samchain/econo-pairs-v1 huggingface dataset:
But I am also very clear that really  2  BIS central bankers’ speeches  achieving the objective of avoiding a no failure regime requires a fundamental change of mindset both inside the PRA and in society more broadly. Fear of failure is an important conditioner of behaviour in a financial regulator, and achieving a change on this front depends on establishing a wide acceptance of our approach that orderly failure that does not compromise our public policy objectives is an acceptable outcome. To be clear, we should be criticised where failure compromises those objectives and we could have taken steps to avoid it, and we will be required to report on such failures. But if failure is orderly, and does not compromise our public policy objectives, the responsibility should rest with the board and management for failing to serve the private interest of their shareholders and creditors. Last on the theme of failure, having firms that are either too big or too important to fail is bad for competition in the industries that we regulate. An industry where exit is too difficult is one where entry is likewise inhibited. Put simply, if we don’t know how to deal with a failed firm, we will inevitably set a higher barrier to entry. This is what we see in the banking industry.

Mario Draghi: Hearing at the Committee on Economic and Monetary Affairs of the European Parliament Introductory statement by Mr Mario Draghi, President of the European Central Bank, at a hearing before the Committee on Economic and Monetary Affairs of the European Parliament, Brussels, 19 December 2011. *  *  *  Dear Madam Chair, Dear Honourable Members, È per me un estremo piacere partecipare per la prima volta come Presidente della Banca Centrale Europea a questa riunione. Il dialogo monetario trimestrale con l’ECON rappresenta un’opportunità fondamentale e la pietra angolare per un rapporto costruttivo tra le nostre due istituzioni. Cet échange a lieu quelques semaines seulement après que d’importantes décisions ont été prises à la fois par le Conseil des Gouverneurs de la BCE et par les Chefs d’Etats et de Gouvernements. Dans ce contexte, notre discussion promet d’être particulièrement riche et fructueuse. Zur Einführung werde ich zunächst auf die aktuellen wirtschaftlichen Entwicklungen im Eurogebiet eingehen. Anschließend werde ich mich den von Ihnen gewünschten Themen zuwenden, nämlich dem Instrumentarium zur Krisenbewältigung einerseits, sowie den Rating-Agenturen andererseits. I. Economic and monetary developments  Since the last regular hearing in October with former President Trichet, the ECB has taken a number of steps to ensure that it will continue to deliver price stability in the medium term in an environment that remains challenging. These steps relate both to changes in our interest rates and to non-standard measures.
  The dispersion of real GDP growth rates across euro area countries is comparable with the equivalent dispersion across U.S. states. For instance, the difference between the fastest and slowest-growing U.S. states is not of a markedly different order of magnitude as that between euro area countries.   Overall employment in the euro area increased by 14 million during the first twelve years, compared with a rise of about 8 million in the United States.   And the overall yearly public finance deficit in the euro area is presently about half that in the United States or in Japan. The IMF projects indeed the euro area’s fiscal deficit to reach 4.4% of GDP this year, against 10.8% of GDP in the U.S. and 10.0% in Japan. The euro’s international status is the outcome of market forces. But one of the particular characteristics of the euro’s international role is to be markedly regional and strongest in economies with close geographical and institutional links to the euro area. The euro’s international role also displays a high degree of stability. And the available factual evidence suggests that it has remained broadly unchanged since the outbreak of the global financial crisis, in particular. For instance, the euro accounted in 2010 for about one-quarter of disclosed foreign exchange reserves globally (against around 60% for the US dollar and 4% for the yen). It also accounted for about one-quarter of the stock of international debt securities and for roughly 20% of foreign exchange turnover.

Jean-Claude Trichet: The euro area and its role in the global economy Remarks by Mr Jean-Claude Trichet, President of the European Central Bank, upon reception of the 2011 Global Economy Prize, Kiel, 19 June 2011. *  *  *  It is a privilege to receive this Global Prize today. I would like to thank the jury for this distinction, which honours the ECB and its staff. Kiel has a long tradition of openness. It has forged close ties with the rest of the world, ever since it joined the Hanseatic League in 1283. Seven centuries later, Kiel is today part of the euro area, a vast economic continent, which is itself globally open and linked in many ways to the rest of the world. It is about the euro area and of its role in the global economy that I would like to share with you some thoughts in receiving this Prize today. How can we characterize the salient features of the euro area and of its role in the global economy? And what are the challenges that need to be addressed in this context? Three key aspects deserve attention in my view. First, the euro area is amongst the most open of large economies in the world. The euro area’s trade relations with the rest of the world have grown appreciably since 1999, which underscores that the euro area is not a closed shop.
During the crisis the Riksbank has acted in its traditional role as lender of last resort. The difference this time, compared with the traditional role, is that it has not merely involved short-term loans in kronor, but also lending at longer maturities and in dollars. Gold and foreign currency reserve The Riksbank has a substantial gold and foreign currency reserve. It consists of gold and assets in different currencies, which can be quickly converted to liquid funds. The main part of the foreign currency reserve consists of securities in foreign currency, with a small percentage of bonds issued by US mortgage institutions and some Australian states. The currency distribution up to the crisis was that half of the currency reserve was listed in euro, 20 per cent in US dollars, 10 per cent each in British pounds and Norwegian kronor and 5 per cent each in Canadian and Australian dollars. During the crisis there has been a greater emphasis on euro and dollars. The gold and foreign currency reserve serves three purposes. Firstly, the Riksbank has traditionally held a gold and foreign currency reserve to be able to support the Swedish krona’s exchange rate. This was a particularly strong reason up to 1991, when Sweden had a fixed exchange rate. But it has no major significance now that we have a floating exchange rate and an inflation target. Secondly, a gold and foreign currency reserve is needed to be able to provide temporary liquidity assistance in foreign currency to banks suffering liquidity problems.

The Riksbank has therefore on three different occasions (in July, September and October)  BIS Review 160/2009  5  offered loans of up to SEK 100 billion with a maturity of almost one year and at a fixed interest rate, to contribute to bringing down the interest rates households and companies have to pay. On the first two occasions the loan amount was fully subscribed, but on the most recent occasion the amount borrowed was SEK 95 billion. By setting interest rates on Riksbank Certificates and fine-tuning – and as we will come to shortly – setting interest rates on the Riksbank's loans to the banks, the Riksbank has been able to steer the short-term rate throughout the crisis. To summarise, monetary policy has been aimed at keeping inflation close to the target and at the same time dampening the fall in economic activity during the financial crisis. The repo rate has been quickly cut to an extremely low level. The steering of the short-term rates has functioned well throughout the crisis. The normal aim of only steering the shortest interest rate has been supplemented with lending to the banks at longer maturities to be able to also influence interest rates further out on the curve. This means that monetary policy approaches questions regarding financial stability, which I will now discuss. Financial stability Financial stability is the Riksbank’s other main task. Put simply, it is a question of ensuring that the financial system is stable and that the payment system functions.
In consequence, it is by no means easy to fully anticipate all the structural changes that will arise as a result of this crisis. This 13  advises maintaining certain support measures for the sectors most affected until such time as these uncertainties are dispelled. However, the necessary flexibility must be maintained so as to ensure that policies can be tailored to facilitate the reallocation of resources to more dynamic areas of activity. The pandemic is having a particularly harsh impact on the tourism and hospitality sectors, both of which have higher levels of relatively low-skilled labour and in many cases with temporary employment contracts. Transformation of the productive system will require the reskilling of these segments of the working population, to allow them to participate in the economic sectors of the future. Active employment market policies should play a key part in this transition, together with training and retraining of the workers most affected by this crisis. In this setting, making efficient use of the Recovery and Resilience Facility to enhance the economy’s human and physical capital could be extremely helpful, a question that I will address in more detail a little later. Moreover, the need to make efficient use of public funds means that their use must also be appropriately timed. In this setting, particular care will be needed with the adoption of measures that may lead to a permanent increase in expenditure levels.

7 The so-called stock-flow (or deficit-debt) adjustment reflects all those transactions and flows that are not reflected in the deficit, but are reflected in government debt (and vice versa), in accordance with the European statistical rules, including notably the requirement to finance the acquisition of financial assets. 25  3 Medium-term challenges 3.1  The changing role of fiscal policy in the crisis: from expansion to consolidation  The pandemic is taking a high toll in terms of human life and, as I have already mentioned, the price is also high in terms of the loss of income of many households and firms. Against this background, there is a high level of agreement among political forces, social agents and economic analysts as to the need for an expansionary fiscal policy that prioritises providing support for households and safeguarding the productive system. The corollary of such a policy is, obviously, a very large impact on public finances. However, it is preferable to bear this cost as the consequences of fiscal policy failing to respond to the pandemic would have been much more severe. The recommendations of the different international organisations, and their own actions, as exemplified by the European Commission’s temporary suspension of the fiscal discipline rules, have also been in line with this consensus on the role of budgetary policy in this crisis, not only in Spain, but also in other economies.
Broken line represents IM F’s forecast  BIS Review 56/2010  00  02  04  06  08  10  12  14  Source: IMF  13  General government net lending in the United Kingdom Percentage of GDP 10  10  5  5  0  0  -5  -5  -10  -10  -15  -15  -20  -20 90  92  94  96  98  00  02  04  06  08  Note. Broken line represents OECD’s forecast  10  Source: OECD  General government net lending in Sweden Percentage of GDP 10  10  5  5  0  0  -5  -5  -10  -10  -15  -15 70  74  78  82  86  Note.

The deficits are currently large in all of the vulnerable countries, but while Ireland and Spain have been able to show a balance or surplus during the years prior to the crisis, Italy and Portugal have shown a deficit throughout. (Slide: General government net lending in Portugal, Ireland, Italy and Spain). A common precondition for the ability of these countries to renew their loans at a manageable cost is the credibility of their fiscal policy consolidation plans. The example of Ireland points to a credible consolidation plan with concrete decisions on large cuts in public expenditure being able to reverse an upward trend in interest rates, while the greatest pressure is currently on Portugal, where the ten-year rate rose last week. (Slide: Government bond rates of Portugal, Ireland, Italy and Spain, compared with those of Germany). The more favourable the conditions for the development of domestic and foreign demand, the greater are the chances that good GDP growth will be able to reduce the problems in public finances. Those countries that have not had large falls in asset prices, including Italy, do not risk suppressed domestic demand in the same way as, for instance, Spain and Ireland, where property prices have fallen substantially. With regard to demand from abroad, the problems are made more severe by wages and prices having grown faster in these countries than in the euro area as a whole since the euro was introduced.
5 The Hong Kong Securities and Futures Commission implemented a Manager in Charge Regime (MICR); the Australian Parliament has recently passed legislation establishing a Bank Executive Accountability Regime (BEAR); and the Monetary Authority of Singapore has published Proposed Guidelines on Individual Accountability and Conduct 6 The FSB Report on Strengthening Governance Frameworks to Mitigate Misconduct Risk can be found here: http://www.fsb.org/wpcontent/uploads/P200418.pdf  4  All speeches are available online at www.bankofengland.co.uk/speeches  4  That’s why the Bank and the FCA are taking a proactive, forward-looking approach to identifying vulnerabilities in hard and soft market infrastructure. We see this as core to our institutional responsibilities. Indeed, the Bank has made catalysing structural reforms in financial markets, such as the new risk-free benchmarks that I’ll turn to in a moment, one of its core strategic goals. But the authorities cannot future-proof alone. We rely on industry to help us scan the landscape for emerging risks and to help determine ways to mitigate them. We are encouraged by your efforts. In particular, the FMSB is undertaking horizon scanning for future misconduct risks through its innovative behaviour cluster analysis; and the Global Foreign Exchange Committee, which is responsible for keeping the FX Global Code ‘alive’, has already identified areas of further work on spot FX market practices.

In April we implemented reforms to SONIA that boosted the volume of transactions captured by a factor of three to £ per day. 7  These areas are: the role that ‘cover and deal’ and similar trading models play in the FX market; how market participants adjust their pricing on E-Trading Platforms and when trading by voice; and, disclosures regarding last look practices. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  The focus now is on transition. Market participants in every sector and market that use Libor now need to come together to identify and resolve issues, change business practices, and adopt alternative benchmarks. In sterling, over 90 institutions, including banks, law firms, corporates, asset managers, trade associations and infrastructure firms, are directly involved in this effort supported by the Bank and FCA. Transition to SONIA will bring a number of benefits. Market participants can have the confidence that SONIA faithfully represents conditions in a deep underlying market. They can also be assured that SONIA’s design is robust to future changes in money markets because, if necessary, SONIA’s data inputs can evolve. Near risk-free rates like SONIA are a better reflection of the general level of interest rates than Libor – which is affected by fluctuations in the perceived credit quality of banks (as well as other technical factors as seen recently). Interest payments for benchmark users should be less volatile as a result, especially in times of stress, and products referencing SONIA should provide a better hedge for duration risk.
MAS safeguards the interests of investors in five ways:   First, we demand stringent disclosure of information by issuers;    Second, we require transparency in the information disclosed;    Third, we set standards for intermediaries who sell investment products to provide quality financial advice;    Fourth, we promote investor education, so that investors are empowered to make informed decisions.   Fifth, we provide affordable and accessible dispute resolution mechanisms for investors who feel aggrieved by the investment process. Let me take each of these aspects in turn. BIS central bankers’ speeches  3  Disclosure There is nothing like disclosure to instill market discipline. In the words of US Supreme Court Justice Louis Brandeis, “Sunlight is said to be the best of disinfectants; electric light the most efficient policeman”. Disclosure is about shining that light so that all can see and make informed decisions. Investors are entitled to accurate and timely disclosure of material information so that they can assess the risks and rewards of their investment. Disclosure works not because all investors understand every word that is disclosed. Disclosure works because it facilitates scrutiny by experts in the market; it is this professional scrutiny that acts as a check on issuers and helps to inform the broader investor base. Take for example an IPO prospectus.

It is the ability of capital markets to efficiently mobilise financial resources that has made possible the large investments needed for the Industrial Revolution of the 18th century, and the risk capital that funded the global Internet Revolution more recently. Like other markets, capital markets are prone to volatility as demand and supply fluctuate. But unlike other markets, turbulence in capital markets can have far wider consequences on the rest of the economy. From the Wall Street Crash of 1929 to the Global Financial Crisis of 2008, we have seen how dislocations in capital markets can have devastating effects on financial stability, economic growth, and the welfare of citizens. Capital markets must therefore be regulated, but in a way that does not unduly undermine their efficiency and effectiveness. This morning, I want to share with you Singapore’s approach to the regulation of capital markets. Why we regulate capital markets We can think of the capital market as an ecosystem comprising four key components:   one, issuers – those who issue securities to raise capital;    two, investors – those who invest in these securities;    three, intermediaries – those who advise issuers or investors and facilitate the trading of securities;    four, infrastructure – the platforms or systems through which securities are traded. Each component of this ecosystem is prone to market failure – hence the need to regulate.
I believe, and certainly hope that, with these latest refinements of the tax regime for CTC activities, we should be able to remove any remaining reservations that your firm may have in considering setting up CTCs in Hong Kong. 25. Coming back to my soccer analogy, setting up a CTC in Hong Kong will offer MNCs a home game advantage. For Mainland corporations, Hong Kong offers unmatched home turf advantage under the “one country, two systems” framework. They are familiar and comfortable with using Hong Kong’s financial platform to advance their global business  BIS central bankers’ speeches  3  objectives. For the other global MNCs, Hong Kong is the ideal place for centralizing their treasury operations in Asia, in particular those that are tied to the rising use of the RMB. We are right at the door step of China, the perfect spot for the CTC, the mid-fielder, to support their front line teams to strike deals and score business goals with their Chinese counterparts. 26. Looking at the very comprehensive agenda today, I am sure you will have very fruitful discussion on how to ride on the different industry trends and create cutting-edge, innovative treasury solutions. May I wish this Summit a great success. 27. 4  Thank you. BIS central bankers’ speeches

This is important because the crisis demonstrated that bank investors and debt holders have a strong presumption that only common equity is truly loss absorbing outside bankruptcy. In the crisis, as losses climbed, Tier 1 capital ratios were eroded from the bottom, with tangible common equity ratios sometimes shrinking to levels that raised questions about a bank’s viability and its ability to access the equity and debt markets. Although common equity is typically a higher-cost form of capital for banks, it absorbs losses on a going-concern basis and so preserves an institution’s viability in the eyes of the market much better than other forms of Tier I capital, such as perpetual preferred stock or trust preferred securities (TRUPS). Second, the standards create a new definition of what constitutes common equity. The emphasis is on the ability of common equity to be loss absorbing. For that reason, there are limits on the amount of the assets that are not readily saleable or loss absorbing that can be counted toward a bank’s tangible common equity. These include assets such as mortgage servicing rights and deferred tax assets. Also, there is strict treatment of equity tied up in the form of minority interests. That is because this invested equity is not immediately available to the parent company to absorb losses in that company’s operations. Third, the minimum required ratio of total tangible common equity to risk-weighted assets will be increased significantly. Once the new standards are fully phased in, it will have to equal 4.5 percent of risk-weighted assets.