samchain/econo-pairs-v1 huggingface dataset:
Such a situation would no doubt lead in time to the public authorities also encountering a demand for euro services, perhaps ultimately leading to the euro being accepted to a greater extent than desired at present. If so, the "wait-and-see" alternative would finally amount in practice to the adoption of the euro. We can only speculate about the practical consequences of a gradual transition but it would probably entail increased costs as well as greater uncertainty for firms as well as society. If we intend to join the euro area in a not too distant future after 1999, the recommendation therefore seems to be: participate from the start and avoid unnecessary and costly solutions for firms as well society. Still a large need of information When talking about the monetary union we should be clear that in Sweden the debate about Europe and EMU is relatively new. Elsewhere in Europe the issue of integration has been discussed much more and for far longer. The debate in Sweden has been rather low key and not particularly widespread. So it is hardly surprising that people here are hesitant and want more information. That the discussion has now got going is all to the good. I was therefore pleasantly surprised by the submissions to the Ministry of Finance on the EMU report. Of 56 submissions, only 4 were negative about EMU.

It is clear from this economic integration that the fear of the region’s borders considerably compromising economic development cannot be confirmed. Rather, the diminishing, relative importance of intra-regional foreign trade and intra-regional cross-border direct investment is due more to globalisation and the ensuing increase in the influence of Eastern European and Asian economies than to weakening ties within the Upper Rhine region. Thirdly, the most notable aspect of the relationship between the region’s two currencies since the introduction of the euro in 1999 is its stability. That does not mean, however, that the issue of Switzerland’s ascension to the EU is of no consequence. Having its own currency allows Switzerland to conduct an independent monetary policy that is tailored to suit its needs. Finally, the economic policy can help the region thrive further by removing remaining hurdles, such as those in the labour market and in the exchange of goods and services (Cassis de Dijon principle). A well-integrated economic region is the key to a prosperous future. “Three nations, two currencies, one economic area” - the title of the paper - not only describes the reality, it also maps out the way forward. BIS Review 45/2005  1
As arid as these concepts can sometimes sound, they are crucial for shaping how this crisis will affect incomes and living standards over the medium-term. Equally important are issues of well-being, not least given understandable concerns about how the virus and lockdown are affecting our mental health. The background report for this event is timely in providing some early answers to these questions.1 Taken at face value, its conclusions are encouraging. Workplace happiness is, in general, higher and many are feeling a greater sense of workplace empowerment. At the same time, it is too early to be reaching definitive conclusions on what the long-term effects of these seismic shifts in how we work will be. It is also crucial to recognise that these changes have affected individuals in very different ways. For many frontline workers - from health and social care, to public transport and police – home-working has simply not been an option. Those jobs, and many others like them, have become both harder and more hazardous as a result of the Covid crisis. The report captures some of those important distributional differences, with happiness lowest among young people, black people, females and those in the worst-affected sectors whose jobs and incomes are most at risk. Even for those who are currently content home-working, there is a question about whether the benefits will persist.

According to the forecasts and commitment made by the ECB Governing Council, inflation is expected to ease towards 2% in 2025 as current drivers weaken and the effects of monetary policy operate on the economy. Yet the impact of monetary policy on inflation raises two questions: with what delay does it take effect, and through which channels does it operate? As we know, monetary policy transmission is not immediate. The effects of rate hikes take time to affect supply and demand and hence price-setting decisions, with economic research suggesting that transmission takes place on average over one to two years. In the present case, the time taken will ultimately depend on the decisions by consumers and businesses, which are influenced by two policy transmission channels: 6  First, inflation expectations. Economic decisions depend both on current economic conditions and expectations on the future state of the economy, and in particular the future level of inflation. If expectations on future inflation go up, investment and consumption decisions, and hence prices and wages, will be modified. By enabling economic participants to coordinate their decisions around a shared and credible inflation target (2% over the medium term), central banks contribute directly to ensuring price stability; Second, financial conditions and demand. Monetary policy acts directly on interest rates and therefore on financing for supply and demand. Through monetary tightening, the Eurosystem allows real interest rates to rise at different time horizons.
Figure 7 A time-varying capital requirement Tier 1 Capital  Countercyclical capital requirements  M inimum requirements  Upturn  10  Downturn  time  BIS Review 68/2010  When economic activity is strong, the capital requirement is high, and vice versa. This timevarying capital requirement has two functions. The first is to build up the bank’s capital buffer when times are good and then let this buffer decrease during less favourable periods. The second function is to dampen credit growth when times are good by increasing the capital requirement and thereby the bank’s lending costs. This increase in the bank’s lending costs in turn implies an increase in the interest rate margin – and thus the lending rate. In light of the discussion of “just the right level of regulation”, a time-varying capital requirement and other regulations varying across time may have certain advantages. Their more apparent connection with risk build-up may make them less costly than the alternative of introducing a constant higher “minimum requirement”. One objective of varying regulations across time is to affect credit growth through the interest rate margin. This creates an additional source of variation in the interest rate margin, which can be illustrated in the lending rate equation by adding an additional time index for the regulations:  itlending  it   t ( zt ) . An interest rate margin with time-varying regulations also implies another dynamic for the transmission mechanism and is more complicated than a one-off shift.

This “credit expansion externality” implies a market failure and may justify public intervention. As experience has shown that it is precisely the bursting of property bubbles that has played such a decisive role in several financial crises, there exists reason to believe that such credit expansion externality may be particularly great on the property market. According to one view, a central bank should try to counteract the increase of property prices and credit volumes by keeping the policy rate higher than would otherwise be necessary during the upturn. Central banks should lean against the wind, as this is usually described. The idea is that the increase in property prices and credit volumes will thus be smaller, but also that the decline, in return, will be significantly less dramatic (Figure 8). If the development of property prices and credit volumes becomes more balanced, it is also assumed that the real economy and inflation will be more stable. While growth will undoubtedly be somewhat lower in the upturn, it will, on the other hand, make it possible to avoid the deep recession that may be the consequence of a fall in property prices. BIS Review 68/2010  13  Figure 8 Leaning against the wind Property prices and lending Without ” leaning” With ” leaning”  time  One complication arising in this context is that it is not entirely easy to incorporate the risks that may be associated with the rapid increase of property prices and credit volumes into the normal work of forecasting and analysis.
But if haircuts are lowered even modestly, resilience is eroded. In the example, lowering haircuts from 20% to 5% raises the crisis probability by an order of magnitude, from less than 0.1 to almost 1. In other words, a hands-off haircuts policy runs a significant risk of systemic collapse if haircuts are procyclically trimmed during the upswing. To prevent this, policy makers could seek to control haircuts directly. In the example, significantly greater resilience could be achieved by imposing a haircut limit of 20%. Alternatively, policy makers could seek to lean against the pro-cyclical tendencies of the financial system as systemic risk increases. The other two lines in Chart 1 show different sets of activist policy intervention. Both require banks to build up larger liquid asset buffer stocks in the event of haircuts being trimmed. This lessens the need for banks to hoard liquidity, so reducing system-wide liquidity stress. The two policies differ in how aggressively they respond to such excesses – “weak” and “tough”. Either way, the effects are striking. Even the weak policy shrinks the probability of collapse by more than half, whatever the initial level of haircuts. And under the tough policy, the financial system is effectively inoculated against haircut-induced pro-cyclicality. It may be over-optimistic to think policy could eliminate the adverse effects of haircut-induced pro-cyclicality. For example, we have little theoretical understanding of how haircut-based policies might affect banks’ behaviour. And we have little empirical case law on the implementation of these policies.

Andrew G Haldane: Haircuts Remarks by Mr Andrew G Haldane, Executive Director, Financial Stability, of the Bank of England and member of the Financial Policy Committee, summarising a forthcoming paper in the Journal of Monetary Economics “Complexity, Concentration and Contagion”, 1 August 2011. *  *  *  The views are not necessarily those of the Bank of England or the Financial Policy Committee. I would like to thank Marnoch Aston, Benjamin Nelson, Sujit Kapadia, Vasileios Madouros, Priya Kothari and Andrew Mason for comments and contributions. During the summer months, I have my hair cut slightly shorter than during the winter months. This helps keep my head a little cooler in the summer heat and my ears a little warmer in the winter cold. Anyone who has seen them will know this is a smart strategy for my ears, to say nothing of my head. This strategy is explicitly counter-cyclical. When the temperature goes up, my hair-length comes down and vice-versa. I am not alone. National statistics show that expenditure on haircuts increases as temperatures rise. The financial system also makes choices about haircuts. The haircuts in question are the amount of collateral a borrower places with the lender over and above the face value of borrowing. But collateral haircuts tend to behave rather differently to personal haircuts. They fall when the financial temperature is increasing and rise when the chill sets in. This strategy is explicitly pro-cyclical.
Since its establishment in 2002, the Islamic Financial Services Board (IFSB) has introduced prudential standards for the Islamic financial services industry in the areas of capital adequacy, risk management, corporate governance and Shariah governance. Nine countries have implemented these standards and 19 more are expected to implement them within the next few years. The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has also contributed to the issuance of more than 80 standards in the areas of accounting, auditing, governance, ethics and Shariah for the international Islamic financial industry. Further progress on two fronts remains important. The first is to continue to evolve a more refined distinction within prudential and financial reporting frameworks to reflect the different nature and profile of risks under risk-sharing contract arrangements. The second is the need to accelerate efforts to further strengthen the infrastructural underpinnings for the development of the overall Islamic financial system. While the broad regulatory principles and standards developed in the aftermath of the global financial crisis can be applied to most Islamic finance transactions, a broad-brush application of these rules would limit the ability of Islamic financial institutions to implement the more unique risk-sharing contract arrangements. The stage of development of the overall financial system in which Islamic finance operates must also be considered to ensure that the effective application of global standards can be achieved without unintended consequences, given the prevailing associated constraints.

These adjustments have allowed us to learn how ON RRPs might be used to support the monetary policy objectives of the FOMC. Our testing has demonstrated that ON RRP operations can set a soft floor on short-term interest rates. That is, while some trades may occur below the ON RRP offering rate, the volume-weighted averages of most money market rates have been above the ON RRP rate on nearly all days (Figure 2). Data across a range of money markets provide evidence that changes in the ON RRP rate affected pricing for both unsecured and secured instruments and that the operations successfully set a floor on short-term interest rates. While market participants are aware of the success in producing a floor from such volume-weighted rates as the fed funds effective rate and GCF Repo Index®, the Desk has been also examining detailed transaction-level data for evidence that the ON RRP sets a floor on nearly all overnight money market transactions. 12  The payment of interest on reserves has been in place since October 2008, although the Federal Reserve Board recently requested public comment on proposed technical changes to the methodology for calculating IOER. The proposal intends to enhance the effectiveness of changes in the IOER rate in moving the federal funds rate into the target range when changes in those rates do not coincide with the beginning of a reserve maintenance period. Further information is available at http://www.federalreserve.gov/newsevents/press/ bcreg/20150413a.htm.
But this transition period will be part of the second phase of the negotiations and there will be no certainty about it until at least this autumn. Up to now, the EU and the UK are following different strategies and even use a different wording to refer to this transition period, “implementation period” being the term used by the UK. More specifically, the UK has welcomed the agreement on the transition period and has sent out the message that nothing will change up to the end of the “implementation period”. Further, to transmit certainty to institutions operating in the UK, it has committed to bring forward legislation, if necessary, to create temporary permissions in the “unlikely” event that the withdrawal agreement is not ratified. The EU has a more prudent stance and recalls that nothing is agreed until everything is agreed. In fact, legal certainty will only come with the ratification of the Withdrawal Agreement by all sides involved in the negotiations. In this context of uncertainty, within the SSM framework, banks are considered to be responsible for taking the necessary steps to obtain all authorisations required for them to carry out their activities in a timely manner to make sure that they can continue to serve their customers after 30 March 2019. They are expected to present credible Brexit plans and to use the possible transition period to implement their plans, not to delay planning. It is acknowledged that adapting to a scenario where the UK becomes a third country is challenging.

The concern about empty shells arises because, given the uncertainty about the future relationship between the UK and the EU and the cost of making organisational changes, a good number of institutions are studying how to adapt to Brexit minimising the changes to be made to their structures, management and business models. They may be considering making extensive use of the capabilities of their UK headquarters through the use of back-to-back booking models for risk management, maintaining shared governance structures, extensive outsourcing within the group or keeping the bulk of their workforce in the UK through the artificial use of branches in the UK. Empty-shell banks do not have risk management and governance structures that ensure a safe continuation of the local business or a smooth wind-down in crisis situations, and may present operational risks and financial stability issues for the countries hosting them. For this reason, when assessing booking models, the ECB and national supervisors will pay attention to whether banks have adequate: (i) internal governance and organisation; (ii) access to financial market infrastructures; (iii) booking and hedging strategies; iv) intragroup arrangements; and v) IT infrastructure and reporting. Lastly, another very relevant issue with regard to Brexit that I would like to mention is that of the transition period. 5/6  EU and UK negotiators have reached agreement that a transition period should be a matter of mutual benefit and have set the principles for the negotiation of a transition period between the date the withdrawal agreement enters into force and 31 December 2020.
The international community turns to the IMF in times of crisis, in part because it is an effective institution that performs the vital functions that are called for, but also for the very simple reason that the world has no one else to turn to. The IMF has played a pivotal role in presenting the initial lessons from the crisis, in providing finance to countries with temporary balance of payments needs, and in preparing the overall framework for the international policy response. When the good times return, we must avoid memory failure and remember these facts of life. The financial crisis has left a legacy. Large public and private debt, high unemployment and wide global imbalances continue to challenge the global framework for economic policy. Shaping the global governance structure In recent years, increasingly assertive non-statutory bodies have emerged in the area of international economic and financial collaboration, most notably the G20. The global crisis pushed the G20 into closer cooperation and at new levels. As an effective and powerful group, the G20 featured prominently in the broad international efforts to stabilise the global economy in late 2008 and early 2009. Without its prompt and comprehensive action, the consequences of the crisis would have been much worse. It is in the interest of all that the large and systemically important countries discuss issues of common interest. Their successful collaboration benefits not only themselves, but also the rest of the world.

It is an original member of the IMF and the World Bank, and is represented on the Executive Boards of both institutions together with seven other countries in the Nordic-Baltic Constituency. In line with its long-held policy of supporting multilateral institutions, Norway entered into a bilateral loan agreement with the IMF in the first half of 2009, when the IMF urgently needed to strengthen its lending capacity. Later in 2009, Norway agreed to raise its commitment under the New Arrangements to Borrow (NAB) and expanded its voluntary transactions in SDRs following the large allocations. It also committed to support IMF lending facilities for low-income countries. Thus, Norway has actively backed the multilateral responses to the global crisis, in large part stemming from decisions of the G20 at the London Summit in April 2009. Norway has a strong external and fiscal position based on large petroleum revenues. The lion’s share of the revenues is invested abroad through our sovereign wealth fund. 1  The membership of the G20 comprises Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Korea, Japan, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union. The G20 was formed as a new forum for cooperation and consultation on matters pertaining to the international financial system. It studies, reviews, and promotes discussion among key industrial and emerging market countries of policy issues pertaining to the promotion of international financial stability, and seeks to address issues that go beyond the responsibilities of any one organization.
At the same time, it extended across national borders. Just before its collapse, the three major cross-border banks that constituted the bulk of the banking system had over 40% of their total assets in foreign subsidiaries, 60% of total lending was to non-residents, 60% of income was from foreign sources, and over two-thirds of total lending and deposits were denominated in foreign currencies. How did this happen, and why was it allowed? I do not think we yet have the research and the consensus to provide a reasonably undisputed list of the main causal factors in this process; however, I think four factors will rank highly on that list. These are Iceland’s membership in the European Economic Area (EEA) in 1994, privatisation of the Icelandic banking system in the early 2000s in a manner that placed the major banks in the hands of risk-loving investment bankers, the global conditions of ample and cheap credit that prevailed in the years prior to the international financial crisis, and the tendency in Iceland both to adopt international and EU regulations without critical analysis of Iceland-specific risks and to base supervision to a significant degree on mechanical checks of adherence to those regulations. Let me expand a bit on the EEA part, as it is highly relevant to my topic. The EEA Agreement provides a legal and regulatory framework based on European Union Directives, including a framework for free movement of capital and provision of financial services.

But of late, we have noticed a worrying trend of FA representatives conducting or wanting to conduct other activities alongside providing financial advice. Let me give a few examples.   We have received queries from insurance agents who also want to be real estate agents. They want to be allowed to market and earn commissions from property transactions, often to the same customers they provide financial advice to.   Some FA representatives have even applied to the Casino Regulatory Authority for a junket promoter license!   MAS has received complaints against FA representatives who used their regulatory status to market questionable schemes in gold bullion. Some of these activities are clearly in conflict with FA activities. They risk undermining the interests of consumers. We will review the activities that FA representatives can conduct outside their advisory role, to ensure that representatives continue to put their customers first. Specifically, we will work with the industry on a list of activities that FA representatives should not engage in. To my mind, the activities with clear conflicts include:   money lending;    promoting junkets for casinos;    selling real estate; and    marketing investment products which do not accord safeguards to customers under the Financial Advisers Act. 4  BIS central bankers’ speeches  We will also review other activities that FA representatives engage in that are not in conflict but which may distract representatives from their professional focus.