samchain/econo-pairs-v1 huggingface dataset:
At that time the main negotiations between savings banks to draw up the new map of the sector had already taken place, and the FROB had committed its first aid in this connection. But some of the key elements to entrench the reforms and restore external confidence in our financial system were still pending. In fact, only a month later, in July 2010, the results of the stress tests of credit institutions, co-ordinated at the European level, were published; the Banco de España agreed to amend the regime governing accounting provisions; and the government approved a key reform on the legal regime of savings banks. Then, in February 2011, the Royal Decree-Law on the reinforcement of the financial system was enacted, and its rules are currently being applied. This year we can roundly state that the restructuring of savings banks has moved into its final stage. Thereafter, we will have a smaller set of institutions (from 45 original savings banks there are now 18) and one that is more efficient and better capitalised, capable, along with the rest of our banking system, of providing the intermediation services our economy needs for the recovery to take root and to contribute to our citizens’ well-being. *  *  *  The road is undoubtedly proving to be a long and complex one. Far behind us now is the summer of 2007, when the sub-prime mortgage crisis broke, spreading its risks across agents and markets through securitisations and credit derivatives.

Against the backdrop of fear and uncertainty, banks have tightened their lending and consumers have become more cautious in their spending. This will act as a drag on the euroarea economy going forward. A key constraint for both the US and euro-area, as well as many other advanced economies, is the limited policy space available to authorities. In these countries, monetary policy and fiscal stimulus have been pushed to their limits. Limited capacity to respond to new shocks thus represents a real risk for these economies, and for the global economy, that we must be weary of. In this setting, and given the deep-seated nature of the problems being faced, meaningful remedies rest just as much on political factors as on economic ones. How governments respond and how their electorates receive these responses will be an important source of uncertainty. In contrast, the rising economies in Asia offer a more positive outlook. Despite the slowdown in exports of many Asian countries, reflecting the softer global economic backdrop, domestic demand remains robust. More fundamentally, the continued rise of China and the formation of the ASEAN Economic Community (AEC) will generate enormous economic opportunities for the region. As will be discussed later, the key challenge for Thailand will be how to optimally position ourselves to reap the full benefits of this trend. This brings me to the internal challenges.
Unfortunately, it is not as simple as this. If it were the case that business ethics simply represented values which everyone accepted and put into practice, this conference and my speech would both be superfluous. However, there is sometimes a gap between what banks claim and what they do. As the Asian crisis has demonstrated, ethical values are still not firmly entrenched and followed in many banks in the region. Bribery and corruption have been one of the root causes of the banking problems, and the Bank Bali scandal has shown that the process of reform still has a long way to go. However, leaving aside such blatant examples of unethical behaviour, even the most well meaning of banks are going to confront moral dilemmas in the course of business. These dilemmas are more complex than the simple: “should I lie, cheat or steal variety?” They pose difficult choices that have the potential to damage reputation and lead to financial losses. The problem is that in an increasingly complex business environment the choice is not always the simple one between what is right and wrong. It is more often between what is right and less right – in other words between shades of grey. This increases the need for organisations to adhere to a strong set of values to steer them through the minefield of ethical choices with which they are faced as they make business decisions.

Section 7 of the Banking Ordinance goes on to say, among other things, that our functions include the following aspects that have a distinct “ethical” flavour: •  taking reasonable steps to ensure that authorised institutions operate in a “responsible, honest and business-like manner”;  •  promoting and encouraging “proper standards of conduct and sound and prudent business practices” ;  •  suppressing “illegal, dishonourable or improper practices”. These specific functions can be related to our general function of promoting the stability of the banking sector. Clearly, if banks are involved in illegal or improper activities (such as fraud or money laundering) this may threaten the reputation not only of the bank concerned but also of the banking system as a whole. This in turn may lead to a loss of public confidence in the banks. I believe however that our functions also imply a broader interest in the concept of “fairness” in the provision of banking services. This is not to say that the HKMA should act as a “consumer watchdog” in investigating and adjudicating on disputes between banks and their customers on matters such as the cost or quality of banking services. But at the same time we should not be indifferent to how banks treat their customers in general. If banks consistently provide a bad or unfair service, this may damage the reputation of the banks and destroy customer loyalty and confidence.
A second positive aspect of UK business performance through this recession has been the ability of companies to maintain their financial strength through the downturn. As Chart 4 shows, the retained profits of private companies in the UK fell only slightly during the downturn and have already begun to recover. In the first half of 2010, the financial balance of the private sector (excluding financial companies) was back above its average level over the last two decades, as reduced interest payments offset a squeeze on profits. Companies have also sustained profits by exploiting flexibility in their cost base – including measures to contain labour costs. They also conserved cash during the recession by aggressive destocking and holding back on investment. 6  BIS Review 158/2010  This more healthy financial position puts the corporate sector in a better position than it has been coming out of previous recessions to increase investment as they see demand recovering. The most recent reports from the Bank of England Agents around the country are relatively positive about the investment outlook and this is consistent with investment intentions indicated by other business surveys. 9 These indications of rising business investment also suggest that constraints in the banking sector – which are making it more difficult for many small and medium sized companies to obtain finance – are not acting as a serious obstacle to a recovery in business investment. The third positive development for the supply-side of the UK economy following the recession is the low level of company failures.

4  BIS Review 158/2010  the Labour Force Survey suggest that UK employment is currently just over 1% down on its peak level, and over the last six months, employment has risen by 350,000. 6 As a result, the unemployment rate has stabilised at below 8% of the workforce – and has recently edged down slightly – whereas it had risen to over 10% at this stage of the cycle in the early 80s and 90s. 7 Given the personal difficulties and waste of resources created by high unemployment, the fact that employment has held up well in the recession – and is now rebounding – is very encouraging. Though we do not have fully up-to-date estimates, the most recent figures do not suggest that recent jobs growth has been in the public sector. 8 Instead, it is the private sector – which employs over three-quarters of the workforce in the UK – which has been increasing employment over the first half of this year. It might be unrealistic to expect the recent rate of job growth to continue – and business surveys do suggest that employment growth is easing. But recent employment trends provide positive indications of the flexibility of the UK labour market and the confidence of business about future economic prospects. Why have we seen a much better employment outcome in this economic cycle than following previous recessions?
Going forward, tight external financial conditions linked to inflation control and low fiscal policy space are expected to impact the global economy negatively. In this sense, credit dynamics in the developed economies anticipate a weak performance of activity and investment. Global financial conditions remain tight, although the volatility associated with the recent banking tensions has decreased. Compared with the March Report, long-term interest rates have shown mixed movements, as they have risen in developed countries and declined in the emerging world. Currencies also performed unevenly, while stock markets have generally traded higher. Nevertheless, developments in the U.S. banking system continue to be a source of uncertainty. Market sentiment  3  remains fragile, with doubts about the extent and magnitude of the latent vulnerabilities in the financial sector (figure 13). In Chile, the financial market has aligned itself with a scenario where inflation will converge to the 3% target and the MPR will begin a downward process in the second half of the year. Thus, both expert surveys and financial prices point to inflation converging to 3% within the two-year monetary policy horizon (figure 14). All this has taken place while the economy has continued to adjust and local uncertainty has diminished (figure 15). Worth noting is the local forex market, whose proper functioning has allowed the Central Bank to dismantle the position of the non-delivery forwards (NDF) program and begin a program of rebuilding international reserves to strengthen our country's international liquidity position.

Projections The central scenario projections contain limited changes with respect to the March Report. Inflation is expected to continue to fall and will converge to the target within the second half of 2024. For December of this year, the annual variation of total CPI is foreseen at 4.2%, compared with the March estimate of 4.6%. Core inflation will end 2023 at 6.5%, which compares with the 6.9% projected in March. Both indicators will converge to 3% during 2024 and will remain in the neighborhood until the end of the policy horizon, that is, the second quarter of 2025 (figure 16). Core inflation will decline more noticeably towards the end of 2023 and the beginning of 2024, as anticipated in the March Report. The projections reiterate that, in the short term, the monthly variation of services inflation will continue to exceed its historical averages. This incorporates the greater rigidities that these prices normally present and the impact of the still-high inflation on the usual repricing mechanisms. Goods inflation, meanwhile, will benefit from a lower than expected trajectory of the real exchange rate (RER) in March. This is consistent with the nominal appreciation of the peso in recent months, in a context where, as I mentioned, local uncertainty has diminished. Looking ahead, the effect of tight external financial conditions continues to be considered. Compared to March, activity projections show minor changes, mainly associated with the mining industry. This year, the annual variation of GDP will be between a 0.5% fall and a 0.25% rise.
The FPC might well find itself wanting the Bank executive to take an issue with EU-wide ramifications to the ESRB or to the European Banking Authority, Markets Authority or Insurance Authority. And sometimes the FPC may find itself wanting to follow up an EU-wide recommendation from the ESRB. BIS central bankers’ speeches  11  Co-operation will be especially important in the deployment of “cyclical” instruments. If one country tightens capital or liquidity requirements on exposures to its domestic economy, the effect will be diluted if lenders elsewhere are completely free to step into the gap. Basel and the EU are addressing how to handle that where the instrument is the Basel 3 Countercyclical Buffer. But we need to explore whether other potential instruments should be subject to similar rules of the game. This is not like monetary policy with a floating exchange rate. The big challenges The reform of the financial system is a global endeavour. Much of it is about strengthening existing regimes. But two parts of it are essentially new. One, on which I spend a good deal of my time, I have not discussed this evening: building effective resolution regimes for the world’s largest and most complex firms.12 The other new challenge is building macroprudential regimes. This is about plugging a gap between microprudential regulation and macroeconomic policy.

Lending only against self-liquidating commercial paper does nothing to prevent an acceleration in prices, as the central bank’s balance sheet simply accommodates any increase in credit driven by a rising general price level. As central banks around the world came to concentrate on preserving stability in the value of their money in terms of goods and services, they put the Real Bills Doctrine in the dustbin of ideas. Wind forward a hundred years. The buzzword is “macroprudential”. And the talk is of how to lean against speculative bubbles or tame the credit cycle; of how to contain contagion and systemic crises; of the role of central bank liquidity facilities; and of how to give banking supervision a more systemic perspective.1 It is striking that those concerns are not so distant from those of the framers of the 1913 Federal Reserve Act. Much is said about “missing  1  See, for example, “Enhancing Financial Stability and Resilience: Macroprudential Policy, Tools and Systems for the Future, Group of 30, 2010. BIS central bankers’ speeches  1  instruments”. It has been a mistake for central bankers, and the legislators to whom they are accountable, to focus at different points of their history on only one of either the stability-threatening excesses of (real) credit cycles or, alternatively, inflation. In the language of the Bank of England’s 1991 statement of Core Purposes, central banks need a mandate for both monetary stability and financial stability.
Norges Bank is the source for figures from 1996. BIS Review 16/2009  Equity capital in investment banks in the US and Europe was very low, as low as 2-3 per cent of total assets. Many of these banks have now collapsed. The authorities in many countries are working to enhance financial market resilience. For Norway, it would not be appropriate to return to the regulatory regime of the postwar period. Interest rate regulation, credit budgets, a wide range of state banks, regulation of crossborder capital movements and a fixed exchange rate are not the answer. Instead, new and higher capital requirements must be imposed on banks. Banks calculate how much capital they need using their own risk models. The models capture losses and gains previously generated by lending. Equity capital requirements are determined by previous experience of the risk exposure of investments. One drawback is that the historical basis for the models, and hence for the risk assessments, is too limited. With losses now rising, as a result of the abrupt and pronounced turnaround, banks must increase equity capital. Thus the rules governing capital requirements amplify the economic cycle. Three changes are particularly relevant: First, for a given risk assessment, capital requirements must be higher. Second, banks must not be able to reduce capital below a minimum level even if they extend loans that, according to the models, seemingly involve low risk. Third, banks must build up strong capital buffers over and above the minimum requirement in normal times.

In the small community of Polden, in the Hamsun trilogy August, far away from large capital markets, the inhabitants live impoverished lives, subsisting on a little fishing and agriculture. But the community changes when wealth arrives in the form of a herring windfall. August says: “… you’re not to plant anything you can eat near your door. It doesn’t look right. I’ve got something better to put there – bushes, garden shrubs.” 9 Farming is abandoned, and then, a few years later, the herring disappears. The Norwegian government has not followed August’s advice, but has spread its wealth. It is partly invested in ownership interests in Norwegian companies, partly in infrastructure, partly in oil and gas and partly in equities and bonds abroad. When there are prospects of markedly slower growth, as is the case now, the value of all government assets falls. This also applies to buildings, roads, the power supply and other infrastructure where the government does not concern itself with regular valuations. Investments abroad by the Government Pension Fund – Global are also spread between equities and bonds from all over the world. The equity portion is now being increased from 40 to 60 per cent. A long-term investor receives extra compensation because the value of equities fluctuates considerably. Many are now incurring losses on equities and corporate bonds. This experience will result in higher required returns in the future. Under the Fund’s strategy, more equities will be bought when equity prices fall and fewer when they rise.
But – thankfully for all of us – we live in a democracy, and so a system of independent regulation can only work if the regulators are properly accountable, in particular to Parliament. So much for principles. In practice, where might these lead to for a post-Brexit system of financial regulation in the UK? One possibility is: nowhere! This could arise in several ways, but one comes immediately to mind – a scenario in which our future relationship with the EU takes a form that means we stick with a system which looks exactly like what we have today. There is no reason to be very alarmed by this prospect – it is not ideal but we have largely shaped that system through our membership of the EU and we make it work well currently. However, this would be undesirable if it came with the prospect of becoming a rule-taker in financial services with all the risks – both prudential, and as a matter of industrial policy – that entails. 4  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  4  But let us toy briefly with the idea that the Government and Parliament decide to adopt a style of financial services regulation built on the six principles set out above, or something like them. What, in practice, would this style look like? To step back one pace, you can consider the style of different bits of financial regulation in the UK as being at different points along a spectrum1.

Even within the EU, where directives are used to implement Basel 3, some member states opted to allow regulators to 6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  implement these directives. Another example is on the insurance side, where some extremely detailed and highly technical actuarial material has ended up in EU legislation as part of Solvency 2 rather than being left to regulators. And in general the EU approach contrasts with that of the UK, where Acts of Parliament are usually used for overarching changes to the institutional framework and many of the details are then delegated to regulators, who are vigorously held to account for their activities by Parliament. Another place in which this bites is in relation to smaller firms, which are often subject to the entire rulebook when in some cases safety and soundness might be better served by a simpler (simpler, not weaker) approach. None of this is to advocate a wholesale re-write of existing, on-shored rules and regulations – to my mind the question is more about what style we adopt for future regulations. Why is the EU approach different? Many others have provided answers that question3. Emphasis is sometimes put on the differing legal traditions in EU countries, which – it is sometimes argued – in aggregate tends to lead to a norm of greater and more detailed specification in EU legislation than tends to result from the UK’s approach.
Focus on financial market infrastructures Let me now focus on the case of market infrastructures to illustrate how the mindset and tools I have just described can also feed into the way we perform our roles, and in particular our role as service provider. From the first-generation of the Target system twenty years ago, the Eurosystem has  demonstrated a strong political will to foster innovation and support capital markets integration and development, through the provision of clearing and settlement services in central bank money for financial intermediaries. These services, namely T2 and T2S, have established themselves as the backbone of the financial market infrastructures for the euro. More recently, the Eurosystem has developed its Vision 2020 program comprising: TIPS, an instant payment solution, launched in November 2018 to settle instant payments ; the T2-T2S consolidation to optimize and enhance liquidity management and cash and securities services planned for 2021 ; last but not least, the ECMS (European Collateral Management System) planned to be launched in 2022, and designed to provide a unified platform for the management of standard monetary policy operations and the associated collateral. These are European successes and ambition. Nevertheless, we have to address new  challenges. In the recent years, there has been a strong demand for quick and safe cross-border payment solutions, available 24/7, enabling smooth exchanges. In Europe, various domestic instant payment solutions have emerged in a certain number of countries, available 24/7, settling retail payment orders up to 15 000 euros in less than 15 seconds.

Denis Beau: What policy framework to help building innovation and growth into Europe’s capital market? Speech by Mr Denis Beau, First Deputy Governor of the Bank of France, at the AFME (The Association for Financial Markets in Europe) Annual Capital Markets Technology and Innovation Conference, Paris, 21 November 2019. * * * Ladies and Gentlemen, The past decades have clearly shown how innovation – in particular technological innovation – have brought new services, reduced barriers and contributed globally to progress and economic growth. However, innovation does not necessarily implies growth for everyone, everywhere. Innovation can weaken some actors, create imbalances and its long-term benefits for society may be, in some cases, uncertain. In addition, I would say that speaking solely about growth is not enough today, in the context in particular of climate change and lowering social mobility. Growth should be sustainable, inclusive and compatible with a necessary level of resilience. Here Central Bankers and Supervisors, in charge of financial stability, have a contribution to make. But what does that mean in the European context for the innovation and growth of our capital markets? My perspective on this rather complex issue is simple: we have to identify  clearly the challenges raised by innovation and be ready to adapt our policy framework if we want that innovation goes with sustainable, inclusive and resilient growth of the European financial market.