samchain/econo-pairs-v1 huggingface dataset:
The first such ‘sustainability-linked bond’ was issued by Enel, an Italian electricity producer, and offered a ‘step up’ coupon penalising the issuer if it failed to meet a specific target for the share of renewable energy in its installed capacity. Such bonds are not a complete answer to the concern of greenwashing: the degree of challenge in the target remains the choice of the issuer, for example, and the use of funds cannot be traced to specific projects in the same way as use of proceeds bonds. But they do illustrate the type of innovation now underway in capital markets. Chart 8: Total green bond issuance  Chart 9: Corporate green bonds outstanding by nationality of issuer  Source: Climate Bonds Initiative (CBI) data (including all selflabelled green bonds aligned with CBI’s Climate Bonds Taxonomy and with at least 95% use of proceeds financing or refinancing green/environmental projects) and Bank  Source: CBI data and Bank calculations. calculations. The billion dollar question, of course, is whether the market is yet discriminating in favour of climate-positive investment, and away from the reverse. There are some encouraging signs from recent primary issuance: green bonds issued by European companies in September priced on average nearly 10 basis points inside existing curves, and tighter than other non-green issuance over the same time period (Chart 11). That’s real money: for example, the average -15bp new issue premium on VW’s recent € green bond issues will save the firm around € a year in interest costs compared to a conventional bond.

3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  Insurers – with one spectacular exception, AIG – generally fared relatively well during the crisis. UK insurers’ balance sheets were in general more robust, and they did not hold many of the same assets that proved so toxic for our banks. Capital resources within the insurance sector did take a hit, but not a fatal one, though of course they benefited from the bail-outs of the banks. But a revolution was a necessary step to achieve greater consistency in insurance regulation across Europe. 3  The UK had already laid the ground for a market-consistent capital regime, through ICAS . But despite this, as the industry knows all too well, the introduction of Solvency II ended up being a rather long and exhausting revolution. There are some bugs we need to iron out (on which I will say more later), but the core elements of the regime are sensible and we will continue to work with the industry to make a success of it. Moreover, across both banking and insurance we now have a robust accountability framework for senior managers, reduced scope for dangerous pay structures, and more effective board governance. In no small part this is thanks to the pioneering work of the Parliamentary Commission on Banking Standards, leading to the introduction this year of the Senior Managers and Certification Regimes. The revolution is over  Stepping back, where are we in the course of this revolution?
Starting positions, in terms of equity and credit quality, were already divergent. Moreover, in a crisis such as the current one, in which the pandemic is affecting different regions and sectors of activity in different ways, the worsening of banks’ solvency will foreseeably hinge on their degree of exposure to such regions and sectors. The current situation: the importance of maintaining stimulus measures and targeting them more specifically The current macroeconomic setting is characterised by an incomplete, gradual and uncertain recovery. Indeed, as a result of the restrictions on mobility that had to be applied in the first quarter, a further decline in GDP in this period cannot be ruled out. This would mean that, at end-March, GDP would still be slightly over 9 pp below its pre-crisis level. In any event, we should acknowledge that the development of effective vaccines against the virus has contained some of the risks to the economy. And, in turn, this has equipped the authorities with what is, in fact, also the best economic policy tool available to usher in the recovery: the roll-out of vaccination programmes that allow for the progressive lifting of the restrictions on economic activity. In this situation, retaining the exceptional support measures for the economy is warranted until the recovery firms. This support is also crucial for preventing the crisis from being compounded by a financial component that would deepen and lengthen it.

This translates into a return on assets (ROA) of -0.21% (down 72 bp on the figure of 0.51% recorded in 2019), which rises to 0.33%8 if the negative extraordinary adjustments applied during the year in three of the system’s main banks are stripped out.9 Notable in these results is the increase in impairment losses, of over 50%, which entailed provisioning that was € billion higher in 2020 than in 2019.10 As to Spanish banks’ external business, the effects were also adverse given the global nature of the crisis. This was the case both for the total volume of lending and its contribution to the consolidated result, while the depreciation of emerging countries’ currencies also came into play.11 In any event, the weight of external business in the main Spanish banks’ ordinary net income has increased. Hence, without taking into account the  5  However, behaviour was uneven in firms (with an increase of 6.6%) and in households (where there was a decline of 5.6%). 6 See, for example, the October 2020 Bank Lending Survey in Spain. Menéndez-Pujadas and Mulino (2020) summarise the results of the survey for the participating Spanish banks. 7 See D. Rodríguez-Miera and R. Vegas (2021), “Impact of the dividend distribution restriction on the flow of credit to non-financial corporations in Spain", Analytical Articles, Economic Bulletin, 1/2021, Banco de España. 8 The return on equity (ROE) stood at -3.1% (10 pp down on the figure of 6.9% recorded a year earlier), and at 4.8% if extraordinary adjustments are stripped out.
Household assets and debts in Sweden Percentage of disposable income 700  700 Total wealth Real wealth  600  600  Liquid wealth  500  500  Debts  400  400  300  300  200  200  100  100  0  0 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11  Note. There is no regular publication of official data for total household wealth and its components. The series are based on the Riksbank’s estimate of the households’ financial and real wealth. Real wealth is the households’ wealth in housing. Liquid wealth mainly consists of household assets in cash, bank deposits, bonds and shares. Sources: Statistics Sweden and the Riksbank  Figure 14. Unemployment Percentage of labour force, 15–74 age group, seasonally adjusted data 12  12  Average 1980-1991 Average 1999-2012 Q3 Outcome  10  10  8  8  6  6  4  4  2  2  0  0 80  85  90  95  00  05  10  Source: Statistics Sweden  BIS central bankers’ speeches  13  Figure 15.

The different responses of those central banks reflect their institutional framework as well as the economic circumstances of the respective countries. On one hand, the SNB has been more flexible than the ECB. The ECB is a new institution without historical record. Moreover, the ECB has a strict mandate of maintaining low inflation, and there have been upward inflationary pressures in certain European countries due to the convergence process. Those factors induced a less aggressive easing of monetary policy in an uncertain environment. In contrast, with traditionally low inflation, the credibility of the SNB is strong, which allows it to react quickly to economic shocks without creating turmoil in financial markets. In the past few years we have thus been able to act in a flexible way, with our own timing, in order to respond to the global economic slowdown and pressures on the Swiss franc. On the other hand, the SNB reacted less strongly than the Federal Reserve to the deterioration of the international economic environment. The United States is a relatively closed economy where the Federal Reserve mandate is broader than price stability. In contrast, our freedom to maneuver is limited by the openness of our economy. In a small and open economy, monetary activism cannot  4  BIS Review 32/2004  fine-tune economic activity. Institutional and economic characteristics of the different countries and central banks have thus implied differentiated monetary policy profiles. 5.
This means that most participants can be assumed to be highly knowledgeable about the products they trade, and capable of making educated investment decisions. As a result these markets have historically tended to work primarily on the principle of caveat emptor – or “buyer beware.” In legal terms, caveat emptor expresses the basic principle that a buyer of property purchases it at his or her own risk, and that — unless expressly agreed otherwise with the seller — there is no guarantee that the value of that property will not fall. In such circumstances, market participants should invest time and energy in looking after their own interests, voting with their feet when they are poorly treated. Such market discipline has historically always been thought of as a key bulwark against widespread abuse in FICC markets. However, caveat emptor has never meant “anything goes”, and certainly does not trump the obligation on a firm to act honestly, fairly and professionally. Change is happening The structure of these markets is already changing, and recent high profile enforcement actions have brought sharply renewed focus on conduct issues, particularly where they are seen as targeting individuals. The FCA has a “credible deterrence” enforcement strategy, and recently highlighted its intention to pursue a more proactive approach to wrongdoing in wholesale markets. Since 2010 it has issued 15 final notices for misconduct in FICC markets and imposed more than £ million in financial penalties.

And it isn’t just the UK: the most high profile enforcement cases to date, involving the manipulation of short-term interest rate benchmarks, have affected every major financial centre, including London, Singapore, Frankfurt and Tokyo, and have already resulted in global fines totalling nearly £ by authorities in the United States, the United Kingdom and Europe. Good progress has also been made on the design and regulation of benchmarks. In the United Kingdom, the design and administration of Libor has been overhauled, and a new regulatory regime was introduced in 2013, following the Wheatley Report. In August this year, as its first act, the Fair and Effective Markets Review recommended to HM Treasury that this regime should be extended to cover a further seven major UK-based benchmarks: SONIA, RONIA, the WM/Reuters 4pm London Fix, ISDAFix, the London Gold Fixing, the LMBA Silver Price and the ICE Brent futures contract. The International Organisation of Securities Commissions (IOSCO) has introduced a new set of standards for benchmarks, and the Financial Stability Board (FSB) has produced detailed reports on the priorities for further reform of interest rate and foreign exchange benchmarks. A number of broader regulatory, market and firm level initiatives are also under way in this area. The second Markets in Financial Instruments Directive (MiFID 2) is expected to have a major impact on the structure of FICC markets across Europe, with new transparency measures expected to transform the way that they function.
For social systems, this does not sound too implausible. Humans are social animals. Indeed, the feature which set humans apart from other animals is their degree of social interaction  Chart 5: The most highly cited articles on agent-based  (Harari (2015)). modelling across disciplines  This, on the face of it, modest adaptation gives rise to some fundamental changes in model dynamics. Linear, proportional responses to shocks become the exception; complex, non-linear responses the rule. Single, stationary equilibria become the exception; multiple, evolutionary equilibria the rule. I discuss these differences in the next section. Before doing so, I want to bring to life some of the uses of ABMs. These models have found widespread application across a broad array of disciplines in both the natural and social sciences. They have been used to address a  Source: Google scholar; Bank calculations. Notes: This was found by performing a Google Scholar search of the relevant term for “agentbased modelling” in each field and then using the citation count of the most highly cited paper which could be fairly and solely attributed to each distinct field. When searching for “Monte Carlo” only papers modelling distinct subsystems were considered and not those using the technique of random number generation more generally. massive array of problems, big and small: from segregating nuts to segregating races, from simulating the fate of the universe to simulating the fate of a human cell, from military planning to family planning, from flocking birds to herding (fat) cats.

Further, based again on standard analysis, the assignment of instruments to objectives ought to be based on the principle of comparative efficiency. Monetary policy is the natural instrument for pursuing price stability. Using again the prisma of Deng Xiaoping, the success of central banks in stabilizing inflation since 1995 strongly supports this view. Macroprudential policies – defined as a set of policies aimed at limiting both excessive credit growth and the build-up of systemic risk within the financial system – will have to take care of preserving financial stability. From here onwards, however, things become less clear-cut, and sometimes positively complex. First, the two objectives are qualitatively different. On the one hand, price stability is very easy to define and to measure in terms of a specific price index. As a result, monetary policy is comparatively easy to communicate, and its performance can be assessed in a relatively straightforward way. Financial stability, on the other hand, is significantly fuzzier, as it deals with preventing the accumulation of systemic risks, the build-up of asset price persistent misalignments, that some call bubbles, etc.. As a result, it cannot be defined in a straightforward fashion, with reference to, in the extreme case, a single indicator, and ought therefore to be communicated and assessed in a more complex way. Second, and crucial, is the unchartered interaction between the two policies. On the one hand, recent thinking has stressed how monetary policy can contribute to sowing the seeds of future financial instability.
However, anecdotal evidence indicates that they have been able to substitute their sources of finance by shifting into bank loans, something that can also be seen as a positive feature of the functioning of financial markets. In fact, the limited transmission of the turbulence through the financial channel is the key difference with the past. More precisely, what has made the emerging markets so resilient this time? The answer is the building up of strengths, not only in Asia, but also in Latin America and in Emerging Europe. On the one hand, growth has become more broad-based and with a much stronger contribution of domestic demand, in other words, more self-sustainable. In addition, southsouth and intra-regional trade linkages among emerging economies have increased. This has mitigated potential trade spillovers from industrial economies, although it has not suppressed them, of course. Very importantly, economic policies have been generally sound. On the financial front, the absence of significant exposures to the subprime market or to complex structured products in domestic financial systems has surely helped in this regard, but there are more structural reasons. In particular, there has been an important reduction of the financial vulnerabilities that were widespread in the past, and which led to costly crisis with important output losses and poverty increases, as the Asian crises ten years ago crudely demonstrated. Many emerging market economies have reduced their financing needs and improved their debt management. Many more run current account surpluses which reduce their reliance on external funding.

4  BIS Review 56/2008  •  New capital regulations based on the Basel I model were implemented. In the new regulation there was a more appropriate relationship between loans granted (risks) and capital, instead of deposits and capital. •  Banco de España was empowered to issue accounting regulations for banks. It duly laid down new prudent accounting rules, in particular regarding loan classification and loan loss provisioning. Since then, the authority to establish accounting standards for banks has proven to be one of the most powerful tools at our disposal. •  Supervisory reporting was established. This is an essential element of supervision which allows for proper monitoring of the situation of banks. •  The Central Credit Register was introduced in the sixties, with all credit institutions required to report regularly to it. This database is exploited for supervisory purposes and will play an important role in Basel II supervision. It can also be used by the banks for credit risk management purposes. •  Since the seventies Spanish banking supervision has paid particular attention to obtaining "first-hand" on-site assessments of developments, to complement its continuous and close monitoring of every institution. •  The growth of the financial markets called for more transparency and better regulation of external auditing. A new law was passed making the external audit of the annual accounts compulsory for every company above a certain size, and for all financial institutions regardless of their size.
These factors have slowed the recovery in primary issuance, and suggest that ABS markets are likely to be much smaller in future. Indeed some markets that were at the epicentre of the crisis, such as those for structured collateralised debt obligations (CDOs), may be permanently gone. 5  Just in the past couple of weeks we have seen the first European CMBS to be issued since August 2007. In the United Kingdom, some corporates have issued long-dated fixed-rate bonds secured on real estate as part of sale and leaseback transactions. Market participants, however, tend to regard these transactions as corporate debt, rather than CMBS. 4  BIS central bankers’ speeches  Chart 6 10-year sovereign bond yield spreads to German Bunds Basis points 1400 Portugal  Italy  Ireland  Greece  Spain  United Kingdom  Chart 7 Selected European sovereign CDS premia Basis points 2000  1200  1000  1800 1600 1400  800  600  400  Ireland Italy Portugal Spain UK Greece (LHS)  Basis points  0 Jan.  Mar. May. Jul. 2010  Sep.  Nov.  Jan.  Mar. May. 700 600  1200  500  1000  400  800  300  600  200  400 200  800  100  200 0 Jan. Apr. Jul. Oct. Jan. Apr. Jul. Oct. Jan. Apr. 2009 2010 2011  0  2011  Sources: Bloomberg and Bank calculations.

In the United Kingdom, the Bank of England responded to the collapse in economic activity and the risk of deflation by cutting official interest rates and embarking on a programme of asset purchases financed by the creation of central bank reserves (known as Quantitative Easing). It also separately sought to stimulate markets for corporate debt and commercial paper, and put in place a Special Liquidity Scheme for banks to swap their illiquid collateral for highly liquid T-bills. Other central banks took a variety of similar actions. For example, the Federal Reserve began purchasing a range of private and public sector securities in large scale. And in Europe, the ECB responded by offering its counterparty banks unlimited refinancing operations at maturities of up to 12 months. Despite these differences in policy, one end result was common – they led to a massive expansion of central bank balance sheets (Chart 11) and a significant injection of liquidity into the global financial system. That in turn pushed down yields on “safe” assets, encouraging portfolio rebalancing (one of the key channels through which asset purchases work) and a “reach for yield”.7 More recently contacts, especially those in the United States, have reported that the reach for yield has been exacerbated by a perceived reduction in the universe of acceptable assets for real money investors.8 For example major corporates, especially those in the United States, are reported to be relatively cash rich.
The growing importance of balance sheet considerations in monetary policy only reinforces the importance of transparency in central bank communication. 5 Finally, let me make an obvious but nonetheless crucial point, even if it goes beyond today’s topic. Transparency is a valuable good in its own right. For good reasons, central banks are powerful and for the most part politically independent institutions. Moreover, the officials who run central banks are typically appointed for lengthy terms and are difficult to remove from their positions. Transparency is a crucial element in creating democratic legitimacy for politically independent institutions whose actions can have wide-ranging consequences for a country’s citizens and its elected government. As former Fed Chairman Alan Greenspan (1996) said ten years ago, it “cannot be acceptable in a democratic society that a group of unelected individuals are vested with important responsibilities, without being open to full public scrutiny and accountability.” Transparency is of little use if markets and the public do not believe what a central bank says. Credibility is therefore a condition that is a sine qua non for a successful monetary policy. How can credibility be established? Alan Blinder (1998) summarises credibility as a "painstakingly built up history of matching deeds to words". A long history of actually matching deeds to words, of honest communication and a reputation for delivering price stability will therefore ensure central bank credibility.

I would also like to stress here that the two points for attention I have just mentioned do not, in my view, overshadow any of the following: the many other initiatives announced in the action plan, the work to facilitate remote access and promote an interoperable digital identity, the provisions on cybersecurity, or the forthcoming discussions on artificial intelligence or data sharing in financial services - open finance after open banking. The message that I think is important today is the following: the stakes of this action plan on the financial sector are high and it will have a major impact on the innovative ecosystems of the 3/4  BIS central bankers' speeches  French and European financial sectors. That is why the Banque de France and the ACPRwill be particularly attentive, in the coming weeks and months, to your feedback, suggestions and questions on this “digital finance package", which is closely in line with the rationale of the ecosystem that I have just outlined. In other words, we have the opportunity to demonstrate today that the discussions held in recent years between the Banque de France, the different players in the innovative financial ecosystem and other supervisory authorities, the relationships of trust established between us, the complementary expertise, the shared experiments and knowledge, have a concrete and tangible effect: that of further strengthening the dynamics of an ecosystem that is destined to count in the future of the European financial sector. * Thank you for your attention. 4/4  BIS central bankers' speeches