samchain/econo-pairs-v1 huggingface dataset:
And, it means that the exposures of major banks and investment banks to these GSEs is larger than in the past, measured relative to capital, and large relative to other major counterparties. Together, these changes mean there are a larger number of non-bank financial intermediaries operating outside the supervisory safety and soundness framework established for banking organizations, that are sufficiently large or integral to the financial system that their failure or anticipated failure could have major implications for the functioning of the markets in which they operate and their financial institution counterparties. And third, hedge funds now play a more substantial role in the U.S. financial system. They are a significant source of liquidity in some markets. They play an important role in making our financial markets more efficient. And they are likely in some circumstances to help markets equilibrate more quickly in conditions of stress, as was the case in the summer of 2003, when they helped meet a substantial increase in mortgage-related hedging demand from banks and the GSEs. Assets managed by hedge funds have grown very rapidly, more than doubling since 1998 to current estimates in the range of one trillion dollars. Gross credit exposure and potential future credit exposure to hedge funds as a group are probably larger today relative to the capital of banks and investment banks, although also likely more diversified.

Changing market structure Let me highlight a few of the changes in the financial structure that are germane to the mandate of the Federal Reserve. They are: •  The greater systemic importance of a smaller number of large bank-centered financial institutions;  •  The greater role played by non-bank financial institutions;  •  The growth of the GSEs;  •  Greater operational demands on the core of the clearing and settlement structure;  •  An increase in the complexity of risk management and compliance challenges; and  •  The extent of global financial integration. These are not all that new, and not all are unique to the United States, but taken together they are significant. Most conspicuously, we have seen the emergence of a small number of very large, complex, bankcentered financial institutions that now account for a substantial share of the assets and liabilities of the U.S. banking system. The top five domestic bank holding companies now hold about 45 percent of banking assets, almost twice the share as they did 20 years ago. BIS Review 55/2004  1  The earnings capacity of these very large banking institutions, the absolute size of their capital cushions, and the diversity of their activities, geographic and functional, should make them less vulnerable to specific shocks and better able to absorb larger shocks than has been true in the past.
The return on real estate and infrastructure tends to follow a slightly different pattern than the return on equities and bonds. Investing in these asset classes is therefore expected to improve the GPFG’s risk-return trade-off. Looking ahead, the GPFG will likely reduce its allocation to bonds from today’s weight of 35 percent. For a long-term investor, this is a sensible adjustment. At the same time, it will signal that the authorities are willing to accept considerable fluctuations in the return and size of the GPFG, at least on a par with the volatility seen during the financial crisis. Even though a number of countries hold substantial foreign exchange reserves, Norway stands out. In almost no other country does the central bank manage such a large and diversified investment fund. The GPFG has delivered solid results, and its management model has been shown to be robust despite periods of rough weather. Transparency, accountability and the safety of capital invested are paramount. The organisation has been enlarged to manage a steadily growing and more diversified portfolio. Changes in the organisation of the GPFG may come. But whatever the future solution may be, the primary objective of investment management must remain firm: the highest possible return for the benefit of current and future generations. The GPFG should remain a financial investor. If the government were to use the GPFG for other purposes, it would limit the scope for achieving good returns and thereby Norway’s fiscal space.

I would like to highlight four emerging lessons from the current crisis that should help prevent future problems. First, we need to understand better the various sources of liquidity risk, particularly under stressed conditions. Second, banks need to develop more effective contingency funding plans. Third, banks should support improved market functioning and stricter market discipline through better disclosure. And finally, supervision should ensure that banks’ liquidity risk management is undertaken to a more robust standard, in order to internalise some of the costs of a bank failure on the wider financial system. I shall cover these briefly in turn. Banks and public authorities alike need to develop a more in-depth and more complete understanding of the various forms in which liquidity risk can arise. That requires both a careful analysis of the various potential sources of liquidity risk, and of how such risks may crystallise under stressed market conditions. As outlined earlier, in today’s financial environment, it is not just the simple maturity transformation between deposits and loans that generates liquidity risk for banks. To this must be added contingent risks, such as the potential activation of liquidity lines to off-balance sheet vehicles, or the drawing of committed facilities extended to corporate customers. Contingent risks may also arise, in a variety of forms, from complex trading instruments, as detailed well by the Institute for International Finance (IIF) last year.
In recent years, with the financial crisis and the sovereign debt crisis, the real return has been lower, averaging about 2½ percent since 1998. We should be careful about taking a rear-view mirror approach to forming expectations about the future. Equity prices fluctuate considerably and there is a possibility that the results of the past few years will be counterbalanced by good years ahead. But changes in the global economy affect the growth outlook and the balance of risks, and hence financial market returns as well. Chart 7  BIS central bankers’ speeches  7  The yield on the presumably safest long-term government bonds can provide a basis for estimating the return on the Fund. Returns exceeding this will reflect the risk we are willing to take. In 2001, real interest rates on long-term government bonds averaged around 3 percent internationally. Real interest rates have since fallen and long-term real interest rates are now at a historical low of between 0 and 1 percent. Over time, we expect equities to yield a higher return than bonds. Over the past few years, the Fund has increased its allocation to equities, compensating to some extent for low bond yields. However, the excess return on equities must be considerable to keep up the overall return on the Fund. This is not impossible, but perhaps more than we can expect. A bolder investment strategy could compensate for low interest rates, although the risk of substantial losses would also increase. This is not a path we are likely to take.

First, there is the question of whether, in stabilising the money market, the SNB released a flood of liquidity, thereby entering into inflation risks. The SNB did indeed sometimes inject large amounts of central bank money into the market. Since the onset of the turmoil, we have in principle always provided a generous supply of liquidity through repo operations. However, fine-tuning was also consistently used to absorb any excess liquidity, as soon as call money rates fell below a certain level. Since the banks ultimately only have limited end-of-day demand for central bank money, there was a regular flow of funds back to the SNB. These operations allowed us to do two things: first, to limit the volatility of call money rates; and, second, to keep market rates close to our repo rate. This is shown in chart 2. Moreover, this also enabled us to keep the average level of sight deposits stable, which meant that we did not allow the banking system to be supplied with excess liquidity. As can be seen from chart 3, there was a wide day-to-day fluctuation in sight deposits during the crisis but, on average over the month, levels remained more or less stable. Thus Switzerland cannot be said to have been flooded with liquidity. Second, attention has focused on how the interest rates are fixed for monetary policy repo auctions. The SNB, on the basis of its monetary policy assessment, decides on a range for the three-month Libor which it considers appropriate for monetary policy purposes.
An important aspect in dealing with financial scams is in raising public awareness, including of scam tactics used by criminals and the steps that the public can take to avoid becoming victims of financial scams. In this regard, BNM, the financial industry and law enforcement agencies will continue efforts to enhance the effectiveness of awareness programmes and improve on the dissemination of information to the public. Various educational and awareness initiatives have been implemented across multiple channels and platforms, including online webinars, as well as the sharing of reminders and advisories on how the public can protect themselves against financial scams. We encourage the public to visit and follow the Amaran Scam Facebook page at https://facebook.com/amaranpenipuan. That said, the effort to combat financial crimes requires the support of all parties. Each of us as consumers are responsible and have a role in protecting ourselves from scams. Online banking users must protect their personal and banking information, and to never disclose such information to any individual or to key it into suspicious websites. Users should also be vigilant and ensure that their devices, such as mobile phones, run up-to-date software and operating systems. They should ensure that their devices are secure, free from suspicious apps which might carry malware and spyware. This means being careful with what you install on devices used for online banking transactions.

The effort to eradicate financial scams requires cooperation and concerted action from all parties, not just of BNM and the financial industry, but also from law enforcement agencies, relevant Ministries and agencies, as well as the public. PDRM plays an important role in combating scams, and has implemented various initiatives on this front. This includes establishing the CCID Scam Response Centre to facilitate the reporting by the public of financial scams. BNM and the financial industry will continue to cooperate with PDRM to combat financial crimes. This includes supporting efforts to recover stolen funds and bring scammers to justice. To combat scams effectively, the cooperation of law enforcement agencies is key, especially to share information and intelligence. In this regard, BNM, together with PDRM, the Malaysian Communications and Multimedia Commission (MCMC), and the National Anti-Financial Crime Centre (NFCC), will work together to further elevate the CCID Scam Response Centre as a more systematic information sharing platform that will enable quicker action to prevent further losses. Through the centre, the agencies will also cooperate and coordinate measures to prevent scams, through the sharing of resources, expertise and data. Further details on this initiative will be announced in due course. In addition, the cooperation of MCMC, third-party service providers (e.g. telecommunication companies), and tech platforms (e.g. social media, ecommerce) will also be key to prevent these services from being abused for scams. In short, all parties play an important role in strengthening our collective defences to deal with the threat of financial scams.
It is important that the Riksdag, the Committee on Finance and external analysts can examine and evaluate monetary policy and assess whether the Executive Board has made the right decision and whether monetary policy is well balanced. As the Committee on Finance says in the comments mentioned above: “A flexible monetary policy requires, in the Committee’s view, a high degree of  8  Issues of the significance of asset prices for monetary policy and of the monetary policy conclusions to be drawn from the financial crisis are discussed further in Svensson (2009b, 2010b). See also Kohn (2009). 9  These issues are discussed further in Svensson (2010a). BIS Review 22/2010  9  transparency and that the Riksbank is very clear about why the various repo rate decisions have been made. This is also a prerequisite for the possibility to examine and evaluate monetary policy.” In order for the Riksbank to be able to be “very clear” about why the various repo rate decisions have been made, I believe it to be necessary to discuss and assess various possible monetary policy alternatives and their consequences for inflation and the real economy. A specific decision can best be justified by comparing it to the alternatives. It is thus a question of clarifying the reasonable and possible repo rate paths that exist and what consequences these alternatives paths have on the forecast for inflation and resource utilisation. Being able to measure and quantify target achievement is a major advantage.

The average rate of change in the last three years is still negative in countries like Slovenia, Hungary, Latvia, Croatia, Bulgaria, indicating that some structural obstacles, such as high NPLS, new regulatory requirements, deleveraging of the private sector, still act as drag for a stronger credit revival. Also, cleaning up of the balance sheet of the banks may to some extent distort the data on the credit support. In order to make a qualitative dynamic review of the main forces behind the lending behavior of the banks in the region, we do a recap of the main findings of the CESEE Bank Lending Survey from 2013 until present day4. The recap points to several important conclusions. First, credit supply from being tight in the second half of 2013, was gradually eased until the first half of 2015. Afterwards it stabilized, and no major changes were observed. In all of the surveys, including the last one for the first half of 2016, the new regulatory environment and capital constraints, as well as the NPL ratio are pointed as key factors which adversely impact supply conditions. Second, demand for credits was improving throughout the whole period, since the second half of 2014 in particular. Furthermore, since 2015 credit demand for investments purposes is also visible, signaling positive structural shifts. Third, access to funding of the banks, in general was not signaled as problem even at the beginning of the survey, indicating that funding problems that emerged at the beginning of the global crisis were alleviated.
In the UK, for example, despite several months of zero or mildly negative inflation rates, there is no evidence of the development of a deflationary mindset among businesses and  3  Whether this was good luck or good policy is an open question but, for those of you who recall debates of Jackson Hole’s past, I’m minded to favour policy, particularly given post crisis performance. 4  Energy consumption per dollar of GDP is now 45% lower in the US and 30% lower in Europe than it was in 1980. 5  Similarly in the UK, energy and food contributed over two percentage points to headline figure in late 2008, and is dragging by a litter over ½ percentage point in the latest data. 2  BIS central bankers’ speeches  households. Spending is picking up rather than being delayed. Consumer confidence is at its highest level in over decade and retail sales have been growing at well above past average rates. Firms’ investment intensions are robust. And inflation expectations remain consistent with our 2% target. 6 Trade Trade creates more complex global inflation dynamics. The ICT revolution has made a great unbundling of production chains possible, and large wage differentials globally have made doing so profitable. 7 This generated vast new quantities of “supply chain trade” (Chart 5), increasingly concentrated in Asia where, by the late 1990s, supply-chain trade had overtaken that of Europe, the US and Canada.

After adjusting for unconventional policy there’s greater monetary policy divergence than implied by a simple eyeballing of the currently highly synchronised global rates cycle. And there remains the prospect of a further widening. In other words, domestic economic conditions – conditions affected by domestic monetary policy – still very much matter. None of this diminishes the considerable challenges of returning inflation to target in the face of global developments. There are profound secular and cyclical disinflationary forces at work in the global economy, and for economies like the UK their impact is being reinforced by exchange rate movements which will drag inflation down further at the policy horizon. Moreover, as events of the past few weeks have reminded us, a variety of global factors can affect global financial conditions and influence the neutral rate of interest. Central banks must take these Disparate Confounding Dynamics (DCDs) into account when setting policy. 2 Even for those economies with the strongest recoveries and the best functioning financial systems, they mean that the policy rates consistent with returning inflation to target will likely need to rise in a gradual fashion and to a limited extent despite robust domestic demand and firming domestic costs. For the UK at least, global DCDs influence but do not dictate policy. 1  Subramanian, A and Kessler, M (2013), “The hyperglobalization of trade and its future”, Global Citizen Foundation working paper 3, June.
Since 2011 the reported incidence of zero-hours contracts has risen rapidly, from 0.6% to 2.4% of the working population (Chart 6). What may be welcome flexibility for a company may be unwelcome insecurity for its workforce. •  While participation rates in the UK workforce have increased, in some cases they remain low by international standards. Female participation in the UK labour market remains well below our European neighbours, such as Germany, the Netherlands and Sweden. And compared to these same countries, the fraction of NEETs in the UK is almost twice as high. •  Finally on wages, real wages have yet to return to their pre-crisis peak. Rather, they are still 6% below that level. Since the crisis, we have seen one of the largest and longest squeezes on wages since at least 1850 (Table 1). •  Indeed, since the crisis real wages have fallen faster even than UK productivity, which itself has been extra-ordinarily weak having flat-lined for the past six years. BIS central bankers’ speeches  3  Put differently, labour’s share of the national income pie has fallen since 2009, from around 58% to 53% (Chart 7). •  That squeeze on real wages has been even more acute for some. Declines in median real wages among the young have been roughly twice as large as among the old. And workers in sectors such as construction, health and social work have seen far-larger declines in their take-home pay (Chart 8).

Inflation may then deliberately deviate from the target if this provides a better balance between stable inflation and a stable real economy. As there is a significant time lag before monetary policy measures have an impact on inflation and the real economy, monetary policy is best when it is based on forecasts. With a flexible inflation targeting regime, it is thus a question of choosing a repo rate path so that the forecast for inflation and the real economy stabilises inflation and the real economy as effectively as possible. It is thus possible and desirable to evaluate monetary policy ex ante and in real time by assessing to what extent the central bank's forecasts optimally stabilise both inflation and the real economy. However, before we do this it is necessary to assess whether the central bank's previous forecasts have been reasonably accurate and of good quality, for example in comparison with those of other forecasters. It is also of interest to evaluate monetary policy ex post, that is, after the event. As target deviations and forecast deviations are unavoidable due to the great degree of uncertainty about the future development of the economy and the delayed impact of monetary policy measures, an ex post evaluation is mainly a question of whether it would have been possible to predict the shocks and deviations that occurred, particularly if other analysts have systematically been able to predict them. 10  A preliminary analysis is carried out in Svensson, Lars E. O.
Indeed, as the U.S. economy has grown more efficient and internationally competitive in the past ten years, the dollar has retained its strong role in the international monetary system. In short, it seems safe to assume that significant changes in the international role of the dollar and the functioning of the international monetary system would occur only gradually, and surely in a manner that could be easily coped with, given the turnover in capital markets we observe today. But should a different international monetary system ultimately emerge in which other currencies, such as the euro, play an increasingly important role alongside the dollar, there would be benefits for the United States as well. Such a development would, for example, impose greater market-led discipline on the United States and, in the process, help us address our chronic low-savings problem. There is another indirect -- although potentially more important -- way in which EMU may affect U.S. business and policymaking. This implication of EMU has to do with the contribution BIS Review 109/1997  a currency union is likely to make to increasing the efficiency and flexibility of the economies that join it. At least since the publication of the “One Market, One Money” study by the European Commission in 1990, observers and analysts of EMU have paid significant attention to the decline in transaction costs that can be achieved by unifying up to 15 different currencies, and to the resulting gains in efficiency for Europe’s economies. The experience of the United States is useful in this respect.

Given its need to instil confidence in the markets and to ensure the stability of the euro exchange rate, the European central bank is likely to want to be perceived as ready and able to operate effectively in the dollar market, for which substantial dollar reserves may be required. In the short term, the response of non-European central banks to the introduction of the euro is also likely to be cautious. Ultimately, the desired euro holdings of these central banks will largely depend on the decisions they make about their exchange rate regime. A number of countries -- including the central European countries that have applied for membership in the European Union and other countries in Africa -- may decide to peg their currency to the euro. Yet these countries may well wait for the newly-formed European central bank to establish its policy record and clarify its operating procedures before they commit their currencies to a euro peg. Indeed, history suggests that a currency’s role as an international reserve, means of exchange, and store of value is slowly gained and slowly lost -- as the examples of the dollar and pound sterling illustrate. The dollar, in particular, may have seemed on the way to losing much of its international prominence after the demise of the Bretton Woods system in 1973. After declining as a share of international reserves and a means for international transactions from 1974 to the mid-1980s, however, the dollar’s relative use has not changed significantly during the past decade.