samchain/econo-pairs-v1 huggingface dataset:
Such coordination failure may arise not because the depositors or the interbank market participants think the bank is likely to be insolvent, but because they anticipate others will withdraw.2 The rationale of liquidity requirements is that they reduce the impact of uncertainty on the bank risk profile, since they allow the bank to withstand larger withdrawals. LOLR and deposit insurance are other ways to achieve the same means: mitigating the risk of a run. The difference is that liquidity requirements are internalised, while LOLR and deposit insurance are externalised to the central bank and to the taxpayers, respectively. Another difference is that liquidity requirements and deposit insurance exert their effects ex ante while LOLR happens after the fact. An additional micro-prudential benefit derived from liquidity requirements relates to a special role of liquid assets. By maintaining liquidity buffers in advance, banks commit to removing solvency risk from a portion of their portfolio. This limits solvency risk and encourages good risk management, acting as a prudential regulatory tool alongside other requirements, such as capital buffers or bail-inable debt, that also exert discipline on bank risk-taking behaviour.3 A counterargument is however that holding a large balance of liquid assets gives bank management too much discretion and can thus create agency problems.4 Liquidity standards should also be designed to mitigate adverse effects owing to inherently systemic characteristics of a liquidity crisis. The reaction of one bank to liquidity strains might create major liquidity strains for other banks.

All in all, one may therefore expect a general increase in bid amounts and bid rates in tender operations, as well as adverse selection in the participation to these operations. Would this imply a changed risk profile of the Eurosystem’s balance sheet? In principle no, as the central bank is protected by its risk management framework, including a haircut schedule calibrated to the credit and liquidity risk of pledged securities. But higher average haircuts could imply a higher level of asset encumbrance on the balance sheets of banks, with potential feedback loops onto the perception of credit risk at counterparty or even at country level. Let me give a second example of how the interaction between liquidity regulation and monetary policy implementation might be expected to be complex, especially for the Eurosystem. On one side, the regulation aims at reducing banks’ undue reliance on central bank liquidity, which is an intended consequence of the regulation. On the other side, the regulation might lead to a situation in which some euro area banks, presumably the most fragile, would rely more on the Eurosystem than otherwise. The central bank then risks becoming a “lender of first resort”. Still, on this note, let me recall that the Eurosystem implements monetary policy in normal times in an environment of a large and structural liquidity deficit by using temporary liquidityproviding operations in the form of reverse repos. This implies that some reliance on central bank funding is not undesirable, but rather wanted.
The use of this type of extreme scenarios, which are plausible but have a relatively low probability of occurring, is an integral characteristic of the main international stress tests and is consistent with the goals of prudential regulation which require that banks have sufficient capital to absorb unexpected losses. The adverse scenario simulates a further increase in energy prices and a greater impact of bottlenecks on global trade. This drives up inflation and, consequently, accelerates the monetary policy response. It also entails a worsening of financial conditions.31 Under the severe scenario, the price shocks are slightly more significant than under the adverse one, but the main difference is the inclusion of a more marked worsening of households’ and firms’ confidence, which causes further falls in the main domestic demand variables (consumption and investment).32 The adverse scenarios for the foreign economies that are important to Spanish banks are calibrated so that their severity is consistent with the impact of the shocks on the Spanish economy. These scenarios thus enable a rigorous analysis of the banking sector’s resilience to the risks deriving from the current geopolitical setting. 31  Specifically, further increases in the sovereign risk premium and the spreads in bank lending to households and firms, and a decrease in the value of the assets that make up household wealth, with substantial falls in stock prices and house prices.

In the absence of direct trust among parties, the alternative is to rely on trusted central parties. In payments and settlement, there is a central operator that records and updates the balances of the clearing participants But trusted central parties are not always available. And even if they are, what if they fail? Single points of failure make attractive attack targets. And what if trust is broken? What if the central party colludes? The key breakthrough of blockchain technology is its ability to establish trust in a decentralised system. Blockchain technology allow diverse parties to collaborate without trusted central parties. All parties to a set of transactions are able to maintain a coherent and consistent view of the state of the world. 1/5  BIS central bankers' speeches  When I am confident that what you see is what I see, we can collaborate more seamlessly without a third party to maintain a “golden source of truth”. How does a blockchain make sure that what you see is what I see without third party verification? First, data are recorded and shared in a way that ensures a consistent view across multiple parties. Copies of the data are spread around all the nodes of the blockchain network. Rather than trusting any single party, the trust is placed in the collective view of all parties. Anybody can check whether something is wrong. Second, data are heavily encrypted or signed with digital signatures that makes the blockchain secure against tampering.
A series of regulatory measures are introduced by the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision, aiming to strengthen the quality and quantity of capital requirements for banks. Basel III will take effect in January 2013, and a more stringent Liquidity Coverage Ratio and Leverage Ratio will be put in place. Besides, the FSB has requested additional capital requirements and more stringent regulatory oversight on global systemically important banks. To address moral hazard in banks which are considered “too big to fail”, they are required to establish a so-called “living will” and recovery and resolution plan. I do not intend to go into details about these measures. But I would like to point out that from now on banks will require more capital and more liquid assets for their financial intermediation activities, and that this is going to reduce their credit-creating ability. 2  BIS central bankers’ speeches  This will inevitably drive up the cost of borrowing for individuals, companies and governments alike, thereby adding impetus to the process of deleveraging and debt reduction in the major industrialised countries. (4)  Government: It is now apparent that many major industrialised countries have over-borrowed. The problem has been exacerbated by the global financial crisis in 2008. Following a prolonged period of incubation by market failure, the European debt crisis was finally precipitated by Ireland and Greece. The crisis has since remained unresolved, and has even spread to core countries like Spain and Italy.

Norman T L Chan: Global deleveraging – the right track Speech by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the Hong Kong Economic Summit 2013, Hong Kong, 10 December 2012. *  *  *  At this very same forum last year, I put forward my view that excessive leveraging, or over-borrowing, in major industrialised countries was the root cause of both the global financial crisis and the more recent sovereign debt crisis plaguing Europe. Today, I’d like to expound my view on this very important issue. As you may recall, I pointed out that during the period between mid-1950s and early 1980s, the total debts of households, businesses other than financial institutions and the government in major industrialised countries remained relatively stable at about 150% of GDP. However this ratio kept increasing after the 1980s, reaching an alarming 320% even after the outbreak of the global financial crisis. As we all know, it is wonderful to have a credit line to meet our funding needs. We can use it to pay hefty tuition fees for our children studying abroad. We can use it to meet emergency needs, such as footing medical bills for a family member suddenly fallen ill. But more often than not, people borrow to fulfil their desire to consume, or to finance their property and equity purchases. In the case of companies, loans may be crucial to their business expansion plan, which would hopefully increase sales.
How many times do we go to bed composing the most fantastic letters or office memos, only to wake up the next morning to realise that they were wholly over the top, too effusive or too offensive, tactless, or whatever. The trouble is that nowadays we do not have to wait to respond until we can reach the other person on the phone the next day, or mail him a letter, or hand him an office memo; by the time we awake the next morning it may already be too late to censor our folly; we may have clicked the send button the night before. Worse still, in an increasing number of instances our counterparty will actually expect a response almost immediately. The phrase, “Let’s sleep on it”, wasn’t born for nothing, but now it may not be allowed. If you are executing major financial decisions by a mouse click, the scope for subsequent embarrassment may be substantial, to say the least. What I find slightly worrying is that the economics of, or business case for, continuing financial innovation and the quest for new efficiencies may depend in large part on successful exploitation of opportunities that can be seized only if you are able and willing to respond with lightning speed. The ultimate manifestation of this is programmed trading, where the computer virtually takes the decision for you.

The growing importance of transparency and corporate responsibility is not restricted to the accounting realm. Indeed, corporate governance is a key aspect in all financial systems. This is acknowledged by the Basel Committee on Banking Supervision, which has approved a specific guide for deposit institutions. The guide seeks to complement other codes, placing particular emphasis on organisational, risk-control and transparency aspects. Growing cross-industry and cross-country integration also has consequences for supervisors, who can increasingly less exercise their powers in isolation. Accordingly, national supervisory activity should  10  BIS Review 60/2006  best form part of the set of initiatives and activities at the international level, especially the activities of the Basel Committee on Banking Supervision and the Committee of European Banking Supervisors, which were both chaired in 2005 by the Banco de España. Once the chapter dedicated to the capital framework and the trading book was concluded in July 2005, both Committees directed their efforts at supervisory co-operation and at enhancing consistency of implementation, thus supporting the idea that a regulatory pause might improve the quality of implementation of this regulation. The call for regulatory convergence to be accompanied by a convergence of supervisory practices is particularly intense in the EU. Fora such as the Basel Committee’s AIG (Accord Implementation Group) or the CEBS (Committee of European Banking Supervisors) in the EU are a response to this call.
However, keeping with the global and domestic economic trends, the relative importance of the agriculture sector has been shrinking. Accordingly, the share in agriculture reduced to about 12 per cent of GDP by end 2007. What has been the impact? It has not been able to create sufficient value or wealth with the reduced share of sectoral importance. While recognizing the historic importance of the agriculture sector we should recognize the fact that it has a limitation in the form of low contribution to the national output and low productivity in the current context. Notably, as about one third of the labour force is engaged in agriculture, its total output is distributed among a large number of workers. According to the World Development Report 2006 of the World Bank, the agricultural value added per agricultural worker in Sri Lanka, measured in 2000 US dollars, has been US dollars 696 for the period of 1989-91. This has increased only marginally to US dollars 737 in 2001-03. However, the comparable figures for other countries, even in emerging countries, have been much higher than these figures. What is the result? As a result, the income of agricultural workers in Sri Lanka has been very low, keeping them below the poverty line. At the same time, underemployment has been the natural consequence since employment in agriculture is seasonal and there is a higher concentration of a large farm-based work-force on limited extents of cultivable land.

There are, however, several dimensions of recent growth that could have turned out more favorable. For instance, the contribution of investment to growth was smaller than it should have been, with consumption spending being the main driver of GDP dynamics in recent years. While there is no question that welfare has increased markedly, the concern for rendering these welfare gains sustainable 4/5  BIS central bankers' speeches  should prompt a switch to policies aimed at fostering investment, thus boosting the productive potential of the economy, so that future economic growth would not lead to further widening of macroeconomic imbalances. In the end, the lesson of the crisis is that a short-term focus in economic policies and paying no heed to accumulating macroeconomic disequilibria ought to be avoided, as they eventually lead to suboptimal outcomes. The only way ahead is by means of a coherent macroeconomic policy mix and resolute structural reforms aimed to boost the growth potential of the economy, ensuring durable growth and enabling the economy to benefit from EU membership. In Romania, infrastructure investment should be a major policy focus, as it would contribute the most to reducing regional disparities while also allowing businesses to access underutilized labor resources – a particularly welcome development in the nowadays tight labor market. In terms of macroeconomic policy, it is beyond any doubt that countercyclical monetary policy favors smooth convergence.
Although it helped understanding the potential risks and developments during the crisis, it did not serve to identify the imminence and the depth of the global financial crisis. 7  In Greece it were public finances that placed a burden on the domestic banks. In a later stage, due to the deteriorating valuations of Greek sovereign bonds, financing of the government become more difficult due to impaired bank balance sheets. BIS central bankers’ speeches  3  of the list of eligible collateral, and outright purchases of covered bonds and debt securities through the Securities Markets Programme. The two long-term refinancing operations (LTROs) with a maturity of three years implemented in December 2011 and February 2012 allowed banks to satisfy their additional liquidity needs. They relaxed banks’ funding constraints and – owing to their long maturity – addressed impairments in the monetary policy transmission mechanism to longer rates. Beyond the direct effect of averting a major credit crunch, the full effects of the three-year operations will unfold over time and may be gauged only as time proceeds due to the usual lags in monetary policy. The Securities Markets Programme was initiated back in May 2010 and offered necessary support to the monetary transmission but did not address the incentives for governments to engage in the necessary reforms and to rebalance their public finances. While the SMP counts for a significant share of the ECB’s balance sheet, it did not stabilise the situation in a sustainable way.

On 5 November, the Monetary Policy Committee (MPC) announced its decision to lower the Bank’s interest rates by 0.25 percentage points. This was done in view of the rise in the Bank’s real rate caused by the past few months’ decline in inflation and inflation expectations, which has been more pronounced than previously anticipated. The rise in the real rate was greater than is warranted by the business cycle position and the near-term outlook. In other respects, for the rationale behind the decision, I refer you to the MPC statement and the speech I gave at the Iceland Chamber of Commerce’s monetary policy meeting the following day. Naturally, we are also ready and willing to answer your questions about both this decision and the interest rate outlook. BIS central bankers’ speeches  1  Finally, I would like to mention that the MPC has been examining its monetary policy instruments in the recent term and, although certain changes have been made, this review is still underway. According to the statement from its March meeting, the aim of this review is primarily to ensure that monetary policy instruments are optimally suited to the achievement of monetary policy objectives, given that it is also desirable that monetary policy implementation be as effective, comprehensible, and economical as possible in terms of the Central Bank’s balance sheet. We are ready and willing to answer any questions that you have on this topic. 2  BIS central bankers’ speeches
Despite this, his critics point to the fact that he has left behind a European economy that is “drugged”, with low growth, rates at zero and inflation very far from the objective. Monetary policy is not the reason for this; it’s been the main driver of the economic recovery and growth in Europe. 11 million jobs have been created, in no small part thanks to monetary policy. This is the main thing, although there are collateral effects. The problem we have at the moment is that these monetary policy decisions need to be complemented by other instruments. Sometimes it seemed like you were not exactly among Mr Draghi’s most ardent supporters. I have always supported President Draghi. But when you heard him being talked about as the saviour of the euro or the person who had rescued Spain, it didn’t sit well with you. Well, he didn’t see it like that either. In Spain, we rescued ourselves, off our own backs, with the help of our European partners, including the ECB. Mr Draghi made a key contribution, but there’s no single saviour here. It was a set of circumstances and a matter of everyone carrying out their responsibilities in their individual roles. As Vice-President will you continue to appear alongside President Lagarde? I have no idea. I suppose it will continue like that. It’s an unwritten rule, a tradition. Traditions can change, but they can also be of value. Brexit, trade and currency wars, geopolitical tensions.

Furthermore, the ESRB adopted three public recommendations on: i)  the macro-prudential mandate of national authorities;  ii)  lending in foreign currencies;  iii)  US dollar-denominated funding of credit institutions. It is important to note that the voting members of the General Board of the ESRB include the Governors of National Central Banks. Indeed, ESRB activities are based on strong cooperation between its members. A key part of the ESRB’s work is to combine the analysis produced by the micro-supervisors and central banks. Clearly, the central bank’s role of ensuring financial stability has extended to the international level, implying further responsibility in decision-making. In Malta, the cooperation between micro- and macro-supervision is embodied in the setting up of the Joint Financial Stability Board. The Central Bank of Malta, in its capacity as the macro-prudential authority, has agreed with the MFSA to set up a Joint Financial Stability Board which will be formally constituted in a few weeks. The objective is to enhance the cooperation between the two bodies for the assurance of the stability of the financial system. The intention is to strengthen the resilience of the financial system and to mitigate the buildup of systemic risks. To these ends, the Board’s mandate includes the development of mechanisms that would identify risks to financial stability, and the establishment of the necessary macro-prudential policy tools. The Joint Financial Stability Board will also be able to make recommendations to the CBM or MFSA boards on macro or micro prudential issues, as the case may be.
Dasgupta’s analysis of World Bank estimates of genuine investment in countries, discovered that the accounts used were incomplete, as they did not include measures such as water resources, air and water pollution, and biodiversity among other measures. In addition, Dasgupta pointed out that shadow pricing strategies aimed at measuring the social worth of goods and services in an economy were questionable. Despite these setbacks, the author was appreciative of the pricing model. Dasgupta further stated that GNP and the Human Development Index as measures of economic growth at times provide contradicting evidence. Evidence supporting the findings of Dasgupta is shown by the change in the Sub-Saharan net savings rate from positive to negative in most years between 1976 and 2000, when the costs of environmental degradation and natural resource depletion were taken into account (UNDP 2003). Another measure of environmental deterioration in this case pollution, is the UNDPs Global Environment Monitoring System (GEMS), however this system does not take degradation into account (Jha and Whalley, 1999). The relationship between economic growth and its impact on the environment is ably demonstrated by the Kuznets Curve. The Kuznets Curve states that there is an inverted U-shaped relationship between economic growth and the environment. Negative environmental externalities increase steadily proportionately to economic growth up to a turning point during the initial stages of economic development (see Chart below). Once the turning point is reached, the economy then begins to place more emphasis on the importance of the environment, by devoting resources to negate further negative effects on the environment.

On the contrary, it’s based very much on emerging best practices in the risk management arena globally, and the objective is to try to encourage the wider spread of these best practices around the banking community worldwide. As regards Hong Kong, embracing the New Accord can only further strengthen our position as one of the world’s leading international financial centres. BIS Review 31/2003  3