samchain/econo-pairs-v1 huggingface dataset:
As long as such uncertainty pervades and markets continue to fail, it is the public authorities’ duty to protect the credit system and safeguard the financing of the economy. The private sector strategies to overcome the crisis cover several aspects. First, I would like to mention the initiative to create a compensation scheme with a central counterparty for credit default swaps (CDS). This initiative from the private sector is strongly encouraged by public authorities given its importance for financial stability. Regarding institutions themselves, different proposals are on the table which relate to their business model and risk profile, to governance and risk management schemes and to disclosure and communication policy. In terms of risks profile, two main models are intensely discussed. Under the first one, universal banks that benefit from diversified sources of profits were better off during the crisis. By contrast, specialised financial institutions, especially those heavily engaged in investments activities, suffered significant losses. I have already mentioned the case of French banks. In the same vein, the interest of Deutsche Bank for Postbank in Germany stems from the same logic: to diversify sources of funding and of profitability. Conversely, the other model under scrutiny focuses on selected core businesses precisely to reduce diversification in markets for which in-house knowledge and capacity may have proved insufficient relative to the risks involved. The move towards this more focused model is contributing to the deleveraging process that is deeply needed in some institutions.

Effective surveillance of the financial market has entailed adoption of appropriate risk management policies and procedures meant to ensure that financial institutions do not undertake excessive risks that may increase the vulnerability of the country to external shocks. V.  Current state of the economy  Mainly due to the policies pursued the Zambian Authorities, the economy has shown appreciable resilience in the wake of the global economic crisis. Positive economic recovery trends have already started to be witnessed within 2009. (i)  According to the Central Statistical Office, GDP growth is now forecast at 6.3% for 2009, up from 5.7% recorded on 2008, primarily driven by increased output in the mining, construction and agriculture sectors: •  Mining growing by 21.4%  •  Construction by 15.5%  •  Agriculture by 7.1%  (ii)  Although inflation rose to 16.6% at end-December 2008 from 8.9% in 2007, much of this increase was driven by the rise in food and energy prices. By October 2009, annual inflation had fallen to 12.3%. (iii)  The exchange rate has also stabilised with the weighted inter-bank rate moving within a range of K4,600 and K4,750 per US dollar in the third quarter of 2009. (iv)  The external sector adjusted strongly with the strong rebound in copper prices, to above US $ per metric tonne, and increased output (primarily through a new mine, Lumwana Copper Mine). The merchandise trade balance recorded a surplus of US $ million (f.o.b.)
The thinking behind this division is that measures of this kind require comprehensive economic analyses, with which we are familiar. An excellent example of a cyclical measure is the countercyclical capital buffer. The Federal Council decides on the activation of this tool at the request of the SNB. In the designation of systemically important banks and functions, the SNB also has a comparative advantage because its approach is geared to the financial system as a whole. Although powers and responsibility for specific macroprudential measures are clearly allocated to one authority, overlapping and mutual dependencies can always occur. Consequently, it is very useful for the institutions to work together closely and engage in a certain amount of coordination. That is why the Swiss authorities have clearly specified how they will differentiate their tasks and work together. From a purely theoretical point of view, a strategy where one institution bears sole responsibility for financial stability might be more appealing. However, experience from the financial crisis does not provide any evidence that the one-authority-for-all model is superior – in systematic terms – to other organisational forms. On the contrary. In this country, the UBS case clearly showed that it is very possible, in an emergency situation, to carefully and discretely draw up a bundle of comprehensive measures in support of financial stability, and to implement these in good time, even where various institutions are involved.

In this scenario, it could be argued that one could relax the policy horizon or the target level to accommodate these inflationary shocks with small output costs. However, based on my previous discussion, this could be very detrimental for the future. Giving up on inflation will lead to losing the inflation anchor on expectations, more backward- than forward-looking behavior of wage and price setters, and an increase in output volatility. In other words, we would be achieving an inefficient outcome for monetary policy and losing the benefits of the Great Moderation. Hence, central banks must carefully monitor inflation expectations. However, in the current juncture of extreme uncertainty and inflation volatility, the breakeven measures that compare nominal and inflation protected securities appear to be excessively high world-wide, thus apparently showing an important increase in inflation expectations, which could even reflect the loss of the nominal anchor. This has also been the case in Chile, especially since the deepness of the market of inflation protected instruments tends to make them the natural safe haven. Therefore, in uncertain times like the ones we are enduring today, breakeven measures may increase without necessarily implying un-anchoring expectations, making their timely recognition more intricate. Some could incorrectly argue that a way to avoid the monetary policy reaction to some specific inflationary shocks is to focus inflation control on core rather than headline measures of inflation.
It has served the UK well for two decades, and has led the way in many areas of innovation. But similar drivers to those behind the PSF mean it too now needs a thoroughgoing refresh to meet the next wave of challenge. Consultation on our vision recently concluded; and, although we are still processing the results of that exercise, it is already clear 3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  that our proposals to boost access, resilience, interoperability and user functionality have received strong support from old and new market participants alike. So it seems likely that, in the next few years, the UK will have a new payments infrastructure for retail and wholesale payments alike. To have got this far so fast is a real achievement. But in truth the real work for the PSF has only just begun. The challenge now is to translate the high level aspirations in this document into something much more concrete. That means delivering a retail payments design that is technically feasible, secure, and aligned with the Bank of England’s settlement models. It also means identifying who will build, and pay for, the new system: no small challenge at a time when the industry faces many competing demands on its resources. Though the Bank of England has not been a formal member of the PSF, we have been an active observer of proceedings throughout the past year. And we will remain closely involved with the next stage of the Forum’s work too.

Norman T L Chan: When markets fail Speech by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the 6th Caixin Summit 2015, Hong Kong, 6 November 2015. *  *  *  1. The topic of my speech today (“When markets fail”) is a little controversial as there are some who do not accept the premise that markets can fail. They believe that markets are capable of self-correcting and will eventually achieve the most efficient price discovery and resource allocation. However, I have some reservations about this notion because our experience tells a slightly different story. Markets do sometimes fail to perform their price discovery and resource allocation functions. In some more serious cases, market failures have even led to destabilising financial shocks and crises. 2. Indeed, the 2007–08 global financial crisis, which ravaged the US and Europe, clearly repudiates the general belief that market failures and financial crises will only occur in third world countries or underdeveloped economies. On the face of it, the bursting of the US property bubble triggered the collapse of the subprime mortgage market, which in turn led to the financial crisis in the US. However, if we look more deeply, we find that prior to the crisis, the banking and financial systems had been churning out a great number of subprime mortgage-backed securities. In addition, various derivative instruments using subprime mortgage-backed securities as underlying assets, like CDO2 and CDO3, added layers of risks like snowpack.
In October 2019, according to CoinMarketCap, total outstanding crypto-assets represented EUR 205 billion globally; in comparison, the euro area’s M3 monetary aggregate amounted to EUR 12.5 trillion in August 2019. In addition, the diversity of views on the contributions that crypto-assets can make to the efficiency and safety of our payment systems mirrors the one in their forms. Some see crypto-assets as a disruptive innovation poised to radically change the way our monetary and financial system operates, and changing it for the better. Others believe that for the time being they do not provide a new and attractive answer to the classical trilemma payments solutions face between low cost, high execution speed and low risk, and would change the way our monetary and financial system operates for the worse. To share with you a few thoughts on this debate, speaking from the perspective of a central banker and a supervisor mindful of the benefit of innovations but also of the risks they could bring to financial and monetary stability, I will focus my remarks on: 1- whether and how crypto-assets can contribute to improve our payment systems, 2- the public policy challenges they raise, in particular for central banks, and how to address them. I – Crypto-assets and the future of payment systems 1- In the payment instrument landscape, there is currently a twin trend: the share of cash  payments dwindles while cashless payments undergo a transformation driven by behavioral changes and technological innovation.

As a result, very few prices are denominated in cryptoassets and not many large brick-and-mortar or online retailers accept bitcoin for example, although there are some exceptions [i.e. showroomprivé.com, France’s second largest flash sale web retailer, which has accepted bitcoins since 2014]. Second, as intermediaries in exchanges, crypto-assets are far less effective than a settlement asset with legal tender status, insofar as (i) their price volatility makes it hard to use them as a means of payment, (ii) they generate transaction fees that are far too high for simple retail transactions (for instance, the redemption fee on Tether is 3%), and (iii) they offer no guarantee of a refund in the event of fraud. 3/6  BIS central bankers' speeches  Third, the fact that they have no intrinsic value and that they offer no guarantee that they can be converted at par upon demand with commercial bank money or central bank money means that they cannot be used to create trustworthy stores of value. In addition, crypto-assets « front end » and « back-end » payment arrangements are  significantly exposed to risks of various nature, including legal, financial, operational and compliance risk with money laundering and terrorist financing, consumer and investor protection, which need to be seriously addressed if they are not to become the « weak links » in our payment systems, with the risk that they undermine the safety of the whole payment chain.
This owes to the fact that, if synchronised crises occur in any of the cited components – sovereign debt, exchange rate, inflation and banking system – synchronised recession episodes are likely to follow. Certainly, simultaneous resorting to external financing with a view to underpinning a great many anti-crisis programmes makes the resources to each country relatively less available and costlier than in the case where only a small number of countries use a given amount of resources. In addition, synchronised recession episodes could translate into greater individual recessions for the economies in which the export-oriented sector holds a sizeable share in GDP. Against this background, the difficulty in adopting a package of reforms and in securing external funding is bigger in the context of the quasi-singular episodes when a large capital inflow cycle ends. Romania took this into account at the time of asking for financial assistance from the EU, the IMF and other international financial institutions to cover the financing gap estimated for 2009 and 2010. I will get back to this topic in the concluding section of the paper. The modern age of global finance saw several episodes of such synchronous, heavy capital inflows. In principle, once in a while, foreign investors find enough reasons to invest relatively large amounts of capital in emerging economies. Considering the time period that elapsed after World War I, one may assert that the pattern failed to repeat itself in the ’30s, the ’40s and the ’50s.

The measure failed to deter capital inflows, which managed to find ways of circumventing the restriction. Despite higher required reserves, commercial banks’ foreigncurrency-denominated liabilities advanced EUR 4.8 billion in 2006, then EUR 7.8 billion in 2007 and a further EUR 5.8 billion in 2008. Nearly 75 percent of the increase in foreign banks’ liabilities during 2005–2008 occurred after required reserves had been raised to 40 percent. Chart 7 Required reserve ratio percent  percent  42 40 38 36 34 32 30 28 26 24 22 20 18 16 14  42 40 38 36 34 32 30 28 26 24 22 20 18 16 14  foreign currency  Dec.08  Aug.08  Apr.08  Dec.07  Aug.07  Apr.07  Dec.06  Aug.06  Apr.06  Dec.05  Aug.05  Apr.05  Dec.04  domestic currency  Source: National Bank of Romania  The constraint deriving from the large capital inflows was severe enough for the NBR to opt for maintaining a managed float regime of the domestic currency. This led to criticism by some analysts who claimed that the inflation targeting strategy adopted in 2005 involved the free float of the domestic currency in order to avoid potentially conflicting targets. The NBR explained that it would not target a particular exchange rate, but rather seek to deter its movements towards unsustainable levels.
This expansion reflects the policy adopted by the SNB to combat the rapid and excessive appreciation of the Swiss franc. A number of measures were taken in 2009 and 2010 to counter this appreciation, and these have left their mark on the SNB’s balance sheet. The most important of the recent measures was the introduction of a minimum exchange rate of CHF 1.20 against the euro on 6 September 2011. This exceptional measure was designed to mitigate the risk of deflation  BIS central bankers’ speeches  1  that threatens the Swiss economy. We are convinced that this policy is effective, and we shall continue to pursue it with the utmost determination. Note also that even the role of foreign exchange reserves has changed since the onset of the financial crisis. Until 2008, the aim of foreign exchange reserves was to ensure that the SNB was able to implement its monetary policy unhindered and at all times. At that time, foreign exchange market intervention was virtually non-existent, and discussion focused more on whether to hold foreign exchange reserves or not. Today, given the level of foreign exchange reserves, this question is less pertinent. Instead, the SNB has had to adjust its policy on foreign exchange reserve management, in order to take account of the large amounts involved since 2008. For this purpose, it has amended its investment instructions, and I would like to briefly describe these to you now.

Many observers of the SNB’s activities have expressed a desire that this proportion be larger. Yet such an increase is not without risk. While the inclusion of equities in a portfolio can reduce the risk profile as a result of the diversification effect, this is only true up to a certain level. We estimate this level of equities to be between zero and 5% of the portfolio. While a higher share would naturally translate into a higher return on the portfolio, it would also mean incurring greater risk. Any increase in the proportion of equities must therefore be analysed from two vantage points: return and risk. Additional risk can run contrary to the criterion of security that the SNB applies to its investments. Let me now turn to the fifth and last challenge: Managing exchange rate risk. The return on foreign exchange reserves essentially fluctuates in line with changes in local currency returns versus Swiss franc returns. This exposure to exchange rate risk is the result of the SNB’s monetary policy. It thus forms, so to speak, part the DNA of a central bank’s activities in a small open economy such as ours. Eliminating this risk would go against monetary policy, which remains the SNB’s priority. We therefore have to live with this risk and try to reduce it without getting rid of it completely. To this end, the Governing Board pursues a strategy of maximum diversification across the currencies at its disposal.
It is important for a bank to identify and be aware of the structures, beliefs and group dynamics which echo throughout the entire institution and which may pose a risk to its performance and stability. Banks’ management bodies should be attentive to these intangible but real underlying drivers of behaviour and, if warranted, acknowledge the need to shift the paradigm before it is too late and negative practices become the norm. Could there be a role for us as supervisor? Whereas we look at elements like the composition of a board as part of a more standard governance assessment, in a broader supervisory governance assessment, including behaviour and culture, we could, for example, seek to identify the patterns of board discussions. Which subjects generate tension? Which topics tend to be neglected? Which board members are the most influential when it comes to making a decision? Do board members include the bank’s declared set of values and norms in their decision-making? Do they walk the talk, when facing the rest of the organisation? Are discussions in the boardroom or between members of executive committees dominated by one person or a small group of individuals? Including a bank’s behaviour and culture in broader supervisory governance assessments could possibly also involve assessing the management bodies’ culture of learning. Can they critically reflect on past experiences, produce a vision of what the culture ought to be, and be candid about what needs to change to achieve it?

As universal banks seek to expand fee and commission income in distributing investment products, there may be a risk that some banks or their frontline staff could become overly keen to market products to customers without sufficient regard to the customers’ own circumstances. Closer to home, the Lehman Minibonds episode has reminded us of the need for banks to take great care in the marketing and distribution of investment products to customers. It is for this reason that some have argued that the banking industry should revert to a simpler model of basic banking and leave the rest to brokerage houses and financial advisors. 7. The Global Financial Crisis and the subsequent international debate have prompted us to reflect on whether universal banking still remains an optimal model of banking for Hong Kong. Our answer is “yes”. But, this is a qualified “yes” because we believe that banks must take two appropriate steps to address the potential concerns that I have just highlighted: (a) Banks should offer their retail customers a high degree of protection with adequate regard to their interests or experience in investing in securities or other structured products. That is why the HKMA has required banks, in selling investment products to customers, to adopt extra investor protection measures on top of those promulgated by Hong Kong’s Securities and Futures Commission.
This can be said of both the financial market infrastructure and the two-tier financial system as a whole. In safeguarding this stability, we should nonetheless remain open to new developments. The SNB will continue to keep a close watch on developments to ensure that we are always able to assess their potential impact on the financial system in good time. Flexible and safe solutions often evolve from cooperation between market participants, regulators and central banks. So let us shape the digital future together. Thank you for your attention. Page 8/8  The financial markets in changing times Changes today and tomorrow: the digital future Andréa M. Maechler, Member of the Governing Board  Zurich, 5 April 2018  *  1 5 April 2018  **  Money Market Event | Andréa M. Maechler | © Swiss National Bank  Sources: Coinmarketcap.com; Bloomberg; FED; World Gold Council.

As I explained earlier, the SNB as the bankers’ bank ensures that there is a reliable foundation for the settlement of payments. In the retail payments space, financial services providers use this as a platform for delivering their services to customers, doing so in competition with one another. Operating on these two levels, this system ensures that the financial sector remains agile and safe, and that the best ideas can thus take hold in the market without this compromising the systemically important segment. Digital central bank money – few advantages, significant risks Ladies and Gentlemen, before I sum up I would like to say a few words on the subject of digital central bank money for the general public. A more prominent role for central banks in the end customer segment is currently being discussed, involving this and other associated terms such as ‘cryptofranc’ and ‘e-franc’. However, we are convinced that private sector solutions are better suited for meeting end customers’ needs in this area. Digital central bank  Page 7/8  money for the general public is not necessary to ensure an efficient system for cashless retail payments. It would deliver scarcely any advantages, but would give rise to incalculable risks with regard to financial stability by calling into question the tried-and-tested two-tier system. Instead of operating as the bankers’ bank as it does today, the SNB would be acting as a commercial bank for end customers. This would exacerbate the threat posed by bank runs in times of crisis.