samchain/econo-pairs-v1 huggingface dataset:
David Rule: Simple, transparent and comparable securitisation Speech by Mr David Rule, Executive Director for Prudential Policy of the Bank of England, at Global ABS, Barcelona, 17 June 2015. *  *  *  Thank you for inviting me to speak at Global ABS 2015. For the past couple of years the Bank of England has been working with the ECB to consider what can be done to foster the development of robust and well-functioning securitisation markets in the EU. Last year we published a joint discussion paper 1 and received helpful feedback from a wide range of commentators. One theme was support for defining the characteristics of simple, transparent and comparable securitisation – more on that in a moment. More recently, we published a joint response 2 in support of the European Commission’s consultation on securitisation and look forward to the Commission’s forthcoming legislative proposals. A key objective of the Capital Markets Union in Europe is a financial system in which stable market-based funding complements bank lending as a source of finance for the economy. Securitisation can be an important part of that stable, market-based funding, alongside other markets such as equities, bonds and private placements. Banks can use securitisation to diversify their funding and transfer risk on underlying loans. Importantly, non-banks can also finance lending through securitisation. Banks and non-banks can use securitisation to help match the maturity of their liabilities to their assets. This is particularly important in the context of housing finance.

There have been some false starts and business failures in this field, but some potentially more durable systems are now emerging in a number of countries, albeit still mostly in only embryonic form. The concept is of a storage location - or account - somewhere in cyberspace, into which you transfer funds from your bank account or credit card, just as you would draw cash from the bank and store it in your wallet. The BIS Review 28/2000  2  schemes are designed essentially for the retail shopper, who can then make payments from the purse for items purchased over the internet: the purse operator responds to your instructions by transferring funds from your purse to an account of the seller. You may wonder what the advantage of such schemes is supposed to be. Why not simply pay for each transaction by an electronic instruction to your bank or, more typically in the case of most retail internet purchases, by credit card? The answer is that digital cash purports to offer three advantages. First, it may be cheaper than other means for a series of relatively low value retail transactions. Second, it can be used by those who cannot or do not have a credit card - for instance teenagers. Third, it offers a degree of anonymity and perhaps a stronger feeling of security, in comparison to using a bank account or credit card, since account-related personal data need not be passed on to the individual sellers of the goods or services.
The macro prudential pillar takes account of those risks that may affect all, part, or most banks in the system - and not just individual banks. Like most other bank supervisors I’ve spent most of my career looking at banking system soundness mainly from an individual bank perspective. However, as a career central banker, I also have had to spend a good deal of time looking at financial stability from the macro prudential perspective as well. For much of my career we didn’t call it macro surveillance but it was very much in our minds when, for example, in the late 1980’s the U.S. banking system suffered from the collapse of a number of sectors of the economy episodically resulting in a very unhealthy and unstable banking system as a whole. Over 1,500 banks failed and public confidence in the industry was understandably threatened. In fact, on two occasions during that period the system was so close to collapse that major banks were unwilling to settle transactions unless the physical documents were in hand. At that time public policy was being directed toward eliminating weak and unstable banks so that trust and confidence could return – a necessary precursor to turning around a weak economy. That’s why – to use the title of my speech – I wonder whether the trend toward macro prudential surveillance isn’t just a new name for something we, as supervisors, have been doing all along.

Lars E O Svensson: Flexible inflation targeting – lessons from the financial crisis Speech by Mr Lars E O Svensson, Deputy Governor of the Sveriges Riksbank, at the workshop “Towards a new framework for monetary policy? Lessons from the crisis”, organized by the Netherlands Bank, Amsterdam, 21 September 2009. I am grateful to Claes Berg, Ylva Hedén, Jonas Niemeyer, Virginia Queijo von Heideken, Annika Svensson, Ulf Söderström, Staffan Viotti, Anders Vredin, Karl Walentin and, especially, Björn Lagerwall, for comments and help with the speech. The views presented here are my own and not necessarily those of other members of the Riksbank’s executive board or staff. * 1. *  *  Introduction  The financial crisis has raised some questions regarding monetary policy and how it should be conducted in relation to financial conditions such as credit growth, asset prices, imbalances, the risk of creating bubbles and so on. I will discuss two particular questions: Has monetary policy contributed to the conditions for the crisis? Do the lessons from the crisis justify any changes in the way best-practice monetary policy should be conducted? I will lay out my pre-crisis view of best-practice monetary policy – flexible inflation targeting – and its relation to financial stability and asset prices, discuss the role of monetary policy in possibly contributing to the current financial crisis and, finally, present my conclusions on whether flexible inflation targeting needs to be modified in the light of the crisis. 2.
BIS Review 32/2010  A box in the material for assessing monetary policy in 2009 describes a method for summarising the information in the alternative forecasts. This method uses an easily-grasped measure, a so-called mean squared gap, of how effectively an interest rate path can stabilise inflation around the inflation target and resource utilisation around a normal level. 6 Allow me to illustrate the method by using an example from the Monetary Policy Report published in October 2009, in which a box presented the method. Figure 6 shows the forecast development of inflation measured in terms of the CPIF and resource utilisation measured in terms of the output gap for the various repo-rate paths discussed in the Monetary Policy Report of October 2009. The various repo-rate paths are shown in Figure 6.a. The path in the middle is that of the main scenario, the repo rate path that the majority of the Executive Board chose at the meeting in October. The lower path is the one I advocated. Figure 6.b shows the forecasts for CPIF inflation that each repo-rate path was expected to give rise to. 7 The output gap, which is shown in Figure 6.d, is calculated in the same way as in the figures I presented earlier. Figure 6.c shows the mean squared gap. A lower mean squared gap for inflation entails a better acquisition of the inflation target; that is a better stabilisation of inflation around the inflation target.

On these occasions, the Riksbank’s forecasts overestimated the prospects for inflation to a greater degree than those of other forecasters. As I said earlier, the overestimations were due to concern on the part of the Riksbank that significant increases in the prices of oil and food during the spring, in combination with unusually high inflation expectations, would lead to an increase in inflation. The credibility of the inflation target Confidence in the inflation target in the form of stable inflation expectations close to the target is fundamental to the Riksbank’s efforts to achieve price stability and stable resource utilisation. This is because inflation expectations affect wage formation and pricing. Stable inflation expectations thus contribute to stable inflation. A high level of credibility for the inflation target also increases the possibility of the Riksbank to stabilise resource utilisation. If an increase in inflation was rapidly reflected in higher inflation expectations, the Riksbank would be forced to act more quickly and more forcefully than would otherwise have been necessary to dampen demand and prevent the inflationary impulse gaining a lasting foothold. The fluctuations in the real economy would thereby be greater than if inflation expectations were better anchored. Establishing credibility for the belief that inflation will be keep low and stable is therefore important in the effort to increase macroeconomic stability.
As an example, allow me to present the background for the monetary policy decision in June, when the key rate was raised from 6.5 per cent to 7 per cent. Developments in international financial markets were uncertain at that time, as they are today. We assumed that activity among our trading partners would show only a gradual recovery. Oil prices were high, also measured in NOK. Private consumption had shown a substantial rise as a result of strong income growth. Households expected strong income growth and borrowed heavily. Housing investment was high and financial investment was low. House prices were rising. Public expenditure was growing as a percentage of GDP. It was also expected that the level of petroleum investment would be high. Against this background, pressures on real economic resources were deemed to be strong. Wage growth was markedly higher than projected earlier. The outcome of the various settlements pointed to wage growth of 5½-6 per cent this year. The wage settlement awarded high pay increases with effect from next year for some groups even though they will also be negotiating pay increases in 2003. Developments in the krone exchange rate had the opposite effect. The krone had appreciated. Expectations of higher interest rates as a result of developments in wage settlements probably contributed to this.

Ravi Menon: Decentralised finance and the future of money Panel remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Andrew Crockett Memorial Lecture by Mark Carney, via Video Conference, 28 June 2021. * * * Thank you for the opportunity to engage on Mark Carney’s deeply thoughtful lecture. Mark has given us a powerful rendition of the transformation taking place that will “re-wire” our monetary and financial systems. Centrifugal forces are driving financial functions away from the traditional core. These forces are not just affecting money, but all aspects of the monetary system. Mark also reminds us that, amid this transformation, money has to be anchored on “values of trust, resilience, dynamism, solidarity and sustainability”. I cannot agree more. I’d like to focus on: the decentralisation of finance across the three ‘I’s of the monetary stack — intermediaries, infrastructure, and instruments; and how central banks and regulators can potentially shape this decentralisation in a way that upholds the critical values of money that Mark has highlighted. Let me begin with Intermediaries, at the top of the monetary stack. The delivery of retail financial services is being decentralised. This is happening in two ways. First, finance by non-financial players. There is now a much broader range of non-traditional – and often unregulated intermediaries in the retail finance space. This is not just BigTechs, but also FinTechs and smaller technology firms. These players provide payments, lending, savings and investments as complements to their core digital service.
It has been accompanied by external surpluses that are larger than for many years, making it possible to repay foreign debt. Government finances, moreover, now show a surplus instead of the earlier deficits, which means that government debt is already being reduced in relation to GDP. The latest figures show that prices in Sweden’s economy are virtually stationary. The falling trend in market interest rates in recent years has been a major factor here in that it has reduced house mortgage interest expenditure and thereby temporarily exerted a downward effect on inflation. The underlying price trend is not, in fact, as low as the CPI figures might suggest but that does not alter the conclusion that in the years ahead, inflation will continue to be low. If Sweden sticks to disciplined fiscal and monetary policies, together with other ways of enhancing economic policy’s credibility, we have a real opportunity of reinstating the tradition of price stability that existed in Sweden prior to the 1970s and 80s. Let me give you a short historical background to our current economic policy strategy. Tradition of price stability In the period from 1830 to the late 1960s, the annual rate of inflation in Sweden averaged around 2 per cent. So if one disregards the 1970s and 80s, low inflation has been the norm for almost a century and a half. There are indeed grounds for saying that price stability is a long Swedish tradition. The tradition of price stability did not obstruct the economy’s development.

Crucially we now have a credible framework for setting monetary policy to meet the inflation target in the medium term. Monetary policy cannot prevent the short-run ups and downs of economic cycles. In the current climate, the Committee believes that, if Bank Rate were set to bring inflation back to target too quickly, the result would be unnecessary volatility in output and employment. Instead we are focused on returning CPI inflation to the 2% target in around two years, when the present sharp rises in energy and food prices will have dropped out of the CPI inflation rate. We judge that in order for inflation to return to target it will be necessary for economic growth to slow this year, reducing the pressure on supply capacity of the economy and dampening increases in prices and wages. But the risks to both the upside and downside remain large and the MPC will continue to make its judgement about the appropriate level of Bank Rate month by month. The next year is not going to be comfortable for anyone and we already hear calls to change the system, the target, and our focus on inflation. But the new framework and the independence of the Bank was designed for difficult times as well as for plain sailing. I hope we can look to you and other businesses for support in doing what is needed to bring inflation back to target. BIS Review 80/2008  5  6  BIS Review 80/2008  BIS Review 80/2008  7
Starting with the economic reasons, academics have been arguing that scale and scope economies are limited in banking and perhaps even negative once a certain size has been reached. The standard argument goes like this: banking is a “relationship business”, where a large part of a bank’s value lies in its customer-relationships. It is from these relationships the bank’s value-added comes in the form of its expert knowledge about the financial needs and risks of its customers and its understanding of the local economy. So a bigger bank cannot create more value, because it’s all about being close to and knowing your customer. Size just increases bureaucracy. And, if the bank would expand abroad, the sources of value are less obvious, since it would lose its natural expert knowledge, and be disadvantaged compared with the incumbents. Hence, the economic case for integration would not be as strong in banking as in other sectors. I question this view. On the academic side, more recent banking research actually finds evidence of scale economies. After all, to a large extent, modern banking is about efficiency in running huge operations consisting of vast branch networks, IT-systems and thousands of employees. That scale economies exist is also supported by the domestic consolidation taking place in the US as well as in individual EU countries. The banks that are best at running their operations should have plenty of good reasons for expansion.

Lars Heikensten: The integration of European banking - some regulatory challenges Speech by Mr Lars Heikensten, Governor of Sveriges Riksbank, at the seminar “The Integration of Financial Markets in Europe”, at the “Riksdagshuset” (Swedish Parliament), Stockholm, 21 April 2004. *  *  *  Thank you for inviting me to share my views on the integration of financial markets in Europe. We have just heard about the positive role capital markets might have in fostering economic growth and stability. We have also heard about how the regulatory process has been changed to promote the growth of an integrated European market for capital and securities. It is my hope that also the area of bank regulation will become part of this simplified process. It is certainly needed. Compared to the European securities market, the banking market is lagging many years behind in terms of integration. True, large companies may have access to foreign bank funding as well as to international debt and equity markets. When it comes to choosing your bank at the retail level, however, Swedish households and small and medium sized companies are left to a market which is to more than 90 percent dominated by Swedish banks. This situation is shared by most other EU countries. This is not a problem in itself. Swedish (or, in general, domestic) banks might very well be excellent. However, most of us tend to believe that cross-border integration, just as trade, is something good because it increases competition.
However, before the agreement was signed and ready to be put into use, the Riksbank was forced to use its own foreign currency reserve. With the aid of this, and gradually with the new swap facility, the Riksbank lent dollars equivalent to around SEK 200 billion for four weeks. In total during 2008 and 2009, the Riksbank was able to offer its counterparties, with the aid of the swap line from the United States, dollar loans corresponding to more than SEK 1,000 billion. Central banks’ balance sheet – grown to manage financial crisis  Note. Per cent of GDP. Source: Macrobond  It is difficult to say what would have happened if the Riksbank had not received access to the swap with the Federal Reserve, and if the Riksbank had not been able to offer the banks this dollar facility. Probably, some of the banks would have experienced severe difficulties. After the global financial crisis, the Federal Reserve has announced that it no longer offers swap lines to other than a small group of central banks, a group to which the Riksbank does not belong. It is also highly uncertain whether we will have access to similar arrangements with the Fed or other central banks the next time problems arise.

Who would want to come to the rescue of a country that is not prepared to pay the cost of a reasonable insurance? Let me make a comparison. Some years ago, Sweden chose to re prioritise within its defence forces, and the compulsory military service system was abolished. Now that uncertainty in global policy has increased, the Swedish defence budget has increased, and compulsory military service is being considered again. It is quite simply safer to have, for instance, a number of JAS fighter planes on standby than to rely on being able to rent them if one needs them, partly because in an acute situation it would probably take too long and because it would be difficult and expensive. Foreign currency reserve – part of Sweden's economic defence Similarly, we can regard the foreign currency reserve as part of Sweden's economic defence. The advantage of having a foreign currency reserve is that it can quickly be made available for liquidity support to the banking system if an acute need were to arise. A foreign currency reserve can also prevent a financial crisis by creating confidence in the central bank’s ability to take action when necessary. This is particularly important in a situation where market confidence in the country’s credit and payments systems is under pressure. If you say it could never happen to Sweden, let me remind you of Ireland and Iceland.
These are the reasons why the EU Innovation Fund and the EU recovery fund’s focus on the green transition are so important. If flanked by national measures that improve the overall business environment, they will be major policy levers for transforming the European economy more fundamentally and overcoming short-termism in investment behaviour that ignores climate-related risks. Greening financial markets The third pillar needed to accelerate the transition towards a low-carbon economy relates to financial markets. The large increase in required bond issuance in response to the pandemic offers the opportunity to deepen the green financial market. Green bond issuance has steadily increased in recent years, with a strong focus on the euro area and on public agencies and financial institutions (see figure 4). Figure 4 Green bond issuance by currency of denomination  Sources: Bloomberg and ECB calculations. Last observation: 15 July 2020  Green bond outstanding amounts by issuer type  Sources: Bloomberg and ECB calculations. Last observation: 15 July 2020  But the universe of green bonds remains vanishingly small compared with the total bond universe and in spite of the exponential surge in investor demand for green assets over the past years (see figure 5). Figure 5  Share of IG green bonds in global gross issuance (in %, based on EUR data)  Source: Dealogic. Last observation: 15 July 2020. Global developed market cumulative flows into ESG funds (USD bn)  Source: EPFR. Last observation: 15 July 2020. The lack of market depth is also reflected in prices.

There seems to be a negative relationship between the outstanding volume of green bonds and their spread over non-green peers (see figure 6). Figure 6 Green bond outstanding volume in % of size of direct curve peers (x-axis) vs. premium (y-axis)  Source: Commerzbank Research. Hence, green bonds tend to be priced at a premium over conventional bonds, in part reflecting poorer liquidity conditions. For example, the daily trading turnover of French conventional government bonds remains notably higher than that of their green counterparts (see figure 7). Figure 7 Average daily bond turnover for selected French bonds(5-day moving average)  Source: Commerzbank Research. The current crisis could give an unparalleled boost to the green financial market and thereby help reduce the costs of transitioning towards a low-carbon economy. We have already seen firms and governments employ more diverse and creative funding strategies in recent weeks. Many euro area governments have started, or are planning, to issue green bonds for the first time. This is undoubtedly good news. But current market forces will not be sufficient to mobilise the funds required to finance the transition towards a more sustainable economy. Further policy actions are urgently needed, primarily on two fronts. First, the costs of the crisis are mainly debt-financed. But growing empirical evidence suggests that stock markets are more effective than bond markets in financing the greening of our economy, given the high capital intensity, high risks and long-term horizon of most projects.