samchain/econo-pairs-v1 huggingface dataset:
Warning notes have been sounded, of course, about the need to avoid a lumbering, slow-moving bureaucracy, and the need to ensure that regulation is appropriate for the type of market. I understand those points and, particularly as far as you are concerned, the need to distinguish between professional wholesale markets and the retail sector. There are some interesting developments in that direction in the US at present, which we shall certainly look carefully at as we decide our own new structures. But, overall, I sense that we begin the task with some goodwill in the marketplace. I was particularly interested to see the summary of the views of members of your Association on regulation in the Price Waterhouse report published late last year. That is a helpful document which we will take into account. I was struck by the importance you attached to a clear but flexible regulatory environment, which scored highly as a success factor as far as the London market was concerned. And I took the strong point made about the need for cost control, on the one hand, and to provide a framework which facilitates innovation. When it came to structure, your views were divided. But I was encouraged that the option of an enlarged SIB incorporating the SROs was the one which received the strongest favourable response. There was also quite a bit of support for taking banking supervision out of the Bank of England.

I note with interest that your own assessment is that the best option for the futures and options business in London would be for EMU to go ahead and for the UK to participate in the first wave. It is a moot point as to whether the impact on the profits and bonuses of derivatives traders will be the number one criterion in the minds of Labour MPs when they come to reach a view on EMU, but I will certainly draw it to their attention if you would like me to do so. BIS Review 67/1997  -3-  By contrast, you are slightly, though not exaggeratedly pessimistic about business opportunities in London if EMU goes ahead with the UK a ‘slow track’ country. I regard this as a pessimistic assessment, and will attempt this morning to persuade you that you are wrong. My first point, and perhaps the strongest, is that uncertainty about UK participation in EMU has persisted now for a considerable number of years - perhaps indeed since the late 1970s when the UK government’s response to the original EMU plan was distinctly lukewarm. And certainly no British Prime Minister has given an enthusiastic endorsement of the most recent Delors Plan for EMU, at any stage.
The priority was to create a secure arrangement that will provide both exporters and importers with a simplified way to settle their transactions with a degree of ease similar to that with which they effect payments within their own countries. From this point forward, there is no doubt that the private sector will take it upon itself to create new financial products and further deepen the real-peso market. Indeed, deepening of the real-peso market, reduction of trade obstacles and access on the part of small and medium exporters are the primary objectives of this initiative. Despite noncompulsory, the facilities and lower costs of the SML should attract exporters and importers. There will be no foreign exchange contracts, despite documentation currently required will remain mandatory. The essential alteration for Brazilian exporters will be the need to register the operation in real. With elimination of a third currency in direct transactions among companies, exporters will set their prices in the currency of their own countries. Thus, they will be better able to calculate their margins precisely, since they will no longer be exposed to exchange rate risk. At the start, it will be possible to carry out trade operations between the two countries with terms of up to 360 days. Payments of services related to trade (for example, freight and insurance) can also be made in own currencies.

Operations may be contracted on the basis of an exchange rate negotiated with financial institutions or the SML rate itself, calculated based on the average real-dollar rate published daily by the Central Bank of Brazil, and the Argentine reference peso-dollar rate. At the closing of both markets, the SML rate will be announced daily. Financial settlement of operations carried out through the system will take place in three business days (d+2). Banking institutions that have Reserve Accounts at the Brazilian Central Bank may be accredited to operate in the system. Authorization to operate on the exchange market is not a prerequisite. The SML is a highly promising initiative for small and medium businesses that have less access to derivative mechanisms to neutralize foreign exchange risk. At the same time, large companies have also shown interest in the system, primarily those that already have mature operations in the two economies. BIS Review 124/2008  1  There is no doubt whatsoever that the system we have just inaugurated will not only stimulate trade transactions between Brazil and Argentina but also enhance competitiveness in both countries. This initiative is a first and important step forward toward greater integration of our economies and of Mercosul. Congratulations to all of those who have played a role in making this historic moment feasible. Thank you. 2  BIS Review 124/2008
The Governing Council is constantly and carefully monitoring all developments and stands ready to do all that is necessary to maintain price stability. Later today, Jürgen Stark will present the outcome of our enhanced monetary analysis that enlarges our toolkit to pursue this aim. Beyond our role as guardians of the euro, we also have to deliver on our responsibilities as part of European and global economic governance. In this context, I would like to touch on the work programme of the Van Rompuy Task Force, which was established by the European Council in March 2010 and in which I am participating. Vítor Constâncio and Lorenzo Bini Smaghi will go into greater detail, and I will highlight a few elements of the task ahead. BIS Review 97/2010  5  First, national fiscal reforms – to which I alluded before – need to find an anchor and a collective guarantee in renewed and strengthened institutions for multilateral budgetary surveillance. National fiscal frameworks will receive a blueprint of good practice, which will ensure that commitments to fiscal prudence are internalised first and foremost in the national Parliaments. A new code for statistical reporting will support the legislatures in enforcing their fiscal plans. This will be the first line of defence against the accumulation of fiscal imbalances. We will have a second line of defence at the level of the EU27, and in particular within the euro area.

Just like consumers and countries, governments cannot live beyond their means forever. Fiscal authorities need to look beyond the current cyclical upturn. There is no alternative to that. Let me remind you of an often forgotten remark by John Maynard Keynes from 1937, in the aftermath of the Great Depression, when he said: “Just as it was advisable for the government to incur debt during the slump, so for the same reasons it is now advisable that they should incline to the opposite policy”. 1 Fiscal consolidation and growth are not mutually exclusive. I disagree with the view that reducing public expenditures will hinder economic growth. On the contrary, prudent fiscal management provides the basis for balanced and sustainable growth. Stability-orientated fiscal policies will foster confidence among households, entrepreneurs and investors, which will ultimately increase our welfare by creating new jobs. 2. How should we address European modalities of today’s global challenges? I have outlined three key areas for efforts to shape the contours of the post-crisis world – reform of the institutions of global governance, reform of the financial system and reform of public finances. These are global challenges affecting in particular the industrial economies. I would now like to explain how Europe specifically is responding to these challenges. An ambitious agenda lies before the continent. It is not only a visionary agenda: it has to be pursued with determination right now.
Despite the recent recovery observed in Spanish banking system profitability, the present levels are below the pre-crisis levels and below the cost of capital estimates available. This situation is not exclusive to Spain, but is in fact quite widespread within the euro area. Indeed, the average profitability of Spanish banks is currently somewhat higher than that of the main European banking systems and the euro area average. The breakdown of the return on assets shows that the main reason why Spanish banks’ profit levels are higher than the euro area average is that their net interest income is higher. This reflects the larger relative share of Spanish banking business in less mature markets, such as the Latin American economies, where margins are higher. Conversely, Spanish banks have higher impairment related expenses and provisions than their euro area peers. Average return on equity among Spanish banks is also higher than for banks of other European countries such as Switzerland or the United Kingdom or for Japanese banks. But it is lower than average return on equity observed in other more profitable banking systems, such as the United States, Sweden, Norway, Canada and Australia. In any event, there is a high level of dispersion in profitability between banks, both in Spain and in the rest of Europe. This shows that profitability problems do not affect the sector evenly, given the range of banking business models, both between countries and within each jurisdiction, and also the combination of multiple explanatory factors.

In any event, in order to assess the overall effect of interest rates on the profitability of banks, it is necessary to take into account that interest rates not only impact the net interest margin but they also impact other items in the income statement. In particular, lower interest rate levels help to lessen losses in the credit portfolio due to their favourable effect on borrowers’ repayment capacity associated with both the lower cost of credit, and higher income and lower unemployment tied to the macroeconomic impact of lower interest rates. These effects may be particularly important in countries like Spain where the banking system started out with a high level of non-performing loans and where short-term or variable rate lending was prevalent, since this results in movements in market returns passing through rapidly to the costs of outstanding debt2. Thus, part of the fall in the non-performing loans ratio in recent years can be explained by this effect. Furthermore, declines in interest rates contribute to increasing the prices of financial and real assets. This effect is immediate for fixed-income securities, particularly long-term ones since prices are more sensitive to changes in yields. Valuations of equities and real assets, such as housing, are also boosted by the fall in interest rates due to the effect on the discount factor, although the price of these other assets is influenced by other conditioning factors such as macroeconomic expectations.
As a result, they have been, and probably still are, able to increase production to a fairly large extent without any substantial increase in real capital and employment. There are prospects of solid growth in productivity in 2004. Nevertheless, our regional network reports that companies in a number of industries are now considering an increase in employment. After rising sharply for several quarters, economic growth in the US slowed in the second quarter and employment growth appears to have stalled this summer. Economic growth has picked up from a low level in the euro area. Economic growth has also gained momentum in Sweden and the UK. Strong growth in the US and China exerted upward pressure on commodity prices in 2003 and the beginning of 2004. Since then, price inflation has been dampened. Oil prices have risen considerably during the summer. Interest rate expectations indicate interest rate increases in a number of countries. The effects of oil price developments on the Norwegian economy are mixed. Persistently higher oil prices may eventually contribute to higher petroleum investment and increased activity in sectors affected by petroleum activities. A sharp rise in oil prices, however, restrains global economic growth and affects demand for our other export products. The analyses in Norges Bank’s last Inflation Report in July 2004 are based on the technical assumption that interest rates will move in line with forward interest rates.

And are the authorities in the latter countries prepared to relinquish the responsibility for an essential part of their financial system to the home country of the parent bank? These are not just abstract issues, as can be seen from the fact that Nordea, domiciled in Sweden, is now the largest bank in Finland and that Swedish banks own the major part of the banking systems in the Baltic states. Thus, it seems that the supervision of international bank groups could lead to problems of coordination and duplication. On the whole, there appears to be no lack of incentives to supervise cross-border banking operations. The problem is rather that in certain cases the rule system prevents the most active countries for exercising supervision, so that this is liable to fall between two stools. On the other hand, an excessively generous right to supervise can lead to the burden of supervision being unduly heavy for individual banks. That could hamper integration as well as efficiency. Formalising crisis management is more difficult than other parts of the work on stability. Discussing crisis management can be perceived as sensitive and troublesome because to some extent it concerns the state’s willingness to assist the financial sector with liquidity. The dividing line between whether or not this should be discussed openly often runs between countries that have experienced a financial crisis and those that have not. Those which have lived through a crisis are generally in favour of a transparent process.
I’ll just have to say that I’m fact-based. New York Fed is fact-based. And I hope we stay that way. Maureen O’Hara: Do you have alternative facts? Just checking, just checking. President Dudley: Look, I think a healthy debate is a good thing about what facts matter and how the world works. You know, people can have different models about how the world works and what’s important, and what’s not. But I think that they have to be based on real evidence. So, I’m going to continue to live in my world, which is very much fact-based. Maureen O’Hara: I think we have time for one more question, and we have someone back there who’s got a mike. Audience Member: Yeah, Mr. Dudley, I have a question. You mentioned that there was some nefarious behavior by banks. I heard you mention that there was some nefarious behavior going on by banks during the financial crisis. President Dudley: Well, the employees of banks. Audience Member: Ok, employees of banks. My question is, there was – some of the big banks, including J.P. Morgan and Bank of America, basically bailing out the government and the FDIC, buying institutions like Countrywide, Merrill Lynch, Washington Mutual. In some of these cases, they were given winks and nods by the government that they were not going to be held accountable for let’s say the sins of these institutions that they took over.

What I think is what’s new is we have to do a better job in terms of retraining people, getting people the mobility they need so they can actually feel that they have a place in the new economy. I was thinking about this question about technology and you think about the U.S. farm sector. You think about how many people in the United States worked on farms in 1900 and how few people work on farms today. Same kind of tech, same science and process of technological transition, but the good news is we were able to find things for those people to do. 4 / 13  BIS central bankers' speeches  People always have for many, many years, talked about how technology is going to put everyone out of work, and everyone’s just going to have a lot of leisure. That has not panned out up to now at all, and so I’m just a little bit skeptical that now we’re at that critical turning point. I could be wrong. This time could be different. But if you think about how long we’ve had these conversations about technology obsoleting everyone’s skills and leading to massive unemployment, this has been a conversation that we’ve been having for hundreds of years, literally. Maureen O’Hara: It’s tricky now, though, isn’t it? I mean in the past, I think you used to think about technology as taking away some of the lower-skilled jobs, and yet now we’re seeing it kind of marching its way up.
In fact findings show that the implications of this in the long term for the ability of households and businesses to get a loan are relatively modest – although there is considerable uncertainty around this result. As such, while other risks may arise during a transitionary phase, the most significant risk arises from the potential for stablecoins in particular to undermine confidence in money and payments, and hence in the wider financial system. As we discussed a few minutes ago, the risk of a loss of confidence in the credibility and stability of private money is not theoretical. Loss of confidence in private money can be a major threat to financial stability. But it is equally true that private money can be made acceptable as a widespread means of payment – indeed, as I covered earlier, the vast majority of money held for transactions in the United Kingdom is already private. So, with the right regulation, a stablecoin could potentially be made safe for wide-scale use. Our existing regulatory framework seeks to ensure that the public is able to trust the reliability and stability of the money it uses every day. Banks are subject to extensive rules and requirements to ensure that consumers can use privately-issued money with confidence and interchangeably with cash. These core rules and requirements were developed over time – in many cases via trial and error, with new rules introduced following financial crises.

This ensures that temporary liquidity issues arising from difficulties selling assets backing the value of stablecoins don’t result in firm failure; and A backstop to compensate depositors – or in this case coinholders – such as the Financial Services Compensation Scheme (FSCS) (or in other countries deposit insurance), in case of failure. This ensures that, even if a firm fails, transactional deposits up to a certain amount remain exchangeable for central bank money. Notably – one of the key responses to the Northern Rock episode was to increase FSCS coverage in the United Kingdom. This is not to say the regulatory model for stablecoins needs to be identical to banks. It could include different applications of the above features. For example, if stablecoin operators are restricted to backing themselves in high quality liquid assets they won’t need regulation to cover credit risk. If they only back themselves in central bank reserves, which are inherently liquid, they don’t need liquidity facilities. Ultimately, the specific requirements may well be different from those applicable to banks, but the outcome will be the same – that systemic stablecoins used as money will offer the same protection to coin holders as commercial bank money. Conclusion The title of this speech is a cliché: Everything that is old is new again. But I am going to end on a different cliché: the definition of insanity (widely – and inaccurately – attributed to Albert Einstein) is doing the same thing over and over again but expecting different results.
A little over 350 years ago, Stockholms Banco, which later became the Riksbank, became the first issuer of modern paper banknotes because people wished to avoid having to carry heavy copper coins around. Now we are facing a situation in which we will perhaps be among the first in the world to launch a new kind of central bank money, a kind adapted to today's digital society and the needs that exist there. When market conditions are changing rapidly due to new technical innovations and increased European integration of technical systems, the Riksbank must adjust its range of services. Among other things, we are planning to modernise our range of settlement services. I also think that we should extend the opening hours of RIX and ensure that our systems are technically constructed so that we can offer the possibility of settling instant payments in central bank money so that the market does not start to use alternative, less efficient solutions. There are also interesting possibilities here for an e-krona to cover the need for central bank money for the general public in a digital world. One possible way forward is for us to continue to analyse and develop a pilot version in 2019. There is also reason to review how legislation regarding the legal tender can be adjusted to the new digital reality. How else will the position of the Swedish krona be protected if cash disappears? All of these issues must be managed together with other players such as the market, public authorities and legislators.

SPEECH DATE:  4 June 2018  SPEAKER:  Stefan Ingves  VENUE:  Stockholm School of Economics  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Money and payments – where are we heading? Today, I am going to talk about money. This is a subject that concerns us all – most of us use money practically every day. But we probably don’t give much thought to how important it is that our daily purchases can be carried out smoothly. It's more or less the same as not giving so much thought to your health as long as you’re healthy. But once you get sick, it becomes almost the only thing you can think about. Our system for payments is similar; as long as it works securely and efficiently, we don’t think about it. And, to continue the analogy: It is the Riksbank's task to ensure that the payment system remains healthy and contributes to a well-functioning society. Right now, we, at the Riksbank, are devoting a lot of time to issues regarding payments and the payment system. The background to this is formed by the rapid changes on the payment market and the rapid decrease in cash usage in Sweden – a development that we are practically alone in, worldwide. Only a few other countries are undergoing a similar, albeit less dramatic, development.