samchain/econo-pairs-v1 huggingface dataset:
In the past year or so, I think we have made quite good progress in providing this peer perspective on risk management and controls. In such areas as corporate governance, economic capital estimation, and anti-money laundering, I think we have been able to be quite specific on how well a given banking organization measures up to evolving industry standards - including what needs to be done to move up to the top rung of performance. I also recognize that there is a tremendous demand for us to provide even more guidance in these dimensions. In the numerous feedback sessions we have had with individual institutions on the quality of our supervisory process, we have heard that message loud and clear. With the maturation of our organizational approach, I fully expect that we will register further improvements in this dimension. The New Accord’s emphasis on risk management processes This brings me to my second broad theme - how the New Basel Capital Accord supports further adjustments in risk management and supervisory approaches and how it fits with the current focus on corporate governance practices. Since many of you do not hail from banking organizations, I’ll take a moment to summarize the objectives the Basel Committee set for itself in re-writing the international rules on bank capital adequacy. The existing rules, which stem from the relatively simple 1988 Basel Accord, represented an important step in answering the age-old question of how much capital is enough for banks to weather economic downturns.

Cards and cash in Sweden Cards compete with cash when we pay directly at the point of sale, for example in supermarkets, petrol stations, restaurants or at cinemas. It is the customers who choose how they want to pay, and as we no longer use cheques in Sweden the choice is between cards and cash. A high level of card usage thus tends to go hand in hand with a low level of cash usage, and vice versa. In Sweden, the use of cards has increased rapidly in recent years. In 2009, the average Swede made 182 card payments but less than 30 cash withdrawals. This means that the value of the payments made by card has increased fivefold, and that the number of card payments has increased more than sevenfold, over the last 10 years. Unfortunately, there are no corresponding statistics for cash payments, but if we assume that the cash withdrawn  BIS central bankers’ speeches  1  from ATMs is used to make purchases then the value of all the card payments is three times higher than the value of all the over-the-counter cash payments. Another way of measuring cash usage is to compare the value of the banknotes and coins in circulation, which is usually referred to as MO, with GDP. If we do this we can see that between 2001 and 2010, MO fell from 3.8 per cent to 2.9 per cent of GDP.
43  12  All speeches are available online at www.bankofengland.co.uk/speeches  12  Typically, the two sides of this argument are taken to be in a secular struggle: the dark forces of secular stagnation pitted against the dynamic forces of secular innovation. Yet in practice, both arguments have merit. They are certainly not mutually incompatible. It is perfectly possible to imagine a world of rapid innovation which nonetheless leaves large swathes of society in its slipstream. More than that, recent research suggests this is a likely outcome of the Fourth Industrial Revolution. There are good conceptual grounds for thinking the displacement effects of the Fourth Industrial Revolution may be larger than ever-previously. Every industrial revolution has resulted in a hollowing-out, typically of mid-skilled tasks. Historically, that has meant largely manual, labour-intensive tasks. Machine has replaced human in activities that are routine and repetitive. The future could well be very different. For example, the dawning of AI means that humans will no longer have the cognitive playing field to themselves. Thinking or non-routine tasks may increasingly be taken up by machines. They will be able to process more quickly, more cheaply and with fewer errors than their human counterpart, at least in some activities. That could make the hollowing-out of human tasks, now cognitive as well as manual, far greater than ever before. 48  A cottage industry has emerged over recent years manufacturing estimates of job loss that might result from 49  this rise of the robots.

In the century ahead, those skill-shifts may be about to go into reverse. To see why, we need to ask ourselves what sets of humans’ skills robots are likely to find it hardest to reproduce and replace in the period ahead. My reading of the runes is that there are three areas where humans are likely to preserve some comparative (if not always absolute) advantage over robots for the foreseeable future. The first is cognitive tasks requiring creativity and intuition (“heads”). These might be tasks or problems whose solutions require great logical leaps of imagination rather than step-by-step hill-climbing. Existing machine learning algorithms allow huge numbers of solution permutations to be tried quickly and costlessly. This allows these hill-climbing algorithms to scale local peaks in record time. Whether they scale global peaks is altogether another matter. It is harder for machines to solve problems where it is difficult to define the solution steps in a logical sequence in advance. Humans call solutions arrived at in this way “intuition”. Despite rapid progress in deep learning techniques, it remains far-harder to devise search algorithms which solve problems requiring a leap into the unknown. 58  Even in a world of super-intelligent machine learning, a demand is still likely to exist for people with the skills to programme, test and oversee these machines. Some human oversight and judgemental overlay of these automated processes is still likely to be needed. Machine design, improvement and oversight require, at least for the moment, humans and machines to operate in partnership.
The margin exchanged to reflect those losses and gains (VM) across UK CCPs in Q1 2022 were larger than those observed during the 2020 Covid crisis. [6] UK CCPs’ aggregate initial margin requirements also increased, but by relatively less than we saw during Q1 2020. [7] This was partially because the shocks to asset prices were less broadbased, and partially because commodity markets had gone through a period of volatility just a few months earlier, so initial margin was already elevated. Page 4  Some early lessons Just because central clearing has been a success, does not mean that CCPs and CCP regulators do not need to keep learning. CCPs have been central to making the financial system safer over the past decade. But we have also seen new significant strains that need to be addressed. Policy makers and market participants have deliberately and sensibly put CCPs in the centre of the financial system. To continue to earn that trusted role we need to keep learning – we cannot be defensive. I see three areas for further work  (1) Tackle the side effects without sacrificing the cure By design, post-crisis reforms mean that in events of market turmoil losses are crystalized promptly and risk is repriced. But as we have seen in 2020 and again in 2022 this can mean very sharp strains on liquidity in parts of the system. The answer here is obviously not to return to pre-2008. We need to avoid having such short memories that we return to a pre-Lehman system.

In practice it is not always so easy to distinguish between what is important for credibility and various factors can interact in a complicated manner. Two cases can, however, be discerned:  BIS Review 56/1997  -6-  - In the first case, the problem of credibility is primarily based on a lack of confidence in the central bank as such and in monetary policy. In the long-term perspective, the task is then the establishment of a trackrecord. Laws that guarantee independence can be an important support in this process. In the short term, there is probably most often not much that can be done other than to show by action--increases in interest rates--that one is sticking to one’s objectives. - More difficult to assess and manage are situations in which the currency’s depreciation is a consequence of weakening credibility in the general direction of economic policy. Investors in the financial market may, for example, think that the risk has increased for a change of regimes in the future, when the target for price stability may be abandoned at least temporarily as a result, for example, of government financial problems. In Sweden this was probably the most common explanation for the recurrent periods of exchange rate turbulence during the 1990s. In situations of this type, monetary policy itself cannot do the job, and what is worse, in the short term the costs of monetary policy measures may be considerable.
This is one of the many lessons that we have learnt from the crisis, but certainly not the only one. There are also important lessons regarding the economic governance of the euro area, the sustainability of public finances, the regulatory reforms of the financial sector, etc. to be learned. In my address today, I would like to share with you some reflections on what we need to do in order to draw such lessons and what, in my view, represents the way forward for the European Monetary Union. II. The state we are in  The idea that highly integrated financial markets are always conducive to macroeconomic and financial stability is not the only economic notion that has been challenged by the crisis. The current crisis was preceded by the “Great Moderation”, a period of reduced macroeconomic and financial volatility and improved economic performance that began in the mid-1980s. During this period, the progression of economic history as a succession of cyclical booms and busts seemed to have come to an end in many advanced economies. Some economists even referred to specific countries as “Goldilocks” economies, with this term meaning their supposed ability to grow on a sustained basis at a rate that was neither too high to generate inflation nor to low to cause unemployment. The trust in the ability of our financial markets and economies to smoothly overcome any disturbances came to an end in the summer of 2007, when the financial “turmoil” began.

It is these risks that are particularly relevant for risk management in banks, following an economic dictum that has been attributed to several people over the years, including an author of science fiction novels and an American General. The general was Leonard Porter Ayres, who also worked as a statistician and economist. When asked by a group of reporters to impart some words of wisdom gathered from his long years of economic study, Ayres replied: “It is an immutable economic fact that there is no such thing as a free lunch.” I am pretty sure that everyone in this room has used that phrase at least once. Translated into the language of finance, it reads: whoever wants to make a profit has to take a risk. The returns, however, are mostly generated right away, whereas the risk might only materialise in the future. This is where good risk management comes into play. Banks and the entire banking system have indeed become much more resilient to shocks. Nevertheless, good risk management is still necessary. It should enrich decision-making by providing a medium and long-term view, and it should highlight the downside to every upside. In a way, risk managers have to be the spoilsports. The same is, of course, true for banking supervisors. One of the tasks of banking supervisors is to ask questions when things are going well, and to intervene when they are not. Therefore, risk managers, as well as banking supervisors, explicitly advocate a forwardlooking, risk-based approach.
Excluded observations account for approximately 0.5% of the entire sample. Notes: For all models, the dependent variable is “failure”. Standard errors are shown in brackets. 26  (*)  Significant at the 10% level  (**)  Significant at the 5% level  (***)  Significant at the 1% level  BIS central bankers’ speeches  Table 6: CAMEL-based determinants of bank failure for FDIC-insured banks(a) Variable Risk-based capital ratio Asset quality Efficiency ratio Return on assets Liquid asset ratio McFadden R2 Likelihood Ratio (Chi-square)  Coefficient –0.04*** (0.01) 0.05 (0.03) 0.001 (0.001) –0.16** (0.07) –0.07*** (0.01) 0.075 261.12***  (a) Sample excludes outlier banks with very large risk-based capital and leverage ratios. Excluded observations account for approximately 0.5% of the entire sample. Notes: For all models, the dependent variable is “failure”. Standard errors are shown in brackets. BIS central bankers’ speeches  (*)  Significant at the 10% level  (**)  Significant at the 5% level  (***)  Significant at the 1% level  27  Chart 1: Number of employees in UK regulatory (a) bodies and the finance industry, 1979–2012  Chart 2: Number of employees in US Federal regulatory bodies and number of commercial (a) banks, 1935–2010  Source: Bank of England, Securities and Investment Board, Financial Services Authority annual reports, Capie (2010), Office for National Statistics and Bank calculations.

(*)  Significant at the 10% level  (**)  Significant at the 5% level  (***)  Significant at the 1% level  BIS central bankers’ speeches  25  Table 4: Horse-race between different indicators of bank solvency for major global banks(a) Model 1  Model 2  Model 3  Model 4  Model 5  –0.23 (0.20)  T1 Risk-based  –0.55 *** (0.18)  T1 Leverage  –0.44 * (0.25)  CT1 Risk-based  –0.70 *** (0.23)  CT1 Leverage  –0.08 (0.05)  Market risk-based Market leverage McFadden R2  Model 6  0.023  0.177  0.070  0.203  0.071  –0.20 *** (0.06) 0.216  Model 7 0.97 (1.47) –0.48 (2.04) –1.52 (1.36) 1.22 (1.99) 0.13 (0.11) –0.35 * (0.20) 0.317  (a) Regression based on a smaller sample (45 global banks). This is because of missing information on market capitalisation (where banks were not publicly listed) or on consistent pre-crisis estimates of Core Tier 1 capital. Notes:  For all models, the dependent variable is “failure”. Standard errors are shown in brackets. (*)  Significant at the 10% level  (**)  Significant at the 5% level  (***)  Significant at the 1% level  Table 5: Risk-based capital versus leverage, FDIC-insured banks(a) Variable  Model 1  Leverage ratio  –0.01 (0.01)  Risk-based capital ratio  Model 2  Model 3  –0.06*** (0.01)  0.27*** (0.03) –0.22*** (0.03)  (a) Sample excludes outlier banks with very large risk-based capital and leverage ratios.
The bank was taken over by the estates of the realm, and is the precursor to the Riksbank which was founded in 1668. There were countless bank runs in the United States at the end of the 1920s and the beginning of the 1930s. Argentina and Indonesia were hit at the end of the 1990s and the beginning of the 2000s. And as recently as September 2007 the British building society Northern Rock suffered a bank run. I shall return to this shortly. It is clear that even the most recent financial turmoil is a question of an imbalance between assets and liabilities, although the assets and liabilities have come to look rather different than in the fictitious example. Essentially this is a question of the same thing, namely lending at long durations that is funded in short durations. The awareness of this inherent instability and the difficulty in seeing where the risks lie meant that there was sometimes too little liquidity in parts of the money market. What is new is that banks around the world have become much more dependent on the securities markets for managing risks and financing themselves. In 2007 we had concrete evidence of how sensitive the banks have become to liquidity shocks in these markets. Problems in the securities markets have almost never before returned to the bank systems with such force. The importance of financial stability When Northern Rock suffered problems, the British authorities took a number of exceptional measures.

There is an evident risk that the crisis management can be prolonged by political negotiating games. When the stakes are high, there is a risk that many countries will choose to play their cards close to their chest as long as possible. In the worst case scenario, this could lead to crisis measures not being taken in time, which could have devastating results for all those involved. In September 2007 a Nordic-Baltic crisis exercise was organised around a financial crisis scenario. Taking part in this exercise were the central banks, financial supervisory authorities and finance ministries of all of the five Nordic countries and the central banks of the Baltic states. Without going into any details, I can reveal that the exercise brought to light many deficiencies in coordination – both between authorities within individual countries and across national boundaries. In particular, it showed that measures taken unilaterally by the authorities in one country can easily have disastrous consequences for financial stability in other countries. It also further emphasises the importance of continuing to develop the cooperation and ensuring that national regulations do not form an obstacle to cross-border crisis management. In a crisis it is essential that the authorities in different countries understand one another’s assessments of the situation and preferable that they can reach a common view. This makes demands for common criteria and joint terminology. It must also be possible to coordinate various measures across borders, such as emergency liquidity assistance and payments of deposit guarantee funds.
Pension reforms if correctly done can also have a significant impact on financial market development when pension funds are encouraged to act as institutional investors involved on the capital market. Participation of pension funds in the capital market can lead to improved clearing and settlement on the one hand, as well as provide more sensitive price information – resulting in better resource allocation, and increasing the availability of capital for financing development. In some developing countries such as Chile, pension funds facilitated internal resource transfers, enabling the government to service its international debts without extreme fiscal adjustment and avoided the drainage of resources that emanates from foreign debt payments. In addition, the funds provided a source of borrowing that did not require excessively high interest payments. Africa can learn from such experiences and undertake necessary reforms to unlock this kind of resource. Pension funds can therefore offer African countries an alternative source of development finance, provide an avenue for restructuring public finances and for the promotion as well as development of the capital markets. 3  Harvey Morris, ‘African states tap pension funds’, in the Financial Times, 24 October 2007. BIS Review 126/2009  3  (c)  Stock markets  Another important avenue for harnessing resources for the financing of development on the continent is the stock market. Stock markets have grown in number across the globe over the past two decades and emerging and developing country markets have accounted for a significant share of this growth.

The discovery of resources on the shores of the Continent should be carefully handled so that the funds that are realised as much as possible are used in the development of the African continent. Exploitation of the natural resources by foreign investors should ideally involve value addition on the continent. This is one way through which Africa would benefit from its rich resource base. 4  BIS Review 126/2009  Conclusion The challenges of mobilizing domestic resources for the medium-to-long term development require higher levels of domestic resource mobilization. Africa needs a paradigm shift in terms of sources of development finance. This is because the resources that it has domestically in terms of official international reserves and pension funds can be used to finance infrastructural development and investments in other productive sectors of the economy. Capital markets can also be a source of finance for private and public sector investment projects. Africa needs to maintain the sound macroeconomic policies which led to the positive growth that the continent has witnessed in the last decade, and continue with policy reforms aimed at reducing the cost of doing business. This is the best way to ensure that domestic resources as well as foreign resources have a positive and long lasting impact on the African continent’s economic growth and poverty reduction outcomes. BIS Review 126/2009  5
While inflation of 4 per cent may not sound much higher than 2 per cent, the difference is large enough that people would have greater need to take account of inflation explicitly in their decision making, especially if it also becomes more variable. Third, the case for creating more room to cut policy rates rests on two assumptions: that other policies to boost aggregate demand are unavailable or inefficient; and that shocks that lead to the ZLB being a significant constraint are reasonably frequent. As far as the former goes, as already noted, there is evidence suggesting that unorthodox monetary policies have had some traction and usually one would also expect that there would be scope to apply a fiscal stimulus too. But there is clearly less room for manoeuvre if a banking crisis also begets a fiscal crisis, as often turns out to be the case. Banking crises typically also raise credit spreads, which cannot be offset by a cut in the nominal policy rate by central banks caught at the ZLB. The case for raising the inflation target to minimise the risk of these situations arising depends crucially on how frequently they are expected to occur in the future. To the extent that the Great Contraction represents a once-in-a-century event and the subsequent changes in regulation and financial market structure are effective in reducing the likelihood of a repeat, the case for raising the target rate of inflation will be correspondingly weakened.

New projects such as the Konkola Deep Mine, Lumwana Mine and Nickel Mining in the Southern Province have come on board in addition to other mining initiatives going on in most provinces of the country. Another key development in the sector has been the revival of zinc production, once, one of Zambia’s metal exports in the 1970s. Sable Zinc of Kabwe (owned by Metorex) has commenced processing the mining dumps in Kabwe. Ladies and Gentlemen, although investment in the mining sector requires massive capital by large conglomerates, the majority of our citizens are increasingly involved in the sector  BIS Review 77/2008  1  through the supply of goods and services to support the mines. However, the main challenge to the growth of this sector has been the availability of finance. Most companies struggle to find finances to meet their contract obligations. The need for financing is immense especially as the mining sector is growing year on year and will need to acquire new equipment and spare parts as the mining companies invest heavily in the development of new mines. It is gratifying to know that the USD 50 million facility in favour of the Zambian Mining Services Companies being signed today, is expected to assist major players in the supplies and services sub-sector of the mining industry to execute contracts with mining companies.