samchain/econo-pairs-v1 huggingface dataset:
I am not going to talk today about what banks must do, which is a lot. I will merely give some examples of the tasks outstanding for the authorities. With regard to cleaning up balance sheets and levels of capital, the latest reform has been a very important step, but nothing in life is final. If the Spanish economy eventually recovers, it will have been more than enough, but if the economy deteriorates by more than expected, then capital will have to continue to be increased and improved if banks are to remain solid. Also, new instruments to increase credit to SMEs will have to continue to be tested. Some of these were discussed at a workshop held by the Banco de España in February in collaboration with the Spanish National Securities Market Commission (CNMV). At some point political decisions will need to be taken in this area. Another area of work is to continue to reduce the size of savings bank governing bodies in order to avoid any duplication when they have transferred their financial business to banks they have set up, which must be stock-exchange listed when above a certain size. A more substantial alternative would be a law requiring savings banks to cease holding significant stakes in credit institutions, within a reasonable period, and to invest as they see fit, perhaps obtaining higher returns, in order to continue to pursue their welfare aims.

More encouraging is the principle of better late than never, and the important thing is that Spain initiated the process of bank restructuring, now nearing completion, in 2009, that significant measures to reduce the budget deficit began to be adopted in May 2010 and that an ambitious labour-market reform was introduced in February this year. Spain has proven itself capable of making adjustments and reforms and this is essential to restore long-lasting upswings and sustainable growth. But this reassurance must not lead to complacency. What we have done so far, despite its huge importance, is not sufficient. And some of us have the thankless task of pointing this out. For example, when each financial reform has been approved it has always been argued that the result will be more credit, but although bank restructuring is certainly an absolutely necessary condition, we have always seen that it is not sufficient by itself to make credit flow again. We have to restructure the financial system so that, as in any process of industrial adjustment, the resulting banks can generate a healthy profit and be sufficiently solid to meet demand when the adjustment process is complete. However, credit will not improve until solvent demand increases. Hence the importance of other economic reforms to boost consumer and investor confidence, such as reducing the budget deficit and reforms, such as the labour-market one, to increase the economy’s growth potential.
(e) Payment systems The Governing Council endorsed a list of eligible securities settlement systems following an assessment of such systems against standards that had previously been laid down for their use in the credit operations of the ESCB. The list, which indicates those securities settlement systems that will be used by the ESCB and the conditions for their use, will be set out in the “General Documentation”, to which I have already referred. In addition, the Governing Council approved a report on the “Assessment of EU securities settlement systems against the standards for their use in ESCB credit operations”. It is intended to release this report during the next couple of weeks. BIS Review 72/1998

In the coming years, we will have to save more, even though the immediate concern is to ensure a recovery in demand. So the case for rebalancing is even stronger in the wake of the financial crisis and recession that followed the nice decade. To achieve a rebalancing we need to sell more to, and buy less from, economies overseas. To close the gap between exports and imports, more than half a million jobs will probably need to be created in businesses producing to sell overseas – compensating for fewer employment opportunities serving UK consumers or the public sector. Such an adjustment is unlikely to be smooth. Unless the fall in domestic spending coincides with the necessary increase in net exports, the path for the economy will be bumpy. As a result, it is dangerous to become fixated by the precise profile of quarterly growth rates. The sensible approach is to focus on the big picture. And the big picture is that total output is roughly 10% below where it would have been had the crisis not occurred. The conditions are in place to support a rebalancing at home: in particular the past depreciation of sterling will make UK-produced goods more competitive at home and abroad. But domestic spending has already fallen before a pickup in net exports. This highlights a key role for monetary policy: smoothing the adjustment process by providing temporary stimulus to demand while the rebalancing takes place, so reducing the risk of inflation falling below the target in the medium term.
Sabine Lautenschläger: Banking supervision – what next? Speech by Ms Sabine Lautenschläger, Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the European Central Bank, at the Banking Supervision, Resolution and Risk Management Conference during the 20th Euro Finance Week, Frankfurt am Main, 14 November 2017. * * * “What next in banking supervision and resolution?” is the title of this panel discussion. Well, before we discuss what comes next, let us take a quick look at what has happened in recent years. Since 2014, we have built European banking supervision from scratch. We have hired people, devised methods and set up processes. There are certainly still things that need to be improved, but by and large the system runs smoothly. As that is the case, there will be less construction work to be done in the years ahead. But this doesn’t mean that we will sit idly by, quite the opposite. The banking sector is facing a whole range of challenges, as you well know, and we have our part to play. Let me mention a few points – and it’s not a comprehensive list. There is the banks’ search for profitability and their need to cut costs and adjust their business models. There is Brexit. There is digitalisation and there are cyber risks. There are the Basel III reforms, which need to be finalised and then implemented. And there are efforts to further strengthen proportionality.

We will discuss with each affected bank individually why it is not fully provisioning for loans which have been non-performing for several years. Only if the results of this structured dialogue do not convince us will we consider Pillar 2 measures. We have followed this path before, for instance with our recommendation on dividend distribution policies and the Asset Quality Review. The addendum to our guidance on non-performing loans explains our methodology and is currently the subject of a public consultation. This consultation will increase transparency for banks, and the public, and it will help to ensure a level playing field. So, while it is ultimately up to the banks to deal with NPLs, we supervisors play a role too. It’s our job to address vulnerabilities in the banking sector. NPLs are probably the single biggest challenge – and of course they are a drag on the entire economy. And while I am convinced that the ECB has led the way with its work on NPLs, we are not the only ones who can and should take action. European finance ministers agreed, in July this year, on an action plan to tackle NPLs. Also, national governments can help to resolve the NPL problem by reforming their legal and judicial systems. In some countries, it can take quite a long time to recover NPLs in court. This is something that can only be addressed at national level by national governments. NPLs are a joint problem, and we need to make a joint effort to resolve it.
And these are the reasons why the recovery of the Spanish economy and employment will depend, more so than on past occasions, on a suitable budgetary policy mix and on its interplay with other economic policy tools, most particularly with supply-side and structural reform policies geared to improving employment-generation capacity, smoothing the switch to other productive activities and increasing the economy’s effectiveness and productivity. The cyclical juncture at which the Budget for 2011 has been drawn up is marked by the muted start of a phase of recovery which became discernible in the opening months of 2010 and which will foreseeably continue over the coming year. Nonetheless, exceptional domestic and external factors of uncertainty are clouding the outlook. So far, the recovery is proving very subdued and dependent on temporary stimuli linked to the government plans supporting spending and to the possible bringing forward of consumption and residential investment decisions by households and firms in the face of the rise in indirect taxes on 1 July. Moreover, funding conditions remain restrictive and both the public and private sectors have a pressing need to restore health to their financial position. In these circumstances it will be difficult for domestic demand to post the same figures it did in the first half of the year.

In the face of this crisis, it is more important than ever that we have a competent supervisor and a resilient financial system. 3/3  BIS central bankers' speeches
All markets should therefore stand open to Icelandic banks for the foreseeable future. However. it is not necessarily certain that these important preconditions will be the only factors at work at any given time. They do so while market conditions are normal but markets can be volatile, especially in a climate of global economic imbalances. The US economy is very buoyant and dynamic at present. This is to be welcomed. However, other signs are less encouraging: a low level of saving, a wide fiscal deficit and a current account deficit that repeatedly hits record levels. Europe has still not recovered and the recent rise in the ECB minimum lending rate has been harshly criticised by those concerned about stagnation and growing unemployment. All these aspects of our environment call for normal caution to be exercised, not least against the background of such rapidly growing and increasingly prominent forays by Icelandic financial institutions in the international capital markets. Under such conditions we can endorse the comment by my colleague, the Governor of the Central Bank of Denmark, who said a few days ago that it was just as important to observe the speed limit in economic policy as on the roads. Now I would like to allow myself a few words about housing issues.

Due to this distinctive feature of the Icelandic financial system, even the short-term benefits to households and business from a more accommodative monetary stance could prove to be minimal or even negative. However, a tight fiscal policy can contribute to a softer landing. Buoyant demand and soaring business profits have generated revenues for the Treasury this year far in excess of forecasts. A similar position could be on the cards in 2006. It is vital for both central and local government authorities to respond to this boost in revenues not by easing their restraint on the expenditure side, but rather by planning to achieve increased surpluses, which appears to be the aim behind the budget currently before Parliament. As announced recently, a change will be made to monetary policy implementation whereby interest decisions will be made on six fixed, preannounced dates next year. Three will coincide with the publication of Monetary Bulletin. On all these dates, the Board of Governors will announce its decision at a press conference, irrespective of whether the policy rate is changed or not, together with supporting arguments. This change will make monetary policy even more transparent. The Central Bank can thereby be said to have increased its formal interest rate decision dates from four to six, because the publication dates for Monetary Bulletin were already recognised as such in effect. Nonetheless, the Board of Governors can of course decide to change interest rates in between the preannounced dates if this is considered justified.
The changes I have just described show that market participants and departments responsible for financial control, and also portfolio and other managers, are often unaware of some of the risks to which their institutions are exposed. For all these reasons, the sound measurement of financial risks and methods for their effective management have become an absolute necessity. It is also important to make regular announcement of information on which market participants can base sound decisions about a bank’s financial standing and risk structure. It is well known that markets have a natural disciplinary mechanism which rewards banks that manage their risks effectively and penalize banks that show themselves to be risky. Everybody knows that the successful operation of this mechanism depends on the regular dissemination of information making banks and the banking system transparent and allows market participants to arrive at sound decisions. In an environment that is home to all these kinds of activity, the task of maintaining the stability of national and international banking systems has come to require new arrangements and dispositions in the banking sector. To lead the way for progress in this area, a committee was established, led by the Bank for International Settlement (BIS) and made up of central banks and banking supervisors from several countries. Almost all of the proposals that ultimately originated in the work of this ”Basle Committee” have been adopted for the banking systems of many countries, even though the Committee has no power to apply sanctions.

A sound economy must be based on well-functioning real and financial sectors, and there can be no doubt that, in times to come, we will have to give still more thought to reducing financial risks and keeping them from interfering with the proper functioning of the system. If competition, volatility, globalization, and stresses threaten to pressure the banking industry into resorting to bad risk-taking practices, the responsible authorities and supervisors must take whatever steps are necessary to restore financial stability. 5  BIS Review 41/1999
What the public sector can do, is to create good conditions for innovation, entrepreneurship and an efficient labour market. In an open world economy, it is not only companies that compete with one another; places, regions and countries all compete to attract labour, top competence and investment capital. Growth is a necessary condition for increasing welfare and it is only more work and better use of time/working hours (productivity) that create growth. Research and development, investment in innovations and increased efficiency that liberate resources for more productive purposes are a necessary condition for production to be able to manage to increase in value and to survive in competition with ‘low-cost’ countries. However, not everyone will be able to, or need to, work in branches exposed to competition. Large areas of private consumption, notably education, healthcare, care services, personal services, trade in non-durable goods, etc. benefit from local anchorage. Many of the new jobs will in future be in this field. Creating good conditions for the growth of the service companies is therefore an important element of a policy to manage the challenges of globalisation. Mobilisation of resources and the promotion of creativity usually assume cooperation between different interests, within politics, the business sector and academia. Sweden has well-developed traditions to build on, this applies in particular to the local and regional work on developing the business sector.

Many Asian central banks have brought dollars that are invested in US government bonds in order to prevent their own currencies appreciating against the dollar, which would reduce their competitiveness. China, in particular, has been strongly dependent on exports to maintain a stable increase in employment and thereby to avoid even higher unemployment. This has meant that the foreign exchange reserves in Asia have increased dramatically in recent years. The consequences of the saving have been that household consumption has been kept down and the increase in welfare has not been as large as it could otherwise have been. 10  OECD, Economic Outlook, No. 78, December 2005. BIS Review 35/2006  5  In my opinion, all of these factors depend on one another and altogether they provide an explanation of the US deficits and the global imbalances. Are the imbalances sustainable in the long term? Although opinions are divided as to the seriousness of the US current account deficit and the main explanations behind it, most analysts agree that there must be a correction sooner or later. Some claim that the sustainability of the US current account deficit is greater than many have earlier believed. They point out that there has been no correction so far, despite the fact that the deficits have remained high over a long period of time and that the dollar has even appreciated over the past year.
In order to fully understand the scope of these risks, I believe it is important to recall the organisational principles of our payment system, which are at the root of its efficiency and stability. a- The organisational principles of our payment system  The first is the dominance of currencies linked by a legally binding rule of convertibility at par: central bank or public money, and commercial or private money, issued by regulated financial sector players, first and foremost banks. The second is that only central bank money is legal tender and must therefore be accepted by all. The third is the complementary roles played by the dominant currencies: central bank money fulfills an integrating and anchoring function that guarantees the efficiency and stability of our payment system, while commercial money, and the services associated with it, which are traded on a highly competitive market, plays a key role in trade and the financing of the economy. 1/5  BIS central bankers' speeches  b- The risk of calling into question the foundations of the efficiency and stability of our payment system However, these foundations are threatened by the diffusion of innovations across the payments field, which has been sped up by the health crisis and social distancing, if no measures are taken to preserve them.

The work conducted under the aegis of the G20, in which the Banque de France played a leading role, has confirmed that a CBDC can bring benefits in this area. However, to fully exploit this potential, central banks will need to coordinate their efforts to ensure that CBDCs in different jurisdictions are interoperable. In its experiments on a wholesale CBDC, the Banque de France tested the main multipleCBDC arrangements identified in the literature. As described in the report published by the Banque de France on 8 November, these experiments showed the different ways in which CBDCs can be made interoperable and highlighted the benefits of a CBDC in a cross-border setting (e.g. more efficient correspondent banking, settlement security). Lastly, choices will need to be made so that the CBDC interacts smoothly with private initiatives such as the EPI project, in order to strengthen the integration of the European payments market. CONCLUSION To conclude, I would like to come back to a question that comes up regularly, about the future role of banks and commercial bank money in a world of stablecoins and central bank digital currencies, and respond with one conviction and one wish. My conviction is that, given the way in which investigations are being conducted into a digital euro, which I have just summed up here, it is unlikely that banks will be erased from a future payments landscape in which stablecoins and central bank digital currency dominate.
I strongly believe that Europe is in a unique position to lead the way in the cross-border implementation of Basel II and to make faster and more tangible progress than is currently possible on  BIS Review 66/2004  5  a wider international basis. We need to seize this opportunity with both hands, because it will not just benefit us in the EU but, I believe, also have a positive impact beyond our borders. We have two major advantages in this respect. Firstly, within the European Union, we have a set of single market legislation in the banking field, founded on harmonisation and mutual recognition. Furthermore, the division of supervisory responsibilities between our countries is embedded in this common legal framework and has been in place for some time. Secondly, from a practical perspective, we also now have the Committee of European Banking Supervisors - CEBS. This committee is directly charged with promoting convergence of supervisory practices and co-operation between supervisory authorities, and has a key role to play in the implementation of Basel II in Europe. For these reasons, I believe that we can - and must - be more ambitious and go further than others may be able to go in our efforts to ensure consistent implementation of Basel II and effective supervision on a cross-border basis. We should not only move faster, but also go deeper in our search for convergence.

In fact - in one of many examples of how Basel II seeks to reflect reality - the new framework draws on the tremendous advances that many firms have already achieved in quantifying their exposures to credit and operational risk. This reflects as well one of the Committee’s goals to build the new framework on sound risk management practices in use today and to provide sufficient flexibility for it to evolve with advances in the future. At the same time, the Committee knows that mathematical formulas and financial models are only as good as the assumptions they make. At best, therefore, they serve as supplements to our insight: they do not replace our need for expertise and judgement. Even Einstein warned of the dangers of confusing mathematical certainty with reality. He said once that, “As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.” Reasonable supervisors and bankers know that we cannot rely purely on the apparent mathematical certainty of models and formulas to make decisions for the uncertainty of the future. Likewise, some banks may engage in unique activities that are not captured in the minimum standards. To guard against overdependence on quantitative models, we have included qualitative provisions to ensure that strong risk management and internal controls are adopted throughout the organisation and to ensure the involvement of boards and senior management. The New Accord also stresses the importance of independent assessments and audits.