samchain/econo-pairs-v1 huggingface dataset:
In this respect, I’d like to look forward and address some of the work we are doing to ensure that the new international capital standard - Basel II - remains flexible and able to adapt to emerging practices and risks. Many of you have a very strong interest in the efforts the Committee is undertaking to consider how best to apply Basel II to certain trading-related exposures using the latest tools being developed by the industry. While this work is still ongoing, I would like to share a status report with you on that effort. Finally, I will highlight some of the work that we are undertaking to promote a smooth and consistent transition to Basel II, including our plans to conduct a review of the calibration of the framework, as well as our efforts in the field of supervisory co-operation and validation, and the key messages that are coming out of these initiatives. The evolution of standards and regulatory burden Allow me to begin by sharing some personal thoughts on a topic that has captured some attention recently: The view, held by at least some in the financial services sector, that the tide of regulation has risen to a high water mark. In my own conversations around the world, I have heard similar concerns from some bankers. Some point to the long debates that have taken place in the accounting  BIS Review 17/2005  1  profession.

One of the factors resulting in more difficult financing conditions for emerging economies with structural problems was the announcement by the US Federal Reserve that it intended to reduce its securities purchases. Overall, growth in the global economy in 2013 was weak and uneven, and remained marked by uncertainty. Will this situation change in the current year? Probably only to a limited extent. According to our assessment, although the cycle has probably bottomed out, the challenges remain formidable. I will now outline the international economic position in more detail. BIS central bankers’ speeches  1  Global economic outlook for 2014 In 2014, growth in the global economy is likely to be stronger than in 2013. Nevertheless, regional differences will remain substantial. While relatively robust growth can be expected in the US, the signs are pointing to a modest and uneven recovery in the euro area. A slightly stronger economic momentum than in 2013 can be expected in the major emerging economies, but they will not attain former growth rates. We therefore anticipate that expansion in the global economy will be no more than moderate. However, the recovery remains subject to significant downside risks. This is still largely due to the European debt crisis. You may be wondering whether the debt crisis is not already over. The extreme risks have indeed been eliminated. Reform programmes introduced in some euro area countries, progress achieved in creating a banking union and measures taken by the European Central Bank (ECB) have clearly brought about an alleviation of the crisis.
In this context, we must remember, though, that the peak was utterly unsustainable, combining as it did a wide positive output gap and an enormous current account deficit. Iceland’s economic recovery began in Q2/2010. We are well on our way towards recouping our lost GDP, and forecasts indicate that this year we will have recovered it in full. The difference, though, is that the domestic economy is in much better balance than it was then. We are running a current account surplus, and inflation is on target. One might ask how much of a success this actually is, given that a number of other countries have already recovered their lost output. It has been pointed out that Iceland’s investment level is low, but this has been true of most developed countries recently, apart from major commodity producers such as Australia, Canada, and Norway. If we compare Iceland’s recovery to the experience of other countries that have suffered a twin banking and currency crisis, we see that it is far from anomalous, not least in view of the fact that, among comparison countries, recoveries have often taken place in a much more favourable global economic environment than we are facing today. In assessing the recovery, it must also be borne in mind that the room for manoeuvre for stimulating demand was limited. From 2010 onwards, fiscal policy had to focus on gradually eliminating the fiscal deficit, which was a prerequisite for reinstating the sovereign’s access to foreign capital markets.

Second, the turbulent environment handicapped the money market and led to a widening of the spread, i.e. by means of an unwelcome interest rate hike. The SNB responded immediately by relaxing its lending conditions for banks. Contrary to certain suggestions, this measure was not intended as a means of increasing the amount of liquidity in circulation on a permanent basis. After all, inflationary pressure would potentially rise given such a scenario. Instead, we acted in a flexible way and adjusted our maturities in accordance with the demands in the lending market so as to provide this market with the buffer it needed. We have consequently introduced three-month loans, whereas the terms we offered previously were never longer than 30 days. We also took joint action with other central banks and provided US dollar liquidity to our counterparties – the first time we have ever taken such a step. 2  BIS Review 50/2008  The gradual tightening of lending conditions within our domestic market is a third factor, albeit one which is still to fully materialise. Indeed, the fear that the liquidity requirements of the two big banks may be having a detrimental impact on credit volumes in Switzerland cannot be excluded. However, the rest of the Swiss banking sector – which accounts for almost two-thirds of Switzerland’s domestic credit supply – posted excellent results in 2007, thereby helping to limit the burden of risk. Furthermore, our figures show that there has so far been no impact on lending growth.
The survey design and sampling means these households are broadly representative of the UK population as a whole. 20  It is well-known, however, that household surveys tend to under-sample the tails of the income  and wealth distribution, in particular the upper tail. th  21  In the analysis, we focus on the Gini coefficient and the  th  ratio of the 90 to the 10 percentile of the distribution (“90/10 ratio”) as measures of inequality. Charts 2 and 3 plot the distribution of income and net wealth across UK households just prior to the crisis. 22  This is the starting date for the exercise, after which UK monetary policy was loosened materially. As is well-known, these distributions are extremely uneven. For example, in 2007 the richest 10% of households accounted for around a quarter of total income and over 40% of wealth. At the other end of the distribution, the whole bottom half of households by income accounted for only around a quarter of income in the economy and only around 10% of net wealth. Around 50% of households earned less than £ in income each year and around 40% had fewer than £ in net wealth. Age is an important factor shaping these distributions, as life-cycle theory would suggest. Chart 4 plots the net wealth distribution by age. Those over 50 account for around 80% of aggregate net wealth and those over 70 for around a quarter. By contrast, those under 30 account for less than 5% of wealth.

On the other hand, what effect would it have on confidence in the inflation target if we allowed a long time for the adjustment? How long can inflation deviate from the target without this affecting confidence and without the inflation target being perceived as meaningless? These are difficult questions that I know we at the Riksbank are not the only ones to be reflecting on. I would very much like to hear your thoughts and reasoning on this. Safeguarding confidence in the inflation target is of central importance for monetary policy. I therefore believe that the best means of managing these concerns is to be open and clear with regard to the analyses produced and the decisions made on the basis of these analyses. I believe that this will in the long run create the best conditions for the policy to be accepted and to win confidence. Thank you! 6  BIS Review 25/2006
Growth in demand is still robust, and investment in the petroleum sector has increased further. Solid growth in other countries and high prices for Norwegian goods are still generating strong positive impulses to export-oriented mainland enterprises. A number of factors are buoying up growth in household demand this year. As a result of a continued increase in employment and rising wage growth, household real disposable income is growing at a faster pace this year than in 2006. Households are optimistic regarding their own financial situation and the Norwegian economy. Growth in housing investment nevertheless appears to be slowing. This may partly reflect rising construction costs and a growing share of capacity in the construction sector  BIS Review 97/2007  1  being used for commercial buildings. The favourable trend is also reflected in Norges Bank’s regional network, which so far has reported continued solid production growth in most sectors. Capacity utilisation has reached a high level as a result of strong activity growth. Employment has risen as rapidly as in the years prior to the cyclical peaks in the 1980s and 1990s, and unemployment is now at a very low level, measured both in terms of the number of registered unemployed and according to Statistics Norway’s labour force survey (LFS). Enterprises report a shortage of qualified labour, and many positions are vacant. The number of vacancies per unemployed person has not been higher since the 1980s.

Emissions need to fall at a much faster pace than seen so far if we want to avert irreversible damage. I am hopeful that the lessons we draw from the COVID-19 crisis may end up helping to tackle climate risks, not least by showing us that when faced with global challenges, we need to – and indeed can – respond with joint solutions. To reduce carbon emissions all the way to zero by 2050, joint action at the global level is just as vital. Today I have listed some of the ways in which, through our supervisory action and as part of international networks, the ECB is compelling banks to account for climate change – when managing risks, selecting their board members and devising stress scenarios. Climate-related risks show up in the already existing risk categories – as such, we will treat them with the same rigour, toughness and importance as we treat other material risks. And we expect banks to do the same. Urgent action is not an option; it is an imperative. 1 OECD (2017), Investing in Climate, Investing in Growth, May. 2 International Energy Agency (2021), Global Energy Review, April. 3 See the Bulletin of the American Meteorological Society entitled “Explaining Extreme Events from a Climate  Perspective”; and the Climate Signals database. 4 ECB (2020), Financial Stability Review, May. 5 De Guindos, L. (2021), “Shining a light on climate risks: the ECB’s economy-wide climate stress test”, The ECB  Blog, 18 March. 6 Available on the ECB Banking Supervision website.
These measures, which reflect the increasing intermediation role assumed by the Eurosystem during this period of turbulence, have contributed to the stabilisation of conditions in the euro money market, to containing the volatility in the very short-term rates,  2  BIS Review 123/2008  especially in the overnight rate as measured through the so-called EONIA, and to limiting somewhat the volatility in the three-month Euribor, even if the behaviour of the money market remained extremely tense, as was also the case in New York. Cooperation between central banks in the field of monetary policy It is important to recall that as the financial market turbulence developed , central banks strengthened the already remarkable levels of cooperation, first, through enhanced information exchange and collective monitoring of market developments and, later on, through coordinated steps to provide liquidity. Since December 2007, the ECB, in cooperation with the US Federal Reserve System and the Swiss National Bank, has been conducting term auction facilities – so-called TAF operations – in which it provides USD liquidity on behalf of the US Fed to euro area banks against ECB eligible collateral. These operations do not have a direct impact on euro liquidity conditions and are aimed at improving global funding conditions. In this respect I would like to stress that to my knowledge this was the first joint action of that kind ever taken by central banks to relieve pressures in the short term funding markets.

In doing so we steer the shortest end of the yield curve, which is the starting point of the transmission process of monetary policy, ultimately reaching the real economy in order to achieve price stability. I would like to commence by describing how the ECB has implemented monetary policy during the financial market turbulence, which started in August last year. In this context, I shall describe how the Eurosystem took action through its liquidity provision to the euro money market in order to ease tensions. I shall then turn to the coordinated action taken by central banks, and how important it was for them to address effectively tensions in global financial markets. In the second part of my intervention, I will discuss the measures put in place by the international financial community to restore market functioning and to ensure that the weaknesses highlighted by the current market correction do not recur in the future. In this regard, I will cover the progress made on the implementation of the priority recommendations of the Financial Stability Forum (FSF), as well as policy areas in which work is currently underway, including risk management of financial institutions, procyclicality and cooperation between central banks, supervisors and regulators. I will conclude with the most recent “action plan” that was adopted by the G7 in Washington and on the “concerted European action plan of the euro area countries”, which was just agreed last Sunday in Paris. 1.
The new syllabus was approved, by the FSTEP Steering Committee on June 28, 2010. Under the revised syllabus, the programme design and delivery will be more balanced between classroom-lectures and experiential learning in the form of case studies, role plays and simulations. This methodology is better suited for adult learning and shift somewhat the responsibility of learning to the trainees. With this in mind, the content and details of the programme will be regularly updated and align with the progressive development of the financial industry. It will keep participants abreast with market needs in this age of advance technology and knowledge. As the financial services industry matures and the lines between businesses become even more blur, the  BIS Review 100/2010  1  skills and talents needed to navigate the industry becomes even more diverse and demanding. The change in syllabus and other enhancements will differentiate FSTEP from other training programmes offered by the financial institutions and training institutes. So I don’t expect FSTEP syllabus to converge with the training programmes offered by individual financial institution. In order to ensure FSTEP secures a constant flow of quality graduates from both local and foreign institutes of higher learning to its training programme, initiatives have been mooted by FSTEP to sign a Memorandum of Understanding (MOU) with all public universities and a few reputable private universities in Malaysia to instill the way for greater cooperation and collaboration in matters of mutual interest and benefit.

In particular, FSTEP will offer scholarships to eligible top graduates from various universities to participate in its one-year fast-track training programme. I wish to congratulate FSTEP for the successful effort in designing a new syllabus and it continuous effort to improve the FSTEP programmes remain contemporary and relevant agreed to by all parties within the financial services industry. More importantly, it is my hope that FSTEP will continue to produce the quality of graduates that will meet the needs of the industry. I hope that all of you will have a fruitful discussion and dialogue. On this note, I declare open the event “FSTEP: Syllabus Enhancement”. 2  BIS Review 100/2010
And it is why we place importance on the minutes of our monthly meetings and the quarterly Inflation Report to convey a full explanation of our thinking. Explaining our analysis at some length is a richer source of information for markets than code words or statements about the future path of interest rates. Less weight should be placed on the short  15  See my discussion of money and risk premia in King (2002b). BIS Review 43/2007  9  statements that are published with the announcements of our decisions because such statements, as we have seen elsewhere, run the risk of becoming monetary policy by code word. They do not help markets understand how we are likely to react to future data. A number of academics have suggested that the MPC publish forecasts for the path of Bank Rate. Several central banks now do so, noticeably the Reserve Bank of New Zealand, the Norges Bank and the Riksbank. Although there is some superficial attraction in such a move, there are four points that suggest the need for caution. First, what markets need more than anything is not an unconditional forecast of where interest rates might go, but an idea of our contingent response to data as they evolve. That is not easily communicated by a path – even when shown as a fan chart – for future interest rates. It requires a careful reading of the Inflation Report, the minutes of our monthly meetings and speeches by members of the MPC.

Companies, households, trade unions and financial market participants can see that we change interest rates in response to news about the inflation outlook. That anchors inflation expectations. In the jargon of economists, people understand that we have a “reaction function” – we react to the economic data in order to keep inflation on track to meet the target. If the economics profession could agree on a model which described exactly how the economy behaved, then it would be possible to set up a Royal Commission of the country’s leading economists to determine the optimal “reaction function” for the Bank of England to follow. It would specify how interest rates should respond to the unfolding of economic data. It could even be implemented by a computer without any need for a Monetary Policy Committee at all. That sounds quite attractive (especially when you’ve attended 120 meetings!). So why don’t we set up a Royal Commission? As members of the SBE know only too well, none of us knows the true structure of the economy or all the shocks that might occur. How long do you think it would be before some other economists would argue, undoubtedly persuasively, that their own research had made the findings of the Royal Commission redundant? Who would have thought in 1997 that monetary policy would have to respond to the challenges posed by the largest inflow of migrant labour and the fastest fall in import prices since Harold Macmillan was Prime Minister? Uncertainty is at the heart of practical monetary policy making.
The closer these cushions are to levels that reflect potential future exposure across a more adverse set of market conditions, the more resilient markets and institutions will be under conditions of stress, and the less likely the prospect that the behavior by institutions will amplify financial shocks. Stress testing and scenario analysis is an important part of the process of calibrating this relationship between risk and capital and margin. The test of a sufficiently strong process is not simply the realism of the process used to measure potential losses, but the impact that it has on the decisions made by the institution on the size and type of exposures relative to earnings, capital and collateral or margin and the terms on which it extends credit. Let me conclude by noting again that we are in a period of perceived strength in economic fundamentals in the United States and many countries around the world. This strength has helped to induce significant reductions in a range of market-based perceptions of risk. Much of this confidence may prove warranted and durable, but the extent to which it endures will depend in part on the degree to which those running the major financial institutions in the United States use the opportunity presented by this period of relatively high profitability to strengthen their capacity to withstand a less favorable overall macroeconomic and financial environment.

The major dealers and the buy-side investors are making substantial investments in improving the process around the credit derivatives market. The overall strategy outlined in the public letter signed by the 14 major market participants on March 10, 2006, offers the prospect of a more automated confirmation and settlement process, with significantly less operational risk than has existed in these markets since their inception. Looking beyond the specific objectives for reducing confirmation times and backlogs, we hope to see agreement over the next several months on a new ISDA® protocol for net physical settlement in the event of default and progress toward adoption of emerging utilities for centralizing certain processing and information functions that can facilitate netting and matching of payments and collateral. Alongside these improvements in what we call infrastructure, this is a moment where it is important to see more care and attention and greater conservatism applied to the discipline of risk management. This is most critical in the areas that are hardest to do well. The challenges seem most exacting in the firms’ abilities to capture the exposure of the institution to stress scenarios that lie outside the range of recent experience, and to set exposure limits and calibrate margin and credit terms accordingly. The challenges here are magnified by the changes I described earlier, including the rapid growth in complex structure products with imbedded leverage, uncertainty about liquidity in many instruments in less-benign financial conditions and other features of the present environment.