samchain/econo-pairs-v1 huggingface dataset:
Last September, 14 major financial institutions and their principal supervisors met at the Federal Reserve Bank of New York to undertake a concerted program of improvements to the infrastructure that supports the OTC credit derivatives market. When that group reconvenes next week, we will review the extent of progress in reducing the backlog on unconfirmed trades and increasing the number of trade confirmed through automatic systems. We will also assess the progress toward agreement on a protocol for settlement events. And we will review new commitments to expand this effort to other OTC derivatives, including equity derivatives. These priorities for policy and supervision have the potential to strengthen our financial system and make it more robust to real systemic events. To be effective, however, we must continue to explore ways for supervisors and regulators to cooperate more closely together. The changes in market structure and financial innovation during the past decade, along with the increased global integration of capital markets, have increased opportunities for regulatory arbitrage. Policy initiatives that focus  BIS Review 85/2006  7  only on the U.S. market or on a specific class of institutions will push the activity to other markets or other institutions, raising costs on the regulated intermediaries without reducing overall risk in the system. Balancing the imperative of a cooperative approach across markets and institutions with the need for a more agile response to the rapid pace of evolution in markets will be a continuing challenge.

Stylish regulation Speech given by Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer, Prudential Regulation Authority  At the UBS Financial Institutions Conference, Lausanne Thursday 16 May 2019  1  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  I met recently with the head of a large foreign bank, who was in London following a visit to the continent. He had been advised by some of our EU colleagues that with the departure of the UK from the EU, the British public would become alarmed at the size of the financial sector relative to the size of the economy and would therefore demand ever-tougher financial regulation in order to assuage their sense of unease. Thus it was put to him that it would be sensible for him to move more of his operations to Paris, Frankfurt or Dublin, where things would be easier. A noisy pro-Brexit demonstration taking place in the next door street seemed to support his case. But I told him that I thought it somewhat unlikely that the public would take much interest in the size of the financial sector unless it blew up again, and that ten years on from the financial crisis we have largely implemented the reforms and are moving into more of a business-as-usual phase.
In December 2007, for the first time in its history, the SNB was able to provide its counterparties with US dollar liquidity against the usual SNB eligible collateral, thanks to a swap agreement with the Fed. In this context, it is important to point out that this dollar liquidity had no impact on either monetary policy or the SNB’s income statement. Yet it helped to facilitate refinancing by our counterparties, and thus made a positive contribution towards easing the tension on the Swiss franc money market. In this phase, the central banks supplemented their usual remedies with some booster treatments. The third wave of turbulence, in March this year, resulted from acute liquidity problems faced by individual international banks, combined with concerns that the money market problems might become chronic. In this third phase, the SNB did not provide any new instruments, preferring to make greater use of our existing tools. In particular, we resumed our US dollar auctions, at which we now offer USD 6 billion on a fortnightly basis. In this way, we are providing the market with a maximum of USD 12 billion. In addition, we are supplying the  BIS Review 80/2008  1  market with generous amounts of Swiss franc liquidity and actively engage in fine-tuning operations whenever necessary. Other central banks have opted for more wide-reaching measures over the past few months. For instance, the range of eligible participants and collateral for refinancing operations was expanded.

This means that movements in the Libor that are not in line with the SNB’s monetary policy objectives have to be countered with a change in repo rates. Thus, over the course of the turbulence, we consistently offset changes in Libor risk premia with changes in the repo rate, as shown in chart 4. For this reason, the Libor remained in the middle of the target band during the whole episode. The Swiss franc Libor was much more stable during the turmoil than the Libor for other currencies. This simply means that we were able to protect the Swiss economy from part of the crisis-induced increase in risk premia. Libor criticised Recently, some market observers have questioned the information value of the Libor. The Libor for all major currencies is fixed daily in London by the British Bankers Association  2  BIS Review 80/2008  (BBA) on the basis of a survey of top-rated international banks. Critics argued that some banks would report unduly low Libor rates, in an effort to talk up their creditworthiness. Others claimed that the rates were too high because the panel of reporting banks was not sufficiently representative. These criticisms almost exclusively concerned the dollar Libor. The BBA has found no evidence of a systematic distortion of the Libor, and has announced that it is leaving the fixing method for the Libor unchanged. However, it will strengthen governance of the Libor fixing process, especially the monitoring of individual banks’ reports.
One thing is clear: the sounder the theoretical foundation for monetary policy, the easier is the life of a central bank governor. Sweden on the way to establishing price stability There has been something paradoxical about Swedish economic policy. After the period of generally high inflation that started with OPEC 1, Sweden was one of the last of the industrialised countries to re-focus economic policy on price stability. The notion that a trade-off exists between inflation and unemployment lived on in Sweden for longer than in other countries. It took rather a long time for the drawbacks of a level of inflation that was relatively high, for an industrialised country, to be widely recognised. At the same time, Sweden has a long tradition in the field of central banking. The Riksbank, founded in 1668, is the world’s oldest, still-functioning central bank. This gives us three hundred and thirty years experience. It was in Sweden, too, that the first banknotes—in Europe at least—were introduced in the seventeenth century. A monetary policy focus on price stability, which is one of the themes for our forthcoming discussions, has always been an important item on the central bank policy agenda. A well-known Swedish economist, Knut Wiksell, was a clear exponent of the idea in the late nineteenth century. As it happens, he addressed an audience on the subject here in Stockholm a hundred years ago almost to the day, namely on 14 April 1898.

Furthermore, rallying demand is likely to help ease pressure on margins in the coming months. We continue to expect a slow improvement of the economy. Our forecast for real growth in 2015 is unchanged at just under 1%. The global economy is likely to gather pace gradually over the course of 2016, and this should strengthen foreign demand for Swiss goods and services. Domestic demand is also likely to remain robust. For 2016 as a whole, we expect growth of approximately 1.5%. Interest rates, exchange rates and inflation expectations I will now review changes in monetary conditions and inflation expectations since the beginning of the year. When we discontinued the minimum exchange rate in January, the monetary policies of the major currency areas were set to diverge, and we were aware that this would have significant consequences for international monetary relations. This is exactly what came to pass, and is  2  BIS central bankers’ speeches  clearly reflected in the exchange rate path of the Swiss franc against various currencies. While the Swiss franc/US dollar exchange rate is now virtually the same as it was at the end of 2014, the Swiss franc has appreciated 10% against the euro since the beginning of the year. The export-weighted Swiss franc exchange rate is about 8% higher than it was in January, having gained approximately 20% at times in the interim. In January, concurrently with the discontinuation of the minimum exchange rate, we lowered the interest rate on sight deposits to –0.75%.
In the case of the future development of industrial nations in Europe and North America, we can expect that it will be negatively affected by the need to consolidate government finances, which have suffered greatly during the recession. All in all, this entails certain risks to developments abroad in the period ahead. With regard to the Executive Board’s monetary policy decisions, one question is why we have not revised up the interest rate path now that economic activity appears to have improved and conditions in the financial markets are beginning to normalise. The forecasts made in December, like those in October, contain revisions that have a counteracting effect when it comes to our decision. On the one hand there has been some upward revision to the forecasts for Swedish GDP and resource utilisation, which would indicate a need for a  BIS Review 3/2010  1  somewhat tighter monetary policy. But at the same time there has been a downward revision of the forecast for inflation, which would indicate a need for more expansionary monetary policy. The question then is what the net effect of these counteracting tendencies will be in terms of what is a well-balanced monetary policy. My opinion is that they in principle counteract one another and that there was thus justification for maintaining the interest rate path that we have had since the monetary policy decision in July.

While this legislation will reduce federal revenues by about 1 percent of GDP in both 2018 and 2019, I anticipate the boost to economic growth will be less than that. Most importantly, most of the tax cuts accrue to the corporate sector and to higher-income households that have a relatively low marginal propensity to consume. This suggests that a significant portion of the tax cuts will be saved, not spent. On the business side, the boost to investment from the lower corporate tax rate and full expensing is likely to be relatively modest. In the past, aggregate investment spending has not been very sensitive to the cost of capital, which is only one of many factors that influence investment spending.4 Moreover, the reduction in the effective tax rate for corporations—or what they typically pay in practice—is only about 3 to 4 percentage points, far smaller than the reduction in the statutory rate. On the household side, the impact is likely to be attenuated by the temporary nature of many important provisions. Households may not spend much of the additional after-tax income if they perceive the gains as likely to be transitory. Finally, the legislation is likely to generate some frictional costs that will mitigate its effects on growth. In particular, it likely will have disparate impacts regionally and across economic sectors. For example, the $ cap on the amount of state and local income and property taxes that can be deducted will raise the effective cost of owning higher-end residential property in high-tax states.
The 1970s and 1980s witnessed a succession of cost crises. The fundamental problem was that economic policy had been unable to prevent excessively fast rises in wages and prices from ending up time and again on a collision course with the commitment to maintain a fixed exchange rate. As a result, the krona was devalued five times altogether over the period 1976-82. When the fixed exchange rate was finally abandoned in November 1992, following extremely high interest rates and costly attempts to defend the krona, it was obvious that something fairly drastic had to be done to enable the Swedish economy to develop more favourably than during the previous twenty years. The solution was what could be called a shift in stabilisation policy regime, whereby the framework and rules for both monetary and fiscal policy were fundamentally changed. The shift in regime involved the introduction of a distinct division of roles in Swedish economic policy. The exchange rate remained variable and monetary policy was given the main task of trying to keep inflation at a low, stable level. Fiscal policy, which had often resulted in large deficits under the previous regime of a fixed exchange rate, would now instead be targeted at achieving long-term stability and sustainability in the public finances.

This is one considerable difference compared with the developments in the 1970s and 1980s. While real wages have risen by about 2.5 per cent a year since 1995, the annual increase in real wages was no more than around 1 per cent in 1970-89. So, even though nominal wages rose more than 9 per cent a year during the 1970s and 1980s, purchasing power improved by only about 1 per cent; the high inflation and devaluations eroded the rest. In fairness, I should add that in addition to the shift in stabilisation policy regime there were a number of significant changes in other areas too that may have contributed to the robust performance. For example, the rapid advances in information technology are likely to have contributed to the improved productivity. Another important factor underlying the stronger recorded productivity growth in the whole economy is the relatively smaller role of the public sector today compared with ten years ago. Yet another feature of the performance of the last ten years is deregulations and increased international competition, the latter boosted by membership of the EU and the ongoing integration of the world economy. So, Sweden’s economic performance after the crisis in the early 1990s has been healthy in many respects. This does not mean that there are no problem areas. One of these is employment. There was indeed a relatively fast upturn in employment after the crisis years.
If banks cannot use deposits for that purpose, how would their lending then be financed? And without a supply of bank credit, how would the real economy, in particular the part of it that cannot easily access securities markets, itself be funded? There is no easy answer to these questions. As far as the non-financial economy is concerned, it’s clear it would be hard seamlessly to replace bank loans with securities issuance. There are good reasons why it’s difficult for young firms, in particular, with little invested capital, to sell shares or bonds13. The same goes for households. If bank lending became scarcer, or more expensive, it’s likely that investment and economic activity would suffer. Furthermore, several economists argue that there’s a degree of complementarity between making loans, on the one hand, and issuing liquid liabilities on the other14. If so, you’d naturally expect to find the same institutions doing both – banks don’t exist in the form they do simply  10  Ricardo, writing at a time when money was held largely as physical cash, argued the note issue should be separated and protected from commercial lending (Ricardo (1823)). The specific proposal in the Chicago Plan was 100% reserve requirements on demand deposits of commercial banks (Simons et al., (1933)). The postcrisis case has been put by Pennachi (2012) and, amongst others, by Martin Wolf of the FT (Wolf (2014)). Lainà (2015) describes how calls for full-reserve banking tend to intensify after financial crises.

Since 1997 we have applied a simple policy rule in order to make our monetary policy even easier to understand: If the forecast shows that inflation will be above target level two years ahead, we usually raise the repo rate, and we lower it if the forecast is below target level. But, as I intend to argue here, the policy rule cannot be applied mechanically. It should instead be regarded as a rule that on average provides a good picture of the policy, but where departures from the rule can and should be made under certain circumstances. The first argument is connected with the time aspect. As there is a time lag before monetary policy has an effect – it takes around 1-2 years before interest rate adjustments achieve full impact on inflation – the Riksbank’s policy must look ahead. Our interest rate decisions are therefore based on forecasts of, for instance, the prospects for inflation and economic activity over the coming two years. It goes without saying that these forecasts, like other assessments of future events, are uncertain. Forecasting errors are often due to genuinely unexpected things, which we have not been able to assess in advance. At the beginning of 1999 the Riksbank made a decision to clarify the principles for monetary policy, as a complement to the simple policy rule. This clarification states that monetary policy is normally aimed at bringing inflation onto the targeted path one to two years ahead.
Time and again, our policies have become even more liberalised than before, as we move forward to make the market more competitive, more transparent and more dynamic. Seven months ago, we took swift and pragmatic actions to implement foreign exchange market development measures to stabilise the foreign exchange market. I am pleased to report that these measures are successful, where the 1-month implied volatility has halved. Onshore foreign exchange have recovered to a stable daily average volume of USD10 billion, an increase of 1.25 times before the measures. Daily foreign exchange turnover remains 5 times higher than equity trades. Another policy that merits attention is the global phenomenon of rising inequality. Markets are not always the best arbitrator for the distribution of jobs, wealth and income. In the era of rapid globalisation, advancement in technology and consequently, the creation of a new economy, there are many winners and losers. As responsible policymakers, we need to reconcile the benefactors of the new economy with those who have been excluded or dislocated during this era of transformation. Cognisant of the urgent need to improve our social safety net, the minimum wage was implemented in 2013. Many have benefitted from this, including migrant workers. The B40 group was also given cash assistance to cope with the rising cost of living. In the near future, the protection and wellbeing of workers will be enhanced through the introduction of unemployment insurance. I urge businesses to take a broader view of these policies and not purely from a cost perspective.

Eesti Pank concentrated on stabilising the economy and on earning and maintaining confidence in the Estonian currency. Today the European Union and its member states are Estonia’s main partners both economically and politically. Working together with the European System of Central Banks has become a matter of course for Eesti Pank, be it in monetary policy, financial stability or economic analysis. We are in an unprecedented position to engage in defining the economic world around us, and our input is listened to. Evidently there are limits on how much a small country can contribute in the functioning of the European Union, because smaller countries have fewer resources. But we can widen  BIS central bankers’ speeches  1  those limits by making the best use of our resources, by learning from our own experience and that of our partners, and by working well together. Working together is particularly important right now, at a time of geopolitical tensions in and around Estonia and of deepening insecurity. It is right now that we need to find the ideals, the ideas, and the goals that can bring us together, and we must work together to achieve them. I wish us strength and good luck in all of this. Thank you again. 2  BIS central bankers’ speeches
The end of the decades long conflict has resulted in the creation of a significant positive impact, not just in the Northern Province, but also in the entire country. To benefit by this positive outlook, it is crucial that we start new businesses and expand on-going ventures. In this regard, I am happy to note that the HSBC, which brands itself as the “World’s Local Bank”, could now offer both corporate and small customers a full range of financial products and services. In doing so, they, as well as all other banks who are doing business in these emerging areas, will face the challenges of borrowers not possessing long credit histories or not possessing adequate collateral. This situation will certainly pose challenges, but we would like to urge all bankers that they should practice innovative cash flow based lending methods at least for 2 to 3 years, and not to be too constrained by security based lending only. I also urge financial institutions to lend the money mobilized from the region for the development of this region. Finally, let me place on record my appreciation of the presence of the High Commissioner of the UK, Dr. Peter Hayes at this opening ceremony. Your support to this effort would certainly encourage the business community both here in Jaffna and elsewhere in Sri Lanka, and I thank you for your gesture. Let me also congratulate HSBC on this auspicious occasion of opening the first foreign bank branch in Jaffna.

9 The second question, whether a different monetary policy could have prevented the crisis, is relevant when assessing to what extent monetary policy can be blamed for causing the crisis, notwithstanding if it was reasonable from an ex ante perspective. The credit growth and the housing boom in the U.S. and elsewhere were very powerful. Real interest rates were low to a large extent because of global imbalances, the global saving glut and investment shortage. I believe that somewhat higher interest rates would have made little or no difference. Empirical evidence indicates that only a small portion of house-price increases can be attributed to monetary policy. 10 Bernanke (2010) shows that the recent phenomenon of a higher share of adjustable-rate mortgages was unlikely to have significantly increased the sensitivity of house prices to monetary policy. The availability of new, more exotic mortgage types mattered much more for initial mortgage payments than the level of shortterm interest rates. In my view, interest rates would probably have had to be raised very high so as to cause considerable damage to the real economy in order to stop the credit growth and housing boom. 11 That could have thrown the U.S. right into Japanese-style deflation and eventually a liquidity trap.