samchain/econo-pairs-v1 huggingface dataset:
With the increasing share of gold on the balance sheet, a secondary effect would be that the profit distribution to the Confederation and the cantons would likely be lower. This is because, unlike foreign currency investments, gold does not generate income in the form of interest or dividends, and any valuation gains on gold could not be realised because of the ban on sales. If, as the initiative demands, a ban on selling gold were to be enshrined in the constitution, the question would arise as to whether an immovable asset of this kind could even still fulfil the function of a currency reserve. Yet, the very purpose of currency reserves is that they are available quickly and without restriction when needed. This availability in a crisis situation is important, even if – as is currently the case – we are not intending to sell gold. The availability of gold reserves also plays a role with regard to their storage. Let me therefore take a look at the third component of the initiative, i.e. the demand that all gold reserves be physically stored in Switzerland. Decentralised storage in Switzerland and abroad is in line with the basic principles of due diligence in the conduct of business and business continuity management. It ensures that the SNB can in fact access its gold reserves, especially in an emergency. The same standards are applied to storing gold abroad as to storing gold in Switzerland. Our partner central banks keep clearly identifiable gold bar holdings for the SNB.

In that context of extended need for cooperation and coordination among regulators and supervisors, my last comment is related to the levers at hand to promote trust and reliance on foreign supervisors to prevent the development of a trend towards ring fencing and the risk of market fragmentation. Let me say first that I don’t think that promoting mutual trust and reliance among supervisors can move us to a world free of ring fencing. This is because it has its root and it is the result of the trade-off each regulator and supervisor has to face, in normal time and during crisis, between the need to preserve the stability of financial intermediaries or the financial system as a whole for which it is accountable and the need to preserve their competitiveness through their integration to the global financial system. For instance, for banks with cross-border activities, regulators and supervisors need to balance requirements for pre-positioning of capital and liquidity in their jurisdiction and the need to leave to those banks enough flexibility in the management of those resources at group level. And this without mentioning the development of idiosyncratic financial stability risk which might call for macroprudential approach and specific additional capital requirements at a country level, and might add to the complexity to maintain this delicate balance.
Of course, the costs of this regulatory edifice would be considered small if they delivered even modest improvements to regulators’ ability to avert future financial crises. The public policy question is – will they? In financial regulation, is more more or is more less? To begin to answer that, consider a set of empirical experiments on the performance of regulatory rules, simple and complex. (4)  Risk-weighting capital – simple or complex? The primary source of complexity in the Basel framework is granular, model-based risk-weighting. Heightened risk-sensitivity of the regulatory framework was intended to improve the detection of bank weakness. But if the financial environment is uncertain, complex risk-weighting may be sub-optimal. As when predicting Alpine avalanches or Wimbledon winners, simpler weighting measures may be more robust. This is a testable proposition. To do so, we take a sample of about 100 large, complex global banks, defined as those with total assets over $ billion at end-2006. 15 These large banks are likely to hold a diverse array of assets and to use complex, internal models to calibrate regulatory capital against these assets. So at least in principle, risks to these banks should be better captured by granular, risk-sensitive capital measures. Von Neumann-Morgenstern principles, with probabilistic-weighting, ought to apply. Consider the relative performance of two measures of capital in predicting bank failure during the course of the crisis: the Basel Tier 1 regulatory capital ratios with assets risk-weighted and simple leverage ratios with assets equally-weighted – a 1/N rule.

The relations and cooperation of the CBRT in the international scene go well beyond our bilateral dialogue with your esteemed Bank and cover also the financial level (swap agreements signed with certain countries), as well as the educational level (the establishment of an international central banking research facility and regional training centre, the İstanbul School of Central Banking). BIS central bankers’ speeches  1  I would like to thank the Bundesbank for opening a Representative Office in İstanbul, for signing the MoU agreement and for all the support and assistance you have provided us in diverse fields and at various platforms. Closing my remarks, I would like to welcome my friend and colleague, Dr. Andreas Dombret, a member of the Executive Board of the Deutsche Bundesbank, and thank him for his tremendous efforts in bringing this project to life. Now let us celebrate our achievements. Thank you for your attention. 2  BIS central bankers’ speeches
These levers, several of which have already started to be implemented, must be combined instead of being pitted against, which is too often the case, and implemented with perseverance rather than remaining fleeting declarations. We could then aim for full employment within ten years and finally bring our debt under control. Massive public debt is indeed the other major French challenge: after its legitimate increase in response to the Covid crisis, if current trends were to continue in the future, it would only stabilise at around 115% of GDP. This would not be sustainable, given the likely rise in interest rates, the need for ecological investment, and the possibility of a new crisis. We must therefore make it clear with regard to the many current proposals for additional spending or tax cuts that our country can no longer afford any further deterioration in its public finances. A credible debt reduction strategy is possible by combining three ingredients: time – over 10 years, French public debt could be brought below 100% –, growth, associated with the aforementioned reforms but which would not be sufficient, and finally better control and efficiency of our public spending. This spending is now not only the highest in Europe but of all developed countries. I am not implying reducing it, by means of austerity, which is so dreaded. But I am referring to slowing down its annual increase: discussing the quality of spending could also ultimately be useful.

Last but not least, efforts to further international collaboration will need to be supported by a solid platform for co-operation and information sharing amongst regulators. Formal agreements between regulators on the scope of cooperation and information sharing will be helpful in this regard. Singapore, as a full member of the IFSB, and a signatory to MOUs with various GCC countries, is keen to explore further avenues for cooperation and collaboration. Underpinning all these, of course, is the need to continue to broaden and deepen knowledge and expertise on Islamic Finance among regulators and industry players. An investors' education platform to promote risk awareness of Shariah compliant products will also serve to reinforce market discipline by raising awareness of the characteristics and risks of Shariah products, as well as boosting demand for such products. Conclusion – opportunities for Islamic finance I would like to end on an optimistic note by reiterating the opportunities available in Islamic Finance. While we must expect the global economy and financial activities to slow in the coming months, the long-term structural improvements in Asia and the GCC will continue. Between Asia and the GCC, for instance, total trade grew by 17% annually since 2000 to exceed $ billion in 2006. 8 Total cross-border capital flows between Asia and the GCC are also predicted to increase from $ billion at end 2006 to $ billion by 2020. 9 Even if only half of these projections are realised, growth is still sizeable.
But, I’d like to start today by delving a little deeper into an overriding theme that heightens my concerns – and that is the challenge of operating in a “global” business and regulatory environment, while at the same time navigating an increasingly “local” business and regulatory environment. Global vs. local The evolution of financial services over the past several decades has resulted in a truly global financial system. Advances in information technology and data management, as well as the development of robust capital markets, greater competition among financial firms and international trade, among other things, have contributed to a faster, more highly interconnected, and more available financial marketplace. The financial crisis confirmed that what was once a fragmented and siloed system was now truly global: failures in one jurisdiction quickly transmitted disruption to other jurisdictions. During the crisis, we clearly saw the interconnectedness of firms, the complexity of the international financial system, and the global impact of bank failures. Through this experience, we identified gaps and weaknesses, both globally and locally, and supervisors, regulators and lawmakers from around the world all set out to put a system in place to avoid a repeat of one of the most economically devastating periods in our history. There has been substantial effort on the part of global regulatory and supervisory bodies to address the weaknesses identified in the financial crisis.

As we strive to find the balance, it is important that we engage with you – the industry. And, it needs to be productive engagement. We need honest, frank and educated discussions, we need concrete examples, we need solid data, and we need to work together to gain a better understanding of a shared goal and how to get there. Thank you for your attention. BIS central bankers’ speeches  7
The overall assessment of inflation, based on an unchanged instrumental rate, accordingly pointed to a risk of the inflation target being exceeded as economic activity became stronger. Moreover, the high inflation expectations contributed to excessively high wage settlements in the spring of 1995. It was partly this—not the price effects from budget consolidation—that warranted the upward adjustments of the instrumental rate from August 1994 to July 1995. Transitory effects again conditioned the rate of inflation during 1996 and 1997 but now in a downward direction via falling house mortgage interest costs. The krona’s appreciation, in connection with the rapid enhancement of confidence in budget policy, also tended to lower the CPI. Had the Riksbank continued to reduce the instrumental rate—after the earlier cuts had had a transitory downward effect on inflation’s current rate—it would have tended to destabilise the economy. The Riksbank would, as it were, have been chasing its own tail, with interest rate cuts that became increasingly large and frequent. Inflation expectations and actual inflation would ultimately have risen, obliging the Riksbank to swing to a markedly restrictive stance. As interest rate increases also have transitory effects on inflation, the Riksbank would BIS Review 5/1998  -4-  again start to chase its own tail but now in an upward spiral. This illustrates how absurd it would be to raise or lower the instrumental rate as a response to the direct, but transitory, effects of the Riksbank’s own monetary measures.

Monetary policy transmission could not work properly without such a system. At the same time, it is equally important that the financial system itself is not a source of excessive risk for the rest of the economy. Our efforts are thus concentrated on increasing resilience by mitigating systemic risk. To ensure this, we work closely with the Financial Market Supervisory Authority, FINMA, the Federal Department of Finance and various international standard-setting bodies. A great deal has been achieved in our country so far. One of these achievements is the countercyclical capital buffer (CCB) 7, which has recently generated a number of headlines. As you know, the SNB has, for the time being, decided against proposing the activation of the CCB. There are two reasons for this. First, as I have already mentioned, we have observed some indications of a possible slowdown of price momentum in the market for residential real estate. Second, two other measures came into effect at the beginning of June – stricter capital requirements for mortgages and a revision of the self-regulation rules for mortgage lending. However, this is far from an all-clear for the real estate market – I want to underline again that the risk of a further build-up of imbalances followed by a significant price correction is  5  Cf. SNB press release, 27 August 2012. 6  Cf. SNB, Financial Stability Report, 2011 and 2012  7  Cf.
Maintaining such a sizeable portfolio will exert lasting downward pressure on term premia. Chart 5: Outstanding quantity of duration: PSPP portfolio and other investors (EUR billions, 10-year equivalents)  6 / 12  BIS central bankers' speeches  Turning to liquidity creation, the roll-over of the portfolio resulting from our reinvestment policy will also continue to preserve abundant liquidity over the coming years. In the absence of reinvestments, and assuming that targeted longer-term refinancing operations (TLTROs) are repaid at maturity, the level of excess liquidity would decline significantly over the coming years (Chart 6). Chart 6: Evolution of excess liquidity under no re-investment counterfactual hypothesis 7 / 12  BIS central bankers' speeches  (EUR billions)  Our reinvestment policy will contribute to maintaining favourable liquidity conditions for an extended period of time, which helps anchor expectations regarding the evolution of very shortterm interest rates at the deposit facility rate. Ample volumes of excess reserves ensure that the overnight interest rate stays close to the floor of the interest rate corridor, which is provided by the deposit facility rate. This, together with forward guidance on the expected evolution of our policy interest rates, reduces rate uncertainty across maturities and thus adds to the 8 / 12  BIS central bankers' speeches  compression of term premia brought about by the duration extraction channel. Of course, our portfolio – even if kept constant – will tend to lose duration over time, as the securities held gradually mature.

Chart 7: EONIA forward curves around June 2018 Governing Council (percentage per annum)  9 / 12  BIS central bankers' speeches  Chart 8: Standard deviation of three-month EURIBOR option-implied density in one year’s time (percent)  10 / 12  BIS central bankers' speeches  But let me turn to the next steps for monetary policy in the euro area. The latest surveys of market participants’ expectations regarding the most likely date for a first rate increase indicate that the “at least through the summer of 2019” formulation has been solidly internalised by market participants. Looking ahead, the rotation implies that our key policy rates and forward guidance about their evolution will become an anchor for monetary policy as the end of our net asset purchases is nearing. Our communication, and the rate path itself, will be calibrated to ensure that inflation remains on a sustained adjustment path. Our policy will remain predictable, and we will proceed at a gradual pace that is most appropriate for inflation convergence to consolidate. In addition, as proved in the past, our forward guidance remains an effective firewall to insulate the euro area from unwarranted tightening pressures originating elsewhere. This protection will be crucial to ensure that, as we move along the normalisation path, euro area financial conditions remain consistent with continued progress towards our policy objective. Finally, our APP portfolio and our unconstrained provision of liquidity will continue, for the time being, to provide an accommodative environment.
This effectively financed the inventory of dealers and other leveraged investors. Demand was strong. The financing tail came to wag the securities-lending dog. I doubt whether all asset managers understood the instruments they would have been holding outright in the event of a counterparty default. But that is only the beginning. Some asset managers used the cash generated by securities lending to buy risky assets outright. AIG’s escapade in and massive losses from the CDS and CDO business is well known. Less remarked upon, although public, 7 is that the insurance parts of the group – not the derivatives part – lost enormous amounts of money from securities lending, as they ended up reinvesting vast amounts of cash in securities. These investments had maturities of years not months, notwithstanding that a securities lending contract typically gives the borrower as well as the lender (ie the underlying owner of the securities) a right to terminate the transaction on demand. Again, I suspect that many asset managers did not understand their exposures. They had leveraged up, and exposed themselves to liquidity risk. Securities lenders like AIG were effectively assuming robust liquidity in the secondary market for their reinvestment securities. They were wrong. As the value of those assets fell, “securities lending” counterparties called their repos. In effect, to add to the problem of accumulating investment losses, AIG suffered a repo run – just like a bank run, in fact.

Rather, I am interested this evening in those instruments, structures, firms or markets which, alone or in combination, and to a greater or lesser extent, replicate the core features of commercial banks: liquidity services, maturity mismatch and leverage. In that spirit, I will say something about money market mutual funds; finance companies; Structured Investment Vehicles and Asset Backed Commercial Paper; and securities dealers. I will also say something about some markets. In particular, the securities lending market; but also how the RMBS/ABS market can combine with repo funding to create investment structures whose leverage and liquidity risk creates some of the brittleness of banking systems. It is not intended to be an exhaustive, systematic survey. And beyond those interested in the details of how markets work, it is the general message that matters. Because some common threads are clear. Notably, maturity and credit transformation. Each of the vehicles, instruments or markets I will discuss has been used to transform longer-maturity, less liquid assets (loans) into shorter maturity, more liquid liabilities. In each case we need to decide whether or not we want to set constraints around the operation of those forms of shadow banking. And we need some principles to guide us when, inevitably, we confront new variants of shadow banking in the future. I do not have all the answers to these questions, so my goal this evening is to push them up the agenda. As the Governor of the Bank has underlined, it is vital we debate the structure of the financial system.
Moreover with the introduction of a floor for risk weighted assets, small banks could compete with large ones on more similar terms. This is because small banks generally use standardised methods and not internal models. It is therefore a good idea to have a floor for how low the banks’ internally-calculated capital requirements may be in relation to the capital requirements for small and medium-sized banks. This is a reasonable balance to ensure that competitiveness is not disrupted. So the future regulation of the banks’ capital levels will probably contain a leverage ratio requirement, a risk-weighted capital requirement and a floor for risk-weighted assets. Some of you may wonder why so many different types of capital requirement are necessary and the answer is quite simple: because each individual requirement has its own strength that offsets the weaknesses in the others. Let me give some examples. As I mentioned earlier, a floor for risk weighted assets is needed to prevent the risk weights declining too much. In addition, a leverage ratio requirement is needed to limit the banks’ capacity to take on too much debt. If only a leverage ratio requirement were present, this could give the banks an incentive to move to higher  7 [12]  risk assets. To counteract this, we need the current risk-based framework that compensates with a higher capital requirement for higher risk assets. How much capital do the major Swedish banks have?

India started introducing Islamic financial products and services last year. It has launched its first Islamic stock market index on the Mumbai stock exchange and also licenced a non-bank financing company to operate on Shariah principles. As more countries cater for Islamic finance, the scope for cross-border Islamic finance increases. We are beginning to see more cross-border sukuk issuance within Asia as well as between the Middle East and Asia. Singapore has benefitted from this favourable global environment for Islamic finance. •  Singapore is the only non-Muslim majority country among the top 15 countries for Islamic finance. •  Islamic assets under management have surged nearly fourfold over the last five years. More than 40% of the Islamic assets in Singapore are managed by our asset management industry. •  15 banks are involved in Islamic banking, double the number five years ago. They hold about a third of the Islamic assets in Singapore. •  The rest of the Islamic assets are in outstanding sukuk and takaful. Singapore has had nearly 30 sukuk issuances to-date, with seven in 2013 alone. The prospects for Islamic finance in Singapore look bright. •  More funds continue to be established here, to meet demand from clients in Asia as well as from the Middle East. •  Several corporations have established sukuk programmes in Singapore to tap the market over the next few years. BIS central bankers’ speeches  1  We can grow faster when we grow together.