samchain/econo-pairs-v1 huggingface dataset:
In fact, legislation might be necessary in order to ensure that the NCB can always obtain the information it needs to fulfil its responsibilities on financial stability, extraordinary liquidity assistance in a crisis, and monetary policy. In Sweden, the central bank concluded an MoU with our bank supervisors but we also have the legal power to ask the banks directly for information. It is difficult to sum up all the arguments for and against. If you are contemplating change in your country, I would say that a broad and objective assessment of the present strengths and weaknesses will give good guidance as to which way to go. The optimal solution for the near term may not be the same as for the long term. The aspects of cross-border supervision Financial institutions increasingly operate across national borders. They establish branches and subsidiaries in other countries and they have business linkages with institutions in other countries. Is there any structure of the domestic regulatory authorities that is particularly suited to the efficient supervision of international financial operations? I do not think so. What matters is that there are arrangements between home and host supervisors which ensure information-sharing and close cooperation in particular in crisis situations. Such arrangements can be agreed on whether bank supervision is in a central bank or combined with securities and insurance supervision in a separate authority.

But I also believe that, if the exchange rate is reacting to a re-evaluation of real economic prospects – and not to some other inflationary shock – the effect should be a one-off change in relative prices, albeit spread out over time. It is important to stress that the MPC could try to offset all the price level effects of such shocks in order to leave the inflation rate unchanged. The problem with that idea in practice is the time it takes for Bank Rate to affect inflation. To counter short-term movements induced by relative price shocks would need very large and frequent changes in Bank Rate – including to offset the lagged responses of earlier changes. That sort of policy response would be very de-stabilising, likely to cause undesirable volatility in output, and be damaging to the economy as a whole. This is where the full remit of the MPC becomes effective – requiring us to support the Government’s objectives for growth and employment. Once there has been a shock to inflation, the Committee have to decide how quickly it should bring inflation back to target. To do that we have to judge the underlying state of inflationary pressure. And we have to monitor inflation expectations to check that they are not adversely affected by a succession of temporary shocks to the price level.
While high value payment systems (HVPS) in many countries are owned and operated by the central bank, CHAPS is run by “CHAPS Co,” a non-profit-making, private company owned by its members. Its role includes setting system rules, monitoring compliance and administrating membership. The Bank of England was given statutory oversight responsibilities in the Banking Act of 2009 and CHAPS Co are formally overseen on this basis. To reiterate, in the UK, although the Bank of England owns and runs the RTGS infrastructure, CHAPS Co is responsible for the provision of CHAPS. There is a parallel with Canada here, where the HVPS (“LVTS”) is managed by the Canadian Payments Association (CPA) instead of the Bank of Canada. This parallel is limited though as the CPA both manages and also runs the infrastructure behind LVTS. There are also a number of privately-operated retail payment systems in the UK which settle across RTGS accounts on a deferred net basis. These include Bacs, which handles direct debits and credits over a three day clearing cycle; Faster Payments (FPS), a near real-time retail payment service which operates “24/7”; and systems for clearing cheques, interbank ATM obligations (LINK), and card payments (Visa Europe currently settles over RTGS though Mastercard does not) – all are industry owned. Except for Visa Europe, each of the systems that settle with the Bank has a contractually separate, industry-run payment scheme, which manages its rules, while their operational infrastructure is ‘outsourced’ to a supplier company.

Recent priorities Amongst the numerous lessons from the financial crisis were: don’t under-estimate tail risks, do worry about contagion, and liquidity matters. Although the payments systems in the UK (and elsewhere) performed well during the crisis, those insights prompted us to address a number of credit, liquidity, and operational risk issues within our core systems with more vigour than previously, and have shaped much of our recent work programme. Concerns about tail risks and contagion have prompted changes in both the wholesale and retail spheres. In the wholesale sphere, the recent focus has been on tiering. Historically, CHAPS had a very tiered structure, with the majority of payments being made by settlement banks on behalf of their customers, a practice which generated significant intraday credit and liquidity exposures between direct participants and their customers. This model also concentrated operational risks, given that an outage at one of the big settlement banks would have prevented its customers from making payments. These risks would be exacerbated in periods of stress, potentially contributing to contagion as payment services were withdrawn or collateral suddenly demanded. Since the crisis, the Bank, working with the scheme manager CHAPS Co, has acted to reduce tiering. Five banks have become direct participants of CHAPS since 2007, and a further five have given us formal indication that they will do so soon.
In this respect, it should be borne in mind that, although this crisis affects all sectors of activity, it does so asymmetrically. This is why the effects on each bank’s credit portfolio depend on its sectoral composition and, therefore, also on its presence in different regions. The pandemic also entails an increase in households’ credit risk, mainly as a result of job destruction. Past experience shows that, in the face of declines in household income, the non-performance of consumer loans tends to increase at some speed. This is a type of loan, moreover, that has been growing at very high rates in recent years. From the standpoint of overall credit to households, this factor of risk is partly mitigated by the mortgage component, for which the evidence available suggests that defaults tend to occur some time after the initial shock when its effects persist over time. Accordingly, if it does in fact hold that the crisis is temporary in nature, this latter credit component will foreseeably post more moderate default rates. But the risks to financial stability arising from the current crisis do not end at credit risks. First, COVID-19 has increased market risk, as a result of the fall in the price of the financial assets that banks hold on their balance sheets. Further, operational risks have also risen insofar as the adaptation to restricted movements and remote working has had to occur in a very short space of time, which may give rise in some cases to vulnerabilities in technological infrastructures.

On the ECB Governing Council, then, we have reiterated our readiness to do everything within our power to help the euro area economy overcome the current deep-seated difficulties. This commitment includes, in particular, the possibility of increasing the volume of asset purchases or their duration and of adjusting their composition. The overriding aim is to eliminate any obstacle that may hamper the effective transmission of monetary policy and to prevent euro area fragmentation risks. 26  The role of the financial system in overcoming the crisis In parallel with the multi-faceted economic policy strategy to tackle the crisis, financial institutions should also contribute to mitigating the adverse effects on the various agents in the economy. The aim here is that banks should be in a position to provide financing to agents which, before the pandemic, had a favourable payment record, but which, after it, face sudden liquidity needs. As I stated earlier, banks now have higher solvency levels than in the previous crisis, which should help them play a leading and active role in this setting. So that the financial system may contribute to overcoming the crisis, national and international authorities with prudential powers - which include the Banco de España, the ECB, the European Banking Authority and the Basel Banking Supervision Committee - have adopted certain decisions aimed at preventing a mechanistic interpretation of the prevailing rules with which banks must comply from leading to fewer loans being granted by them just when this is all the more necessary. These decisions affect two differentiated areas.
Instead, the industry must continuously evolve to meet the needs and preferences of its consumers which are rapidly changing. It must proactively and strategically position itself to offer products via diverse and innovative delivery channels to reach out to different segments of the population with varying levels of financial knowledge. In this regard, under the LIFE Framework, the Bank envisions the market share of regular premiums/ contribution products sold/ marketed via non-agency channels to exceed 30%. Currently the ratio is 14%, and this statistic provides compelling evidence that the industry must double its effort to reach the target of 30%. Similarly, for us to expand the penetration rate to reach 75% by 2020, the industry must add and expand the reach of its non-agency channels. Throughout the world today, financial inclusion has been identified as an important area of focus to achieve a more balanced and sustainable economic growth. Societies that are adequately empowered and supported by suitable financial tools can assist in helping them cope during temporary period of emergencies. Empirical evidence showed that microinsurance customers can be as valuable as a company’s any other customers. This is where the industry can play a major role to develop suitable microinsurance/ takaful products that would enhance the social safety net of this underserved segment enabling them to get back on their feet and become financially independent even after experiencing an adverse event. Yet many in the industry appears uninterested in microinsurance/ takaful for reason that it is a loss making venture and uneconomical to pursue.

Recently, Matthew Rose, CEO of Burlington Northern Santa Fe (America’s second biggest rail company), expressed frustration at the focus on quarterly earnings when locomotives lasted for 20 years and tracks for 30 to 40 years. Echoes, here, of “quarterly capitalism”. This evidence – anecdotal, survey, quantitative – is broadly consistent with popular perceptions. Capital market myopia is real. It may be rising. For at least some of the jury, however, it remains inconclusive. In 2010, Richard Saunders (Chief Executive of the IMA) summed it up thus: “Now red lights start flashing for me when people talk about shorttermism, particularly when shareholders feature in the same sentence. What do people mean when they claim that shareholders behave in a short-term fashion? And what evidence do they have for it? I have yet to hear a convincing answer to either question”. 3. Testing for short-termism  In the quest for some concrete, quantitative evidence, our test of short-termism uses the forward-looking asset price framework of Miles (1993). A simple example illustrates the basic approach to testing myopia and its implications for project choice. (a)  A simple example  Consider an investment project costing $ This investment is riskless and pays $ at the end of each of 10 years.
FINANCE AND HOUSING IN CENTRAL AND EASTERN EUROPE: A DEMAND-SIDE APPROACH Liviu Voinea, Deputy Governor, National Bank of Romania Finance and Housing Panel, Bruegel Annual Meetings 2017  In 2015, ESRB published the Report on residential real estate and financial stability in EU. In November 2016, a detailed assessment of countries with high vulnerabilities followed.  AT, BE, DK, FI, LU, NL, SE, UK were identified as having medium term vulnerabilities on the Residential Real Estate (RRE) market. No CEE country was singled out.  The ESRB methodology is based on the concept of “stretch”, applied to households, collateral, and banks.  Household stretch refers to vulnerabilities related to borrowers’ indebtedness and ability to repay debt, as well as their capacity to maintain their consumption pattern. Main indicators: household debt % GDP, financial assets to debt, debt service to income.  Collateral stretch refers to vulnerabilities relating to the property market. Main indicators: residential price index, house price to income.  Banking stretch refers to vulnerabilities related to direct losses by banks and due to their RRE exposures. Main indicators: loans for house purchases, loans’ growth rate and trend.  The report finds that the structural features of the RRE markets can be grouped into demand-side, supply-side and institutional factors. The demand side factors include: household income, credit availability and interest rates, home ownership rates, demographic factors. On the supply side: residential investment, housing construction and construction costs. Institutional factors: housing taxes and subsidies, mortgage contract features, foreclosure and insolvency procedures.

Nothing is settled, and the French presidency will need to deepen and strengthen the main avenues that are currently the subject of global consensus. This is already a huge task. But the greatest responsibility that I see for the future presidency is the correction of large external imbalances at the global level; such a correction is crucial if we are to avoid another major crisis in the future. And in Seoul the G20 explicitly asked the French presidency to work on criteria for measuring these external deficits and surpluses. The financial crisis is over, but its effects can now be felt in terms of the economy. Do you believe that all the necessary lessons have been learned in order to avoid a new global crisis when one sees measures here and there that are perceived as protectionist, in particular in the United States and China? We are in the midst of reflecting at the international level on the lessons to be learned from the crisis. This is a considerable task and it is being undertaken by the whole of the international community, including emerging market economies. It will take some time. For example, in order to make the global financial system much less vulnerable, much more robust, the measures proposed by the Basel Committee and adopted by the G20 will necessarily take time to implement, given their scale. This applies in particular to a very considerable increase in banks’ capital requirements at the global level.
SPEECH DATE:  12/04/21  SPEAKER:  Deputy Governor Henry Ohlsson  VENUE:  LO  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Hidden wealth* Expansionary monetary policy causes asset prices to rise and thereby makes those who own assets wealthier. But this wealth is unevenly distributed among households, and therefore the income from it (capital income) will also be unevenly distributed. Expansionary monetary policy can thus lead to more uneven capital income. At the same time, unemployment decreases when monetary policy is expansionary. This makes labour income more even than it otherwise would have been. As the effects on capital income and labour income counteract each other, it is unclear what effect the expansionary policy has on income distribution in total. But this does not stop higher asset prices leading to more uneven wealth distribution. In this speech, I will highlight a phenomenon that can mitigate this effect. I will start with an example that illustrates what I mean by hidden wealth. The Norwegian oil fund is one of the world’s largest funds. In 2019, the value of the fund was 285 per cent of Norway’s nominal GDP. Norway's revenue from oil operations are added to the fund and the assets are then invested abroad. The nominal return has been a good 6 per cent a year on average since the fund started in 1996. Every year, the Norwegian state may utilise the fund’s average real return.

2 [6]  Figure 1 shows that funded collective pension wealth made up a very small share of total wealth up until the 1960s. With the advent of the National Swedish Pension Funds, the share began to rise and grew on a more or less trend basis up to the end of the millennium. In 2019, the share was 25 per cent. In other words, a quarter of total wealth in Sweden was in collective pension funds at that time.2 So what determines the individual Swedish person's share of funded collective pension wealth? Several factors are significant. The factor I would like to highlight here is labour income. Let me give a few examples: 2.5 per cent of labour income is transferred to the premium pension system up to an annual ceiling.3 The system is mandatory for all those that have labour income. For a person who starts to withdraw their premium pension and has never hit the ceiling, their premium pension wealth will depend on their labour income during their working life and on how the individual has chosen to invest their premium pension wealth. My point here is that we know that labour income is more evenly distributed than capital income. The conclusion will then be that premium pension wealth is more evenly distributed than other wealth. The pension agreement between the Swedish Employers’ Confederation (SAF) and the Swedish Trade Union Confederation (LO) is an example of an agreement between parties that applies to privately employed blue-collar workers.
Admati, A and Pfeiderer, P (2010), “Increased-Liability Equity: A Proposal to Improve Capital Regulation of Large Financial Institutions”, Graduate School of Business, Stanford University. Alessandri, P and Haldane, A G (2009), “Banking on the State”, Bank of England, available at http://www.bankofengland.co.uk/publications/speeches/2009/speech409.pdf Anglo-Continental Guano Works v Bell (Surveyor of Taxes) (1894) 3 TC 239. Aspen Institute (2009), “Overcoming Short-termism: A Call for a More Responsible Approach to Investment and Business Management”, The Aspen Institute Business and Society Program, September 9. Bagehot, W (1873), “Lombard Street: A Description of the Money Market”, History of Economic Thought Books, McMaster University Archive for the History of Economic Thought. Bankers’ Magazine (1951–68). Basel Committee on Banking Supervision (2010a), “An assessment of the long-term economic impact of stronger capital and liquidity requirements”, Bank for International Settlements. Basel Committee on Banking Supervision (2010b), “Principles for enhancing corporate governance”, Bank for International Settlements. Bliss, R R and Flannery, M J (2002), “Market discipline in the governance of US bank holding companies: monitoring vs. influencing”, European Finance Review, Vol.6, pages 361–395. Calomiris, C W (2011), “Incentive-Robust Financial Reform”, The Cato Journal, Vol. 31 No. 3 (Fall 2011), pages 561–589. Calomiris, C W and Gorton, G (1991), “The Origins of Banking Panics: Models, Facts, and Bank Regulation”, in “Financial Markets and Financial Crises”, NBER, pages 109–174. Calomiris, C W and Herring, R (2011), “Why and How To Design an Effective Contingent Capital Requirement”, Columbia Business School Working Paper, February.

(c) The dotted black line is a suggested trigger level for contingent capital calibrated by minimising a loss function which takes into account both Type I and Type II errors. Type I error is the probability that conversion occurs despite capital not being required. Type II error is the event that conversion does not occur despite capital being required. The loss function places greater weight on Type II errors. Note that the loss function takes into account the full range of banks, not just the average score for each set. (d) 30-day moving average of market capitalisation. 24  BIS central bankers’ speeches  Table 1: Estimated subsidy for UK and global banks $  Contingent claims / Kou(a)  Ratings(b)  2007  2008  2009  2010  2007– 2010 average  2007  2008  2009  2010  2007– 2010 average  UK  134  354  622  250  340  9  51  178  58  74  Global  496  1,308  2,294  924  1,256  33  211  528  197  242  a) Calculated using an extension to the Merton (1977) model developed by Kou (2002). It models changes in banks’ assets as being normally distributed with upward and downward “jumps” designed to reflect the possibility of extreme movements in asset values, and “fatten the tails” of the resulting distribution. This model is fitted to the prices of options written on the four largest UK banks’ equities.
Perhaps the most controversial frameworks took the form of commitments to meet targets for the growth in the money supply. These were meant to act as rules, which would tie the hands of politicians, but they proved ineffective, not least because the underlying economic relationships broke down. There were also periods – notably the 1970s – when there was no discernible monetary policy framework at all; when monetary policy was in eclipse and Governments relied on incomes polices to control inflation. These, too, were a dismal failure. 1  Inflation has averaged 2.5% since 1997, with a standard deviation of 0.8%. In the two decades to 1992, it averaged 9.6%, with a standard deviation of some 5.6%. Over the past decade, output has grown steadily, averaging 2.8%, with a standard deviation of 0.7%, compared with an average of 2% and a standard deviation of 2.5% over the seventies and eighties. BIS Review 20/2007  1  All these frameworks suffered from one of two basic problems. They either lacked credibility, or they lacked sufficient flexibility for policy-makers to respond intelligently to events. So it is little surprise that they were associated with two decades of poor macroeconomic performance.

What was the defining characteristic of this approach to policy, and other broadly contemporary frameworks developed by countries like Canada, New Zealand and Sweden? The best short answer is encapsulated in a term originally coined in 1997 by two US academics, Ben Bernanke and Frederick Mishkin (now Chair and member of the FOMC respectively). It is ‘constrained discretion’ 2 . Bernanke described this as “an approach that allows monetary policy-makers considerable leeway in responding to economic shocks, financial disturbances, and other unforeseen developments. Importantly, however, this discretion of policy-makers is constrained by a strong commitment to keeping inflation low and stable.” 3 In the UK, the Government is constrained by the institutional framework, which is set in statute. And the MPC is constrained by the need to meet the inflation target. But while the MPC are told what to do, they are not told how to do it. At the operational level, there is a lot of discretion. The commitment to meet the inflation target is fundamental, as a matter of law and economics. As long as it is credible, such a commitment will help to anchor people’s expectations about future inflation, and stabilise their response to unexpected shocks. But the scope to exercise discretion about how long temporary inflation disturbances will be tolerated is critically important too, for the performance and long term credibility of the framework. Of course it must be used with integrity – saying one thing and doing another, for short term advantage, is toxic.