samchain/econo-pairs-v1 huggingface dataset:
After all, based on prevailing estimates in the literature, the net effect of these two opposing exchange rate movements could have lifted HICP excluding energy and unprocessed food inflation – I will refer to this as core inflation from now on – by up to 0.5 percentage point over the course of last year. 4 In other words, such estimates suggest that euro area core inflation in 2016 would have been less than half its actual level if it had not been for the euro’s depreciation in the preceding years. While this cannot be ruled out in the absence of a reliable counterfactual, it at least invites suspicion, not least as producer price inflation proved equally resilient lately. Recent price developments therefore raise two important questions. First, has the exchange rate passthrough declined over time and, if so, is it a temporary or a more permanent phenomenon. And, second, if it has declined, is this related to the use of non-standard monetary policy measures? My answer to the first question is that, yes, the pass-through is likely to have been lower in recent 2 / 14  BIS central bankers' speeches  years, mainly for two reasons. The first, and more permanent, reason has to do with structural factors unrelated to monetary policy.

For instance, one possibility would be an obligation, which would apply to all banks, to accumulate additional capital buffers in times of excessive credit growth. However, to date, experience with this kind of regulation is limited. It is therefore necessary to evaluate these instruments carefully. Do the measures contribute to the robustness of the regulatory setup? A third important criterion is that consideration must be given to the fact that each individual measure, on its own, is either insufficient, or displays shortcomings that are often not directly obvious, or can be manipulated or even avoided. These latter three problems become particularly acute as the measures become more complex. One way of countering these weak points is to make use of simple instruments, as an alternative to, or to supplement complex instruments. The benefits of simple instruments are, first, that although they are often less detailed and specific, they are more effective in a crisis. For instance, it is true that a straightforward restriction in banks’ leverage using a simple instrument, the leverage ratio, does not do justice to the different risk classes of assets and may, in some circumstances, have unintended effects or create false incentives, as can any other regulation. 6 However, excessive leverage, in an absolute sense, is usually a clear indication that a company is carrying a high level of risk with regard to its solvency.
Some products, such as ETD equities, saw unprecedented shocks to market prices and increases in volatility while other ETD products, such as metals and agriculture, saw relatively mild shocks relative to historical precedents. In this context it is to be expected that some margin models moved more on some products and asset classes than others. Indeed, for some markets and products, the increase in margin requirements was less pronounced than the corresponding volatility indices. However, looking at the response in 2020 across a range of CCPs, we were able to establish that the movements observed also reflect the selection of key model parameters, such as the choice of lookback periods, the incorporation of stressed market data, the base level of initial margin, the liquidation period and the confidence levels employed. 4/6  BIS central bankers' speeches  A degree of dispersion is to be expected. Clearing is a practice that is applied to a range of products and services to manage risk. How that practice is applied needs to be flexible and to reflect the underlying financial instrument being cleared – there is no ‘one size fits all’ margin model. To take one example, energy markets are subject to volatile natural phenomenon, and are prone to a greater frequency of peaks and troughs. But our assessment illustrated how much modelling parameters matter. The issues on variation margins are simpler as there is less of a risk judgement being made.

Bond yields reversed their movements from the early part of the pandemic, with 10 year US treasury yields rising by 65 bps in this period and 10 year gilt yields moving 64 bps higher. Bid-offer spreads on US treasuries widened by a factor of 10. The gold price fell by 12%. Investors suddenly looked to redeem from money market funds (MMFs). Sterling MMFs saw outflows of 11% in just over a week. Similar outflows were seen in the US prime MMFs. This self-reinforcing dynamic was broken by massive central bank intervention. On 19 March, the Monetary Policy Committee (MPC) announced the stock of asset purchases would increase by £ of gilts. We also launched special repo operations (the Contingent Term Repo Facility), a 1/6  BIS central bankers' speeches  credit scheme (the Covid Corporate Financing Facility), extended term credit to banks (the Term Funding Scheme with additional incentives for SMEs) and joined other major central banks in activating the swaplines. In the US, amongst other actions, the Federal Reserve announced a $ asset purchase program, quintupled its repo operations (from $ to $ and established a temporary repo facility for international authorities with a view to support treasury market functioning. In Europe, the Pandemic Emergency Purchase Programme was put in place to purchases eligible assets up to € As a result, order returned to financial markets and subsequently the growing realisation that governments would step in to limit economic damage further restored confidence. What lesson should we learn from that episode?
BRRD is explicit on this requiring, under Article 55, all third country unsecured liabilities to carry contractural terms that provide for bail-in. Most existing debt instruments do not. As part of the resolution planning process, we will ensure that they do and that our statutory powers in resolution are enforceable. These examples illustrate the basic idea that there is much to be done through the resolution planning process to make existing liability structures compatible with resolution. This won’t be a matter of grandfathering. Indeed even if a particular liability meets the definition of MREL, on the face of the directive it does not mean it does not represent a barrier to resolvability. As resolution authorities we will address these barriers as part of our resolution planning work and find ways to remove them. Or else we will adjust MREL requirements for  BIS central bankers’ speeches  3  firms. In the FSB proposal this is the placeholder for a Pillar 2 element alongside the Pillar 1 minimum requirements set out in the term sheet. My third theme is why then a standard – if we are going to be preparing resolution plans and setting MREL for individual firms why have a standard at all? There is an obvious level playing field consideration, especially among the G-SIBs that compete with each other and operate internationally. But there is a deeper reason that goes to making resolution – and indeed international banking – work.

Since 2006, the Singapore Exchange has operated a clearing facility for OTC derivatives. It started with derivatives contracts for commodities, energy and freight; and introduced interest rate swaps in November 2010. It will clear FX forwards by the end of this year. Our policy consultation will provide further details on how mandatory clearing will be implemented. Third, move trading to platforms where appropriate. International discussions on implementation issues are still ongoing. MAS is actively participating in these discussions. We will use the findings to help develop our own regulatory framework for organised platforms for trading. Fourth, report trades. We are assessing the need for a local repository and the appropriate regulatory regime. Our aim is a practical and efficient system that avoids duplication. On the insurance front, Singapore was among the first in Asia to introduce a risk-based capital framework back in 2005. Unlike in banking, there is no common global capital standard for insurance companies. The closest is the EU’s new standard known as Solvency II which is expected to be implemented by 1 January 2013. Many non-EU countries are looking to modernise their own capital frameworks along similar lines. To ensure that our risk-based capital framework in insurance keeps pace with these developments, MAS will embark on a review of our framework. We expect to issue a consultation paper by the end of this year. In the post-crisis landscape, there is a premium placed on well-regulated financial centres that have strong economic fundamentals. Singapore is in a good position to benefit from this.
The realisation is setting in that bank creditors are at risk if the bank gets into trouble. There certainly appears to have been a jump in awareness at the beginning of this year. The average spread for senior debt issued by European G-SIBs increased by over 25% within little more than a week. In part, this is a result of the entry into force of the BRRD, and in the UK the Bank’s consultation paper on the setting of MREL.12 But it has almost certainly been reinforced by other events that have brought the issue into sharper relief. As a result, perhaps not surprisingly, there have been calls to amend the regime before it has even been implemented, on the grounds that it will raise costs for banks and make them less able to lend to the real economy and that it is politically impossible to bail in bank creditors. There are clearly some very important and difficult transitional issues here. And no major shift in preventative regulation is ever universally welcome. But, it is, however, possible to view this greater awareness of the new regime in a more positive light. I have mentioned already evidence that expectations of taxpayer bailouts have diminished.

As a result, when Northern Rock got into trouble and a buyer could not be found, the Government had no alternative but to nationalise it – shareholders were wiped out and subsequently the Government was forced to inject £ billion of capital into the bank. A year later, when faced with the much bigger challenges of RBS and HBOS, the Government likewise had to step in.8 The situation was similar in other countries. While the US had a resolution regime, this only covered the insured deposit-taking entities within a banking group and proved unable to deal with the failure of large, interconnected groups. Similarly, SEC-regulated investment banks were outside of the scope of resolution regimes. While some European countries had bank-  8  4  Existing shareholders were not fully diluted in either RBS or HBOS. In the case of RBS, for example, they retained 16% of RBS’s total share capital (30% of voting shares). BIS central bankers’ speeches  specific insolvency regimes, they too did not have regimes that satisfy modern standards for bank resolution that would have guaranteed the continuity of critical economic functions. The shortcomings in terms of public institutions and powers have now been addressed in the key jurisdictions. We have, of course, yet to see how the new resolution powers operate in practice. But we now have a crucial, far reaching capability that we lacked entirely eight years ago. We need to be clear at this point what we mean by ‘resolution’ powers and authorities.
As a percentage of world GDP. 2000 – 2010 The crisis was preceded by a build-up of global imbalances. Large and growing deficits in the US were driven by high consumption and a large appetite for debt among US households. In the US, domestic spending had outpaced domestic production for a long period. Private debt  BIS central bankers’ speeches  1  increased in the US, but also in Europe, matched by high saving in Asia – primarily in China. Asia’s willingness to purchase US bonds allowed the imbalances to grow. Global trade imbalances have been reduced somewhat over the past two years, but there is a considerable risk that they will persist. They must be corrected through structural changes in the real economy. This may weaken growth in the world economy in the coming decade. Asian economies, however, have fared well through the crisis. Emerging economies are now sufficiently large so that growth in their economies provides impetus to production in other regions. Chart 2: GDP. Constant prices. Index, 2000=100 The financial crisis hastened the pace of change in the world’s economic geography. If GDP is set at 100 in the year 2000, it would have grown to 112 for the euro area and 118 for the US up to last year. The figure for Brazil is 143 and 271 for China. If the trend continues China could outgrow the US to become the largest economy in the world in the course of the next 10–20 years.

8 The Chancellor’s annual remit letter sets out that the ultimate purpose of pursuing this objective is that “a strong and stable financial system supports economic growth, facilitates the provision of finance to support the expansion of the economy’s productive capacity and underpins the UK’s position as an important global financial centre”. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  could include those that increase the efficiency of financial services, level the playing field between existing firms and new entrants, or that support the development of new products and markets. The FPC’s setting of macroprudential policy can be broadly characterised as minimising the loss function, ℒ: 𝑇  min ℒ ≡ 𝐸𝑡 {∑ 𝛽 𝑖 [𝑓(𝐺@𝑅𝑡+𝑖 ) − 𝜙𝑦𝑡+𝑖 ]} 𝜌𝑡  𝑖=0  where 𝜌𝑡 is a policy setting at time t, 𝐸𝑡 probability-weights all future states of the world conditional on information available at time t, 𝛽 is the discount factor, 𝑇 is the FPC’s time horizon, which should be thought of as representing the medium-to-long term, and 𝑓 ′ (·) < 0 and 𝑓 ′′ (·) > 0. The FPC’s primary objective is captured by the first term, 𝐺@𝑅𝑡+𝑖 , “GDP-at-risk”.9 This is the far-left tail of the forecast distribution of GDP, and is a summary measure of the impact of tail risks on the economy. GDP-at-risk can be thought of as the consequence of financial instability.10 𝐺𝐷𝑃𝑡+𝑖 is the central GDP forecast, which will over time be determined by the economy’s trend rate of growth.
Basis 4: Transition of the burden of financial crises from shareholder to tax payer Ladies and gentlemen, the history of global financial crises taught us that nature of crises have been changing and along with that the burden of such crises have shifted from shareholders to tax payers. The history of systemic financial sector crises dates back to the 18th century, to the banking sector crisis named as the South Sea Crisis in UK in 1720s. After the inception of the formal banking system, USA has reported a series of crises in their banking system from 1792 to the latest, the Subprime Crisis in 2008. During initial periods, the impact of these crises was local and their spillover effects were negligible. With the evolution of the global banking business, banks have gradually started to link with the other banks in tandem with the improvements in global trade and capital market developments. With this interconnectedness, a crisis in one particular bank or banks in a particular country began to spread and create crises in the regional and global financial markets. The first ever global financial crisis erupted in 1857 in the US. However, until the world’s biggest slump, the Great Depression during 1929–33, Governments wanted financial systems to become stable by themselves, while the Governments’ involvement with banks was limited to raising funds from banks for developing infrastructure and other public spending. There was no lender of last resort to look after the crisis-ridden financial institutions.

Step 2: Setting up the “Financial Sector Consolidation Unit” at the Central Bank The “Financial Sector Consolidation Unit” of the Central Bank, in general referred to as the “Consolidation Unit” was formed to design a strategy to catalyze the consolidation process and to spearhead the structural changes necessary for strengthening the financial sector. The Consolidation Unit is headed by the Assistant Governor of the Central Bank in charge of financial system stability with high-ranking officers of Bank and Non-Bank Supervision Departments appointed as members. A Technical Assistance Team representing expertise in the areas of accounting, auditing, banking, legal and regulation was also appointed to assist the Unit. The Consolidation Unit is responsible for drawing up the Road Map to facilitate the envisaged outcome, providing guidance to the banking and NBFI sectors to ensure that its implementation will be smooth, effective and generate synergies to the financial system. The Unit is expected to liaise with all other stakeholders, such as Ministry of Finance, Inland Revenue Department, Securities and Exchange Commission, Colombo Stock Exchange, Registrar of Companies and Panel of Auditors, to facilitate the expeditious implementation of the consolidation process. Further, the Unit is also required to submit papers to the Monetary Board to obtain necessary approvals for the consolidation model of each Bank and NBFI on a case by case basis and to apprise the Monetary Board on the progress of the consolidation programme on a periodic basis.
There is clearly very significant long-term potential across most of the region. The second issue is our continuous commitment to developing Islamic finance in Hong Kong. The Chief Executive of the Hong Kong Special Administrative Region acknowledged in his Policy Address in 2007 that Islamic finance offers huge potential for development. To further consolidate Hong Kong’s position as a global financial centre, Hong Kong should actively leverage on this new trend by developing an Islamic financial platform. Our priority is to push ahead with the development of an Islamic bond market. There should be no doubt about our determination to establish a platform for Islamic finance in Hong Kong. In a recent speech, the Secretary for Financial Services and the Treasury also mentioned that having reviewed Hong Kong’s legal, taxation and regulatory regimes, there is no fundamental obstacle to accommodating a sukuk market in our existing system. Technical modifications to the taxation regime to provide a level playing field for Islamic finance transactions are being pursued as a priority. With our commitment and status as an international financial centre, we believe that Hong Kong is well positioned to develop Islamic finance. We should play to our key strengths and capabilities and I would like to highlight two very important aspects on which Hong Kong intends to capitalise. The first aspect relates to the core strengths of Hong Kong in providing a stable and free economy. Hong Kong has been ranked the freest economy in the world for 14 consecutive years by the Heritage Foundation.

A period of intensified competition seems to have curbed the rise in prices for domestically produced goods and services. Now that inflation has picked up, it is also close to the 2006 projections. Inflation was particularly low in the years following the turn of the millennium with the stream of ever-cheaper goods from Asia, and solid productivity growth in Norway that resulted in a subdued rise in prices for domestically produced goods and services. Low inflation was addressed by lowering the interest rate. Solid growth in output and demand for goods and  BIS Review 65/1008  3  services gradually led to prospects for higher inflation. The interest rate has gradually been raised again since summer 2005 to prevent inflation from becoming too high. During 2007, the key policy rate neared what we consider to be a normal level. The key policy rate was raised in seven increments from 3.50 per cent to 5.25 per cent. The interest rate was raised ahead of the curve before inflation approached 2.5 per cent. Growth in the Norwegian economy has been high and higher than expected since 2003. Growth recovered faster and has been stronger than in the 1980s and 1990s. Growth was unusually high in 2007 for such an advanced phase of the upturn. Annual growth in mainland GDP in the three-year period 2004-2006 averaged more than 4 per cent. In 2007, growth was just over 6 per cent. Inflation remained low for a long period despite strong growth and increasing capacity utilisation.
Changes in the regulation of the rental market or increased subsidies for rented housing would increase the share of accommodation to rent, thereby dampening demand for cooperative housing and thus housing prices. However, increasing the number of cooperative houses and changing the structure of the Swedish housing market can take a long time to implement. Over that time we will be obliged to look at different measures which could dampen demand for housing and mortgages. Measures which can dampen household demand for mortgages Raising capital requirements important to reinforce the resilience of banks, although the effects on household indebtedness are limited One option is to focus on the banks and raise capital requirements, which I think we should do. If the banks were forced to change the funding mix on their balance sheets towards a higher share of equity, lending rates could then increase which would mean lending volumes would decrease. However, our own analysis suggests that the effects on banks’ lending rates and lending to households would be limited. 14 The main effect is in fact that the resilience of  14  See the article “Stricter capital requirements for banks – effects on the macro economy”, Monetary Policy Report, July 2014. BIS central bankers’ speeches  11  banks is strengthened. But this is a central point seen against the background of financial stability risks I described earlier.

Mugur Isărescu: Integrated supervision Opening speech by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the Seminar “Integrated Supervision”, jointly organised by the Romanian Financial Supervisory Authority and the National Bank of Romania, Sinaia, 22 January 2014. *  *  *  Distinguished guests, Ladies and gentlemen, It is a pleasure for me to warmly welcome you to this seminar on Integrated Supervision. The newly established Romanian Financial Supervisory Authority and the National Bank of Romania decided to jointly organize the conference on this challenging topic that has recently come into the spotlight. I particularly want to thank our guests from the national supervisory authorities of Austria, the Czech Republic, Germany, Poland, United Kingdom and Ireland. I also welcome the experts from the World Bank, the International Monetary Fund and the European Commission who will generously impart their knowledge to all of us. I do wish all of you a pleasant stay here in Sinaia. This three days long seminar is an excellent occasion to learn, to exchange views and to generate professional ties. Allow me to say a few words about where you are. This is a premise of the National Bank of Romania’s training center, situated in Cumpatu district, in this lovely resort, Sinaia. The name Sinaia is an eponym of Mount Sinai. By the end of the 17th century, a group of Wallachian monks, led by Mihail Cantacuzino, a landlord of those times, went on a pilgrimage to Palestine and the Sinai Peninsula.