samchain/econo-pairs-v1 huggingface dataset:
To a degree, the authorities have responded to this risk: last year the Financial Supervisory Authority imposed a ceiling on residential loan-to-value ratios, following analysis and discussion within the Systemic Risk Committee, which works for the Financial Stability Council, and upon receiving an opinion from the Council. Developments in the real estate market will continue to be monitored closely in this respect, and the possibility of applying additional macroprudential tools will be considered. Another risk factor that the Financial Stability Council has identified is uncertainty about future developments in the tourism sector and the potential impact that a setback in the industry would have on the position of the banking system. At the end of 2017, lending to the tourism sector accounted for 9% of the large commercial banks’ total lending, but because growth in tourism has eased recently, this ratio has held broadly steady. The Central Bank of Iceland conducts an annual stress test in consultation with the Financial Supervisory Authority, in which it examines the impact of macroeconomic scenarios on the commercial banks’ resilience. The results are published in the autumn issue of the Bank’s Financial Stability report. The last stress test assumed that there would be a recession in trading partner countries, plus a drop in major export prices and a steep decline in the number of tourists visiting Iceland. In this scenario, the banks’ capital ratios would fall by an average of 3½ percentage points, to a level close to the minimum capital ratios currently required by the Financial Supervisory Authority.

5 April 2018  Speech Már Gudmundsson, Governor of the Central Bank, delivered at the 57th Annual Meeting of the Central Bank of Iceland, 5 April 2018. Mr. President; Prime Minister, other Ministers, Speaker of Parliament, Directors and Ambassadors; Ladies and Gentlemen! The Icelandic economy has been in fine fettle recently, with full employment, to say the least, as we have had to import a large number of workers to support economic activity. The risk of overheating has receded somewhat in the past year, however; the positive output gap has narrowed, and the residential housing market is less stretched than it was a year ago. Until last month, inflation had been close to target but below it for four years running. Inflation expectations have been at target by most measures in the recent past. It is this that has enabled the Bank to lower its policy interest rate by 0.75 percentage points since our last Annual General Meeting. Inflation expectations have fallen to the target and have become more firmly anchored there, reflecting the success of monetary policy in the recent term. The Bank’s Chief Economist recently published a Working Paper explaining this success, noting as well that the decline in inflation to the target between 2012 and early 2014 was virtually costless, partly because of increased credibility of monetary policy.1 If changes are made to the monetary policy framework in the coming term, it is important to preserve this success.
I have not said anything on the bankruptcy laws or tax issues, which were two issues I was asked to addresss, but I don’t think there is much I can say on these areas except that we appreciate the banks’ views and will reflect these to the appropriate authorities as appropriate. Certainly we are aware of the rising trend in personal bankruptcies and the possible impact of this on delinquencies, and this is something we are watching closely. We are also in dialogue with the Privacy Commissioner and other parties to try to get the scope of the credit data that can be released to credit agencies increased, which would perhaps help in this area. 14. I hope these comments have been of interest to you all. Let me end on a positive note. We are all part of a highly successful industry here in Hong Kong. As banking regulator, it is the HKMA’s objective to promote a safe and stable banking system. To achieve this we need the banking industry to be successful, profitable, competitive, innovative, and responsive to change, and this surely is your objective too. So let’s continue to work together on initiatives such as those I have discussed today so as to ensure the continued prosperity of our industry. 15. Thank you. BIS Review 3/2001  3

Attracting talent into the financial sector To increase the flow of talent into the financial sector, IBF has also been reaching out to our institutions of higher learning. Under the financial sector seminar series, IBF and our industry partners have delivered a series of talks at our universities and polytechnics to highlight the dynamism and the diverse career opportunities in the financial sector. These talks attracted a total audience of over 1000 participants. To increase the supply of job-ready graduates, IBF spearheaded intensive finance preparatory programmes (FPP) for jobs in high demand. The first batch of students for the FPP in Global Banking and Securities Operations, which was introduced in July 2007, will be completing their programme next month. IBF is currently exploring the need for FPP in Insurance. These programmes will continue to attract 70% co-funding support from the Financial Sector Development Fund Gaining international mindshare To create greater international mindshare, IBF launched the FinanceConnectSingapore website to profile Singapore’s financial sector, to provide more information on the career opportunities here and to promote Singapore as a choice location to live, work and play. To date, the website has registered over 100,000 visits. IBF recently partnered with Contact Singapore to provide a job portal for financial institutions to post job openings targeted at financial professionals from overseas. Bringing value to IBF members I have outlined some of the initiatives undertaken by IBF over the past year.
It may seem as though competition and efficiency will only increase as digitalisation increases. But the payment market is distinguished by positive network effects. This means that when new users connect to a payment solution, there is increased benefit for all participants. This means that the market could ultimately be dominated by one or a couple of large companies that attain  8 It is of course also important to have a stable fiscal policy to ensure there is confidence in the currency. 5 [35]  monopoly status. It is therefore important that the state takes responsibility and regulates the market, but as new products are positive for consumers, the state also needs to implement measures to benefit competition and innovation. 9 These new types of company that have begun competing on the payment market often have as business concept to gather and analyse data, which means they can offer cheap services. This so-called FinTech sector has grown rapidly and is now challenging the banks. In general, increased competition is positive, as it leads to lower prices for companies and customers. However, it is important that the same rules apply to all players on the market, and that the legislation also stays apace of the emergence of new phenomena, which can be difficult to classify and to scrutinise. Sometimes the changes on the payment market occur very quickly. In China, it didn’t take long before companies like Alipay and WeChat Pay had taken a dominant position. This is where network effects come in.

A possible solution to this coordination problem could be to establish a central mechanism entrusted with setting the euro area’s overall fiscal policy stance and responding to tail events, with national authorities focusing on medium-term goals and placing debt sustainability as their primary objective (see slide 7). This fiscal policy tool could be automatic, such as a common unemployment insurance scheme or a more general stabilising instrument dependent on the cyclical position. In any case, risk sharing must be accompanied by an incentive system that prevents negative cross-country externalities and moral hazard, something of utmost importance in a monetary union. Furthermore, I believe that such a central instrument would also be suited to tackling global challenges, such as climate change or the process of digitalisation, and might be a better option than national “golden rules”. These rules exclude specific types of public expenses from deficit calculations, on the grounds that these could be growth-enhancing and thus need to be protected. This option is attracting much attention in current EU debates. In particular, it is argued that in the current context, with countries having to expend a great deal of effort in the fight against climate change, such investments should be excluded from the expenditure target or budget balance in order to safeguard them from EU fiscal rules. However, a golden rule would add an additional layer of complexity to an already intricate system (see 6  slide 7) and would require the definition of the types of spending to which it ought to apply.
Most of the government measures in 2008 were targeted at viable banks and were intended to prevent the crisis from spreading. Supporting otherwise viable banks in times of financial turbulence may be necessary and profitable for society. An interesting feature of the Irish crisis is that this was exactly what the authorities believed they were doing when the first guarantees were issued. But eventually it transpired that Irish banks were sitting on huge losses. Government support for insolvent banks violates a fundamental principle of economics: We should avoid supporting unprofitable activities. We do not rescue a business that is bankrupt. Instead, we should allow businesses that are profitable to take over. Over time, this improves the conditions for a healthy economy. Apportioning losses following a crisis may also be viewed as a matter of morality and fairness. When the authorities bail out banks, some parties are spared the consequences of their own choices. Bailing out investors and owners using public funds conflicts with people’s ordinary sense of fairness. Moreover, government support for insolvent banks undermines the stability of the financial system. When the authorities bail out banks, the banks can transfer their losses to others, while reaping the gains in good times. 7  A description of externalities in the banking sector and how they may justify regulation is found in Borchgrevink et al. (2012), “Why regulate banks?” Norges Bank Staff Memo 16/2013.

In conclusion, I hope this description has given you a sense of the PRA’s intended approach to supervising insurers, and some of the big issues that we see ahead. We have grown all too accustomed to focusing heavily on banks, reflecting their capacity for damaging spillovers and externalities. Whether, or how much, insurers share some of these characteristics is the subject of extensive debate. I am yet to be persuaded that the similarities of insurers and banks are more important that the differences. But I am persuaded that insurance is a critical financial service provided by firms that have considerable complexity in terms of financial risks. This alone demonstrates why we care about the prudential supervision of insurers. I should stress that we are looking forward to the challenge. Thank you. BIS central bankers’ speeches  7
Banks that believe the authorities consider them to be too big to fail may assume excessive risk and their creditors may supply them with credit at a cost that is too low. For instance, if banks believe that the central bank will solve any liquidity problem, this will weaken their efforts to prevent such problems from arising - and if they occur, from solving problems in the interbank market. The use of credit on special terms in situations where financial stability is not threatened is associated with indirect costs. The situation must thus be carefully examined before loans on special terms are granted. If it is widely known and recognised that if an institution’s problems are confined to liquidity, it should be possible for the institution to raise loans in the market. A problem bank’s creditors - often other banks - will in such a situation make their own assessment of the bank’s solvency. In principle, it is not a foregone conclusion that the central bank and other authorities would be in a better position to evaluate an institution’s solvency than its own creditors. Implicit insurance schemes, which are in fact what loans on special terms are, may impair the effective functioning of markets and lead to excessive risk-taking among banks. It may take a long time before the costs come into evidence. In a crisis situation it is important to take into account the long-term benefits of not providing support such as better functioning markets and more appropriate risk-taking.

SPEECH  Paradise lost? How crypto failed to deliver on its promises and what to do about it Speech by Fabio Panetta, Member of the Executive Board of the ECB, at a panel on the future of crypto at the 22nd BIS Annual Conference, 23 June 2023 Basel, 23 June 2023  Introduction Some 15 years ago, software developers using the pseudonym Satoshi Nakamoto created the source code of what they thought could be decentralised digital cash. [1] Since then, crypto has relied on constantly creating new narratives to attract new investors, revealing incompatible views of what cryptoassets are or ought to be. The vision of digital cash – of a decentralised payment infrastructure based on cryptography – went awry when blockchain networks became congested in 2017, resulting in soaring transaction fees. [2] Subsequently, the narrative of digital gold gained momentum, sparking a “crypto rush” that led to one in five adults in the United States and one in ten in Europe speculating on crypto, with a peak market capitalisation of € trillion. [3] However, this illusion of crypto-assets serving as easy money and a robust store of value dissipated with the onset of the crypto winter in November 2021. The fall in the price of cryptos (Chart 1) led to a decrease of around € trillion worth of crypto assets within less than a year. This caught millions of investors unprepared. [4] An estimated three-quarters of bitcoin users suffered losses on their initial investments at this time.
In the work that has begun on a new architecture for the financial system, measures of three kinds have been singled out as particularly important: more transparent accounting for financial institutions as well as for governments and central banks; a greater involvement of private investors in crisis management; and a reinforcement of the financial system. For work on the third category, there are in principle two different approaches or a combination of these. One involves tightening up the supervision of banks and the other the introduction of higher capital standards to raise the proportion of equity capital in the bank sector. My guess is that the future work to create a more functional banking system will be conducted along both these approaches. In the prevailing situation it is important that the international banks do not become unduly cautious. Banks should take risks but their risk-taking should be properly managed. It would be unfortunate if more countries were to start imposing restrictions on capital exports. That would exacerbate the present state of affairs. Similarly, it would be directly counterproductive to introduce some type of turnover tax, as proposed earlier by Professor James Tobin. That was tried out in Sweden in the late 1980s and simply resulted in trading being transferred to other countries. Even if agreements were to be reached between many countries, there would always be countries that refrained from joining the arrangement. Moreover, the poorer liquidity that would accompany turnover taxes might actually impair the workings of some financial markets.

The problems showed up first in Thailand but soon spread to South Korea, Malaysia and Indonesia. While the deterioration in these countries was partly a consequence of the economic stagnation in Japan, perhaps the main cause of the acute crisis was that a strong capital inflow from the West, above all from the United States, suddenly turned into an outflow. For various reasons, political as well as economic, assessments of the development potential in the countries in question had been gradually revised. More recently the problems have spread to Russia, where the economic situation - as in Japan - was already troublesome. The situation became so precarious that the Russian government suspended payments on government debt denominated in the domestic currency. That was a very far-reaching decision. Since then, capital outflows have also hit Latin America. For a long time it seemed that the Asian crisis would not have sizeable repercussions in industrialised countries in the West. The direct real economic impact was judged to be small and at first it looked as though the main effect would be a tendency to keep inflation down, while growth would remain good. As Russia also encountered increasing problems, however, there was growing concern and the crisis BIS Review 83/1998  -2-  accordingly began to spread even to financial markets in the West. During the summer, share prices began to fall. Credit risks rose. Investors and banks started to become increasingly cautious, partly on account of some losses.
All in all the potential impacts of this new regulatory approach may be profound and wide-ranging. I would like to explore some of these implications that have received some attention. 6. How Basel II will affect the flow of capital across borders. Let me start reflecting on how Basel II will affect the flow of capital across borders. Some observers suggested that the new capital framework’s heightened sensitivity to risk may reduce the flow of foreign investment in developing economies, since exposures to those economies might typically be considered of higher risk. I believe that, in the short run, Basel II will not have a material effect on the flow of capital, whereas in the medium and long term Basel II’s forward-looking elements will probably take over and higher risk efficiency will improve the financing of all kinds of economies. The first part of this comment, the lack of any short-term material effect on capital flows, is based on the notion that Basel II seeks to align capital regulations more closely to banks’ current practices, which today are already risk-sensitive. Therefore, it will not change the way that banks actually evaluate risk to decide whether to invest in emerging market economies. Yet some observers have assumed that a more risk-sensitive approach might drive up not just capital requirements, but also the pricing of credit to emerging market countries. This argument assumes that regulatory capital drives individual loan pricing decisions.

The sale to outside parties of credit risk packaged into new instruments helps, of course, to transfer the risk, but the credit risk still exists. While the transfer of risks to institutions or households that are better able to withstand them is a positive factor, and one of the structural explanations for the resilience of the banking sector during recent periods of stress, we should be conscious that this development may introduce some new risks into the system, such as operational risks, which require adequate treatment. Sellers of credit-related instruments face some degree of legal risk, for example, when new instruments are issued and their enforceability in courts has not yet been tested. Likewise, the creation and management of the new products can put strains on legacy risk measurement and management systems that were not intended to handle them, creating new possibilities for operations to fall short or even to fail in some way, creating losses. These advances in the technology and practice of risk management introduce unique opportunities for public authorities to promote greater stability. I’d like now to turn to the efforts that banking supervisors are undertaking to respond to these recent trends. This represents the next topic I’d like to address today. 5. The supervisory response: Basel II  Against this background of increasingly sophisticated risk management practices, heightened complexity in the financial markets and stronger interaction between the real and the financial economy, the Basel II process started more than 5 years ago.
Others – including the European Banking Federation – promote the idea of a “lead supervisor” approach, providing banking groups with a single interlocutor which has powers relating to the group as a whole. Both proposals raise significant political, legal and practical issues. Yet it is clear that the status quo will not be sufficient in the future. We need to move forward. And we need arrangements that reduce compliance costs for banks and streamline their interaction with supervisory authorities if we are really to make progress in integration. I think the key to success will be pragmatism, both on the part of the supervisory authorities and on the part of the industry. Let me highlight the principles that I believe should guide us in finding a way forward. I will begin with four principles which could be classified as being on the prudent side of the debate. Firstly, I believe that we need an approach which ensures legal clarity for all concerned. Banks need to know what requirements they should meet, on what basis and in which countries; supervisors need to know what activities they are responsible for and who they are accountable to; and depositors need to know where they can turn and on what basis if things go wrong. Informal arrangements between supervisory authorities can be extremely useful. But they do need to be grounded on firm and clear legal settings and accountability mechanisms. Secondly, we must recognise the diversity of situations within the EU. The European banking industry is far from homogenous.

It is essential that the industry keeps considering the issues and expressing its ideas, but I am afraid that unrealistic expectations can only lead us to an agonised debate which could polarise views and even hinder the progress that we need to make now in the crucial and urgent work of implementing Basel II, and international accounting standards. As I mentioned earlier, these were the more prudent principles that I wanted to mention. But, as the 19th century English writer Charles Caleb Colton said, “there is nothing more imprudent than excessive prudence”. Therefore, let me add a further four principles that go more in a more progressive direction. Firstly, I think that the EU needs to be ambitious, and set an example. I am convinced, and have said in many of my recent interventions, that the EU can and should go further, deeper and faster than the wider international community in finding greater consistency, convergence and efficiency in banking supervision. We should especially take advantage of the opportunities presented by Basel II and the fact that we already have a body of single market legislation and a long history of supervisory cooperation on which to build. And if we can demonstrate that progress is possible among 25 countries that are still rather diverse, others will have more confidence to push ahead also. Secondly, we should recognise the legitimate concerns of the industry. More efficient supervision is a necessary - although not sufficient - condition for a more integrated market.