samchain/econo-pairs-v1 huggingface dataset:
I have now described the fault lines in cross-border banking, both at the global and the EU/EEA level, and how they burst open in a particularly violent form in the case of Iceland. But what is and what should be done about this? The problem with giving a precise answer to this question is that what needs to be done at the national level will depend on what is ultimately done at the global level, and for countries that are part of the EU single market it also depends on what is done at that level. In turn, necessary reforms at the EU or global level are put in place partly to avoid national responses that would unduly fragment the international financial system or, in the case of the EU, undermine the single market and the eurozone. Bearing in mind that circularity, let me start at the national level. The key issue here is that, as long as global risks and EU flaws are not dealt with, individual countries are forced to take action to protect themselves: action that might contribute further to the retreat of cross-border banking and financial globalisation more generally. Such action might take the form of restricting international activities of home banks, placing much stricter prudential limits on foreign currency maturity mismatches, limiting FX lending to unhedged parties, and deciding that deposit insurance shall be paid only in the local currency.

The EEA Agreement is basically a mechanism through which EFTA countries like Iceland and Norway were allowed to participate in the EU single market, which includes free movement of capital and provision of financial services. The underlying principles are those of home licensing for operation anywhere in the area and of a level playing field for competition, where size and location are not supposed to matter. It therefore goes against the underlying principles of this framework to consider the size of banks relative to GDP as a metric for concern, as is now so rightly in fashion. This so-called European “Passport” enabled the Icelandic banks to operate throughout the EEA, including through branches in other EEA countries. We now know that there are deep flaws in this framework and that these flaws are important elements in the current euro area crisis. A key issue here is the contradiction between the European Passport rights, on the one hand, and national supervision, national deposit insurance, and national crisis management and resolution regimes, on the other. This is what recent proposals of a banking union are supposed to address. All of these problems are much aggravated when different currencies come into play, and for EEA countries and EU countries outside the euro area, this framework also has embedded in it a potentially huge foreign currency liquidity risk in the banking system that is not covered by a LOLR.
How do I think policy should balance these divergent risks? How should these risks affect my views about how to follow the FOMC strategy of pursuing a balanced approach to achieving our policy goals? In my mind, current circumstances and a weighing of alternative risks mean that a balanced policy approach calls for being patient in reducing accommodation – that is, being patient about when we first increase the federal funds rate and being patient about setting the pace of rate increases once we have begun to move. Let me explain how I get there. Proceed cautiously in normalizing policy To say the least, conducting monetary policy at the ZLB has been a difficult experience that we all want to avoid repeating unnecessarily. In the winter of 2009, with the unemployment rate soaring to double digits, the Fed would have very much liked to lower the nominal federal funds rate an additional 300 basis points; but we couldn’t because the rate was already at zero. Faced with a pressing need to provide additional accommodation, we were forced to turn to innovative, but controversial, unconventional monetary policies. These policies have been extremely helpful. But there is no denying that they were second-best options; the ZLB had made lowering the fed funds rate, which is our first-best interest rate tool, infeasible. Everyone will welcome a return to more normal times and a reliance on the traditional policy framework of adjustments to the federal funds rate.

Indeed, in the Committee’s Summary of Economic Projections released about a week ago, most participants anticipated that the unemployment rate would return to its long-run neutral level by the end of 2016 and that inflation then would be in the range of 1–3/4 to 2 percent. A balanced approach to monetary policy Now let me turn to my views on monetary policy. I can’t speak to my FOMC colleagues’ forecasts and how they interact with their views regarding appropriate policy. But, for my part, I think it is more likely that we will achieve our employment mandate before inflation is clearly headed back to 2 percent. Conceptually, this could raise a policy dilemma – achieving our inflation objective would call for strong accommodation, while achieving our employment target usually would call for earlier policy normalization. However, the story is even more complicated than that because important risk factors also come into play. In some ways the insight from Nobel laureates Lars Hansen and Tom Sargent regarding robust control evaluations help form my assessment. 13 I see two important and divergent ways my forecast could go wrong. One is that I may be overestimating the underlying strength in the real economy and its ability to exit from the ZLB. Guarding against this risk calls for a more patient removal of accommodation. The second is that I may be wrong about the inflation outlook, and we could be poised for a much stronger rise in inflation than I am forecasting. This risk calls for more aggressive rate hikes.
By handling more financial flows, a centre will be able to further improve and innovate on its risk management capability. The process is interactive and there would be a clustering effect once a centre has established the leading position in risk management and client servicing. 5. Here I should mention several important developments in the last decade that are highly relevant and instrumental to Hong Kong’s rise to become the risk management hub in Asia. Internationalisation of Renminbi (RMB) 6. From 2009 onwards, Hong Kong has rapidly developed into the biggest offshore hub for RMB businesses in the world. Hong Kong is the source of around 50% of the global offshore 1/4  BIS central bankers' speeches  RMB liquidity. On average, Hong Kong’s RMB Real Time Gross Settlement system clears and settles over RMB1 trillion a day. Moreover, over 70% of the global RMB SWIFT settlement goes through Hong Kong. All these figures suggest that Hong Kong is already the largest centre for RMB loans, Dim Sum bond issuance and RMB-related products and financial derivatives. The availability of a wide range of banking products, investment and hedging instruments in Hong Kong has made us the undoubted leader in risk management in the offshore RMB market. Stock Connect 7. The launch of the Hong Kong-Shanghai Stock Connect in 2014, followed by the Hong KongShenzhen Stock Connect in 2016, has opened up the most important part of the Mainland capital market to the world’s investors through Hong Kong.

François Villeroy de Galhau: Challenges and opportunities in Europe and beyond Keynote address by Mr François Villeroy de Galhau, Governor of the Bank of France, at the 2018 Paris Europlace International Financial Forum, Tokyo, 19 November 2018. * * * It is a pleasure to be with you again in Tokyo, with my colleague and friend Governor Kuroda. This 22nd edition of the annual International Financial Forum is focused on the disruptive world that Europe is facing. But beyond disruption, the world is also increasingly uncertain, with tensions coming from protectionism, rising oil prices, a controversial policy-mix in the United States, and equity market valuations that remain volatile; but also, within Europe itself, the Italian fiscal policy and Brexit. So in my remarks today, allow me to elaborate on these two dimensions: the challenges and opportunities for Europe, but also the global questions that we have to address collectively. **  1. Our European challenges and opportunities Let me first speak about the gradual normalisation of our monetary policy. The broad-based expansion of the euro area economy is continuing, although at a more moderate pace. Despite a slowdown in the first half of the year, GDP growth is still expected above potential in 2018, even if the output gap is closed. 9.2 million jobs have been created since 2013 and the unemployment rate has fallen from 12.1% to 8.1%.
As a large owner, the state will have to safeguard its financial interests ensuing from its current holdings. This is partly because various owners may have different interests to promote. Joint ownership is not the same as joint interests. The reason for government ownership that seems to have been highlighted most is the importance of national ownership. There may be concern that the acquisition of Norwegian companies could lead to a relocation of head offices, research and product development to a foreign country. Proximity between decision-makers and enterprises may also be important. On the other hand, it may be a disadvantage for an enterprise to be designated as a means of safeguarding national ownership. The state may after a period find that it owns enterprises that were, but no longer are important. The business sector is not static. At the same time, cross-border acquisitions and sales of companies are important for disseminating knowledge and technology and thus for enhancing growth. Value added in Norwegian companies can be increased when they acquire foreign companies, and in many cases Norwegian jobs may be more secure under the ownership of a company located abroad. The best contribution to balanced ownership is a well functioning Norwegian capital market, a solid infrastructure in infrastructure, a neutral tax treatment of investment and a well educated workforce. Changes in state ownership of two of the three largest Norwegian commercial banks illustrate that national considerations, although deemed important, are not always decisive.

Since the banks themselves have massive investments in this market, they were obliged to make writedowns which, in some cases, were hefty. There is still uncertainty about the volume of additional bank writedowns that will be needed, so that the situation on the international money markets remains tense. In this crisis, central banks have reacted fast and flexibly in order to secure the supply of liquidity to banks and counter distortions on the money market. By means of various measures, the Swiss National Bank was able to stabilise the three-month Libor within the target range, thereby keeping fluctuations in the relative restrictiveness of monetary policy low by comparison with other countries. However, it is not possible to solve the fundamental problems in the banking sector through the flexible deployment of an expanded range of monetary policy instruments; neither can they be resolved by means of coordinated actions on the part of central banks alone. The banks themselves must make a substantial contribution to solving the problems which triggered the current crisis. In this respect, the most urgent matters are transparency with regard to endangered positions and their valuation, increasing the capital base, and improving risk management and control systems. BIS Review 37/2008  1
318 (New York: Federal Reserve Bank of New York, March) for a discussion of how adverse selection and asymmetric information along with poor incentives caused a lack of market discipline. 7  For further discussion of the efficient markets hypothesis and the crisis, see Eugene Fama’s blog, “Fama/French Forum” (shared with Kenneth French). In particular, see Eugene Fama and Kenneth French (2008), “Q&A: Market Turmoil” Fama/French Forum (Santa Monica: Dimensional Fund Advisors, December). 8  For a specific example of this phenomenon, see Richard Roll (1984), “Orange Juice and Weather” American Economic Review, vol. 74 (December), pp. 861–880. 4  BIS central bankers’ speeches  In normal times, the tension between efficient markets and actual developments is relieved by a series of these tweaked explanations without any substantial changes to underlying views. But as markets came under increasing stress it made the arbitrage and liquidity assumptions underlying efficient market explanations less tenable.9 Further, the signals generated in different markets started to disagree markedly. One of the basic quandaries at the start of the crisis was the differing perspectives from price developments in equity and fixed income markets. The fixed income and equity markets were giving very different signals about the outlook for the economy. Fixed income markets were indicating an abrupt slowdown in economic activity and through derivatives such as the ABX indices substantial credit losses on some of the newly issued structured products related to residential mortgages. The equity market in contrast reached a peak in October 2007 indicating little evidence of such a slowdown.

But even in the capacity of a research economist at a central bank, my understanding of financial markets and the economy was greatly informed by the many types of interactions central banks have with financial markets. Today I will first reflect briefly on the nature and purposes of central bank interactions with financial markets. I will highlight the operational and market monitoring responsibilities of the New York Fed Markets Group and how these responsibilities evolved since the onset of the financial crisis in 2007. Next, I will share some of my personal experience as a research economist at the time trying to make sense of the unprecedented events of the financial crisis through the prism of economic theory, and the lessons I learned. Let me emphasize that my remarks represent my personal views and do not necessarily represent the views of the Federal Reserve Bank of New York or the Federal Reserve System. Pre-crisis central bank interaction with financial markets The Markets Group interacts with financial markets in several important capacities. It is perhaps best known for the role it plays in the implementation of monetary policy by conducting open market operations (OMOs) at the direction of the Federal Open Market Committee (FOMC). As most of you probably know, in an OMO the central bank purchases or sells securities in the market in order to influence the level of central bank reserves available to the banking system.
Summer – Supporting the expansion By the end of 2014, the challenge for the MPC had become to keep the economy on this path to a long economic summer by setting policy to return the level of output to potential and total CPI inflation sustainably to the 2% target. The MPC recognised that achieving this trajectory as the headwinds to demand following the crisis continued to fade would likely require some tightening in monetary policy. But how much? During the pre-crisis inflation targeting era, Bank Rate had averaged 5¾%, and the equilibrium real interest rate was generally thought to be around 3¾%. Early in 2014, the Committee concluded that the equilibrium interest rate – the level of the real policy rate that, if allowed to prevail for several years, would place economic activity at its potential and keep inflation low and stable – had fallen significantly.11 This equilibrium rate, r*, is determined not by central banks, but by the real, fundamental factors driving desired savings and investment. For an open economy like the UK, those factors will reflect global influences as well as domestic ones.12 Both long and shorter-term factors have contributed to the fall in equilibrium interest rates. In recent decades, a set of powerful structural forces has been pushing down global r* – including demographic change, slower potential growth, a larger left-hand tail in the distribution of economic outcomes, and the increased cost of financial intermediation. The financial crisis added to this downward pressure.

One reason why equilibrium interest rates are low at the moment is because the distribution of economic outcomes has become more skewed to the downside. In this regard, low rates are a consequence of riskier environment, not the cause of higher risk premia. 26 For example, see Ihrig, J, Klee, E, Li, C, Wei, M, and Kachovec, J (2018), ‘Expectations about the Federal Reserve’s balance sheet and the term structure of interest rates’, International Journal of Central Banking, vol. 14(2), pp. 341-390. 21  All speeches are available online at www.bankofengland.co.uk/news/speeches  21  V. Winter – Monetary policy in a persistently low r* world Looking ahead, deep structural changes in economies are creating disinflationary pressures at a time when conventional monetary policy space is already limited. Inflation targeting frameworks will be tested in new ways. It feels like winter is coming. In all likelihood, equilibrium interest rates will remain low for a prolonged period as many of the structural forces that have pushed them down are set to persist for years. Moreover, these could likely to be reinforced by flaws inherent in the international monetary and financial system27 and the disinflationary effects of advances in technology and the changing nature of commerce.28 The principle structural force leaning in the other direction on inflation is that the shift towards deglobalisation with the potential fracturing of the global trading system.
John C Williams: A jack of all trades is a master of none Remarks by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the 2022 US Treasury Market Conference, New York, 16 November 2022. ***  As prepared for delivery Good morning, everyone. We are excited to have you back in person at the New York Fed for the annual U.S. Treasury Market Conference. You may have noticed that our auditorium has gotten a new look since you were last here. I hope you'll find it a comfortable space since we have a very busy day ahead. The Last Time (LIBOR's Version) The topic of today's conference is resiliency in the U.S. Treasury market. Before I speak about that, I'd be remiss if I did not take this opportunity-hopefully for the last time-to remind everyone that we are entering the final stretch of the transition away from the London Interbank Offered Rate (LIBOR). I'm pleased to report that the transition has been extremely successful so far, thanks to the significant and coordinated efforts from stakeholders across the globe. A special shout-out to the Alternative Reference Rates Committee (ARRC) for its outstanding work and dedication in guiding the move off of U.S. dollar LIBOR and promoting the adoption of more robust rates like the Secured Overnight Financing Rate (SOFR). They proved that LIBOR was far from irreplaceable. But there's still more work to do.

In 2021, the FOMC introduced the Standing Repo Facility and the FIMA Repo Facility.6 These standing facilities are priced such that they are not used often in normal times but remain ready to provide liquidity as needed should funding pressures arise. We also must continue to prioritize having a robust financial system, and that starts with the most core market of all: the U.S. Treasury market. The Inter-Agency Working Group for Treasury Market Surveillance is doing just that. Ahead of today's conference, the group published a progress report around its work to enhance the resilience of the U.S. Treasury market, which I strongly encourage everyone to read.7 The report emphasizes progress made on the proposed expansion of central clearing, enhancements to data collection and transparency, and the potential for evolution in market structure. It's also important to recognize that the world is not static. The Treasury market has increased enormously over the past quarter century, and the key players have changed significantly. And the rest of the financial system continues to evolve, with nonbank financial institutions (NBFIs) playing an increasingly important role. The Financial Stability Board has been actively engaged in this space, assessing global trends and risks through a monitoring exercise and developing policy recommendations to strengthen oversight and regulation.8 Here at the New York Fed, we too are deepening our expertise and monitoring of NBFIs. 3/4  BIS - Central bankers' speeches  But this is not just a job for the official sector.
When I tapped my phone against an ipad to buy my coffee earlier, my payment may have involved as many as four different non-bank entities – in addition to my own bank, the retailer’s bank, and the payment system (in this case, Visa). It is possible that over time, one of these new entities will become so critical that disruption to it could take down the entire chain. And, if they could disrupt the entire chain, the risks these entities could pose would be comparable to the risks posed by the payments systems we currently regulate for financial stability. To safeguard and future-proof our regulatory framework, we need to move away from a system in which how you are regulated depends on the type of entity you are, towards one in which what matters is what risks you  4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  pose. In other words: regulation of payments should reflect the financial stability risk, rather than the legal form, of payments activities. This should cover the entire chain, end-to-end. This may seem obvious: same risk, same regulation. It is hard to argue that regulation should not reflect risks. And a framework that focused on risks rather than legal form would help level the playing field – ensuring that regulation isn’t unfairly applied to one type of firm but not another as a result of their legal structure or status.

Third, the entry into force of the Mechanism will entail the need to conduct new activities and develop new functions: the monitoring of the banking systems of the remaining euro area countries, which is needed to underpin the Banco de España’s place on the Supervisory Board; participation in the definition of the Mechanism’s supervisory policies and in the administrative procedures in relation to the significant banks; and also collaboration in the performance of other horizontal and specialised supervisory functions developed by the SSM. Fourth, there are certain areas of banking activity whose supervision will not be assumed by the Mechanism, but will continue to be within the remit of the national authorities. The Banco de España will thus continue to exercise supervisory powers in the areas of money laundering prevention, consumer protection and, partly, in the oversight of financial markets. It will also retain the supervision of banking foundations within its sphere of competence, that is to say having regard to regional governments. Fifth, the Banco de España, like the other national supervisory authorities participating in the SSM, fully retains its supervisory powers over non-bank financial institutions, other financial institutions and entities related to the financial sector such as payment institutions, electronic money institutions, credit financial intermediaries, mutual guarantee companies, currencyexchange bureaux and appraisal companies. In short, with the launch of the SSM, the main centre of supervisory decision-making on significant Spanish banks has passed from the Banco de España to the ECB.