samchain/econo-pairs-v1 huggingface dataset:
We began publishing this rate on April 3 of this year, along with two other repo rates: the Tri-Party General Collateral Rate and the Broad General Collateral Rate. 18 This work complements steps by the Federal Reserve to promote greater transparency in rates in unsecured markets through enhancements to the calculation of the effective federal funds rate (EFFR) and the launching of an entirely new rate, the overnight bank funding rate (OBFR).19 I have long been a proponent of the idea that central banks are well suited to take on this responsibility. Reference rates have strong public good properties, and the private sector faces notable coordination challenges in this area. Central banks have a long history in producing such measures—recognizing that traditionally this has been for purposes related to monetary policy— 3/6  BIS central bankers' speeches  and are trusted independent parties. In my view, central banks also ultimately “own” the financial stability risks that are present when key reference rates are flawed. Better to recognize this responsibility and move proactively to mitigate such risks than to step aside and hope that someone else will take up the mantle of reform. The Federal Reserve has designed these benchmarks to be compliant with IOSCO principles, with regular review by oversight bodies and comprehensive ethics and conflict-of-interest policies for staff.20 Best practice also dictates that administrators periodically review the rates they produce to assess whether changes in the underlying markets require changes in how those rates are administered.

William C Dudley: The transition to a robust reference rate regime Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Bank of England’s Markets Forum 2018, London, 24 May 2018. * * * Thank you, Mark, and thanks to the Bank of England for the opportunity to talk about the important issue of reference rates. I will focus my remarks today on reference rate reform in the United States—where we have been, where we are, and where we are headed. In short, I will argue that while much has already been accomplished, we still have a lot more to do—and it must happen within a compressed time frame. This is an important point that Andrew Bailey usefully underscored for us last year. Because of the great uncertainty over LIBOR’s future and the risks to financial stability that would likely accompany a disorderly transition to alternative reference rates, we need aggressive action to move to a more durable and resilient benchmark regime. As always, what I have to say reflects my own views and not those of the Federal Open Market Committee (FOMC) or the Federal Reserve System.1  LIBOR Scandal Demonstrated the Imperative for Reform Although the backdrop to current reference rate reform efforts is well known here, some historical context is useful when considering the issues facing us today. That history highlights why alternatives to LIBOR are needed.
Similar to banking, insurance firms can choose to use a standard formula or an internal model approach (or a partial model). But it seems to me personally, that both are more complex that their equivalent concepts in banking. Most insurance firms covered by Solvency II in the UK and elsewhere will be on the standard formula. But, relative to the rest of Europe, the UK has more insurers applying this autumn for approval of internal models for all or part of their capital assessment. Another wave will be applying in the following year or so, potentially giving the UK around 50 insurers using an internal model approach, compared with a handful in most other European countries, even the larger ones. The internal models are complicated, covering all aspects of a firm’s risks and setting capital to prescribed rules. The high number of applications to use models in the UK in part reflects the size and complexity of insurance businesses in the UK market, which includes Lloyd’s and the London market. The PRA considers the standardised approach is appropriate for the large majority of UK firms. However, for firms with more complex or unusual risk profiles, the standard formula will not be appropriate and an internal model will be needed. 4  6  Bank of England, 30 March, 2015. “Stress testing the UK banking system: key elements of the 2015 stress test”.

Alongside the SMR and SIMR, there are also new remuneration codes. CRDIV sets a cap on the proportion of variable pay for bankers. There is a risk that this will simply increase the fixed element of pay, making it harder to adjust pay in the light of performance. The UK’s approach nevertheless has to reflect those rules. In addition, the UK has provided for firms to defer elements of pay for up to 7 years – and a further 3 years if conduct investigations are still ongoing. Firms will be able to apply “malus” to variable pay which has been deferred and not yet vested. So if misconduct is discovered or risk-taking turns out to have negative medium-term consequences, the firm can subsequently withhold those deferred elements of remuneration. The UK code also provides for the possibility of clawback of pay that has been vested. There has also been misconduct discovered in markets that were not previously subject to regulation, such in the setting of LIBOR or behaviour around foreign exchange fixes. The setting of major financial market benchmarks has now been brought within the regulatory perimeter. And the Bank of England, FCA and HMT conducted the Fair and Effective  10  PRA CP18/15, May 2015. Corporate Governance: Board Responsibilities’. 11  Parliamentary Commission on Banking Standards, June 2013. “Changing Banking for Good”. 10  BIS central bankers’ speeches  Markets Review12 which has made a series of recommendations to improve conduct and the functioning of markets going forward.
The bank can sell its credit risk on the company, entirely or partially, without needing to cancel the loan or to have any discussion at all with the company. At the same time, the buyer of the credit risk (the seller of the credit derivative) does not need to tie up more than a fraction of the capital that would have been required to take over the credit directly. Moreover, the buyer of the credit risk can in turn easily sell the risk to another party, wholly or partially. Reinsurance thus becomes both simpler and cheaper to manage than with regard to traditional credit insurance. Large investors such as mutual fund companies and insurance companies often want to have a particular amount of credit risk in their portfolios. The credits can actually reduce their total risk, as the prices of the credits do not have such large covariation with other prices, for instance, the prices of shares and real estate. A certain share of credits provides a more diversified portfolio, which gives lower risk for a given expected return. Credit derivatives also makes it possible to divide up credit risks into small parts and to trade these parts at a low cost. This is not possible with traditional credit insurances. As the trade is so extensive, the pricing of credit risk becomes much improved. From the economy’s point of view, it is essentially positive that the credit risk is spread to institutions outside of the bank system.

Caleb M Fundanga: Supervision of non-bank financial institutions Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the opening ceremony of a MEFMI/ACBF/IMF - East Afritac Regional Workshop on “Supervision of non-bank financial institutions”, Lusaka, 14 February 2005. *  *  *  •  The Executive Director, MEFMI, Dr. Maruping  •  The Executive Director, Africa Capacity Building Foundation  •  Representative from the IMF  •  Distinguished Workshop Participants  •  Ladies and Gentlemen  On behalf of the Macroeconomic and Financial Management Institute for Eastern and Southern Africa (MEFMI), the African Capacity Building Foundation (ACBF) and the East African Technical Assistance Centre (AFRITAC), I wish to welcome you all to this important workshop and to the beautiful city of Lusaka. May I also welcome our distinguished resource persons and thank them for accepting our invitations. I hope their participation will enrich the deliberations of this workshop as well as enhance the knowledge of the participants. Having perused through your programme, I noticed that you have a tight schedule. However, I urge all of you to find time in your busy schedule to visit some interesting places that the city of Lusaka has to offer, including shopping malls, museums, cultural villages, to mention but a few. Allow me also to thank the Executive Director of MEFMI, Dr. Maruping, for having invited me to officiate at this regional workshop on “Supervision of non-bank financial institutions”.
We can see that AFM members are mindful of this as your conference programme covers a number of major strategic issues for your sector – including investment, consumer engagement, artificial intelligence, operational resilience and climate change reporting. Unsurprisingly there is a reasonable degree of overlap between the issues you see as most important to the sector’s future and our supervisory priorities. And it is quite refreshing not to see a major topic on Solvency II reform. This afternoon, I’m afraid I will give you an update on the latter. But first, I will give my perspective on three of the (other) changes and challenges that are priorities for the PRA as a prudential supervisor; and on our and industry responses to those challenges. It was quite a tall order to shortlist three and they are inevitably pretty broad: technology, social factors in relation to diversity and inclusion; and climate change risks. Technology 1/6  BIS central bankers' speeches  Even amongst your current generation of members and policyholders, how their insurance products are sold and serviced has changed remarkably – and remarkably rapidly. The focus of a lot of our supervisory interaction with insurers around technology tends to be on continuity of important business services, operational resilience against the threats posed by systems, process – or people – failure; or cyber vulnerabilities of insurers. However, in our business model analyses, technology features more in our assessment of whether a firm may be sustainable and competitive; and the role of investment costs and returns.

For friendly societies seeking to merge their businesses, the PRA has sought to achieve proportionate outcomes within the parameters of the legislation. This has included waiving the requirement for an independent actuarial report where possible, in order to reduce the impact of the costs of transfer on member value. Conclusion The number of challenges we – and society – face present a full agenda for the Boards of mutuals and as they consider their long-term strategies. In order to continue to serve the wider economy effectively change is needed and as such, firms should be open to adapting their business models to ensure they remain sustainable, whether that be through upgrades in technology or – with due prudence – evolving their products. For some mutual business models, by design targeted at particular types of individuals, businesses or risks, the positives of specialisation can turn into negative concentrations of exposure, for example in Child Trust Fund business; applying sensitivity analysis and reverse stress testing to the business plan can help Boards assess, manage or at least mitigate those risks. We expect businesses with specialist offerings to be alert to concentration risk and, wherever possible, to develop mitigations that will enable those businesses to serve future generations as effectively they do their current members. I began these remarks noting the value of mutuals within the insurance sector and the adaptability that has been shown through the COVID 19 pandemic.
Details on our proposal can be found on the website of the Bank for International Settlements, and the Committee has invited public comment on the approach through the end of this year. In recommending this revision, the Committee seeks to ensure that risk management systems distinguish between losses that can be anticipated versus those that cannot. Moreover, the new framework would include explicit incentives for banks to address each kind of loss appropriately ensuring strong incentives for banks to provision properly against expected losses. Since the proposal would require only modest revisions to the text of CP3 and would not alter the underlying system and data requirements for banks wishing to adopt an advanced approach to credit risk, we expect that the revised treatment will conform closely to the work that banks have already completed to prepare for implementation. The work plan to improve the framework discussed during our last meeting identified several areas in addition to this important EL-UL issue. We think that this work plan is perfectly compatible with the original time schedule to implement the New Accord by yearend 2006. Other issues ahead: complexity Beyond the “EL/UL” issue, the Committee has put at the top of its work plan for the next few months several other credit-risk related issues that emerged in consultations. Of these matters, I’d especially like to highlight three, namely complexity, conservatism, and competition. Certainly, the complexity of the proposals continues to draw the public’s attention.

The minimum standards were developed to help ensure that global competition in banking markets will be driven by each bank’s strengths, rather than by differences in each country’s rules. Moreover, Pillars Two and Three were largely created to promote a more level playing field for banks. For example, incorporating supervisory review – or Pillar Two – into the international guidelines represents a seminal achievement for all of us. By developing guidelines for supervisors’ evaluation of a bank’s internal capital allocation process, the Committee believes that supervisors and banks will engage in more focused, more consistent, and less burdensome discussions of the risks that banks face and the responses they adopt. National laws and regulations provide different avenues through which supervisors may conduct such reviews, and consequently Pillar 2 affords each jurisdiction the flexibility to accommodate those differences. 4  BIS Review 46/2003  To advocate more consistent standards, the Committee created the Accord Implementation Group, or “AIG,” precisely to share experiences and encourage shared approaches. This group, which is chaired by Nick Le Pan, the Canadian Superintendent of Financial Institutions, has already been long at work comparing notes on practical matters. We expect these discussions to help supervisors apply the New Accord more consistently at home, thereby providing a more level playing field across countries as well.
In our open economy, with a floating exchange rate, it can be assumed that an increase in wage growth of one percentage point without  BIS Review 72/2001  1  any monetary policy response will gradually translate into a corresponding increase in price inflation 1 unless wage increases are anchored in higher productivity. When Norges Bank concludes that the key rate should be changed, the change will in most cases be made gradually. This is because there is normally uncertainty about the situation in the economy, potential disturbances to the economy and how fast an interest rate change will affect price inflation. But we will not always take a gradualist approach. A rapid and pronounced change in the interest rate is appropriate if, for example, heightening turbulence in financial markets or a cost-push shock resulting from negotiations indicates that confidence in monetary policy is in jeopardy. Norges Bank analyses the inflation outlook in separate inflation reports, which are published three times a year. Further assessments are presented every sixth week in connection with the Executive Board's monetary policy meetings. Higher interest rates curb demand for goods and services and reduce inflation. Lower interest rates have the opposite effect. If evidence suggests that inflation with unchanged interest rates will be higher than 2½ per cent, the interest rate will be increased. If it appears that inflation with unchanged interest rates will be lower than 2½ per cent, the interest rate will be reduced. There is symmetry here.

A stronger exchange rate will curb the rise in prices for imports, which directly and indirectly account for 40 per cent of goods and services in the consumer price index. A stronger krone weakens earnings and reduces activity in enterprises in the internationally exposed sector. This has an impact on enterprises’ capacity to pay, wage growth and price inflation. We do not expect a change in interest rates to have an immediate effect on inflation. Our analyses indicate that a substantial share of the effects of an interest rate change occurs within two years. Hence, the key rate is set with a view to achieving an inflation rate of 2½ per cent two years ahead. The social partners will take account of the inflation outlook in their wage negotiations. If there are prospects of higher inflation, the nominal wage increases will be higher. At the same time, higher wage growth means higher inflation. Developments in the labour market and wage formation are therefore important for interest rate setting in Norges Bank. It is also important to be aware that developments in labour costs may influence inflation, growth and employment differently in a system with a floating exchange rate that in a system with a fixed exchange rate.
We have also seen some peaks in transaction volumes as well as more frequent and higher margin calls. Furthermore, many infrastructures have had to cope with the default of a major participant, notably in the context of the demise of Lehman Brothers in September 2008 and the corresponding spill-over effects on its subsidiaries. Fortunately, EU market infrastructures were able effectively to overcome these challenges without any major operational disruptions. In particular, the Eurosystem’s TARGET system – which is not only the backbone of the large-value payment infrastructure for the euro, but also plays a central role in providing settlement services for 36 retail payment systems and 33 securities settlement systems that are connected as ancillary systems – has proven to be  BIS Review 74/2009  1  stable and resilient. Nonetheless, I would like to mention three key stylised facts which illustrate the impact of the current turmoil: First, the values processed in TARGET in the last quarter of 2008 showed an unusually high increase of 13% compared to the first three quarters (see Chart 1). When looking at the average values settled in different time bands during the day, the main difference between the third and the fourth quarter of 2008 relates to the values settled in the last hour of operations.

However, owing to the close interdependencies between financial markets, intermediaries and infrastructures, the difficulties affecting institutions and markets have also had a knockon effect on market infrastructures, putting the functioning of payment systems, central counterparties and securities settlement systems under a real-life stress test. Fortunately, as I will illustrate in a moment, EU market infrastructures have proven to be remarkably resilient, thereby limiting the overall systemic risk. In the main this has been due to the successful interaction between industry, regulators and overseers, just like – if I may – in the Italian banking sector, which has also shown itself to be remarkably resilient in the current circumstances. In the second part of my intervention, I would indeed like to look beyond the current turmoil. I will – despite the very positive overall assessment for infrastructures – point to three areas that warrant particular attention for the future of market infrastructures. The first of these is the enhancement of overall crisis management arrangements for market infrastructures. The second involves strengthening market infrastructures for OTC derivatives. And third, given the importance of retail markets to the overall stability and efficiency of the financial system, there is the need to complete the Single Euro Payments Area (SEPA). Performance of EU market infrastructures during the financial turmoil The financial market turmoil has impacted on EU payment systems, central counterparties (CCPs) and securities settlement systems mainly through intensified and more volatile market activity.
In other words, across the system there was too great an element of banks (and dealers) having shed credit portfolios only so long as they could sustain their own repo financing. Meanwhile, firms such as AIG and funds of various kinds had bought ABS and CDOs financed by short-term repo, so that they held portfolios of household and corporate loans financed at very short maturities – just like a bank, so the argument goes. When the crunch came and ABS asset values fell, some of these firms and funds could not rollover their funding. In the case of some dealers and AIG, end of story. Indeed, towards their end, some could not even repo-out US Treasuries to raise cash! The chain of financing was too long and too fragile to prove resilient under stress. 9  The Securities Lending and Repo Committee is a UK-based committee of international repo and securities lending practitioners and representatives of trade organisations, together with bodies such as Euroclear UK and Ireland, the UK Debt Management Office, the London Stock Exchange and the FSA. It is chaired and administered by the Bank of England. The terms of reference can be found at: www.bankofengland.co.uk/markets/gilts/slrcterms.pdf. 10  For example, see Gorton G B (2009), “Slapped in the Face by the Invisible Hand: Banking and the panic of 2007”, paper prepared for the 2009 Federal Reserve Bank of Atlanta Jekyll Island Conference. 6  BIS Review 6/2010  What are the lessons?

In mid-2007, serious problems with structured products backed by sub-prime mortgages put an abrupt stop to the boom in securitisation. False incentives, inadequate control mechanisms, shortcomings in the rating system and insufficient personal responsibility on the part of investors were the main criticisms aimed at securitisation practices. What is important now, is to correct these deficiencies, so that the trust of market participants in these products can be restored. It would be wrong to ban the securitisation of mortgages, since these refinancing instruments generate substantial economic benefit and are an indispensable part of our modern financial system. The mortgage securitisation weaknesses revealed in the financial market crisis do not apply in the case of the Swiss mortgage bond. Consequently, it should definitely have the potential to play an even greater role in maturity-matched refinancing of mortgages in Switzerland in the future. In addition, banks can improve their liquidity by holding portfolios of Swiss mortgage bonds themselves. Mortgage bonds could be converted into liquidity quickly and simply, as required, by means of repo transactions – either in the Swiss franc interbank market or at the SNB. BIS Review 60/2008  1