samchain/econo-pairs-v1 huggingface dataset:
It is also important to note that another consequence of the rising demand for cash, and the failure to meet that demand by selling assets, was a sharp rise in money market rates. The rise was sharpest at longer money market-tenors, but there was also a pickup in overnight repo rates. This was a particularly serious sign of market dysfunction in what are core markets, and a serious challenge to our ability to implement monetary policy by keeping these rates broadly aligned to the official Bank Rate. It resulted in an increase in the cost and reduction in the availability of credit – to the financial system, other companies and households – precisely at the time they needed it most. There was therefore a serious threat to both monetary policy and financial stability, in other words both of the core purposes of a central bank. It was an existential moment. We took two actions which eased the pressure, and did so quickly. First, on 19th March the MPC decided to buy gilts in large size and at high speed. At its peak the pace of gilt purchases reached £ per week, more than twice as fast as in early 2009. The use of this broad monetary policy tool was warranted given the widespread nature of the dash for cash, and the implications of the pandemic for the economic outlook. Other central banks took similar decisions around the same time.

As investors realised there was a risk they may not receive their original investment in full, or that their holdings in MMFs may be suspended, a run on other funds followed, contributing to the extreme volatility in money markets and broader financial markets observed at the time. Following the financial crisis, considerable work was undertaken to build the resilience of MMFs. In 2012 the International Organization of Securities Commissions (IOSCO) published policy recommendations for the regulation and management of MMFs. Many of the reforms that were subsequently implemented have helped improve the resilience of MMFs, however it is clear they 1/6  BIS central bankers' speeches  did not go far enough in solving the underlying problems. And in some cases they may have had unintended consequences, such as the introduction of a link between the level of illiquid assets held by a fund and the potential use of tools (such as fees or gates) to manage redemptions during periods of stress. While introduced to manage potentially disruptive outflows, these changes have made funds more sensitive to so-called cliff edge effects – thus increasing an incentive to exit before the gate closes. One of the important, broader changes in the financial system post financial crisis has been the shift in the importance of bank and non-bank finance, with the latter growing relative to the former. This is not accidental: the post crisis reforms meant that there were asset classes which were no longer suitable to hold in large scale on the balance sheet of banks.
For example, the fact that chief executive officer compensation and prestige are related to size may be just as important. On the other, this still is a problem because it works to distort the structure of the financial system and makes – by encouraging the proliferation of large, complex firms – the too big to fail problem worse. I conclude that while the funding advantage issue is very relevant to the debate on too big to fail, it may not be the most important issue. To me, the unacceptable risk posed to financial stability from the failure of large, systemic firms is at least as important. Solving too big to fail As I see it, there are two broad ways of solving the too big to fail problem. The first is to create a more robust financial system so that the failure of a large, systemically important financial firm does not threaten to take down the rest of the financial system. In this case, the authorities can let the troubled firm fail. Because failure is now credible, this should also eliminate the funding advantage from being perceived as too big to fail. BIS central bankers’ speeches  3  The second is to take steps to prevent the failure of such large, complex firms in the first place. This also reduces any funding advantage for firms perceived as being too big to fail, but without some of the negative financial stability consequences associated with failure.

The CCAR is a significant supervisory innovation intended to ensure that large, complex bank holding companies have robust internal capital planning processes and sufficient capital to withstand stressed economic conditions and to continue to be viable financial intermediaries. Importantly, the CCAR takes a forward-looking perspective in assessing a bank’s capital adequacy, including ensuring that its internal stress testing processes address its unique vulnerabilities and exposures. The CCAR should push banks to proactively manage their capital so as to be well prepared for the type of market stresses that could cause significant declines in income and capital. Other steps could be taken to complement the CCAR. One approach would be to implement a long-term debt requirement in a way that further enhances market discipline and provides incentives for regulators to promptly intervene if necessary. Another might be to structure compensation practices to strengthen senior bank managers’ incentives to proactively manage risk. For example, imagine how incentives would change if a significant portion of senior bank management’s compensation each year were deferred to be available to cover future capital losses. I suspect that over time this would meaningfully alter management’s risk tolerance. Also, in addition to the quantity of the deferred compensation, the form it takes could also affect incentives. If most of the deferred compensation were in the form of debt rather than equity, I suspect this would also affect management’s risk tolerance and the appetite to cut dividend payments, reduce share repurchases or raise more capital more promptly when the firm began to become stressed.
A number of reports2 also found weaknesses in the implementation of effective risk management. In many cases, risk was not managed on an enterprise-wide basis and Boards were not fully apprised of the level of risk facing the company. Overseas regulators are now reviewing the role of Boards in providing guidance on the alignment of corporate strategy with risk-appetite, as well as on appropriate internal structures in risk management. Not surprisingly, remuneration practices have attracted the most public attention. The alignment of executive and Board remuneration with the longer term interests of the company and its shareholders is a widely accepted corporate governance principle. Nonetheless, compensation practices that rewarded staff handsomely for short-term gains, without any corresponding penalties for longer-term losses, have been blamed for encouraging excessive risk taking in some institutions. A number of jurisdictions, such as Australia and the US, are considering legislation that will address this by empowering shareholders to have a more direct role in setting remuneration. Creation of the Corporate Governance Council Financial institutions in Singapore have generally been prudent in their business, and have weathered the crisis well. Listed companies in Singapore that have maintained high standards of governance have similarly withstood the crisis. Nevertheless, we must not be  1  Kirkpatrick, Grant (February 2009), "The Corporate Governance Lessons from the Financial Crisis", OECD.

if the spot falls below the strike), the owner of the underlying security loses money but the owner of the option does not. That’s simply because he or she can always choose not to exercise the thing. Thus the fundamental value of a financial call option arises from the ability to pick one’s moment and avoid the downside risks that come with owning the underlying security. 6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  Anyway, with these simple ingredients – and assuming, critically, that its prospective investment is irreversible – it turns out the firm’s decision rule is also simple. It will invest if and only if R ≥ ρ + qλL  [2]  This is just the version of [1] that applies in this particular case. 5 If there were no uncertainty (q=0) the investment would be justified so long as it offered any sort of excess return (R > ρ). But, given the uncertainty hanging over the decision, and in particular the risk that it might come to regret it, the firm needs an extra margin of safety – the “option value of waiting” qλL – before taking the plunge. What can we say about this term and what are the implications, if any, for Brexit uncertainty? The first thing to note is that, in common with all these models6, only the downside risk matters.
For example, the UK has enacted a new Companies Act 2006 in which the duties of directors have been codified. Recently, there have been discussions between the Institute of Certified Public Accountants of Singapore, or ICPAS, and the Singapore Institute of Directors, or SID, regarding directors’ responsibilities for the internal controls and accounting policies and estimates that are relevant to companies’ financial statements, and how these responsibilities of directors should be reflected in auditors’ reports. This recent issue illustrates the importance for clarity on directors’ duties amongst all stakeholders. The Accounting & Corporate Regulatory Authority, or ACRA, will lead a study on the duties of directors, taking into account of standards observed internationally as well as the corporate environment in Singapore. ACRA will work with the Singapore Institute of Directors, ICPAS, the MAS and SGX, and other stakeholders in this study. 2  BIS Review 73/2007  Corporate governance – enhancing performance A sound and responsive regulatory framework is critical to corporate governance. But it is worth reminding ourselves that corporate governance is not merely about compliance with the rules. Corporate governance is in the wider sense about how the business and affairs of a company are directed and managed in order to enhance corporate performance and long-term shareholder value. Good corporate governance is ultimately about performance and accountability to shareholders.

Our fiscal deficit, now between 3 and 4 percent of GDP, is in the zone of unsustainability. Our external imbalance - the current account deficit - is now between 6 and 7 percent of GDP, a level without precedent in U.S. economic experience. Each of these imbalances magnifies the risk in the other. One might be less troubled by a fiscal imbalance of this size if it was not accompanied by a substantial increase in our reliance on the savings of the rest of the world. The external imbalance might be less troubling if the government was in balance and those substantial capital inflows were going to finance private investment. Together, however, these imbalances raise the potential for higher risk premia on U.S. financial assets and more uncertainty about future returns on claims on the United States. This in turn could reduce expected future investment, productivity growth and U.S. growth potential. This could reduce the willingness of the world’s savers to put their capital to work in the United States. And this could mean lower growth outcomes and slower growth in future incomes. These are risks, not certainties. And there are a number of reasons why the probability of a destabilizing adjustment to these imbalances is likely to be low. These explanations are worth some attention. There is a reasonable case to make that the U.S. fiscal deficit, although a problem, is a problem of manageable dimensions for the medium term, provided we deliver modest changes to the paths of expenditures and revenues.
Chart 2 International synchronisation of inflation (headline and core) Headline inflation  Core inflation  average pairwise correlation  0.6 0.5 0.4 0.3 0.2 0.1  0.0 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 Notes: Average pairwise rolling (15 years) correlation of seasonally-adjusted quarterly headline and core inflation. The country-specific average pairwise correlation of a time series xi in country i (pcix ) is the average of the contemporaneous correlation between xi and xj for all i ≠ j. The average pairwise correlation (pc x ) is computed as the average of the pcix across all countries and, as such, provides a measure of international synchronization of 𝑥𝑥. Source: OECD, Global Financial Data, DataStream, National sources, and Bank Staff calculation. 8  BIS central bankers’ speeches  Chart 3 International synchronisation of inflation (headline and core) and policy rates at different frequencies  Notes. Rolling average (15 year window) of the bilateral dynamic correlations of an unbalanced panel of 46 countries. Dynamic correlation is a function of the cross-correlation and autocorrelation functions of two series that breaks down their comovement into different frequencies. “Cohesion” is the average of bilateral dynamic correlations in the sample. See Croux 26 et al. (2001). Source: OECD, Global Financial Data, DataStream, National sources, and Bank Staff calculations. 26  Croux & Mario Forni & Lucrezia Reichlin, 2001. “A Measure Of Comovement For Economic Variables: Theory And Empirics,” The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 232-241, May.

And it should be recognised that the direct exposure of the UK economy to China is relatively modest and that the recent tightening of financial conditions comes on the heels of a prolonged period of sustained improvement. Moreover, realisation of some of a downside risk previously identified by the MPC, if it persists, has to be weighed against ongoing domestic strength, underpinned by credible policy regimes and an increasingly robust financial system. In this regard, developments in China are unlikely to change the process of rate increases from limited and gradual to infinitesimal and inert. Indeed, as I said recently, the prospect of sustained momentum in the UK economy and the gradual firming of underling inflationary pressures will likely put the decision as to when to start the process of gradual monetary policy normalisation into sharper relief around the turn of this year. To be clear, that opinion doesn’t prejudge any particular decision. But it does indicate that recent events do not yet, to my mind, merit changing the MPC’s strategy for returning inflation to target – a strategy that already reflects the balance of two large gross effects: namely domestic strength on the one hand and disinflationary forces from the combination of the exchange rate and global weakness on the other.
Financial resilience and economic earthquakes Speech given by Alex Brazier, Executive Director for Financial Stability Strategy and Risk, Bank of England Member of the Financial Policy Committee  University of Warwick 13 June 2019  I am grateful to Kiman Bassi, Jon Bridges, Jeremy Franklin, Andrew Gimber, Shahzad Gitay, Nick Jackson, Ben King, Philip King, Miriam Kurtosiova, Cian O’Neill, Rupal Patel, Simon Pittaway, Matt Roberts-Sklar, Jamie Semark, Sagar Shah, Nick Vause and Danny Walker for their assistance in preparing these remarks. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  In the aftermath of the financial crisis, a new buzz phrase emerged in economic policymaking: macroprudential policy. It tells you something about economic policymakers that this phrase qualified as buzz. But after a fragile financial system had sideswiped the economy, turning what could have been an economic downturn into a disaster, it was difficult to disagree with the aim: to promote a financial system that could serve households and businesses in bad times, as well as good. That means a financial system that is resilient to the bad times, but not so resilient as to be inefficient the rest of the time. In many respects, the idea of macroprudential policy was vintage wine in a new bottle.

Higher capital requirements ensure that enough of the finance raised by banks is in a form that can absorb losses without the banks failing. Higher levels of capital enable banks to attract other non-capital funding, in turn making it easier for them to lend to households and businesses. At present it is the better capitalised banks that are expanding lending. How well are the banks doing in building resilience? There is good news here, as the banks have strengthened their capital positions since the darkest days of the crisis. But there is further to go. These capital positions are most often measured by the ratio of capital to riskweighted assets. Risk is difficult to measure, but I think that we must continue to do this, albeit accepting the uncertainty in the process by using a healthy dose of scepticism, and aiming to keep the  BIS central bankers’ speeches  1  method of measurement as simple as we reasonably can. But it is helpful to back up the riskbased measure with a leverage ratio that simply measures capital as a proportion of assets. In the lead-up to the crisis, banks around the world chronically underestimated the risks to which they were exposed. The consequences were dramatic and highly damaging, and we are still living with them today. The crisis has been fundamentally a product of banks that grew rapidly and failed to back that growth with sufficient capital to bear the losses.
Ladies and Gentlemen, the mere fact that a central bank has to conduct monetary policy in a transparent manner at best results in the availability of the information necessary in order to judge the bank’s performance. Discussions of this information are not only done by the government but also most importantly, the public at large. The latter’s perception of what the central bank does and how it is done may have an impact on the central bank performance. Furthermore, Mr. Chairman, our contribution therefore should set out to develop the pillars on which central bank governance must rest. These include operational independence, accountability and indeed transparency which are complementary. Yet, certain tensions between these elements of governance cannot be ignored and have to be observed when establishing a code of good governance. With respect to operational independence, there seems to be consensus among academics and central bankers that central banks must be given a charter which includes a strong commitment to price stability, and the freedom and sufficient scope to pursue it. This means that while central banks may not have goal independence, they should have operational or instrument independence to effectively pursue their primary objectives. In a democratic society, transparency and accountability are essential if central bank independence is to remain “acceptable to the public”. Providing for a sufficient degree of transparency can help not only to increase the understanding of monetary policy which ultimately enhances central bank credibility.

Caleb M Fundanga: Trends in central bank governance Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the official opening of the seminar on “Trends in Central Bank Governance”, Livingstone, 28-29 February 2008. *  *  *  His Honour the Vice President Her Grace the Mayor of Livingstone The Chairperson Central Bank Governors and Deputy Governors Board Members of Central Banks Resource Persons Distinguished International Participants Ladies and Gentlemen On behalf of the Bank of Zambia and indeed on my own behalf, I would like to extend a very warm welcome to you all to this important seminar on “Trends in Central Bank Governance.” To our colleagues from outside Zambia, I wish to extend a special welcome to you to Zambia, in particular to Livingstone, our tourist capital especially at this time of the year. Like the rest of Zambia, Livingstone is a city of tranquility with an easy-going African charm. Apart from the famous Victoria Falls, there are many other tourist spots such as the Mukuni Cultural Village, curio markets, the Game Park, the National Museum, railway museum, e.t.c. I therefore urge you to find time or indeed stay an extra day or more to sample this special menu that Livingstone can offer. Like other participants, I am glad to be part of this rare gathering of imminent experts.
Thus, during 2010, the banking sector credit growth, albeit lower than in the pre-crisis period, was considerable, around 9%, while in some Central and South-Eastern European countries, it was negative. The deceleration of credit growth, which was initially driven by supply-side factors, is mostly a phenomenon attributed to the decline in the demand for loans. As a consequence of weaker expectations for activity development, businesses decreased their production capacity utilization, lowering investment objectives and the demand for loan. In spite of weathering the direct impact of the crisis, important challenges lay ahead of the banking sector and the Bank of Albania. First, the performance of credit quality should be monitored prudentially, aiming to timely identify non-performing loans, assess them correctly according to possibilities of their repayment and pursue proper policies, in order to recover the loan value within an appropriate time. Second, during this phase, it is necessary to strengthen the banks’ internal audit systems, not only related to credit risk but also to provide a higher standard of management. Third, banks should assess their expectations about the performance of their activity and take measures to strengthen their capital position in advance, in case of need. The Bank of Albania deems that in the periods ahead the Albanian banking sector and the economy need to determine and pursue more suitable development policies, which should include: setting realistic development objectives; setting more competitive prices for banking products and services; and increasing lending in the national currency.

About overall economy, a more sustainable development should be ensured, relating mainly to better control on trade deficit, supporting the sectors that actually contribute or may contribute to increasing exports in the country. Public authorities should strengthen their commitment to developing the non-bank financial market, which gradually leads to reduction of economic dependence on the banking sector condition and improves access to financing of a higher number of private entities. In this way, a greater opportunity would be provided to the financial system to finance projects in the agricultural sector, which has a high potential for ensuring competitive advantages in the Albanian economy. Allow me to conclude by emphasizing the Bank of Albania’s willingness to contribute, through its policies on monetary and financial stability, to maintaining a better climate of sound development of the financial and banking activity, as a condition for a greater financial support to business development in the country. I think that this forum will make a valuable contribution to setting some concrete development policies and projects, about which, I believe that the Black Sea Trade and Development Bank will offer its own support and expertise. Wishing success to the proceedings of this forum, I thank you for your attention! 2  BIS central bankers’ speeches