samchain/econo-pairs-v1 huggingface dataset:
When a highly reputable hedge fund, Long-Term Capital Management, was hit by major setbacks, the international banks became even more wary. Investors have fled to assets that are generally regarded as secure. Lending rates to all but the most creditworthy borrowers have therefore risen around the world. In the last few days, moreover, long bond rates have moved up in many countries, which is a sign that investors are increasing the cash component of their portfolios. Expressions like “flight to quality” and “flight to cash” are common in the course of a development such as that we are now experiencing. How great will the repercussions be? Observers throughout the world are now engaged in appraising the global economic effects of the crisis in Southeast Asia, the inability to tackle the problems in the Japanese economy, the uncertainty about the situation in Russia and the risk of contagious effects in Latin America. The world economic impact of the problems in the emerging markets can be divided into effects on real economic activity and influences via financial markets. The latter are transmitted both by falling prices for shares and possibly other assets and by a higher degree of prudence on the part of firms, households and banks. Let me begin with the real economic effects. In the emerging economies that are currently affected, the problems have led to sharply falling demand and output. Imports from the rest of the world are therefore declining, too. At the same time, currency depreciation has improved the competitiveness of exports.

The problems showed up first in Thailand but soon spread to South Korea, Malaysia and Indonesia. While the deterioration in these countries was partly a consequence of the economic stagnation in Japan, perhaps the main cause of the acute crisis was that a strong capital inflow from the West, above all from the United States, suddenly turned into an outflow. For various reasons, political as well as economic, assessments of the development potential in the countries in question had been gradually revised. More recently the problems have spread to Russia, where the economic situation - as in Japan - was already troublesome. The situation became so precarious that the Russian government suspended payments on government debt denominated in the domestic currency. That was a very far-reaching decision. Since then, capital outflows have also hit Latin America. For a long time it seemed that the Asian crisis would not have sizeable repercussions in industrialised countries in the West. The direct real economic impact was judged to be small and at first it looked as though the main effect would be a tendency to keep inflation down, while growth would remain good. As Russia also encountered increasing problems, however, there was growing concern and the crisis BIS Review 83/1998  -2-  accordingly began to spread even to financial markets in the West. During the summer, share prices began to fall. Credit risks rose. Investors and banks started to become increasingly cautious, partly on account of some losses.
Eggertsson, Gauti B., and Michael Woodford (2003). “The Zero Bound on Interest Rates and Optimal Monetary Policy”, Brookings Papers on Economic Activity, 1, 139–211. 10  BIS central bankers’ speeches  Gagnon, Joseph, Matthew Raskin, Julie Remache, and Brian Sack (2010). “Large-scale Asset Purchases by the Federal Reserve: Did They Work?” Federal Reserve Bank of New York, Staff Report No.441. Greenspan, Alan (2002) “Opening Remarks” in Rethinking Stabilization Policy, 1–10. Federal Reserve Bank of Kansas: Kansas City. Joyce, Michael, Ana Lasaosa, Ibrahim Stevens and Matthew Tong (2010). “The Financial Market Impact of Quantitative Easing,” Bank of England Working Paper No.393. Posen, Adam S. (2010). “Do We Know What We Need to Know in order to Lean against the Wind?”, speech to the Cato Institute, http://www.bankofengland.co.uk/publications/speeches/2010/speech462.pdf. Qian, Rong, Carmen M. Reinhart and Kenneth S. Rogoff (2010). “On Graduation From Default, Inflation And Banking Crisis: Elusive Or Illusion?”, National Bureau of Economic Research Working Paper 16168. Rajan, Raghuram G. (2005). “Has Financial Development Made the World Riskier?”, in The Greenspan Era: Lessons for the Future, 313–370. Federal Reserve Bank of Kansas City: Kansas City. Reifschneider, David L., and John C. Williams (2000). “Three Lessons for Monetary Policy in a Low Inflation Era”, Journal of Money, Credit and Banking, 32(4), 936–966. Reinhart, Carmen M. and Vince Reinhart (2011). “Pride Goes before a Fall: Federal Reserve Policy and Asset Markets”, National Bureau of Economic Research Working Paper 16815. Reinhart, Carmen M. and Kenneth S. Rogoff (2011). Taylor, John B. (2009).

Finally the schedule will become vertical when the capital ratio, which in this simple set-up is just the inverse of the leverage ratio, reaches its regulatory minimum. The equilibrium spread is given by the point of intersection, B. During the upswing phase of a credit/asset-price boom, perceptions of macroeconomic risk tend to be low. Moreover, rises in asset prices also boost bank net worth. In sum, the health of the banking system is not in doubt and the upward sloping part of the XS schedule will tend to be a long way out to the right. But when the boom turns to bust, the associated unexpected losses lead to falls in bank equity, reducing the supply of credit. Moreover, people’s subjective perception of the macroeconomic risk blows out, reducing desired leverage. The XS schedule moves inwards, to XS’, while the equilibrium spread rises to S’. That in turn pushes the rates of return on savings down to R’ and the cost of borrowing up to RB’ and the volume of loans down to L’. The fire sale externalities referred to earlier can then greatly amplify this contraction in credit supply by generating further losses in the net worth of intermediaries. The consequences of all this for output are shown in Chart 7. On the usual assumption that savers save a fraction of any increase in income, the supply of funds from savers will be increasing in output, generating the usual downward-sloping relationship between output and the policy rate, IS.
The PRA therefore welcomes the more rigorous approach to group supervision that will be introduced by Solvency II. This will lead to a much more joined-up approach between regulators through the operation of colleges. Enhancing information flows and producing equivalent and comparable data should make European colleges easier to operate – leading to more effective supervision and enhanced co-ordination among national supervisory authorities. We think that the UK has been ahead of the game with the ICAS regime. But it is important that there is a more rigorous rulebook across Europe to allow more effective supervision in an interconnected world. Challenges ahead As I mentioned earlier, the industry is currently facing a number of other challenges. In particular the changes to the UK taxation system of the “at retirement” market, the impact of which is already significant on some insurers’ business models. Change to the annuity market will also bring about: •  New / untested risk exposures;  •  Increased competition;  •  A need for enhanced support for the consumer; and  •  Potential redistribution of pension pot monies. Changes to business models will naturally lead to changes in risk exposures which will need to be carefully considered and managed. Through these changes, it is imperative that we continue to learn and adjust, working openly and transparently with the industry.

In some instances, individuals rely absolutely for their future lifetime incomes on the continuity of their insurance cover. To achieve an appropriate level of policyholder protection, insurers must be, and be seen to be, safe and sound. I have said this before but I think it is worth reiterating. The PRA believes the UK industry is in a good position, having had the UK risk-based ICAS regime for around ten years. We are therefore not looking to use Solvency II as an opportunity to raise capital requirements across the board. We do, however, recognise and respect that Solvency II is a maximum-harmonising Directive with a key objective of promoting supervisory co-operation. The PRA is committed to upholding this valued objective and will implement the Directive as intended. We can’t and won’t gold plate. Our approach has been, and will continue to be, proportionate in our supervision. As a judgement-led, risk-based regulator, this principle is already part of the PRA approach. It is not the PRA’s role to make sure no insurer fails. However, we are concerned that any failure is orderly and manageable. We seek this in conjunction with appropriate policy holder protection. For example, when business models become challenged we may seek to secure manageable and orderly wind-down, as has been seen in the past in this sector. In fact, roughly one third of insurers authorised by the PRA are in some form of run-off. More than just a capital regime, Solvency II strengthens the linkage between capital and risk management.
It represents the financial system’s interface with the general public and is crucial for preserving confidence in the financial system and, ultimately, in the euro as the single currency. Two issues relating to the retail business and the current turmoil are noteworthy. First, the retail business – with its cornerstones of saving, lending, and payment services – has successfully withstood the financial crisis. Second, banks with a balanced business model have been best equipped to cope with the current challenges. Therefore, retail services offer two major opportunities at the present time: first, to revive confidence in the banking sector in the eyes of the general public; second, to strengthen banks’ balance sheets. However, one important – sometimes overlooked – issue seems a key prerequisite: in the same way as the large value infrastructures mentioned before, stable and efficient retail infrastructures are needed throughout Europe in order to alleviate systemic risk and safeguard financial stability. However, despite 50 years of European economic integration, Europe is still lacking an integrated retail payments market. Therefore, the further realisation and completion of the Single Euro Payments Area project is a crucial element for the retail banking and payments market beyond the turmoil. Without doubt, SEPA is the largest payment initiative undertaken in Europe, following the euro cash changeover. Major milestones have already been achieved: only recently, regulators have addressed the uncertainties surrounding interchange fees and the reachability of the SEPA Direct Debit. Nevertheless there are still a number of further topics on our common agenda, e.g.

In September 2020 we proposed in response two possible and complementary expectations on the level of modelled residential mortgage riskweights: (i) a risk-weight of at least 7% for individual mortgages; and (ii) an exposure-weighted average of at least 10% for the whole portfolio.5 We’ve now received the responses to our consultation, including some very helpful and detailed data submissions. As we speak, the PRA team is forensically considering all this information to assess the likely impact of our proposals against our original assessment – including whether both floors are needed, the exact calibration, and the timing of any implementation. Four points stand out so far. First, there is a strong prudential case for some minimum expectations on model risk-weights. Given the capital held on modelled mortgages that stems from risk-weights has decreased by more than a third in the last decade, you should not be surprised to hear me say this. Second, in addition to the prudential benefits, such floors should in my view benefit competition between larger firms on modelled and smaller firms on nonmodelled approaches, an issue our competition team has been alert to for some time. Third, however, it is not yet clear whether both floors are needed, or what exactly the right calibration is, as it is not the intention of the policy to significantly increase capital across all mortgage providers; the new data we’ve received will help us expand our assessment on this point.
But we cannot know for certain the extent and the speed at which payment stablecoins might be adopted and we may well need limits, at least initially, to ensure we avoid disruptive change that could threaten financial stability. Another important question will be whether the requirement to be redeemable in fiat money, on demand and at par and the backing asset model will be sufficient to ensure uniformity of sterling stablecoins with each other and with other forms of sterling money. This will depend to some extent on whether there are frictions in the redemption and interchange process. It has been suggested that ensuring the uniformity (or ‘singleness’ of money) requires that all transactions between different monies settle ultimately in central bank money across the books of the central bank. While it is not clear to me that this should be the case, it is clearly an issue that should be considered carefully in the design of the regulatory regime. Finally, on stablecoins, it is important to emphasise that powers in the Bill and the Bank’s regime will be for stablecoins used for payments. A digital representation of an asset with a generally stable value could be used for other purposes. It could offer a return as an investment product akin to a money market fund. Or it could be part of the credit creation process, with the loans issued in the form of stablecoins.

Neither of these models is likely to fit within the regulatory regime for payment stablecoins, though they may fit within other regulatory regimes. In the first case, to be acceptable as a means of payment at systemic scale, stablecoins will be required to meet redemption at par  on demand which is inconsistent with an investment product. In the second case, the issue of liquid liabilities that can be used as money in return for illiquid debt obligations is the banking business model and issuers of tokenised money who wish to pursue credit creation will need to be regulated as banks. This brings me to the second area, the issuance by commercial banks of new forms of digital money to be used on new payment rails – in the form of ‘tokenised’ bank deposits. These might offer some or all of the functionality and efficiency claimed for stablecoins, allowing banks deposits to compete better with non-bank payment coins. Some banks in the UK and in other jurisdictions have been exploring and investing in the development of tokenised deposits as settlement assets on new forms of ledger (eg DLT). The majority of this effort appears to have centred on wholesale as opposed to retail financial transactions[16], though there are signs that attention is now being given to tokenisation of retail deposits[17]. In regulatory terms, the tokenisation of bank deposits is a much simpler proposition than nonbank stablecoins.
Recent runs on short-term bank liabilities and the fiscal crisis in the euro area are a clear example of this. No one wants to be the last one to withdraw his deposits from a tottering bank, sell bonds issued by a country heading for insolvency, or rid himself of the currency of a country facing an imminent balance of payments crisis and potentially unsustainable debt burden, even though it may only be unsustainable provided that other investors think it is. The capital controls stopped a run on Iceland’s currency. In a sense, they also undermined confidence for the long term – that is, investors’ confidence that Iceland’s economy and public sector finances could achieve balance and sustainability in the absence of controls, knowing that the fragile balance created by the controls is based on coercing many investors to hold króna assets. Ultimately, confidence can be established only under conditions of free trade, not through coerced transactions. Fortunately, however, investors’ view on the Icelandic economy is diverse. Some understand quite well that behind the cloud of dust swirling in the wake of Iceland’s financial collapse is a country fraught with opportunity. When the dust has settled, Iceland’s net international investment position may turn out to be lower than it has been in decades, and in spite of sizeable gross debt, the Treasury’s net debt position indicates that it will be possible to reduce gross debt rapidly, if the programme of fiscal consolidation set forth is followed strictly.

Confidence in a currency comes not only from its security but also its availability, especially during times of uncertainty. Central banks and financial institutions must have robust business continuity measures to ensure adequate supply of cash to meet surges in demand and the resilience of national payment systems. The second “C” is convenience. Although cash is widely used and accepted in our society today, e-payment alternatives such as mobile payments and electronic wallets are gaining popularity. The “tap-and-go” feature of contactless cards is much in sync with the hurried lifestyles of today, hence the growing popularity of these cards. Convenience is an important consideration in developments within the cashless space of payments. In 2008, for the first time, GIRO overtook cheques by volume of transactions in Singapore. In fact, GIRO itself – which is based on batch processing – will be eventually overtaken by straight-through, real-time payments systems. The third “C” is cost-effectiveness. Handling cash is costly. According to a 2010 study by Retail Banking Research, the cost of distributing, managing, handling, processing and recycling cash in Europe is estimated at € billion. This is equal to 0.6 per cent of Europe’s GDP. How to reduce the cost of cash without compromising confidence and convenience? A number of countries are exploring alternative note substrates and coinage materials to increase their durability, quality, security, and cost effectiveness. Besides managing manufacturing costs, countries are looking at the end-to-end costs of currency distribution and collection.
None of the underlying causes of the current crisis have been removed. The problem of “too important to fail” banks is still with us. And even more intractable is the challenge of how to reconcile free trade with a stable international monetary and financial system. Today, the most obvious problem at the global level is that the imbalances are growing again. And continuing high debt levels, although in many ways a natural response to low long-term interest rates, leave indebted countries particularly vulnerable to a rapid reversal of high saving rates in surplus countries and a rise in long-term interest rates – surely inevitable in the long run – which would drive down asset prices. It is clear that these vulnerabilities affect us all. So recognising our common interest in moving to a more sustainable pattern of world demand is in our self-interest. The global community showed that it could work together when the world economy was close to the abyss in 2008. The challenge now is to prove that we can also work together when we are no longer in an immediate crisis, but still facing deep-seated problems. Will we create a more stable IMFS? The next few years will provide the answer. And they will, as our Chinese friends say, be interesting. BIS central bankers’ speeches  5

We should stress here that, of the larger euro area countries, France has the highest proportion of market-based financing, at 40%. Non-bank financing in France totals EUR 1.748 trillion, and the leading asset manager in Europe is a French firm, Amundi. France also has an internationally recognised regulator, in the form of the AMF, while Paris is home to the European Securities and Markets Authority, ESMA. After Brexit, I also have every reason to believe that a significant share of the market activities of the largest global banks will be based in Paris. First of all, I want to put an end to the non-debate over whether market-based financeis better than bank-based finance and vice versa, and the misconception that the US system should be 1/3  BIS central bankers' speeches  replicated in Europe: working towards a balanced development of non-bank finance simply means giving companies the option of diversifying their debt financing. Fun damentally, the real debate lies elsewhere: it is about switching from debt to equity.This is crucial in advanced economies, where growth is dependent on innovation. Equity financing is better suited to the uncertainty and often long-term returns associated with innovative projects. The euro area is seriously lagging behind in this respect: equity only accounts for 74% of GDP, compared with 125% in the United States. Moreover, it only makes up half of the total external financing of euro area corporations (equity + debt), compared with three quarters in the United States.
As you all know, foreign exchange markets were one area where it was clear that corrective action was needed. And that is why the BIS Governors took the 2  initiative to sponsor the development of the FX Global Code, which was launched in May of this year. 3  The Code’s objective is ‘to promote the integrity and effective functioning of the wholesale FX market’, where diverse participants can ‘confidently and effectively transact at competitive prices.’ This is no small task, and my main focus today is on what needs to occur over the next year or two to further this aim. But before doing so, let me recap where we have got to, drawing out how the complexity, diversity and dynamism of the FX market influenced the development of the Code we are looking to embed. That complexity arises both from its uniquely global nature and from the variety of ways in which participants can transact, with no single trading venue, or even single method of trading dominating. Participants range from corporates looking to hedge their trade flows, through to principal trading firms reacting to the most transitory of pricing anomalies. Some access the wholesale market directly, others indirectly through the sponsorship of their prime broker. And the market itself is constantly evolving, as service providers respond to the ever-changing requirements of market participants and the external environment in which they operate. That pace of change shows little sign of slowing; indeed one of the strengths of the FX market is its innate dynamism.

Mojmír Hampl: An uncertain world Speech by Mr Mojmír Hampl, Vice Governor of the Czech National Bank, at the 8th Corporate Research Forum (CRF) International Conference "An Uncertain World: Planning for 2025 and beyond", Prague, 12-14 October 2016. * * * Ladies and gentlemen, Good evening and let me welcome you all here to the premises of the Czech National Bank. I’m really pleased you have chosen our Congress Centre for your cocktail reception. On behalf of the Bank Board of the Czech National Bank I’d like to say that we are delighted to have such a distinguished gathering here today. And I don’t say that just out of courtesy, I really mean it. When we started organising this welcome speech with Richard Hargreaves, he asked me to introduce the Czech Republic in 10 or 15 minutes. I said: “Wow, what a challenge”. Typically I speak about interest rates, inflation or the exchange rate rather than about typical features of this country, but then I thought sometimes even a central banker should try to do something useful. So I put my mind to work. I will not repeat the known facts to this noble audience of educated people. I’m sure most of you will have heard about Czech beer, about our former president Vaclav Havel (or Vaklav Hejvl as many tend to pronounce his name) or about the international success of Czech sports stars in tennis, ice hockey and sometimes even soccer.