samchain/econo-pairs-v1 huggingface dataset:
When no trading takes place, no updated prices are quoted. This represents a challenge for institutions, auditors and regulators trying to mark assets and liabilities to the market. This has amplified the impact on the financial sector of the defaults on subprime mortgages. In the absence of pricing, the balance sheets of financial institutions holding such instruments became opaque. Uncertainty about the potential loss of other banks and about their own future liquidity needs has made banks reluctant to lend to each other. To the surprise and dismay of many, the extremely efficient and well-functioning money market ground to halt. Central banks had to step in and provide liquidity to the banking system. When money markets go into gridlock, it is appropriate for central banks to ease banks’ liquidity problems, but they should do so at a price that maintains the incentive to restore the smooth functioning of the market. Losses and evaporating liquidity then hit the capital base of many financial institutions. So far, the most severe problems have been local or national, like the British bank Northern Rock and the Norwegian brokerage house Terra Securities. These problems were resolved by means of national remedies. But with increased integration and the emergence of crossborder banks, sooner or later we are bound to encounter a problem in a bank or financial institution that may be systemically important in several countries (but not necessarily in the home country).

The euro area suffers from a lack of competitiveness and productivity, which of course take different forms in individual Member States. Structural problems and current weak demand lead to unsatisfactory economic growth and unacceptably high unemployment in many countries. Tackling these challenges in the long term is not the job of monetary policy. Crisis management must tackle the root causes for the long term and we, the ECB, will therefore not tire of reminding governments that we can only provide them time for the urgently needed reforms. Against this backdrop we could ask whether it was appropriate that the ECB took action. I think it was – precisely because of the path of inflation, even if there is room for discussion about the some of the measures and their design. The list of our crisis management measures is long. In June and September this year we lowered key interest rates further. The main refinancing rate is now just 5 basis points. The interest rate channel has thus been exhausted. For the first time in our history we have resorted to a negative deposit rate in an effort to achieve the desired monetary policy accommodation within the tried and tested corridor system. This justified monetary policy step – which favours investment – was not an easy decision for us, not least because of its possible side effects for the financial sector and for savers.
On the benefits side, there is now stronger evidence on the costs of credit booms and the role of capital in constraining the severity of the downturn in the aftermath of these booms. It also suggests that the costs of raising extra capital are no larger, and may well be smaller, than originally anticipated. This strengthens the hand of macroprudential authorities when tightening capital requirements during a credit boom. Other things equal, it would also increase quantitative estimates of banks’ optimal capital ratio. On the other side of the ledger, the LEI study did not anticipate two factors. First, the role of TLAC in augmenting banks’ capital base in situations of stress, potentially reducing the probability and severity of crises. Second, higher capital requirements could impose liquidity-related costs on the financial system, though their scale (and whether they are a social cost) remains open for debate. These arguments, in particular around resolution, have been used by policymakers in some countries, including the UK, when coming the view that capital requirements should be lower than in the original LEI study. For example, having assessed all the factors and evidence within Table 1, the Bank of England’s Financial Policy Committee judged that the appropriate structural level of Tier 1 equity in the system would be 13 ½% of 18  See the Financial Policy Committee’s June 2016 Financial Stability Report (pp 27-33) for an assessment of market liquidity in UK markets more broadly.

On top of the difficulties with implementing first best policies, policymakers may feel compelled to act fast because past experience has led them to be wary of surges in capital inflows. History has taught us that these inflows have a tendency to end in sudden stops and sharp currency depreciations that for some countries may result in recessions and crises. In the session of tomorrow morning, the presentations by Jaume Ventura and Sebnem Kalemli‐ Ozcan will address some of the potential consequences of the capital inflows to financially‐ integrated emerging economies: the appearance of asset price bubbles and the transmission of foreign shocks. These concerns have led several countries inside and outside Latin America to implement interventions in the forex market, capital‐account‐management and macroprudential policies to reduce the financial vulnerabilities that may arise from real exchange rate misalignments, fast credit growth, maturity or currency mismatches, and housing price increases. These types of policies have been more prevalent among emerging markets. But they have also been implemented by developed countries. For instance, Switzerland has actively intervened to maintain the value of the Swiss franc relative to the Euro, and South Korea has  2  For example, Forbes and Warnock (2012) indicate that global factors were the most important drivers of capital flows to emerging markets, especially debt flows. Fratzscher (2012) uses an event study methodology to show that QE announcements had an effect on equity and debt flows to emerging economies. 3  See Bianchi (2011), Korinek (2011), Dell’Ariccia et al. (2013), among others.
The main thing to understand is that, even if domestic monetary policy has some bearing on real interest rates, at least for a while, it is not their ultimate determinant. In the end real rates are driven to their natural level by deeper economic forces. The policy rate is but one expression of those forces. 8  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  8  Chart 9: Long term real interest rates are  With open capital markets, and for a small economy  determined globally  like the UK, one can actually go further than that: it’s unlikely that any domestic factor, whether monetary policy or anything else, can be the predominant influence on longer-term real interest rates, as these are determined globally. Consistent with this, longerterm real interest rates are tightly correlated internationally (Chart 9). In particular, they all share the same downward trend over the past couple of decades. With inflation relatively stable in all these countries, it’s hard to believe central banks were doing much else than simply following a similar  Sources: King and Low (2014), Rachel & Smith (2015), Bloomberg, Consensus Economics, IMF, Thomson Reuters Datastream.7  decline in the neutral rate of interest – the level consistent with stable inflation. It’s also hard to believe that, whatever its cause, UK real rates could have escaped this decline. 8  As I say these points have been made before . And in making them again, I don’t want to underplay the potential significance of pension fund deficits.

-5 Aug IR May IR Business investment (LHS) UK uncertainty indicator (RHS)  -2  10 0  1  -10 -20 1985 1990 1995 2000 2005 2010 2015 Source: ONS and Bank of England calculations  4  Source: ONS and Bank of England calculations  1  I’ve excluded the World War periods because investment growth was so volatile it would have dominated the graph. During World War II investment fell almost to nothing. In 1945 this remained quite low, so in 1946 its growth rate jumped to 1,894%! 3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  One obvious reason for the volatility of investment is the natural gearing in such decisions. The flow of 2  investment spending is much smaller than the existing stock of capital . So small changes in the second can require big moves in the first. Suppose, for example, you regularly spend a steady but relatively small amount on repairs and maintenance for your house – something that counts as investment – and then decide, in one particular year, that you want to build an extension. This will have a much bigger proportionate impact on the flow of your capital spending than on the size of the building (the “capital stock”). It will also mean your investment spending is far more volatile, from one year to the next, than your consumption. Similarly, small shifts in a firm’s desired capital stock require much bigger proportionate changes in investment.
Nevertheless, the Celtic tiger was not immune to the challenges that the financial crisis posed to many of the world’s advanced economies. On the contrary: Ireland has had to deal with more severe challenges than most. Much has been written about how Ireland arrived in this position. But let me state this right at the beginning: Ireland is not the only country that needs to reform. Fiscal consolidation and growth enhancing structural reforms are needed everywhere in Europe to remain competitive on a global marketplace. Ireland is, however, one among several countries with more severe adjustment needs. Our view is that to set the correct course, we must be clear-headed about the reasons why we are where we are. To frame the issue somewhat bluntly, the Irish State and people woke up to a painful new reality when the Irish housing bubble burst at the onset of the international financial crisis in 2007. Extraordinarily high growth in the run up to the crisis had gone hand-in-hand with the build-up of economic and financial imbalances. The path back to full fitness has been enormously difficult and entailed wrenching economic, financial and social change. And the path has not been smooth. Indeed, about one-and-ahalf years ago the economy was close to cardiac arrest. The patient required life support – kept alive with the substantial assistance from international lenders, as well as the continued levels of extraordinary support from the Eurosystem. But progress since then has been good: the programme is on track. So far, Ireland has delivered.

An over-sized and lightly-regulated financial system not only fed on these excesses but actively supported them. And government expenditures had been set on a clearly unsustainable course, based on the false assumption that very high tax receipts stemming from the booming housing sector and exceptional real growth where a lasting feature of the Irish economy. For example, from 1998 to 2010 nominal public wages per government employee increased by more than 90%, significantly outpacing public wage increases in most other euro area countries by 40 or more percentage points. Only Greece saw larger increases than Ireland. 2. The adjustment process  As anyone who has ever undergone the grinding process of recovering fitness will attest, the process can be long and painful. And so it has proved. Domestic demand has shrunk. This was unavoidable as both public and private spending had increased to levels well above the sustainable productive capacity of the economy. Unemployment has strongly increased. Programme milestones I would identify three major milestones of the macroeconomic and fiscal adjustment programme:   2  First, a return to growth, already in 2011. BIS central bankers’ speeches    Second, the progressive return to market funding well in advance of the end of the programme in 2013.   Third, reaching a fiscal deficit of 3% in 2015.
Strangely, however, these worries appear to be emerging. So we need to be clear: the rise in rates, if conducted in an orderly and well-managed fashion, will be favourable for the financial sector. It should bolster French banks’ profitability by increasing their net interest margins. For insurers, it will allow them to change the composition of their portfolios with the inclusion of higher-return assets; and this, combined with the distribution of profit-sharing reserves, will allow them to continue offering close to market rates of return on euro-denominated contracts, and limit redemptions. Financial institutions will nonetheless have to guard against any potential adverse effects in terms of unrealised financial losses, and on the solvency of certain borrowers that are excessively “leveraged”. But overall, interest rates – which have been  Page 8 of 8 exceptionally accommodative for borrowers since 2015 – will remain favourable and very bearable for the entire economy compared with historical standards. Last, among the challenges facing the financial system, I need to mention the rising threat of cyber risk. Exposure to this risk has increased considerably with the digitalisation of our working methods, and in particular the growing use of remote working; it is being further exacerbated by the possibility that Russian authorities might resort to cyber attacks as part of the Russia-Ukraine conflict. So far, we have not observed any rise in cyber incidents targeted at financial institutions since February, but they need to remain vigilant.

The direct exposure of the French financial sector to Russian assets is contained: the liabilities of French banks vis-à-vis Russian banks account for less than 1% of their total international liabilities, and French insurers’ investments in Russian securities amount to just under EUR 500 million. The withdrawal from investments in Russia was admittedly tricky, but orderly. The conflict could have more of an impact via indirect channels, including the strong tensions in global commodity markets. For the time being, the consequences of these market movements on the French banking sector have been kept under  Page 7 of 8 control. However, the ACPR remains fully mobilised in monitoring any potential financial risks that might emerge. More broadly, the macroeconomic and financial environment has evolved significantly since last year, and the Ukraine conflict has exacerbated the inflationary pressures that were already visible at the end of 2021: we are naturally keeping a very close eye on this, like our fellow citizens. The latest inflation figures for May, for France and the other countries, confirm a rise that we were already expecting, and the need for a gradual but resolute process of normalisation. We shall take a decision at our Governing Council meeting next week, which will be in line with recent comments by the President of the ECB. After having for years listened to complaints about how low interest rates were weighing on banks and insurers, we might have expected few to voice concerns now about a rise in rates.
At the end of the day, the question is an empirical one. Here, there is no evidence that Hong Kong’s long term growth has been impeded by our exchange rate regime. Indeed, there is some evidence that Hong Kong has grown more rapidly than would otherwise be expected on the basis of our factor endowments. Perhaps this should not be surprising. It would seem natural that the very flexibility required to respond to short-term shocks under a fixed exchange rate regime would foster a climate of innovation capable of turning challenges into opportunities. Hong Kong’s involvement in the rapid opening and development of the Mainland economy is an excellent example of this. It seems to me, then, that the sustainability of our exchange rate system has been demonstrated through its performance. While the economic logic is important, of course, it is irrelevant unless it is complemented by a high degree of public support — the ultimate test of sustainability is that the public at large recognise and endorse the benefits of the linked exchange rate. The high degree of public support that the linked exchange rate continues to enjoy — in spite of the painful aspects of the current adjustment process — testifies to the strength of the consensus that our system is appropriate. The choices for Asian economies The linked exchange rate system, with its strict currency board arrangements, has served Hong Kong well since 1983.

Let me stress two elements in this direction: • We are data driven, we are not forecasts driven. And recent data show that even if we are obviously still far from the inflation target, our monetary policy is at work, and is working : inflation has peaked in the euro area, core inflation has declined for the second consecutive month, and there are several other signs that underlying price pressures are softening. According to yesterday’s inflation forecast, which is a rather cautious one, inflation should be at 3 % in the euro area by the end of this year, and at 2% by 2025: we are confident that we will deliver on our inflation target in the next two years. • We have already shown our determination on interest rates through this overall 400 basis point increase. We obviously covered most of the  Page 2 sur 6 ground, and we are clearly in restrictive territory on all maturities: the key issue now is the transmission of our past monetary decisions, which is proceeding forcefully to financial conditions but could take up to two years for its full economic effects. Hence, the duration matters more than the level; persistence matters more than the peak. II. Forces pushing for greater diversification in the IMS Despite the end of the Bretton Woods system in the 1970s, the US dollar still plays a dominant role in the international monetary system (IMS).
It goes without saying that progress in the ICT has contributed to the deepening of the globalization process and significantly enhanced labour productivity in many sectors. Global imbalances One of the manifestations of globalization in recent years are global imbalances. In 2005, the US current account deficit approached 6.5% of the GDP, and many forecasts of investment banks point to its further increase in 2006 and 2007. 25 The negative net investment position of the world’s largest economy has moved towards 30% of the GDP in 2005 and, according to all available forecasts, it is bound to deteriorate at a high rate. The large current account deficit in the US is related to the negative savings of households and a strong growth in real property prices. These phenomena have occurred in the recent years not only in the US but also in all Anglo-Saxon countries. 26 Moreover, the current account deficit in the US is financed in a great measure by purchases of American debt securities by the Asian central banks. It entails a significant increase in the exchange reserves of the said banks. For instance, the reserves of the People’s Bank of China went up from USD 166 billion in December 2000 to USD 819 billion in December 2005 and over USD 850 billion in March 2006. It means that China is now ahead of Japan  22  Obstfeld M., Rogoff K. “The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?”, NBER Working Paper 7777, 2000.

In a country with a limited number of banks it is less clear that a separate supervisor is needed and the central bank may well be able to take this responsibility on without risk to its reputation or of other contagion to its primary monetary policy responsibilities. In contrast to monetary policy, where the appropriate institutional framework is common to all countries, there is unlikely to be uniformity in the roles played by central banks in the supervision of the financial system. Regardless of where responsibility for regulation lies, it is hard to imagine taking steps either to prevent, or to deal with, the consequences of a financial crisis without the active involvement of the central bank. Central banks are currently at the heart of efforts to restore confidence in the banking system by the provision of liquidity against assets which have proved to be highly illiquid. But the recent challenges presented by the latest episode of financial turmoil suggest that much hard thought will need to be given to the structure and nature of banking regulation in the future. In the longer-term, it seems extremely likely that banks and other “near” banks, especially those that have been regarded as similar to banks  2  BIS Review 36/2008  in terms of their eligibility for financial assistance, will be called upon to hold more capital and a greater quantity of liquid assets than hitherto. It is too early to foresee clearly where the long-term direction will go.
In describing the FinTech projects aimed at solving each of the five problems, I will relate them to the properties of these five elements. The five key outcomes we want to achieve through our collaborative FinTech projects are: instant remittance atomic settlement programmable money tokenised assets trusted sustainability data  1/11  BIS - Central bankers' speeches  FLOWING LIKE WATER - INSTANT REMITTANCE (PROJECT NEXUS) The first desired outcome is instant remittance. The advent of real-time payment systems over the last few years has made domestic payments flows seamless in many countries. Today, with PayNow, we can make 24/7 real-time transfers using just mobile numbers or unique entity numbers. But the world has not solved the cross-border payment problem. For most people, it remains slow, costly, opaque, and inefficient, relying on an archaic network of correspondent banks. According to the World Bank, the global average cost of sending remittances is a hefty 6% of the transfer value. This is particularly painful for the migrant worker who wants to send money home or the small business which wants to reach overseas markets through ecommerce. We want cross-border payments to flow seamlessly like Water. One way to do this is to build linkages across countries' real-time payment systems, just as canals allow boats to pass from one body of water to another. Singapore has been working to connect its PayNow with the faster payment systems of other countries. We connected PayNow to Thailand's PromptPay last year, the first such linkage in the world.

The industry needs to develop and implement an action plan to increase access of the OKUs to the financial products and services. Role of individual institutions – to ensure enabling environment for OKUs For a start, individual financial institution is encouraged to address immediate needs mentioned earlier that was highlighted by the OKUs such as providing lower counter, Talking ATMs, sign language for the deaf, website which is W3C compliance and offer appropriate insurance products for the OKUs. In providing the accessibility to the OKU community, the industry players need to ensure that the services and products are relevant, sustainable and affordable in meeting the needs of the OKUs, associated risks are mitigated and the OKU consumers are protected. 4  BIS central bankers’ speeches  Role of Bank Negara Malaysia – to consolidate effort and move forward together As mentioned earlier, it has always been high on Bank Negara Malaysia’s financial inclusion agenda that all facets of the Malaysian society are served by the financial industry. As such, I would like to call upon all of us here, let us embrace this journey together towards a more caring and responsible industry by ensuring the needs of the OKUs are provided for. Launching of “Cash Test” for the visually impaired As part of Bank Negara Malaysia’s continuous initiative to support the needs of OKU community, the Bank has introduced a device known as Ringgit Cash Test Cards, a credit card-sized plastic card with gauges designed to assist the visually impaired in identifying banknotes and coins.