samchain/econo-pairs-v1 huggingface dataset:
As the Eurosystem, we stand ready to take part in initiatives on issues falling within our fields of competence. I should like to end my remarks here. However, before I do, let me once again express my gratitude for being invited to give this lecture today. It has indeed been a great honour, in particular in view of Governor Zolotas’ long and distinguished career at the Bank of Greece. BIS Review 113/1999  6

There is also the question of what is the end-result of the merger in terms of market share. It may be necessary for more than two banks to get together in order to achieve a significant increase in scale. But the more banks that are involved in a merger, the greater the complexity of achieving strategic fit and cultural harmony. The attitude of the HKMA This reinforces the general point made earlier that successful execution of M&A is not an easy task. However, despite the potential pitfalls, the HKMA continues to believe that consolidation of the local banking sector is desirable and probably inevitable. This is for the reasons I have already mentioned. In general, it is difficult to see how a banking system like Hong Kong's, which is open to the forces of global competition, can resist the pressures that are leading to consolidation in other banking systems. In terms of Hong Kong's particular situation, while it is always dangerous to extrapolate current market conditions into the future, it does appear that organic growth is going to be more difficult to achieve than it was in the years before the Asian crisis. This lays greater stress on the need for smaller banks to find a strategy that will differentiate themselves from their competitors and enable them to earn an adequate return on capital. This will not be straightforward, particularly since a number of the potential business options such as wealth management involve heavy set-up costs that need scale to justify them.
And indeed – the financial crisis has led to a comprehensive response from regulators and policymakers across the world. Compared to the pre-crisis era, international banks will face: –  substantially higher capital requirements,  –  higher demands on the quality of capital,  –  a leverage ratio,  –  an international liquidity framework, with both short-term and structural liquidity requirements (I am proud to note that the Basel Committee, less than a week ago, published the final standard for the net stable funding ratio, NSFR), and  –  a regulatory framework for global systemically important banks (GSIBs). When you add to this work related to reducing RWA variability and disclosure, you end up with a pretty impressive list – a list that represents an unprecedented leap forward in terms of global banking regulation. So then, how do I see this? Do I claim to know how all these new rules will play out together? Am I confident that there will be no inconsistencies and contradictions? No, definitely not. We have every reason to be humble in this respect. Monitoring and assessing the effects of reforms will therefore be imperative. Will the reforms be costly for banks in the short term? Yes, they will. Will banks have to adjust their activities? Yes, a return to pre-crisis banking behaviour is neither appropriate nor viable. Do I therefore think that regulation has gone too far and that parts should be undone? No, not at all.

What impacts of cyber-criminality on financial stability? There is one question we must pay particular attention to: the virtual currencies. Recent operations against financial criminality have evidenced that new payment methods using the internet, and linking the virtual sphere with the real sphere, are a privileged way for cyber criminals to launder money. Virtual currencies have indeed recently drawn attention from authorities and from central banks in particular. Designed as alternatives to official currencies but with no guarantee of reimbursement, they cannot be classified as currencies because they lack legal tender and therefore do not infringe the central banks’ monopoly in the issuance of money. However, although they currently do not pose a significant threat to financial stability, they do pose serious questions in terms of money laundering and can be perceived as vehicles for speculative investments. Virtual currencies therefore bring challenges to authorities when it comes to regulating them. Our speakers on the virtual currencies topic could address such questions as: should the use of virtual currencies be prohibited to protect us from cybercrime and the expansion of money laundering or  2  BIS central bankers’ speeches  terrorism? Or is it better to set out the legal, regulatory and ethical issues of the virtual currencies? A round table dealing with financial sector solutions to curb new cybercriminals’ strategies will follow. To what extent do current guidance and principles deal with the threat of cybercrime? Can cybercrime be effectively deterred or only defended against?
Banks were therefore willing to approve credits in order to establish a relationship with such a profitable customer as LTCM. At the same time, the fund’s reticence about its risk profile made it difficult for creditors to form an accurate picture of the total risks. The banks were evidently unaware of the size of the credits that other players had provided, which by itself is remarkable. Neither did they fully appreciate what the large positions might have for consequences if the collateral had to be called. In other words, the banks ought not to have relied to such an extent on the collateral, in the form of securities, they had accepted for their loans. Lending of this type requires that even the banks obtain a picture of the borrower’s total situation. Had they done so in the case of LTCM, the outcome would certainly have been different. The problems last autumn also revealed shortcomings in current risk models and the management of certain types of risk. The banks must pay more attention to how the models work in the event of a pronounced change in market conditions. The markets moved to such an extent that historical estimates of co-variations ceased to apply. The crisis accordingly offers several lessons:  7  BIS Review 23/1999  •  In the light of what happened in international financial markets last autumn, all participants in the financial system must improve their credit policies.

The infrastructure must be constructed so that it does not exacerbate any problems that may arise. It needs to be capable of handling external shocks without any danger of collapsing. However, the severe strains that arise from time to time in the payment system tend to be generated not so much by hang-ups in technical and administrative systems as by problems for one or several of the participating banks. Problems for one bank quickly spread to the rest of the payment system and may generate a systemic risk. This risk arises if problems with credit or liquidity prevent bank A from completing its payments to bank B, which thereby has difficulties in paying bank C. Banks B and C are then liable to fail solely because bank A cannot fulfil its commitments. The risk obviously varies with the size of the payments in question; the larger these are, the greater is the potential systemic risk. The occurrence of systemic crisis threatens the whole or parts of the payment system, and if this ceases to function the entire financial system as well as the real economy will be affected. The crisis in Sweden in the early 1990s was associated with large systemic risks. Last autumn the U.S. Federal Reserve perceived considerable systemic risks in the domestic financial market. In neither of these cases, however, was there a full-blown systemic crisis. In the event of a systemic crisis, the payment system needs a large supply of credit.
I will also discuss what concrete steps can be taken, and are being taken, to further financial integration in the region. Expanded intra-regional flows of funds do potentially expose financial institutions to new types of risks. Hence I will argue that regulators need to be vigilant as the integration process proceeds. Here in Hong Kong, we are actively working to implement the latest supervisory standards. This should ensure that our banking system will be ready to take on the new challenges associated with greater financial linkages in the region. 3. But let me start at the beginning, namely, the definition of financial integration and what benefits it is likely to bring. 4. The fundamental characteristic of financial integration is that net savers in an economy can have access to any investment vehicle regardless of the geographical location of either the saver or the issuer of the investment product. Similarly, entrepreneurs seeking funds to finance capital expenditure plans can, in a financially integrated area, have access to sources of credit irrespective of geographic location. 5. Put differently, financial integration permits the efficient transfer of funds between economic units that save in excess of their investment plans to economic units for which the opposite is true. As a result, net savers will receive the highest return on their funds, and the investors will obtain credit on the lowest available terms.

Level 3 is ‘expert judgement’ — where a panel bank has insufficient Level 1 or 2 transactions, it estimates the rate at which it could fund itself in the unsecured wholesale funding market, based on an approved procedure. Further details are available at: www.theice.com/publicdocs/ICE_LIBOR_Methodology.pdf 3 Interim Financial Stability Report, May 2020 – Box 1 The continued importance of the transition away from Libor, https://www.bankofengland.co.uk/-/media/boe/files/financial-stability-report/2020/may-2020.pdf 2  3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  benchmark. Libor rates – and hence costs for borrowers – rose as central bank policy rates fell to support the economy.4  It is logical that credit spreads on bank debt (a measure of perceived risks in lending to banks) should increase during periods of stress. It is also unsurprising for banks to be attracted to the idea of being able to pass that cost directly onto their customers, but it does raise an important question:  Given this cost is passed directly onto borrowers through the interest rates they pay, how well does that rate actually reflect the cost of bank funding? There have been significant changes to the way banks fund themselves since the global financial crisis, making them more robust. Regulatory changes have significantly reduced dependence on the fickle shortterm unsecured markets that Libor measures.5 We have seen the benefits of those reforms through the first half of this year as banks have continued to lend and markets have remained open.
Svante Öberg: Monetary policy and productivity Speech by Mr Svante Öberg, Deputy Governor of the Sveriges Riksbank, at a meeting arranged by Danske Bank, Stockholm, 29 January 2008. *  *  *  Productivity is an important part of the equation when analysing the economy. In the long run, productivity determines most of a country's GDP growth and welfare. In the short term it is an important factor for how inflation develops. It is therefore important for the Riksbank to assess how productivity will develop in future. To create a better picture of productivity and its driving forces the Bank regularly works on further developing and deepening our analysis. For instance, we arranged two conferences on the theme of productivity last year, where the most recent analysis and research in the field was discussed. I intend to take up some of the insights from the conferences in my speech today. Productivity has gone from surprisingly strong to surprisingly weak Over the past 10-15 years inflation has been lower and more stable than before. This is a pattern that can be seen around the world and probably has several explanations. One explanation is that monetary policy has gained greater credibility. Inflation expectations have thus stabilised at a low level, which in turn has contributed to keeping down inflation. Another explanation is that globalisation, that is, increased trade and economic integration, has subdued inflation.

As structured, most contracts would allow the counterparties in another jurisdiction of a firm that had been put into a resolution to close out their contracts and to seize collateral covering their replacement value. For example were a resolution authority in Europe to put a cross-border bank into resolution, close-out by US counterparties could trigger a disorderly unwinding of the derivatives book undermining the effectiveness of the operation. The international regulatory community is working with the International Swaps and Derivatives Association to develop a revised protocol for derivatives which put in place a stay on close-out rights to permit the orderly use of resolution powers. Drawing up a revised standard for derivative contracts is just the first step; the next and harder step is effecting a move of the hundreds of trillions of dollars of derivatives onto a revised set of contacts. The way forward will likely entail the major dealers, the ‘sell side’, who together account for around 80% of contracts in the market, moving first. Structural reform There is one other, extremely important element of the agenda to end too big to fail – structural reform. Legislators and authorities worldwide have concluded that simply breaking banks up is not the answer. However, some jurisdictions – particularly the those with very large, international financial sectors – have concluded that, given the risks, structural reform measures are also necessary to ensure that the parts of banks crucial to the domestic economy are insulated and kept apart from riskier activities and can be resolved if necessary.
Too often, WAIFEM has had to run courses in econometric modeling and forecasting in order to bridge these gaps and it has resorted to improved monetary and fiscal policy formulation in the sub-region. Ladies and Gentlemen, Lessons in capacity building needs I have not made any pretensions to proffering exhaustive analysis of the problems of liquidity forecasting. I believe the expert faculty at your disposal will do just that. However, from the presentation thus far, it is clear that a lot of capacity gaps will need to be filled if member countries must conduct monetary and fiscal policies at the cutting edge of best practices. An articulation of the gaps is therefore in order. •  Capacity for analysis of monetary survey Staff in monetary and fiscal policy departments must be familiar with the intricacies of monetary survey – a consolidation of both the balance sheets of central banks and deposit money banks. The monetary aggregates are summarized in the assets and liabilities sides of the survey. The financial database for liquidity forecasting is contained in the monetary survey. •  Training in macroeconomic relationships The staff of the relevant departments of Central Bank and Ministries of Finance and National Planning Commission should be familiar with macroeconomic relationships and financial programming. To this end, an advantage should be taken of WAIFEM/IMF annual courses in financial programming. •  Training in econometric modelling and forecasting Familiarity with econometric methodology is critical to effective conduct of liquidity forecasting for sound monetary policy.

On behalf of the Board of Governors, I wish to register our profound gratitude to the Centre for Central Banking Studies of the Bank of England and the UK Treasury Department for collaborating with WAIFEM to build capacity for macroeconomic management in the West African sub-region. Our particular thanks go to Messrs. Simon Gray and Tony Smith, who represent these collaborating institutions at this course, for taking time off their busy schedules to share their wealth of knowledge and experience with us. 2.0  The need for liquidity forecasting  This course could not have come at a more auspicious time than now when all the countries in the West African sub-region are operating the indirect approach to monetary management and for that purpose most have instituted monetary policy committees (MPCs). MPCs bring together the major stakeholders in monetary and fiscal management with responsibility, among other things, to derive the quantum of liquidity for mop up from, or injection into, the economy through Open Market Operations (OMO). The overriding objective has been to keep inflation at low and stable level. In recognition of those objectives this course augurs well in filling the capacity gaps in liquidity forecasting as an essential input in the design of sound monetary policy administration in countries of WAIFEM member banks.
Also as with income, the net effect of monetary policy on measures of wealth inequality is negligible. The unequal prior distribution means, however, that monetary gains are heavily skewed, with the top two deciles accounting for 60% of total net wealth gains. Charts 14-17 look at the effect of monetary policy on income and wealth looking across the age distribution. They show some notable generational differences. In percentage terms, the income gains from looser monetary policy have been largest among the young, largely due to improved employment prospects. 28  Recessions typically generate sharper rises in unemployment among those who are less educated or less skilled, so it is also worth noting that the loosening in monetary policy during the crisis played an important role in limiting that effect. Older cohorts, by contrast, lost out in income terms due to lower interest receipts on their savings. By contrast, wealth gains have been evenly spread across the age distribution in percentage terms, with every cohort gaining. In money terms, the largest beneficiaries have been older age groups, the value of whose pensions and houses have been boosted by the policy-induced rise in asset prices. Looking at the oldest age group, this boost to wealth has exceeded their income losses by a factor of around 10. Looking at the effects of monetary policy by region, the benefits of monetary policy on incomes have been evenly spread in percentage terms (Charts 18 and 19). Monetary policy has not caused any significant widening in regional inequality.

Foreseeably, a phase of gradual growth will begin over the course of the coming year, based on a continuing positive contribution of external demand and on a progressive pass-through of the improvement in the world economy to business investment and employment. On average, however, 2010 might still see a moderate decline in activity, the result above all of the carry-over effects of the negative rates in 2009. The growth path in 2010 might also be affected by the VAT rise announced for next July, since this measure might bring forward  BIS Review 151/2009  3  some spending decisions to the second quarter, raising demand and activity in this period but reducing them in the second half of the year. This slow path of recovery in activity broadly matches the government's macroeconomic forecasts on which the State Budget for 2010 is based. The setting I have described highlights the significant challenges the Spanish economy faces. For the recovery to materialise and firm, the Spanish economy must first check and then absorb unemployment, restore health to business and household finances, rebuild confidence in the economy's productive capacity and reduce the large budget deficit. To achieve these goals, I reiterate that it is vital to adopt an ambitious agenda of reforms. The economic policies pursued since the start of the crisis have focused on countering in the short run a very adverse economic and financial situation, and there is broad consensus that the efforts made have contributed positively to this end.
The objective is to see not just how each individual bank copes, but also how, when you put together all their responses to the stress, the system performs as whole. And the scenario we have developed is deliberately not what we think is likely to happen. In the stress scenario the UK suffers a severe recession: a drop of 4% in GDP and a rise in unemployment of over 5 percentage points. Due to the current account position, interest rates have to increase. House prices drop by 35%. This stress is a severe one; a chain of events and challenges that is very unlikely. But it is one that could plausibly happen. Many of these things have happened in the UK before: in the last recession, GDP dropped by 7%, in the early 90s recession, the unemployment rate rose by almost 4 percentage points and interest rates had to rise to nearly 15%. To repeat, this is not a combination of events that we expect to happen or think likely. But we do want our banks to be resilient to this level of stress, to such an unlikely but plausible scenario. We do want the financial system as a whole to be able to withstand such a shock without a breakdown in the essential functions on which the economy depends. And if we find that individual banks or the system as a whole are not resilient we will need to consider how stability should be reinforced.

Gold plays virtually no part in our or other modern economies. But I do not think it was an accident that so many associated gold with the Bank. Gold remains for many a powerful symbol of stability. And stability is what the Bank of England is for. There have been major changes to the Bank over the last year or so. With the passing of the Financial Services Act in April last year, Parliament gave us very significant new responsibilities and wide ranging powers. More than ever now, stability remains at the heart of what we do. As we set it out in our new objective, the Bank’s core purpose is: “to promote the good of the people of the United Kingdom by maintaining monetary and financial stability”. I want to focus today on the financial stability part of that purpose: what are we trying to achieve and how do we go about it? And how does it fit in with the other main part of that core purpose, maintaining monetary stability – or to put it simply, controlling inflation? A little bit of history might help to provide some context. The Bank’s current arrangements for the setting of monetary policy date back to 1997. At that time, I was involved, at the Treasury, with the implementation of the reforms that gave the Bank of England operational independence on monetary policy. Our thinking in those days was very much dominated by the need for simplicity and clarity – “one instrument for one target”.