samchain/econo-pairs-v1 huggingface dataset:
The corresponding consultation for U.S. dollar and some other non-U.S. dollar derivatives contracts closed just last week, and I look forward to hearing the results and next steps. Universal changes to derivatives contracts will take out about 95 percent of the exposure—the $ trillion number. If the market signs up to the ISDA protocol when it’s published early next year, it will be a huge step in the right direction. In addition, the ARRC has released four sets of recommended fallback language for different types of cash products. This fallback language clearly stipulates trigger events, replacement rates, and spread adjustments, and the triggers are close to those that ISDA has consulted on for derivatives. 2/3  BIS central bankers' speeches  And on Friday, the Securities and Exchange Commission (SEC) staff issued a statement highlighting risks and disclosures for market participants to evaluate proactively as they transition away from LIBOR. While derivatives and institutional cash markets make up the bulk of LIBOR-based contracts, consumer products are a critical area where the industry needs to focus. Ensuring a fair transition away from LIBOR is going to be particularly challenging, and it’s important consumers understand what the changes being made mean in real terms. Last week the ARRC published potential paths forward for adjustable-rate mortgages (ARMs). These include a set of guiding principles for ARMs and other consumer products, draft fallback language for new ARMs referencing U.S. dollar LIBOR, and a framework for use of SOFR in new ARMs.

But liquidity has begun to develop in derivatives and cash markets. And, earlier this year Federal Reserve Board economists published research demonstrating how forward-looking term rates can be derived from SOFR futures and swaps markets. However, we are still some time off from a point at which a robust, IOSCO-compliant term rate can be created, and use of such a term rate should be limited to certain segments of the loan market and to fallbacks for new contracts. I want to emphasize that the industry must not wait for a SOFR term rate to transition away from LIBOR. In my view, the biggest challenge isn’t liquidity or the creation of a term rate, it’s a willingness on the part of the market to stop using LIBOR. We need a mindset shift where firms realize that every new U.S. dollar LIBOR contract written digs a deeper hole that will be harder to climb out of. If companies are going to use LIBOR, they need to start including robust fallback language in the contract, so that if LIBOR ceases to exist, chaos does not ensue. This is an area of recent progress I mentioned earlier. The International Swaps and Derivatives Association (ISDA) has led great work on the development of contingencies for some derivatives products for the scenario where U.S. dollar LIBOR ceases to exist. The public consultation on fallback language for some non-U.S. dollar derivatives contracts took place last year.
Both factors are viewed today as important elements in the quest for stable prices which are a prerequisite for sound economic development. Stable prices can only be achieved when those responsible for monetary policy are in a position to take decisions based on a longer-term view. Short-term activism, caused by an attempt to finetune the economy, invariably results in higher inflation, higher interest rates and a loss of credibility. Giving the central bank a clear goal and protecting it from outside interference is thus a basic ingredient of a successful monetary policy. Viewed from that angle, the ECB is in a comfortable position. However, a good legal framework is not sufficient for ensuring a successful monetary union. The ECB must also be in a position to conduct a coherent monetary policy for all participating countries. There will no longer be a German monetary policy and there will no longer be a French monetary policy: There will only be a European monetary policy. It will thus no longer be possible to conduct a monetary policy that is in tune solely with the economic situation in a specific country. For a European monetary policy to be successful, the economic situation in the member states of EMU must therefore be comparable. To put it another way: the economic situation in the participating countries should converge before EMU starts. The EU tries to achieve convergence by making membership of the EMU subject to a country’s ability to satisfy so-called convergence criteria.

Mr. McDonough describes the role of the FRBNY in the events leading up to private-sector recapitalization of Long-Term Capital Management Testimony by the President of the Federal Reserve Bank of New York, Mr. William J. McDonough, before the Committee on Banking and Financial Services of the US House of Representatives on 1/10/98. Good morning Mr. Chairman and members of the Committee. I am pleased to appear before you today to describe the Federal Reserve Bank of New York’s role in the events leading up to the recent private-sector recapitalization of Long-Term Capital Management and its fund, Long-Term Capital Portfolio. I will cover four points. First, I will provide some background on Long-Term Capital’s financial problems. Second, I will explain our judgment that an abrupt and disorderly close-out of Long-Term Capital’s positions would have posed unacceptable risks to the American economy. Third, I will explain the limited role we played in facilitating the privatesector resolution to this private-sector problem. Fourth, I will identify some of the issues that should concern us as we begin to understand the lessons of this experience. Background Long-Term Capital is an investment partnership that was started in 1994. It has many of the characteristics of a “hedge fund” in that it borrows money to leverage its capital and is only available to wealthy investors. The strategy of Long-Term Capital was to use complex mathematical formulas to identify temporary price discrepancies between different interest rates.
This is because of the start of the development of the market economy goes back to 1950, relationship with the EU back to 1963 and the completion of the Customs Union back to 1995. Indeed, Turkey is the only country that completed customs union without being a member. In a sense, Turkey is more integrated to the European markets than many new members and other candidates. When you look at the current account, Turkey has the second largest share after Poland in total trade volume towards the EU-15. And as of August 2005, the share of the EU-25 in Turkey’s total exports and imports are 52.5 percent and 42.4 percent respectively. Furthermore, 52 percent of the total number of tourists visiting Turkey so far in 2005 are EU citizens. Viewing Turkey’s capital account, it is noticeable that in the last two years, 85 percent of total foreign direct investment inflows to Turkey came from the EU. That figure was 71 percent on average in the last fifteen years. In consequence, the Turkish membership to the EU will nourish this close economic relationship further. Turkey’s membership will not only create a market for the EU in favour of both consumers and firms, but also help the EU to become closer geographically to the Middle East, Russia, Black Sea and Central Asia markets and so increase its competitiveness. As you all know, Turkey is an important regional power at the crossroads of important energy, transportation and communication networks.

First, last February, concerns surrounding a faster-than-expected tightening of monetary policy in the US triggered a major stock market sell-off and a corresponding volatility spike (green curve). Then, in May, political uncertainty in Italy led to a considerable widening of the yield spread between German and Italian 10-year bonds (blue curve). Demand for various asset classes regarded as safe havens, such as the Swiss franc, increased. Finally, in August, we witnessed a huge sell-off of certain emerging market currencies and an increase in their volatility (yellow curve). Fears of global contagion resulted in the franc appreciating strongly. It remains a safe-haven currency during periods of high uncertainty. Indeed, an analysis of the options market confirms that the Swiss franc was in demand as a safe-haven currency during the three events described above. Risk reversal shows that during these events, participants were prepared to pay a higher premium to hedge against losses resulting from a steep appreciation of the Swiss franc vis-à-vis the euro than against a depreciation. As we can see from chart 5, three-month risk reversal for the EURCHF pair was significantly negative. Even today, risk reversal is still well below zero, indicating that the situation on the foreign exchange market remains generally fragile. And now I would like to hand back to Andréa Maechler. As we have just seen, without this kind of in-depth analysis as a supplement to traditional macroeconomic analysis, it would not be possible for us to capture the complexity of markets simply and comprehensibly.
But it also means we have a long way yet to go in reducing debts and returning to sustainable growth. 5. We are also seeing important shifts in the structure of global finance, besides the gradual contraction in global liquidity. It is too early to say where we will be five years from now, but some of the broad brush-strokes in this new landscape of global finance are already with us and likely to stay: •  The return on equity in global banking has fallen, and will not return to pre-crisis levels, given stricter capital and liquidity rules. •  Deposits have become more important as a source of bank funding. •  Banks in certain major jurisdictions have retreated from global markets, and worryingly, and may stay in retreat for some time. •  The securitised debt markets should recover, but with less leverage underpinning them, and hopefully greater risk transparency. •  In the derivative markets, there will be greater standardisation of products, and much greater reliance on common market infrastructure – for trading, clearing and reporting of trades. High volume, low-margin platforms will likely gain in competitiveness. •  Wealth management will remain a growth industry, especially in Asia, where the pool of wealth is growing most rapidly and the need for diversification remains great. •  And outside of intermediated finance, companies will seek new ways of raising funds, including through private placements. 6. Will this mean a safer financial world? Maybe.

Therefore, any kind of implementation, initiative and disclosure that might lead to deterioration in risk perceptions and expectations affect the disinflation process and macroeconomic stability in a rapid, harsh and negative way. In this respect, relations with the IMF and the EU are two important anchors, especially as to medium and long-term expectations. These two factors should remain as anchors in the upcoming periods, as they bear significance for the enhancement of confidence in our country, the uninterrupted implementation of structural reforms as planned and the predictability of our economy in the medium and long-term. The Central Bank analyzes all kinds of risks in its scenarios designed to foresee inflation and makes its forecasts accordingly. As I have mentioned earlier, on condition that the cautious stance of monetary policy, fiscal discipline and structural reforms continue, the targets set for 2007 and 2008 seem to be attainable. The target we set for 2007 and 2008 is 4 percent and all our policies are directed towards attaining these targets. It is of critical importance that economic agents use these targets as a reference while drawing up their future plans. The floating exchange rate regime that is implemented today is the sine qua non of the inflationtargeting regime. The basic principle of formal inflation targeting is to target only inflation itself and to make no commitments other than the inflation targets.
[11] Productivity growth impacts R* through firms’ optimal level of capital for production, in other words the demand for capital from firms. Lower productivity reduces the potential returns on new investment (the marginal product of capital) and this reduces firms’ demand for capital at a given interest rate. In equilibrium this reduction in demand lowers R*. The model simulations suggest that this effect accounts for almost half of the decline in Global R* over this period. Population ageing has been driven by a decline in population growth rates relative to the high levels seen following the Second World War and a marked increase in life expectancy. Importantly, however, in the model the impact of ageing comes almost entirely from the rise in longevity, rather than the decline in population growth rates. What this means is that the effect of population ageing on the trend real rate is not a consequence  Page 8  of the so-called ‘baby boom’. Instead, it reflects the fact that the oldest generations in the population – including older retirees – also tend to be those who have accumulated the most wealth. This naturally occurs as households accumulate wealth over their working life, in order to fund their retirement. This means that a shift in the age distribution towards these cohorts, in other words population ageing, will increase total wealth in the economy. [12] The equilibrium real interest rate falls to incentivise firms to invest this additional wealth into productive capital.

William C Dudley: Job polarization in the region Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Quarterly Regional Economic Press Briefing, New York, 30 May 2012. *  *  *  Good afternoon and welcome once again to the New York Fed’s Quarterly Regional Economic Press Briefing. I am pleased to have this opportunity to talk with the journalists covering our region – and through you, to the people in our District. This morning I will focus on regional economic conditions, with particular attention to job polarization, which I would define as the expansion of the number of jobs at the upper and lower ends of the wage and skill distribution and a shrinking of job opportunities for those in the middle. We will see how these trends are playing out in our region. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System. National economic conditions The U.S. economy is continuing to slowly recover from the after-effects of the housing boom and bust and the financial crisis. But the recovery has been disappointing. Indeed, when we look back at economic forecasts made over the past three or four years it is notable that growth has systematically fallen short of both the Federal Reserve and private-sector forecasts.
The complexity of such a process means it is necessary to design forthwith efficient exit strategies, so that they may be implemented when the time is right. The euro area also shares, albeit to a lesser extent than other zones, these signs of incipient improvement. The latest economic data have been less adverse than expected and the quantitative and qualitative indicators coming to light point to a stabilisation of activity in the very short term which, according to the ECB's projection exercises, will be followed by a presumably slow recovery that will not be free from difficulty. Public finances have deteriorated considerably as a result of the operation of the automatic stabilisers, the discretionary measures to stimulate aggregate demand and action to shore up the financial system. In turn, the financial crisis and the fall-off in activity have severely affected certain European banks, which depend in part on public sector support and which remain subject to a deleveraging process whose scope is still not readily discernible. On the prices front, the risks of deflation have diminished substantially. Although the strong easing in commodities prices until mid-year meant that inflation turned negative, there is a broad consensus, of which the ECB is part, that anticipates inflation will resume positive levels towards the end of the year. Such levels would, however, be moderate for a relatively lengthy period, against a background marked by considerable slackness in productive capacity which will help contain potential inflationary pressures.

We are at a crossroads where economic policy action may be decisive in setting us once more on a path of growth and increasing well-being. My testimony today, as part of the Parliamentary discussions on the Budget, offers me an opportunity to analyse the role budgetary policy should play and the need for this policy to be underpinned by a series of structural reforms that remove the obstacles to a recovery in economic activity, in employment and in public finances. I shall begin with a brief reference to the international setting and to the economic outlook for the euro area. It is well known that these settings determine the behaviour of monetary policy. Regarding this latter point, allow me to remind you that the ECB Governing Council will meet later this week; accordingly, my appearance here is during what we call purdah period, and my comments should not be interpreted, under any circumstances, as a prelude to or anticipation of the monetary policy discussions or decisions at this meeting. After several quarters of continuous deterioration which led the world economy to the biggest contraction since the Second World War, the latest economic indicators are beginning to point to a pick-up in activity and in international trade, which is more evident in the emerging than in the more advanced economies, where the signs of improvement are somewhat more incipient.
Miguel Fernández Ordóñez: Current status of the Spanish financial system Speech by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, to the Council on Foreign Relations, New York, 11 March 2011. *  *  *  Let me thank the Council on Foreign Relations and Mr. Rubin for giving me the opportunity to address this distinguished audience. The current difficulties faced by certain Spanish savings banks have their roots in a long expansion in the Spanish economy dating back from 1996 to 2006. It was a period of sharp growth in employment, activity, and wealth. At the same time the budget deficit diminished drastically and the level of public debt over GDP fell below 40%. However, the expansion was also accompanied by some imbalances. House prices rose substantially; the current account deficit climbed significantly, reflecting in part the loss of competitiveness, and in part the need to fund investment rates that rose to around 30% of GDP, targeted not only on increasing residential investment but also on investment in equipment and infrastructure; Spanish households and firms increased their debt levels notably, in response to low interest rates prompted by euro area membership, reflecting their asset purchases (real estate assets in the case of households, and productive assets in the case of firms, coinciding with a major internationalisation of Spanish corporations). The big financial crisis that began in 2007 had a very limited impact on the asset side of Spanish banks.

Current account imbalances are no more than the arithmetic difference between gross capital inflows and outflows. As these gross flows increase as a result of financial liberalisation, it is natural to expect the difference between them to become more volatile (Obstfeld (2010)). As Chart 4 shows, the growth of gross capital flows in the  2  BIS Review 174/2010  years preceding the crisis was dramatic. At the start of the 1980s, gross capital flows were around 5% of world GDP. By 2007, they had risen to 7 times that. This growth in capital flows and imbalances has been mirrored in the path of the external balance sheets of the major economies. These, too, have adjusted rapidly. In 1985, the US was a net external creditor. By 2009, it had become a net external debtor to the tune of around 20% of GDP. In 1999, China was a net external debtor. By 2008, it had become a net external creditor of around one third of GDP. An interesting perspective on the drivers of imbalances is provided by looking at the gross saving and investment behaviour of surplus and deficit countries over this period. Chart 5 looks at these patterns. It suggests a couple of striking patterns. First, the correlation between saving and investment rates appears to have weakened significantly over the past two decades, for both surplus and deficit countries. This is consistent with increasing capital mobility. Historically, there has been a high correlation between national saving and investment rates – the Feldstein-Horioka (1980) puzzle.
4  BIS Review 124/2006  Chinese authorities that the central bank should be more open-minded about cooperating with the government institutions in managing huge reserve assets). So, ceteris paribus, this factor will imply balance of risks skewed towards further risk premia compression in emerging markets in situation when US growth slows and expected returns in developed markets drop amid poor growth outlook. The important question is how it will end? Temporary US growth slowdown is unlikely to solve global imbalances issue, it is unlikely that oil-exporting countries will accelerate further their investment in real estate, as the pace is already frantic, lack of reforms in the eurozone indicates that potential output in this part of the world is unlikely to speed up significantly. So standard, consensus prescriptions will not work. The only feasible channel that might work is accelerating the pace of financial sector development, particularly in emerging markets, to produce more financial assets and more collateral. These reforms are easier to implement, because they do not require taking away social benefits and they do not hit any specific groups of interests. So it appears that the discussion should shift away from overvaluation of renminbi, and from implications of pegging gulf currencies to the weakening dollar, towards ways of speeding up necessary financial markets reforms in saving-abundant countries. If these reforms gain speed, we may be able to solve global imbalances problem without much global pain.

The logic there was that at that level failure of the material entity might trigger resolution of the group as a whole; problems for smaller entities, even those that might house functions that are critical to the host jurisdiction, should be more of a recovery matter. -  by including a provision that internal MREL for subgroups should be scaled in single point of entry (SPE) groups to 75-90% of the requirement that would apply to the subgroup on a standalone basis. The logic was that given the interdependence in the business models of SPE firms, prepositioning in this range would be sufficient to secure cooperation and deter hosts from ring-fencing, and home authorities from cutting off, foreign subsidiaries. Prepositioning of resources in this way will provide concrete underpinning for cooperation that goes beyond the paper commitments to cooperate in Memorandum of Understandings (MOUs), honoured in the breach in previous cross-border failures. Even with these restrictions there may still be a sum of the parts problem in which the sum of TLAC requirements at solo level pushes up external requirements. If internal TLAC requirements are high they are also likely to stand in the way of holding a surplus at the top of the group that could provide flexibility in covering losses if they are concentrated in a particular part of a group. Thus in our internal MREL policy our intention is first to consider setting internal MREL generally for the firm at the bottom of the 75-90% range.