samchain/econo-pairs-v1 huggingface dataset:
Both the leverage ratio and the calibration of MREL are not intended to focus on the riskiness of a firm’s balance sheet. The leverage ratio is a relatively simple metric of capital over a firm’s total 3/5  BIS central bankers' speeches  exposures, and in this way it acts as a guardrail against uncertainties in the measurement of risk, which – from bitter experience of the problems which can sometimes arise from risk-weighting – I consider very important. As a backstop to the system, the MREL calibration focuses heavily on the potential impact of a failure, rather than the likelihood of the failure. This is in line with the resolution authority’s objectives and mandate. It is not surprising then that when you combine the two, the resulting capital requirements may feel high to mid-tier firms that are not designated as systemic and, on the face of it, appear to engage in lower risk activities. The third link between the two reviews is that both reviews are also considering the scope of each framework. When the PRC and FPC finalised their leverage ratio framework in 2015 we decided to apply the framework to our largest and most systemic firms and return to the question of whether to include other firms in scope in the future.

So, as you can see, designing a simpler framework is not a simple task! Our discussion paper elaborates on all these choices, and I hope to have whetted your appetite to get involved in the discussion by responding to our paper. Leverage Ratio and MREL reviews Next, I want to move on to something a bit more relevant in the shorter-term to some of the larger BSA members with us today – the links between the leverage ratio and MREL reviews. I am conscious that at the moment this may be relevant to only a handful of you, so in case you are still listening to my speech I will aim to be brief. The Prudential Regulation Committee and the Financial Policy Committee are conducting a review of the UK leverage ratio framework in light of the now-finalised international standards.3 At the same time, the Bank, as Resolution Authority, is conducting a review of its MREL framework and how it applies to mid-tier firms.4 As many of you know, this alignment of timings is not coincidental as the two are closely linked. How so? At first look, one link is through the calibration of MREL. For firms subject to bail-in resolution strategies, MREL is calibrated as twice the applicable minimum requirements set by the PRA. So if a firm is subject to a minimum leverage ratio requirement, this will typically be doubled-up in their MREL. But the two are linked in another way, which gives this doubling-up an additional significance.
In the first analysis there is comfort from the improved risk management and supervisory processes that have been developed over the past decade. But we need vigilance in terms of the possible knock-on implications for the financial systems. Moving to a more specific, and very topical, example I would like to mention complex financial instruments. We have all read alarmist stories. But Alan Greenspan often makes the point that one may over estimate some of the risks and under estimate the benefits. Shocks such as the Asian crisis, LTCM, 9/11 have been successfully absorbed by the financial system. The fact is that they have not triggered a systemic financial crisis and the instruments themselves contribute to flexibility and resilience in the system. They enable financial institutions such as banks to transfer or diversify risk to a wide variety of participants including mutual funds and insurance companies, and hence reduce concentration. My own view is that this may be true but equally we would be unwise to take too much comfort for granted. At the Bank, we certainly feel the need for vigilance. We need to understand the implications and threats of these instruments. We start by breaking down the whole area of complex instruments into a more granular form. We focus specifically on four key aspects. Firstly there is the question of opacity and data. It is very hard to know both where risks have been transferred from and who is now on the receiving end.

Internationally, we have contributed expertise and advice to the standard setting process via bodies such as the Basle Committee and the International Accounting Standards Board. And we contribute actively in the work of official international bodies like the Financial Stability Forum, the Group of Twenty and the G10 central banks’ Committee on the Global Financial System. On a separate tack, we have also increased our focus on insurance, where the FSA is developing a prudential approach along the lines of Basel II for insurance companies. We recently led work in the CGFS to better understand techniques of credit risk transfer and their implications - particularly important for reinsurance. We also wanted to obtain better data on who was shedding and who was taking on what risk. This should in due course allow more effective monitoring of the transfer and accumulation of risk. And earlier this year, I was myself heavily involved in drawing up the Group of Thirty study “Global Clearing and Settlement: A Plan of Action”. It detailed 20 recommendations in relation to interoperability, risk management and governance that once implemented should improve efficiency and reduce risk in securities clearing and settlement. The task now is to get them implemented: and we are involved in that process too. So in these areas we try to help to influence standards that are being set at a global level. Standards which of course also bear directly on much UK-based activity.
In the absence of a monetary policy easing, unemployment would have risen further after the crisis in every region in the UK, by an additional 4 percentage points. Around an extra 1.5 million people would have found themselves out of work. Here in the North-East, the unemployment rate today would have been over 10%, or an extra 50,000 people out of work. That is the equivalent to losing nearly seven Nissan factories. Absent a monetary policy loosening, net wealth would also have contracted across all UK regions, on average by around 20% or around £ per household. Here in the North-East, that decline of wealth would have been around £ for the average household or more than three times annual GDP per head. Without a monetary policy loosening, almost every town and city in the UK would have been painted red. Of course, it is possible these model estimates overstate the impact of monetary policy in boosting demand and asset prices. These estimates also make no explicit allowance for the fact that different regions might be affected differently by a given monetary policy stance. Nonetheless, it is clear monetary policy has played a material role in lifting all boats since the financial crisis broke. Indeed, without it, it is plausible to think the vast majority of regional boats would have sunk. (b) Distributional Impact  Even if monetary policy has lifted all boats, and could plausibly do so again if needed, that does not mean it has done so equally.

One Car, Two Car, Red Car, Blue Car Speech given by Andrew G Haldane, Chief Economist, Bank of England  Materials Processing Institute, Redcar 2 December 2016  The views are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Mauricio Armellini, Sandra Batten, David Bradnum, Ben Broadbent, Angelina Carvalho, Fergus Cumming, Jeremy Franklin, Alex Haberis, Andrew Hebden, Gabor Pinter, Alice Pugh, Tom Smith, Gertjan Vlieghe, Matt Waldron and Chris Yeates for comments and contributions. The title draws its inspiration from “One Fish, Two Fish, Red Fish, Blue Fish” by Dr Seuss, a children’s book first published in 1960, whose use of simple language contains an important lesson for economists like me. 1  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  As someone whose family hails from the North-East, and who themselves was born in the North-East, it is wonderful to be here in Redcar. Regional visits like this are crucial for the Bank of England. They enable us to take the temperature of the local economy by speaking to a broad cross-section of businesses, charities, social enterprises, schools, further and higher education institutions and trade unions. Here in the North-East, it is clear the temperature of the local economy is not as high as either you or I would wish. Despite having come down rapidly over recent years, the unemployment rate, at over 6%, is still higher than for any other region in the UK.
Policy actions may turn out to be ill-timed or miscalibrated in the face of these uncertainties. There is thus an inevitable short-term volatility in UK inflation, which monetary policy makers have  Page 6  to live with. And when the shocks driving that short-term volatility are large, then the amplitude of this short-term volatility in inflation can be large. This story remains an important part of what the UK has experienced of late. Recognising the impossibility of fine tuning inflation developments on a month-to-month basis, the MPC has long emphasised its focus on achieving the inflation target over the medium term. This medium-term orientation of monetary policy is crucial if the inflation target is to be met in a sustainable manner and monetary policy is not to become a source of inflation volatility itself. At present, the desirability of adopting this medium-term orientation is bolstered by the nature of the underlying drivers of UK inflation. The large rises in the prices of international goods and energy not only directly raise UK inflation, but will also weigh on domestic incomes and demand through the terms of trade channel. [10] As a result, in taking monetary policy decisions today, the MPC needs to take account not just of the immediate inflationary impact of higher energy prices in the coming months, but also the potential disinflationary impact of higher energy prices through weaker incomes and demand at longer horizons. This distinguishes the situation we face from that in other jurisdictions – notably from the US.

Through the years, the phrase has been simplified into “as safe as the bank”. As banks and central banks store gold and money in their vaults, their edifices have always been solid, protected by thick walls. In a figurative sense, it might be said that a safe and credible national monetary value relied for a long time on thick central bank walls insulating its internal workings from the general public. Until our time, central banks have been closed, both physically and figuratively. Central banks were shrouded in an aura of mystique, which they probably had a hand in perpetuating. Central bank governors worldwide refrained from saying too much, and what they did say often sounded cryptic. 1  The duty of confidentiality for Norges Bank employees is laid down in Section 12 of the Norges Bank Act. Violation of the duty of confidentiality is punishable under the General Civil Penal Code: “Any person who wilfully or through gross negligence violates a duty of secrecy which in accordance with any statutory provision or valid directive is a consequence of his service or work for any state or municipal body shall be liable to fines or imprisonment for a term not exceeding six months” (Section 121, first paragraph of the General Civil Penal Code).
Does that not offer a recipe for success in so many areas of our lives?   We tell our children to play less and study more, so that they can acquire the education necessary to lead productive and comfortable lives in future.   We tell ourselves to eat less and exercise more, so that we can keep in good health for a longer time and continue to enjoy good food.   Should it be any different in matters financial? What does it mean to be patient and prudent in finance? Three things.   Budget carefully    Borrow responsibly    Invest wisely  These are the three areas that MoneySENSE – our national financial education programme – will focus on increasingly. MoneySENSE – spearheaded by MAS and involving a number of government agencies – has been working in partnership with the financial industry, education institutes, and professional and consumer associations to help empower Singaporeans to manage their finances well. BIS central bankers’ speeches  1  Budget carefully Let me start with budgeting – the first area of focus. The financial questions we face in our lives are quite similar to the dilemma the children had with their marshmallows. If anything, they are more complicated. For one, marshmallows or the good things in life are usually not free. We have to pay for them with money we receive from working or from our savings. Or from borrowing.

அதாவது, நமது வாழக்ைகப் பயணத்திற்கு நிதித் திட்டமிடுதல் அவசியம். இவ்வாறு  திட்டமிடுவதற்கு,  ெபாறுைமயும்  முன்மதியும்  அடிப்பைடப்  பண்புகளாகும். The practical insights in Ponnaana Ethirkaalam are relevant not only for the Tamil or Indian community but for all Singaporeans. I understand the authors have plans to translate their book into English to reach out to more people. I congratulate MP Sellvem and Jaafar Ghany on their achievement and wish them every success in the launch of Ponnaana Ethirkaalam. Thank you. 4  BIS central bankers’ speeches
Three UK exercises have been undertaken, in 2007, 2009 and 2011, for a subset of banking assets – corporate exposures, sovereign exposures and banking exposures. Chart 3 demonstrates the range of variation in default probabilities for these three sets of asset across UK banks, while Chart 4 shows differences in risk weights across these portfolios in 2011, the most recent estimates. The range of cross-bank variation is enormous. Default probabilities differ by factors of between five and ten. Risk weights differ by a factor of between three and five. There is no sign of this range having shrunk over time. The Basel III reforms will raise banks’ capital standards by a factor of between three and four. These cross-bank differences would be sufficient to absorb fully those reforms. The Basel Committee has recently undertaken its own HPE on a wider range of international banks, focussing on the trading book (BCBS (2013)). Chart 5 summarises the range of variability in capital requirements for certain of the trading book metrics (VaR, stressed VaR (sVaR) and the Incremental Risk Charge (IRC)), while Chart 6 focuses on the IRC charges for a set of particularly complex models.2 The variation is again enormous. Calculated trading book risk weights differ by factors of three to five, even for simple metrics such as VaR. For some of the more complex, such as IRC, the range of variation needs to be shown on a log scale. For some portfolios, it runs to three figures.

Complexity has meant that avoidance and arbitrage can flourish behind a curtain of opacity. And self-regulation has meant that even as one wormhole is closed, others can be created in their place. Taken together, this evidence does not paint an especially encouraging picture. Many of the intended aims and purported advantages of a complex, risk-based regulatory approach may not have materialised in practice. Worse, some of the assets of the risk-based approach may even have become liabilities. 6  BIS central bankers’ speeches  Unintended consequences So much for the intended consequences of the shift to self-regulatory standards. What of the unintended consequences? Three are worth noting. (a) Cost and compliance First, regulatory complexity comes at a cost – the cost of compliance. These costs are borne, in the first instance, by the regulator and regulated firms. The costs of moving to Basel II, and the emergence of internal models, are difficult to calculate. But external estimates put it at tens of billions of dollars. For European banks, the costs of implementing Basel III are estimated at over 70,000 jobs per year (Harle et al (2010)). For US banks, the costs of Dodd-Frank are also estimated to be tens of thousands of jobs. The costs of Solvency II, the new capital standard for European insurance companies, have been put at tens of billions of euros – and it is unclear even whether this standard will be implemented.
For example, in July 2016, the Desk purchased approximately $ billion in agency MBS across only 10 different TBA contracts; upon settlement of those transactions the following month, SOMA received almost 2,000 different individual MBS securities. In addition, the TBA market trading convention allows for the use of dollar rolls (which extend the settlement date by one month) and coupon swaps (which allow the specific TBA contract being purchased to be switched). These trading tools have been used to facilitate efficient settlement and can alleviate market stress.17 The liquidity and market depth provided by the TBA trading convention facilitate the Desk’s ability 3 / 10  BIS central bankers' speeches  to conduct large-scale asset purchases in a non-sovereign market and to do so at a relatively fast pace without hindering market functioning. For example, the Desk purchased more than $ trillion agency MBS in 2009 and almost $ billion of agency MBS in 2013. These purchases allowed the SOMA portfolio, which owned no agency MBS at the end of 2008, to expand its agency MBS holdings to approximately $ trillion by October 2014.18  SOMA agency MBS holdings have been maintained near this level since the end of the latest purchase program on October 29, 2014. These holdings constitute approximately 10 percent of GDP and account for almost one-third of the universe of fixed-rate agency MBS.

Through a series of large-scale asset purchase programs (LSAPs), the Federal Reserve’s balance sheet expanded to include more longer-term Treasury securities and two additional asset classes, agency debt and agency mortgage-backed securities (MBS).1 Agency MBS currently represent more than 40 percent of the System Open Market Account (SOMA) domestic portfolio.2  Furthermore, in order to maintain the size of the SOMA’s agency holdings, the New York Fed’s Open Market Trading Desk (the Desk) continues to reinvest principal paydowns on agency MBS and agency debt into agency MBS each month.3 In my remarks today, I will share some reflections on LSAPs at the ZLB and the flexibility that access to the agency MBS market gives the Federal Reserve to execute such programs. Before I begin, however, let me remind you that the views I express are my own and do not necessarily reflect those of the Federal Reserve 1 / 10  BIS central bankers' speeches  Bank of New York or the Federal Reserve System. Large-Scale Asset Purchase Programs Currently, all the major advanced-economy central banks are either at or close to the zero lower bound.
During that period, inflation has ranged from a low of 2.1% to a high of 3.2%. The experience of the past decade has been that low and stable inflation has gone hand in hand with more stable growth of output and employment. Total output in the economy has now increased for 28 consecutive quarters – an unprecedented period of positive growth. And unemployment, as measured by the Labour Force Survey, has fallen from a peak of 10.7% in 1993 to its current rate of 5.9%, the lowest level for nearly twenty years. The current outlook is for continued growth with low inflation. If Britain is to retain this degree of macroeconomic stability, then there will be periods when interest rates will rise and periods when they will fall. For some commentators, interest rates can never be too low. But for too long there has been a view that interest rates should rise only when necessary, and should be lowered whenever possible. That asymmetric response was a recipe for instability. The current monetary policy regime has been designed to lock in the greater stability of both inflation and output. There are three key elements in the regime. First, there is a clear and unambiguous objective for monetary policy – an inflation target of 2½% – set by the Government.

More importantly, we believe that by working together in partnership, Vietnam and Singapore can present an even more compelling proposition to global investors and to raise the profile of ASEAN markets. Vietnam and Singapore have always enjoyed strong economic linkages. Bilateral trade between Singapore and Vietnam rose by 8.6% to $ billion in 2006, making Singapore Vietnam’s 4th largest trading partner. Likewise, Vietnam is Singapore’s 14th largest export market, with over $ worth of exports in 2006. In the last few years, we have witnessed how Vietnam’s economy has flourished, spurred by an impressive growth rate of more than 8%. Vietnam is now Asia’s secondfastest-growing economy, trailing only China’s. Touted as Asia’s newest economic tiger, we have seen Vietnam’s stock market index surged 144% last year and its market capitalisation developed from less than $ billion to more than $ billion now. These results have been due to Vietnam’s commitment towards market liberalization and its steadfastness in working towards your accession into the World Trade Organization. Vietnam’s strong economic story has attracted investors from across the globe, attracting foreign direct investment of $ billion in 2006. As Vietnam’s economy continues to boom, your capital markets will also be developing just as rapidly. It is thus important during this dynamic phase of growth that we work closely together to develop more robust capital markets which are efficient, well-governed and will draw sustained investor interest. The Vietnam-Singapore Listing Preparatory Program was developed with that intent.
Although it may not always be clear what story best fits a particular statistical movement, it is sensible to be alert to such developments and try to understand the signals which they may give. 2  BIS Review 91/2001  Operations It may be considered natural for central banks, like any other financial institutions, to be active on their own account in the derivatives markets. Nevertheless, there are perhaps one or two cautions which might apply in the case of central banks. If a central bank is trading for profit - as it would usually be when, for instance, managing its foreign currency reserves- it may be presumed to follow the normal trading strategies of any portfolio manager, within specified guidelines and subject to appropriate risk controls of course. Derivatives may usefully be part of that, providing an efficient avenue for pursuing trading or hedging opportunities. It seems entirely reasonable for the central bank to be allowed to operate in this way, but, in derivatives as in the cash markets, the central bank may need to balance the objectives of fund management against those of its own monetary or exchange rate policy. There is also a question whether derivatives should be used as a deliberate tool for monetary policy purposes. Typical examples would be use of foreign exchange forwards or options to assist in maintaining exchange rate stability.

This is perhaps a rather dry topic and I feel sure that there are many more interesting and challenging aspects of derivatives which will be discussed during these two days of seminars related to the Derivatives Expo. 2  Record of discussion of the Exchange Fund Advisory Committee Sub-committee on Currency Board Operations on 5 November 1999, reproduced in HKMA Quarterly Bulletin, February 2000. BIS Review 91/2001  3