samchain/econo-pairs-v1 huggingface dataset:
The euro area faces risks to its economic growth on such a scale that it’s necessary to use all available tools to support the economy. And that means using the instruments on the demand side and the supply side. On the demand side, you have monetary policy. And what the ECB has announced shows that we are committed to taking steps and that we have instruments we are ready to use. You have also fiscal policy, in those countries that have space to expand it. But what matters  BIS central bankers’ speeches  1  most are the structural reforms, because without them no supply or demand measure will have an effect. Q: Is that message aimed at France and Italy? A: We are not asking anything from anyone in particular. There is nothing of a give and take here. The ECB is independent and does not enter into this kind of bargaining. We do what we think we have to do and we expect others to do their job. We are just highlighting the conditions for it to be effective. For example, in our view, the countries that want flexibility in applying the Stability Pact should announce reforms beforehand, because flexibility is useless if it isn’t backed by reforms. Fiscal policy should be used to support aggregate demand – but within the framework of the Stability Pact, and that’s an important “but”. The Pact creates confidence.

In the case of banks, it is important that they rethink their sources of income: one response could be to diversify the range of services – both proprietary and via partnerships – that they offer to customers, and possibly change existing pricing policies, with fewer flat-rate prices and more pricing by use. The digital transition will also involve preparing for shifts in jobs and in skills, through dialogue with social partners. It will also require adopting an open approach, with the creation of partnerships with FinTechs and the scientific community. Finally, it will call for major IT investment to provide services that are increasingly aligned with customer needs, to reduce structural costs and improve regulatory compliance. IT systems will need to be – and this is the crux of the challenge – more secure so that they provide strong protection against cyber-risks, but at the same time more flexible and open to interconnectivity. In the case of insurers, the digital revolution is also starting with a complete overhaul of customer relationships and user habits. But it goes further than that. I’d just like to underline two topics that I think are essential. First, with the help of reinsurers, insurers need to be capable of meeting demand for coverage against cyber-risk, a concern that affects all companies – both small and large.
The banks created special intermediaries off their balance sheets to hold and structure the securitised credits. This made it possible for the banks to increase leverage both on and off the balance sheet. However, explicit and implicit guarantees from the banks to these special companies meant in practice that the risks led directly back to the banks' balance sheets. The result of all these new instruments and artificial intermediaries was a motley and almost impenetrable structure. A wide range of asset types with idiosyncrasies in pricing arose. This also made them more difficult to value. Moreover, the complicated links between the banks and their special investment vehicles made it difficult to see exactly what the banks' exposures were. Eventually, no one knew where the risks were. The increasing amount of credit not only made investors highly indebted in relation to their equity, many banks also did not really have enough capital in relation to the risks they took. When economic activity began to decline in the USA and prices fell on the US housing market, many institutions suffered major losses. Above all, however, a great deal of uncertainty arose. It proved to be simply impossible to know with any certainty who was exposed to "toxic assets", that is assets that risked losing value as a result of major credit losses. The realisation that many institutions could be more in debt than appeared to be the case on their balance sheets fuelled this uncertainty.

The banks have thus increased their reserves at the Riksbank. The Riksbank has also lent almost SEK 200 billion in US dollars. We have financed this partly by borrowing against the currency reserve and partly by means of a loan agreement with the Federal Reserve. The fact that the currency reserve appears to have increased is primarily due to exchange rate effects. The liabilities item "Other" includes the Riksbank's net income and the revaluation account. This item has increased mainly due to exchange rate effects, but also because we have earned quite a lot of money from these transactions. Some other central banks, such as the Federal Reserve and the Bank of England, have gone one step further. Apart from increasing their lending to the banks, they have also bought various types of domestic financial assets. When a central bank lends money to the banks, or purchases different types of assets, the banks' access to funding increases. This in turn increases the so-called monetary base on the balance sheet's liability side, that is the total of outstanding banknotes and coins and the banks' deposits in the central bank. A common feature of the measures taken by the central banks is thus that they have inflated the balance sheets and increased the monetary base. There are, nevertheless, some differences and different central banks have also described their measures in slightly different ways.
In the end, this will make the whole structure more stable and robust. 2. Origins of the sovereign debt crisis in Europe  It is striking that those countries which experienced the European sovereign debt crisis in 2010 – notably Greece and Ireland – were among the best performers in terms of growth in economic activity within the European Union (EU) over the decade preceding the crisis (charts 1 and 2). Indeed, Ireland was called the “Celtic Tiger”, drawing a parallel with the fastgrowing “Asian Tigers” in earlier decades. While prima facie a paradox, the relationship between strong pre-crisis growth and the severity of the crisis itself reveals much about the origins of the underlying economic, structural and institutional weaknesses that lie at the heart of recent events. The introduction of the euro in 1999 led to a sharp fall in real interest rates especially in the so-called peripheral countries of the euro area, as nominal interest rates converged to low German levels (Chart 3). In addition, the credibility of monetary policy’s commitment to maintain price stability was bolstered by the institutional changes associated with Monetary Union (Chart 4). The resulting improvements to the growth outlook were further supported by the completion and deepening of the EU Single Market and the prospect of structural reforms underpinning national competitiveness in this integrated market. In this context, the outlook for income growth in the peripheral countries was widely believed to have been transformed for the better.

5 It is therefore useful to explore parallels between the emerging market experience and what we are currently seeing in Europe. Here in Hong Kong, it is natural to focus on the Asian experience in the mid- to late-1990s, although events in Latin America are also useful to bear in mind. To set the stage for a discussion of policy responses, allow me first to set out what I see as the key similarities and key differences between these episodes. Similarities between euro area and EME experiences The accumulation of financial imbalances and vulnerabilities prior to the crisis is an important feature of both the European and Asian experience. Over-optimistic expectations of longerterm growth performance stimulated a surge in credit expansion and economic activity, associated with massive inflows of capital from abroad (Chart 11). 6 The risks associated with these capital inflows were under-appreciated by investors and therefore under-priced by markets, in part because the aggregate and systemic consequences of a “sudden stop” in such flows were neglected in the decisions made by individual investors (Chart 12). Rating agencies acted in a pro-cyclical manner, also failing to adequately assess systemic risk (Chart 13). 4  See: Calvo, G.A. (1998). “Capital flows and capital market crises: The simple economics of sudden stops”, Journal of Applied Economics 1(1), pp. 35–54. 5  The literature is too large to offer a complete list of references. For a summary, see: Edwards, S. (ed.) (2000). Capital flows and the emerging economies: Theory, evidence, and controversies, University of Chicago Press.
The SNB will be allowed to evaluate its gold holdings at their market price, and a revaluation surplus will appear on our balance sheet. Technically, the SNB will also be able to buy or sell gold on the market. 3.2 Second stage: transfer of excess reserves The recently revised Constitution and the new Federal Law on Currency and Payment Instruments are not sufficient as a legal basis for allowing the National Bank to transfer excess reserves for external use. A special constitutional basis must be created for this purpose and then specific legislation will have to allow the realisation of concrete projects (law on the Swiss Foundation for Solidarity, for example). 5  BIS Review 73/1999  Consequently, a second revision of the constitutional article concerning the SNB is now being drafted. Among other things, this new article provides for the possibility to transfer, outside the SNB, excess reserves deriving from the revaluation of the gold stock. Deliberations on this article have just begun in Parliament. If everything goes well, the article could be approved by both houses before this summer. Afterwards, in compliance with Swiss regulations, the draft of the new article of the Constitution will be submitted to the voters and the cantons for approval. In Switzerland, every amendment to the Constitution must reach two majority votes: a majority of the citizens’ vote and a majority of the cantons approving the revision. This vote could take place in spring 2000, i.e.

This is what I called a "Financing Union for Investment and Innovation", notably to shore up equity, which is the key to an innovation economy. The aim is crystal clear: within a Monetary and Banking Union, a cross-border merger must not be more difficult and cumbersome than a “domestic” merger. Several levers must be pulled if the obstacles to these activities are to be removed. From a supervisory point of view, this involves promoting a consolidated approach by granting more waivers on liquidity and capital so as to allow more flexible capital allocation and limit ring-fencing. From a resolution point of view, internal MREL requirements should be a tool to facilitate the resolution of institutions, but they would become meaningless if calculated on a national basis. They must be calculated at the level of the Banking Union, considered as a unique jurisdiction. Indeed, compartmentalising an internal MREL within national borders would be an obstacle to the single market and European banking crossborder mergers. As a first concrete step, I suggest that the European Banking Authority publish a comprehensive stock-taking of all the regulatory and supervisory obstacles to cross-border activities and mergers. *** Conclusion: Banks must be prepared for these extreme situations because: -  There is no such thing as zero risk, despite the improvements to prudential regulations and the reinforcement of banks' financial capacity. -  The failure of a single participant, even one considered to be secondary, can have systemic effects, as even the largest groups are now no longer immune.
Another is that the global economy has led to increasingly weak money illusion, the illusion that prevents wage-earners from immediately perceiving a deterioration in their purchasing power following a depreciation, and from demanding compensation that would render the depreciation ineffectual. Despite the intellectual appeal of such arguments, it is not difficult to see that during the past decade, the US, Europe and Japan have had very different growth rates and their business cycles have been highly unsynchronised. Given that monetary policy would be dictated by the monetary system, a tremendous burden would be placed on fiscal policy to stabilise the economy when the differences across the common monetary area are too great. The large real adjustments that would be required in wages and relative prices in the US and Europe - instead of an adjustment in the exchange rate - would probably cost more than the gains derived from having fixed global exchange rates. Therefore, the requirements necessary to make such a system work, which in reality are the factors that determine what constitutes an optimal currency area, indicate that such a solution is a distant prospect, if it should become reality at all. In addition, there are the practical and administrative problems of organising such a global monetary system, indeed even a global central bank with representation from all countries.

This is something that characterises monetary policy in many countries and the reasons for this are primarily international, with specific Swedish conditions playing less of a part. My assessment is that the root causes are connected to long-term structural changes in the financial system around the world. It is therefore not just connected to temporary crises. Consequently, I also consider that changes in the central bank’s holdings of various assets will be an important part of monetary policy for a long time to come, even if the policy rate will remain an important instrument. One lesson from the last few decades is that central banks need to pay attention to how the financial sector transforms over time and to be well prepared to act rapidly and broadly in times of crisis. With the broader range of monetary policy tools developed over the last decade – which, in many ways, are reminiscent of how monetary policy was conducted in times past – the Riksbank is better equipped to fulfil its tasks. And considering the Riksbank’s long history, this is nothing new – we have to move with the times! 12 [13]  References Adrian, Tobias (2020), “‘Low for Long’ and Risk-Taking”, IMF Monetary and Capital Markets Department, departmental paper series no. 20/15, November. Andersson, Björn, Magnus Jonsson and Henrik Lundvall (2020), “The new macroeconomic environment after the global financial crisis”, Sveriges Riksbank Economic Review, no. 1, Sveriges Riksbank.
So, from a supervisory perspective, they were huge "black holes", including what has been called a "shadow banking system" where most of the excesses of securitisation took place. Not any more. During the last twelve months, a coordinated effort by industrialized and emerging countries alike has brought most important financial actors under the umbrella of supervision. Principles and rules have been enacted for rating agencies to deal with their conflicts of interest, enhance their rating process, increase transparency and their oversight through compulsory registration. Hedge funds will go through a process of licensing and oversight: they will have to meet transparency requirements towards both investors and regulators. Finally, off balance sheet activities will be consolidated and disciplined through changes in the accounting and prudential frameworks. The nature of financial regulation and supervision is changing. Here, I see two major trends. We must complement micro-supervision with macro-financial supervision, taking into account the systemic importance and interconnectedness of institutions, markets, instruments and the cumulative risks and dynamics which they create. System-wide phenomena that went unchecked, such as the aggregate rise in leverage and maturity transformation, must no longer escape our vigilance. All countries are moving in that direction. In Europe, following the de Larosière report, we are creating a European Systemic Risk Board. In the United States, it has been proposed that the Federal Reserve will become the future systemic supervisor.

It is necessary to continue strengthening the robustness of these methods to evaluate situations of extreme tension. Starting tomorrow, the Central Bank of Chile will hold its Annual Conference, and this version will feature frontier work in this area. From the regulatory standpoint, supervision must consider the macroeconomic impact of financial activity. In the months to come, we will have to analyze also the potential procyclicality of the Basel II capital requirements, as well as the modeling and quantification of liquidity risk. A regulatory framework will be necessary to ensure the building of sufficient reserves in the boom phase of the cycle in order for the financial system to be well capitalized when the bust phase comes. 9 One of the most recurring sources of financial stress in the past few years in emerging economies are periods of euphoria or pessimism, which trigger movements in their exchange rates beyond what their fundamentals would justify. For example, when economic expectations are good, foreign exchange appreciations can arise with symptoms of bubbles in favor of all the domestic assets. As I discussed before, a first line of defense for specific asset prices, stocks or housing is to raise the interest rate. However, in the area of exchange rates this may trigger more pressures to appreciate and exacerbate financial imbalances.
Our position has not changed. In any case, we call for  2  BIS central bankers’ speeches  the full implementation of the decisions taken by the Heads of State and Government on 21 July. Then providing funding to Greece remains the only option. How many years will Europe have to support Athens? Greece must pursue an adjustment which must be very strong and credible under the permanent surveillance of the IMF and of the European institutions. A key element, in my opinion, is the technical assistance of Europe, now being organised in Athens by Mr Reichenbach. Can the European safety net protect the euro area from a conflagration? We welcome the decisions of the Heads of State and Government of 21 July through which the flexibility of the safety net was enhanced. It is now their responsibility to make the safety net operational as soon as possible. Do you believe that the ECB will then be able, as planned, to cease its controversial buying up of government bonds? In the future, the EFSF will be able to intervene in the secondary market. The stability of the European financial system will in the future be guaranteed by the governments via the EFSF. How large should the capacity of the EFSF be? The governments must first implement all the decisions of the EU summit of 21 July and provide appropriate leveraging of the fund. Should the EFSF be granted a banking licence in order to be able to obtain money directly from the ECB?

Do you have the impression that the Heads of Government have understood what is at stake? I believe they are conscious of their extraordinary responsibility. They all have to make decisions in the context of democracies which, in the advanced economies, are very inwardlooking, which is a real problem at the time of the worst global crisis for the last 66 years. What will happen if the European Heads of Government do not get the crisis under control? My working assumption is that the Heads of State and Government will overcome the crisis. Europe must realign its fiscal policy, as other large developed economies must also do. This year, at 10%, the deficits in the United States and Japan will be around twice as high as in the euro area on a consolidated basis. In spite of this, Europe is the epicentre of the government debt crisis. The reason for this is the mutual dependence of the 17 euro area countries. This is why it is so important that every euro area country plays by the rules. A few days ago in the European Parliament, I quoted what I told the Members of the Parliament in my first hearings, eight years ago, four years before the crisis, concerning the absolute necessity to stick to the Stability and Growth Pact. At your Governing Council meeting last week you reactivated all the crisis instruments. Is the euro in serious danger? The euro as a currency is evidently not in danger.
2  In a more restrictive experiment in which speculation is not possible, bubbles and crashes still occur. See Vivian Lei, Charles N. Noussair, and Charles R. Plott. 2001. “Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality.” Econometrica 69, no. 4 (July): 831–59. 3  One might argue that an innovation is not a necessary condition for an asset bubble. For example, the run-up of the dollar in the mid-1980s was not associated with any particular innovation. Instead, a sharp shift in fiscal policy led to high real interest rates that stimulated a strong demand for the dollar, which caused the dollar to appreciate sharply. This eventually unwound as the dollar’s rise undercut U.S. trade competitiveness. This caused the U.S. economy to slow, interest rates to decline and the dollar to fall. The lack of experience with a floating exchange rate regime undoubtedly played a role here. The world moved to a floating exchange rate system in the early 1970s. There was not much experience with how an expansive fiscal policy would affect exchange rates. This undoubtedly increased uncertainty about the sustainability of the dollar’s appreciation. 2  BIS Review 43/2010  For example, the technology stock market boom in the late 1990s coincided with the development of the Internet, which fostered the reorganization of many business processes and generated significant productivity improvements.

Regulators around the globe are very mindful of this trend and are willing to take calculated risks on innovative ventures, going beyond the banking system for solutions. There is thus, a more level-playing field and more business opportunities for non- traditional companies that are responsive and effective in meeting the financial services needs of consumers. For example, new robo-advisory businesses are now providing high quality investment advice at low cost, while payment technology companies are making cross-border payments cheaper, 1/5  BIS central bankers' speeches  quicker and more efficient. TransferWise, a cross-border payment company is now moving to offer ‘borderless’ bank accounts for businesses that operate across border. This is a challenge for many incumbents. The second observation is that data could be the ‘king-maker’ of finance. Companies that are able to control and leverage on data to deliver superior customer experience will possess the greatest advantage. Successful startups over the past decade such as AirBnb, Grab, Snapchat and Uber have all utilised technology and data to improve business models and customer interactions. For the financial sector, this could potentially mark a highly interesting shift of mantra in the future from “cash is king” to “data is king”. The arms race of the 21st century is really big data. Firms on Wall Street and the City of London are now employing data scientists en masse. They are the new breed of ‘bankers’. The bankers of the future.