samchain/econo-pairs-v1 huggingface dataset:
Moreover, in addressing this question the authorities also need to take into account that some actions taken today to limit the likelihood and costs of financial instability if risks do crystallise may lead agents to underinsure again future risks. They may thus raise the probability and amplitude of future problems. Resolving these issues raises major challenges for the global regulatory community given the strong increase in financial market integration and the substantial growth in internationally active banks. Action is underway internationally 7 as well as domestically 8 to improve and strengthen the management and supervision of liquidity risk and to promote greater consistency of approach. The Basel Committee on Banking Supervision is working on producing revised Sound Practices for the management and supervision of liquidity risk. These will be released for consultation in the early summer. The Committee of European Bank Supervisors is undertaking work in parallel. The aim is to strengthen the platform for the management and oversight of liquidity risk. Among other areas for improvement, supervisors are driving higher standards for stress testing and subjecting contingency funding plans to more rigorous cross-examination before they are validated. Section V: Conclusion To conclude, developments in financial markets have increased the importance and complexity of liquidity risk management over the past decade. That, in turn, increased the vulnerability of banks to a system-wide liquidity shock. Preparations for such a shock proved inadequate and insufficient.

The first agreement on liquidity between the Bank of England and private banks occurred in 1947, and involved a requirement to hold a minimum liquid assets ratio of thirty-two percent (lowered to twenty-eight percent sixteen years later). The regime prevailed until 1971, when the Competition and Credit Controls Act (CCC) introduced a minimum reserve ratio of twelve and a half percent. The CCC had two objectives: first it was intended to strengthen control over monetary policy, by creating a solid money base to underpin it; second, it aimed to unify restrictions on banks to strengthen competition in the industry. The minimum reserve ratio was designed with this aim in mind, and this perhaps took priority over any desire to impose prudential liquidity reserves. While CCC undoubtedly liberalised the UK banking sector and thus supported improvements in competition and efficiency, it led to a fall in very high quality sterling liquid asset holdings of UK banks, as shown in Chart 4. After twice lowering the minimum requirement, the Bank of England finally replaced the reserve ratio regime with the cash ratio deposit regime in 1981, which did not directly require a minimum level of liquid assets. The Sterling Stock Liquidity Regime (SLR) in 1996 focused on holding sufficient liquidity to meet a particular severe cash flow funding stress.
The support included a soft loan and the write-down of a loan. The measures were part of a broader bank rescue package. The Ministry of Finance immediately submitted a report to the Storting (Report No. 24 (1989–90) where the Ministry of Finance wrote”..The write-down of loans from the central bank may […] represent an active use of central government funds that should be deliberated in the Storting in advance”. The Standing Committee on Finance and Economic Affairs endorsed this view and the resolution received final approval only after the Storting had deliberated the matter. This delimitation of Norges Bank’s tasks is important. Norges Bank shall not provide grants or capital to the banks. During the financial crisis in August 2008, the banks’ short-term and medium-term funding seized up. Norges Bank provided short-term loans as is customary and natural for a central bank. At the same time, we took the initiative to put in place the swap arrangement, whereby banks could exchange covered bonds (OMFs) for government securities. This went through the government’s balance sheet and not that of the central  44  See Chart 1 in Karsten Gerdrup (2004): “Norges Bank’ role in the event of liquidity crises in the financial sector.” Economic Bulletin no. 2/2005. 45  For a discussion, see Tore Jørgen Hanisch, Espen Søilen and Gunhild Ecklund (1999):”Norsk økonomisk politikk i det 20. århundret. Verdivalg i en åpne økonomi”. [Norwegian economic policy and politics in the 20th century.

Throughout the 1990s, the objective of monetary policy was to stabilise the krone and thereby make a contribution to low inflation. The central government budget was to smooth fluctuations in output and employment. This became increasingly demanding as favourable economic developments and oil revenues generated government surpluses. Both the interest rate and the government budget had then, in periods, the effect of amplifying, not dampening, cyclical developments. This resulted in fluctuations in the krone exchange rate. 31 Norges Bank was forced to recognise that it could not fine tune the exchange rate from day to day or month to month. Nor would the Bank knowingly contribute to fuelling inflation or deflationary downturns. Interest rate policy was then instead geared to keeping inflation in line with euro area countries. As from 1999, the Bank’s policy was in practice oriented towards an inflation rate of around 2 per cent. 32 Keeping inflation low and stable is the best contribution monetary policy can make to economic stability and a stable krone exchange rate. A formal inflation target – with a target of 2.5 per cent – was introduced in Norway in March 2001. The new monetary policy framework was introduced at the same time as the government drew up new fiscal policy guidelines that provided for a gradual, albeit sustainable, phasing in of oil revenues into the Norwegian economy.
Of course, this will have implications for monetary policy decision-making, which will become more complex. The application of time-varying regulations may also give rise to a more indirect effect on the interest rate margin. Just as uncertainty about the future policy rate gives rise to a risk premium, so can uncertainty about the manner in which regulation will develop give rise to an additional “regulation risk premium”. It is already possible to see that the uncertainty prevailing around the proposed tightening of the capital and liquidity regulations – which are not intended to vary over time – is affecting both interest rate margins and the supply of credit. One way of increasing predictability would be to adjust the regulations automatically, according to a specific rule, as, for example, is the case with the dynamic provisioning used in Spain. 4 However, I do not consider it practically feasible to rely entirely upon automatic decision-making rules. Uncertainty surrounding the manner in which regulations may change over time will thus always remain. However, it may be possible to learn lessons from the experiences of monetary policy in order to reduce this regulation risk premium. Even if monetary policy is essentially conducted in a discretionary manner, economic agents frequently have a fairly good idea of the way in which the interest rate will change. Naturally, I would like to believe that this is due to the present openness and clarity of monetary policy.

Nonetheless, regardless of the form of institutional organisation, it seems inevitable that monetary policy and regulatory activities will increasingly approach each other. Can monetary policy prevent a credit-driven property boom? One issue that has been discussed for a fairly lengthy period of time, and which has gained fresh impetus from the financial crisis, concerns the extent towards which monetary policy should be used to attempt to counteract a rapid increase of property prices and credit  12  BIS Review 68/2010  volumes. This focus on the property market in particular exists because problems there often have greater effects on the financial system and the economy in general than problems on, for example, the stock market. Allow me to use the property market as an illustration here too. The dynamic of a creditdriven increase on the property market can be described as follows. When the price of an asset starts to rise, it becomes possible to borrow against that asset for a higher amount. This frees up money to buy more of the asset, but also for consumption. The latter implies that rising property prices may lead to a credit-driven consumption boom. When the price increases, there also arises a tendency to regard the asset as being less risky, meaning that the credit risk premium decreases and the loan-to-value ratio is allowed to increase. In the lending rate equation, this implies a decrease in the interest rate margin. Cheaper credit feeds further price increases, which, in turn, feed further credit expansion, and so on.
And last but not least, GDP growth has been relatively robust and the margin of spare capacity in the economy has been disappearing at the same time as inflation has been trending towards target. Many observers would consider this to be evidence that monetary policy has hardly been on the wrong track. Yesterday’s announcement that future interest rate movements would depend on wage developments in the labour market seems to have drawn some attention. But there seems to be some misunderstanding about what this means. Over time – but not necessarily at every moment in time – wages in the labour market as a whole – but not necessarily for each group – should rise by an amount equal to the inflation target plus productivity growth. How much this is depends, then, on productivity growth. At present, productivity growth appears to be low – about 1%. This means that the scope for wage increases consistent with the inflation target is 3.5%. What that means for wage settlements depends on the degree to which wage drift can be contained. Some groups could receive larger pay rises than this, but then others would have to have smaller increases. Sometimes there are grounds for this. Then it is important to bear in mind that this is a long-term relationship.

The consequences of our inability to cope with these capital flows did not show up in the usual macroeconomic indicators such as growth, unemployment and inflation. Overall balance in each of the major economies was maintained. Rather, the massive flows of capital from the new entrants into western financial markets pushed down interest rates and encouraged risk-taking on an extraordinary scale. Banks expanded their balance sheets and new instruments were created to satisfy the search for yield. In the five years up to 2007, the balance sheets of the largest UK banks nearly trebled. The build up of risk came to threaten the stability of the entire financial system. Capital flows provided the fuel which the developed world’s inadequately designed and regulated financial system then ignited to produce a firestorm that engulfed us all. To prevent another crisis will require reform to both the regulation and structure of banking and the international monetary system. I have spoken about the former on earlier occasions. Tonight I want to focus on the question of how we can reduce the imbalances in the world economy. Although overall growth in both high and low saving countries was sustainable, the composition of that growth was not. And the composition of growth reflects the interaction between countries’ economic policy choices. No individual country faced strong incentives to alter its own choices, but the collective outcome was costly to everyone.
07.05.2019  Challenges for the Spanish economy. Productivity and the business sector Assembly of the Instituto de la Empresa Familiar Pablo Hernández de Cos Governor  Good morning. Let me begin by thanking the Instituto de la Empresa Familiar (IEF) for their kind invitation to take part in their Annual Assembly. Throughout its 25-year history, the IEF has not only played a crucial role in disseminating studies on the reality of and the challenges facing family businesses in our country, but has also fostered debate on many economic aspects of general interest. One recent example is its interesting publication on dual training on its website.1 In my address today I shall, after briefly describing the current economic setting, mainly analyse the principal challenges facing our economy in the medium and long term. I will particularly focus on productivity, the main determinant of economic growth in the long run. In Spain’s case, productivity dynamics have been particularly poor in recent decades. Improving them with a view to the future is, therefore, a prerequisite for achieving sustainable and balanced growth in the long term. The economic situation  After averaging growth of around 3% in the three years from 2015 to 2017, the pace of the Spanish economy eased somewhat last year to annual growth of 2.6%. 1  See the study by Instituto de Empresa Familiar (2018) “Orientación profesional y formación dual. Hacia un modelo integrado para el empleo juvenil”.

The role of compliance in supporting the integrity of regulatory frameworks; ii The larger social and economic consequences that can arise from compliance lapses; and iii. The impact on public confidence and trust in an environment where financial intermediation is no longer the exclusive domain of banks. 1/5  BIS central bankers' speeches  Regulation, particularly for banks, has become significantly more complex as banks grow in size and sophistication. In the face of these growing complexities, global standard setters continue to develop standards that can best manage this issue. In general, Bank Negara Malaysia has been supportive of moves to make regulation simpler and less costly. Even so, some complexity in regulation is inevitable due to rapid advancements in the business of banking, compounded by the process of globalisation and changes in the banks’ operating landscape and interactions with other components of the financial system. Continuous regulatory changes are necessary and will be the norm as efforts are continuously taken to safeguard financial stability. If you observed carefully over the last few years, it is not just banking rules that are becoming more complex. Developments in financial reporting standards are adding to this complexity as well, in ways that we may not even fully contemplate yet. Regulation has also evolved from detailed prescriptions to “standards”, which focus on principles and outcomes. With this evolution, substantial value judgement and discretion are required in such an approach. Banks need to determine and decide on how to reflect these standards in their day-to-day operations.
In the new banking package, the concept of “transition plans” is important. Under Article 76 of the proposed amendments to the Capital Requirements Directive (CRD VI)[13], a bank’s management board is required to monitor and address environmental risks arising in the short, medium and long term. [14] Banks have to make sure that their business model and strategy are not misaligned with the relevant Union policy objectives towards a sustainable economy and they need to manage potential risks from such misalignments. Article 11 TFEU, the requirement to integrate environmental requirements into the policies and activities of the Union, plays a role in supervision. The ECB has a duty to integrate the Climate Law’s neutrality objectives into its supervisory policies and activities. However, we have some discretion as to how we do this. After all, the climate neutrality objective affects the ECB’s mandate in many respects and Article 11 TFEU does not prescribe how the ECB should integrate the environmental requirements. Do not expect us to act to regulate or enforce environmental policies. We will stick to our mandate. Our mandate is to keep under control the risks that banks and the financial system are facing, and in that capacity we have to look closely at the risks that are building up in the banking sector as a consequence of the climate crisis. Lastly, I would like to draw your attention to the work of the Central Banks and Supervisors Network for Greening the Financial System (NGFS).

Last year the Governing Council adopted a comprehensive action plan[9] to further incorporate climate change considerations into its monetary policy framework. There are a number of actions to which the ECB is committed under this plan. Let me now give a very concrete example of how the ECB has taken into account climate change considerations in the context of its corporate sector purchase programme (CSPP). Under the CSPP, the Eurosystem purchases corporate bonds for monetary policy purposes. Right now we are in the reinvestment phase which means that we are no longer increasing our portfolio but only reinvesting bonds that mature. Up until October 2022, the Eurosystem purchased these bonds in accordance with the “market benchmark”. However, owing to the way the corporate bond market functions, this “market benchmark” has been criticised as leading to the purchase of a larger proportion of bonds from carbon-intensive firms. Therefore, from October 2022, the ECB started to implement its decision to “tilt” CSPP reinvestments to increase the share of assets from issuers with better climate performance, rather than those with poorer climate performance. There are two main reasons for this decision. First, the ECB considered this essential in order to effectively pursue its primary objective of maintaining price stability. Given that carbon-intensive issuers are more vulnerable to physical and transition risks arising from climate change, large holdings of bonds from such companies pose higher financial risks to the Eurosystem’s balance sheet, which has an impact on the implementation of its monetary policy.
DORA in particular represents a major and innovative step forward, with the establishment of an oversight framework for monitoring third-party service providers that are identified as critical for European financial institutions. These providers shall be required, under possible on-call duty, to collaborate with client institutions to enable them to comply with their own obligations in terms of IT security and business continuity. As regards crypto-assets, although the size of the ecosystem remains relatively small to date, which limits the contagion effects on traditional finance, the instability of the sector shows that establishing a reliable regulatory framework is necessary to ensure its long-term growth. France has been a forerunner in this respect since 2019 with the enactment of the PACTE law and the 6  introduction of the status of Digital Asset Service Provider (DASP). Europe is also leading the way in this field with the Markets in Crypto-Assets (MiCA) regulation, which has just been adopted in its final version. Elsewhere, approaches are still being developed: some countries are hesitating between regulation and an outright ban, while others, such as the United States, are taking a fragmented approach to regulation, which is not always respected by the players. In any case, given the global dimension of this market, it is important that international regulation be implemented as rapidly as possible. In this respect, it is essential that it results from the high-level recommendations drawn up by the Financial Stability Board on crypto-assets and stablecoins.

The recent Basel standard, published at the end of 2022, which regulates banks' exposure to crypto-assets is also a very encouraging first step in shielding the banking sector from contagion risks. 2.3 Pursuing regulatory efforts and harmonising supervisory practices [Go to slide 6] Regulatory efforts must therefore be pursued and new initiatives have already been identified: regulations on Artificial Intelligence, open finance data sharing, and electronic identification. It is clear that we are walking a tightrope: we must not restrict financial innovation in order to benefit from the contributions of digital finance and big techs, while anticipating the possible bypasses that these players will no doubt exploit, to the detriment of financial stability. To this end, the community of regulators has a clear guideline: "same activity, same risk, same rules". With this objective and this guideline in mind, what regulatory changes concerning big techs can we hope to see to ensure financial stability and fair competition with other players? First, the strengthening or introduction of a prudential framework and requirements harmonised at the European level regarding payment services and non-bank loans, which are the areas where big techs are developing more specifically. Second, the introduction of a new framework for the non-financial conglomerates that are developing in the financial sector (also known as mixed activity groups).
In this new environment, the Paris financial centre has obvious advantages, building on the very welcome measures announced in July by our Prime Minister to strengthen Paris’ attractiveness. To name a few, France has the biggest investment banks in continental Europe, the largest asset management industry and is the leading private equity investor; and French universities are renowned worldwide for the excellence of their finance teaching. And, last but not least, Paris will have the privilege of welcoming the EBA. Furthermore, the euro area has to keep control of the risks regarding its currency, the euro, and euro-based transactions. Some financial market infrastructures located in London, which are key for the EU, will soon become off-shore to the EU as a consequence of Brexit. This is particularly problematic when these infrastructures could put the EU’s financial stability at risk, as they represent 70% of the daily euro clearing business, equivalent to around EUR 930 billion (GBP 792 billion) in trades per dayi. This is the reason why the Commission proposed – and we support – a location policy for CCPs. Clearing activities in euro, for all those of “super-systemic” importance, must be located where the supervision of the Eurosystem can be exercised effectively. It is a matter of consistency for monetary policy and financial stability.

That might not matter were the consequences limited to the party-goers. But they are not. When the party ends, some innocent bystanders may lose their homes altogether. Moreover, the party-goers aren’t just deposit-taking banks. A wide range of financial institutions, including investment banks, monoline insurers, even hedge funds, have the potential to cause significant damage to the rest of the economy in the wake of their demise. Are they all to be helped to get home safely when the party ends? If so, will they all be regulated in the same way as banks? If not, how can we limit the potential cost to the taxpayer? Add to this the problem that many of these institutions are global in scope, but the responsibility for both regulation and rescue remains firmly at national level, and you can see why policy-makers get headaches as bad as the party-goers’. No individual bank, or indeed the authorities, can easily find a way out of this because their incentives are to continue in the same manner. There is, therefore, no point blaming anyone for the outcomes. But together we have to find an answer. Of course, excessively strict and detailed regulation would mean that there were no parties worth going to and the economy as a whole would suffer from a suppressed and inefficient financial sector.