Something has to give. I hope that it will be that output grows faster – either through upwards revisions to recent growth rates or faster growth in future. If, on the other hand, the UK economy uses up all its spare capacity, without having had a substantial rise in real national income, then we should all be disappointed. The weakness in productivity growth has been well documented, but a convincing explanation remains elusive. There are many plausible explanations of factors which could have contributed to the weakness, but each explains only a small part of the whole puzzle. I don’t have time to get into that debate today, but we do offer a variety of candidate explanations in recent Inflation Reports. One better feature of the current situation is that price pressures seem to be subsiding, not growing. Despite good rates of employment growth, there is no sign of nominal wages overreacting to general tightness in the labour market. Other price pressures also appear to be easing somewhat.
In the EU27, foreign affiliates’ local claims in local currency as a share of total banking assets increased from on average 9.8 per cent during the period 2001–2003 to 16.9 per cent at the end of 2009. The corresponding increase for other advanced economies 4 was from 4.1 per cent to 5.9 per cent. 5 In 2009, European banks had more than 60 per cent of their total banking assets abroad, compared to approximately 30 per cent for North American banks and 25 per cent for Asian banks. While a large part of the European banks’ international operations take place outside Europe, there is a strong regional component to cross-border banking. 6 There is a clear tendency towards regional clusters in cross-border mergers and acquisition activities in Europe – in particular there seem to be such clusters in the Benelux region, the Nordic-Baltic region and in Southern, Central and Eastern Europe. 7 That geography matters for cross-border banking is shown by simple regression analysis relating the local claims of one country’s banks in another country to the size of the home and host economies and the geographical distance between them. Using information on cross-border activities within the EU in 2009 from the Bank for International Settlements shows that, on average, a 10 per cent greater geographical distance between the home and host countries is associated with 14 per cent lower consolidated local claims, controlling for the GDP of the countries involved.

As governments are responsible to their respective parliaments, and ultimately to the voters, there is also a strong tendency to favour national solutions. Because of this we have seen a number of uncoordinated crisis resolutions resulting in exceptional levels of public financial support to the banking sector. The handling of the failures of Fortis and the three Icelandic banks are perhaps the most obvious cases. In the case of Fortis, it is interesting to note that the authorities from the Benelux countries initially reached an agreement to save the group as a whole. However, as liquidity pressures continued and the burden-sharing agreement proved politically unviable the agreement eventually fell apart. In the end, the authorities had no other choice but to divide the bank along national borders – an outcome which most likely became more costly than a joint solution for the group as a whole. An important factor affecting the authorities’ abilities to deal with cross-border banks is how banks choose to organise themselves. The most common way of accessing markets outside the home country is to either establish a foreign based branch or a subsidiary and to offer  16  See e.g. Navaretti G., Calzolari G., Pozzolo A. and Levi M. (2009), Agénor (2001), Goldberg (2002, 2004, 2008). BIS Review 82/2010  19  services through this legal entity. At present these two forms of foreign operations end up being dealt with within different regulatory frameworks.
Those small countries in particular had to accept the new economic reality of lower demand, higher unemployment and forced fiscal consolidation due to a fall in tax income or borrowing difficulties. The other group consists of bigger or more closed economies that were relying on domestic demand. They were able to smooth the initial impact of the crisis with more extensive government support measures. There was also the expectation that the crisis would be temporary. With the benefit of hindsight we know that we were not facing a temporary bump on the road, but a more fundamental need for adjustment. The initial smoothing of the shock may have been even more costly as it resulted in a higher level of public debt. Secondly, the required policy adjustment involves a dimension which we now consider critical: the speed of reacting and the decisiveness of policy actions. The Baltic countries have learned it firsthand through their experience, which of course is the hard way. There are few economists today that would fundamentally question the need for fiscal consolidation and structural reforms in Europe, as the crisis has clearly turned out not to be temporary. However, we all know it is politically difficult to cut government spending and implement reforms fast. The natural tendency for most politicians is to favour gradual adjustment. “Gradualists” say that in case of fast changes the risk of possible policy mistakes is higher, leading to losses in physical and human capital. Opponents of that view, including myself, certainly acknowledge those risks.

In this second  BIS central bankers’ speeches  9  phase, some macro-prudential decision-making would naturally reside at the international, rather than national, level. (d)  Improved international liquidity assistance  This is plainly the thorniest of the issues. Fifteen years ago, then-IMF Deputy Managing Director Stanley Fischer set out the case for the IMF becoming a quasi-international lender of last resort (Fischer (1999)). His argument was that the IMF’s financial firepower had failed to keep pace with the scale of cross-border capital flows. At the time, I remember being sceptical about the feasibility and desirability of this proposal. In the period since, there has been a further dramatic ratchet up in cross-border capital flows. This has not been matched by IMF resources. The mismatch between global financial risk and global financial resources has widened. Fifteen years, and several crises on, I think it is clear that Stan was right. Ratification by the US of the 14th general review of IMF quotas would help close the gap but, by itself, would not prevent it from yawning. Various proposals for augmenting IMF resources have been put forward (Lachman (2006) and Farhi et al (2011)), but have foundered on political rocks. Partly in response, regional facilities have sprung up as a partial substitute, growing broadly to match in scale multilateral facilities. But the financial system is a global, not regional, one – indeed, increasingly so. Regional facilities can be a complement, but are no substitute, for multilateral insurance mechanisms.
Christine Lagarde: Hearing at the Committee on Economic and Monetary Affairs of the European Parliament Speech by Ms Christine Lagarde, President of the European Central Bank, at the Hearing at the Committee on Economic and Monetary Affairs of the European Parliament, Brussels, 20 March 2023. ***  Accompanying charts of the speech I am happy to be back in this Parliament to discuss the ECB's monetary policy shortly after last week's Governing Council meeting. More than one year has now passed since that February morning when we all woke up to the horrifying news of war in Europe. The Russian invasion of Ukraine – which you have selected as a topic for this hearing – is first and foremost a human tragedy for the people of Ukraine. And in the face of this senseless atrocity, they have shown remarkable resilience and determination. In the words of the former President of this Parliament, José María GilRobles, who sadly passed away last month, "The future belongs to those who are prepared to make the effort to hear the voice of hope".1 As Europeans, we need to continue hearing the voice of hope coming out of Ukraine and support the Ukrainian people in their struggle for freedom, democracy, and peace – the fundamental values of our Union. It is clear that solidarity, especially during this crisis, makes us stronger and more resilient.

The elevated level of uncertainty reinforces the importance of a data-dependent approach to our policy rate decisions, which will be determined by our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. The key ECB interest rates remain our primary tool for setting the monetary policy stance. 2/3  BIS - Central bankers' speeches  The reduction of the asset purchase programme (APP) portfolio – the second topic for today's hearing – is part of our monetary policy normalisation. As of the beginning of this month, the APP portfolio has been declining at a measured and predictable pace of € billion per month on average and will continue to do so until the end of June 2023. The subsequent pace will be determined over time and the Governing Council will regularly reassess the pace to ensure it remains consistent with the overall monetary policy strategy and stance, to preserve market functioning and to maintain firm control over short-term money market conditions. Conclusion Let me now conclude. With war in Europe and high inflation requiring immediate action, policymakers may be inclined to divert their attention from long-term challenges – but we must all strive to keep up our efforts to address the existential crisis of climate change.
It is noteworthy to me that the employment cost index has risen only 2.1 percent over the past four quarters and has shown no acceleration (Figure 7). Fourth, inflation expectations remain well-anchored (Figure 8). This is critically important because inflation expectations are an important driver of actual inflation outcomes. Taking into account the current stance of monetary policy, I anticipate  BIS central bankers’ speeches  5  that inflation will decline to slightly below our 2 percent long-run objective over the next few years. So what does this all imply for monetary policy? I currently anticipate that the Federal Reserve’s federal funds rate target will remain exceptionally low – that is at the current level – at least through late 2014. This policy setting is more accommodative than the setting prescribed by the Taylor 1999 rule discussed earlier.8 Using the Federal Reserve Bank of New York’s current staff forecast, the Taylor 1999 rule – unadjusted for the Federal Reserve’s balance sheet actions – implies liftoff in 2014.9 But this is incomplete because it does not incorporate any adjustment for the Federal Reserve’s balance sheet actions. I estimate that the current balance sheet provides the equivalent of roughly 150 to 200 additional basis points of federal funds rate easing.10 But as time passes, we will come closer to the date when the balance sheet will begin to be normalized. This implies that the amount of stimulus from the balance sheet will gradually lessen over time.

To some degree, this likely reflects the anchoring exerted by stable inflation expectations. But some of the price pressures can be attributed to other, more temporary, factors:   Higher oil and gasoline prices and their pass-through into the costs of other goods and services.   Upward pressure on imputed homeowners rents due to increased demand for rental housing.   Higher import prices for goods, such as apparel. This reflects many factors including commodity prices pressures and higher wage inflation in countries such as China. Some of these upward pressures on inflation appear to be fading. Oil and gasoline prices have fallen in recent months. Apparel price inflation should gradually ease, given the sharp drop seen in cotton prices. Owners’ equivalent rent should also eventually stabilize as multi-family construction picks up and programs that shift real estate owned by banks to investors so they can be rented gear up. More generally, there are several reasons to think that inflation will remain moderate and close to our objective. First, and most obviously, the economy continues to operate with significant slack. Second, measures of underlying inflation show little upward pressure. In fact, one – the Federal Reserve Bank of New York’s Underlying Inflation Gauge – is turning down. This measure uses a very wide set of variables to forecast the underlying inflation trend (Figure 6). Third, it is hard to be very concerned about inflation risks when the growth rate of nominal labor compensation is so low and stable.
But this does not mean that there are no important tasks for the Banco de España – or other participating countries’ national supervisors – to perform in the SSM, in addition to the functions that remain intact as they are not assumed – or are assumed only partially or in exceptional circumstances – by the SSM. In recent months there has been talk of the Banco de España becoming devoid of its powers. This reflects a lack of knowledge or misunderstanding of how the SSM is organised and how it will operate and is reminiscent, in a sense, of the talk afoot when Monetary Union came into being and the ECB assumed responsibility for the main monetary policy decisions. The model then adopted entailed full decentralisation of monetary policy implementation. This meant that it relied on the national central banks for its implementation (in fact, credit and deposit institutions have no direct operational relationship with the ECB) and that in practice, although the ECB assumed decision-making powers, there was no decrease in either the workload or the staffing needs of the national central banks. BIS central bankers’ speeches  3  Albeit for different reasons, the start-up of the SSM is expected to have a similar impact on workload and staffing needs at the Banco de España and at the other national supervisory authorities. *** In any event, the creation of the SSM poses an organisational challenge for the national authorities.

The centrepiece of the supervision of significant banks will be the Joint Supervisory Teams, responsible for the day-to-day oversight of these banks. These teams will be made up of specialists from the ECB and from the national authorities, under the leadership of a coordinator designated by the ECB, and a sub-coordinator designated by the national supervisor. Approximately 75% of those making up the teams will be drawn from and designated by the national supervisors; in the case of Spanish banks, it will of course be staff from the Banco de España. Inspection visits to significant banks, what is known as on-site inspection, will continue to be conducted by the national authorities, and their results will be passed onto the ECB for the adoption of the appropriate measures. With regard to the less significant banks, national authorities will continue to directly supervise them as they have to date. Over 3,600 banks across the euro area are involved here. The ECB will define common practices and criteria, it will monitor the actions and position of these banks and it will always be entitled, if it considers it necessary, to re-claim direct supervision over any of these banks. 2  BIS central bankers’ speeches  The competences and responsibilities of the Banco de España in the framework of the new Mechanism I would now like to address the competences and responsibilities of the Banco de España, as a national supervisor, under the new Mechanism.
The ability of a bank’s loan review system to identify, classify, monitor and address loans with credit quality problems in a timely manner should be  4  BIS Review 35/2002  assessed by the supervisor on a regular basis as part of its risk-based approach. A misclassification of assets (and the corresponding under-provisioning) is always present in banks heading for profitability and solvency difficulties. Sound credit risk management practices at the banks’ level, including acknowledgement of expected losses in due time, collide to a certain extent with the current accounting framework. The problem stems from the fact that this framework does not support the notion of provisions on the basis of expected losses, with the result that the recognition of losses is frequently delayed. Some of the answers given by accounting-rules setters to this problem (i.e. full fair value accounting) may have other important drawbacks. I will touch upon this later. Let me briefly summarise the content of our dynamic provision. In December 1999, the Bank of Spain introduced a new solvency provision, the so-called statistical or dynamic provision, focusing on the statistical risk embedded in the unimpaired portfolio. It started to apply in July 2000. The main idea behind this provision is to try to capture, together with the other provisions of the Spanish system, expected losses.

All creditors can face having to absorb losses. What matters is the creditor hierarchy  Notwithstanding the clarity in the Financial Stability Board’s international standard on resolution,4 and in the US and draft EU legislative regimes, it is still common for commentators and industry participants to refer to “bailin bonds”.5 As I have said before, “bailin” is a verb not a noun. It is a power, not a special kind of bond. Like other resolution tools, it can be applied to any kind of debt obligation. What is true is that if bonds are issued from a holding company and the resolution is topdown (SPE), then those bonds will absorb losses before any creditors of the operating  2  See Financial Stability Board (2013), “Recovery and Resolution Planning for Systemically Important Financial Institutions: Guidance on Developing Effective Resolution Strategies” and Tucker (2013), “Resolution and the future of finance”. 3  See Tucker (2013), “The reform of international banking: some remaining challenges”. 4  See Financial Stability Board (2011), “Key Attributes of Effective Resolution Regimes for Financial Institutions”. 5  Most recently in Chapter 3, “Changes in bank funding patterns and financial stability risks”, of the IMF’s October GFSR, which misleadingly refers throughout to “bail-in debt”. 2  BIS central bankers’ speeches  subsidiaries; holdco creditors are structurally subordinated to opco creditors. But if the losses are vast enough, then the haircuts imposed by the resolution authority can in principle permeate to any level of the creditor stack.