samchain/econo-pairs-v1 huggingface dataset:
Any linking of monetary policy to social policy raises the issue of potential conflicts of interest with the SNB’s actual mandate. That would also be the case if income were committed in this way. To ensure that the SNB can fulfil its mandate, our decisions must be based solely on monetary policy considerations. The current arrangements for determining and distributing profits take due account of the individual stakeholders’ responsibilities: the SNB’s responsibility for monetary policy, and that of the Confederation and cantons for fiscal and social policy. The law stipulates that the SNB’s profits be allocated to the Confederation and cantons, which can dispose of them as they see fit. Transferring the income derived from the negative interest rate to the pension funds would not only result in a questionable mingling of monetary and social policy, it would also reduce the volume of funds available for ordinary distributions to the public sector. Ultimately, it would be a zero-sum game. For the negative interest rate to have the desired monetary policy effect, it must be applied across all sight deposit accounts held at the SNB as far as possible. Making an exception for such an important investor category as the pension funds would severely impair this effect. Moreover, it is likely that other players which also perform economically relevant and socially useful functions – such as charitable foundations – would promptly demand the right to be treated equally.

Thanks to these measures, together with the favourable trend on the equity and real estate markets, the coverage ratio of the pension funds of private-sector employers has remained stable since 2015 – despite the aforementioned correction to the technical interest rate, which has the effect of reducing this ratio. These efforts are approaching their limits, however. As the adaptation of the portfolio structure is associated with increasing investment risks, larger fluctuations in value are to be expected in future. In addition, the measures implemented to date are not sufficient given the rise in life expectancy. All other things being equal, the longer average duration of pension payments calls for increased retirement assets. What can be done about this? Only a limited number of adjustment mechanisms can be used to restore the equilibrium of a pension system. The first such mechanism relates to the pension funds’ income – in other words, the contributions paid into these funds. Higher contributions by employees and employers would make it possible to accumulate more capital. The other adjustment mechanisms relate to pension funds’ expenditures. To reduce  8 9  Pension funds have little scope for action with respect to mandatory insurance cover, as the conversion rate is fixed at 6.8% in the BVG. Discount rate applied when calculating future benefits. The lower the technical interest rate, the larger the amount of pension capital required. Investment income should be sufficient to finance the technical interest rate.
This is not a question that can be answered by a clear set of facts that can inform a judgement of probabilities. And of course how the financial system responds to a shock is substantially dependent on the nature of the event. In assessing this question today, there are numerous factors to consider: •  The number of hedge funds, and their total assets under management, have increased dramatically since 1998, significantly more rapidly than total financial assets. Although they still represent a relatively small share of total financial assets, they play a significant role in some market segments. Total exposure of the major bank and non-bank financial intermediaries to hedge funds as a group may be larger today, but that exposure is probably more diversified than in 1998. Market participants seem to believe that average leverage in the hedge fund community, and the extent of leverage for the more highly leveraged hedge funds, is lower than in 1998, but clearly it is difficult to assess these issues with any precision. •  On balance, the quality of risk management by counterparties to hedge funds has, we believe, improved substantially since 1998. This is important, given the gaps revealed in market practice at that point. More on this later. •  Capital in banks and in the parts of the financial system affiliated with banks has increased significantly in absolute terms - that is, the major intermediaries are significantly larger than in 1998.

In addition, changes in the market, specifically increasingly complex relationships that firms have with hedge fund counterparties, suggest the need for higher standards in some areas relative to what seemed appropriate in the wake of the events of 1998. Let me emphasize a few specific areas that my colleagues and I believe should be the focus of attention by market participants: First, firms need to give greater attention to the full range of exposures they face in the different, and often multiple, relationships they have with hedge funds - including those related to prime brokerage and counterparty credit extensions, proprietary investments in hedge funds, the provision of structured hedge fund products, and the offering of external funds of funds and in-house managed hedge funds as investment products, among others things. An important part of this involves managing the potential conflicts that arise from these multiple relationships and the legal and reputational risks entailed. Hedge fund-related activities need to be integrated into the broader compliance discipline. Second, improving the overall discipline of the stress testing regime is critical. This is an area where we see the greatest divergence in practice across firms and the greatest gap relative to the achievable frontier of best practice. Potential future exposure measures produce what can be misleadingly low overall measures of counterparty credit risk.
At the end of the day, the decision was made on the basis of an overall assessment.” 50 The way this was reported by the news agency did not make it easy to understand the actual background for the assessment. 51 I remember listening to this report on the radio while driving. It made me think about the formulations in our own press releases. To be honest, they were not much clearer. I saw room for improvement, and we have subsequently made efforts to improve the communication of our assessments. We have nevertheless experienced that it can be demanding to communicate why we arrive at one conclusion and not another. Can we become more transparent? Views on transparency and communication are constantly changing. As mentioned, Norges Bank has become more transparent in recent years. But is there room for even more transparency? I readily admit that we were uncertain before taking new steps. When we first start publishing information, it is difficult to retreat. But the experience so far has been positive. 52 In some areas, therefore, I believe there is room for increased transparency. Some observers have argued that Norges Bank and other central banks should provide information to the public about the models we use and how we use them. 53 I agree with this. It is difficult from a pedagogical viewpoint to explain how the models are used as a basis for economic policy.

Having an understanding of the range of possibilities, having the ability to make sound strategic decisions and excelling under the different circumstances also becomes important. The ICLIF leadership centre was established in 2003 as part of Bank Negara Malaysia’s commitment towards providing a focused and coordinated approach to enhance leadership capability and to develop world-class leaders. It was initially for the financial services industry, post the Asian Financial Crisis, with the aim of producing a new generation of leaders to steer the industry in a fundamentally transformed financial landscape. It has since been extended to corporate and public sector participation. The Centre, the first of its kind in Asia, focuses on the emerging market experience, contextualized mainly to Asia. ICLIF has now grown to offer a wide range of services in the areas that include leadership development, organizational performance, corporate governance and advisory services that are designed to enable sustainable and responsible business growth. In 2010, the ICLIF has further repositioned itself through the setting up of a new governance centre with a vision to promote high impact boards and develop world class directors who are advocates of best practices and excellence in corporate governance. Known as the Financial Institutions Directors’ Education Program or FIDE, it is currently the only governance initiative in the region that focuses exclusively on the financial sector and has trained hundreds of directors since its inception. The Centre has now been renamed as the ICLIF Leadership and Governance Centre with an enhanced faculty comprising renowned experts from the world leading institutions.
Vítor Constâncio: The nature and significance of Banking Union Speech by Mr Vítor Constâncio, Vice-President of the European Central Bank, at the conference “Financial regulation – towards a global regulatory framework?”, Chatham House City Series, London, 11 March 2013. *  *  *  Ladies and gentlemen, Thank you for inviting me to speak to you at Chatham House today. The topic of my address is the nature and significance of establishing a Banking Union in Europe. To many this seems like a new initiative borne out of the experience of the crisis. But it is in fact based on an older debate. During the preparations for the Maastricht Treaty in the early 1990s, there was already the strong conviction that a single system of banking supervision was as a key element in the construction of monetary union. Indeed, one of the foremost proponents of this view was a Bank of England official, Brian Quinn, who chaired the preparatory subcommittee on banking supervision.1 This conviction was based on the relatively logical observation that the single currency would deepen financial interdependence in Europe and so require an integrated system of supervision. It was also in line with the prevailing model at the time of banking supervision being entrusted to the central bank.

This would bring huge potential benefits for all Member States in terms of enhancing financing for the real economy, managing risks and pooling the resources of investors from European and elsewhere. 4  BIS central bankers’ speeches  Conclusion Let me now conclude. What we are aiming for in Banking Union is to create a system that is truly European and not just an inter-governmental framework for national authorities. We have seen that a Banking Union would have made a real difference during the crisis – and for this reason, there is no pressing reason to carry on with national arrangements that have not functioned effectively. I believe that this message has made its way into the SSM legislation. The elements are there for a truly European approach to supervision. And I hope that it will also translate into a strong Single Resolution Mechanism, to be launched as soon as possible. The SSM and the Single Resolution Mechanism are complements and we need progress on both these fronts. As Victor Hugo once remarked, “you can resist an invading army; you cannot resist an idea whose time is come.” I believe that Banking Union is just such an idea. But it now depends on us – as policymakers, as commentators, as citizens – how it is turned into reality. If we are anything less than wholly ambitious, then we will have learned nothing from this crisis. Thank you for your attention. BIS central bankers’ speeches  5
•  That doesn’t tackle biggest issue of all. Central banks can, to a degree, smooth the necessary adjustment of economies and so create time for households, firms, governments to strengthen their balance sheets where necessary and adjust to shifts in the relative pattern of demand for goods and services. That is what is going on in the West now. But obviously central banks cannot force others to act. And our actions can make delay seductive. •  Given central banks’ responsibility to explain, we can nudge but we must stay within our remit. •  In the present crisis, part of the real-side adjustment is needed within the banking system. For that the Bank of England does have a special role. Through the new Financial Policy Committee (FPC), we have been pressing the banking industry to adjust given the external threats, as sound banks are needed for sustainable recovery. •  This represents the first intervention of so-called macro-prudential policy. Can view the role of the FPC as being to ensure that the need for stability in the financial system is not overlooked. Looking ahead, this will mean keeping the regulatory regime up-to-date as the financial system evolves and, when the time comes, ‘taking away the punchbowl’ before the next party gets as dangerously out of control as the last one did. •  The case for operational independence here is just as strong as for monetary policy. Taking Away The Punchbowl is something that requires a medium-term orientation.

If the rules proved to be flawed, they should still be enforced, for credibility’s sake; but later changes should be made to the rules. BIS central bankers’ speeches  1  •  Animating spirit of ‘prudential supervision’ is completely different. Impossible to write down a complete (or even adequate) set of binding rules on the financial health of a bank (or on the substance of the professional competence of bankers). Instead, things like capital ratios or liquidity ratios are really indicators of financial health. •  This is reminiscent of an old debate in monetary policy. Thirty-odd years ago, policy was meant more or less mechanically to follow targets for broad or narrow monetary aggregates. It didn’t work: the economic world was not sufficiently stable. Since we adopted inflation targeting, central banks have had an eclectic approach to indicators. We are constrained by a clear medium-term objective (2% CPI target), but do not use a set of supposedly fool-proof core intermediate indicators. •  No more can we write down hard and fast rules on bank balance sheets. •  Nor, consistent with Parliament’s wishes, is the Prudential Regulation Authority seeking to achieve a zero failure regime. The failure of individual firms has to be an acceptable outcome so long as they can be wound down in an orderly way.
IT systems and websites are vulnerable to attack by criminals. Attacks can put services out of order and reduce confidence in the systems. Attacks take ever newer forms. This requires that system owners keep updated on the various kinds of attack. The establishment of FinansCERT by Finance Norway is a sound measure in this regard. In addition, participants must ensure robust defences against attack. This will not be any easier in the period ahead. Nevertheless: if we are to reap the benefits of IT and online services, a substantial use of resources on monitoring and security is a price we must pay. Banks and Norges Bank must in the worst case deal with situations where all or part of the payment system has been put out of action. New technology may in the longer term usher in new contingency arrangements. Even so, to date no sufficiently adequate alternatives have been documented to allow cash to be written off as a part of the overall solution. 8  Appendix F in the CPMI-IOSCO principles. BIS central bankers’ speeches  5  Finanstilsynet and Norges Bank are now examining closely contingency preparedness for both electronic payment and banks’ contingency arrangements for cash distribution. Norges Bank shall ensure that society has access to cash as a means of payment. Banks can make cash withdrawals based on deposits in Norges Bank. The general public go to their banks to withdraw cash. The Government presented a bill for a new Financial Institutions Act before summer.

That said, climate transition is far from being the primary cause of the recent surge in energy prices across the world. Indeed, it has more to do with a combination of global factors: rapid demand recovery from the pandemicinduced recession, supply disruptions, geopolitical tensions. And in the specific case of Europe, the shock on energy prices is amplified by the run-up in wholesale electricity market prices, due to a shortage in natural gas. Page 9 sur 9 Afterwards, beyond our projection horizon, the transition to net zero might have a more significant impact on inflation, especially if it were to be disorderlyii. The net zero transition would then result into a negative supply shock, in particular if the capacity increase in alternative energy sources were too slow. In addition, the reallocation of demand involved by the transition might trigger relative prices changes in some sectors. The level of r* – the natural interest rate – could also be affected in two opposite ways: higher green investments will increase it; but a negative impact on productivity growth would reduce it. On many of these questions, it’s too early to tell. We need urgently more analytical work on the macroeconomic modelling of climate transition; more than ever, monetary policy will remain a judgment exercise, looking through temporary phenomena while averting lasting increases in inflation. Central banks will have to ensure that these shocks on relative prices do not result into a lasting increase in inflation.
Quite simply, there will in my view be more of it in the future. When I started in supervision in the late 1980s, we prohibited banks from disclosing their Basel I capital ratios, and we got exercised when they did nonetheless  BIS central bankers’ speeches  7  declare their ratios. That was a relatively simple regime. The Basel III regime is undoubtedly more complex and it is not about the single capital ratio. Capital requirements and buffers will vary between firms and over time, for good reasons. Banks and investors do complain about the lack of clarity about their future requirements in this regime. But that precision is not realistic. Within defined parameters the regime is designed so that buffers adjust in relation to risk and the impact of firm failure. Counter cyclical buffers can be varied over time depending on conditions, and banks can move between GSIB buffers as they change size and structure. Likewise, supervisory work, including stress testing, can lead our judgement about appropriate buffers to change. The regime is built this way deliberately to include a greater element of judgement by supervisors. My view is that this will inevitably lead to more transparency and disclosure, which is fine and to be encouraged providing it can deliver useful guidance. That means we have to work hard to deliver as much clarity as is possible in an uncertain world.

Regarding the tighter liquidity requirements (modeled as a 25% increase in the holding of liquid assets, combined with an extension of the maturity of banks’ wholesale liabilities) MAG’s estimations point to a median increase in lending spreads of 14 basis points and a fall in lending volumes of 3.2% after four and a half years. This is estimated to be associated with a median decline in GDP in the order of 0.08% relative to the baseline trend. An IMF study dating as of February 2012, reports similar results to MAG’s research, finding that in the absence of any monetary policy response, a permanent synchronized global increase in capital requirements for all banks by  1  For instance the EBA requirements and the Volcker Rule, within the Dodd-Frank Law in US. 2  Banco Bilbao Vizcaya Argentaria. 4  BIS central bankers’ speeches  1 percentage point would cause a peak reduction in GDP of around 0.5 percentage points, of which around 0.1 percentage point would result from international spillovers. Their findings show somewhat higher losses in EMEs as compared to AEs (0.74 percentage point loss in GDP in EMEs as compared to 0.46 percentage points in AEs) due to higher estimated spillover effects. The third point of transmission relates to development of financial markets EE’s. The development of deep domestic financial markets can improve the economy’s ability to absorb shocks and manage financial risks.
I experienced the interplay of public and private sector efforts in the early 1990s, in the wake of the commercial real estate and leveraged buyout downturn in the US Northeast. In the public sector, the supervisors pursued an aggressive program of remediation for troubled banks with three major elements. Because the problems at that time were simpler, the remediation program imposed by supervisors was easy to understand and it was effective. The three principal actions were: a troubled bank had to raise additional capital and strengthen its liquidity; it needed to fully identify its problem assets and exposures, isolate them and place them in workout; and it needed to develop a new business plan. At the same time, Congress passed the Federal Deposit Insurance Corporation Improvement Act, otherwise known as FDICIA in 1992; for its time, it contained a large number of provisions to guide supervisory and market practice. Its lasting contributions were the prompt corrective action framework escalating the intensity of supervision as capital levels fall in a bank culminating in the ability to close banks before capital is fully depleted and a management attestation about the quality of internal controls that foreshadowed SarbanesOxley. Today, however, much of FDICIA has been forgotten. The reason? At many financial firms, bankers struck the theme of “never again”. That conviction spurred them to identify lessons learned and institute stronger controls on commercial real estate lending and buyout lending and maintain them.

This reflects partly an expected technical reaction to the strong growth seen in the first quarter as well as dampening effects from global and domestic factors, including direct and indirect effects from high commodity prices. Against this background, it remains imperative to avoid broad-based second-round effects in wage and price-setting. In full accordance with our mandate, we emphasise that maintaining price stability in the medium term is our primary objective and that we are resolute in our determination to keep medium and long-term inflation expectations firmly anchored in line with price stability, thereby preserving purchasing power in the medium term and supporting sustainable growth and employment in the euro area. On the basis of our assessment, the current monetary policy stance will contribute to achieving our objective. We will continue to monitor very closely all developments over the period ahead. Regarding fiscal policy, budget plans for 2009 should fully reflect existing policy commitments. This implies that euro area countries with relatively large fiscal deficits need to specify much more ambitious and concrete consolidation measures, especially on the expenditure side. Countries that have already achieved their medium-term budgetary objectives need to ensure that they maintain sound structural fiscal positions. At the current juncture, the steady pursuit of stability-oriented fiscal policies would help to contain inflationary pressures and provide the required budgetary room for manoeuvre to allow automatic stabilisers to contribute to smoothing the business cycle.