samchain/econo-pairs-v1 huggingface dataset:
I am not thinking of the credit problems of SMEs in the short term due to higher risk aversion or to their weakness during the crisis. These problems have been covered extensively in previous addresses and the measures being taken to alleviate them include exceptional and, naturally, temporary programmes such as those of the Official Credit Institute. Here I am not referring to the short term. My concern is that, although it is positive that all the regulatory changes under way seek to ensure that banks will never again cause the serious problems which arose in many countries and ultimately spread to all of them, it should also be realised that those new post-crisis banks will, by definition, be less willing to lend money for business projects with a certain level of risk. Clearly, you can’t remove the punchbowl and expect the party to swing. The purpose of the calibration exercises undertaken is to avoid excessive requirements that stifle the economy. But nothing will prevent the post-crisis banks arising from the new regulatory regime from being much more prudent and focused on traditional intermediation than in the recent past. It will be possible to temper those requirements involving an excessive cost/benefit burden, but it is doubtful that a change enjoying such wide support will be stopped. The fact is that public opinion in the major countries wants the new international regulatory environment to oblige financial institutions to behave as conservatively as necessary to avoid a repeat of the current crisis.

I shall not elaborate here on this change in style, but let me stress its historical nature, since it entailed the recognition of a far different world from that when the Bretton Woods institutions were designed at the end of the Second World War. But the change in substance has not been any less. The philosophy behind international regulation until then had been based on the idea that private financial institutions knew better than anybody what they had to do, and we could therefore count on self-regulation. Meantime, in many countries, hands-off supervision was the prevailing philosophy: the less the public sector laid its hands on financial activity, the better. The crisis and the initiative of the G20 leaders have called this philosophy into question. An example of this is the radical change in direction of the work of the Basel Committee. Although the so-called Basel II reform had some very positive aspects, such as the greater sensitivity to risk of regulatory requirements and the consequent stimulus for banks to set in place better risk management systems, the Committee’s work was naturally infused by the self-regulation approach then prevailing. However, since late 2008, financial regulation has taken a radically different road.
We closely monitor industry structure and fund flows to detect whether the framework is having any unintended impact. For example, we watch banking data and money fund holdings to see if savings are shifting between the two, because if such a shift had to reverse as we wound down the ON RRP, those flows could potentially create costs to the firms concerned and also unnecessary problems for market functioning. We also keep track of prime money funds converting into government-only money funds, because if they do so on the mistaken impression that the Federal Reserve would provide a risk-free investment opportunity indefinitely and on a very large scale, they might later have to unwind that change when their error became apparent. Avoiding financial instability The third lens for evaluating the framework is the extent to which the framework avoids augmenting risks of financial instability. In particular, the framework shouldn’t create a risk that, in times of stress, money market lenders will rapidly disintermediate their usual counterparties and come to the Federal Reserve instead, such as through the ON RRP facility.27 Of course, flight-to-quality effects existed in financial markets long before we put the new framework into place – what I’m referring to is a situation where the framework facilitates those effects or makes them larger. We address the risk of sudden surges in take-up in a couple of ways. For example, we can employ vigilant market monitoring to detect any such shifts and allow the FOMC to formulate a response.

So we couldn’t completely rule out that the federal funds rate and BIS central bankers’ speeches  3  other money market rates might not go up one for one with rises in administered rates. One might also worry that money market rates might not move together as rates rise, meaning that, for example, a disconnect might emerge between secured and unsecured rates, or between overnight and term instruments.24 Either situation could result in impaired transmission of monetary policy into broad financial conditions. Assessing the performance of the new framework To summarize my conclusion about the performance of the operating framework to date: I am extremely pleased with what we’ve seen so far. In discussing why I view the framework as effective, it’s helpful to start by explaining what it means for the tools to work well. I think about this issue through three lenses: interest rate control, avoiding unintended impact on the structure of the financial system, and avoiding financial instability. I’ll touch on what each of these mean, and then I’ll review the quantitative evidence since liftoff on how well things have gone. Interest rate control Clearly, interest rate control is the paramount objective. It is of great importance that the public is confident that the federal funds rate will be, on average over time, within the target range set forth by the FOMC, and that other money market rates will continue to move closely with changes in the federal funds rate.
Despite initial fears here in Switzerland, open and integrated labor markets between the EU and Switzerland have clearly given the Swiss economy a welcome boost in recent years. Indeed, private Swiss firms and even semi-public sectors like health care have reaped substantial benefits by drawing on the supply of large numbers of highly skilled immigrants from the EU member states and in particular from Germany. Moreover, this has not come at  BIS Review 87/2010  1  the expense of Swiss workers. Recent research actually suggests that the immigration from the EU during the last couple of years has narrowed the wage differential. 1 Immigrants have also been an important source of demand during the financial crisis. They are clearly one of the reasons why Switzerland’s economy has weathered the financial crisis relatively well. Indeed, Switzerland is one of the very few developed countries where private consumption remained a steady source of growth virtually throughout the entire financial crisis. 2 A particularly relevant benefit directly linked to the introduction of the Euro pertains to exchange rate volatility. After the introduction of the Euro and before the peak of the financial crisis in 2008, the average Euro – Swiss franc volatility was roughly 30% lower than the prevailing Deutsche Mark – Swiss franc volatility in the 1990. The compression in exchange rate volatility is significantly larger if one takes the Lira or the Peseta or any of the other peripheral European currencies as a reference point.

In an attempt to understand what is currently happening in Europe, we have to go back to the 1950’s. European integration as we know it began 60 years ago, and until recently, it has been a success. The signing of the treaty establishing the European Coal and Steel Community on 18 April 1951 was the first genuine step towards economic and political integration. The six signatories – Germany, France, Italy, the Netherlands, Belgium and Luxembourg –, agreed to run their coal and steel industries under a common management. The overriding goal was to secure a lasting peace on the European continent. The introduction of the Euro in 1999 was just one further – albeit major – step in this long-standing integration process. Throughout these decades, the world benefited from economic prosperity and peace on the European continent; a continent, that had previously been torn apart by two world wars within the span of forty years. From a Swiss perspective, regardless of one’s political or ideological leanings, there can be no doubt that the Swiss economy situated at the very heart of Europe but remaining outside the European Union (EU) has benefited from the continued process of European integration. There are a host of examples to illustrate this. The bilateral agreements Switzerland concluded with the EU in 1999 and 2004 would have been very difficult to reach with 27 individual nations. Among other things, this has led to greater immigration from the EU.
Fast and Secure Transfers A successful example of ISO 20022 adoption in Singapore is “Fast And Secure Transfers” or “FAST”. This is a secure electronic funds transfer service that is available 24/7. 2  BIS central bankers’ speeches  •  We started with 14 participating banks in March 2014, we now have 19. •  FAST usage has risen steadily, clocking 18 million transactions since its launch. FAST offers several advantages for bank customers in Singapore. •  You can pay someone almost instantaneously from your computer or mobile device at any time of the day. •  You can receive confirmation of payment within seconds. •  If you are a company, whether big or small, near-instant payment and confirmation round-the-clock makes a huge difference if you rely on cashflow to pay suppliers frequently. With the whole transaction going electronic, you can look forward to more efficient reconciliation of your payments with your financial accounts. •  In short, FAST is almost as convenient as cash, yet potentially safer and cheaper. While the take-up of FAST has been encouraging for person-to-person payments, it has some ways more to go for merchant payments. On the payee side, a barrier to adoption by merchants is the challenge of integrating electronic payments with the existing work flow of confirming and reconciling receipt of payment, which is currently done at the cash register. Two of our banks have come up with solutions for this.

•  MAS is working with several other banks and insurers on their plans to establish and expand their analytics and innovation teams in Singapore. At the heart of a Smart Financial Centre must be a progressive information technology architecture. Two key characteristics of such an architecture are: •  common standards; and  •  seamless data sharing. Common standards Let me begin with common standards. They are key to making systems interoperable and harnessing fully the benefits of new payments technologies. Lack of standardisation leads to fragmentation, inefficiency, and inconvenience. •  Take for example electronic funds transfer. •  Without a common standard, an application written to effect funds transfer for one group of financial service providers may need to be rewritten to work with another group of financial service providers that operate on different interface standards. Common standards allow systems and applications to operate efficiently and seamlessly when different financial service operators and solution providers come together. •  The EMV chip is one of the most impactful examples of a common standard. It is all the more impressive as it was an industry initiative without any government involvement. •  NFC, or near-field communications, represents the next big thing in common standards. It is enabling contactless payments on mobile devices like smart phones. Yet another good example of a common standard is ISO 20022. This is the international standard for electronic data exchange among financial institutions. •  Its growing adoption has helped to make payments platforms interoperable and reduce inefficiency.
Ideas and Institutions – A Growth Story Speech given by  Andrew G Haldane Chief Economist Bank of England  The Guild Society University of Oxford 23 May 2018  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Shiv Chowla and David Ronicle for their help in preparing the text. I would like to thank Will Abel, Sandra Batten, Sarah Kinson and Patrick Schneider for their comments and contributions. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Economic growth has been among the greatest gifts given to us, as individuals and societies. It may no longer be fashionable to say so. Measures of economic growth, like Gross Domestic Product (GDP), can be highly imperfect metrics of how well individuals and societies are faring, their subjective sense of well-being. 1  And growth in income and output is not, of course, an end in itself. Nonetheless, it is now pretty well-established that growth is a vital ingredient, indeed pre-requisite, for meeting many of the broader societal objectives many would view as important to our longer-term health, 2  wealth and happiness. While not an end in itself, economic growth appears to be a vitally important means of achieving those societal ends. Economic growth is the main reason why global levels of poverty and rates of infant mortality have fallen spectacularly over recent centuries. It is why longevity and educational standards have risen secularly over the same period.

30  9  All speeches are available online at www.bankofengland.co.uk/speeches  9  During the first three Industrial Revolutions, the skills workers needed to keep one step ahead of the machine were largely cognitive. Machines undertook largely manual (“doing”) tasks, which had previously used labour-intensive technologies. Cognitive (“thinking”) tasks remained, by and large, the exclusive domain of humans. So institutions emerged to nurture thinking skills, largely in children and young adults, to increase the chances of successful transition to the cognitively-intensive future world of work. In children, the most important of these institutional innovations was probably compulsory schooling. For children between the ages of 5 and 10, this was formally introduced in the UK with the Elementary Education Act of 1880. It was extended to age 11 in 1893 and age 12 in 1899. The Fisher Act of 1918 provided for compulsory education to age 14 and part-time education to age 18. Compulsory full-time education was extended to age 15 in 1947 and age 16 in 1972. 33  As these pieces of social infrastructure developed, so too did standards of educational attainment and cognitive skills. The fraction of the population aged 15 and over that attended secondary school rose from 23% to 60% between 1950 and 2010. 34  In the 1950s, less than 11% of the relevant age group passed five  or more GCSE O levels in England and Wales. By 2010, that had reached almost 80%.
In early December, OPEC and other oil exporters agreed to cut production in 2019. However, the developments of this year demonstrate that producers can rapidly ramp up shale oil production when prices are high. Another considerable external factor is geopolitical risks affecting both Russia and other 1/3  BIS central bankers' speeches  countries and regions. As far as internal factors are concerned, here we have persistent uncertainty over the price response to the VAT rate hike, the effect of this year’s weakening in the ruble on inflation, and its effect on inflation expectations. It means that the uncertainty over price movements is associated with both an estimated direct effect of proinflationary factors and the scale of secondary effects dependent on inflation expectations. Thus, our baseline scenario assumes that the VAT rise will contribute approx. 1 pp to inflation. However, the possible estimates of this contribution range between 0.6 and 1.5 pp. The scale of secondary effects is still harder to estimate. Even a temporary acceleration of price growth raises inflation expectations of both households and businesses. We saw it from the surge in petrol prices registered in May-June this year. Petrol prices have been stable in the second half of the year. However, surveys suggest that Russians are highly concerned about the rise in petrol prices. Inflation expectations remain unanchored. This means that they are highly likely to go up in response to price growth following the VAT rate hike. Therefore, we cannot consider the VAT rate revision as a purely one-off factor.

The residual impact of the one-off factors on annual inflation is set to be entirely gone in one year’s time – in the first quarter of 2020. Now, I will say a few words about the economy and the forecast. Economic growth rates remain close to their potential levels. Unemployment is invariably low and close to its natural rate. Having said that, certain economic activity indicators continue to post a mixed performance. The forecast remains essentially unchanged. Given the state of the global energy market over recent months, we have downgraded the oil price path somewhat in the baseline scenario. The assumption has been updated to reflect faster declining oil prices in the course of 2019 – based on the calculation that the average oil price will total $ per barrel (from the previous estimate of $ a barrel). Moving forward, the average price is set to remain at this level between 2020 and 2021. As before, our approach to oil price assumptions is conservative. The oil price volatility we saw in the fourth quarter (from $ to $ a barrel) is an indication of the validity of this approach. The running fiscal rule will ensure that the impact of changing oil prices on economic growth 2/3  BIS central bankers' speeches  remains limited. We therefore leave our GDP growth forecast unchanged at 1.2-1.7% for 2019, admitting it may rise to 2-3% in 2021 as the Government implements its structural reforms. Changing oil price assumptions have stronger implications for our estimated balance of payments.
Further, growing deviations between benchmark and production projections could highlight emerging (or declining) areas of risk. In this regard, a related area of research could address optimal ways for supervisory to assess the signal when benchmark and production model results deviate significantly from one another. Finally, these simpler models could potentially form the basis of a more dynamic, systemfocused stress test analysis that builds in the linkages and feedbacks not currently captured in the CCAR and DFAST stress testing programs. This is a short list of what I see as some important tactical issues in supervisory stress test modeling. But I also want to highlight some bigger picture issues where additional research could help guide the evolution of the supervisory stress testing regime. Recall that I framed my discussion by arguing that supervisory stress testing emerged from the experience of the financial crisis to address both the backward-looking nature of regulatory capital requirements and potential first-mover problems that an individual bank might face in cutting dividends or raising new capital during periods of emerging stress. If that’s the case, how well has the stress testing regime, as incorporated into the SCAP and now the CCAR and proposed Stressed Capital Buffer approaches, addressed these problems? Is the approach working? Does it stand up? It is easy to see that banks have more regulatory capital now than before the financial crisis.

Chart 7: Three-month interbank rates relative to expected policy rates  Chart 8: Three-month UK interbank rate relative to expected policy rates  Sterling  Basis points 250  Basis points Euro 400  US dollar  200  350 300 (d)(e)  150  250  Forward spread on 7 October 2008 (c)  (c) 200 150  100  Forward spread on 20 October 2008 (c)  100  50  50 0 Jan.  Apr. 2007  Jul. Oct.  Jan.  Apr. Jul. Oct.  Sources: Bloomberg 08 and Bank calculations. 0 Jul. 2008  Sep.  Nov.  Jan.  Mar. May. Jul. 09 Sources: Bloomberg and Bank calculations  BIS Review 132/2008  7  Chart 9: Dynamic provisioning  Specific provisions as a percentage of total loans General provisions as a percentage of total loans Total provisions as a percentage of total loans  Upswing  Per cent of total loans  Downturn  0  Time  Table 1: Key actions to improve resilience  • Macroprudential tools are needed to guard against systemic risk • Capital levels need to rise and need to be of sufficient quality • Liquidity standards should be strengthened • Strengthen the legal framework for depositor protection and bank resolution • Better management of cross-border financial institutions • More disclosure, including potential future balance sheet volatility • Developing centralised infrastructures for over-the-counter instruments  8  BIS Review 132/2008
In summary, the central bank, such as ours, has a key role in the attainment of the MDGs through the implementation of appropriate monetary and supervisory policies that ensure price and financial system stability. Macroeconomic analysis and modelling are key components in arriving at sound and effective macroeconomic policies which will contribute to poverty reduction through the acceleration of economic growth and facilitate the achievement of the MDGs. In a nutshell, Mr Chairman, one can simply state that low inflation coupled with a developed and stable financial system, will enhance higher economic growth. Sustained and higher growth will create more jobs and subsequently increase people’s income. An increase in people’s incomes will contribute to alleviation of poverty as it will improve their capacities to access the human basic needs such as food, shelter, education, and health. Further, with increased investment (and a growing economy) partly on account of price and financial system stability, Government revenue is more likely to rise, therefore enabling the Government to improve the provision of education and health services, the two which are among the key tenets of poverty reduction. Furthermore, increased Government revenue will allow more investment in infrastructure such roads needed to transport produce from various production centres to markets thereby enhancing the incomes, particularly those of rural communities. This would contribute to the achievement of MDGs.

Their response in turn will affect how financial institutions interact with businesses going forward. Beginning from July this year, financial institutions have started reporting their climate related risk exposures based on the Climate Change and Principle-based Taxonomy developed for the financial sector to assess and classify economic activities within their portfolios. Aside from building a strong foundation for risk assessments and disclosures, the taxonomy is expected to encourage the flow of capital towards supporting transition activities. We recognise the need to minimise macroeconomic and social dislocations in the short term as we transition to a low carbon economy. The financial sector taxonomy therefore does not adopt a binary classification of green and brown activities, but also recognises credible efforts by businesses to actively reduce the harm that their operations might pose to the environment during transition. Based on an analysis of their material exposures to climate-related risks, financial institutions would be required to take actions to address high and unmitigated exposures. We have also strengthened the standards that we expect financial institutions to meet in managing climate related risks. This includes an expectation for financial institutions to work with and support their customers in managing their transition. More to the point, if businesses are committed and willing to undertake changes to reduce their GHG emissions and green their operations, the financial sector should help them make the transition. This may take the form of appropriate financing or protection solutions and advisory services.