samchain/econo-pairs-v1 huggingface dataset:
Paul Tucker: Shadow banking – thoughts for a possible policy agenda Speech by Mr Paul Tucker, Deputy Governor for Financial Stability at the Bank of England, at the European Commission High Level Conference, Brussels, 27 April 2012. *  *  *  It is excellent that the EU Commission has published a consultative paper on shadow banking and is holding this conference today. The Commission’s paper fits well with the approach that the G20 Financial Stability Board is taking. The issues here are very important since, as the international community reregulates the banking industry, more activity is almost bound to be booked outside banking. We need at some point to move on to policy. I am therefore going to use today’s occasion to put on the table some thoughts for a possible concrete policy agenda. I am doing so in the spirit of wanting to help nudge this work into its next stage. And I should be clear that the FSB, where our work is led by Adair Turner, have not yet articulated our collective preferred policy approach. The definition of “shadow banking” employed by the FSB and the EU Commission is, paraphrasing, credit intermediation, involving leverage and maturity transformation, that occurs outside or partly outside the banking system.1 That is very close to the definition I used in a speech two years ago calling for work on shadow banking, except that in addition to leverage and maturity transformation I include “monetary services”.2 I want to make three broad points about this.

What I suggest on this front is:   There should be greater market transparency, perhaps ideally via a Trade Repository with open access to aggregate data, so that the world can see what is happening in these very important but opaque financing markets. (That would be helpful for market participants themselves).   Financial firms and funds should not be able to lend against securities that they are not permitted or proficient enough to hold outright.   Non-bank financial firms should be regulated in how they employ cash collateral.   The authorities should be able to step in and set minimum haircut or margin levels for the collateralised financing markets (or segments of them). (That would need to be pursued at international level.3 It might be linked to central bank haircuts). Some of those points are aired in the FSB’s report on securities lending and repos published today4 and will, I hope, be explored intensively in the coming months. I will expand slightly on the last point in my list. The amount of leverage available in the system depends, of course, to a significant degree on the haircuts applied in chains of secured financing transactions; leverage is the reciprocal of the haircuts. The resilience of the system is therefore impaired when a bout of exuberance drives down haircuts. The authorities need to be ready to place constraints on that – through minima that either apply continuously or are specially introduced when conditions are overheating.
This is relatively high by the minimum standard, and will allow Thai banks to meet any provision in the future, as well as supporting credit expansion. Non-performing loans, which peaked at 47.7 % of total credit, have now been reduced to 22.5 % of total credit at end-October. A total of B1.1 trillion of NPL have been restructured, while a further B1 trillion of NPL is either in, or is in the process of being submitted to court, with resolutions that need to be accelerated. The remaining portion, B600 billion, of un-restructured debt consists mainly of loans to small and medium enterprises (SMEs), as well as consumer and mortgage loans. To speed up the restructuring of the last portion, especially the SMEs, the Bank of Thailand has set up a scheme of debt restructuring and new lending for SMEs with NPL problems but have viable business prospects. This scheme is made possible through a credit guarantee by the Small Industry Credit Insurance Corp. When the scheme was first introduced, there were some minor problems relating to the requirement for additional personal guarantee. This issue has now been resolved. It is hoped that the scheme will help SMEs in returning to a state of normalcy. In addition, the Bank of Thailand has encouraged financial institutions to separate their non-performing assets either to be sold or transferred to asset management companies. In all, 14 asset management companies have been approved, and approximately B579 billion worth of assets have been transferred as of end-October.

Those completed included: Data Management Group - a centralisation of data collection that were originally performed by many departments within the Bank; introduction of the use of information technology for the dissemination of information for public use through the Bank of Thailand's web site; Financial  4  BIS Review 6/2001  Markets Operations Group - to develop working efficiency by increasing skills in risk management and the modernisation of the trading room; another group which has been completed under the programme was the Supervision Group. On personnel development, most of the Bank of Thailand's staff lacked systematic development. In the past year, therefore, heavy investment was put on staff training by doubling the budget for this purpose. Moreover, staffs with high potential were assigned job training in outstanding private sector companies in order to increase their vision and experience and to understand how the private sector works. A job evaluation system has been applied to each position in order to put the right man on the right job. Most importantly, we have introduced performance evaluation and individual development plans in accordance with international standards. Next year, the Bank of Thailand will start a new salary structure to be consistent with job evaluation, and to set out a clear work target and plan for each group. The most important change that occurs has been the improvement in the decision- making process. Today, all Bank of Thailand policies have been made on the basis of sound principles and reasoning that can be explained clearly to the public.
So, the key to success for CDI clearly lies beyond technology. We need to find the right commercial incentive for all to benefit and create the network effect. 30. Similarly, for the mBridge project, technical interoperability is key but relatively straight forward. The platform now has the flexibility to allow central banks to easily connect through CBDCs or traditional payment systems. But that won’t attract more jurisdictions to join by itself. To do that, the platform needs to account for policy and business challenges. How to build-in different regulatory requirements like anti-money laundering, how to ensure sufficient on-chain foreign exchange liquidity, or how to develop a shared legal framework are all challenging but necessary tasks. The project team will focus on these issues, which are well beyond technology, in taking the project to its next stage. Closing 31. The HKMA began its fintech journey six years ago. We have come a long way, reached some important milestones, kept pace with our peers, and are now pressing on into uncharted territory. But like everyone else, we are still exploring, experimenting and learning. And as we continue our journey, we will stay radically open-minded, learn from our failures and keep trying, and go well beyond technology to achieve network effects. 32. As I said at the beginning, Hong Kong will continue on the road of fintech adoption. Many exciting developments are taking place, and you are bound to see interesting sights and meet interesting people on the way.

Having done a lot of convening, the Bank is collaborating in key international fora to advance the discussion on transition finance, including the G20 Sustainable Finance Working Group (SFWG). We support the transition finance framework developed by the G20 SFWG this year and look forward to its operationalisation in 2023 to ensure transition finance is mobilised at pace and at scale. Second, through being creative in the use of and access to the Bank's balance sheet. In November 2021, the Bank published a comprehensive framework to 'green' our corporate bond portfolio to support the transition to net zero, while at the same time not undermining the scheme's primary monetary policy purpose. Whilst the portfolio is currently unwinding in-line with monetary policy objectives, we have created a greening framework for other investors on how to green a corporate bond portfolio. And our convening role as the UK's central bank should ensure they take note. This ties in well with the third area, our prudential work. As the UK's central bank and prudential regulator, it is the Bank's role to ensure the resilience of the financial system to the impacts of climate change, including the transition to net-zero. Collaborating with many others through the Network for Greening the Financial System we are seeking to understand how different transition pathways could affect the economy and the stability of the financial system, as well as the safety and soundness of the firms we regulate.
I don’t pretend to offer definitive answers to any of these questions. But they are very relevant to the ways that different members of the MPC think about the current situation, and approach the challenges now facing monetary policy. The international context I’ll start by looking at the wider world. The UK was not alone in enjoying a decade of unusual stability. Across the industrialised world, output growth and inflation were less volatile than in the 70s and 80s, though growth was disappointingly weak in Japan and Germany. The slowdowns that followed the East Asian crisis and the stock market crash were relatively mild and short-lived. Economists have named this period the Great Stability (or the Great Moderation, in the US) and contrasted it with the Great Inflation of the 1970s. And there has been a lively but inconclusive debate about how much of this better performance is due to good luck and how much to good policy. Over the past couple of years there has been a growing view among central bankers and some academics that a substantial part of the ‘good luck’ story may have reflected the benign effects of globalisation. This realisation has dawned as it has become clear that globalisation is having pervasive effects on our economies, as well as contributing to some trends which are not so immediately favourable. Globalisation, in the present context, is shorthand for the increasing integration of international markets for goods and services, capital and labour.

Rachel Lomax: Perspectives on current monetary policy Speech by Ms Rachel Lomax, Deputy Governor of the Bank of England, to the Cardiff Business Club, Cardiff, 27 November 2006. I am very grateful to Gareth Ramsay for his help in preparing this speech, and to a number of colleagues at the Bank of England for useful comments. *  *  *  The decade to 2004 was one of the most remarkable in the UK’s economic history. For the first time in a generation, inflation was low and stable. Output grew for forty straight quarters, and the unemployment rate fell steadily to levels not seen since the mid seventies. By these high standards, the economy’s performance over the past couple of years looks slightly more mixed. After a mild slowdown in the first part of 2005, output has been growing steadily at around its long-term average rate for the past year. The inflation rate has varied around the target. But unemployment has been rising for most of the past eighteen months. As always, there is more than one view about what may be going on. I want to start by setting current monetary policy preoccupations in a broader context, and highlighting some difficult issues. Was the UK alone in experiencing such unusual economic stability since the mid 1990s? What might have caused it? Was it expected? Can we count on it continuing? And how should monetary policy makers deal with the exaggerated expectations that the stability of the past decade may have encouraged?
Too Big to Fail: resolution regimes This wasn’t a crisis that revolved in every single degree around institutions that were Too Big Too Fail but, my goodness, they were at the heart of it. And it is intolerable for our societies, it is intolerable for capitalism, that we should continue to have institutions that are too big to fail. The Financial Stability Board will, therefore, be recommending to the G20 a package on this. It will include greater loss absorbency for the largest and most complex firms whose distress would inevitably spillover into the global system – probably in a way that can, in degree, be implemented in different ways in different countries and contexts, subject to a meaningful process of peer review to avoid free riding. But absolutely central to this is resolution regimes. Too many countries do not even have the most elementary resolution regime for their national commercial banking institutions. Perhaps partly for that reason, many people, when they talk about resolution, slip after about 15 seconds into talking about enhanced supervision and early intervention. To be clear, resolution is about when everything else has failed. It is about when early intervention and higher capital requirements, better risk management and more resilient capital markets let us down, and we are in “the last chance saloon”. The distressed institution is no longer viable, and officials are presenting our political leaders with a ghastly choice between chaos from straight liquidation and, alternatively, taxpayer support to prevent the system imploding.

2  BIS central bankers’ speeches  At the regional level, the ASEAN Natural Disasters Research Works Sharing (“ANDREWS”) Committee has been formed to facilitate dialogue and information exchange between academia and insurance industry professionals on latest research and market developments relating to natural catastrophes. In Singapore, industry players have ramped up catastrophe analytics and modeling efforts rapidly in recent years. This is supported by scientific and state-of-the-art catastrophe risk research undertaken by research institutes such as the ICRM, the NUS Centre of Hazards Research and the Earth Observatory of Singapore. (iii)  Thirdly, a shortage of expertise to properly understand and assess catastrophe risks. Even where catastrophe models are employed, it is essential to overlay deep expertise and good judgment to challenge assumptions in modeling outputs, in order to have a more robust assessment and interpretation of the risks. The Thailand floods in 2011, for example, offered useful learning lessons about how there can be blind spots, without a deep understanding of the underlying risks: (a)  Thailand was not even designated by insurers as a catastrophe-prone prior to the floods, despite the potential risks and exposures;  (b)  Secondary losses arising from the business interruption claims were heavily underestimated; and  (c)  The accumulation of risks arising from Japanese cedants relocating their supply and production chains to Thailand from Japan, which had been hit with an earthquake and tsunami just months before, was generally overlooked.
Finally, while there were a number of adjustments over the five and a half year period, the SNB never departed from the principle of regular and transparent sales. As a result, market rumors and price volatility associated with SNB’s sales practices were virtually non-existent. In a similar light, the SNB’s experience as a gold seller suggests that it is best to consider ex-ante to what extent performance considerations should play a role in how the sales are conducted. In the case of the SNB, the Governing Board made a number of key performance related decisions at the outset: to limit the foreign exchange risk associated with the dollar proceeds of the sales, to allow clearly defined active trading around the daily sales quotas, to use a conservative option strategy to achieve a modest outperformance and to assure competitive pricing from the dealer community. Once these parameters were set, little room was left for discretion by the Governing Board or the SNB’s trading desk. Human nature being what it is, we all know that too much discretion can quickly turn into room for judgmental error, particularly at times of heightened market pressure. A central bank in  4  BIS Review 31/2005  particular has every incentive to minimize such room for error in all its activities as its all important reputation is ultimately indivisible. Contrary to initial expectations, the SNB was able to conduct its gold sales in a relatively favorable market environment.

Paul Tucker: The role of deposit insurance in building a safer financial system Speech by Mr Paul Tucker, Deputy Governor for Financial Stability at the Bank of England, at the International Association of Deposit Insurers Annual Conference, London, 25 October 2012. *  *  *  It is a great honour to be the closing speaker at your conference today. I shall use the opportunity to update you on progress with the Financial Stability Board’s work on the resolution of distressed financial institutions.1 Deposit insurance, stability and competition Although it has rarely been centre stage in recent debates, deposit insurance in fact plays a key role in the international efforts to build solid foundations for global finance. Eighty-odd years ago the US introduced deposit insurance to underpin confidence in a commercial banking system that was threatening to unravel. In recent years, the UK has not been alone in learning the hard way that it is not enough simply to have a deposit insurance system. Retail depositors will run from a troubled bank if they are not confident that they will have access to their transactions balances quickly. The general public need to know about the deposit insurance system, understand it, and be able to rely on rapid payout by the Deposit Insurer in the event of a bank’s failure.
Central banks can always issue new money, but they can lose control of monetary policy if their financial position becomes too weak. The circumstances surrounding the Riksbank's asset purchases have varied. The asset purchases during the initial phases of the pandemic were very important. Without the extensive support measures quickly announced by central banks and other authorities, the pandemic would probably have resulted in a prolonged recession, where problems in the financial markets would have made the recovery more difficult. However, the Riksbank's asset purchases more recently seem to have had minor effects on inflation and real economic developments.

Earnings capacity is important for central banks’ financial independence However, problems may arise if the central bank loses its long-term earnings capacity. In contrast to most other authorities, central banks are not funded through appropriations. Instead, they have their own balance sheet with substantial assets and liabilities and, to put it simply, they tend to be able to finance their operations through the return on their non-remunerated capital, that is, the sum of equity and the amount of banknotes. A central bank can always continue to finance its activities by 'printing money'. However, if the central bank lacks earning capacity, its interest-bearing debt will increase uncontrollably, which is hardly compatible with price stability in the long run. Alternatively, the central bank can keep interest rates low so that interest payments are small. In both of these cases, monetary policy will thus be affected by the weak financial position of the central bank.39  The Riksbank's earnings capacity is weak The Riksbank's situation here is a little special in an international comparison. Since the demand for cash is very low in Sweden, the so-called seigniorage – the surplus from the monopoly on issuing money – is insignificant. Other central banks with low or negative capital can more easily than the Riksbank continue to finance their operations and at the same time build up new capital with the aid of the seigniorage.
An economist’s duty is to identify tradeoffs, especially when it hurts. For a politician to take decisions without knowing the relevant tradeoffs is surely even more painful because it necessarily leads to disappointment and eventually to failure. 1  Frey, B.S. (2003), “Publishing as Prostitution? - Choosing between One’s Own Ideas and Academic Success”, in: Public Choice, 116, 1-2, 205-23. 2  BIS Review 62/2004  In examples of economists’ work in government controversy plays a central role because economists regularly disagree. Different economists time and again identify different tradeoffs. This may be deemed a fundamental weakness of economics. I do not share this view. I rather think that although a lack of consensus among economists makes life more difficult for politicians, it ultimately improves their rationality. Politicians have to assume full responsibility; they must not pass it on to advisers. Just as everyone benefits from a “second opinion” from doctors before undergoing medical treatment, politicians benefit from a second or even a third opinion from economists before deciding on a particular political programme. The example - or should I say controversy - I have selected to illustrate the task of economists in government is the introduction of the euro, which took place on January 1, 1999. From the perspective of an economist, the launch of a common currency promises benefits and causes costs.

Niklaus Blattner: Economics is what economists do Speech by Professor Niklaus Blattner, Vice Chairman of the Governing Board of the Swiss National Bank, at the Opening Session of the Integrated Master Programme, Faculty of Economics and Behavioral Sciences, Department of Economics, Albert-Ludwigs-Universität, Freiburg im Breisgau, 22 October 2004. * 1. *  *  Introduction  This is an important moment in the professional life of all of you who have chosen to participate in one of the three Master Programmes starting today and offered by the University of Freiburg. Your choice was either the Master of Economics and Politics, the Master of Finance or the Master of Internet Economics. A common denominator of all these programmes is economics. I felt it might be worthwhile, right at the beginning of your undertaking, to draw your attention to what economics stands for. This begs the question of what economics is. Jacob Viner (an eminent international trade theorist, 1892-1970) gave a slightly disturbing answer: “Economics is what economists do”. This sounds less scientific than you might have wished. But Viner has a point: when talking about a subject that has a history of constant change and development, why not simply look at the empirical facts and take instruction from what one observes? This is exactly what I propose to do. - I base on my own experience and observation.