samchain/econo-pairs-v1 huggingface dataset:
What are the early signs of insolvency of a central bank? A central bank becomes insolvent when its capital is eroded to the extent that its net-worth turns negative. A central bank reaches such a catastrophic situation when it makes mounting losses year after year due to its engagement in imprudent financial transactions. A central bank can always finance itself (and also the government) by inflating the economy. However, it also spawns the danger of a central bank getting trapped in an ever expanding  BIS Review 58/2009  3  spiral of inflationary financing, if it does not pursue an inflation-fighting policy consistently. Economists have found that central banks, acting at the instance of their governments, have incentives to reverse the tight monetary policy after they have made some gains in controlling inflation. This is known as the “time-inconsistency problem” 2 or the “prisoner’s dilemma” 3 faced by a central bank. In the time-inconsistency problem, there is an unceasing battle between a central bank and the public for fooling each other. A central bank, in response to public’s outcry against the high inflation, may pursue a tight monetary policy to lower the inflation rate. However, once the inflation rate falls and the public’s outcry subsides, it no longer has the incentive to follow the same tight policy.

It is important to learn the lessons from all of our experiences, both good and bad, to help us better shape the future regulation and supervision of the financial system. And it is with this in mind that I want to comment on our experience with global banks headquartered in Spain. As I will stress throughout my intervention, the global nature of systemically important banks should not be seen as a negative attribute. Globalization allows countries and cultures to learn from each others’ experiences, enriching us in a very broad sense. Of course we want a safer world, but a key foundation of safety is a world that is able to grow. And growth goes hand-in-hand with openness and globalization. In fact, globalization has been the engine of growth in the years before the crisis. And global banks have played a key role in this process and, therefore, in delivering growth to our societies. Some banks have become global because they have accompanied domestic non-financial companies in their international expansion process. BIS central bankers’ speeches  1  Our largest global banks became international around fifteen years ago. They went first to Latin America, following their large domestic customers (utilities, oil companies, telecom firms, construction and technology firms and so on) into those new markets. Once in the new markets, the banks were able to familiarize themselves with the needs of other local customers and started to provide banking services to local households and firms.
However, recent years have left their mark on banks and insurance companies in Ticino, as elsewhere. The financial crisis, the end of banking secrecy, the tax treaty with Italy and now the coronavirus pandemic have posed major challenges for many institutions. Nevertheless, the Ticino financial centre continues to be vitally important for employment and value added in the Italian-speaking region of Switzerland. I will use my speech today to focus on aspects that I believe are important for the current and future potential not only of the Ticino financial centre, but of the Swiss financial centre as a whole. But first, I want to talk about why a well-functioning financial centre is of value to our economy. I will start with insurance companies. Insurance companies bundle risks that households or companies would otherwise have to bear themselves, or would even be unable to take in the first place. And then, there are the banks. They perform a key economic role with their core business of collecting deposits and granting loans. In doing so, they enable, for example, private individuals to take out mortgages and companies to fund major investments. Just how important the supply of credit is to the economy has been demonstrated by the coronavirus crisis. This past spring, many companies in Switzerland experienced liquidity shortages due to disruptions in economic activity.

Political and institutional framework A further prerequisite for Swiss financial service providers to compete on an international level is a sound political and institutional framework. Switzerland has long had stable political relations, legal certainty, efficient authorities, and a solid and secure infrastructure. This constitutes a strong underpinning for financial service providers. But let us not rest on our laurels. We must try to avoid creating any administrative hurdles that neither contribute to stability nor bring any great benefit, but instead unnecessarily restrict the activities of financial service providers. Transfer stamp tax and withholding tax, for instance, curb the potential for growth in Switzerland. The reform of the withholding tax system and the abolition of transfer stamp tax on domestic bonds are expected to strengthen the Swiss capital market. 2 This would not only benefit the financial sector, but also improve the financing options available to companies. It would also benefit small and medium-sized enterprises, for which such opportunities have been very limited until now. 2  Cf. Roadmap for financial market policy Switzerland 2020+, Advisory board for future of Swiss financial centre, 2019. Page 4/5  Open market access Switzerland undoubtedly owes much of the prosperity it enjoys today to open markets and thriving trade. However, for the export-oriented parts of the Swiss financial industry, limited market access continues to be an obstacle restricting growth potential. Market access to some countries has deteriorated since the financial crisis. This especially affects wealth managers who are operating in our relatively small domestic market.
The question is how well the last 20–30 years of history reflect the risks we may face in the future. History warns us of low resilience in the financial sector Even before the last crisis, we in Sweden had already seen warnings of insufficient capital levels. The credit deregulation of the mid-1980s coincided with the highest leverage ratios in Swedish banking history. As some of us remember, lending increased almost explosively during the second half of the 1980s. The low solvency of the 1980s created strong financial leverage that facilitated the excessively rapid growth of credit. As most of us remember, this ended in disaster. The low level of solvency also made the banks far too vulnerable when growth slowed down. The crash at the start of the 1990s led to a banking crisis with three years of negative growth and steeply rising unemployment and public debt. As we all know, leverage can work both ways. Resilience is needed in uncertain times Only a few years ago, we came close to seeing history repeat itself. In late 2008 and early 2009, Sweden stood on the brink of a new banking crisis. The low level of confidence on the financial market and great uncertainty over developments in the Baltic countries made it difficult or impossible for Swedish banks to obtain funding on the market. The measures adopted by the Riksbank, the Ministry of Finance, Finansinspektionen and the Swedish National Debt Office were decisive for saving the situation.

So transposed to Swedish conditions, around SEK 2 000 billion is at stake. This happens to be in the same order of magnitude as the balance sheet total of three of the four major Swedish banking groups. And, of course, this kind of shock to the national economy would not spare the country’s citizens in their role as taxpayers. Financial crises impact severely on the public treasury. A recently-presented British investigation – the so-called Vickers report – shows how the  BIS central bankers’ speeches  1  financial crisis, since 2007, has increased the United Kingdom’s public net debt by about 100 per cent of GDP. Basel III is strengthening the system’s airbags… The crisis of recent years has made us painfully aware of the financial system’s vulnerability and its importance for the real economy. The need for bigger and better airbags is obvious. These lessons lie behind the global Basel III agreement. The most important areas of Basel III deal with the quantitative requirements for capital and liquidity being placed on the banks. …with a substantial amount of equity… The Basel Committee’s analysis has concluded that the banks need substantial resilience. The crisis has shown the risk of considerable losses. So capital requirements are being increased in Basel III, above all for Common Equity Tier 1.1 The minimum requirement for the banks’ equity is being set at 4.5 per cent of riskweighted assets – more than double the requirement under Basel II.
13  2  Figure 11 Real MPR in Chile (1)  Real MPR: cross-country comparison (2)  (percent)  (percent)  -1  -2  -2  -3  1  0  0  -1  -1  -2  -2  -3  -3  -3 10 11 12 13 14 15 16 17 18 19 20  Mexico  -1  1  Indonesia  0  2  South Africa  0  2  Brazil  1  3  Colombia  1  3  Peru  2  4  New Zealand  2  4  Australia  3  Chile  3  (1) Considers the decision adopted at the Monetary Policy Meeting of 31 March 2020. (2) Current MPR minus inflation expected one year ahead. Sources: central banks of respective countries. Figure 12 MPR corridor (*) (percent)  2.5  2.5  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0 20 Corridor FBS MPR  21 Confidence interval: 33% EES  0.0 22 Confidence interval: 66% Forward  (*) The corridor is built following the methodology in box V.1. It considers the Financial Brokers Survey (FBS) of 26 March, the Economic Expectations Survey (EES) of 10 March, and the forward curve derived from financial asset prices at the statistical cutoff date. Source: Central Bank of Chile. 14

If the issuance of private electronic money grows to a significant level in the real economy, and if much of that growth is provided by nonbank issuers of electronic money, there could be a similar request for nonbank issuers to provide information about the volume of their issuance and their outstanding electronic money liabilities, to the extent these liabilities are not recorded on the books of a bank every time they are circulated in the general economy. A Bank Supervisor’s View From this perspective, combining banking and the Internet offers both great opportunity and great potential risk. First, the good news -- it is primarily cost-related. It has been reported by several banking studies that the cost of a typical transaction at a bank branch is now over $ the cost of an ATM transaction is approximately $ The cost of an Internet transaction, however, has been estimated at about a penny. I do not vouch for this statistic, but the difference is substantial. Such figures make a compelling argument for banks to get on the Internet sooner rather than later, and to move as many of their customers on to electronic or Internet banking as soon as they possibly can. Indeed, some banks offer low-fee accounts where the customer is not expected to enter an office physically -- mail, phone, and ATM are sufficient. As stated by Board of Governors Chairman Alan Greenspan: “it is useful...to begin by reminding ourselves just why there is bank supervision and regulation.
If the world economy needs rebalancing, so does our own. The substantial trade deficit over a number of years means that national spending exceeded production. We need a higher national saving rate, a shift in spending and production away from consumption and towards exports. And a key part of that is a reduction in our budget deficit. There is a perfectly reasonable debate about the precise speed at which to reduce the deficit. Indeed, I supported the extra fiscal stimulus to the economy provided in the immediate wake of the crisis. And there is a further question about how the deficit should be reduced – the balance between raising taxes and cutting spending. That is not for me to say; that is for you and the politicians to debate. But it is indisputable that, because of the crisis, national income is 10% lower than was expected with a damaging impact on tax revenues. As a result, this country has the largest peacetime budget deficit in its history – over 11% of GDP in the fiscal year to 2010. Although a large budget deficit is inevitable for a period after a crisis, it is also clearly unsustainable – our national debt, even relative to GDP, is rising sharply and will continue to do so for several years. It is vital for any government to set out  2  BIS Review 117/2010  and commit to a clear and credible plan for reducing the deficit.

Via the programme, we are offering banks loans of up to SEK 500 billion, on condition that the banks in turn lend the money to Swedish companies. To strengthen the programme and ensure that the money reaches companies, the Riksbank has also made it possible temporarily for more banks and credit institutions to gain access to our money. We are doing this because many small companies around the country are customers at smaller, local banks rather than at the major banks. Something else that often happen in times of crisis is that the demand for safe and liquid assets increases as agents try to dispose of riskier assets. The safest and most liquid asset on the financial markets is central bank money, money created by the central bank. The Riksbank has therefore taken measures to make it easier for banks to gain access to central bank money without having to sell their assets to a great extent. We have eased the requirements regarding the collateral banks can pledge when they borrow from the Riksbank. We have, for example, given banks generous opportunities to use a greater proportion of mortgage bonds and other covered bonds as collateral. More generous collateral requirements also strengthen the programme of corporate lending and simultaneously help to keep the large Swedish mortgage bond market running. We have also cut the lending rate for Riksbank loans overnight to banks from 0.75 to 0.20 per cent.
It is only within such a framework, that they can really flourish and that the benefits of technological change can be secured. The views expressed here are not necessarily those of the Bank of England or the Financial Policy Committee. I would like to thank Jennifer Enwezor, Bernat Gual-Ricart, Akeel Hansraj, and Cormac Sullivan for their help in preparing the text. I would like to thank Kushal Balluck, Stephen Fishbourne, Amy Lee, Matthew Osbourne and Magda Rutkowska for their helpful comments. 1. Bloomberg Data and BoE Staff Calculations. 2. Share of Trade Volume by Pair Denomination, The Block. Exchanges included in calculation: Binance, Poloniex, Bitfinex, Huobi, OKEx, Bittrex, Coinbase, Kraken, Bitstamp. 3. Figures from CoinMarketCap.com 4. This is illustrated by the recent fall in Coinbase’s share value, which has been linked, in part, to a statement in its regulatory disclosures that “the crypto assets held in custody on behalf of customers could be subject to bankruptcy proceedings and that such customers could be treated as general unsecured creditors”. 5. Speech at SIBOS by Jon Cunliffe - ‘Is ‘crypto’ a financial stability risk?’ (13 October 2021) 6. Prudential treatment of cryptoasset exposures - second consultation 7. IOSCO Crypto-Asset Roadmap for 2022-2023  (30 June 2022)  (7 July 2022)  8. FSB Statement on International Regulation and Supervision of Crypto-asset Activities  (11 July 2022)  Page 9 9.

All of this this work is being closely co-ordinated by the Financial Stability Board (FSB), which, as it set out in yesterday’s statement[8], is working to ensure cryptoassets are subject to robust regulation and consultation. The FSB will publish a consultation report later this year with recommendations for promoting international consistency in regulatory and supervisory approaches to non-stablecoin cryptoassets, markets and exchanges as well as for strengthening international coordination in this area. And, putting on my domestic hat, given that the the Bank of England is responsible for regulation and supervision of systemic payment systems in the UK, our intention is to apply the ‘same risk, same regulatory outcome’ approach in the UK. The Government has announced its intention to legislate in the current session of Parliament to update the powers of the Bank of England and the Financial Conduct Authority to regulate and supervise stablecoins. We hope to issue a consultation document on the regulatory policy framework later this year. Taken as a whole, the UK authorities have made clear that they are prepared to see stablecoins – issued by either banks or non -banks - operate in the UK, provided they are properly regulated and supervised[9]. This should not, however, be interpreted as any weakening in standards for risk mitigation. I doubt any of the stablecoins currently in operation in other jurisdictions would meet the necessary standards for operation at systemic level in the UK – whether in the crypto world, should that become systemic, or in conventional financial services.
When the interest rate falls, it is less profitable for households to save, and they will therefore make purchases now rather than wait until later. Borrowing also becomes less costly, and investment also rises. Higher demand in turn leads to a higher rise in prices and wages. Lower interest rates make it less attractive to invest in the Norwegian krone and for Norwegian enterprises and households to raise loans in foreign currency. Therefore, lower interest rates will normally lead to reduced capital inflows and a depreciation of the krone. This makes imported goods more expensive. In addition, a weaker krone increases activity, profitability and the capacity to pay in the internationally exposed sector. Activity in the economy moves in waves. For the Norwegian economy, the 1980s was a period of relatively wide fluctuations in activity, with periods of high inflation. The mid-1990s represents a period of stable and solid growth. In contrast to the situation in the previous decade, inflation was low and stable. At the beginning of the 1990s, the Norwegian economy was in a deep recession. Production was far below capacity. When growth in the economy picked up, capacity utilisation increased. The output gap shows the difference between actual GDP and the level indicated by trend growth - estimated at close to 2½ per cent in Norway. Around 1996, there was full capacity utilisation, and the output gap, as we normally measure it, closed.

You must re-evaluate the securities’ portfolio quality, in particular that in foreign currency, in order to attain the optimum characteristics of safety and tradability. In addition, the portfolio of placements in foreign currency in the form of deposits or related products with international financial institutions should have as its main objective the safety of the investment and the adequacy of maturity term. In a broader context, you should reassess the adequacy of certain indicators’ level in terms of differences in maturity terms and the type of currency of assets and liabilities. Assets’ quality, which is mainly affected by the quality of loan portfolio, remains a constant risk to the banking business in general. The reduced quality of assets does not only impair the institution’s income, but also harms its liquidity position. In the case of the Albanian banking sector, the loan portfolio quality has been decreasing, although at gradual rates, and the situation is presented as entirely manageable. The rapid growth of credit and the challenges certain sectors of the economy that have been lent significantly may be faced with, are factors that will continue to exert pressure on the loan quality in the near future. Hence, it is crucial for you to implement a policy of rapid detection of non-performing loans and promptly create reserve funds. It is for this reason that the Bank of Albania will increase the frequency of controls and the efficiency in monitoring and checking this process.
2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  Ensuring that innovation in payments this time around doesn’t end in a leap backwards is important for two reasons. The first is that we want innovation to be sustained. Innovation in payments could bring significant benefits for users. Innovation could meet unfulfilled customer needs, widen access to financial services, lower costs, and facilitate better integration of payments with other platforms. Innovation could also support financial stability by increasing diversity in payment methods. Diversity means that if there is a problem with one way to pay, there are ready alternatives, reducing the risks of disruption from any one payment method. The second is that the ability of individuals and businesses to transact safely and smoothly is critical to financial stability. People and businesses need to be able to make and receive payments on time, with confidence, even in periods of economic uncertainty. The Bank of England’s Financial Policy Committee, the body charged with safeguarding financial stability in the United Kingdom, lists the provision of payment and settlement services as the first of the vital functions which the financial system as a whole performs in our economy. They define the very purpose of preserving financial stability as “avoiding serious interuptions in [these] vital functions”. Responding to innovation already under way  While some of the current innovation in payments is very visible, there is also significant innovation happening beneath the surface. Increasingly, the process of electronic payments has been disintermediated or ‘unbundled’.

In the event of excess liquidity, banks will be able to lend New Turkish Lira to the Central Bank at the Central Bank’s borrowing rate without any limit. (ii)  The current implementation of the Late Liquidity Window Facility will continue. Banks will borrow from the Central Bank against collateral, and lend to the Central Bank without any limit between 4:00 p.m. – 5:00 p.m. and on the last working day of the required reserve provision between 4:00 p.m. – 5:15 p.m.  (iii)  In case of a temporary or permanent liquidity shortage, the Central Bank will continue to execute its liquidity management mainly through one-week repo auctions. During the periods when the Central Bank does not apply a technical interest rate cut, the Central Bank will announce the amount of repo auction for the day of liquidity shortage on Reuters’ “CBTF” page at 10:00 a.m. As long as no extraordinary fluctuations are observed in the markets, the Central Bank, while determining the amount of the auctions, will endeavor to maintain the average auction interest rate as close as possible to the borrowing rate of the Central Bank announced for intraday transactions. (iv)  Weekly repo auctions will be held at 11:00 a.m. and the results will be announced on Reuters’ CBTG page no later than at 11:30 a.m. as much as possible. The traditional method will be used in auctions; in other words, successful bidders will be evaluated with their own interest rates.