samchain/econo-pairs-v1 huggingface dataset:
4  BIS Review 39/20086  The sudden discovery by Bear’s derivatives counterparties that important financial positions they had put in place to protect themselves from financial risk were no longer operative would have triggered substantial further dislocation in markets. This would have precipitated a rush by Bear’s counterparties to liquidate the collateral they held against those positions and to attempt to replicate those positions in already very fragile markets. In short, we judged that a sudden, disorderly failure of Bear would have brought with it unpredictable but severe consequences for the functioning of the broader financial system and the broader economy, with lower equity prices, further downward pressure on home values, and less access to credit for companies and households. Following that initial call with the SEC on March 13, my colleagues in New York and in Washington spent the night focusing on the implications of a large-scale default by Bear and how we might contain the consequential damage. Bear renewed conversations that began earlier that day with JPMorgan Chase, which is Bear’s clearing bank for its repo arrangements, to explore a range of possible financing options. The New York Fed dispatched a team of examiners to Bear Stearns to look at its books so that we could get a better handle on what could be done. We gathered the best information we could, evaluated the risks involved, and explored a range of possible actions.

I won’t enter into the details. Just bear in mind the three following elements. First, authorities are extending guarantees to banks’ refinancing so that they can, in turn, properly finance the economy. Second, very significant reforms of accounting rules are now being implemented. Basically, these reforms allow banks to transfer instruments previously marked to market value to portfolios where that will no longer be the case. They also provide for greater flexibility in marking to market value assets whose market has shut down. Third, and lastly, governments have confirmed their willingness, when warranted, to step in and support banks’ capital. What about France’s actions? The Government and Parliament very quickly put meat on the bones of the European principles. A new bill has been passed, which provides for two things. First, it sets up a EUR 320 billion funding vehicle to guarantee banks’ medium-term refinancing (i.e. up to five years). This vehicle is strictly supervised by the French Government and the Banque de France. The guarantee is granted for a fee, so that the beneficiaries pay costs corresponding to normal market conditions. Second, the law also creates a state-owned company empowered with EUR 40 billion and entitled to subscribe to  2  BIS Review 143/2008  banks’ subordinated debt issues or preferred shares. As you know, six banks have expressed that they will issue subordinated debt and the Government announced that it will subscribe to these issues for EUR 10.5 billion.
The ECB’s accommodative policy stance has been a key driver of domestic demand during the recovery, and that stance remains in place. As laid out in the ECB’s forward guidance, monetary policy will continue to support the economy and respond to future risks in line with our price stability mandate. And we will continuously monitor the side effects of our policies. As I confirmed to you last time when I was here, the ECB remains resolute in its commitment to deliver on its mandate. This commitment is vital for the stability of the euro area economy and for the welfare of euro area citizens. But you have also asked me to discuss more structural issues facing monetary policy, in 2/5  BIS central bankers' speeches  particular the review of the ECB’s monetary policy strategy, which will start in the near future. Such strategic reviews are relatively common for central banks, although their scope and aims often vary. The US Federal Reserve is currently undertaking such a review; the Bank of Canada has one every five years. In the ECB’s case, the last strategy review was completed in 2003. A lot has changed in the last 16 years. The macroeconomic landscape has been marked by the Great Financial Crisis and the sovereign debt crisis, and more recently by a low inflation environment. At the same time, new challenges have emerged such as demographics, disruptive technology and climate change. Conventional wisdom has been challenged and monetary policy globally has explored unchartered territories.

By offering settlement in central bank money, TIPS increases the speed and safety of customers’ daily transactions.5 Since 2016, the ECB has also been exploring the application of new technologies, particularly distributed ledger technologies, to market infrastructures. Together with the Bank of Japan, the ECB is conducting a research project called “Stella” which is investigating innovations that can facilitate safer, faster and cheaper financial transactions.6 But driving change also means identifying and managing the risks that come with breaking new ground. Innovations – including stablecoins – will only be beneficial if the associated risks are mitigated through effective regulation and oversight. So I believe we should follow the golden rule of supervision: “same business, same risk, same rules”. We must ensure that stablecoins do not compromise the safety and efficiency of the payment system or the soundness and stability of the financial and monetary system. And this is all the more important for stablecoins with a global reach. The G7 Working Group chaired by my fellow Executive Board member Benoît Cœuré has made clear recommendations with a view to developing a globally consistent approach to their regulation and oversight.7 As it did for the General Data Protection Regulation, the European Union can show the way here. In line with international standards and recommendations, we – and here I count on you as colegislator – should develop and enforce regulation that strikes the right balance between supporting innovation and addressing risks.
If we add to the foregoing ingredients a strong increase in banking competition, both among deposit institutions and between these and other less regulated non-bank competitors, the pressure to increase the risk profile in order to maintain past profit levels simply heightens banks' incentives to take on more risk in upturns. Having commented on the problems of excessive credit growth and how a more conservative monetary policy can mitigate them, I would like to move forward to the second part of my speech, and concentrate on the resilience of the banking system and the role of supervisors. We should acknowledge that the resilience of the financial system in general, and of credit institutions in particular, plays a key role in softening cyclical downturns. Evident in this crisis has been the notable weakness with which many banks have faced the downswing. To increase their resilience, banking regulation policy can perform a pivotal function by curbing  2  BIS Review 149/2008  the countercyclical behaviour of capital, so that it protects banks and prepares them for the crisis. And to discuss this, I am bound in this second part of my speech to refer to Rojo (the Spanish for red, and “Rot” in German). Again, this is not only a type of wine but the name of the former governor of the Bank of Spain entrusted with steering and successfully ensuring the Spanish economy’s entry into the euro area.

Ivan Iskrov: Association of Banks in Bulgaria – 20 years Congratulatory address by Mr Ivan Iskrov, Governor of the Bulgarian National Bank, to the Association of Banks in Bulgaria on the occasion of the 20th Anniversary of the Association’s Foundation, Sofia, 3 April 2012. *  *  *  Mr. President, Ladies and gentlemen, Dear colleagues and friends, It is a great honour and a pleasure for me to be here today commemorating with you the 20th Anniversary of the guild of the banking profession – the Association of Banks in Bulgaria. This is a perfect opportunity to congratulate the Association for the long way it successfully traversed, and along which it established itself as one of the most reputed trade associations in the Republic of Bulgaria. All these years the Association consistently assisted its members in pursuing their banking business and protecting their interests, all the while standing as a stable and constructive partner of the central bank, as the banking regulatory authority, of other government authorities, and of the representatives of the business. Therefore, we the members of the BNB Governing Council are all pleased to attend this occasion as a proof of the respect cherished by the central bank’s management for your work and professional achievements! Behind the ABB’s history stands the individual road of achievements, but also of challenges, of each one of the Association’s members.
Similarly, if you went to your personal lawyer and overheard him refer to you in conversation with his associate as a “counterparty,” rather than as a “client,” would you worry? You should. My point here is not that banking is a profession like medicine or law. My point is about how you see your customer and the service provided to that customer. A counterparty is not someone needing your help; “it” represents a profit opportunity – something to be exploited. Their loss is your gain. A customer, by contrast, is someone to be served. It is right to charge a fee to a customer, client, or patient, but the transaction is driven by the other person’s needs. Many financial services firms, however, refer to the people they do business with as counterparties. This is no accident. It characterizes the way in which the organization views the person it is facing in its businesses. Viewing customers as profit opportunities is inconsistent with a strong ethical culture. In my experience, firms that consider their operational model as service provider tend to have a better culture than those firms that consider their operational model as money maker. The second item that I would leave out is a conception of a bank as a money making machine. This is not to say that I would ignore profitability; that would be foolish and would destine a firm to a short life.

The number of vacant jobs is significantly higher than two years ago, specifically by about a third. Many industries are facing a shortage of workers, including both specialists and low-skilled workers. Speaking of the inflow of labour migrants, it has already returned to the pre-pandemic level, according to recent data. However, as the demand in the industries with a large portion of labour migrants (in courier services and construction) has surged over this period, companies still experience a deficit of labour migrants. Consequently, the rise in the demand for labour in various groups of employees is translating into the steady increase in nominal wages. In the course of the discussions preceding our today’s decision, several executives of our regional branches stressed that increasingly more companies were forced to raise wages at a double digit pace to be able to retain their employees. The staff shortage is a factor limiting enterprises’ capacities to expand output. It is hard for them to catch up with growing demand. This suggests that proinflationary risks brought about by labour market gaps are strengthening. Monetary conditions continue adjusting to our earlier decisions on the key rate. After the meeting in October, nominal interest rates, including on federal government bonds, deposits, and loans, continued to go up. Yields on federal government bonds rose over the entire curve. The growth of short-term yields has been mostly driven by the increase in the key rate and the updated forecast of its further path, whereas long-term yields are largely influenced by the escalation of geopolitical tensions.
However, there are factors restricting the leeway on this front, since the policy interest rates of some Latin American economies stand at record lows, and in some cases the central banks themselves regard them as close to the effective lower bound. Admittedly, the financial asset purchase programmes implemented by some Latin American central banks have been effective so far; but the consequences of their prolonged continuation or future extension are uncertain, given that the use of such instruments in the region is in its infancy. Therefore, in the event of further adverse shocks, there is a vital role to be played by the global and regional safety net, such as the support of the credit facilities provided by the IMF,11 the World Bank, the Inter-American Development Bank and the Development Bank of Latin America, among others, along with the Federal Reserve's swap lines and FIMA Repo Facility. Third, as in the rest of the world, the pandemic may have permanent downside effects on potential growth. These stem, among other factors, from extensive job destruction (the  10  According to the Economic Commission for Latin America and the Caribbean (“The social challenge in times of COVID-19”, COVID-19 Special Report, No 3), the poverty rate may rise, setting it back to 2010 levels, together with a significant increase in the Gini coefficient. 11 To date, the IMF has provided countries in the region with close to $ billion in financial programmes.

For a more detailed analysis, see Banco de España (2020), “Recent developments in the most important Latin American banking systems for Spanish banks”, Box 2, “Report on the Latin American economy. Second half of 2020”, Analytical Articles, Economic Bulletin, 4/2020. 8 For a stress test analysis of the 61 largest banks in Latin America, see Annex 4 of the IMF’s Regional Economic Outlook (2020), Pandemic Persistence Clouds the Recovery. 9 See A. Werner, A. Ivanova and T. Komatsuzaki (2021), Latin America and Caribbean’s Winding Road to Recovery, IMF blog. 5  First, in addition to the human cost in lives, the effects on poverty and income distribution have been very severe.10 Indeed, during 2019, bouts of political tensions and social unrest in several countries, partly related to this situation, fuelled economic uncertainty; this in a region where numerous elections are due to take place in the coming quarters. A second challenge is that posed by shrinking fiscal space following the increase in government debt in the region during 2020, positioning it as the emerging region with the highest government debt-to-GDP ratio and, where debt refinancing is concerned, leaving it highly vulnerable to changes in investor sentiment. Against this background, monetary policy is supported by the accommodative policies of the main developed economies and by low inflationary pressures.
Sometimes, unfortunately, some directors of finance companies think that they are immune from this risk. Some of them say: “we have a highly respected chairman; we have a super CEO. We have entrusted the entire management to those wonderful persons; they are very good; they are well known; they know their subject;  2  BIS Review 55/2008  so therefore we can take it easy and relax.” That appears to be their philosophy. If you think so, you may do that. But remember, you would be doing that at your own risk! You must realize that you are also fully responsible. It is the collective board that will be held accountable. Recently, you may have recently seen some advertisements that were placed by the Failed Finance Companies Commission, summoning all the directors, in the course of their inquiry. They have not said, “we will summon only the chairmen and CEOs of the failed finance companies”. No. They have summoned all. That is perfectly correct because every Director is responsible. So, each one of you too, will be responsible in the future with regard to your Company. That is why we have invited eminent professionals to come and explain to you, your duties and responsibilities. Sometimes, directors may not really appreciate their responsibilities and they may be quite comfortable about leaving key decisions to their colleagues, whom they trust implicitly. Maybe, you may comfortably place your trust in them, and indeed you may think you are entitled to do so, because you are working together.

But, at the same time, in the interest of the entire system, there may be occasions that we have to do that. So, please understand the rationale for our regulation. We are responsible for financial system stability and you, in an indirect way, are also responsible for that. 4  BIS Review 55/2008
In this regard, the ECB supports both private-sector and European Commission initiatives to encourage further integration, such as the follow-up to the report of the Commission’s Forum Group on Mortgage Credit. Infrastructure Integration of financial markets cannot take place without an integrated payment, clearing and settlement infrastructure. This brings me to the third component of the financial system, the financial infrastructure, which also gives me the opportunity to illustrate some cases of where the ECB has taken direct action. TARGET is one such example. Had TARGET not been operational from the first day of Monetary Union, there would have been no means of transferring liquidity from a country with a liquidity surplus to a country with a liquidity deficit. Consequently, we would not have had a single but several money markets, which would have made monetary policy far more difficult to implement. Over time, TARGET has continuously increased its market share in large value payments in euro. TARGET's market share is now around 90% of the total traffic value compared to 70% at the moment when the euro was launched. At the same time, the domestic component has remained at roughly three quarters of the total traffic value. However, our ambitions did not stop in 1999. We are currently building TARGET2, which is due to go live in 2007 and will replace the current decentralised system with a single technical platform.

Prior to the most recent informal meeting of the finance ministers and central bank governors in the EU, which took place in Oviedo in Spain, a working group had studied the conditions for speeding up financial integration. This group made a review of the important welfare functions of the financial system and referred to the profits that an efficient financial sector can generate. They also illustrated some of the obstacles that remain within  3  the EU and which I have just mentioned. On the basis of its analysis, the group drew conclusions on what measures from the public sector could contribute to realising the political ambitions within the EU. The finance ministers and central bank governors of the EU member states endorsed the group’s conclusions. They thus emphasise once again that the 42 measures in the financial services action plan must indeed be implemented in the member states no later than 2005, in a way that opens up markets but does not create new obstacles to integration. Public supervision of financial activities needs to become more uniform within the EU, to enable operators with financial activities in several countries to be covered by similar conditions and to facilitate co-operation between the national supervisory authorities. Competition within the financial sector should be intensified, and in particular different financial operators should be afforded equal access to clearing and settlement systems. Furthermore, existing elements of tax discrimination should be identified and removed.
Now, onto this scene lands crypto and digital money. Note, I did not describe crypto – in its unbacked form – as money. It isn't. For money to fulfil its function as a means of  2/6  BIS - Central bankers' speeches  payment it requires stability of value. This is clearly not true of unbacked crypto. It could be a bet, a highly speculative investment or a collectible, but note that it has no intrinsic value, so buyer be very aware. More interesting is the creation of so-called 'stable coins' or digital currency, which purport at least to be money as a means of payment. But, as we have seen, they do not have assured value, and in the work we have done at the Bank of England we have concluded that the public should expect assured value in digital money, and confidence in this is needed to underpin financial stability. For stable coins to function as money they will need to have the characteristics of, and be regulated as, inside money. Meanwhile, a lot of work is going on to assess the future of digital money, including Central Bank Digital Currency (CBDC). Digital money is not new. Digital money in the form of commercial bank deposits and commercial bank reserves at the central bank have existed for many decades. What is new is the idea of broadly available retail digital money.

Currently, they have an aggregate LCR of 149% which means a total liquidity buffer of £ trillion. That buffer comprises £ billion of reserves and cash and £ billion of other high quality liquidity assets, mainly government bonds. As QT proceeds, that mix will change as reserves decline. We can't assume that, going forwards, the current answer on the total size of liquidity protection is the correct one. We saw with Silicon Valley Bank that with the technology we have today – both in terms of communication and speed of access to bank account – runs can go further much more quickly. This must beg the question of what are appropriate and desired liquidity buffers that create the time needed to take action to solve the problem. Let me go on to the next stage of developments in money, digital money, how will it change things and is it needed? We tend to think about money in two ways at least: its uses and its forms. The uses are store of value, means of payment, unit of account. On the forms, we use the terms inside and outside money and commercial bank money and central bank money1. (Gurley and Shaw 1960; Friedman and Schwartz 1963). In this language, commercial bank money is inside money, and central bank money is outside money. We regulate banks in good part because money is a public good. Inside or commercial bank money is now the dominant type of money, and that supports the provision of credit in economies.