samchain/econo-pairs-v1 huggingface dataset:
In terms of improved systems to enhance risk management internationally, the Continuous Linked Settlement Bank (CLS) was successfully established last autumn. It was an international response to a well recognised but partly unresolved risk: risk to foreign exchange settlement which goes back to the Herstatt crisis in 1974. CLS now settles FX transactions in eleven major currencies. And total daily values of transactions settled now exceed $ trillion: a figure that is likely to grow further. 2  BIS Review 49/2003  These are examples of ex-ante steps to reduce both the emergence of threats and their potential impact. But the third leg of our work is to consider what to do if there is a problem. What happens if a threat materialises? Firstly there is what I might call a “traditional” financial crisis involving one or more banks directly. All such crises ultimately manifest themselves in a shortage of liquidity, which can easily spill over from one bank to another. Clearly we need the market intelligence, expertise and operational experience to handle the liquidity aspects of such an event. Secondly, there is the possibility of what I would call an LTCM type problem. In autumn 1998 the creditors of LTCM - mainly banks and investment banks - became concerned by LTCM’s financial position. The concern was partly that even though LTCM may have been short of bankruptcy, there could be attempts by its creditors to reduce their exposures, and thereby to set off major market disturbances.

Timothy F Geithner: Risk management challenges in a changing financial environment Remarks by Mr Timothy F Geithner, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the New York Bankers Association Financial Services Forum Chairman's Reception, New York City, 5 April 2006. *  *  *  You are meeting at a time of greater confidence about the near-term world economic outlook and the stability of the financial system. The expansion in global economic activity has become more broad-based. In the United States, underlying productivity growth remains strong and some of the structural changes underway in other mature, large economies offer the prospect of greater productivity growth in those countries, as well. The gains of the past two decades in reducing inflation and stabilizing inflation expectations have been preserved in the face of a sustained and substantial rise in energy and commodity prices. In many emerging markets, a combination of stronger external balance sheets, more flexible exchange rate regimes and better monetary and fiscal policies have produced stronger growth and an apparent reduction in vulnerability to financial crisis. The world economy also faces some considerable longer-term challenges. These stem from a myriad of factors—the impact of demographic changes on fiscal sustainability, the evolution of the current pattern of external imbalances in the world economy, the political pressures induced by greater global economic integration, potential threats to energy supplies and many others. These challenges are familiar, but they have produced few indications of unease in financial markets.
65  See Broadbent (2013), Hackworth et al (2013) and Elder et al (2005). 12  BIS central bankers’ speeches  References Acemoglu, D and Robinson, J (2012), ‘Why Nations Fail: The Origins of Power, Prosperity, and Poverty’, Crown Publishers. Aikman, D, Barrett, P, Kapadia, S, King, M, Proudman, J, Taylor, T, de Weymarn, I and Yates, T (2011), ‘Uncertainty in macroeconomic policy-making: art of science?’, Philosophical Transactions vol. 369 no. 1956. Ainslie, G (1975), ‘Specious reward: a behavioral theory of impulsiveness and impulse control’, Psychology Bulletin 82:463–96. Anand, G, and Thakor, A (2008), ‘Overconfidence, CEO selection, and corporate governance’, Journal of Finance, Journal of Finance 63, 2737–2784. Asch, S (1951), ‘Effects of group pressure upon the modification and distortion of judgment’, in H. Guetzkow (ed.) ‘Groups, leadership and men’, Pittsburgh, PA: Carnegie Press. Bailey, A, Breeden, S and Stevens, G (2012), ‘The Prudential Regulation Authority’, Bank of England Quarterly Bulletin, Vol. 52, No. 4, pages 354–62, available at: www.bankofengland.co.uk/publications/Documents/quarterlybulletin/qb120405.pdf. Ball, L (2014), ‘The Case for a Long-Run Inflation Target of Four Percent’, IMF Working Paper No. 14/92. Barro, R and Gordon, D (1983), ‘Rules, discretion and reputation in a model of monetary policy’, Journal of Monetary Economics Vol. 12, Issue 1, pages 101–121. Bergman, M and Lane, J (1990), ‘Public Policy in a Principal-Agent Framework’, Journal of Theoretical Politics, Vol. 2, No. 3, pp. 339–352. Bernanke, B and Mishkin, F (1997), ‘Infation Targeting: A New Framework for Monetary Policy?’ Journal of Economic Perspectives, 11(2), 97.116. Bernanke, B.

At best, some  BIS Review 44/2004  1  small banks might be required to allocate capital for operational risk through the basic indicator approach. In the case of larger institutions, they will be allowed, at first, to implement only the foundation IRB approach. For the advanced IRB approach more time will be necessary for the banks to improve database quality and for supervisors to improve their experience in validation. Also for operational risk, in the first moment, only the alternative standardised approach will be available. The advanced measurement approaches will have to wait a while longer. No significant impact is expected in terms of capitalisation levels after Basle II. As previously explained, current capital requirements in Brazil are 11% and this buffer has allowed banks to face periods of high volatility with no major impact. Two important challenges expected in the implementation of Pillar I are the construction of adequate databases, either of pooled or individual data, and the incipient stage of operational risk management in the industry. As for Pillar II, with the New Capital Accord, it will be necessary for institutions to further develop their own processes for the internal assessment of capital adequacy and for the supervisory authorities to increase their supervisory focus on such processes. Cross-border supervision is another issue where occasional problems are expected to occur.
Risks: Going forward, we expect economic growth to moderate, while remaining robust and well above the euro area average. We consider that risks around this scenario are balanced. On the upside, there is the potential for private consumption to grow even more rapidly in a low interest rate environment especially if labour productivity increases to permit higher wage settlements. The downside risks relate mostly to the external situation. Malta is one of the most open economies in Europe, heavily dependent on international trade for its long-term prosperity. Slower than expected growth in key trading partners, geopolitical tensions in our immediate neighbourhood and a resurgence of protectionism threaten this prosperity. Another dimension of risk relates to inflation. I have already explained that the Bank  believes that Malta’s potential economic growth rate has risen in recent years, implying that the economy can grow more rapidly than it used to without fuelling inflation. Nevertheless, output currently exceeds potential. Page 5 of 8  Should such a situation persist, we would normally expect to see upward pressures on prices and costs. We have not observed them yet, as wage growth has remained largely contained and foreign inflation is subdued. The labour market situation, however, is tightening, which could lead to an intensification of wage pressures. This underlines the need to achieve better results in labour productivity growth to support wage demands without loss of competitiveness. In addition, global oil prices are now rising after having reached a trough towards the beginning of this year.

Thus, payments enabled by new providers have just started to take off, but it looks promising to become a new normal as they are expected to improve the user experience. How fast this segment of the financial system in the EU is developing can be witnessed by the approximately 300 new providers operating by midSeptember this year, which is just two years since the application of the new regulation-relevant regulatory technical standards under the PSD2 (Open Banking Report, 20212). Most of the companies that offer these innovative services are fintechs, but open banking also 3 1/3  BIS central bankers' speeches  offers a possibility for traditional banks. In fact the survey conducted by Accenture3 finds that three quarters (75%) of the banks see payments modernization as being driven by changes in the national payments infrastructure and regulation, which include improving bank-to-bank payments systems, new industry standards and open banking. The rapid move to digital payments has put additional pressure on banks, with three-quarters (75%) of bank executives saying that the pandemic has increased the urgency of their plans to modernize payment systems. Pressures are felt by the central banks as well. In response to changes in consumer payments preferences, the need to further increase efficiency of payments, as well as the disruption caused by COVID-19, the interest in central bank digital currency (CBDC) has also increased. In fact, last year was the launch of the first “live” digital currency in the Bahamas.
Last September, 14 major financial institutions and their principal supervisors met at the Federal Reserve Bank of New York to undertake a concerted program of improvements to the infrastructure that supports the OTC credit derivatives market. When that group reconvenes next week, we will review the extent of progress in reducing the backlog on unconfirmed trades and increasing the number of trade confirmed through automatic systems. We will also assess the progress toward agreement on a protocol for settlement events. And we will review new commitments to expand this effort to other OTC derivatives, including equity derivatives. These priorities for policy and supervision have the potential to strengthen our financial system and make it more robust to real systemic events. To be effective, however, we must continue to explore ways for supervisors and regulators to cooperate more closely together. The changes in market structure and financial innovation during the past decade, along with the increased global integration of capital markets, have increased opportunities for regulatory arbitrage. Policy initiatives that focus  BIS Review 85/2006  7  only on the U.S. market or on a specific class of institutions will push the activity to other markets or other institutions, raising costs on the regulated intermediaries without reducing overall risk in the system. Balancing the imperative of a cooperative approach across markets and institutions with the need for a more agile response to the rapid pace of evolution in markets will be a continuing challenge.

An even greater challenge is measuring the exposure of the firm not simply to the direct effects of the failure of a particular hedge fund counterparty, but to the broader distress that it might cause to other market participants or its impact on the other exposures of the firm. The management of these direct and indirect exposures needs to be an important focus of attention. Capital and margin Supervisors have put a considerable amount of effort over the past decade into designing a successor to the Basel capital accord. The present regime does not do a good enough job of capturing the risks a major institution typically assumes today. Because it understates the amount of capital required against some risks, overstates others, and ignores still others, we should work to put in place a replacement regime as quickly as we can be confident we have a viable alternative. The prudent, conservative approach should be to move forward to a more risk sensitive framework that creates better incentives for prudent risk management, not to try to extend the life of the present accord. It is critical that these broader efforts to fix the capital regime be reinforced with more attention by supervisors to margin practice and limits around the counterparty risk-management process within the major financial institutions. The regulatory capital regime is designed to offset the effects on individual firms of lower margin. Where margin levels are low relative to potential exposure, the capital requirement is higher. Where margin is higher, the capital charge is lower.
Second, the need for accountability and credibility may encourage a central bank to target average inflation over a number of years, offsetting a period of above-target inflation with a subsequent period of below-target inflation. And in some countries, such as Australia, the objective is explicitly defined as being “over the cycle”. But, as already noted, average inflation targeting approaches price-level targeting as the horizon extends to infinity. Third, optimal policy under uncertainty may lead to some correction of price-level deviations. For instance, suppose that a shock has caused inflation to move above target. As time passes and the central bank seeks to return inflation to target, it is possible that further shocks push inflation away from the intended path or that tighter monetary policy fails to return inflation to target as quickly as expected. With the usual concave objective function, the policymaker should prefer to err on the side of inflation undershooting its intended path, rather than risk departing even further above target. Consequently, in the presence of uncertainty, the monetary authority will seek to return inflation to target more rapidly and may even aim to keep inflation below target for a period. For more on this, see Kamenik et al (2008). Whatever the explanation for the trend-stationarity of the price level, these results suggest that existing policy frameworks have delivered something quite close to price-level targeting in practice. That suggests the welfare gains from making the extra step may be limited, particularly when there are costs to changing the framework.

Some of those funds have been recovered, but Bangladesh Bank is still working to recover most of its loss. We at the New York Fed are still helping them to do so. Simply put, it was not just Bangladesh Bank that was wronged. The New York Fed—my client and employer of more than 20 years—was wronged as well. So I come to you today not as a dispassionate observer. I come to you today bearing the scrapes and bruises and scars of our own experience at the New York Fed. This morning, I will speak about where we are and where I think we should go from here. My message, in brief, is that we are all in this together. The integrity of the payment system is critical to the U.S. and global economy. Financial institutions and the official sector must do their utmost to protect the system from financial crime. 1/6  BIS central bankers' speeches  Where Are We Now? The payment system can be used to facilitate many types of crime. Fraud and theft have accompanied money transfers for as long as there has been money. The Romans considered counterfeiting to be a form of falsum, which was a fraud against the public.2 And, of course, Willie Sutton provided the timeless, common-sense explanation for bank robbery. Money laundering is, by contrast, a more recent development in criminal law. In the United States, anti-money laundering law reflects an evolution in focus from banknote tracking to combatting narco-trafficking to counterterrorism.
But internal distrust and uncertainty within the global system, particularly since midSeptember, has made financial market participants reluctant to take risks and to lend money to one another at longer durations. It has become expensive and difficult to find funding, even for the Swedish banks who are “in good shape” and have good capital adequacy. It has been particularly difficult to borrow at slightly longer durations. The banks normally have what may be called financing risk. When they lend money to individuals and companies it is often on long-term contracts. This means that the bank finds it difficult to get its money back earlier if it needs it. The banks receive money deposits on a short term but they lend out money more long term; this is also expressed as deposits being liquid while loans are illiquid. As the functioning of the financial markets has deteriorated, the banks have been forced to refinance at shorter and shorter maturities, often only overnight. This has increased the banks’ financing risk. The fact that they have been forced to finance themselves at shorter durations has in itself increased the uncertainty over which banks can manage their financing, and this has contributed to even greater anxiety and a lack of confidence. When fewer and fewer market participants are willing to expose themselves to risk the banks’ access to credit declines. This in turn reduces the possibilities for households and companies to borrow money. This type of development can ultimately lead to a credit crunch.

This means that the companies can obtain financing by issuing commercial paper and selling to the banks, which can in turn use this as collateral to borrow from the Riksbank. The interest on the loans provides compensation for risk and time to maturity and the banks can only use the credit facility if they buy new commercial paper. If large companies outside of the financial sector gain greater access to credit, then the banks should have more scope to lend more money to small and medium-sized enterprises as well. Liquidity assistance on special terms The Riksbank has also provided special liquidity assistance to two Swedish financial institutions, namely Kaupthing Bank Sverige AB and Carnegie Investment Bank AB. These loans have been granted against collateral and at an interest rate that is higher than the normal borrowing cost. Although neither of these two market participants has a dominant position in the Swedish market, the Riksbank chose in both cases in the current turbulent market situation to grant liquidity assistance to prevent serious disruptions to the financial system and to maintain confidence in Sweden’s credit and payment systems. The decisions were based on assessments that the participants were solvent, but that they nevertheless were unable to acquire the necessary liquidity themselves to meet their payment obligations. With regard to this type of loan, liquidity assistance on special terms, it is important to remember why they are being granted. The issue is to safeguard the financial system and important social values.
Housing tools revisited Speech given by Sir Jon Cunliffe, Deputy Governor Financial Stability, Member of the Monetary Policy Committee, Member of the Financial Policy Committee and Member of the Prudential Regulation Committee  Bank of Portugal, Lisbon 3 July 2019  I am grateful to Iren Levina and Katie Low for their help in preparing these remarks. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  I am very pleased today to be in Lisbon. The Bank of England has a long history. But we are relative teenagers compared to the Aliança Inglesa or Anglo-Portuguese alliance dating back to 1373 – that is, I think, the oldest alliance still in force in the world. We do however have a long history for a central bank. We were over 150 years old by the time the Banco de Portugal was founded in 1846. But a long history is not always a good thing.

It is possible, however, that the risk comes mainly from the borrowers’ balance sheets, that they may continue to repay lenders but reduce other spending in the economy making the downturn and the eventual losses in the financial system worse. In that case, action to reinforce lender resilience will not address the risk or only do so ineffectively and inefficiently. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  Borrower-based tools Against that background, let me say a little more about the FPC’s housing tools and how they have operated in practice. The FPC’s housing tools  In the five years after the financial crisis, housing market activity and house price growth was very subdued. But by 2013 both price growth and mortgage transactions began to pick up rapidly. In 2014 in the UK, house prices grew by 9% in the year to Q1 – twice as fast as incomes.5 Mortgage approvals had risen from around 50,000 per month in June 2012 to over 70,000 in January 2014. And, very importantly, the share of those mortgages at high loan-to-income (LTI) ratios was rising. The aggregate debt to income ratio for UK households had fallen from its crisis peak but remained high relative to historical averages and international comparators. To be sure, we had not reached the rate of increases in house prices relative to earnings and in mortgage debt that we had seen before the crisis and in other episodes in the UK.
Capital requirements that increased with the rate of  BIS Review 39/2009  5  growth of balance sheets, or some measure of incipient stress. Variable margin requirements on the terms of credit provided to financial, or even real-economy, borrowers. A fourth big question is whether the chosen instrument(s), whatever it is, could be operated by rules or would require an element of top-down judgment. On that, I am inclined to the view that our community is unlikely to be able to write down a suitably robust rule. I have two reasons for that. One draws a parallel with monetary policy. The history of monetary policy, not least in this country, is littered with failed attempts to design an optimal rule, giving way to efforts to constrain the discretion of policymakers making judgments. I cannot see why we would be any better at developing rules for financial stability. As the structure of the financial system evolved, we would need to adapt the rule and would probably fail to spot the need to do so. But there is also something about the nature of financial stability problems that makes “rules” implausible to me. In the upswing of the credit cycle, there is often a collective-action problem. Even though individual banks may perceive risk as underpriced, not knowing for sure whether or when the party will end they hesitate to step off the rollercoaster for fear of damaging their business franchise.

13 However, the fact that it is difficult to estimate stable links between resource utilisation and inflation using econometric methods does not mean that these links do not exist. International experience indicates that minor variations in resource utilisation in normal times do not significantly affect inflation, but that a very low level of resource utilisation noticeably dampens inflation. In the current crisis, with a very low level of resource utilisation in the United States and the eurozone, underlying inflation has fallen from normal levels of around 2 per cent to around 1 per cent. As far as Sweden is concerned, it appears that, despite everything, there is a relatively strong link between underlying inflation and resource utilisation measured using the RU indicator with a time lag of one to two years. (Figure 12. The RU indicator and HICP inflation excluding energy 14 ). In Sweden, underlying inflation measured in terms of the CPIF (the CPI with a fixed mortgage rate) has stayed at, and even above, 2 per cent over the last two years despite the fall in resource utilisation. This is probably related to the substantial weakening of the krona in the most acute phase of the crisis. This contributed to rising import prices measured in Swedish kronor, which kept up inflation. The krona has now strengthened again and is more or less back to its pre-crisis level against the euro, and CPIF inflation has fallen back to below 2 per cent. (Figure 13. CPI and CPIF inflation).