samchain/econo-pairs-v1 huggingface dataset:
By engineering artificial expectations of stability, the regime had led market participants to disregard the possibility of exchange rate devaluations, leading to mispricing of risk, insufficient hedging and ultimately to misallocation of financial and real resources. Governments that found themselves in this position had very limited ability to mitigate the economic damage that was to come, but the policy choices that accompanied the exchange rate change often compounded the problem. Japan's experience provides another example, though the context was different. There is a perception in parts of Asia that the Japanese government's decision to let the yen appreciate in the late 1980s was principally responsible for Japan's so-called “lost decade” of low growth. And, Japan, viewed through this prism, is cited as an example of the perils of letting an exchange rate move up in response to changing fundamentals. The reality is more complex. The problems of the Japanese economy in the 1990s were largely due to the aftereffects of the collapse of the real estate and asset price boom of the preceding decade, a boom fueled in part by efforts by the monetary authorities to limit the appreciation of the yen. The size of the negative shock to demand from the collapse of the bubble was very substantial, and the capacity of the government and the central bank to mitigate the damage was constrained by the weakness in the banking system. A more forceful macroeconomic policy response, however, might have brought about a quicker recovery.

These developments have spurred the necessity of our having to better understand and perform more analysis on banking risks. After all, banks do live and prosper by accepting risks, but these risks have to be managed with proper care. As we have all seen, well-managed banks have tended to stay resilient to the banking crisis and provided a backbone for restoration of financial stability. We must therefore, continuously adopt new techniques and technologies in risk analysis to ensure appropriate risk management of all financial institutions in the future. Of course, prevention is always better than the cure. As financial regulators, one of our main tasks is to provide a prudential framework ensuring the overall improvement of risk management of financial institutions. In the case of Thailand consolidated supervision as well as prompt corrective action will be introduced under the new Financial Institutions Act. Study is also on the way to prepare ourselves for the implementation of the BIS New Capital Regime, and we look forward to their conclusion for an explicit framework that will complement our current practices where we ask the Board to understand the nature of their organization’s business activities and risk appetite in order to provide an adequate internal control system to monitor and mitigate risks. Risk-based supervision represents yet another endeavor to tackle the effectiveness of risk management of financial institutions as transaction testing may no longer be an effective approach to examine the ever-more complex financial institutions of today.
Koop (2018), ‘An economist’s guide to climate change science’, Journal of Economic Perspectives 32(4), pp. 3–32. Hardin, G. (1968), ‘The tragedy of the commons’, Science 162(3859), pp. 1243–1248. Nordhaus, W.D. (2018), ‘Projections and uncertainties about climate change in an era of minimal climate policies’, American Economic Journal: Economic Policy 10(3), pp. 333–360. Böhringer, C., J.C. Carbone and T.F. Rutherford (2016), ‘The strategic value of carbon tariffs’, American Economic Journal: Economic Policy 8(1), pp. 28–51. For a critical assessment of the significance and effectiveness of a carbon tax and other instruments, see IMF Fiscal Monitor ‘How to mitigate climate change’, October, pp. 3–13. Page 3/12  But if it is not part of the SNB’s remit to intervene in these issues, why are central banks interested in climate risks? Why are central banks interested in climate risks? To fulfil their mandate, central banks must understand how climate change risks influence the functioning of the economy and the financial system – and hence price stability and financial stability. Economists classify climate risks into two categories: physical risks and transition risks. Physical risks include the direct material effects of climate change on income and production capacity. For example, severe storms can damage factories and transport infrastructure and disrupt value chains that are essential to international trade. In the first instance, physical risks cause supply shocks. These shocks result in a drop in production in the affected sectors and tend to engender temporary price increases.

Its principal mission is to ensure price stability in the medium term, while contributing to the stability of the Swiss financial system as a whole – two key conditions for our country’s prosperity. After all, can economic agents be expected to plan their spending, savings and investments sensibly and manage their liabilities if prices fluctuate widely? If they go up, the value of savings goes down. If they go down, debt suddenly becomes more costly to service, especially as wage levels tend to move in line with prices. In short, a financial system that can withstand shocks is essential for a wellfunctioning economy and the successful implementation of monetary policy. 7  Bank of England (2018), ‘Transition in thinking: The impact of climate change on the UK banking sector’, September, pp. 27–29. Page 5/12  Measures taken by the SNB In its assessment of the economic and monetary situation, the SNB endeavours to take into account all relevant risks, including those linked to the climate. Economic forecasts for both the international and Swiss economies factor in the effects of climate events that depart from the norm. More broadly, the SNB regularly updates the tools and methods it uses to analyse monetary developments and financial stability, in terms of both data sources and the structure of the models. We continually adapt our models to integrate new economic realities and structural changes, particularly those induced by climate change.
To put this into perspective, the percentage of employment accounted for by firms under high financial pressure2 would rise by 1.6% following the interest rate increase, from 9.1% before the hike. Household income is primarily being supported by labour market developments – given the year-on-year increase of 3.6% in the number of persons employed and of 5.1% in hours worked – and, to a lesser extent, by the government policy support measures. However, high inflation is driving a significant decline in real disposable income. Indeed, in 2022 H1 households’ disposable income increased by 4.2% year-on-year in nominal terms, which transforms into a 3.1% fall once developments in the private consumption deflator are taken into account. Bank lending to households has held stable in recent months. However, a distinction can be drawn between the performance of mortgage lending (growing consistently at rates of just over 1%) and that of consumer lending (shrinking at rates of around 4%). Unlike firms, in 2022 households are not accelerating the growth of their bank deposits, which have been on a sustained growth path (above 5%) since 2021. Together with cash, they account for 40% of households’ total financial assets. Simulations have also been carried out on the potential impact on household income of the rise in energy prices and interest rates, which is notably uneven across income percentiles. The upturn already observed in energy prices would generate an increase in the median household's energy expenditure as a proportion of its budget from 10% to more than 12.5%.

We also need to encourage equity financing rather than debt funding. 5/ Improve European economic governance The second idea I would like to share with you relates to economic governance in Europe. I believe we need to make progress towards a more economically integrated euro area. This is essential, regardless of whether or not the United Kingdom remains in the European Union. Naturally, I would like it to stay in. My point is not purely institutional. It is not about “more Brussels”, it is about more growth and employment. Indeed, economists estimate that the current lack of coordination between national economic policies has cost Europeans between two and five percentage points of GDP growth since 2011. Contrary to the case of monetary policy, the aim is not to fully integrate all of our economic policies at the European level, but to achieve a “full coordination” of fiscal and structural policies. For this, we need to have shared economic goals, and a true “collective strategy” for the euro area, in which each country has a role to play to improve everyone’s situation. This requires trust based on a clear pact: national reforms and, not or, European coordination. This full coordination also rests on the setting up of a strong and legitimate European institution: a euro area Finance Minister backed by a European Treasury system and subject to greater democratic accountability. This Finance Minister would be in charge of defining the collective strategy, supervising its decentralised implementation by Member States and handling crisis management tools.
In the context of investment policy, climate risks are not fundamentally different from other financial risks – they too can trigger or amplify market fluctuations, which influence the attractiveness of certain assets. By opting for broad coverage of entire markets, the SNB takes into account the complexity of the many different risks. We regularly review changes in the risk landscape and factor them into our investment policy where necessary. Furthermore, as an investor the SNB has long had in place a clear set of exclusion criteria for companies that violate Switzerland’s fundamental norms and values. For instance, it does not invest in companies that systematically cause  1  Relevant documents are available on the SNB website: www.snb.ch/en/ifor/finmkt/fnmkt_benchm/id/finmkt_reformrates  Page 3/6  Berne, 12 December 2019 Andréa M. Maechler  News conference  severe environmental damage. Given the monetary policy requirements of our mandate, we are convinced that the approach we have chosen is appropriate. Foundation of the BIS Innovation Hub  In October, the SNB announced that it was collaborating with the Bank for International Settlements (BIS) to establish the BIS Innovation Hub Centre in Switzerland. This Hub Centre, which is scheduled to commence operations at the beginning of 2020 alongside the Hub Centres in Hong Kong and Singapore, will initially focus on two projects. The first will examine the integration of central bank money into a distributed ledger technology infrastructure, with a view to facilitating the settlement of tokenised assets between financial institutions.

Since then, many banks have been benefiting from higher exemption thresholds and have an incentive to take on liquidity via the money market. As expected, this demand for liquidity led to higher trading volumes and a slight rise in SARON and other short-term repo rates in the week following the introduction of the new calculation basis (cf. chart 4). The SNB was active in the repo market from time to time in order to keep SARON close to the SNB policy rate. The Swiss franc repo market functioned smoothly throughout the transition, not least thanks to the state-of-the-art and reliable money market infrastructure. The SNB trades using the same infrastructure as the banks on the interbank market. This is particularly helpful as it ensures that the SNB’s operations are highly effective. Transitioning from Libor to SARON  SARON is currently establishing itself as the leading reference interest rate for financial products in Swiss francs and is replacing Libor. As you know, the UK’s financial regulator will only be supporting Libor until the end of 2021, so it is important that the transition process on the market take place now. Over the last few years, the National Working Group on Swiss Franc Reference Rates (NWG) has put forward recommendations on how to proceed with replacing Libor. Market participants must now act decisively to implement these recommendations. A SARON-based swap market is especially important for the financial markets. Swap markets are used to hedge interest rate risk (e.g.
There is huge overlap between the areas of interest of, and information required by, and available to, both the supervisor and the central bank. Second, rescue or liquidity crisis will normally involve and require the immediate BIS Review 55/1997  -8-  provision of liquidity, which can only be done by the central bank. This is facilitated by internalising the supervisory body within the central bank. Others argue the reverse. First, since the finance of any large rescues involves government funding, the politicians have a direct interest and involvement in financial regulation. This may undermine the independence of a central bank if it also plays a supervisory role. Second, it is argued that an independent central bank in its conduct of monetary policy and being responsible for banking supervision may be perceived as too powerful. Third, the failure of a central bank in its supervisory duties will harm its credibility in its conduct of monetary policy. There is an inherent conflict between supervision and monetary policy. Central bank assistance to bail out problem banks tends to be inflationary on the money supply. The arguments are finely balanced. Whether the regulatory power should be centralized or diffused will depend very much on the legal, constitutional and historical background for each financial system. Conclusion Regulation is an art, not a science. It involves complicated trade-offs between competing interests. As Walter Bagehot said over 120 years ago, money will not manage itself. The regulation of money will be debated in the years to come.

This is an impressive outcome, made possible only by commitment, enthusiasm and exceptional cooperation that has been shown by the project team and all our partners who are here today throughout these last two years. I am well aware of the numerous logistical and communication challenges that had to be overcome by the team and the industry, and the persistence that it took to break long-held perceptions before we were able to build momentum in our outreach efforts to deliver these results. So let me on behalf of Bank Negara Malaysia, join Faris in extending my congratulations to all who contributed to this important initiative. We are especially grateful to the World Bank for working with us to bring the Greenback Project to Johor Bahru – the first champion city in Asia, and for providing technical support in the project’s design and implementation strategies. It goes without saying that we could not have done this without the exceptional support of Yang Berhormat Datuk Bandar and your team at Majlis Bandaraya Johor Bahru. The city of Johor Bahru has been an exemplary host for the first Greenback Project in Malaysia. Johor Bahru can be proud of serving as a role model for promoting transparent, efficient and affordable remittance services that are contributing to more inclusive financial services for all individuals and businesses.
No one knew how large the losses would be and whether the reserve capital would suffice. Funding ran short. Because what financiers in the market would want to give loans to a bank that appears unsteady? And who would want money in an account in this bank? I am sure you will remember the pictures of the queues outside Northern Rock’s branches in the United Kingdom. To restore confidence, the state and the taxpayers in many countries had to inject capital and go in as owners of the banks. This would not have been necessary if the banks had held more capital when the dark storm clouds gathered in summer 2007. The Basel Committee has taken note of this. The current capital requirements are being raised substantially. If I may go into technical details, the new regulations require that the  BIS Review 159/2010  3  banks should have a Tier 1 capital corresponding to at least 6 per cent of their assets, or more correctly their risk-adjusted assets. The risk adjustment means that for each asset one recalculates the value, depending on whether the value of the asset can be regarded as certain. One sign of this might be, for instance, that the value of the asset has varied a lot. The higher risk an asset is believed to entail, the more capital needs to be allocated. At present, the minimum requirement for Tier 1 capital is only 4 per cent of the total riskweighted assets.

Market risk is the risk that the bank’s assets will vary in value in a way that was not anticipated, and this makes it difficult for the bank to get hold of capital without making a loss. For example, fluctuations in interest rates and exchange rates can affect the value of the assets. In addition to these risks, there are what are known as operational risks. This can involve, for instance, a technical system failing to function, or a human error that puts the bank at great risk. Some of you may remember how the British bank Barings collapsed in 1995 as a result of speculation and unchecked risks taken by a single employee. Risk management is about protecting oneself against such undesirable and unexpected outcomes. In short, one wants to take calculated risks. According to earlier agreements within the Basel Committee, the banks have the possibility to develop models themselves to calculate the size of their risks and this is an opportunity most of the major banks have used. Over time, their risk calculation models have become increasingly sophisticated. But during the crisis it turned out that not even the most advanced models managed to capture the real risks. Sometimes it was not the model that was inadequate; there was a lack of available data for assessing the risk. In many cases there was quite simply not enough historical data, as the financial instruments were such fresh inventions. You may have heard of various types of complicated derivative, such as CDOs, CDSs and so on.
Even though the liberalization policies were adopted independent of the EU perspective, they helped to facilitate Turkey’s attempt to apply for full membership, by providing a solid basis for lasting progress. On the other hand, member countries of the EU have tried to make some adaptations in their banking regulations to integrate financial systems. Competition among them has increased. A universal banking system is accepted. Banks either have increased their assets or have merged with other banks in order to be strong in a market where competition is intensified. New financial products are created every day. Technology is used intensively in order to reduce costs and serve customers better. In parallel to these developments many reforms have been made in order to develop the Turkish banking system. Some amendments were made to the Banking Law to harmonize it with European standards, and now we are in the process of preparing a new Banking Law. These changes will require some banks to strengthen their financial situation and bring their credit risk and equity participation ratios closer to the EU norms. Within the process of becoming more deeply integrated with the European financial markets, the Turkish banking system will now face new competition. The CU agreement has naturally affected Turkish banks and changed the dimensions of competition. But Turkish banks seem ready in many ways for this new and larger competitive environment. Today banks in Turkey are made more dynamic by a high-technology electronic infrastructure, high-quality services and well-trained manpower.

17  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  17  You’d expect all this to lead to matching reallocations in employment – job shedding in the weaker sectors and regions, strong rates of hiring where demand has picked up the most. And in the DMP survey that is indeed what you do see (Chart 21). But it hasn’t yet happened to the same degree as in firms’ reported sales – nor, if we extend the series backwards with other sources of data14, to the same extent as after the financial crisis, whose impact on firms’ output was also highly uneven. Chart 21: Employment reallocation has picked up but still looks lower than after the financial crisis  Sources: Decision Maker Panel, Bureau Van Dijk (based on Companies House data) and Bank calculations. For similar reasons, and again both on the demand and supply side, I would expect these imbalances to subside somewhat as the economy recovers. The underlying dispersion in demand is more likely to narrow than widen further. We’ve already seen some signs of that across sectors, with “social consumption” recovering faster than areas of spending since the economy re-opened (Chart 14 again). In the meantime, the reallocation of jobs, which should also reduce these strains, is likely to continue and may even pick up for a while. However, I’m more uncertain about this process, and the implication for costs in aggregate, than about the transitory nature of goods-price inflation.