samchain/econo-pairs-v1 huggingface dataset:
http://www.bankofengland.co.uk/publications/Pages/inflationreport/2016/aug.aspx 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  In auctions we offer to buy across the range of eligible assets the MPC has specified, pre-define the mechanisms we will use to weigh the competitiveness of offers, and then passively respond to the pattern of bids that we receive in any given auction. Our judgement last summer was that the MPC’s corporate bond purchase objective would probably also be best achieved using auctions, but that we would need to make a number of changes relative to the pre-existing gilt auction design to cater for the differences in the underlying markets. Let me highlight this by explaining three of the main, mutually reinforcing, changes that we made, informed by auction theory and expert advice. First, the size of our purchase operations were designed to be flexible, adjusting automatically to reflect the quantity and quality of the offers received. This means the purchase pace can fluctuate to account for seasonality, market conditions and so on. It also encourages greater competition between offers, as some offers are likely to be rejected, even in auctions where there are a smaller total number of offers. By contrast our gilt purchases are made at a pre-announced pace through fixed-size auctions. Second, we changed our allocation method within our auctions with the aim of promoting participation and competition. Experience has shown that the competitive nature of the gilt market routinely delivers 8  widespread participation in our auctions.

Given these considerations, the Bank chose instead to set minimum reserve spreads privately for each bond in the auction, drawing on a range of sources of information. One factor is the balance of our portfolio relative to the market as a whole, where the MPC was very clear that purchases should be representative of outstanding issuance. The Bank therefore publishes every month a ‘sector key’, showing the target share of purchases for each sector alongside our current holdings. 8  Since the August 2016 decision, cover in these operations has averaged 3.1, with the second operation in August 2016, which received offers slightly below the target level of purchases, standing out as an anomaly. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  By adjusting our reserve spreads over time to reflect progress against that sector key, we can make ourselves relatively more willing to buy in sectors where we are underweight, tilting purchases towards those sectors. Collectively these choices were designed to encourage participation and competition in the auction, ensure that the Bank does not over-pay for bonds but delivers appropriate value for money, and accommodate the likely variable intensity of participation through time. Impact so far So if that was the theory, what have the results been? Most obviously, and even before purchases began, there was a clear and immediate impact on market pricing from the announcement of the August package. Yields on gilts eligible for purchase in the APF fell by 14-18 basis points on the day (Chart 4).
What then can the United Kingdom bring, initially as an ‘out’, or ‘pre-in’, to the European party, in terms of contributing to the euro’s success? There are, I think, two things in particular. First, we can continue to pursue macro-economic - both monetary and fiscal discipline alongside the euro-area countries. The Government is committed to that course as a matter of national economic self-interest, but it reflects the same philosophy as that which underlies the Maastricht Treaty. One of its very first acts in Government, for example, was to give operational independence for the conduct of monetary policy to the Bank of England, and we have been set the objective of delivering, consistently, underlying retail price inflation of 2½%. That objective appears to be compatible with the ECB’s target for the European Harmonised Index of Consumer Prices of less than 2% - in fact while we are, on the most recent data, precisely on track in terms of our own target measure, our inflation rate in terms of the harmonised index is down to 1.3%. And on the fiscal side the Government has committed itself both to maintaining the debt to GDP ratio at a stable and prudent level over the economic cycle and to the “golden rule” (under which public sector borrowing is limited to the financing of investment). These fiscal rules, too, are broadly consistent with those established for euro-member countries under the Stability and Growth Pact, and will ensure that we continue to comply with the Maastricht Treaty fiscal criteria.

In that context there has been a good BIS Review 88/1998  -7-  deal of talk about concerted interest rate cuts in Europe and the United States to stimulate domestic demand and offset the effects of recession elsewhere. And it is true that those effects - both lower world commodity prices and falling external demand - do mean that interest rates in the industrial countries generally can be lower than they would otherwise be, which in turn will help to sustain global demand. But we do not all start from the same point. Rates have in fact been cut in the United States and the United Kingdom, where underlying domestic demand growth also shows signs of slowing. In Continental Europe, on the other hand, domestic demand growth has, as I say, been picking up. But even here interest rates have already come down in some of the smaller countries and are likely to be generally lower than they would have been in the absence of the global slowdown. Markets are, in fact, now expecting rates to converge by the end of the year on German rates, where only a couple of months ago, they expected convergence at significantly higher rates. None of this, Mr. Chairman, it seems to me need affect the prospect for the euro - if anything it may reinforce the more recent firmer tone of the euro currencies.
Unable to adjust lending rates according to the creditworthiness of borrowers, banks resorted to significant collateral requirements and to credit rationing. The heavy reliance on real estate as collateral, the insufficient importance attached to the viability of project proposals, along with the absence of a capital market meant than savings were often not channelled efficiently into productive investment. The resulting misallocation of resources served to compound the distortions that would proliferate in the rest of the economy. A sea change in economic strategy occurred in the late eighties with the introduction of policies to reduce the overbearing state presence. These included a gradual reorientation towards a more market-oriented banking system and a monetary policy that operated more through incentives and less through command. A first reduction in the government’s shareholdings in banks took place during 1990/1991, and this was accompanied by a strengthening of the regulatory framework, including measures to enhance the capital base of banks through profit retention and the issue of new stock. A capital market, in the form of the Malta Stock Exchange, was also created. Supporting economic reforms included a relaxation of the extensive system of import controls, the partial lifting of wage-price controls and an overhaul of the income tax regime. While reforms were incremental, a number of landmarks stand out. In 1994, for example, a comprehensive package of legislation was enacted as part of a strategy to further develop Malta as an international financial centre.

Michael C Bonello: The challenges facing Malta's banking system Speech by Mr Michael C Bonello, Governor of the Central Bank of Malta, at the Second Annual Conference of Finance Malta, Valletta, 29 May 2009. *  *  *  Introduction This conference about Malta’s financial services industry is being held in the midst of the most severe global financial crisis since the Great Depression and whose consequences for the real economy in terms of output and employment losses are proving to be the most devastating in living memory. It is a crisis, therefore, which cannot but have repercussions on a small, open economy like Malta’s that is highly integrated with the world economy through trade and finance. These circumstances present challenges for the domestic banking system, and in addressing them it is important to recognise the implications for the economy at large. A sound, adaptable and innovative banking system is a prerequisite for sustainable development. The birth of a modern banking system Malta’s recent banking history has indeed tended to mirror policy shifts in the broader economy. The nationalisation of the major banks in the 1970s was itself recognition that the centralisation of economic activity could not be achieved without state control of financial resources, including credit flows. Lending rates were set by the minister of finance while the central bank controlled deposit rates. Nominal interest rates were kept artificially low, often resulting in negative real interest rates.
Paraphrasing Einstein ‘a good framework should be as simple as possible, but not simpler’ Much of the complexity in Basel II actually stems from the diversity existing in real world and from the many options that the rules provide. Many of those options reflect banks’ own requests to address the rich variety of risks and practices in existence today; some banking organisations thought that a “blanket rule” would unfairly burden them. By providing a range of options, we are better able to fit the regulatory framework to each bank’s profile, rather than the other way around. Similarly, some of the complexity in Basel II stems from the details we provide to clarify expectations for banks and supervisors and to promote a more level playing field. Many bankers and supervisors asked the Committee to provide greater details where they thought a danger existed for differences in interpretation to arise across jurisdictions. We have worked hard over the past years to clarify the rules, to simplify those thought to be the most complex, and to provide options for those wishing to use a simpler approach. In fact, as the Basel Committee demonstrated in an annex to the third consultative paper, supervisors can select options that would result in a very simple set of rules that can be specified in just 12 pages of text. That is approximately equal in length to the original 1988 Accord.

It also makes greater supervisory cooperation essential, in order to ensure consistent implementation. One concern which has been expressed many times is that excessive reliance is placed on External Credit Agencies for those banks that do not have sufficiently robust internal rating systems. The Committee has been mindful of this concern and if supervisors are uncomfortable with external ratings in their countries, there is an option whereby all corporate claims are weighted at 100% and sovereigns and banks can be risk weighted according to the risk scores of export credit agencies, in which case there need not be any reliance on external credit agencies at all. Indeed, our discussions with colleagues and counterparts from countries outside the Committee have been instrumental in revising the capital framework. Thanks to our consultations, we have endeavoured to address several broad issues in the new framework, which I will set out now. Complexity One inevitable by-product of designing a comprehensive three-pillar framework with built-in options to suit different circumstances is increased complexity. The members of the Basel Committee certainly recognise that complexity is not a virtue for supervisory guidelines. It is far easier to enforce a simple rule than a complicated one. However, achieving a balance between simplicity and comparability, and also between simplicity and risk sensitivity is particularly difficult in an industry like banking, where a culture of constant innovation makes it a tall order for regulators to develop simple rules that fit all banking products and services in all their permutations.
In particular, they find that the first phase, QE1, triggered portfolio rebalancing out of emerging economies into US equity and bond funds – perhaps reflecting the role of QE1 in reducing tail risks in the United States – while the opposite occurred under QE2. Finally, to the extent that the unconventional policies are successful in their aim of boosting activity in the originating country, they will generate aggregate demand spillovers onto other countries through increased demand for imports. It should be obvious from this discussion that the spillovers from unconventional monetary policies are diverse in nature and ambiguous in overall sign. But from the point of view of the world as a whole, there has to be a strong presumption that these unconventional monetary policies have been expansionary. And with the world economy still suffering from deficient global aggregate demand and underutilised resources that surely has to be a good thing. That said, I would not wish to underplay the difficulties that some recipient countries have faced in absorbing large inflows of relatively short-term capital in a safe fashion. The presence of these complex spillovers has led to suggestions that monetary policies need to internalise these spillovers and be better co-ordinated (see e.g. Committee on International Economic Policy and Reform, 2011). While I can accept the logic of this, I am afraid I do not think we know nearly enough about the magnitude – or even the sign – of these spillovers to make this a viable option.

The ruble’s strengthening since the beginning of the year made an additional contribution to inflation slowdown. Higher oil prices and overall favourable conditions in financial markets helped. International investors’ interest in Russian assets recovered, which was the most distinctive in the OFZ market. The agreements on retail fuel prices between the Russian Government and oil majors are continuing to play a significant role. Consumer petrol prices rose in May by 2.8% year on year, and their growth is likely to be moderate in the near future. That said, the new regulation in this market, in particular, the offsetting mechanisms (including reverse excise duties), is rather complicated. Currently, it is hard to accurately estimate its medium-term economic effectiveness, especially for scenarios providing for tangible oil price fluctuations. Moderate domestic demand is also curbing inflation. This calls for a deeper insight into the economy. This is the second most important factor that we took into account. Economic growth in the first half of the year has been lower than expected. We predicted that business activity might slow down somewhat at the beginning of the year on the back of the following factors: the VAT hike, a likely slowdown in growth of the global economy and demand for Russian goods and services, and the implementation period of the major national projects scheduled for the second half of the year. Some of these factors had a stronger effect than expected. In particular, budget expenditure dynamics.
Diversification is a solid protection against failure, but not all mergers and acquisitions are motivated by diversification – they may by contrast be designed to gain greater market share in an existing business and thereby do nothing to increase diversification. Moreover, there is again the  4  BIS Review 43/2001  distinction between individual banks and the system – the system can be diversified by having lots of different specialised banks. This would not in all circumstances be a less robust system than one where individual banks have reasonably diversified portfolios which are all as a result vulnerable to common shocks, or one where a smaller number of large banks are all directly interconnected with each other. And finally, even if we were to conclude that consolidation makes banks safer in the long run, the short run effects could be very different as management tries to resolve inconsistencies in systems or clashes in cultures. Secondly, there is the issue that consolidation is perhaps likely to make bank failure more damaging in its impact, although again this can only be judged case by case. And thirdly, since larger banks tend to be organisationally more complex, there is the question that resolving large bank failures can turn out to be an infinitely more complex task.

I emphasise that this is not a call for harmonisation of regulation or a blind assertion of the need for a completely level playing field, but simply a call to re-examine the rationale for differences in regulation. We may find that some differences are justified. For example, if we conclude that failures of insurance companies impose fewer systemic costs than bank failures, we might certainly choose to set our minimum insolvency tolerance at a different level. Much of the detail of risk measurement and regulation must necessarily differ, for example because of the very different time horizons involved in life insurance compared with either banking or securities business or non-life insurance. But there is a body of common risks faced by banks and insurers on both their assets and liabilities – namely credit, market, and operational risks – as well as a body of distinct risks (such as mortality risk for life insurance companies and on the banking side liquidity risk); and to my mind this means that any very fundamental divergences in the basic frameworks do need careful consideration: for example, whether the trend toward risk based measures in banking needs to be mirrored in the non-life insurance regulation in Europe. This is clearly not a small task but I would welcome it being scheduled for the future on the international agenda.
But the period was not free of crisis. •  The Global Cyber Crisis of 2034 triggered the deepest recession in Singapore’s history, with the economy contracting by 8.5% that year. •  The resurgence of smallpox and resultant pandemic in 2039 plunged the global economy into a recession that lasted two years, not to mention the tragic toll on human lives. It remains till today the darkest period in our nation’s history. 2041–2065: Climate change mitigation and adaptation By 2040, climate change had become the defining issue facing the global economy, including Singapore. It has been the key driver of the transformation of our economy over the last 25 years. As recently as 50 years ago, climate change was still a matter of debate internationally, although it was known that global surface temperatures had been rising since 1850. •  But by 2020, it had been established firmly that man-made emissions of greenhouse gases were the dominant cause of global warming and that climate change on an existential scale was inevitable if urgent actions were not taken. •  It took the global community another 10 years to reach an agreement on carbon emission reductions. The Global Climate Change Compact of 2030 – with subsequent reviews every ten years – was probably the most important international agreement in history. •  By committing countries to significant absolute reductions in carbon emissions, it helped slow down and eventually arrest global warming, thereby forestalling calamitous changes in the climate.

Staying connected with Main Street is also important because the effectiveness of our policy actions is enhanced when private actors have a clear understanding of what our actions are intended to accomplish. For these complex policy decisions, the Federal Reserve System needs accurate and timely information on business and financial conditions, and the perspectives of participants in markets throughout the United States. Economic conditions often differ in various parts of the country, and it is important that the Fed takes all of this into account when it formulates policy. This input is particularly important for the Second District of the Federal Reserve, where we sit today, because the forces that drive economic conditions here often do not mirror the forces driving other regional economies. BIS Review 49/2010  1  In order to monitor and understand the various aspects of local economic conditions, we utilize a number of different measures. Two of these measures we have developed here at the New York Fed – a survey of manufacturers and indexes of economic activity. We regularly produce the Beige Book and report information on local credit conditions. These measures supplement and extend the understanding gleaned from public data sources. We also seek input from regular meetings with several advisory groups representing different facets of the District’s economy – such as our Small Business, Upstate New York and Thrift Institutions panels – and from interactions with key academic researchers at local universities and public policy organizations.
Kansas City Federal Reserve Bank. Brunnermeier, Markus and Sannikov, Yuli (2013), Reviving “money and banking”. In Reichlin and Baldwin (eds) Is Inflation Targeting Dead? Central Banking After the Crisis. Vox eBook. Centre for Economic Policy Research. Caruana, Jaime (2010), Macroprudential policy: what have we learned and where are we going? Keynote speech at the Second Financial Stability Conference of the International Journal of Central Banking, Bank of Spain, 17 June 2010. Bank for International Settlements. Committee on International Economic Policy and Reform (2011), Rethinking Central Banking. Brookings. Cúrdia, Vasco and Woodford, Michael (2009), Credit Frictions and Optimal Monetary Policy. Working paper. Department of Economics, Columbia University. Davies, Gavyn (2014), Macro pru is no panacea. Post on the Financial Times blog on 11 May. Available at www.ft.com. 10  BIS central bankers’ speeches  ECB (2010), Asset price bubbles and monetary policy revisited. Article in ECB Monthly Bulletin November 2010. Goodhart, Charles (2013), Lessons for Monetary Policy from the Euro-Area Crisis. Journal of Macroeconomics 39, pp. 378–382. Greenspan, Alan (2002), Opening Remarks. In Economic Symposium Conference Proceedings: Rethinking Stabilization Policy. Kansas City Federal Reserve Bank. HM Treasury (2014), Monetary policy remit: 2014. Letter from the Chancellor of the Exchequer to the Governor of the Bank of England. Hoenig, Thomas M. (2010), What About Zero? Speech at Santa Fe, New Mexico April 7. Federal Reserve Bank of Kansas City. IMF (2013), The Interaction of Monetary and Macroprudential Policies. IMF Policy Paper. Issing, Otmar (2009), Asset Prices and Monetary Policy. Cato Journal 29 (1), pp. 45–51.

In addition, a bank must have a clear understanding of an HLI’ s operations and risk management capabilities. The Committee observed weaknesses in each of these areas. Let me give a few examples. The Committee found that banks did not obtain sufficient financial information to allow for a full assessment of how much and what types of risk had been assumed by large HLIs. In particular, banks did not obtain the information needed to measure leverage. They also did not have sufficient information to understand HLIs’ concentrations in particular markets and risk categories, or their exposure to broad trading strategies. BIS Review 27/1999  2  Similarly, banks generally did not sufficiently understand the ability of HLIs to manage their risks. Because risk profiles can change from one day to the next, or even from moment to moment, it is necessary for a bank to be sure that the HLI can effectively manage its business operations and risks on an ongoing basis. In general, we did not find sufficient reviews of HLIs’ risk management systems and their underlying assumptions, back office systems used to manage daily operations such as collateral and liquidity, and the major accounting and valuation policies. Exposure Measurement The Committee also thought that banks need to develop better measures for determining the credit exposure resulting from different types of trading activities.