samchain/econo-pairs-v1 huggingface dataset:
They will need to enable best practice sharing between different jurisdictions, monitor the progress achieved on the roadmap and set out clearly what industry needs to do, and to explore what structures could achieve real change. The IMF and World Bank could also help by encouraging involvement and collaboration of non-CPMI countries and offering technical assistance. Conclusion I want to leave you with three key messages today: enhancing cross-border payments is crucial to the global economy; tangible progress is already being made; and to really change the dial we need work collaboratively. And “we” means the three groups of stakeholders - central banks, industry and public authorities – working towards a common vision. The one difference to the Trireme is that there may be different starting points reflecting the nature of individual jurisdictions. I look forward to continuing to work with you all on this important mission to enhance cross-border payments: collaboration will be the key to our success. I would like to thank Paul Bedford, Michaela Costello, Sophie Dalzell, John Jackson, Anna Koch and Karin Oldham for their help in preparing these remarks. 1. Cross-border Payments Outlook 2022: Trends, Challenges, and Opportunities 2. Trading Economics: Remittances in Greece 3. Juniper Research: Cross-border payments 4. Visa Global Merchant eCommerce Study 5. Enhancing Cross-border Payments - Stage 1 Report to the G20 (FSB Report 2020) 6. Enhancing Cross-border Payments - Stage 2 Report to the G20 - Building Blocks of a Global Roadmap (FSB Report 2020) 7.

Page 7  Towards an international effort – central banks, industry and public authorities rowing in unison In a highly connected and networked industry such as payments, we can only make a real difference if we work together in a coordinated way. We need to row together in unison to reach our destination of faster, cheaper, more transparent and more inclusive cross-border payment services. So what are the concrete actions that each of the groups – central banks, industry and public authorities - need to take? The role of central banks Central banks, both as operators and supervisors, of payment infrastructure, we have a key role to play. We build infrastructure, add new functionality and set standards and policies to underpin safe and efficient economic and social activity. Central banks need to start changing policies and enhancing core payment systems in line with the best practices, assessments and analysis that are developed as part of the work on the 19 building blocks. To do so effectively, we need to listen to and collaborate with industry, involving them in outreach and consultations and updating them on latest developments. And we also need to share our learnings and experiences with our peers, and beyond. This could be done through the establishment of communities of practice, through which central banks can discuss challenges and barriers with peers and find ways to overcome them. The role of industry The payments industry is another key, and wide range group including correspondent banks, FMIs and the non-bank FinTech.
Together, reserve and uncalled capital made for a deep contingent capital pool for even limited liability banks, amounting to as much as 50% of banks’ liabilities. With big money on the line, extended liability kept bank shareholders and managers on their toes. Risk monitoring incentives remained sharp and risk appetites blunt. In the US, banks in states with higher-multiple extended liability regimes typically assumed less balance sheet risk (Grossman (2001)). The same was true of UK banks with high proportions of uncalled capital (Grossman and Imai (2011)). For a time, extended liability seemed to strike a reasonable risk-taking balance. But entering the 20th century, that balance was again about to tilt. Consolidation was underway in banking. Between 1825 and 1913, the number of English and Welsh banks fell from over 600 to around 70.10 As the industrial structure of banking adapted, vetting of shareholders became impractical. In an echo of today, it was argued that these larger institutions were better able to diversify away their risk. 5  Turner (mimeo). 6  Economist (1879). 7  Acheson et al (2010). 8  Acheson et al (2010). 9  Macey and Miller (1992). 10  Collins (1988). BIS central bankers’ speeches  3  Extended liability had also shown itself to be ineffective in dealing with banking failure. In crisis, exercising the capital option had heightened panic, not diminished it. As the Bank of England’s Deputy Governor remarked, “today a bank could not in a crisis make a call on shareholders without aggravating the crisis” (Turner (2009)).

In England and Wales alone, over half a million individuals and nearly 100,000 businesses have found themselves in insolvency since 2007. Internationally, a growing number of sovereign states face a similar fate. This tells us that the risks from banking have been widely spread socially. But the returns to bankers have been narrowly kept privately. That risk/return imbalance has grown over the  16  Further refinement of voting rights might be possible. For example, some have argued that voting rights could be made conditional on the holding period of an investor (Aspen Institute (2009)). This would lean against short-termist tendencies which encourage rent-seeking. 17  An alternative way of aligning managerial and system-wide incentives is to remunerate managers not in shares or cash, but in CoCos (Haldane (2011)). This would sharpen managerial incentives to keep equity away from conversion and the “wolf away from the door”. BIS central bankers’ speeches  13  past century. Shareholder incentives lie at its heart. It is the ultimate irony that an asset calling itself equity could have contributed to such inequity. Righting that wrong needs investors, bankers and regulators to act on wonky risk-taking incentives at source. 14  BIS central bankers’ speeches  References Acheson, G G, Hickson, C R and Turner, J D (2010), “Does Limited Liability Matter? Evidence from nineteenth-century British Banking”, Review of Law and Economics, Vol. 6, Issue 2, Article 6.
It has a history stretching back at least a century. The fortunes of this debate have been shaped importantly by financial crises. Indeed, a clear historical pattern has emerged: fair value accounting principles have waxed when asset prices and banks are rising and waned when both are falling.2 Consider experience in the United States either side of the Great Depression. Fair value principles were rolled-out progressively during the early part of the 20th century. This move was led by the banks who held marketable securities as assets. As these securities rose in value ahead of the Great Crash, marking them to market allowed profits to be booked. Rising asset prices and bank profits went hand in hand, with fair values playing the role of matchmaker. That was one reason why the “roaring ‘20s” roared. The stock market crash of 1929 put paid to this happy marriage. Falling asset prices, marked to market, crushed bank profits and balance sheets. In the United States, around 10,000 banks went bust between 1929 and 1938. Fair values were now seen as more troublemaker than matchmaker. Pressures to suspend fair values, from banks, regulators and politicians, began to mount. By 1938, after an initial recovery from the Great Crash, the United States was bracing itself for a double-dip recession. In response, under pressure from the Federal Reserve, President Roosevelt suspended fair valuation of investment bank assets.

My colleague, Fritz Zurbrügg, will provide further details on interest rate developments on the money and capital markets. Despite the low interest rates, mortgage growth has continued to weaken slightly in recent months. Notwithstanding this, imbalances on the mortgage and real estate markets remain high. My colleague, Jean-Pierre Danthine, will discuss this in greater depth in his remarks. 1  2  In October 2014, Consensus Economics projected inflation expectations of 1.4% for the period 2020–2024; in April 2015, it put these at 1.5% for the period 2021–2025. Long-term inflation expectations are only surveyed on a half-yearly basis. BIS central bankers’ speeches  In light of the uncertainty regarding the future of Greece, the Swiss franc continues to serve as a safe haven currency. In trade-weighted terms, the Swiss franc is still approximately 12% higher than it was at the beginning of the year. Over time, negative interest rates on the Swiss money and capital markets should help to correct the overvaluation of the Swiss franc. The rise in long-term interest rates abroad has also led to a widening of the interest rate differential with these countries of late. As conditions continue to normalise on international financial markets, investments in other currencies should become more attractive; this, in turn, is likely to help ease the overvaluation of the Swiss franc. The slowdown we are now observing in the economy also suggests that the Swiss franc is very unlikely to remain persistently high. Monetary policy outlook I shall now move on to our monetary policy.
I’ll ask whether the economic galaxy is destined to be upended as Debt Strikes Back, or whether there is New Hope and the galaxy can be a safer place thanks to the Return of the Regulator. My conclusion will not surprise you. But before we get there, I want to take you back to a galaxy that may now seem far, far, away...  Crisis and recovery  Ten years ago, an unsafe financial system caused financial crisis and economic disaster. The Western banking system had expanded rapidly. Banks - and their regulators - had been blind to the basic fact that more debt meant greater risk of loss. After years of stability and good performance, few had considered what could go wrong. A false sense of security grew up. At Royal Bank of Scotland – the most egregious case – that illusion meant the bank could be toppled by losses of less than one per cent of its assets. And so, come the reckoning, the Western banking system just wasn’t able to absorb the losses it faced. In fact, it was structured in complex ways that magnified those loan losses. 1  This phrase was used by my colleague, Martin Taylor, in evidence to the Treasury Committee of the House of Commons: “Being an FPC member is one of those jobs, more common nowadays than before, where one is charged with worrying.

These tests ask what would happen to lenders’ balance sheets in a very severe recession in the UK and the rest of the world, coupled with market turmoil and falling property prices. The tests are tough and they get tougher as the actual economic situation gets better; as unemployment falls, house prices rise, and credit expands. So just when lenders might be thinking risks have fallen, they are faced with the need to pass tougher tests by getting stronger. As the actual unemployment rate falls, the lenders have to be able to pass a test with a bigger rise in unemployment. And where debt levels rise, the test gets even more severe. This means that as the risks to the economy grow, the tests get tougher for everyone. All banks need to strengthen their balance sheets – funding themselves with more capital – to pass the tests. And those banks that have taken on the most risk will need to do even more than others. That concentrates the mind of the shareholders about any contribution their lending may be making to growing risks. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  Most importantly, it means the financial system can absorb very severe economic shocks without cutting back on its lending, cutting off one of the channels by which debt affects the wider economy. Last year’s stress test showed the major banks make losses of £ that’s substantially more than their losses at the height of the financial crisis.
There are other areas of the assessment where I am more undecided. One of the recommendations was that we should regularly take into account other operators in the infrastructure than the banks and institutions. I agree that it is important to look further afield, not just in obvious places, when trying to identify threats and shocks. We should most probably take some steps in this direction. However, there are also risks entailed in this suggestion. One strength of our method of working has been the concentration on central, systemically-important issues. If we broaden our commitments we may be forced to give up some of this depth, and what we publish may be more difficult to grasp. Some of the recommendations concerned international connections in the stability work. Increased international surveillance is one of their recommendations that we are happy to follow. The integration of financial systems is increasing all the time and requires that we raise our gaze to take in the world around us. We already have this aim, but much remains to be done. Another aspect of internationalisation that is emphasised concerns crisis management. We are encouraged to continue with our crisis management exercises, but to carry them out together with our European colleagues. This is an important issue that we discussed in more depth in the Financial Stability Report published a year ago. We observed then that an integrated financial market has positive effects on the economy as a whole, but that it entails challenges for those of us who oversee the system.

The fact that the concept of stability is slightly vague and difficult to define, as well as covering many different functions and operators, is of course one reason why it is difficult to determine when a threat to the system arises. It is also very rare that crises can be forecast. If we describe a crisis, it is probably already happening. It is difficult on the whole to describe different nuances of financial stability. Perhaps a financial system is either stable or instable. When is one situation more stable than another? The lack of clearly measurable goals for financial stability makes it difficult to be clear on this point. One means of dealing with this, apart from discussing possible threats and risks, is to focus on the resilience of the system. How large a shock can the banks manage without any threat to their survival? By testing how hard potential risks would hit the banks’ resilience, we can gain an idea of how robust, or stable, the system is. The Riksbank’s most important tool for influencing financial stability is our analysis. Credible and knowledgeable analysis can probably often be used to influence and convince market operators. Our analysis can also provide support to the Government and to Finansinspektionen who have more instruments at their disposal. Given all of these difficulties, why should the Riksbank devote itself to stability work? One reason is the central role we play in the payment system. The Riksbank, together with the commercial banks, forms the hub of this system.
We must resist the temptation to go into reverse; we shouldn’t agree to stand still: we must forge ahead towards more integration. As a central banker, I am more of an observer than an actor in this area. Monetary policy is only one part of this. But even the harshest critics acknowledge that the ECB is an institution that functions well and has the capacity to take decisions and to avoid catastrophes. The same effectiveness would be required at the political level, even if, admittedly, it is more difficult. And, as I said earlier, the crisis did not reveal the weaknesses of monetary union, but rather the weaknesses of an incomplete monetary union. BIS central bankers’ speeches  3

But even this would probably cost quite a lot in terms of money and prestige (for example, it is easy to imagine the management being replaced), so, in general, this is probably not an alternative that a bank would wish to consider. Naturally, one way of reducing the risk would be, quite simply, to decrease lending in dollars and thus also the need for borrowing in dollars. In such a case, customers would have to be referred to other banks. Of course, at least major customers generally also have contact with US banks, which never encounter acute liquidity shortages, as they can turn directly to the Federal Reserve in the event of a crisis. So they have access to a lender of last resort which can create dollars. This is exactly what the Swedish banks lack. Now, naturally it hurts for a bank to refer good customers to a competitor, but if you don’t have any dollars, then you don’t have any dollars. It’s all a question of what risks the bank is willing to take. Another way of minimising the risk is for the Riksbank to maintain a foreign currency reserve that the banks can have access to in a crisis, as it does at present. The Riksbank has several reasons for maintaining a reserve in foreign currency, but one important argument for its current size is precisely the need to be ready to lend to the banks6. The Riksbank’s foreign exchange reserve is currently equivalent to about SEK 300 billion.
Yet despite the historically positive figures in terms of the decline in the number of unemployed (over the past 12 months, registered unemployment saw the biggest year-onyear decline ever in the related time series), joblessness remains very high, with more than  BIS central bankers’ speeches  3  4.4 million people out of work, reaffirming the need to persevere with the reforms and policies that have driven the improvements to date. It is also interesting to see that, during the fourth quarter of 2014, residential investment posted quarter-on-quarter growth of 0.4%, meaning it has increased for four consecutive quarters. These figures confirm the change in cycle and a moderately upward trajectory. In turn, open-market house prices, according to INE figures, are estimated to have increased by 0.3% in 2014, following six years of declines. The year-on-year rate in the fourth quarter was 1.8%, suggesting incipient – but growing – price rises, albeit with notable differences across regions and real estate market segments. Lastly, house-purchase figures for February announced yesterday also indicate a clear recovery, especially in second-hand housing. Underpinning the growth forecasts for our economy for 2015 and 2016 are the growth of private domestic demand and the strength of exports, along with the lower tax burden and the monetary stimulus measures adopted by the ECB, which are already having a significant impact on the cost of financing both for firms and households.

This legislation, now in passage through Parliament as a draft law, includes initiatives in the area of insolvency law to strengthen the application of out-of-court payment settlements, and introduces a second-chance mechanism. In relation to the Code of Good Practices, the exclusion threshold, the application of so-called “floor clauses” and the calculation of the limit on the price of properties acquired to be able to avail oneself of the dation in payment envisaged in the code have all been reviewed. Lastly, the law on measures to strengthen the position of mortgage debtors provides for an extension of the moratorium on evictions in the cases of particular vulnerability identified in Law 1/2013. These improvements are in addition to those adopted as a result of the financial crisis. They are steps in the right direction which, given their significance, merit analysis and assessment. And, in this respect, I would like to voice two ideas. First, in this new setting it is essential that legislation should preserve the payment culture that has traditionally existed in the Spanish mortgage market. The erosion of this culture, as occurred in some euro area member countries under European Union bail-out programmes, would truly be most negative for the stability of the financial system.
There are signs of stretched valuations on stock and real estate markets, and global corporate and sovereign debt levels are high. This makes the banking sector vulnerable to corrections in these markets, triggered for example by a sudden increase in interest rates or a deterioration in economic prospects. As a central bank with a mandate to contribute to financial stability, the Swiss National Bank monitors these developments closely. In particular, we focus on the Swiss real estate and mortgage markets, given growing signs of vulnerabilities in these markets as well as their relevance for the Swiss banking system. Before I dig deeper with an assessment of current vulnerabilities both abroad and in Switzerland, let me take stock of our experience with macroprudential policy so far. In order to do so, let me start by recalling the objectives of macroprudential policy, and the instruments policymakers use to achieve them. Macroprudential policy: objectives and instruments Objectives  The GFC demonstrated how costly financial crises can be, both in terms of output and from a broader social perspective. This experience is also backed by research, which highlights that recessions associated with a financial crisis tend to be deeper and longer lasting than ‘normal’ (non-financial) recessions. This is especially the case if the preceding expansion was characterised by stronger-than-average credit and real estate price growth.

In particular, low interest rates push up housing demand but also incentivise risk-taking behaviour by banks, by reducing the cost of leverage and weighing on bank margins and profitability. A global normalisation of monetary policy rates seems to be underway, most notably in the UK and in the US, against the background of a sharp rise in inflation. This could help slow down the increase in vulnerabilities, if the normalisation takes place gradually and does not trigger an excessive tightening of financial conditions. However, the global level of interest rates is likely to remain low in the medium term, dampened by structural factors such as demographics, inequality and a strong demand for safe assets internationally. Monetary policy has no influence over these factors. Even more importantly, the focus of monetary policy is price stability and economic developments, and not curbing financial system vulnerabilities. The most suitable way to address these vulnerabilities is therefore through macroprudential policy. Many authorities have in fact already responded to these developments by tightening macroprudential policy. Some countries have tightened borrower-based instruments in an attempt to curb rising vulnerabilities (e.g. Finland, France and Iceland). Others have opted to increase banking sector resilience to ensure that banks have enough capital to withstand a correction. Jurisdictions that released or reduced the CCyB in the acute phase of the pandemic to support bank lending are reactivating or increasing it again, in some cases to a higher level (e.g. Denmark, Germany, Iceland, Norway, Sweden, UK).