samchain/econo-pairs-v1 huggingface dataset:
In particular, these set out the minimum requirements for systemically important financial market infrastructure and the principles of ongoing system oversight by the National Bank. The task for the next few months will be to determine which payment and securities settlement systems are to be classed as systemically important. Then we will have to define the practical modalities that are best suited for implementing ongoing system oversight as effectively and efficiently as possible. Oversight is focused on infrastructure that is vital for the Swiss financial centre, i.e. especially those systems which together constitute the Swiss value chain. In addition to Swiss Exchange SWX, which will remain under the supervision not of the National Bank but of the SFBC, this infrastructure consists primarily of the payment system Swiss Interbank Clearing (SIC), the securities settlement system SECOM and the central counterparty x-clear. The first talks have been held with representatives of these systems to establish the implementation of system oversight. Investigations over the next few months will clarify whether other systems are also to be subject to oversight. By the end of July, all payment and securities settlement systems in Switzerland must report to the National Bank. As mentioned earlier, system oversight was not the product of a crisis. This can also be seen from the new Financial Stability Report, which examines specific aspects of the current financial market infrastructure and gives them a clean bill of health.

The aim of system oversight is to ensure that the high levels of safety and efficiency which characterise the market infrastructure of the Swiss financial centre are safeguarded for the future. Emergency liquidity assistance: a means of overcoming crises The National Bank is not only active in prevention - i.e. in the macroprudential oversight of the banking sector and in the oversight of the payment and securities settlement systems (system oversight) - but also contributes actively to overcoming crises. In a crisis, the National Bank - like any other central bank - is primarily responsible for maintaining liquidity. On the one hand, it can do this by ensuring that the market is amply supplied with liquidity. And on the other hand, as lender of last resort (LOLR) it can also provide emergency liquidity assistance to individual banks that are illiquid but still solvent. Here too we adopt internationally accepted procedures. Many central banks still prefer not to inform the commercial banks in too much detail about their role as LOLR. Quite understandably, they want to prevent the banks from being lulled into a false sense of security. The jargon term for this is “constructive ambiguity”. By contrast, the Swiss National Bank has opted - after carefully weighing up the moral hazard implications of its conduct - to communicate its terms to the banks both clearly and well in advance. The modalities are described in the Guidelines of  2  BIS Review 39/2004  the Swiss National Bank on Monetary Policy Instruments of 30 April 2004.
In this regard, Banco de España does not consider necessary to accelerate the implementation timetable, although we believe that banks should make reasonable efforts to comply with the liquidity ratio as soon as possible. To sum up: We support banking prudential regulations incorporating liquidity ratios such as those proposed. We are aware that this will entail a major effort for banks, mainly because it demands changes in their management of this risk. Spanish banks must be active in improving balance sheet structures. I would like to conclude my comments on Basel III by referring to the importance of ensuring that it is implemented in a consistent way across institutions and across countries. This objective is framed in a project undertaken by the Basel Committee to ensure that the benefits of having risk-sensitive regulation, like Basel III, are not achieved at the cost of an extremely complex legislation which, apart from other problems, brings about results that are not comparable across banks. The Banco de España agrees with this initiative. We are in favor of simplifying current regulations, seeking an appropriate balance – indeed, always a difficult balance - between simplicity, comparability and risk sensitivity. So, we view very positively the transparency exercise carried out by the Basel Committee, with the publication of the results of the comparative analysis of banks’ calculations of risk weighted assets, both in the banking and in the trading book.

It seeks to reduce excess leverage in the banking system, and to afford an additional measure of protection against the so-called “model risk”, i.e. against the risks associated with the use of sophisticated models allowed under Basel III. There are still doubts about this ratio as a Pillar 1 measure. I understand that the doubts do not concern the concept, but, rather, its final calibration and how it will impact on specific business models, in particular, those most focused on retail activity. Moreover, it is not fully clear whether the best option will be a single percentage for all banks, irrespective of their size or business model; or whether it would be better to opt for different percentages, depending on the type of business or activity of the bank; or to establish a range within which the supervisor would have discretion to decide which figure applies best to specific institutions. We believe that this new ratio can be a good prudential tool, once it is correctly calibrated. European regulations envisage that countries may apply the leverage ratio as they consider best until its harmonization in 2018, but the Banco de España does not consider necessary to bring forward its entry into force. With regard to liquidity regulation, Basel III has included, for the first time, a short-term liquidity ratio (LCR) which seeks to ensure that banks have a buffer of high-liquidity assets equal to 100% of foreseeable liquidity requirements for, at least, 30 days.
Even if stronger exports were to provide only a partial offset to the restraint from fiscal consolidation, the increase in demand generated by rebalancing  6  BIS Review 28/2010  would reduce the risk that the nascent recoveries might falter. This, in turn, would also reduce the risk of a protectionist backlash. To conclude, the structural case for rebalancing is compelling. The current cyclical circumstances reinforce this case. Thank you very much for your kind attention. I would be happy to take a few questions. BIS Review 28/2010  7

21.10.2020  Opening remarks XIX Germán Bernácer Prize Ceremony at the Banco de España Pablo Hernández de Cos Governor  Ladies and Gentlemen, It is a great pleasure for me to welcome you all, and to introduce this Award Ceremony for the 19th Germán Bernácer Prize. I would like to start by thanking Luis de Guindos, Vice-President of the European Central Bank and Chairman of the Selection Committee of this award, for his contribution to this initiative. Luis, we are greatly honoured by your presence at this ceremony. Let me also thank The Observatory of the European Central Bank – chaired by Guillermo de la Dehesa – and the sponsors, represented here by Luis Isasi, President of Banco Santander España. As you know, the prize is named after Germán Bernácer, a prominent Spanish macroeconomist with deep knowledge of monetary theory, who became Head of the Servicio de Estudios of the Banco de España in 1930. The Bernácer prize recognises outstanding scientific research by young economists under 40 from the euro zone, and our institution has been a strong supporter of this award since its inception in 2001. On this occasion, I am glad to congratulate the winner of the 19th Prize edition, Mr. Loukas Karabarbounis. He is a Professor of Economics at the University of Minnesota, a Consultant at the Federal Reserve Bank of Minneapolis and a Research Associate at the National Bureau of Economic Research.
Another way to say this is that we probably need to spend as much time discussing the limits of the quantitative outputs of the risk-management process as we do on the estimates produced by the models. Understanding and evaluating “tail events” - low probability, high severity instances of stress - is a principal, and extraordinarily difficult, aspect of risk management. These challenges have likely increased with the complexity of financial instruments, the opacity of some counterparties, the rapidity with which large positions can change, and the potential feedback effects associated with leveraged positions. Stress testing and scenario analysis have become central to the process of risk management, and we have seen substantial progress since 1998. The efficacy of these tools should be judged in part by the extent to which they capture, on a high frequency basis, the full exposure of the firm to a sufficiently broad range of adverse conditions, the aggregate exposure to specific types of different risk factors and types of counterparties, the potential interactions among those factors, the effects of a general loss of liquidity and confidence in markets, and the constraints on the ability of the firm to move to reduce its exposure to further losses. And, of course, the credibility of the risk-management process should be judged not just by the quality of attempts to estimate stress exposure, but also by the impact of these results on the decisions about how much exposure the firm actually takes.

The recognition of a market failure does not mean, of course, that policymakers have the capacity to design solutions that can effectively mitigate those failures without raising others problems. The fundamental challenge for policy is how to achieve the appropriate balance between efficiency and financial resilience. With too much government intervention, innovation is constrained and the system is stifled. With too little, the probability of systemic crisis may rise to levels that are unacceptably high. We judge the appropriate balance not against the standard of whether it reduces to zero the probability of a major financial crisis, the failure of a large individual financial institution or a major reduction in asset prices. That is not an appropriate objective of policy. Some vulnerability to crisis is a necessary and unavoidable feature of a dynamic and efficient financial system where asset prices need to be able to adjust to changes in fundamentals. The consequences of trying to induce regulated financial institutions to self-insure against all conceivable potential risks would do substantial damage to the level and efficiency of economic activity and cause the same risks to migrate to other institutions. This leaves policymakers with a set of normative questions, the answers to which must be based on knowledge about how markets work, as well as a substantial degree of judgment about what policy actions are likely to be both appropriate and effective. What level of exposure to very low probability, extreme adverse events should we be comfortable living with?
Around USD13 billion was invested by venture capital players in fintech startups in 2017, the third highest annual total this decade. Among these, the most impressive transformation is perhaps in cross-border payments. Allow me to share an anecdote highlighting the magnitude of the change that is happening. Earlier this year, eight Chinese tourists went on a six-day trip to Finland courtesy of a Chinese online payment platform company. This trip was significant for two reasons. First, payments for the entire journey was cashless and performed through a mobile app, from the payment of flight tickets to food, ground transportation and other retail purchases. Secondly, Finland, located as far as 6,000 km away from China, became the first country where this Chinese app can be used to make virtually all payments. This is just the beginning. As fintech companies expand to other markets and enable seamless cross-border payments for other users, one can already imagine a future where one can travel the world with just a smartphone in hand. Not only that, another related consequence of such a future is that essentially all we know of “international banking” today could be performed without an actual bank. Naturally, we ask ourselves what are the implications of these changing boundaries of international finance? For financial customers, it means adapting to a new banking paradigm. A more regional and digital banking ecosystem could lead to increasing localisation, personalisation and efficiency of financial products and services.

The transfer of risks related with the debt is prohibited in Islamic finance. Therefore speculative transactions such as derivative are nonexistent. Transferring the risk related with the debt and speculative financial activities could cause unnecessary booming of the financial transaction volume well above the size of the real economy. Moreover, linking credit supply to growth rate of the economic activity, Islamic finance acts as a natural hedging scheme. In other words, financing extended by means of Islamic institutions can be used only with the real economic activity, and thereby, help restrict excessive credit boom. Credit is mainly extended for the purchasing of the real goods and services. In Islamic finance, Islamic financial institutions should own and possess the real goods and services and the buyers of the real goods and services should want to take delivery. Therefore, stakeholders share profits in good times, and losses in bad times. Distinguished Guests, There is ample room to improve Islamic financial system, more specifically on regulatory and supervisory side. While the high growth rate of the Islamic financial institutions is expected to continue in the coming years, they maintain certain market risks such as reputation and liquidity risk. Liquidity management is difficult under Islamic finance rules as practical instruments in accessing liquidity are limited. However, Islamic financial institutions, being aware of the limits in liquidity management, sustain higher liquidity ratios compared to conventional banks. Similar case is valid for their capital ratios.
The world is simply too complex to put monetary policy on autopilot. 18 Concerns over the FOMC’s degree of discretion in monetary policy likely reflect, in part, innovations in monetary policy enacted in recent years that added accommodation at a time  17  The Board of Governors plays an important role in the oversight of the Reserve Banks. The Board of Governors regularly evaluates Reserve Bank operations and each Bank’s budget The Reserve Banks conduct supervision under delegated authority from the Board of Governors. Reserve Bank directors continue to have no role in bank supervision. 18  See The Fed at a crossroads, Where to go next? Brookings Institution panel remarks, October 15, 2015. 6  BIS central bankers’ speeches  when short-term interest rates were stuck very close to the zero lower bound. In particular, the Federal Reserve’s balance sheet grew substantially as the Federal Reserve enacted a series of large-scale asset purchase programs designed to support economic activity. With respect to the argument that these programs have distorted financial markets, I would simply respond that monetary policy always affects financial markets and financial asset valuations. The expected path of the federal funds rate is an important factor influencing the level of bond yields, and the level of bond yields and bond term premia have implications for the valuations of other financial assets, such as equities, and influence the foreign exchange value of the dollar. Of course, the impact of monetary policy may have been greater this time.

I see this as necessary because there is a risk that the Federal Reserve could be changed in ways that might impair our ability to achieve our primary objectives – namely, full employment and price stability. As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System. The current debate surrounding this nation’s central bank is not new, but rather dates back to our nation’s independence from Great Britain. The notion of a central bank in the United States has nearly always been controversial – in concept, design and practice. So much so that the charters of the first two U.S. central banks, the First and Second Banks of the United States, were allowed to lapse. The United States, in contrast to many of our European counterparts, had no central bank from 1836 to 1913. During this period, the economy was prone to financial panics. The rapid development of the 19th century American economy, including the westward expansion made possible by railroads, outstripped the ability of the private banking system to satisfy the nation’s needs for an elastic currency and a stable supply of credit. Ultimately, the Panic of 1907 – in which J.P. Morgan, the leading financier of the day, played an outsized role in responding to the crisis – was the catalyst that turned the tide back in favor of establishing a central bank.
In the justification for its new strategy, the Federal Reserve notes that the level of the policy rate that is compatible with maximum employment and 4 For a more detailed account, see for example, Jansson (2020). 5 It is difficult to know exactly where this bound lies, but my guess is that, in Sweden, it is slightly lower than –0.5  per cent, as the Riksbank’s repo rate was for a period, and it probably also depends on how long the repo rate remains at negative levels. 4 [17]  long-term price stability has fallen relative to its historical average. The policy rate will therefore be limited by its lower bound more often than has been the case in previous periods. In order to anchor long-term inflation expectations at 2 per cent and prevent them from falling below this level – which would make the lower limit binding even more often – it has chosen to specify the target as an average of 2 per cent. This makes it clear that ‘bygones’ are not ‘bygones’: if inflation has been below the target for a period, this must be compensated for by inflation then being above target for a period.6 In turn, as I have just mentioned, the ECB has moved on to a symmetrical target of 2 per cent in the medium term. In practice, this means that the target has been raised slightly, as previously inflation should have been “below, but close to, 2 per cent”.

This symmetry means that both negative and positive deviations from the target are equally undesirable. The ECB too points out that the marked decline in the equilibrium real interest rate has meant that the effective lower bound for nominal interest rates is likely to limit monetary policy more often. It also emphasises that one consequence of this is that strong or sustained monetary policy measures are needed when the interest rate is close to the lower bound to avoid negative deviations from the inflation target becoming permanent. It also notes that the new strategy may mean that inflation periodically will be above the target, but, unlike the Federal Reserve, it has chosen not to introduce an average target.7  Mutual dependence We have thus seen that a prerequisite for fiscal policy and monetary policy to be effective is that they have a stable long-term foundation. For fiscal policy, there must be confidence that public debt is stable over the long term and, for monetary policy, there must be confidence that the central bank can keep inflation low and stable. In order for monetary policy to be able to use the policy rate to counteract economic downturns and increased unemployment, it is also necessary for average inflation not to be too low.
The effort is clear to see. It is too in terms of foreclosed assets, which have fallen by almost 40% from their 2012 peak, and stood, as at June 2018, at around € billion. Nonetheless, the foregoing figures remain high in historical terms and dynamic management of these types of assets by banks remains necessary. They must set ambitious but credible objectives. 5/8  In designing these objectives, banks should bear in mind the supervisory expectations defined over the past 18 months. In particular, they should be very mindful of the guidelines the SSM published in March 2017 and the addendum thereto released in March 2018. The guidelines are predominantly qualitative. They describe measures, processes and best practices in the management of non-performing exposures, with a view to banks defining strategies that enable them to reduce the accumulated volume of such exposures. The addendum complements the guidelines and sets supervisory expectations as to the prudential provisioning levels for new non-performing exposures, considering as new those classified as such as from 1 April 2018. These expectations set a timeframe of two years for 100% provisioning of unsecured exposures, and one of seven years for 100% coverage of secured exposures. In this latter instance, moreover, provisioning is expected to be gradual, such that it is not left until the last year to set aside the provision.

09.10.18  Banking business model: challenges and opportunities IX Financial Meeting. “Transformation of the banking industry in a new setting of digital innovation” Margarita Delgado Deputy Governor  Good morning. It is a pleasure to participate in this ninth edition of the Financial Meeting, a classic in our calendar widely acknowledged for its prestige and which gathers together a large number of banking industry leaders. I thank the organisers for their kind invitation to me to speak at the start of the event. And it is a pleasure to follow on from Ramón Quintana, my “brotherin-arms” over the course of intense years of work, first at the Banco de España and then at the European Central Bank. Indeed, in connection with Ramón’s words, and in this my first address as Deputy Governor of the Banco de España, I wish to focus on the banking business model and the need to adapt it to a changing environment. Like all private companies, banks can only survive in a stable fashion over time if they are profitable. And, set against the current transformation of the banking industry, ensuring profitability over time calls for a comprehensive, strategic and individualised reflection on the business model. Allow me to develop this idea of “comprehensive, strategic and individualised”.