samchain/econo-pairs-v1 huggingface dataset:
Had a single European supervisor existed prior to the crisis, it could have spotted the unsustainable growth in private sector debt and the excessive leveraging of banks’ balance sheets associated with it – and hopefully taken early preventative measures. Mitigating the crisis What about the role of Banking Union in mitigating the crisis? Here I can see two key ways in which it would have been instrumental. First, it would have lessened the so-called “bank-sovereign loop” that drags down the fiscal sustainability of sovereigns. This loop is driven by bank bailouts or just by the expectation that sovereigns will have to bail-out struggling banks, which then increases borrowing costs for sovereigns and further drives up funding costs for banks. A Single Resolution Mechanism would avoid this by resolving banks rather than saving them and by making the private sector rather than the taxpayer pick up the bill. Moreover, any residual fiscal burden on sovereigns would be distributed across the euro area through the common fiscal backstop. Second, a Banking Union would have reduced the fragmentation in financial markets that holds back bank lending and economic growth. At present, market fragmentation is severely disrupting the transmission of the ECB’s monetary policy. In some countries, changes in our main interest rate are being passed on fully by banks; in others, because bank funding is  3  2  Schoenmaker, Dirk (2011): “The Financial Trilemma”, in Economics Letters, 111 pages 57–59. BIS central bankers’ speeches  tight, interest rate changes are being passed on hardly at all.

This would bring huge potential benefits for all Member States in terms of enhancing financing for the real economy, managing risks and pooling the resources of investors from European and elsewhere. 4  BIS central bankers’ speeches  Conclusion Let me now conclude. What we are aiming for in Banking Union is to create a system that is truly European and not just an inter-governmental framework for national authorities. We have seen that a Banking Union would have made a real difference during the crisis – and for this reason, there is no pressing reason to carry on with national arrangements that have not functioned effectively. I believe that this message has made its way into the SSM legislation. The elements are there for a truly European approach to supervision. And I hope that it will also translate into a strong Single Resolution Mechanism, to be launched as soon as possible. The SSM and the Single Resolution Mechanism are complements and we need progress on both these fronts. As Victor Hugo once remarked, “you can resist an invading army; you cannot resist an idea whose time is come.” I believe that Banking Union is just such an idea. But it now depends on us – as policymakers, as commentators, as citizens – how it is turned into reality. If we are anything less than wholly ambitious, then we will have learned nothing from this crisis. Thank you for your attention. BIS central bankers’ speeches  5
On one hand, a monetary policy that favors sound domestic price stability is consistent with macro stability in the medium term. This is a much sought-after objective in many economies of the region and must be protected. On the other hand, a flexible exchange rate policy is the best framework for dealing the situation we face. The reasons are twofold: first, in a context of high commodity prices and good external financing conditions, a floating exchange rate helps prevent the incubation of macroeconomic imbalances, 5 as Chile can attest from past experience. There are many examples of countries facing favorable external conditions, in which foreign exchange rigidity resulted not only in higher inflation but also in large current account deficits, causing major imbalances in the external accounts. Second, foreign exchange adjustments allow the economy to adjust to fluctuations in external conditions, such as those that have been so prevalent in the past several years. Volatility of the terms of trade and external credit conditions generates a constant need to adjust relative prices, which is more easily accomplished through flexible exchange rates. 6 Current developments in Europe are providing further evidence for this view. The benefits of flexible exchange rates are accompanied by costs, primarily due to the possibility of an increase in exchange rate volatility. This introduces further difficulties for making business and investment decisions.

The impulse to demand from these conditions does not depend essentially on monetary policy, which can primarily affect the trade-off between fluctuations in the nominal exchange rate and domestic inflation. Although monetary policy does have a toolkit to smooth shortterm exchange rate fluctuations without jeopardizing price stability – which under some circumstances could justify intervening the foreign exchange market –, the underlying trends of the real exchange rate cannot be dealt with using monetary policy. The second issue has to do with recognizing that this phenomenon has an impact on the competitiveness of certain export-oriented industries whose prices do not increase in dollars and whose domestic costs rise due to pressure on wages. Here we need to distinguish a couple of elements. For one thing, essentially the same phenomenon that is holding the copper price above its long-term level is causing high prices of other commodities, such as foodstuffs. This is why Chinese growth offers such enormous opportunities to countries with agricultural and agribusiness potential, such as Chile. In turn, Chile’s capacity to diversify its exports and avoid specializing in a handful of raw materials requires a substantial effort to promote competitiveness, which is the most critical tool to foster growth and diversification. Support for and training of human capital, increased market competition and flexible labor markets all stand out as important measures to improve competitiveness. All these dimensions point to the fundamental source of productivity gains, which is the creation and development of new enterprises.
Therefore, in order to promote solution innovation, we would organise Regtech competitions and challenges so that we can bring together investors, financial institutions and technology firms to innovate together. These can be showcases for solutions or approaches that address common pain points in the industry. Such events also have the potential to create lasting partnerships between banks and Regtech firms. 43. Next, “Regulators Matter” – so far, I think it is fair to say that the industry welcomes those circulars and guidelines on Regtech and underlying technologies that the HKMA has issued so far. No doubt, we have to provide further guidance to the industry going forward, in order to help the industry understands our policy stance. This would also reaffirm the HKMA’s commitment in this area. 4/6  BIS central bankers' speeches  44. But we note that a large proportion of banks operating in Hong Kong have their headquarters in other jurisdictions. And therefore differences in approaches to Regtech across jurisdictions can create significant challenges for those banks. We all know that complete alignment or harmonisation on such matters may not be possible. But we reckon that such challenges can at least be reduced if regulators from different jurisdictions engage in more active and ongoing dialogue and information sharing. In that process, of course the HKMA needs to also stay up to speed with international best practices. 45. The fourth area in our framework is “Talent Matters”.

We hope the White Paper that the HKMA is publishing today will encourage banks in Hong Kong to actively consider the challenges that can be solved with Regtech. We want to see banks embracing new technologies and proofs of concept, and ultimately adopting more Regtech solutions in the years ahead. 5/6  BIS central bankers' speeches  56. This is also an opportunity for the Regtech community to develop their solutions for the Hong Kong market. 57. I trust that our goals are crystal clear. We want to accelerate the adoption of Regtech in Hong Kong. And this will involve us working hand-in-hand with banks and the Regtech community, in order to realise our vision for Regtech 2025. 58. On that, I very much look forward to your support in our Regtech journey in the next few years. And I trust you would find the rest of the Fintech week both enjoyable and fruitful! Thank you very much! 6/6  BIS central bankers' speeches
The authorities carry a particular responsibility for monitoring financial stability and ensuring that the rules of the game are followed. The alternative to open securities funding is bank credit. This type of financing is traditionally based on a close relationship between banks and borrowers. Banks gain access to extensive information concerning the borrower and often exert influence over business decisions. This type of arrangement has long been preferred in many European countries as it was very difficult to obtain adequate information about individual companies and time-consuming to analyse the information that was available. This situation has changed with the advent of new information technology. Financial markets are now more effective in terms of channelling capital to investments that yield the highest returns. Germany is the country in Europe where banks and borrowers have been the most dependent on each other. In addition to providing loans, banks have large shareholdings in companies and big companies have a large stake in private banks. The tax system has locked in this cross-ownership. Owners have had to pay about 50% in taxes on capital gains on share transactions. The German government has announced that this tax will be eliminated from 2001. This is expected to prompt a restructuring, first in the ownership of German banks and enterprises and subsequently in production. The business sector is dependent on both a smoothly functioning securities market and banks with a close relationship to borrowers. Small and medium-sized enterprises are particularly dependent on the expertise and guidance offered by banks.

In order to distinguish between the parts of this story that provide lessons that are applicable to the rest of the world and those that do not, we need to get some of the facts straight, because to this day there are still several misconceptions floating around about what was done in Iceland during the crisis. The collapse of Iceland’s three cross-border banks in early October 2008 was the most noticeable event in the unfolding of the financial crisis. The combined balance sheet of these banks was 10 times Iceland’s GDP (see Figure 1), and their combined bankruptcy, measured in terms of balance sheets, ranks second in size in the international history of corporate failures, only after Lehman Brothers. And this happened in a country that ranks among the smallest in the world! We are still dealing with the complications that this entails, as can be seen in our overblown and unbalanced IIP and the controls on capital outflows. Figure 1  Source: Central Bank of Iceland. BIS central bankers’ speeches  1  Before the collapse, the banking system had expanded very rapidly, growing in just five years from a combined balance sheet of less than 2 times GDP at the end of 2003 (see Figure 1). Most of this expansion was cross-border, and a significant part of it was actually off-border, having very little to do with Iceland, as both financing and investment took place abroad. Around two-thirds of the balance sheet of the three cross-border banks was denominated in foreign currency.
There were also inadequacies with regard to credit granting. Large loans were made to new customers, new sectors and new geographical areas. This type of lending strategy is not wrong in itself, but it requires that the credit-granter has done his homework and is aware of the possible risks. In some parts of the banking world, they talk about credit-granting according to the church tower principle, i.e. that loans should be primarily made to customers living and active close by. How this principle was applied in connection with investments in Atlanta or Brussels is not easy to see. In addition, the banks contributed to their customers building up a comprehensive credit exposure in foreign currencies, regardless of whether or not they had matching income in their loan currency. As the krona exchange rate was high, some borrowers chose to take out loans in foreign currencies that had a lower nominal interest rate. The risks with this strategy became evident after the krona’s rapid fall of almost 25 per cent in six months, calculated from when the krona was allowed to float in November 1992. When the banks’ borrowers found that their debt amounts had increased by up to 25 per cent, calculated in kronor, many of them were unable to meet their obligations and the banks’ loan losses increased further. These actions by the banks are actually quite remarkable.

Lars Heikensten: Risk management and financial stability Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, at the Risk Management Forum, Stockholm, 17 February 2004. *  *  *  Why is the Riksbank interested in risk issues? Firstly, I should like to thank you for the invitation to come and speak at the Risk Management Forum. The Riksbank’s objectives are not limited to price stability; the Sveriges Riksbank Act also requires that we promote a safe and efficient payment system. We therefore have a natural interest in monitoring risks in the financial sector and that these are handled in a responsible, but also efficient, manner. As you know, this has not always been the case. At the end of the 1980s, risks built up in the Swedish banking system that were much greater than most people realised. The Riksbank was as unaware of the situation as others. However, when the crisis was over, we decided that we needed to improve our knowledge of the risks in the financial system and to closely follow their development. Later, we began to publish a twice-yearly report on financial stability, which focuses on the development of risks in the financial system. We were actually pioneers in this work and several central banks have since followed our example. Naturally, our endeavour has not been to ensure that the risks are as small as possible in every aspect.
Francois and R. Portes (Economic Policy 24, 1997) emphasising the importance of institutional assurance for investors. The European Commission also highlights the importance of this in its study published in May 2001. BIS Review 9/2002  3  annual GDP over 15 years. If the EU's GDP during the corresponding 15-year period increases by only 0.2 per cent a year thanks to the integration with central and eastern Europe, the enlargement would involve socio-economic gains. The remaining obstacles Having said this, there is no reason to believe that the enlargement process will be simple and painless, for either the new members or the old. Despite all of the changes the candidate countries have undergone over the past decade, EU membership will involve a period of major new upheavals. Many countries still have remnants of unprofitable state-owned industries that are propped up by central government finances. The banking system is still undeveloped – lending still corresponds to only a fraction of the countries' GDP, while in countries like Sweden it is roughly the same size as GDP. A properly functioning housing market and housing financing does not yet exist. The actual EU entry requirements involve extensive changes in legislation, administration and the implementation of regulatory frameworks, in addition to the weighty but necessary investments that are required to bring environmental protection and infrastructure up to EU standards. It is precisely because there are already so many requirements made of the countries, that the EU process should not further burden them with informal requirements and expectations.

Perhaps the biggest danger for the candidate countries is that they will come under too much pressure. One such risk is the exchange rate regime. From the point of view of foreign investors, the years immediately before and after membership run the risk of being characterised by unwarranted euphoria. The inflow of capital to equity and real estate markets in these countries can be so large that asset prices and real exchange rates become overvalued. When the capital flows then wane slightly and some capital leaves the countries again, this may come as a surprise. In connection with EU membership, with fixed nominal exchange rates, even within a fairly broad band, pressure on the exchange rate can arise. The best thing then is to have clear regimes with a clear target. Several of the large countries now have inflation targets with a floating exchange rate, which is not as exposed to speculation attacks. Other smaller and very open candidate countries have currency boards in euros and have shown that they can adapt flexibly to both shocks such as the Russian crisis and rapid fluctuations in investment flows. The choice of an exchange rate regime can affect flows of foreign capital. But it does not in itself change the pressures for real appreciation and depreciation created by large capital inflows or outflows. However the actual effect will vary depending on the regime.
13 Just as when we based our forecasts on market expectations, publishing our own interest rate forecast does not involve any commitment from the Riksbank that the repo rate will then actually follow this path. It is important to bear this in mind. A further argument that has been put forward against publishing a forecast for the development of the repo rate is that the financial markets, if given access to the central bank’s views on the interest rate level in the slightly longer term, would stop trying to find other information that is significant for longterm interest rates. The central bank would then lose an important source of information, namely how market prices reflect the markets’ views on economic prospects in the longer term. Neither do I find this argument particularly convincing. The financial market agents know that we live in an uncertain world and will continue to look for other sources of information on long-term developments via other channels than the central bank and make independent assessments. What defines a good interest rate path? When we make our forecasts of the repo rate, we must of course consider what would be a wellbalanced monetary policy given the developments we foresee. What is meant by a well-balanced monetary policy? Let me answer this by briefly summarising how we describe our monetary policy strategy in the special document on monetary policy published in May 2006. 14 Our new assumption for the interest rate does not change the way we conduct monetary policy.

I would like to emphasise once again that this is a question of a forecast for the future development of the repo rate. Forecasts are, as we know, always uncertain and new information and changed circumstances can lead to assessments changing. The new interest rate assumption does not entail any commitment on the part of the Riksbank that the repo rate will actually follow a particular path. Nor does this involve a new way of conducting monetary policy. BIS Review 6/2007  5  When we chose to replace the assumption of a constant repo rate with an assumption based on market expectations, we took a large step towards increased openness and clarity. Now we are taking a further step in the same direction. I hope that this will enable us to become even better at explaining to the general public how we reason when making our monetary policy decisions. Thank you! List of references Alsterlind, J. and Dillén, H., “Monetary policy expectations and forward premia”, Sveriges Riksbank Economic Review 2, 2005. Archer, D. (2005), “Central-bank communication and the publication of interest rate projections”, article presented at the Riksbank’s conference “Inflation targeting: implementation, communication and effectiveness”, June 2005. Blinder, A., (2006), “Monetary Policy Today: Sixteen Questions and about Twelve Answers”, paper presented at the Banco de España Conference on “Central Banks in the 21st Century, Madrid, June 8-9, 2006. van der Cruijsen, C. and M., Demertzis (2005).”The impact of central bank transparency on inflation expectations”, Working Paper no. 031/2005, De Nederlandsche Bank, 2005.
In particular, capital, with its industry-wide vantage point, can influence stakeholders to invest in the necessary infrastructures to support an open data ecosystem, which in return benefits investors in the long run. This could help overcome individual inertia and align towards ecosystem-wide benefits, or a win-win for all. In advancing the development of an open data ecosystem, industry players need sufficient space to test and innovate. We are fully supportive of a market-led development approach in this. Eventually, convergence on standards could emerge that are fit for purpose. To this end, the Bank is fully supportive of industry collaboration in leading this front, which will also enable more use cases and fintech innovation. The Bank will still facilitate efforts to develop common standards for high-impact use cases identified by the industry, as well as key building blocks for data sharing in the financial sector. The key building blocks include consumer consent mechanisms, ethical use of data, liability management framework and dispute resolution mechanisms, as well as oversight arrangement for non-banks. Examples of high-impact use cases that stand to benefit from wider industry collaboration include promoting greater financial inclusion via the development of alternative credit scoring models, as well as consumer empowerment via more efficient financial planning. On the part of the authorities, having regulatory clarity is important to dispel any adverse perception or fear of investing in innovation. To this end, we will work with other financial regulators to streamline and refresh approaches to ensure continuously effective, relevant and proportionate regulations.

It could also similarly arise from a determination that there is no realistic prospect of a successful auction to return to a matched book or that the CCP’s own rules to allocate losses or tear up contracts are either not yet available to it or will undermine financial stability or the objective of continuity through full tear-up and closure of the service. So – in line with the Key Attributes – it needs to be possible to place the CCP into resolution before its loss allocation rules are exhausted. These are all examples of entry into resolution caused by clearing member default. But nondefault losses could also bring a CCP down and it is certainly possible that a breach of a CCP’s regulatory requirements with no reasonable likelihood of replenishing its capital would present a trigger point for intervention. I have mentioned the incompatibility of full-tear up with the objective of continuity. But an intervention by a resolution authority cannot by itself guarantee a successful auction. To do so, may still require partial tear-up and forced allocation and these would seem to be necessary tools in any resolution toolkit for a CCP. How losses are then allocated upon tear-up again  4  BIS central bankers’ speeches  goes to the question of the timing of intervention and whether the tear-up takes place before the resources available to a CCP have been exhausted or after it.