samchain/econo-pairs-v1 huggingface dataset:
This, of course, is the case in the UK with the establishment of the Financial Policy Committee of the Bank of England. Macro-prudential policy is still in its infancy. But the new macro-prudential machinery will, I think, play an increasing role in determining the future landscape for the financial sector as a whole, and banking in particular. Macro-prudential policy will be motivated by two rather different impulses. The first impulse is the need to establish and preserve resilience in the financial system as a whole. The crisis was what statisticians call a “tail event”; a highly improbable event statistically, that had not occurred for 80 odd years. But while such an event seemed in advance very improbable, very much in what statisticians call the “tail of the probability distribution”, it happened. And because the system did not have the resilience to weather it, the system failed. For macro-prudential policy makers, like the members of the Bank’s Financial Policy Committee, the FPC, systemic resilience in the face of improbable and incalculable risks is an ever present concern. Their colleagues on the Bank’s Monetary Policy Committee focus on charting the best short to medium term path for supply and demand in the economy that is consistent with the inflation objective. But the members of the FPC focus much more on the robustness and resilience of the financial system to events in the tail of the distribution, and to events that are difficult to place in any measured probability distribution – the so called “unknown unknowns”.

the interest terms at which  BIS Review 95/2001  1  financial institutions can borrow short-term capital from them, central banks can influence the volume and price of liquidity in the financial system. Central Bank interest rate decisions have an impact on short- and long-term interest rates, financial system liquidity, money in circulation and bank lending, exchange rates of currencies, other asset prices and, last but not least, market participants’ expectations about the future development of all these factors. All this, in turn, influences consumption and investment decisions of individuals and businesses, and thereby aggregate demand. The impact in individual areas can vary greatly from one time to the next. The new Central Bank Act The previous Central Bank Act dated from 1986 and was drafted over the period 1981 to 1984. It was a product of its time and did not reflect the perspectives that later established themselves. In the early 1990s the then Minister of Commerce appointed a committee to review the Central Bank Act, chaired by Professor Ágúst Einarsson, the current Dean of the Faculty of Economics and Business Administration. Following the committee’s work the Minister of Commerce proposed a bill to parliament for a new Central Bank Act which entailed sweeping changes from the 1986 Act, including what are now considered to be many of the necessary elements of central bank legislation. However, the bill was not adopted by parliament.
Our bold monetary policy response to the pandemic provides ample liquidity and acts as a backstop: the liquidity provided via the targeted longer-term refinancing operations (TLTROs) and the pandemic emergency longer-term refinancing operations (PELTROs) both of which are supported by collateral easing measures, in addition to asset purchases through the continuation of our asset purchase programme (APP) and the launch of our pandemic emergency purchase programme (PEPP). These measures endeavour to respect the principles I have just mentioned in order to be legally sound. First, all the instruments deployed in response to the pandemic are provided for in primary EU law (Article 18.1 of the Statute of the ESCB): to achieve its objectives, the ECB may operate in the financial markets by buying and selling marketable instruments outright, and may conduct credit operations based on adequate collateral. Second, the crisis measures taken pursue monetary policy objectives with due respect to the aforementioned “no bailout clause”. Without forceful action, the singleness of our monetary policy and the effectiveness of the transmission mechanism would have been put at risk. Third, the measures we have taken are temporary, targeted and proportionate in nature. We have disenfranchised ourselves from the previously self-imposed constraints so that these measures can address the uncertainty of the evolving crisis. They are also designed in such a way that they should preserve market functioning and price formation mechanisms.

Yves Mersch: Legal aspects of the European Central Bank’s response to the coronavirus (COVID-19) pandemic – an exclusive but narrow competence Keynote speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the European Central Bank, at the ESCB Legal Conference, Frankfurt am Main, 2 November 2020. * * *  Exploring the legal framework governing the ECB’s actions – scope and general legal principles When exploring the scope of our actions we are cognisant that the ECB has exclusive but narrow competence to define the European Union monetary policy for the purpose of maintaining price stability. Moreover, the European Court of Justice has consistently held that the ECB enjoys broad discretion in defining monetary policy within its mandate to pursue the objective of price stability. Discretion without limits increases the risk of arbitrariness. Therefore the Court has insisted on being able to control this discretion on the basis of the criteria that some refer to as the self-imposed constraints. Furthermore, we are bound to respect certain established legal principles. Our measures must be proportionate to the ECB’s legitimate objectives. They must not undermine the spirit of the “no bailout clause” and must also comply with the prohibition of monetary financing, which is its monetary policy counterpart. Last of all, the principle of an open market economy in which resources are allocated efficiently must also be respected. These are the constitutional red lines for our actions.
More than 6 pp of this change corresponds to downgrades within the investment-grade category, almost 5 pp to movements within the high-yield category, and less than 3pp to a downgrade from investment grade to high yield. Downgrades, which have decelerated in recent months, have affected to a smaller share of firms in comparison to the global financial crisis. A similar picture is observed both at the European and global levels. However, we cannot rule out another wave of rating downgrades if economic outlook deteriorates significantly. Past experience shows that extensive credit rating downgrades below investment grade in the corporate sector can generate adverse second-round effects that exacerbate crises. A recent study by the European Systemic Risk Board illustrates how important this vulnerability may be6. Specifically, it is estimated that investment funds and insurance companies hold the bulk of BBB rated corporate debt holdings, one-third of which are associated with sectors considered to be pandemic-sensitive. A large-scale downgrading of this debt to below investment-grade status would entail considerable potential losses for the entire European Union financial system. Credit rating agencies play a fundamental role in this process. Accordingly, when making their assessments, they need to take into account the long-term outlook for the corporations concerned and avoid excessively procyclical behaviour. Indeed, this time round, credit rating agencies appear to have been more cautious than in the global financial crisis.

In my remarks today, I will outline: Why climate change matters for the economy and for financial institutions, and; How we can and must work towards building climate resilience. Why climate change matters for the economy and financial institutions The financial sector is an important enabler of economic growth. The ability of financial institutions and authorities to identify and manage risks that can impair financial intermediation has direct consequences on the performance of the financial sector and the economy. These risks impact those we invest in, lend to, promise to cover and strive to create wealth with. Climate change impacts all of them, in increasingly significant and lasting ways. As we have seen in recent years, climate change is causing greater volatility in weather patterns. Globally, overall economic losses arising from natural disasters have been on an increasing trend for the past 40 years. In 2018, such losses amounted to USD160 billion – half the size of Malaysia’s economy, and among the costliest disaster year on record. Last year, Asia was the continent most affected by geophysical events, where typhoons, earthquakes, landslides and flash floods accounted for 43% of all events worldwide and for 74% of fatalities. While storms and droughts have long been familiar to this region, they have become more intense, more prolonged and more frequent. This translates into greater economic loss for governments, businesses and households – which in turn, can make its way into the financial system.
However, what is quite certain is that the size of structural change required will be large, comparable to what Thailand experienced during the economic liberalization of the 1980s and 90s. This change, almost by definition, will not be easy. If Thailand overcomes this hurdle, it will benefit from exporting more goods, possibly more hi-tech, to the region while becoming part of the regional supply chain and enjoying a greater range of imports. But while the domestic outlook appears positive, the global environment remains uncertain. The lingering euro debt crisis and fragile US recovery continue to weigh on global growth. Why? Current technical solutions do not address deep-rooted long-term problems. As a result, resolution has been delayed, adding to uncertainty. Moreover, the longer the delay, the more interest rates and fiscal stimulus in both the US and euro area will be pushed to new limits. The tightened policy space means that new shocks will be hard to manage and could derail the ongoing recovery. In my view, it appears that the global economy currently lacks the clear leadership especially in regards to getting the advanced economies out of the woods. Countries which had previously provided the leadership for global macroeconomic management through, for example, the International Monetary Fund, are now caught in the dilemma of solving their own economic problems versus choosing policy options for the greater good of the global economy. This is a separate issue deserving of its own discussion.

Mr. Singer said that while the central bank remains worried about the possibility of another “hiccup” in the eurozone, he is less concerned than he was before the ECB first indicated in May that it was preparing to take action. “The outcome was more positive than I would have expected five months ago, and things look less gloomy than they appeared before they (ECB policy makers) found some consensus,” he said. The eurozone’s persistent economic weakness has been the main concern for policy makers gathered here over recent days. Those concerns were heightened by a run of very weak data from Germany that indicated the economy may have contracted for a second straight quarter in the three months to September. Mr. Singer believes those figures from August that recorded large falls in industrial production, manufacturing orders and exports are not reflective of the underlying state of the German economy, but instead the fact that there was a larger number of holidays than usual taken during that month. He said the Czech economy, which has a similar focus on industry rather than services, had experienced similar volatility in output over the summer months. “I would be unpleasantly surprised if the weakness in Germany continues,” he said. With its benchmark interest rate already at 0.05%, the Czech central bank last November pledged to maintain the koruna’s exchange rate at above 27 to the euro, effectively setting the firmest acceptable level for the currency.
Eurostat, the US Department of Commerce and the Riksbank  BIS Review 18/2005  9  7.UND1X: outcome and forecast in the main scenario Annual percentage change  4.0  4.0  UND1X Inflation Report 2005:1 Inflation Report 2004:4  3.5 3.0  3.5 3.0  2.5  2.5  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0  0.0  -0.5  -0.5 -1.0  -1.0 97  98  99  00  01  02  03  04  05  06  07  Sources: Statistics Sweden and the Riksbank  Table 1. GDP by expenditure Annual percentage change  GDP by expenditure  2003  2004  2005  2006  2007  Private consumption Government consumption Gross fixed capital formation Change in inventories Exports Imports GDP at market prices  1.5 0.8  1.8 0.3  2.7 1.2  3.0 1.4  3.3 0.6  -1.5  5.1  8.0  5.8  4.5  0.2 5 4.9  -0.3 10.2 6.7  0.0 6.6 7.5  0.0 6.1 6.6  0.0 6.0 6.7  1.5  3.5  3.2  3.2  2.8  Sources: Statistics Sweden and the Riksbank  10  BIS Review 18/2005

Yves Mersch: Post-trade harmonisation and financial market integration in Europe Closing remarks by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the conference “Post-trade harmonisation and the integration of financial markets: a joint effort”, organised by the European Central Bank and the European Commission, Frankfurt am Main, 19 March 2013. *  *  *  Ladies and gentlemen, We have come to the end of today’s very intense programme. I now have the pleasure of sharing with you some thoughts on the main messages that have emerged in the course of today. Financial integration remains at the core of the European agenda. For the future of Europe, it is important that the Single Market project is taken forward with the full determination of all of us, even in times of difficulty. As President Mario Draghi remarked this morning, “in times of severe economic challenges, it is particularly important that our commitment to achieve a truly single European market is reaffirmed”. From the Eurosystem’s perspective, financial integration is of great importance. First, it is vital for the single monetary policy of the euro area: monetary policy is implemented through the financial system, which has to be as efficient as possible in order to guarantee a smooth and effective transmission of monetary policy impulses. A highly integrated financial system ensures that impulses diffuse homogeneously across the whole euro area. Second, financial integration has implications for the stability of markets. Integration results in increasing interconnections and cross-border activity.
The decline has accelerated in the first months of this year, however. The wide variations in prices for some imported consumer goods, in particular footwear and clothing, can have an unexpected impact on consumer price figures from one month to the next. In 2004, the fall in prices for some services made a strong contribution to keeping inflation low. The fall in airfares and prices for telecom services was particularly pronounced. Intensified competition in these industries has probably reduced operating margins and driven up productivity. In recent months, airfares have picked up again. In addition, the rise in food prices was very subdued in 2004. New entrants may have increased competition in this industry. These prices have also edged up recently. Low inflation in the Nordic countries Inflation has also declined in the other Nordic countries and is relatively low. Common factors have been increased efficiency in distributive trades and service industries and the low rate of increase in prices for imported consumer goods. In highly open economies such as the Nordic countries, we may have to expect somewhat wider variations in inflation than other countries. Euro-area inflation has remained at a higher level even though developments in activity are weak in the euro area. Stable inflation expectations Experience may indicate that inflation expectations remain stable even if inflation varies somewhat as long as the interest rate is used actively to moderate variations. Monetary policy cannot fine-tune economic developments, but it can avoid the largest effects when the economy is exposed to disturbances.

Inflation is low, but the indices are also influenced by temporary and erratic disturbances. Mainland fixed investment has also shown a gradual increase. In its monetary policy assessments in the previous Inflation Report, the Executive Board indicated that growth in the Norwegian economy has become more self-driven. Capacity utilisation is close to normal and rising. Moreover, the Executive Board has also highlighted several sources of uncertainty such as the considerable trade and balance-of payments imbalances in the world economy. BIS Review 38/2005  5
That could complicate monetary control if it causes banks to bid up for reserves, pushing up on short term market rates relative to official levels. Such effects – ingloriously known as ‘autonomous factors’ in central banking jargon – are nothing new. Increases in physical banknotes or government deposits, for example, also drain reserves – and scaling that historical variation by the sort of estimates for CBDC size shown in Chart 2 suggests that day to day variation in CBDC demand would not pose materially greater uncertainty (the orange bars in Chart 6). Sharper and less predictable inflows, e.g. during a period of stress – proxied in the purple bar in Chart 6 using the extreme tail of existing autonomous flows – could however drive rather larger volatility. Source: Bank of England, Bank calculations. 10  This issue, and others discussed in my remarks, are also well covered in this 2018 report by the Bank for International Settlements’ Committees on Markets and Payment and Market Infrastructures: Central bank digital currencies (bis.org). Bank of England  Page 10  Whether this matters for monetary control depends on the level of reserves at the point digital currencies are introduced, and the type of monetary control regime being operated. As of today, most major central banks use so-called ‘floor’ systems, with a level of reserves (injected via QE) that far exceeds most estimates of aggregate demand from the banking system.

Jacqueline Loh: Managing risks in an uncertain world Keynote address by Ms Jacqueline Loh, Deputy Managing Director of the Monetary Authority of Singapore, at the 13th Singapore International Reinsurance Conference, Singapore, 3 November 2015. *  *  *  Opening Distinguished guests, ladies and gentlemen, good morning. It is my pleasure to join you today at the 13th Singapore International Reinsurance Conference. I believe the theme of this year’s conference, “Managing Risks in an Uncertain World”, is one which will resonate with many of you, as insurers, reinsurers and brokers alike navigate the crosscurrents in the reinsurance industry, in search of profitable growth and better returns. In keeping with the conference theme, I would like to share a few observations on how the Singapore insurance industry can capitalise on the opportunities created by new risks, new client segments, and new markets in Asia. Too much capital finding too little risks Those of you who attended the recent Monte Carlo Rendezvous would have discussed extensively the challenging conditions in the current reinsurance market, which some have warned would be the “new reality”, or the “new normal”. We have seen how structural responses – winning market share from competitors, and bulking up through acquisition of rivals – are largely built on a zero sum game. This becomes a problem when the pie is not growing, as could be the case if the industry does not innovate and create uncontested space.
At this stage we also saw the establishment of the National Shariah Advisory Council (SAC), the highest authority on Shariah matters related to Islamic Finance. A tax neutrality policy was introduced for Islamic financial instruments and transactions which has benefited our players, consumers and the development of Islamic finance as a whole. The policy, which was later emulated by many countries around the world, ensures neutrality to tax treatment between Islamic and conventional financial products and services, a move which enhances the attractiveness of Islamic financial products as competitive alternative to conventional banking. The most recent development of Malaysia’s legal infrastructure for Islamic Finance was the enactment of the Central Bank of Malaysia Act 2009. Our Central Bank of Malaysia Act accords formal recognition to the dual financial system practised in Malaysia and our mandate to develop Malaysia as an international financial centre. The Act formally recognizes the SAC as being the highest authority on Shariah issues related to Islamic finance transactions, and the role of the SAC as a consultative body to the Malaysian judiciary system. Most critically, SAC’s rulings are binding on the courts and arbitrators. This referral system preserves the sanctity of Shariah rulings and the consistency in the interpretation and application of Shariah principles for Islamic finance transactions in Malaysia. For adjudication purposes, a dedicated judge in the commercial division of the High Court has been assigned to preside over litigated cases on matters relating to Islamic finance.

Let us identify the gaps and shortfalls and move forward from there. We must also hone the public sector’s ability to make incremental improvements and course corrections, as much as sweeping reforms. After all, correction mechanisms are what make governments smarter. Third, a strong and sustained focus on protecting and promoting the qualities of efficient and effective public institutions must define our path to becoming a high-income economy. Ultimately, attaining high income status must be commensurate with the governments’ ability to intervene less, but to intervene more smartly. As I bring my remarks to a close, let me be clear that although Malaysia’s journey to transition to a high-income economy will be challenging, it is not out of reach. The key is to have the right mindset and values so that we attain, not just the high-income target, but also the qualities of a developed nation and society. I look forward to an insightful discussion ahead about what it will take for us to cross the finish line. Thank you. 1 “Perspectives on Global Development 2019: Rethinking Development Strategies,” OECD. 2 Source: World Bank Enterprise Survey Data 3  Porter, M.E. and S. Stern (2002). “National Innovative Capacity,” The Global Competitiveness Report 2001– 2002. 4  Stoiljkovic, N. (2017). “The Paris Agreement is a $ trillion investment opportunity. How can we unlock it?,” World Economic Forum. 5 “Accelerating 4IR in ASEAN: An Action Plan for Manufacturers,” ATKearney (2019). 4/4  BIS central bankers' speeches