samchain/econo-pairs-v1 huggingface dataset:
Such a system should offer a wide variety of financial services. Since providing the necessary financial functions is more important than the exact set-up of institutions, we should be flexible as to the means to achieve the desired services. In practice, most countries’ financial systems contain banks, other financial institutions, markets and exchanges, and payment and settlement systems. I will later elaborate on why the financial system must be well regulated and supervised, in accordance with modern and globally-acknowledged practices, for instance those formulated by the Basel Committee for Banking Supervision. Moreover, the development of a well-functioning financial system depends on a number of external factors, such as macroeconomic stability, an adequate legal and judicial structure, robust rules for accounting and auditing, and a financial safety net to deal with problems occurring in the financial institutions and markets. In my presentation today I will discuss all of these components and I will base it on my experiences of transforming the Swedish system from highly regulated and inefficient to a modern one that today competes successfully on the international scene. The Swedish experience might in some ways also be relevant for other countries, although one must always take into account the specific domestic circumstances. The basic conditions underlying a sound financial system are similar for all countries. I will first give an overview of the regulated system we used to have in Sweden and some of its objectives and consequences and I will then turn to deregulation and the challenges we faced.

Another shortcoming was that no authority had taken on the responsibility to oversee the financial sector as a whole, to promote overall financial stability, which is different from the supervision of individual institutions and markets. If we had had such an authority, the events and developments outside the financial sector that eventually undermined its stability might have been detected earlier. Corrections might have been implemented that could have prevented or at least reduced the impact of the crisis. Monitoring overall financial stability has now become one of the primary tasks of the central bank, the Riksbank. Let me stress this again: The fact that deregulation in some countries, also in South East Asia, was followed by banking problems does not imply that you should not deregulate. The conclusion is rather that deregulation must be carefully planned, succeeded by other and more modern types of regulation and monitoring, and supported by a sound macro economic policy. I will speak more about this in the following. The development of the banking sector in Sweden For many years there has been consolidation in the banking sector in Sweden as well as in other countries; this development was accelerated by the crisis. Banks merged and larger banks acquired smaller banks. For instance, the large network of co-operative banks merged into a single bank which later merged with the bank that emanated from the network of the major savings banks – forming one large bank. In this way, several hundred banks became one very large bank.
I am pleased that Dick Berner, a former NABE president now at Treasury, running the Office of Financial Research, is here. I believe it was Dick who, during a round of golf at Jackson Hole [Wyo.] long ago, told me the bad joke about the fellow who suggested that a moose crossing sign be moved because “there is too much auto traffic where the sign is currently located.” I also see Bill Dunkelberg, another former NABE president, who has been most generous in sharing with me and my staff his understanding of the whys and wherefores of small business, an important input into the way we look at things at the Dallas Fed. There are many others here today whom I would acknowledge if time permitted, but I ask their forbearance so that we can get down to business. As learned economists, you are fully aware of the nation’s predicament. Chairman [Ben] Bernanke reviewed it concisely in his speech at Jackson Hole and again, just last week, in Minneapolis. Knowing that most of you read those speeches, my guess is that you are looking to me for two things today. The first, given that you are in Dallas and the nation is in the throes of a presidential election season with two Texas contenders for their party’s nomination, would be the Dallas Fed’s perspective on the much-discussed Texas economy.

“Hard” infrastructure refers to the physical equipment, software and networks supporting those markets. See “Open Forum: Building real markets for the good of the people”, http://www.bankofengland.co.uk/ markets/Documents/openforum.pdf. 2  http://www.bankofengland.co.uk/publications/Pages/news/2016/071.aspx. 2  BIS central bankers’ speeches  independent CREST research project later in the day, which has reached very similar conclusions 3. Table 1 Key lessons for success from the crest project  All successful projects need a clear platform for change – and CREST had a burning one! The collapse of TAURUS on 11 March 1993, followed by the resignation of Peter Rawlings, the Chief Executive of the Stock Exchange, was front page news. The huge rancour, reputational damage and cost (estimated by the FT at £ all-in, in mid-1990s money) cast a pall over the UK financial system, already reeling from the failed attempts to defend  3  “From Paper to Automation – Streamlining UK Securities Settlement”, at http://www.globalservices.bt.com/ static/assets/pdf/products/financial_markets_settlenet/CREST-BISS-Industry-Report-final-for-publication.pdf. BIS central bankers’ speeches  3  sterling on “Black Wednesday” and the publication of the BCCI Report in 1992, and facing renewed competition from financial centres in continental Europe and elsewhere. Without TAURUS, the UK was left with what one leading fund manager gloomily described as a “Third World settlement system in a first-rank financial centre”. Equity settlement relied entirely on paper certificates, passing through an average of 25 pairs of hands for each trade, each time running the risk of getting lost, misfiled or stolen. Settlement occurred only once a fortnight, and on a fixed rather than a rolling timetable.
Saudi Arabia has always been cognizant of risks inherent in the leveraged and leniently regulated model. A sustainable model is one which supports resiliency of the financial system in a crisis. In particular, the crisis made clear that regulators need to have a macroprudential framework for the system as a whole, as well as focusing on the microprudential risk management of each individual bank. 6. Regulatory challenges  Recent efforts by the G20 and other global entities (Basel Committee, FSB, G20 & IMF) in addressing system pitfalls and weaknesses show the seriousness of the problem as well as the need for remedial action. It is well-known that crises are a recurring phenomenon, warranting appropriate countermeasures to contain systemic risks of the scale seen in 2007/2008. Some big challenges in reforming the world’s financial system still remain, however. Allow me to say a few words on this point. In the past two years or so, the G20 has issued calls for coordinating financial regulations and their reforms across multiple issues, such as capital and liquidity requirements, derivative instruments, and orderly resolution of failing banks. However, the G20 process is facing increasing resistance within some member countries on these measures for reasons of domestic politics and practicality of the proposed reforms in some G20 economies. For example, it is agreed that a sound macroprudential framework needs to be in place. The regulators will be expected to decide when the pace of credit expansion is unhealthy. Similarly, SIFI’s definition has proven to be contentious.

Money market risk premia rose sharply, from below 10 basis points to over 50 basis points, and even exceeding 100 basis points for some currencies. In this phase, we reacted flexibly to the volatile bank demand by providing generous amounts of liquidity at our repo auctions, and by increasing the frequency of finetuning operations. In October, there was a period of calm and risk premia retreated. In this phase, our patient – the market – was prescribed the usual remedies, although in higher doses and several times a day if necessary. The second wave arose out of concerns about refinancing shortages around the year-end, and reached its peak in December. To reduce uncertainty on the part of market participants, the Swiss National Bank increased its repo transactions at maturities of several weeks, or even several months, instead of the usual weekly maturity. These measures made it easier for banks to manage liquidity around the end of the year. During this second wave, European banks found it increasingly difficult to refinance in US dollars, and dollar rates were regularly higher in Europe than in the US. One reason for this was the structural dollar short position of the European banks and their concern that they would not have sufficient dollar liquidity at close of business as a result of poorly functioning money markets. For this reason, the Federal Reserve, ECB and SNB decided to take concerted action.
In Europe, the bank in greatest difficulty has been taken over and more banks are expected to be taken over by other financial institutions in the period ahead. 1  Ben S. Bernanke: “Subprime mortgage lending and mitigating foreclosures.” Remarks before the Committee on Financial Services, US House of Representatives, Washington DC, 20 September 2007. Hentet fra BIS Review 104/2007. 6  BIS Review 115/2007  Financial market turmoil has had a severe impact on the British bank Northern Rock. This bank, with its low deposit-to-loan ratio, was not able to renew its short-term financing in money markets and was forced to turn to the Bank of England for assistance. When the news broke, many customers quickly withdrew their savings. The UK had not experienced such panic-driven withdrawals since 1866. The Financial Services Compensation Scheme was not sufficient to calm the bank’s customers. Finally, the Chancellor of the Exchequer announced that the government would guarantee all deposits in addition to the cover already available. 2 Only then did the long queues outside the bank’s branches disappear. When the worst was over, Northern Rock share prices had fallen by over 70 per cent. Compared with the UK and other countries, Norway has a generous deposit-guarantee scheme covering deposits up to NOK 2 million per depositor per bank. Norwegian banks are required to be members of the scheme. Branches of foreign banks in Norway are not required to be members of the scheme, but some have chosen to join it.

More emphasis will have to be given to keeping costs in check and to risk and asset-liability management. Perhaps banks will spend more of their resources on attracting deposits and a little less on selling loans. In any event: Keep an eye on your earnings. Thank you for your attention. BIS Review 115/2007  17
It was impossible for such an economic model to be stable and by now, as I already mentioned, the situation has thoroughly changed. GDP in leading industrial countries will decrease 3.8% this year with growth in the USA contracting by 2.8%. For the rest of the world this means the USA foreign trade deficit will reduce notably, which, in the IMF's estimate, will lead to shrinkage in the USA imports. BIS Review 89/2009  1  Therefore, global economic growth will not be able to lean on the US domestic demand and exports of goods and services to the States either this or the next year. The recession in the USA has hit hard exports-dependent East-Asian countries, where goods exports have declined by more than a third year-on-year. Therefore, smaller and more open Asian countries have suffered a very sharp downturn. For instance, Singapore is expected to undergo a 10% and Taiwan a 7.5% contraction. Larger Eastern-Asian countries, such as China, maintain their economic growth by launching foreign assets accumulated over the past ten years and reducing interest rates. National expenditure on infrastructure has been markedly boosted and it is also hoped cheap bank loans will help keep up consumption. The IMF forecasts Asian new industrial countries' economic growth will be – 5.6% in 2009 and 0.8% in 2010. In conclusion, the current crisis has thoroughly changed the past ten year's development scenario of the global economy.

Cyber security remains one of our supervisory priorities for the coming years and it is important to actively maintain or engage our dialogue in this regard, facilitate the emergence and dissemination of best practices, and strengthen the resilience of the insurance sector. In this decisive transition phase, I would like to draw your attention to the ACPR's paper on IT risk, which discusses best practices regarding IT risks and more specifically cyber risk. While the digital revolution creates new risks for insurers as targets, it also offers new opportunities for growth in the industry to cover the cyber risk of their policyholders. The ACPR will therefore be particularly vigilant in the development of cyber insurance, which again requires insurers to adapt, manage a ”new” risk in terms of selection and underwriting, pricing, and portfolio oversight. The last supervision priority I would like to mention is related to climate change. Although losses from natural disasters in the world during the first half of 2018 were half of those observed during the same period in 20171, this is not good news. The long-term impact of 1  Losses amounted in USD 33 billion in the first half of 2018 and USD 65 billion in the first half of 2017 7  climate change remains a key area of vigilance for insurers, as climatologists foresee a longterm increase in natural disasters.
The textbooks which most of us studied depicted a world economy different from the one we are confronted with today and certainly different from the one which will take shape in the coming years. That environment was characterised by one large economy, which set the reference interest rate, and by many small ones. What used to be the leading economies are getting smaller and smaller, while others are growing fast and becoming systemically relevant. The imbalances are the result of both sides not fully recognising these opposite developments and acting as if the old paradigm was still valid. What is required are not changes at the margin, but a global framework that can encompass the unprecedented changes which are taking place. Otherwise our analysis will fall short, our surveillance will remain weak, and the policy mistakes may become more frequent, and more costly. Thank you for your attention. Chart 1: Real GDP in selected countries and regions  Note: Annual; 1992 = 100. Data based on IMF WEO October 2010 database. Grey shaded area indicates the evolution based on the IMF October 2010 WEO projections up to 2015. Sources: IMF WEO and ECB staff calculations. 6  BIS central bankers’ speeches  Chart 2: Real GDP per capita in selected countries and regions  Note: Annual; 1992 = 100. Data shown is calculated on the basis of 2000 constant US dollar series. Sources: World Bank Development Indicators Database, Haver Analytics and ECB staff calculations.

The comparatively large size of these two sectors made Irish public finances vulnerable to the bust of the cycle, leaving personal income tax as the shock absorber until the economy recovers. Interestingly, the fiscal package that is included in the Irish adjustment programme with the IMF is of a comparable magnitude to the pre-crisis fiscal expansion. Surveillance has clearly failed to understand this phenomenon. More attention needs to be paid to the overall size and interconnectedness of the financial sector as a whole in the various countries, and to the ability of these countries to absorb shocks affecting not only a single financial institution but the whole financial system. It is now fashionable to stress-test the banks. It would probably be appropriate to stress-test countries as well. BIS central bankers’ speeches  5  Conclusions Let me conclude by suggesting that surveillance of the world economy, in particular some of its systemically relevant members, has to focus more on the sustainability of their policies, in particular their fiscal and monetary policies. Some policies may appear to be sustainable on the basis of assumptions which may turn out to be simplistic, especially those relating to long-term trends of growth and inflation. In particular they may not take sufficiently into consideration the impact of broader developments under way in the global economy. As Keynes said, we may be “slaves of some defunct economist”.
Thus risk-based supervision and proper risk assessment by banks are essential measures to bring about financial stability. In this regard Basel II will no doubt help strengthen our collective financial systems by encouraging banks to adopt stronger risk management mechanisms. Pillar 2 of Basel II will add to the stability of the financial system by providing a deeper and richer mechanism to evaluate a broader range of risks - including risks that will impact on the system more broadly - such as credit concentration risk. Encouraging greater transparency by banks under Pillar 3 also contributes to making financial systems more resilient by providing a consistent framework across national boundaries for analysts to do their job in identifying weak or risky banks. Ensuring the soundness of individual banks – what some people now call the "micro prudential" perspective – is, however, only part of ensuring a sound financial system. Bank supervisors these days now talk about "pillars" and in addition to the three pillars of Basel II I believe that there are also two pillars of financial stability. One of these is the micro prudential perspective. The other one is the macro prudential perspective. They are mutually reinforcing and both are essential for ensuring financial stability. An important movement in the last decade has been a much more explicit emphasis being given to the macro prudential aspects of banking supervision by central banks as well as academics and other market observers. What do we mean by macro prudential aspects?

A major improvement to the inflation targeting framework itself was to confirm explicitly beginning with the 2013 remit that the MPC is required to have regard to trade-offs between keeping inflation at the target and avoiding undesirably volatility in output. In other words, the MPC can use the full flexibility of inflation targeting in the face of exceptionally large shocks to return inflation to target in a manner that provides as much support as possible to employment and growth or, if necessary, promotes financial stability. Even more fundamentally, the lessons of the global financial crisis prompted a radical overhaul of the Bank’s broader policy framework. The crisis exposed the limits of inflation targeting itself, notably how a healthy focus on price stability could become a dangerous distraction. Central banks had won the war against inflation only to lose the peace as financial vulnerabilities built remorselessly during the Great Moderation. Price stability clearly is not a guarantee of financial stability. With the deficiencies of the Tripartite regime1 on full and painful display, the decision was taken in 2012 to give the Bank of England responsibility for macroprudential and microprudential supervision. Two new independent committees, the FPC and the PRC, were created and charged with maintaining financial stability and safety and soundness of banks and insurers, respectively.
This is an important point, and one that must be given serious consideration. It is my view that the global financial system needs to move toward addressing potential credit problems preemptively before these problems have time to grow from minor disturbances to major disruptions. A more risksensitive capital framework should help ensure that banks hold appropriate capital behind high-risk credits in the first place, and thus reduce the tendency for accentuating the need for capital after problems arise with such loans. Credit risk mitigation techniques Greater recognition of the benefits of risk mitigation techniques - such as collateral, guarantees, credit derivatives and netting - also is at the forefront of the Committee’s work in revising the Accord. In January of last year, the Committee held consultations with over 50 banks and industry associations within the G10 on their methods for mitigating credit risk. We are now evaluating how to incorporate the risk-reducing benefits of the best of these practices, while at the same time addressing potential risks that remain from their use. As we finalize our proposals for making capital charges reflective of risk mitigation techniques, we are striving to find the right balance between recognizing a material reduction of risk with a structure that is applicable beyond internationally-active banks to both domestic and non-G10 banks. While we recognize that the treatment of credit risk mitigation techniques might differ in some respects between the standardized and the internal ratings-based approaches, we want to ensure a high degree of consistency between the two.

The Bank is confident that the FSPB will continue to play an important role in supporting these efforts – including through its work to identify implementation challenges, develop solutions and introduce improvements to reflect emerging issues. The financial industry has demonstrated leadership in so many areas – surely none can be as important as leadership in something as fundamental as professional and ethical conduct. On that note, let me once again commend and congratulate the FSPB on this important, and certainly most relevant initiative. 3/3  BIS central bankers' speeches