samchain/econo-pairs-v1 huggingface dataset:
And Darell and Arvind are right to say that regulation bears a social cost by increasing segmentation and reducing incentives to compete, search and match in money markets. But it would not be right to then conclude that the framework of regulation that was introduced following the crisis represented a net cost to society. Would it really be desirable to return to a world in which, as Pozsar (2016) put it, the quantities traded were “endless”, and the impact on balance sheet “an afterthought”? The role of the leverage ratio Given that I am a member of the Financial Policy Committee (FPC), which has been one of the architects of the post crisis regulatory framework in the UK and put a leverage ratio in place in 2015, you probably won’t be surprised to hear that I support the existence of the leverage ratio. Remember that over the period from 2000 to 2007 around a quarter of dealers held less than enough equity to absorb losses worth 2% of their assets. That was facilitated by an over-reliance on risk weighting, which tended to place too much weight on periods of stability and too little on periods of underperfomance. It’s now clear that in the years before the crisis banks were underpricing the use of their balance sheet, and that the dispersion of rates in money markets probably underestimated the true real marginal cost of intermediation.

And the price of repo in sterling markets has increased approximately in line with its US counterpart, as measured by the increase in GC repo rates relative to 3-month OIS swaps that carry similar economic risks (Chart 3). Alongside this there has been a deterioration in perceptions of overall sterling secured market function over the past year or so, which participants note has coincided with pressure to reduce balance sheet size due to regulatory reporting requirements – in particular the leverage ratio (Chart 4). Some of this impact may be transitory: as dealers and others adjust to the new arrangements they may find ways to transact more efficiently while staying within the letter and spirit of the regulation. As the paper describes, opportunities for netting could be further increased were a greater proportion of repo transactions to be centrally cleared – around 10% of US Dollar repo transactions are currently cleared centrally, compared with 45% in Sterling, and 65% in Euro. 1 Dealers may improve the optimisation of their balance sheets across the whole group, better allocating leverage headroom in one part of the business to more leverageconstrained activity in other parts of the group. And over time new approaches to intermediation could emerge – some exchanges are exploring platforms to allow end users of the repo market (such as pension funds) to transact directly with one another. However, such innovations and adjustments will only ever provide a partial offset to the underlying changes.
The sectors trade with each other, and with the banking system, behaving in ways that we calibrate to known features of the system. That means behaviour in one part of the system affects decisions elsewhere. The system is more than the sum of its parts. The simulator, by its nature, does not capture the full diversity of the assets and participants in the system. It is a simplified version of reality, helping to guide us. Using it, we can begin to assess what different features of the system might matter for the resilience of corporate credit supply. In general, it highlights how financial institutions do not need to be at risk of failure for credit supply conditions to be fragile. I’ll highlight two features that stand out in the simulator, both centred on liquidity: cashflow pressures on leveraged investors like hedge funds, and redemption pressures on open-ended funds. Cashflow pressures on leveraged investors  Investment funds have grown in importance as holders of corporate debt in general, and they now hold around 25% of the global leveraged loan market – a quarter of which is in the form of CLOs, often the most risky slices. The relevant funds are not the super-financially-leveraged, dangerous institutions of some imaginations. 11 Even hedge funds take positions worth only about one and a half times net asset value – materially less than they did a decade ago.12 And financial leverage in funds other than hedge funds is generally limited.

14  All speeches are available online at www.bankofengland.co.uk/news/speeches  14  Chart 17 Map of who holds leveraged loans and in what form Indicative estimated global stock of leveraged  Indicative estimated holdings of leveraged loans by  loans by product type  global investors  Sources: BarclayHedge, Bloomberg Finance L.P., FCA Alternative Investment Fund Managers Directive (AIFMD), Firm public disclosures, LCD, an offering of S&P Global Market Intelligence, Morningstar, National Association of Insurance Commissioners, Securities Industry and Financial Markets Association, Solvency II submissions and Bank calculations. Notes: (a) Estimates of the total stock are based on Bloomberg’s definition of leveraged loans. Given the lack of a consistent definition of leveraged lending, there is uncertainty over the total stock of outstanding leveraged loans. (b) For loans that are distributed to non-bank investors and CLOs, allocation across investors is based on ‘bottom-up’ estimates of holdings from a range of sources. Hence, there is a significant proportion of institutional loans that are unallocated. (c) For hedge fund holdings of leveraged loans and CLOs we scale up holdings reported to UK authorities by non-EEA managed AIFs to reflect the size of the global hedge fund universe. This means these estimates are particularly uncertain. (d) Revolving credit facilities and amortising term loans are allocated to banks given that they are typically the holders of these facilities. This picture is consistent with wider developments in corporate credit. Non-banks account now for 56% of the stock of UK corporate debt.
The interest rate influences inflation indirectly via domestic demand for goods and services and via its effect on the exchange rate. When interest rates rise, it becomes more profitable for households to save, and consumption will therefore be postponed. Similarly, borrowing becomes more expensive, and investment will decline as a result. Lower demand then curbs the rise in prices and wages. Higher interest rates make it more attractive to invest in NOK and borrow in foreign currency. Therefore, higher interest rates normally lead to an appreciation of the krone. This makes imported goods cheaper. In addition, a stronger krone reduces activity, profitability and the ability to pay in the internationally exposed sector. Major economies such as the US, Germany and France are struggling with stagnation and fears of recession. Sluggish developments have led many countries to set very low interest rates in an attempt to stimulate growth. The business cycles in Norway and other countries have been desynchronised. While the turnaround abroad took place two years ago, the Norwegian economy continued to show a high level of activity. Towards the end of the upturn, the economy was facing labour shortages, higher wage growth and a sharp increase in household consumption and debt. Interest rates had to be kept at a high level in  BIS Review 23/2003  1  Norway. This led to a widening of the interest rate differential against other countries. The main explanation for the wide interest rate differential is that interest rates abroad are at a historically low level.

Investment as a share of output and demand is now lower than the average for the past 20 years, but now appears to be stabilising. It may therefore take some time before the turnaround occurs and investment picks up again. Strong investment growth has contributed to a build-up of overcapacity in US manufacturing. Capacity 1 utilisation in manufacturing is low. Low capacity utilisation also reflects the overinvestment that took place at the end of the expansionary period. The household saving ratio has picked up somewhat since 2000, probably as a result of the decline in the equity market - although it is still low. Similarly, the federal government budget deficit - as a result of expenditure in connection with war combined with substantial tax reductions - will increase. The current account deficit in the last quarter of 2002 was equivalent to 5¼ per cent of GDP. The low saving ratio and the substantial current account deficit has contributed to a depreciation of the US dollar. Conditions in the US today are more conducive to growth than they were six months or a year ago. The low interest rate will support an increase in both consumption and investment. Corporate profits and financial balances have improved. Companies’ liquidity is solid. At the same time, however, it is 2 uncertain how far shortfalls in corporate pension schemes will weaken growth impulses. And with low capacity utilisation, it may take time before investment gains momentum.
Ardian Fullani: Strengthening the capacities of the Bank of Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the Closing Ceremony of the IPA-funded Twinning Project on strengthening the capacities of the Bank of Albania, Tirana, 16 July 2012. *  *  *  Dear guests, Central banks, since their inception, have been vested with a “veil of mystery”. This relates to their exclusive right to issue money, set a loan interest rate and control liquidity in the market. Precisely, this important role of central banks and the recent global developments put these institutions on the spotlight. Responding to these developments, central banks worldwide, in perfect coordination with one another and in addition to traditional instruments, took extraordinary measures that had never been employed before. Through those measures, they intended to provide sufficient liquidity in the market, with a final goal, which has remained unchanged since ancient times, to restore public confidence in financial institutions. The Emperor Tiberius, dating to A.D. 33, had to inject one million gold pieces of public money into the financial system to keep it from collapsing. Today, cooperation and coordination among central banks have become an integral part of institutional management. Technological developments and the globalisation process have aroused the need for coordination among decision-making institutions all over the world.

Under your leadership the bank has continued to bring to the banking sector an array of products and services that provide convenient alternative channels that lead to customer satisfaction and improved service delivery. The introduction of new products and services such as mobile banking, internet banking and e-statements provide customers with greater flexibility in their banking requirements, enabling them to transact at their own convenience, knowing that their finances are completely secure. This will no doubt enhance customer confidence in the banking system in Zambia. Ladies and Gentlemen, I am reliably informed that the m-Banking product we are launching today, will allow the bank to reach out to many more customers. This will increase the number of people with access to the financial system. At Bank of Zambia, we believe strongly that wider access to financial services through positive action by the banking community is vital. We also believe that the driving force will be banks and other financial institutions searching for new, profitable market opportunities. Furthermore, a key element in the strategy of poverty alleviation is the provision of financial services to the majority of our people especially the small and micro entrepreneurs who are financially excluded. Access to improved financial services, through the provision of better ways of accumulating savings and access to credit to augment accumulated savings, avails funds for investment in income generating projects that help the public to lay foundation for better standards of living for themselves and their families.
Some countries have preferred to maximise their production of tradeables by undervaluing their real exchange rates through fixed or heavilymanaged nominal exchange rates to the US dollar. As the absolute sizes of their economies have increased, so have their current account surpluses and the scale of their foreign  1  http://www.imf.org/External/Pubs/FT/GFSR/2008/01/index.htm. BIS Review 94/2008  1  reserve accumulation is now massive. Global foreign exchange reserves have increased from just under $ trillion in early 2000 to over $ trillion in May 2008 and are forecast to grow by $ trillion in 2008 alone (Chart 2). The vast excess savings of these economies needed somewhere to go. The gainers were in the West where the asset and financial markets were most developed. The inflow brought greater liquidity to markets and helped to create the conditions for widespread underpricing of risk. The counterpart to the excess savings in the East became expansion of credit, the growth of consumption and a boom in asset prices in the West. Looked at in a global perspective, the dramatic increases in wealth and living standards in emerging economies have been a great step forward. But the growth pattern has been unbalanced and we are now having to handle the inevitable correction.

2  BIS Review 94/2008  In addition, regulation can also encourage procyclical risk taking. Basel I, for example, encouraged the growth of securitisation and the “originate to distribute” model of banking because holding the low risk elements of a loan portfolio in the banking book were relatively heavily capital-weighted. Basel II contains more carefully calibrated capital risk-weights and is a considerable improvement over Basel I. But the risk measures are drawn from the market and share some procyclical features. Weights increase as credit risk rises so riskweighted assets will seem relatively low during tranquil economic times and relatively high during periods of stress. While there may be scope within Pillar II to address this, it is too early to know whether that can be used effectively. The combination of these market and regulatory effects have amplified risk taking during the boom and is now constraining risk appetite as financial conditions have deteriorated. Policy responses Since the crisis broke last summer, regulators, governments and central banks have come together in the Financial Stability Forum (FSF) to analyse what has gone wrong and agree an international response.
I note with interest that your own assessment is that the best option for the futures and options business in London would be for EMU to go ahead and for the UK to participate in the first wave. It is a moot point as to whether the impact on the profits and bonuses of derivatives traders will be the number one criterion in the minds of Labour MPs when they come to reach a view on EMU, but I will certainly draw it to their attention if you would like me to do so. BIS Review 67/1997  -3-  By contrast, you are slightly, though not exaggeratedly pessimistic about business opportunities in London if EMU goes ahead with the UK a ‘slow track’ country. I regard this as a pessimistic assessment, and will attempt this morning to persuade you that you are wrong. My first point, and perhaps the strongest, is that uncertainty about UK participation in EMU has persisted now for a considerable number of years - perhaps indeed since the late 1970s when the UK government’s response to the original EMU plan was distinctly lukewarm. And certainly no British Prime Minister has given an enthusiastic endorsement of the most recent Delors Plan for EMU, at any stage.

Here again, estimates vary from one study to the other, and all agree on the same finding: a huge potential is still there to exploit. This being said, risks in the financial sector are the most varied and most important, especially in terms of money laundering, financing terrorism, cyber security, as well as protecting customers and personal data. Such risks have become major concerns both at the national and international level. For us, central banks in particular, the changes brought by the Fintech challenge us in several aspects, namely in our core functions. Now, even the monopoly of issuing currency is exposed, leading some central banks to consider the option of issuing a digital currency, and therefore reduce the costs related to conventional banknotes’ production and use, and minimize the insecurity risks involved. 6  Among the other fields concerned is financial supervision. This area is now gradually expanding as new actors and financial products have emerged, which can certainly affect monetary policy transmission. Ladies and gentlemen, The digital transformation we are facing today is primarily driven by operators and private companies that continue to invest heavily in this area and seize the opportunities and the potential it offers. Considering the important economic, financial and social implications of such a revolution, public authorities are compelled to set an adequate legal framework and provide an environment  conducive  to  technological  innovations  and  Fintech  development.
The end users will provide a steady stream of long-term demands for bonds which will complement the dealers’ more traditional short-term horizon. In addition, the portfolio structure of end-users also acts as a countercyclical force to the one-way market of financial intermediaries which is common to an emerging market, and help preempt a massive panic or withdrawal of funds. How are we doing on all these, then? In the primary market, fiscal prudence in the past decades before the crisis had resulted in a very limited supply of government bonds. All this has changed as a result of the crisis. The amount of public sector bond has increased substantially during the past 2 years. Much of this was created by the government taking on the responsibility of fiscalizing the costs of financial sector restructuring incurred by the Bank of Thailand in our cleaning up of the financial institution system. Currently, there is close to one trillion baht in public sector bonds outstanding, amounting to about one fourth of the country’s GDP and the banking system’s deposit base. With even further losses to fiscalize, the supply of government bond is not going to be a constraint for future development. Attempts have also been made to introduce a quarter-ahead calendar of regular issuance. Thus, Mondays were typically reserved for treasury bills, Tuesdays for state-enterprise bonds and Wednesdays for government bonds. This has worked well for a brief period, but now we are back temporarily to waiting for new supplies of bonds.

Inflation forecast I shall now turn to the course of inflation and our new inflation forecast. Our inflation forecast of June 2002 (the green dash-dotted curve in the graph) shows that at that time we assumed, based on a stable three-month Libor rate of 1.25%, that inflation would gradually rise to 1.9% in the first quarter 2005. Year-on-year inflation, as measured by the national consumer price index, dropped to 0.3% in the third quarter 2002 from 0.7% in the second quarter. In October and November it rose to approximately 1%. These fluctuations are due mainly to changes in the exact points in time when data on clearance sales prices are collected. This is also the main reason why our forecast of June 2002 over-estimated the development of inflation in the third quarter 2002. Our new inflation forecast (red dashed curve) is based on the assumption that growth in the US will pick up again from the second quarter 2003 onward. The US economy is likely to achieve its growth potential stepwise until the beginning of 2004. In the EU, the upswing will take a little longer. We are not expecting a significant acceleration of growth before the end of 2003. We assume that the  BIS Review 73/2002  1  dollar/euro rate will remain at about the current level and that the oil price will be around $ per barrel.
This stands in stark contrast with the mystique and opaqueness which characterized earlier central bank communication. For a long time central banks have focused predominantly on their interest rate policy. Considerably less attention has been devoted to their liquidity policy which used to be carried out somewhere in the basement of the monetary policy temple, far away from the spotlight of the announcement of interest rate decisions. This year, liquidity policy has moved into the spotlight and has taken over the lead role at the forefront of the monetary policy scene. The current situation also highlights the close interaction between price stability and financial stability and that the focus of policy makers today is on crisis management. The challenge in the coming months and year is to pursue a dual approach consisting of short-term action and long-term solutions. We must constantly be on the alert to put out fires when and where they emerge, while studying the causes of the current crisis and finding the right long-term remedies in the form of new rules and systems so that we do not repeat the same mistakes. As the French saying goes, there is no point in putting a band-aid on a wooden leg. 2  Ecklund, Gunhild (2008), Creating a new role for an old central bank: The Bank of Norway 1945-1954, Series of Dissertations No. 2-2008, BI Norwegian School of Management. 3  Sejersted, Francis (1994), On the so-called “autonomy” or “independence” of central banks.

External sector of the economy continued to be characterised by a positive, though falling, contribution of foreign demand to economic growth. The correction pace of the trade deficit was slower in this quarter. Trade deficit reduced by 1.2% compared to two-digit correction rates recorded in the first half of 2010. This situation of the trade deficit is determined mainly by the acceleration of imports, which marked a year-on-year increase of 10.8% in the fourth quarter of 2010, recording a growth for the third consecutive quarter. On the other hand, Albanian exports increased by 48.8% year-on-year, maintaining high rising rates. The Bank of Albania holds that the Albanian economy will find it difficult to maintain the same growing rates of exports during 2011; among other things, this projection reflects temporary factors that influenced on 2010 growth and is in line with the global economy situation and basic statistical effects. Nevertheless, external demand is expected to generate positive contribution to the economic growth during 2011, as well. 2  BIS central bankers’ speeches  Monetary indicators, financial markets and inflation Performance of monetary indicators continues to generate controlled monetary inflationary pressures on the domestic economy. Money supply increased by 12.5% in December 2010, reflecting a good performance of deposits in the banking sector during the second half of the same year. Our assessments indicate that monetary expansion is in line with the private sector demand for real money.