samchain/econo-pairs-v1 huggingface dataset:
Nevertheless, they have significant consequences for the  structure of markets, with a substantial impact on our ability to impose and control our public policy choices regarding financial services, in particular in terms of legal, technological and operational certainty. For instance, which law is applicable, when the provision of services involves players established in different jurisdictions with sometimes contradictory legal requirements? The United States in particular is characterised by a broad definition of extraterritoriality. Besides the identification of the legal framework, there is also the question of the ability of a judicial authority to enforce the law, given the size of financial groups, the large number of 1/4  BIS central bankers' speeches  intermediaries, or the location of their various activities. The digitisation of financial services also introduces a new form of dependence on physical (mobile phones and connected objects) as well as digital (search engines, mobile applications) entry points and on the non-European technology companies that control and dominate them. Yet, competition law, created in the 19th century in a period when the State took a stand on monopolies, is proving to be ill-equipped to deal with these technology companies. Lastly, the dematerialisation of activities, by increasing the number of interconnections and system entry points, makes them more vulnerable to potential “cyber-attacks” and to their use for money laundering and terrorist financing purposes, and makes them more dependent, to counter this, on non-European players who also operate outside the regulated financial sectors.

In addition, while growth was slowing, inflationary pressures were heightening and inflation expectations were being revised upwards, which has raised the risk that they may become unanchored. Nobody doubts that an eventual loss of control of inflation, with the subsequent deterioration in price expectations, would contribute to seriously exacerbating a slide towards economic weakening in the area. Such is the difficult setting in which the ECB Governing Council has had to take its monetary policy decisions. These decisions have been pondered bearing in mind at all times the impact of tighter financial conditions and of the change in the dynamism of demand. Thus, against a backdrop of growing uncertainty, it was decided to hold interest rates steady until last July, when the materialisation of some of the previously identified risks to price stability made a 25 bp increase necessary. At the recent Governing Council meeting, however, we noted a weakening in activity in the area and the fact that the latest price data point to the onset of some easing. Inflationary risks have therefore diminished somewhat, though they have not disappeared, meaning that monetary policy should continue contributing to containing them. Given the seriousness of the tensions on international financial markets, we also reiterated the readiness of the Eurosystem to provide all the liquidity required for as long as should prove necessary. Let me now turn to the Spanish economy.
Recently, there have been negotiations between Canada and the EFTA countries on a free trade agreement and a similar agreement with Mexico has been discussed. If an agreement is reached the share of NAFTA countries in trade and investment could increase. Given Iceland’s membership in the European Economic Area and consequent tariff-free access to the European Union, Iceland offers a unique opportunity for foreign direct investment from non-European investors, including of course American ones. Concluding remarks To conclude, I would like to emphasise the importance which I attach to the liberalisation and opening up of the economy in recent years. The market is a strict master and provides strong discipline for economic policy. There is little doubt that Iceland is today reaping the benefits of general liberalisation. At present, we are also for the first time after the opening up of the capital account facing a challenge posed by the threat of overheating in the economy. Our policies and policy tools are being put to a test. 5  BIS Review 117/1999

Over the last 6 years the cumulative productivity growth in Estonia, relative to its main trading partners, has amounted to 25 per cent. The corresponding CPI-based real exchange rate appreciation amounts to 22 per cent. The share of current and future EU member states in Estonian exports is about 80%. By now, Estonian economy is strongly integrated into the European economic area. Can we say that the restructuring of our economy has been completed? III. On the way to Europe  What are the challenges ahead? For Estonia, like for all new member states, the only possible way to join the euro system is to do it in full compliance with the letter and spirit of the EU Treaty. Speaking about the present accession countries as a group, it can be said that the key challenge of the policy maker is similar everywhere - to foster real convergence and at the same time maintain macroeconomic stability. But although the underlying processes are the same for all, earlier national economic policy choices - and also the size of the country in question - play a very significant role. Thus, the optimal approach to euro area membership can in no case be a uniform one suitable for one and everybody. ERM II provides, in principle, a much-needed buffer zone before a country's EMU entry. However, there are obvious risks involved.
A third argument is that Banking Union membership should benefit participating countries through the removal of an incentive for deleveraging on the part of banks with foreign capital. The on-going cross-border deleveraging process, while reflecting balance sheet repair in host countries, as well as constrained demand for new borrowing, must be monitored carefully. To give you an idea of the size of the phenomenon, as compared to the beginning of the crisis, external funding from parent banks has decreased in Romania by 35 percent, about half of the reduction occurring last year. The rebalancing of bank funding away from parent-subsidiary lines of credit and more towards domestic funding is necessary and appropriate (inter alia, it reduces loan-to-deposit ratios and the stock of foreign private indebtedness, both processes impacting financial stability favourably), but must not be unduly accelerated in the short and medium term, especially when superimposed on an on-going fiscal consolidation effort, as this puts excessive downward pressure on economic growth. As a fourth argument for Banking Union membership, there are also potential benefits which relate to eliminating the possibilities of jurisdictional arbitrage (for example, by preventing the widespread potential conversion of foreign-owned bank subsidiaries into branches), as well as to creating a more competitive market by reducing distortions and entry barriers. There is a lot of potential for increased efficiency of the banking sector by virtue of being a member of the Banking Union. A more efficient banking sector cannot but bolster the long-run growth potential of an economy.

In fact, when the financial system grows out of proportion with respect to economic fundamentals, this may go hand in hand with the creation of exceedingly complex financial products, herding behaviour, materialization of tail risks and it may attract more resources relative to its value added. The theoretical channels through which excessive finance may be detrimental for growth are still unclear. One possibility is that distorted incentives – deriving from the increasingly higher payoff coupled with limited downside risks – may lead managers to take hidden tail risks. That is, managers may have increasingly higher incentives to invest in assets offering generous compensation most of the time, but generating severe losses with small probability. These incentives may be further exacerbated by herding behaviour, as the performance of managers is often evaluated in comparison with that of peers. Herding behaviour, in turn, generates bubbles and makes the loss associated to the unlikely bad outcome even more  BIS Review 81/2010  3  severe than it would have been otherwise. During financial bubbles, the search for yield intensifies, risk-taking increases, and leverage in the system reaches unsustainable levels. The exponentially rising volume of financial assets and transactions, especially by highly leveraged and interconnected institutions, leads to financial fragility. Shocks to the system can lead to fire sales and asset price decreases, resulting in liquidity squeezes and solvency risks.
At the same time, central banks and financial regulators became increasingly vocal in stressing the overwhelming importance of a stable financial system, and took a more active role in strengthening their regulatory frameworks, both nationally and globally. Inevitably, these substantial, unprecedented shifts in the design and operation of a key field in economic policy have raised fundamental questions and cast doubt on deeply entrenched beliefs. Based on practical experience of making monetary policy in the last few years, I will try today to dispel four Swiss monetary policy “fictions” by contrasting them with established facts about Swiss monetary policy. These facts are not necessarily new, but rather took a back seat in more benign times; it took the crisis to amply demonstrate their considerable relevance. Fiction I: Negative interest rates can’t happen First, I would like to address the belief that, because of the so-called “zero lower bound”, nominal interest rates cannot become negative. This belief has clearly been proved a fiction by current developments, with the SNB lowering its policy target rate into negative territory. 1 Unsurprisingly, the measure has sparked intense debate in the public domain. This is partially due to fears that the costs incurred by banks holding sight deposits with the SNB will, at some point, be passed on to their clients. But there is a more fundamental issue here. At first glance, negative rates violate the intuition that savings must be remunerated. However, this intuition is misleading.

Stories of destitution among retirees is one but many of the sad stories, I would like you to avoid. Guard the assets that you have acquired in your working life jealously, because retirement does not give you multiple chances to make amends when you make unsound business decisions. It is for this reason that the Bank, through Human Resources Department, has engaged Future Search a Consultancy firm to give you tips on how to live in retirement, I urge you to attend the upcoming workshop. I therefore wish you God’s blessings as your pursue the challenges of life in retirement. Thank you. BIS Review 1/2007  1
The change in monetary policy from an exchange rate target to an inflation target has probably made it less likely that households will be exposed to a "dual shock" in the form of higher unemployment and higher interest rates, as was the case during the banking crisis. This may imply that households can bear a somewhat higher debt burden than was the case prior to the banking crisis. The level of household debt in Norway is also high by international standards, although not as high as in Denmark. However, if we look at debt in relation to wealth, the picture is very similar for all the Nordic countries. In Denmark, household financial wealth is high, while housing wealth is relatively high among households in Norway. The value of the housing stock may partly explain the level of debt. However, housing wealth does not provide a liquid buffer against payment problems. After a lengthy and sharp increase, house prices have edged down recently. From May last year to 6 May this year, house prices fell by 1.1 per cent. The price level is nonetheless high in a historical context. Growth in corporate debt has been more moderate, but the debt burden is high. Debt growth among Norwegian borrowers can also be illustrated by the credit gap, an indicator developed by the BIS. The credit gap is derived from developments in the ratio of credit to nominal GDP and is defined as the deviation between actual developments in this variable and trend.

At the same time, more prudent transformation ratios (say, loans to deposits), coupled with a lower capacity of banks to attract savings would imply, at least in some countries, that the ability of banks to lend would decrease; but their willingness would not necessarily decrease, since they keep the advantaged standpoint to screen and monitor loans. This means that the implied gap might be filled by actors (insurance companies, pension funds) with greater capacity to attract savings although with limited capacity to lend directly. Securitisation of bank loans can be the privileged vehicle through which the gap is filled. Securitisation is also key when one thinks at impediments to capital relief and at tools to decrease the perilous geographical concentration of assets in banks’ balance sheets. In fact, if the right incentives are given, securitisation markets are the best way to more rapidly guarantee that loans are available for capital markets to invest while decreasing the home bias in banks’ balance sheets and ensure that credit is channeled to the best projects at the minimum cost. That is, securitisation could also have a decisive role in the integration and deepening of European financial markets, by allowing the transfer of risk from the originator to investors of any type located in other jurisdictions, in the context of a still very fragmented banking sector, lacking for instance relevant pan-European banks.
They are plagued with issues such as options and national discretions, different interpretations and practices, reporting requirements across the EU system and the difference between legal and operational structures in banking groups, basically, issues under pillar II. As a country within the EU-system, Sweden will have to comply with common reporting frameworks for capital requirements and have consolidated financial data. They have to deal with common recognition processes for external credit assessment institutions and comply with home/host country guidelines. Sweden is attempting to deal with these issues in a systematic manner during 2007, following the regulations to be passed by its Parliament. Fortunately, Sri Lanka does not have to deal with such cross-border issues as in many other countries. South Africa is well ahead in terms of handling implementation issues on time targets. During 19992003, they have complied with core principles for banking supervision issued by BIS. In 2004, Basel II regulations were issued and economic impact studies were completed in 2005. In 2006, consultations have begun and in 2007 parallel runs will be conducted to implement Basel II in 2008. In fact, South Africa has begun data capturing and mandatory requirements way back in 2004 and had discussed appropriate models with banks opting to use internal rating based models. Informal field tests were also conducted in 2006. In order to avoid supervisors performing redundant and uncoordinated approval and validations of models and risk assessment by banks, South Africa has established supervisory colleges to share information and coordinate supervisory actions.

The Basel  BIS Review 3/2007  5  Committee has now decided to pay greater attention to give a standard definition for capital, hopefully before the implementation begins in 2008.  International Comparison Many countries have not tackled all these issues associated with Basel II, but there is notable progress; some slowly, some moderately and some at a faster phase. For example, the Development Bank of Singapore (DBS), the largest bank in Singapore and the 5th largest group in Hong Kong with universal banking, providing full range of products and services for consumer, small and medium enterprises, corporate banking, investment banking, fund management, trade finance, cash management, securities and treasuries has taken a keen interest over the last 2-3 years in meeting the Basel capital adequacy requirements and to implement the same in 2008. At present, it has a Tier I capital ratio of 10.1% and a total capital ratio of 14.1%. The main philosophy behind the DBS’s approach is a balanced and enlightened one based on the management of capital. The approach is led by the DBS’s board and senior management and it is embedded within business of a whole group. It is constantly reviewed by supervisors and communicated to the markets. The DBS group has implemented a large-scale Basel II governance structure at several levels which is a success factor.
However, it will be interesting to see if, to what extent, and in what areas people in Switzerland will use the euro as a means of payment. Certain structural effects of the euro have already become evident for quite a while, for example on the primary bond market, where the Swiss franc is losing in weight while the euro capital market is enjoying growing popularity due mainly to its excellent liquidity. According to the survey conducted by the Bank for International Settlements (BIS) for the trading days of the month of April, the trading volume in international foreign exchange transactions dropped by nearly 20% within three years. Another contributing factor to this development was the advance of electronic trading and the discontinuation of trading between the euro's predecessor currencies. Roughly 6% of all global foreign exchange transactions include the Swiss franc. This share still amounted to 7% three years ago and to just over 8% nine years back. The fact that the Swiss franc has lost relative significance in foreign exchange trading is probably largely attributable to institutional conditions for trading in additional currencies having improved. By far most of the Swiss franc transactions were effected against the US dollar. This currency pair was traded approximately five times as frequently as the Swiss franc-euro pair. This volume ratio, however, is likely to be subject to strong fluctuations depending on specific exchange rate developments.

Bruno Gehrig: Review of the Swiss economy: end-of-year media news conference Introductory remarks by Prof Dr Bruno Gehrig, President of the Swiss National Bank, at the End-of-year Media News Conference, Zurich, 7 December 2001. *  *  *  Financial markets characterised by economic slowdown Development on the financial markets during the current year was characterised by a surprisingly significant weakening of the economy affecting all the major economic regions around the world. The slowdown was most pronounced in the US, but Europe is experiencing a considerable setback in growth as well. Inflationary pressure, already weak, thus eased further. The central banks took advantage of the rapidly increasing flexibility and lowered their key rates, in some cases down to historical lows. Up until the middle of the year, the prevalent opinion in the financial markets was that - buoyed by the Fed's marked interest rate cuts - the US economy, along with the global economy, would stage a fairly swift recovery from the deterioration in the technology sector and the associated weak investment activity. For this reason, the second quarter was characterised by a recovery on most stock markets, increasing bond yields and a US dollar defying gravity. By mid-year it became clear that the cyclical decline was likely to be more serious and to last longer. This reversal of opinion led to investors gradually becoming more risk averse. Equities portfolios were regrouped and invested in the money market and in bonds.
Paul Fisher: Tail risks and contract design from a financial stability perspective Speech by Mr Paul Fisher, Executive Director for Markets of the Bank of England, at Clare College, Cambridge, 1 September 2011. *  *  *  The paper is co-authored with Patrik Edsparr, Visiting Fellow, Bank of England. The authors would like to thank Ravi Mattu (PIMCO, Newport Beach), Morten Hviid (UEA) and colleagues at the Bank of England for their comments on a draft of this paper. The views represented in this paper are those of the authors and should not be taken as the policy of the Bank of England or to represent the views of any other person at the Bank. The wider theme of this conference is about what we have learned from the recent crisis. There have been many lessons. Some are not new but just a re-learning of old lore: “banks need to hold adequate capital”; “real-estate prices can fall dramatically”; “financial institutions need to avoid excessive risk taking”. The authorities are pursuing a long list of regulatory initiatives to address the externalities arising from risks in banks and markets, including Dodd-Frank in the US, the European Market Infrastructure Regulation (EMIR) in Europe, the Independent Commission on Banking (ICB) in the United Kingdom and the various Basel capital and liquidity rules internationally. And the Financial Stability Board has taken on a role in co-ordinating much of the other international effort.

It would be helpful if actual conversions happened reasonably frequently and not only in a rare crisis, demystifying the whole process. One  16  Admati, DeMarzo, Hellwig and Pfleiderer, 2010, “Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Expensive,” Stanford GSB research Paper 2065. 17  Duffie, 2010, “Contractual Methods for Out-of-Court Restructuring of Systemically Important Financial Institutions”, in Ending Government Bailouts as We Know Them, Scott and Taylor (eds). Hoover Press. 10  BIS central bankers’ speeches  would also need to make sure that the maturity profile was such that no dominant amount of contingent capital was rolled at any one point in time. There could be an on-going process of monitoring, rather than particular trigger dates that may cause a focus for a “run” during times of stress. Stress tests could also be one of the tools to force conversion of contingent capital securities by bank regulators. In addition to the accounting based capital trigger, capital requirements could be expressed in terms of what scenarios a bank has to be able to withstand, with capital securities triggered when the existing common equity is not sufficient. One argument that has been raised against contingent capital, has been the lack of a natural investor base, reflecting market segmentation between “credit”, “rates” and “equity” investors. We believe strongly that market segmentation is an inefficiency which should not be taken as a given; there are already regular convertible debt securities with an investor base.