samchain/econo-pairs-v1 huggingface dataset:
Nevertheless, the ability to meet initial margins and variation margins can pose severe liquidity constraints for market participants, especially in non-banks financial institutions, and may thus exacerbate liquidity stress in the system. The proper calibration of haircuts is therefore essential so that in times of crisis they do not behave procyclically and do not have to be increased abruptly. Several international working groups are currently exploring the issues related to margin requirements, in particular in the context of the market turmoil observed in the early stages of the Covid crisis. More recently, the default of Archegos on its margin calls, at the end of March 2021, also highlighted the significant risks to which certain banks were exposed through their services to non-bank financial entities, through their prime brokerage activity. Both adequate dimensioning of margins, and requirements of high quality collateral prove critical. At the level of the European Union, the last step of the compulsory use of the initial margins will come into force in 2022 in application of the EMIR regulation, and should help contain such developments. And the ESRB issued in June 2020 recommendations to address liquidity risks arising from margin calls. Nevertheless, we should remain alert and critical in terms of supervisory actions and regulatory requirements to ensure that best practices are enforced. b) The second issue is the sovereign-bank-corporate nexus European banks’ ownership of sovereign debt has increased in the course of the year 2020.

A number of factors have contributed to this outcome, including flight to safety flows, the presence of the Eurosystem on the secondary market, the hunt for yield by investors, and the success of the first European common debt issues. Liquidity indicators also displayed good resilience. For instance, the depth of the secondary market for French government negotiable securities, measured by the average volume of daily transactions (excluding Eurosystem purchases), has remained at a historically high level,albeit at 1/4  BIS central bankers' speeches  an increased transaction cost, more pronounced for non-core sovereign debt markets, but at levels far below those of previous crises. The ownership structure of European debt securities has also contributed to and reflects this resilience. According to data from the ECB1, non-residents of the euro area were holding a significantand stable 44% of euro area government debt at the end of 2020,willing to invest in EUR, via highly liquid securities. Among residents, long term investors are prominent investors : the central banks were accounting for 21% of total outstanding debt, for the euro area, investment funds, insurance corporations and pension funds were holding about 11%, while other monetary financial institutions or banks for 19%. b) Let me now turn to the repo market and its resiliency during the Covid crisis. Under normal market conditions, the repo market is very liquid since large banks dedicate specific balance sheet capacity for this activity.
BIS Review 69/2004  5  Figure 2 Oil price average level and volatility  40 35 30 25  2 8 U SD +/- 4 .5  20 15  18 U SD +/- 3 .5  10 5 86  88  90  92  94  96  98  00  02  Mean [Median]  S.D.

Management of the Petroleum Fund The Petroleum Fund is currently one of the world’s largest institutional investors, on a par with the largest pension fund in the US and the largest European fund. With the rate of growth that can be expected, the Petroleum Fund will be larger than these two funds in the next year or two. Norges Bank manages the Petroleum Fund on behalf of the Ministry of Finance. This is a challenging task that has been given high priority within the Bank. We have established what we believe is a professional management organisation. Performance is measured against the benchmark portfolio defined by the Ministry of Finance and the results are published in a quarterly report. So far, Norges Bank has achieved an excess return every year. Management costs have been low. In terms of net earnings, Norges Bank has added close to NOK 15bn to the Fund. The total return for the Fund is largely determined by the benchmark portfolio. Since 1997, the real return has averaged 4.2 per cent. Of this, 0.4 percentage point can be attributed to active management, for which Norges Bank is responsible. The Fund has become a large investor in international equity markets. Norges Bank recently established a group dedicated to actively supporting best practice corporate governance in companies where the Fund has ownership interests. Norges Bank already makes extensive use of its voting rights and has voted in about 17 000 cases this year.
And within the banking system, to strengthen even further the core – the globally and domestically systemic banks which provide the key connections in the financial system and with financial markets. We have, as I have noted, further to travel through the economic stresses of the COVID crisis. The extent of the economic damage remains very uncertain. But as far as the initial phase is concerned, the banking system has by and large been able to absorb a very sharp financial market shock and the large prospective losses. In the UK, the desktop stress test carried out by the Financial Policy Committee on the basis of the scenario for the economy in the MPC’s May Monetary policy Report3, indicates the banks could face up to £ of credit losses over the next two years. There is of course great uncertainty about the future evolution of the pandemic, of the health policy measures necessary to contain it and of the consequent economic impact. The stress test scenario is only one possible economic path through the crisis; more adverse paths are possible. But even after the very significant losses indicated by the stress test, considerable resilience remains in the core banking system to deal with more adverse outcomes: the impact of the stress test would exhaust a little less than half of the loss absorbing capital buffers in the system. Liquidity failure, as we learned 10 years ago, can damage the banking system faster than credit impairments.

Over the years, the DFIs in Malaysia have evolved in tandem with the country's economic transformation, especially to support developments in the strategic and new growth areas such as high technology, infrastructure, SME development and micro finance. Bank Pembangunan was entrusted by the Government to support infrastructure development in expediting economic recovery following the financial crisis in 1997. Likewise, in line with the strategy to promote capital-intensive and high technology industries, Bank Industri was entrusted with the task of supporting advanced industrial development, such as engineering activities and computer software development. In the Malaysian financial system, the banking institutions form the largest component of the financial system, constituting about 51% and 78%, respectively, of the total assets and loans of the financial system. In contrast , the total assets and loans of DFIs as a group, respectively accounts for about 5% of the financial system. Nevertheless, these DFIs have been instrumental in providing the complementary financial services needed to support development of the targeted sectors and activities. One particular notable development is the support provided by the DFIs for SMEs. Like many other economies, in Malaysia, the SMEs form the backbone of the economy with high potential in fostering the forward and backward linkages of activities along the value chain. While SMEs constitute about 90% of total establishments in the manufacturing sector, at the  3/5  moment they only provide about 30% of employment in the sector and contribute about 6% to Malaysia's GDP.
Accordingly, we will continue to monitor very closely all developments over the period ahead. As regards fiscal policies, many euro area governments are faced with high and sharply rising fiscal imbalances. If not addressed by a clear and credible exit strategy, this could seriously risk undermining public confidence in the sustainability of public finances and the economic recovery. The very large government borrowing requirements carry the risk of triggering rapid changes in market sentiment, leading to less favourable medium and longterm interest rates. This in turn would dampen private investment and thereby weaken the foundations for a return to sustained growth. Moreover, high public deficits and debts may complicate the task of the single monetary policy to maintain price stability. The Governing Council therefore calls upon governments to communicate and implement in a timely fashion ambitious fiscal exit and consolidation strategies based on realistic growth assumptions, with a strong focus on expenditure reforms. Tax cuts should only be considered over the medium term, when countries have regained sufficient room for budgetary manoeuvre. In this regard, the recent ECOFIN Council conclusions, which call for consolidation to start in 2011 at the latest and to go well beyond the structural benchmark of 0.5% of GDP per annum, represent the minimum requirement for all euro area countries. The success of fiscal adjustment strategies will also depend crucially on the transparency of the budgetary procedures and the reliability and completeness of government finance statistics.

But the latter would surely have made it even worse had it be in place for longer. Looking forwards, we do need strong judgemental supervision, and we do need the powers to separate trading activities into separate legal entities as the ICB has proposed. As Paul Volcker recently pointed out, customer banking involves a fiduciary duty, whereas trading with counterparties does not. My only caveat here, and it is a very important one, is that the fiduciary duty of customer banking was sadly lost in the wave of mis-selling. Judgemental supervision has already been applied to correct the excesses of pre-crisis activities. Investment banks have been forced to lower leverage and raise capital, and we are seeing the consequences. The monoline mortgage bank model – in the commercial not mutual-sector has been restructured heavily already. No demutualised building society survives as an independent entity today. The high return on equity with low cost of equity business model is dead. Of course, there is more to be done, and I have set out the framework within which I think about the capital needs of the banking system. Above all, simplicity is about clear focus and a firm resolve. Thank you  4  BIS central bankers’ speeches
BIS Review 21/2009  9  Some argue that the framework imposed a straightjacket on central banks including ours by setting too narrow a remit. Interest rates could only be changed when there was a clear and present danger to the near-term outlook for consumer inflation. So they could not be used to prevent imbalances building up. Action was almost bound to be too late. This critique takes an unduly narrow interpretation of the framework. There is nothing in the MPC’s remit which would prevent us from consciously allowing inflation to undershoot the target for some time, in order to avoid a significant overshoot at some point in the future. Or as my fellow Deputy Governor Charlie Bean put it: “a central bank seeking to stabilize inflation and output over a sufficiently long time horizon, should necessarily aim to incorporate the possible adverse long-term consequences of an asset price bubble in its deliberations” Intelligent inflation targeting on these lines run by independent central banks still seems to me the best foundation for macroeconomic policy. But that does not mean the current framework or the way we explain it is perfect. First a point on communication. Inflation targeting was designed not just to control inflation but as the best policy framework for promoting wider economic prosperity and stability.

The question is why we didn’t see the problems in the Stability and Growth Pact from the beginning? Perhaps because we were fortunate to have something that could work as a temporary replacement for rules: clear objectives, strong leadership and the market as a quickly reacting judge. Most countries wanted to meet the convergence criteria and thereby join the euro area. Germany led the way, both in terms of its economic size and its example of fiscal discipline. Now the objective of joining the euro has been achieved for many countries, and, in addition, Germany has lost its leading role and the markets react less to fiscal laxity. Instead of national leadership towards clear objectives we have seen the opposite – the political exploitation of the gap between the national and European level. The requirements of the Pact are blamed on heartless “accountants in Brussels”, and when a majority within the countries puts narrow national political interests first the agreed rules become moot – “peer pressure” becomes ”peer protection”. Incorrect facts have been more or less deliberately sent to the Commission ahead of sensitive elections. A study by Barclays Capital shows that during the years 2000-2003 growth projections were overestimated by 1.5 percentage points on average each year by the euro area countries, leading to fiscal balances turning out worse than expected on average by about 1% of GDP per year.
This includes how we should conduct supervision, how we formulate regulations and how we organise ourselves to be able to manage financial crises, if these should arise. In Europe, the EU cooperation gives us a joint forum for tackling this challenge. The EU’s Financial Services Action Plan was launched in 1999. It has been a driving force behind the development I described earlier. The measures proposed in the action plan have now largely been implemented. However, much remains to be done. This is evident when one looks more closely at the EC regulations that form the basis for the national frameworks for supervision and crisis management. The regulations we have in the EU at present and the way we organise ourselves is not adapted to the new conditions prevailing due to the increased integration. One problem is that the responsibility for supervision is not adapted to banks with cross-border operations. Within the EU the supervisory responsibility for banks is governed by the principle which in practice imbues all EC regulations in the financial field, namely the home country principle. This means, in brief, that the responsibility for supervision lies with the country where the bank is legally domiciled. To illustrate how this works, we can imagine a bank with branch offices abroad. The bank and its branch offices are regarded as one single legal entity. They are therefore governed by the regulation and supervision that apply in their home country. How the operations are actually divided up between the different countries in principle has no relevance.

Above all, it would mean that individual countries were not forced to pay large compensation amounts to depositors in other countries. I am aware that this type of suggestion is far-reaching and controversial. It would mean a transfer of power from the member states to the EU. But the suggested arrangements would only apply to the banks conducting cross-border operations of sufficiently large scope to warrant EU-wide measures. The main advantage of such a “supranational” arrangement is that the public frameworks for regulation, supervision and crisis management can correspond to the actual structure of the financial market. When supervision and crisis management are centralised, this also creates the conditions for reducing the administrative burdens on the banks and at the same time managing the risks where they actually arise. Both the banks and the individual countries would be the winners in such a system. Conclusion My main message today has been that financial integration is increasing rapidly in Europe, and that this leads to better conditions for economic growth, but that it also means that regulations, supervision and arrangements for crisis management must become more international. Financial integration provides us with a number of new challenges and we must work together to find solutions to the problems that arise. Thank you! 4  BIS Review 38/2007
* 1998 prices  BIS central bankers’ speeches  Chart 9 – Wealth by type  Chart 10 – Mean versus median wealth* £ bn  Wealth, £  120  500,000  100  400,000  800  300,000  600 400  2008  2010  2012  2014  200,000  200  Median net wealth inc. pensions  0  Mean net wealth inc. pensions  100,000  0 Private Pension Wealth 2012 2014 2008 2010 Physical Wealth* Sources: Wealth and Asset Survey, ONS, Bank calculations. Financial Wealth (net) * Property, physical and financial wealth excluding private pensions. Property Wealth (net) Total Wealth (including Private Pension Wealth  Sources: Wealth and Asset Survey, ONS, Bank calculations. *July 2006 to June 2008 estimates for physical wealth are based on half sample. Chart 11 – Regional GDP per head* North East Yorkshire and The Humber West Midlands London South West Scotland  North West East Midlands East of England South East Wales Northern Ireland  2007 = 100  110 105 100 95 90  2007  2008  2009  2010  2011  2012  2013  2014*  85 2015**  Sources: ONS, Bank calculations. * Regional GVA (income approach) deflated using the GDP deflator. 2014 is provisional ONS estimate. 2015 figure is indicative, estimated using the average annual growth rate from the preceding two years.

They may also be linked to the stagnation, or in some cases falls, in disposable incomes in some regions, age groups and income cohorts. A third area of perceived deterioration concerns income. With a sizable fraction of households having seen their disposable incomes stall, especially once account is taken of housing costs, that should perhaps come as no surprise. One metric often looked at here is poverty. For example, Charts 30 and 31 look at the fraction of households whose incomes are below a fixed threshold (“absolute poverty”) and below 60% of median incomes in the UK (“relative poverty”), in both cases after housing costs. 13 It does so for three cohorts: under-16s, those aged 16–65 and the over-65s. Whether in absolute or relative terms, the story is roughly the same. Among those over-65, levels of poverty have declined steadily both prior to and following the crisis, if at a less rapid rate over the past few years. That is not true, however, of the 16–65 cohort. Their levels of poverty have tended if anything to drift upwards slightly over the past few years. In other words, poverty levels among those of working age have increased at the same time as the economy as a whole has recovered fairly robustly. This, too, puts a somewhat different gloss on whose recovery this has been. Monetary policy implications What, then, does this mean for monetary policy? Around a year ago, my assessment of the UK economy was a cautious one.
This coincided with monetary policy being increasingly aimed at holding inflation in check. A growing number of countries had introduced explicit or implicit inflation targets and monetary policy had increasingly been delegated to independent central banks. Once inflation expectations had been anchored, it became easier to stabilise the real economy as well. Many felt that an important reason for the favourable developments in the world economy was that these changed enabled monetary policy to be conducted in a better manner than before. 1 Moreover, during the period prior to the crisis financial stability was increasingly being taken for granted. It was assumed that the financial markets were on the whole efficient and functioning smoothly. Financial crises did occur, but most of the countries affected were able to get back on their feet relatively quickly. The successful management of the IT bubble at the turn of the millennium supported the impression that if crises occurred, they could be dealt with relatively simply and efficiently. Japan, where the problems following the crisis at the beginning of the 1990s nevertheless had been long-lasting, was regarded as a special case. Although developments in Japan were regarded as interesting, the lessons perceived were not thought to indicate that anything similar could happen in, for instance, the United States or Europe. In this apparently stable macroeconomic environment, interest in research into the interaction between the financial sector and the real economy gradually declined.

During the recovery phase after the crisis, the Riksbank has also tried to reduce the risk of exaggerated indebtedness and overly-inflated housing prices by conducting slightly less expansionary monetary policy than would otherwise have been the case. 6  See, for example, Mishkin (2007) and Cagliarini, Kent and Stevens (2010). Heikensten (2008), writes: “With house prices increasing drastically, risks for the real economy have been perceived to be bigger. On a few occasions in 2004–05 the Riksbank did for that reason not follow a strict inflation-targeting rule. We “leaned against the wind”, in the sense that we did not take rates down as quickly as we could have done considering the outlook for inflation alone.” The development of house prices and household debt have long been on the agenda of the Riksbank’s Executive Board, see for example Srejber (2002). 7  Ingves (2007). I said, for instance: “[W]hen we observe long periods of high growth rates in asset prices and debt, growth rates that appear to be unsustainable in the long run, our view is that it is not reasonable to completely ignore that there may be risks associated with this[. ]…What this view has meant in practice is fairly marginal changes in the timing of our interest rate changes, and substantial oral and written focus on the issue.” This problem is also taken up in Ingves (2010).