samchain/econo-pairs-v1 huggingface dataset:
In difficult times, banks will be allowed to fall significantly below the target levels defined for good times. Allowing banks to draw down capital without violating any minimum requirements should help mitigate the potentially harmful effects of de-leveraging. 8 In Switzerland, compatible with these features, FINMA issued decrees imposing higher capital requirements on the two big banks at the end of last year. According to these decrees, the big banks will have to meet risk-weighted capital requirements that are double what they were before the crisis. As a complement, FINMA has introduced a leverage ratio. In good times, the capital base has to account for at least 5 per cent of the total adjusted assets. 9 To prevent a procyclical impact, these targets will apply as of 2013 at the earliest, giving banks enough time to recover from the crisis. Furthermore, the big banks will be allowed to temporarily fall short of these targets in bad times. The Swiss experience suggests that the largest banks can adjust rapidly, even to ambitious new capital requirements, without causing collateral damage to the overall economy. To reduce uncertainty and to facilitate the planning process at banks, it is crucial that the ultimate target levels are clearly communicated, and that a sufficiently long phase-in period is provided for. This will enable banks to adjust to the new rules in an orderly fashion.

Second, a single framework for banking supervision. Third, a single mechanism for resolving banks, funded by levies on the sector itself. Fourth, a common backstop in case temporary fiscal support is needed. Fifth, a common system for deposit protection. 1  Harold James, Making the European Monetary Union, pp. 313–315. 2  Padoa-Schioppa, T., “EMU and banking supervision” Lecture in the London School of Economics, on 24 Feb 1999. BIS central bankers’ speeches  1  How would Banking Union have helped during the crisis? To illustrate why these elements are so important, it is helpful to think through how a genuine Banking Union in Europe could have helped both prevent and mitigate the crisis. Preventing the crisis Turning first to prevention, one of the key causes of the crisis was the unacknowledged buildup of large private financial imbalances in the period from 1999 to 2008. They were unacknowledged because the governance framework that existed in Europe was focused exclusively on fiscal policies via the Stability and Growth Pact. This reflected the prevailing belief at the time that the private sector was composed of fully rational agents and was essentially stable and self-correcting – hence only the public sector could create instability. This was of course a fiction: the private sector was where some of the largest imbalances were concentrated.
In addition to wanting to see firms that are adequately protected against cyber-attacks and prepared to respond should they occur, we are equally as concerned with the overall safety and soundness of the financial system – as a whole. No one firm or agency is going to come up with the one and only permanent solution or protection against cyber-attacks. I see how we approach cybersecurity similar to how we approached Y2K – I’m sure you all remember that. •  We need an approach that everyone agrees to adopt. •  We need to see more public/private partnerships in the development of that approach. •  We need to come together to identify the vulnerabilities that are shared and what needs to be done. •  We need to agree on a path forward and how we test it. •  We need to acknowledge that, unlike Y2K, this does not have an expiration date. Cybersecurity is a “new normal.” It is going to become part of our vocabulary in nearly every exam we conduct, conversation we have with senior management, and conversation about the future of financial services. To be successful, we have to agree that we have common goals; although we can approach them from different angles and think creatively about solutions, we should all be working toward understanding the threats we are facing. The threat landscape is shifting constantly, and we are all responsible for keeping up with the changes and adapting our controls accordingly.

In fact, two areas that we recently reviewed that require attention include basic IT asset management and strengthening patch and vulnerability management practices. These are necessary hygiene steps and should be a fundamental for a sound cyber security defense program. As part of good risk management, firms also need to start considering how to assess the costs of cyber and connect the pricing of cyber risk to the businesses. You must ask yourself “what is my cyber exposure?” And, you need to think about how you should price it, because until cyber is priced, it may not get the attention it needs. 3. It’s not just the banks  Cyber isn’t just about the banks – it’s about the entire financial sector, as well as the connections between the financial sector and other sectors like the utilities, retail, and others. We know that every area of the industry is interconnected; and it’s not just financial firms. As the old saying goes, we are only as strong as the weakest link. In the financial system, that weak link could be a weak firm, a weak vendor, a weak point of vulnerability in a payments or clearing system, etc. A weakness in any of these areas exposes the entire system, because the interconnections mean that you are all linked to each other, to non-financial firms, and to every system that supports the operations and structure of the industry.
Page 1  Inflation is a ‘wicked problem’ − speech by Huw Pill Introductory remarks given at the Warwick Think Tank, Warwick University  Page 2  Published on 16 February 2023  Speech Good evening everyone. It is a great pleasure to be here at the Warwick Think Tank today. Thanks to the organisers for the invitation to participate. I am sure that you have many questions about the outlook for the UK economy. We all do. I am looking forward to discussing those in a moment. But before we turn to that discussion, I thought I would kick-off with a few remarks about the framework within which monetary policy works. The first thing to say is that the objective of monetary policy in the UK is very clear. The Bank of England’s Monetary Policy Committee (MPC) has the objective of price stability. Through achieving price stability, monetary policy creates an environment in which firms and households can make the longer-term plans and investment decisions that generate the innovation, dynamism and productivity that ultimately drive growth and prosperity. Price stability has been operationalised in the form of an inflation target of 2% for the consumer price index (CPI). This target holds at all times. The MPC therefore needs to achieve this target on a sustainable basis: it is not a target for one moment or horizon, but must be achieved on an ongoing basis over the medium term.

If Bank Rate is increased, monetary conditions are being tightened; and conditions are being loosened if Bank Rate is cut. There are a few important simplifying assumptions being made here – assumptions whose validity in current circumstances is doubtful. In the first place, that view of the world implicitly assumes that the equilibrium real rate is stable over time, whereas in fact it will move about. 6 Sometimes the central bank will need to change its policy rate simply in order to maintain unchanged monetary conditions (as proxied in the literature by r minus r star). In the same vein, if near-term inflation expectations rise or fall, our nominal policy rate may need to change just to leave the actual short real rate unchanged. In other words, we can fix only one thing – the short nominal rate – but what any particular level of Bank Rate means for monetary conditions will depend on short-run inflation expectations and on the equilibrium real rate needed to balance the economy. Both will likely have changed materially in the face of the cost and credit shocks. What our Bank Rate will mean for monetary conditions will depend on how it relates to the panoply of other interest rates on financial contracts. In fully efficient markets, the risk-free  6  See Neiss, K and Nelson, E (2001) “The real interest rate as an inflation indicator”, Bank of England Working Paper No 130.
Indeed, the most commonly used measure of policy uncertainty has generally been more elevated for the UK than the equivalent measures for Europe and the US, although it has fallen back sharply from its post referendum peaks (Slide 5). In periods of elevated uncertainty, businesses may be reluctant to undertake investment and prefer to 6  employ more labour, which is easier to reverse, as I suggested in a speech in November last year. And a range of survey results suggest that Brexit related uncertainty is an important factor weighing on investment in the UK, despite otherwise favourable conditions for capital expenditure globally and domestically. Fourth, the slowing in UK productivity growth since the crisis has primarily reflected slower growth of high-productivity companies. As discussed in the MPC’s latest Inflation Report, productivity growth varies widely between companies, and has tended to come from those companies at the frontier of the productivity 7  distribution. That remains the case, but the slowing in productivity growth since the crisis reflects slower growth of the top end of that distribution. I am just comparing the distributions of productivity pre and post-crisis, so these aren’t necessarily the same companies becoming less productive. The outlook That’s productivity growth over the past. What then of the outlook for productivity (Slide 6)? Ahead of the MPC’s February meeting, we conducted our annual stocktake of the supply side of the economy.

The UK’s productivity growth challenge Speech given by Dave Ramsden, Deputy Governor for Markets and Banking, Bank of England  Babraham Hall, Cambridge Friday 23 February 2018  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Relevance of productivity for monetary policy  It is businesses that are vital for driving productivity, and it is crucial for the Bank and MPC to engage with and hear from all sorts of business, which is why we have a national network of agencies spread across the UK. It is a pleasure to be back in the region covered by the Bank’s South East and East Anglia Agency. It happens to be the region I was born and grew up in, and one I visit regularly on my bicycle at weekends, so I know what a diverse and vibrant region it is, economically and more generally. The monetary policymaker’s perspective on productivity is naturally a particular one. As MPC members, past and present, have noted, the future potential of the UK economy is not within the gift of monetary 1  policymakers. And monetary policy cannot offset the economic impacts of a large structural shock like Brexit.
Banking by its very nature is a business of taking calculated risks. If they didn’t take risks, banks could not perform their essential functions in a market economy. But sound banking also entails the prudent management of those unavoidable risks. Each banking institution must have in place the technical systems and management processes necessary to identify the risks associated with its activities – lending and otherwise – and to effectively measure, monitor and control those risks. But even if an institution has an effective risk management and control structure in place, that structure must also be accompanied by an institutional management culture that ensures that written policies and procedures are actually translated into practice, with buy-in at all staff levels. Ultimately, an institution's culture is determined – once again – by the board of directors and the senior management it chooses to install. Management must take active steps to ensure that its commitment to an operating environment that includes effective risk management and rigorous controls filters down the line of the organization. To summarize, these aspects of effective bank level management – good corporate governance, rigorous internal controls and effective risk management – represent the first and most important line of defense against potential problems. And this will increasingly be the case as the activities of banks and other financial institutions become more complex and more global.

Pillar 2: Supervisory Review Let me also briefly touch upon the two other pillars of the revised capital adequacy framework – supervisory review and market discipline. These topics are certainly familiar and important ones to all of you. 9  BIS Review 75/2000  As I mentioned in the context of the internal ratings-based approach, supervisory review of capital is a critical complement to minimum capital requirements. The task for supervisors in the revised framework is to evaluate how well banks are assessing their capital needs relative to their risks, including whether banks are appropriately addressing the relationship between different types of risk. I want to stress that this proposed approach is in no way intended to replace the judgement and expertise of bank management, or to shift responsibility for capital adequacy to supervisors. On the contrary, it is well understood that bank managers have the most complete understanding of the risks their institutions face, and it is they who have primary responsibility for managing those risks. Most importantly, in proposing this second pillar, the Committee intends to foster a more active dialogue between banks and their supervisors, such that when deficiencies develop, prompt and decisive action can be taken to restore capital. Pillar 3: Market Discipline The third pillar of the new capital adequacy framework, market discipline, will serve to reinforce capital regulation and other supervisory efforts to promote the safety and soundness of banks and financial systems.
Secondly, the major problem so far has been the financing of the banks’ operations, while the problem last time was credit losses linked to falling property prices. The positive element here is that the current problems are not due to poor profitability or large credit losses. The negative element is that even a country with a profitable bank system with large buffers can experience problems. Iceland is one example of how a small country with an open economy and its own currency can be affected by a financial crisis. I pointed out on several occasions at the monetary policy meetings held last year that there is a considerable risk that the crisis will be both more profound and more prolonged than we assume in our forecasts. I would like to take this opportunity to develop my reasons. Kenneth Rogoff is another of the advisers to the Executive Board of the Riksbank. Together with Carmen Reinhart he has made a number of studies of financial crises. They consider the Swedish bank crisis of the 1990s to be one of the most serious financial crises, “the big five”.3 One of their studies shows that the financial crises that have occurred in industrial nations in recent decades have been followed by long periods of weak growth.4 Seen as an average of the 18 crises reported, this concerns a period of three years of low growth and for the "big five" an average of three years of negative growth.

The crisis was triggered in the United States on the market for mortgages to households with a poor ability to pay, what are known as subprime loans. Hedge funds have played a limited role in the development of the crisis. Instead it is highly leveraged institutions that have been central to the sequence of events, where some of the lending has been outside of the banks’ balance sheets. My main messages today are that so far Sweden has been able to handle the problems that the global financial crisis has caused for the financial system, although the negative consequences for the Swedish economy will be considerable over the next two years. And that there is a need to reform the global financial system in order to reduce the likelihood of new financial crises. I have divided my speech into three sections. I shall begin with the financial crisis in an international perspective: the course of events, the causes of the crisis and the handling of the crisis. Then I shall discuss how Sweden has been affected by the crisis: Sweden's dependence on the outside world, measures to counter the crisis and our experience of previous financial crises. I shall conclude with a section on the current economic situation and monetary policy, where I shall comment on new statistics without making any new assessment of monetary policy.
Company Law in a number of countries, such as the UK, gives primacy to the interests of shareholders when defining the objectives of a company and its decision-making. The objectives and rights of a broader set of stakeholders, including workers, suppliers and wider society, tend to be secondary (Mayer (2013)). This governance structure has stood the test of time. But it is not without distributional consequences. If power resides in the hands of one set of stakeholders, and they are shorttermist, then we might expect high distribution of profits to this cohort, at the expense of ploughing back these profits (as increased investment) or distributing them to workers (as increased real wages). To some extent, this matches the stylised facts on rising inequality – rising executive and shareholder compensation and faltering real wage growth. The shareholder model may, ironically, have contributed to unfair shares. If so, this suggests that one avenue worth considering further is corporate governance reform. A set of corporate incentives which had as its fulcrum long-term company value and which more fully reflected the interests of a wider set of stakeholders might help rebalance the scales – for example, towards investing rather than distributing. Such an alternative model is certainly not without precedent. It is found in a number of countries around the world (Mayer (2013)). Inequality and corporate governance are deep, structural issues. Central banks do not have many, perhaps any, of the solutions to these problems. But the stakes – a more stable, faster-growing, fairer society – could not be higher.

6  BIS central bankers’ speeches
William C Dudley: US monetary policy and emerging market economies Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Roundtable Discussion in Honor of Terrence Checki “Three Decades of Crises: What Have We Learned?”, Federal Reserve Bank of New York, New York City, 27 March 2014. *  *  *  The scaling back of the Federal Reserve’s asset purchase program – both the prospect and the actuality – has created significant challenges for many emerging market economies. Although this shift in U.S. monetary policy was inevitable at some point, it seems to have triggered a broad-based sentiment shift in global markets. Recent events are a reminder that U.S. monetary policy can have powerful effects abroad. What lessons should we draw from these events? That will be the general theme of my brief remarks today. Before I go on, though, I first would remind you that the thoughts I offer today are my own, and should not be interpreted as representing the position of the Federal Reserve System. I also want to call attention to Terry Checki, who is being honored today and has been at the center of events in global finance for more than three decades, and who has done so much to shape them.

But, these efforts should help us to avoid repeating the mistakes of the recent past, and to take a more proactive stance toward mitigating potential future vulnerabilities. Of course, we at the Fed are not alone here. Since the recent financial crisis, central banks worldwide have been engaged in a broad rethinking of how better to fulfill their mandates. I also think there is another area we need to work on, an area where very little has been done to date. We need to collectively devise a better international mechanism for facilitating BIS central bankers’ speeches  3  adjustment when the direction of capital flows changes abruptly. The current regime strikes me as inefficient and often ineffective. Holding large cushions of foreign exchange reserves is expensive, drawing down those reserves is often unattractive because of the potential adverse signal that this sends, and EMEs are loath to turn to the International Monetary Fund for resources to cushion the adjustment process. It seems to me that we could design a better global solution of collective insurance – access to liquid resources in times of stress that were not stigmatized and that could and would be used to facilitate adjustment. This could help reduce market volatility and dampen the size of foreign exchange and other adjustments. This is a topic, in my opinion, that deserves greater attention from central bankers around the world. Let me close with a final thought. The largest problems that countries create for others often emanate from getting policy wrong domestically.
1  4  Norges Bank: Historical monetary statistics for Norway. BIS central bankers’ speeches  The Norwegian economy is well equipped to tackle the challenges. The defence mechanisms of economic policy are better suited today than when oil prices fell in the mid-1980s. At that time, current oil revenues were largely spent over the government budget. When oil prices plummeted, the budget was severely tightened. Today we have accumulated savings of more than five times the government budget. In the 1980s, the banks had little equity capital. Many of them failed when faced with loan losses, which in turn amplified the economic downturn. In recent years, banking regulation has been enhanced. Banks have built up their capital levels, which puts them in a better position to fulfil their role as providers of credit during a downturn. BIS central bankers’ speeches  5  Towards the end of the 1980s, both interest rates and unemployment reached a high level at the same time. There is little likelihood that this will happen again. Since the inflation target was introduced, it has been easier for monetary policy to have a countercyclical effect. When inflation expectations are firmly anchored, monetary policy should also be geared towards stabilising output and employment. Inflation has been low and stable for a quarter century. This is now of benefit to us all. The oil price collapse in the 1980s led to a substantial current account deficit. Competitiveness had to be strengthened.

Each of these process improvements aims to reduce the resource burden on insurers created by the regulatory regime. This should enable insurers to reallocate more resource to innovation with a view to improving, for example, the quality of their underwriting and investment decision-making, and reduce barriers to entry, thereby improving the competitiveness of the UK insurance sector and its ability to provide long-term productive finance to the economy. Conclusions and next steps The reforms I have discussed today are wide-ranging and aim to achieve a tailored regulatory regime for the UK insurance sector. We will carefully assess the package across the review’s objectives. Does it advance the PRA’s primary objectives of insurers’ safety and soundness, and  Page 8  policyholder protection? Does it effectively remove any unnecessary impediments to bulk purchase annuities firms’ productive UK investments? Does it deliver the material gains in process improvements that can further the competitiveness of the UK insurance sector? We believe the package we are contemplating will achieve the Government’s objectives for the review. And while not an objective in itself, the package is also projected to deliver a reduction in regulatory capital requirements. This net capital release can be used to support additional investment if firms choose, and investment in the productive UK real economy, assuming suitable additional supply. The reforms to investment flexibility, reporting and approval processes are not without risks.