samchain/econo-pairs-v1 huggingface dataset:
If it is a subsidiary that is systemic in the host country, one solution might be for the central bank of the host country to grant emergency liquidity assistance to the subsidiary. However, it may not be possible to successfully ring-fence it, and the money is lost and the rescue mission fails. Similarly, the decisions in an emergency situation may also be distorted by conflicts of interests regarding deposit guarantee schemes and other crisis resolution measures. Through deposit guarantee schemes, bank deposits are partly insured in the event of a bank default, thereby protecting depositors from losses (up to some maximum amount), which in turn reduces the risk of bank runs that may jeopardise financial stability. Deposit guarantee schemes are thus a vital part of the safety-net for banks, apart from the central banks’ ability to grant emergency liquidity assistance. All EU-countries are required to have deposit guarantee schemes that are supposed to be financed by the financial industry, for example through fees to a fund. Typically such funds would be designed so that any deficits in the fund are financed by the banks from future fees. However, it seems doubtful that such financing would be sufficient in all cases. In the case of default of a very large bank, it seems more likely that the government would then have to intervene somehow. Either the deposit guarantee fund would have to borrow from the government, or the government would step in directly and provide some retribution to depositors on behalf of the deposit guarantee fund.

To bring you another example that is close to my home, the Danish bank Danske bank has significant operations in many parts of Northern Europe. With its network of branches, it is now the fifth largest bank in Sweden and is on the verge of becoming systemically significant, at least by some standards. There are also some banking groups that have a significant share of their operations outside of their home country. Interestingly, banks from some small countries such as Belgium and Austria are responsible for a large part of cross-border banking investments. It is banks that may have systemic relevance in several countries, or are perhaps systemic in one country but not in another, or which are simply very large, and complex, with geographically widespread operations, that pose the greatest challenges to authorities. Fortunately, there are not too many of these critical banking groups in Europe at this point in time. According to an ECB study, there are 43 banks with operations in three or more countries. Of these only nine are truly pan-European banks. Nevertheless, a crisis scenario in any of these may pose serious difficulties to resolve. In the current system, the organisational structure of a cross-border bank – specifically, whether the bank is organised according to a subsidiary structure or a branch structure – affects the distribution of responsibilities between the home country authorities and host country authorities.
I do not intend to go into the research literature, but just note that it entails investigating a number of effects and trying to weight them against each other: How effective the policy rate is in counteracting the build-up of financial imbalances, how effective other tools are and for how long they are effective – that is, how easily they can be circumvented7, how much of a negative impact a higher policy rate has on the rest of the  4 It is worth pointing out that in Sweden the boundary between macroprudential policy and supervision of indi-  vidual banks, microprudential policy, has never been particularly distinct because of the market structure we have, with a small number of large, dominant banks. If the stability of one of these banks is threatened, it also entails a threat to the stability of the financial system as a whole. To this extent, one can say that we in Sweden have actually been conducting macroprudential analysis for quite a long time. 5 Sometimes, the problem is turned round and asks whether macroprudential policy should help stabilise the business cycle. This is something I am sceptical of. 6 Caballero and Simsek (2019). 7 Conversely, a major challenge for macroprudential policy is how to prevent “leakage” from regulations in a particular sector to other sectors not covered by the regulations. Macroprudential policy measures can be seen as a shadow interest rate for a particular sector of the economy, which can be related to the policy rate set in monetary policy.

The tendency to leak will of course be higher the greater the tension is between the policy rate and the shadow interest rate that ensues from the regulations and the longer the interest rate differential lasts. 3 [21]  economy and how great the cost is of the crisis that is possibly avoided or mitigated. To investigate this, theoretical models and simulations in quantified models have been used. 8 It is perhaps not particularly surprising that whether it is considered a good or a bad idea to use monetary policy to counteract financial imbalances largely depends on the assumptions made and how the model is designed. My interpretation of the literature is that it is not leaning clearly in either direction. 9 Taking a step away from the research literature, what does it look like in practice? As academic research has not come to any clear conclusion, it is perhaps not so surprising that central banks have slightly different opinions. Many central banks, for example the US Federal Reserve, seem sceptical to using the policy rate to counteract financial imbalances, other than possibly as an absolutely last resort, if nothing else proves effective. 10 But there are also central banks that have made a “leaning against the wind” policy into an integrated part of the monetary policy set-up. Perhaps the clearest current example is Norges Bank. Norges Bank’s remit refers, on the one hand, to regulations and the supervision of financial institutions being the most important means of preventing shocks in the financial system.
Part of this borrowing is used to finance mortgages in Swedish krona and the foreign currency therefore needs to be converted into krona on the FX market. I do not intend to go into this in depth; merely to observe that this has further increased the complexity of the Swedish financial system in that the number of intermediaries has increased. At the same time, the banks have become dependent on the FX market functioning smoothly. Households’ high indebtedness could jeopardise the banks’ funding opportunities Swedish household debt has been rising in line with the increase in housing prices since the mid-1990s. The fact that households today are so heavily indebted means, for instance, that they are sensitive to changes in their personal finances and to disruptions in the housing market, for instance. If housing prices were to fall, this could affect the banks’ possibilities to fund Swedish mortgages. Let me try to explain why. Funding using covered bonds is closely linked to the housing market Around one half of the Swedish banks’ market funding comes from covered bonds. When the banks issue these bonds, they earmark collateral that is only for the market participants investing in bonds. The investors often require a particular extra buffer of collateral, and so the banks often earmark more collateral than is required by the regulations. It is primarily mortgages that are earmarked, and funding with covered bonds is therefore closely linked to developments on the Swedish housing market.

In Australia, the Hayne Royal Commission has detailed a litany of wrong-doing in the country’s banking industry, including forging loan documents and pushing customers into bad investments to meet bonus targets. I take some comfort that financial institutions in Singapore have generally been better behaved and are better regarded. But we have had our problems too: the mis-selling of Minibonds and other structured products; the manipulation by traders of financial benchmarks; and more recently the laundering of 1MDB-related funds through our banking system. We too can do better. Let me briefly suggest three things the industry and regulators can do together to strengthen trust in finance, with a focus on what we are doing here in Singapore. First, we must ensure that the financial system is not abused for illicit purposes – be it money laundering, tax evasion, or terrorist financing. In Singapore, we had a rude awakening in 2015 when it came to light how 1MDB-related funds were laundered through our banking system. MAS and the industry have worked hard since then to strengthen systems and processes to detect and deter illicit fund flows. Financial institutions have made significant strides in managing money laundering risks. Boards and management are more focused on addressing issues related to illicit finance. They have made the detection of money laundering risk a responsibility of front-line, customer-facing staff, and not just the compliance function. Many financial institutions have strengthened their remuneration frameworks to include financial crime risk management as a key performance indicator.
But there is no guarantee that major and lasting damage would not have been done by the types of dramatic exchange rate overshooting that have been witnessed elsewhere in the region. And it is unrealistic to expect that exchange rates would not have overshot, given Hong Kong’s openness and exposure to international capital flows. If Hong Kong’s peg had been abandoned last year, it is likely that the attacks on other regional currencies would have been even more dramatic and widespread, with negative feedback on the region and on our own performance. That Asia — including Hong Kong — now appears to be entering a recovery phase was by no means assured twelve months ago. We might well wonder what conditions we could now be facing had the crisis proceeded to yet another level, with widespread currency collapses along the lines witnessed in Indonesia. Other observers have argued that, from a longer-term perspective, fixed exchange rate regimes are inflexible and stifle growth. Again, I believe that Hong Kong’s experience belies this view. I would agree that, in the absence of the ability to adjust interest rates in response to cyclical conditions, output fluctuations can be larger than would otherwise be the case — at least in response to certain types of shocks. At the same time, though, the certainty generated  5  BIS Review 53/1999  by such a solid and clear-cut anchor reduces the impact of shocks to confidence and other factors that might undermine policy credibility.

Second, we need to look at skills development, job placements, and career pathways in an integrated manner. We cannot look at skills in isolation from job roles. And we cannot look at job roles in isolation from careers. In other words, skills are the engine that will propel career mobility – laterally or upward. This is why IBF took two important steps last year. In April, IBF began to facilitate the implementation of Professional Conversion Programmes for the industry. Then, in August, IBF launched, together with our tripartite partners, the IBF Careers Connect, providing career advisory and job matching services. 2/3  BIS central bankers' speeches  IBF is now the one-stop, single point of contact for all matters relating to jobs, skills, and careers in the financial industry. It is too early to tell if this new integrated approach will work, but the preliminary signs are promising. IBF has secured commitment from 19 financial institutions to reskill 4,000 existing finance professionals – to equip them with the skills necessary to take on new or expanded roles against the backdrop of transformed business activities. IBF has also provided career advisory and job matching services to more than 600 finance professionals whose jobs have been affected by change. Third, we cannot do business transformation without workforce transformation. But workforce transformation is a capability that financial institutions are only beginning to build up.
The stable path of inflation conceals a decline in the contribution of the energy component, as the impact of the past oil price hike fades, offset by a gradual increase in underlying inflation. Although measures of underlying inflation remain generally muted, they have been increasing from earlier lows. Tighter labour markets and the emergence of wage pressures are expected to continue to bolster underlying inflation. Given the underlying strength of the economy, we are confident that the sustained convergence of inflation to our aim will proceed even after a gradual winding-down of our 1/4  BIS central bankers' speeches  net asset purchases. At the same time, an ample degree of monetary accommodation will still be necessary to ensure a durable convergence of inflation over the medium term. Against this background, we have reduced our net asset purchases to € billion as of this month, and we continue to anticipate that net purchases will terminate by the end of the year.

It falls if decisive and correct policies are applied and low inflation and permanent price stability can be continuous if only these policies are carried on. We should not forget that inflation was not only the most important problem of our country for years but also kept us from seeing the existing problems in the society and in the economy. Attaining price stability will repair the damage of the economy caused by high inflation and will help us see other unnoticed problems hiding behind inflation. The key to erasing the traces of past period high inflation and to solving other problems of our country is structural reforms. Today, the process of erasing these traces begins with operation of dropping six zeroes from Turkish lira. I would like to underline that an important issue here. In some countries that had dropped zeroes from their currencies this operation was conducted as a part of the disinflation policies. However, in our country it is the consequence of the successful implementation of the stability program that has already reduced inflation considerably. Within this framework, YTL to be issued as of January 1st, 2005, depicts both the decline in inflation and our determination to achieve price stability. Before I finish, I wish to repeat a remark I made two years ago at the start of the fight against inflation. “Above all, people deserve to live in an environment where price stability is achieved.” Thank you for listening. BIS Review 63/2004  5
The entrance of other types of company than banks on the retail payment market 25 may result in major changes. These companies have large customer bases in several countries, giving them a platform for offering both domestic and cross-border payment services, which could provide them with a competitive advantage in on-line shopping, for example. 26 Even if we welcome the increased competition on the payment market, there is a risk that the development on the market will be too fast. When many players are moving rapidly in different directions, we risk losing the economies of scale of the old model of cooperation that has worked well in Sweden. This argues in favour of some type of central coordination, similar to the role adopted by the ECB. In Sweden, the Riksbank has a very important task, namely ensuring that coordination continues to work for payments in Swedish kronor in the future. Centralisation of payment systems At the Riksbank, we are therefore investigating how our systems can be adapted to better meet the increased demand for instant payments. However, if the Riksbank offers a system, this does not necessarily mean that the actual technical platform for settlement needs to be present within the Riksbank's premises or even within Sweden’s borders. The European Central Bank (ECB) is currently extending its infrastructure for payments. In the field of instant payments, it is in the process of developing a new technical platform called “Target Instant Payment Settlement” (TIPS).

But in a balance sheet recession there is also a risk that the policy rate will reach its lower limit. 9 The consolidation of the balance sheets may take a fairly long time, in some cases perhaps several years, and during this period there is a risk of the economy as a whole weakening. It is only when the participants in the economy are satisfied with their balance sheets that they will begin consuming and investing again, and everything returns to normal. Developments in the United States similar to Japan In Japan the policy rate was close to zero in 1995, but the private sector continued paying off its debts and it was not until around ten years later that balance sheets had been consolidated. It was primarily the corporate sector that paid off its debts and held back demand. Many analysts are now saying that the United States is undergoing a similar  7  See, for instance, Financial Stability Report 2005:1. 8  Koo, R. C., Balance Sheet Recession: Japan’s Struggle with Uncharted Economics and its Global Implications, Wiley, 2003. 9  Normally, an expansionary fiscal policy is considered the best recipe in a balance sheet recession, see for instance Eggertsson G. and P. Krugman, “Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach”, unpublished paper, Princeton University, November 2010. 4  BIS Review 164/2010  process, but there it is mainly the households that are struggling with balance sheet problems.
Regulatory environment The introduction and application of new technologies in the payments area have led to greater innovation, the introduction of new payment channels as well as new methods of delivering payment services more efficiently at lower costs to a wider spectrum of society and consumers. However, these have also brought on new risks. Regulators, providers and issuers have taken into consideration the risks that each of these various payment modes may have on the safety of the payment systems as a whole. Safeguards have to be put in place to instill public confidence in the usage of these innovative payment services or channels. In this regard, it is vital for regulators to impose prudential requirements on the providers and issuers of the electronic payment systems and instruments. The need for sound regulation and supervision is further exacerbated by the fact that criminals are constantly on the lookout to exploit the weakest link or point in the financial system. The risk of the new and increasingly popular payment mechanisms being used as conduits for money laundering and combatting the financing of terrorism (AML/CFT) activities is also a growing concern for central banks and financial intelligence units around the world. The increasing use of electronic payment systems, particularly electronic money, for making cross-border payments makes them vulnerable to exploitation for criminal purposes. Therefore, all parties involved in the payment value chain have to be vigilant to ensure that they are not exploited for such purposes.

Markets are also questioning the overall solidity of bank balance sheets in the aftermath of the financial crisis. Therefore, last Thursday the heads of governments of the EU member states agreed that the results of stress tests on their respective banks will be published in the second half of July. This decision can play an important role in fostering market confidence. In the event that these stress tests reveal cases where additional capital is necessary, recapitalization efforts will have to be undertaken swiftly. Institutional investors appear to be underweight in their exposure to European banks. This should prove helpful in lending support to potential capital raising efforts following a credible and transparent stress test exercise. Indeed, one of the reasons investors currently appear to underweight European banking stocks may very well  3  See IMF (2010): World Economic Outlook, April, chapter 1, p. 9. 4  ECB press release, 10 May 2010. BIS Review 87/2010  3  be related to the fact that there is insufficient transparency about bank balance sheet conditions in Europe. Credible stress tests can remedy this problem. Contrary to what some commentators suggest, financial markets also look beyond the shortterm. As a result, Europe’s authorities had to recognize that decisive and comprehensive longer-term fiscal programs are needed to put the EU as a whole on a sound fiscal basis. Equally, individual countries can’t forever live beyond their means.
Discussion as to the institutional arrangements that are most appropriate from the point of view of financial stability remains open. One key question is who should be responsible for the tasks of prudential regulation. Another, although perhaps slightly less important, is who should do the supervision. There are arguments in favor of different policy options, but any specific recommendation must take into account the experience and circumstances of each country. Until the crisis, the prevailing trend was for a body different from the central bank to be responsible for regulation and supervision whereas now the wind seems to be blowing in the opposite direction. In this context, one piece of practical advice is not to significantly change something that has worked well. In any case, the decisions that are taken may have significant implications for central banks’ institutional insertion, the scrutiny to which they are subject, and internal organization of their activities. These implications become particularly important if it is decided to give the central bank broad responsibility for financial stability. In this case, it may be advisable to adjust internal governance so as to ensure the necessary separation of the objectives of financial stability and price stability. Under any institutional model, coordination and communication between the different authorities with functions related to financial stability will always be very necessary.

29.04.2022  Presentation of the Action Plan against Financial Fraud* Ministry of Economic Affairs and Digital Transformation Pablo Hernández de Cos Governor  *iEnglish translation of the original speech in Spanish. First Deputy Prime Minister, State Secretary for Security, Chair of the National Securities Market Commission, authorities, ladies and gentlemen, good morning. The protocol we sign here today stands as a milestone in our efforts to enhance and reinforce action against potentially fraudulent offers of financial products and services. It comes at a particularly opportune time, with several factors giving rise to an increase in financial fraud, most notably growing digitalisation. Moreover, it is an excellent example of how a problem for citizens can be addressed far more effectively through collaboration between different stakeholders, be they public or private. In the case of the Banco de España, apart from the evident microprudential and macroprudential concern for the security and resilience of the supervised entities’ IT systems, the impact that fraudulent use of technology may have on the citizens and firms that use banking or credit services has been a concern of ours for some time. Such fraud can also come at a high reputational cost to the financial system, the proper functioning of which depends on mutual trust between supply and demand.