samchain/econo-pairs-v1 huggingface dataset:
Preparedness to act rapidly and in several different ways has now become part of ordinary monetary policy in Sweden and other countries. During the financial crisis, the Riksbank did not carry out asset purchases. Monetary policy was instead primarily broadened by new forms of, and conditions for lending to the banks. But in 2012, the Riksbank purchased government bonds for SEK 10 billion, a relatively small amount in the context, to create operational preparedness in the event that large-scale asset purchases would later become necessary. And in 2015, when inflation had been too low for too long and the ECB was initiating large-scale purchases of bonds, the Riksbank was able, in a relatively simple way, to make monetary policy more expansionary - that is, to hold down the general level of interest rates in Sweden - via large purchases of government bonds. Correspondingly, this year, we have decided on the purchase of corporate bonds to a value of SEK 10 billion to strengthen monetary policy preparedness. We are thus building up an operational capacity in the event a highly unfavourable scenario arises and more comprehensive purchases, for example of corporate bonds, become necessary to ensure that lending and the financial conditions do not deteriorate too much. In this context, I need to address the Riksbank Inquiry. Previously, in its consultation response, the Riksbank has questioned the actual starting point for the Inquiry's way of looking at monetary policy.

New financial sector regulation (I am referring to the CRR/CRD and the forthcoming BRRD) and single banking supervision will add new aspects and new partners to Nordic-Baltic cooperation. The goal of harmonisation of cross-border regulatory and supervisory practices is to create an operating environment for banks and other financial institutions that fosters mutual trust and helps ensure that the provision of financial services is continuous and satisfies the needs of the real economy. When the SSM becomes operational, it will have important effects on the routine supervisory work in the Nordic-Baltic region. The home countries of several subsidiaries that will be included under direct supervision by the SSM/ECB will probably remain outside the SSM. This presents a new challenge for the Nordic-Baltic cooperation framework. In the light of the success of our regional cooperation it is rational that we build the new principles of supervision on the existing foundation wherever possible. I hope and believe that in this new and more complex framework we will be able to preserve an important value – the spirit of cooperation. In view of the development of the single market it is also important that the building of the banking union be completed – the SSM must be followed by the SRM. Ideally, this would create the balance between rights and responsibilities which has been the guiding principle in safeguarding cross-border financial stability for nearly a decade.
The typical level of client initial margin for OTC derivatives held by a large clearing member is over $  34  If clients representing  half of the initial margin port, and the others are closed out and lose their entire initial margin, the loss to these clients collectively would exceed $ (Clearly we cannot know what the actual losses would be in any particular event, but we do know that the sums at risk are substantial). The financial stability benefits would have to be set against any possible costs. The risk-weighted capital ratio rather than the leverage ratio is the dominant constraint for many large clearing members. This means that for these firms a change in the leverage ratio to allow initial margin to offset exposure is unlikely to change their resilience at all. But even were a large clearing member to be constrained by the leverage ratio, the effect on capital – and hence on resilience – is small. For instance, for a typical large clearing member, the effect is to change the probability of default estimated by a model that has been used previously by Bank staff to inform discussions about the calibration of capital requirements  35  by between 0 and 8 bps. This takes the probability of default of  this typical clearing member from 1.2% to 1.28% at worst. This illustrates how different pieces of analysis and evidence could be brought together to assess objectively the case for making a dynamic adjustment to an aspect of banking regulation.

New products, market practices, and especially technologies are going to emerge; some of these might create new risks that were unforeseen when the post-crisis reforms were developed. As unintended consequences come to light and new risks emerge regulators may need to make changes to regulation over time, what I am going to refer to as ‘dynamic adjustments’. Being open to making such adjustments does not mean undermining the objectives behind the post-crisis regulatory framework or changing the level of resilience in the banking system regulations are aiming for. On the contrary, it is by making dynamic adjustments that we can ensure the regulatory framework continues to deliver on the reforms’ objectives and ensures that the resilience that policy makers injected into the system post-crisis endures. To ensure this is the case we will need to follow a set of principles to guide us towards when it is appropriate to make dynamic adjustments. Principles for making dynamic adjustments  What might these principles look like? Here are my current thoughts. Principle 1: decisions about dynamic adjustments should be made with reference to the objectives of the original regulation and/or of regulators. For the Bank, prudential regulation is relevant to a number of our primary and secondary objectives: most obviously the PRA’s microprudential objectives and the FPC’s macroprudential objectives, but also the MPC’s monetary policy objectives given the role banks play in the monetary transmission mechanism. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  Principle 2: decisions about dynamic adjustments should be evidence-led.
This means that, compared with past demand shocks, policy will remain more accommodative for longer, thereby likely muting further the pass-through of any growth-driven exchange rate appreciation. And with the current recovery in the euro area being largely driven by domestic demand, euro strength may also have less of an impact on growth than, for example, after the Great Financial Crisis. All of this suggests, therefore, that monetary policy never acts in isolation on the exchange rate and that, in periods of recovery, the positive confidence and stimulus effects of monetary policy are likely to offset, at least in part, the disinflationary effects of a stronger currency coming from expectations of tighter policy. Of course, this also means that should the contributions of the different shocks driving the exchange rate change over time, then also our assessment of the impact on inflation will have to change – expansion or not. Exogenous shocks to the exchange rate, if persistent, can lead to an unwarranted tightening of financial conditions with undesirable consequences for the inflation outlook. As shown on slide 6, the emerging disconnect between the euro’s exchange rate vis-àvis the US dollar and the long term interest rate differential between the US and Germany may suggest that we are entering such a situation. Against this background, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring.

Benoît Cœuré: The transmission of the ECB's monetary policy in standard and non-standard times Speech by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at the workshop "Monetary policy in non-standard times", Frankfurt am Main, 11 September 2017. * * * Monetary policy has had a powerful impact on financial markets in recent years.1 There is compelling international evidence that non-standard policy measures, such as asset purchases, forward guidance and negative interest rates, have been successful in altering relative asset prices in a way that is consistent with the predictions of portfolio rebalancing theory and the signalling channel of monetary policy. 2 Few therefore dispute that the first stage of transmission of non-standard policy measures to the financing conditions of the private sector has been effective. Since the effective lower bound on nominal interest rates is expected to prevail more often in the future, this is undoubtedly good news. The situation is less clear, however, when it comes to the second and third stages of transmission – that is, from easier financial conditions to economic activity and from economic activity to prices. Many central bank observers point to continued anaemic growth and low inflation across the globe and conclude that unconventional policy measures have failed to stimulate the economy. If this were the case, it would place a question mark over the use of such measures. In my remarks this morning I would like to examine this claim more closely.
To be effective in curbing recession risk, that response should have as its objectives, first, speeding-up the process of reskilling by workers (“enabling”) and, second, cushioning the impact of new technologies on displaced companies and their workers (“insuring”). In the face of mounting concern about the societal impact of the rise of the robots, quite a lot has been written recently on the sorts of new insurance mechanism that might be required to smooth this transition. 56  Here, I will focus on two areas where new “enabling institutions” could ease the transition for workers and companies. Both draw on one of the greatest institutional inventions of the past millennium – universities. In 1852, John (later Cardinal) Newman published The Idea of a University, a book that has since assumed classic status as a statement of the principles by which universities should be run and organised. There are many themes to that text. From these, I would highlight two which have particular relevance to the debate about the future role of universities within our societies. First, Newman emphasised universities’ role in providing a liberal education for students, by which he meant access to a range of disciplines. Rigid specialism was to be avoided. The capacity to think was what mattered. Second, the role of the university was to propagate ideas, rather than necessarily generate them. The capacity to diffuse knowledge, rather than generate it, was what mattered. With a twist, both are st  relevant to the Idea of a University in the 21 century.

30  9  All speeches are available online at www.bankofengland.co.uk/speeches  9  During the first three Industrial Revolutions, the skills workers needed to keep one step ahead of the machine were largely cognitive. Machines undertook largely manual (“doing”) tasks, which had previously used labour-intensive technologies. Cognitive (“thinking”) tasks remained, by and large, the exclusive domain of humans. So institutions emerged to nurture thinking skills, largely in children and young adults, to increase the chances of successful transition to the cognitively-intensive future world of work. In children, the most important of these institutional innovations was probably compulsory schooling. For children between the ages of 5 and 10, this was formally introduced in the UK with the Elementary Education Act of 1880. It was extended to age 11 in 1893 and age 12 in 1899. The Fisher Act of 1918 provided for compulsory education to age 14 and part-time education to age 18. Compulsory full-time education was extended to age 15 in 1947 and age 16 in 1972. 33  As these pieces of social infrastructure developed, so too did standards of educational attainment and cognitive skills. The fraction of the population aged 15 and over that attended secondary school rose from 23% to 60% between 1950 and 2010. 34  In the 1950s, less than 11% of the relevant age group passed five  or more GCSE O levels in England and Wales. By 2010, that had reached almost 80%.
So earlier this year the Bank announced we would be drawing up a blueprint to replace our current real-time gross settlement (RTGS) system, now twenty years old. 48 institutions currently have settlement accounts in RTGS. All other users of the systems that settle across RTGS access settlement via one of four agent banks. 5 These users include over 1000 non-bank PSPs serving customers’ increasingly demanding standards, and many rely on major UK payment schemes, particularly Faster Payments (FPS). As they grow, some PSPs want to reduce their reliance on the systems, service levels, risk appetite and goodwill of the very banks with whom they are competing. Re-selling services ultimately provided by banks limits these firms’ growth, potential to innovate, and competitive impact. 3  These PSPs include firms granted the status of either an e-money or payment institution in the UK. 4  Examples include From Stripe to Square, from Paypal to Ripple, from Applepay to Zapp. 5  Indirect access removes the need to build costly payments infrastructure – a potentially large fixed cost for young companies. 4  BIS central bankers’ speeches  That is why I am announcing this evening that the Bank intends to extend direct access to RTGS beyond the current set of firms, allowing a range of non-bank PSPs to compete on a level playing field with banks. 6 By increasing the proportion of settlement in central bank money, diversifying the number of settlement firms, and driving greater innovation in risk-reducing payments technologies, expanding access should bring financial stability benefits.

A typical settlement chain can involve many different intermediaries, meaning securities settlement is comparatively slow. Transactions that take nanoseconds to execute settle in days. This also means large costs and operational risk. And, like in payment systems, economies of scale introduce concentration and create single points of failure. All of that ties up potentially tens of  6  Another key enabler of PSP access to major retail payment systems such as FPS is the development of aggregators that can provide direct technical connections to the infrastructure, reducing the costs of building this capability for newer entrants. The intention is that these aggregators could be used by PSPs without an RTGS account, but under this arrangement PSPs would still need an agent bank for settlement of their obligations across RTGS. 7  The legislative changes include adding Payment Institutions to the list of regulated entities to whom the Settlement Finality Regulations apply, modifying the Payment Services and Electronic Money Regulations to enable safeguarded funds held by E-Money Institutions and Payment Institutions to be posted with the Bank and amending the Banking Act to expand HM Treasury’s powers to grant the Bank of England with the ability to supervise any relevant payments systems if they ultimately grow large enough to pose a systemic threat. The first is essential to enable these firms to benefit from the critical protections the Settlement Finality Regulations offer to users of major UK payment systems.
Modeling socalled pre-provision net revenue (PPNR) was one of the innovations introduced in the SCAP and represented one of the key challenges in that exercise – and, I will argue, is a continuing challenge today. Given the choice to model net income and regulatory capital ratios, another set of design choices concerns the horizon over which net income is calculated and how cumulative changes in net income over this horizon are incorporated into regulatory capital ratios. The SCAP assumed a two-year forward horizon, while the subsequent CCAR and DFAST stress tests have assumed a 9-quarter forward horizon.6 Other supervisory stress test regimes have made different assumptions – for instance, the European stress tests use a three-year forward horizon.7 An 2/8  BIS central bankers' speeches  alternative choice would be to project losses and income over the full lifetime of a bank’s loans and other assets. Estimating lifetime losses on particular fixed portfolios of loans and securities was arguably the prevalent approach during the financial crisis period.8 But in a stress testing context, the lifetime loss approach presents practical difficulties given the varying maturities of different types of assets, as well as the greater uncertainty inherent in more distant future points. At the time of the SCAP, we judged that a two-year horizon was long enough to capture significant losses while remaining within what could reasonably be projected conditional on the macroeconomic scenario.9 Closely related to the scenario horizon question is how cumulative losses and revenues are incorporated to calculate post-stress capital ratios.

Many large banks continued to pay dividends well into 2008, even after government support was provided to the banking industry via the Troubled Asset Relief Program (TARP), something noted in the press at the time.2 Some have argued that these continued dividend payments reflected intentional risk-shifting from equity to debt holders,3 though many institutions had stopped making share repurchases months before,4 which does not seem consistent with risk-shifting behavior. Alternatively, in an environment of considerable uncertainty, banks may have been concerned with the negative market signal that a dividend reduction might send, hesitating to be the first to take this step. Supervisory stress testing emerged as a policy solution to address both backward-looking regulatory capital ratios and possible first-mover problems facing banks during periods of stress. 1/8  BIS central bankers' speeches  By their nature, stress tests are designed to ask “what if” in a forward-looking way. Stress tests aren’t a prediction of future events but rather hypothetical exercises intended to assess the robustness of a bank’s resources against various potential future bad outcomes. In this way, they provide additional insight into the true degree of capital adequacy inherent in a bank’s current capital position and the risks embedded in its balance sheet, including its ability to continue to make capital distributions in both baseline and stressed economic conditions.
There is thus already scope for special national solutions, regardless of whether or not a country is part of the Banking Union. The group of non-euro countries within the EU also risks having less influence now that the United Kingdom has left. Being a member of the Banking Union is a means of gaining more influence and affecting the design of the regulatory framework for the financial markets. Financial system riskier The technological developments within the information and communications field – what is known as digitalisation – have been very rapid in the past 10-20 years. This, together with globalisation, has implied that trade has increased and that the labour force and capital have become more mobile, which has been positive for economic developments, but also for the development of the financial markets. These markets have been able to open up for more participants and new services. Risk management has become more effective with the aid of new financial instruments, and risks have been spread over more markets. Companies are  30 The Capital Markets Union is an EU initiative aimed at facilitating free movement of capital within the union, see https://ec.europa.eu/info/business-economy-euro/growth-and-investment/capital-markets-union_en. 13 [35]  increasingly often using market financing and this has been positive for competition and forced the banking sector to become more efficient. Several of the changes in the financial system have in other words been positive, but they have also entailed larger risks. Market participants’ behaviour riskier There is a greater risk of herd behaviour.

But as far as other durables are concerned, the pace of new buying has meant that the stock of them, relative to income, has been rising and is now significantly above average. This suggests that the current pace is unlikely to be maintained indefinitely (there are only so many cars and cookers you need). Chart 10. Shipping congestion has intensified in recent months though cost down a bit 80  Dollars (thousands)  Days  75 70  Chart 11. In the UK, recovery of consumer-facing services output suggests demand is rotating back, but some sectors lag behind Per cent change on 2019Q4  20  Average number of days (lhs)  18 Average freight rate (rhs)  16 14  65  12  60  10  55  8 6  50  Retail goods Hotels and restaurants Travel  4 45 40 Nov 18  2 Nov 19  Nov 20  Nov 21  Average number of days: end-to-end (factory to warehouse) shipments between China and the US. Average freight rate: shipments from China/East Asia to North America West Coast. Sources: Freightos.com and Freightos Baltic Index. Jan 20  Jun 20  Nov 20  Apr 21  20 10 0 -10 -20 -30 -40 -50 -60 -70 -80 -90 -100  Sep 21  ‘Retail goods’ series is retail sales in volumes. The other series are output measures. Sources: ONS and Bank calculations.
“Quantitative easing” is able to provide the much desired relief for everyone, be it a household in negative equity that has overstretched itself, an over-expanded enterprise or a government faced with social unrest as a result of the stringent measures it is forced to implement. Yet, quantitative easing is the exact opposite of deleveraging. Quantitative easing aims at: 1. reducing the interest burden of highly leveraged individuals, enterprises and governments, and 2. propping asset prices, lessening the negative wealth effect or even trying to create positive wealth effect, enhancing people’s confidence so that they will be more willing to spend, and increasing employment. However, quantitative easing is not a panacea. In the past three years, quantitative easing had limited stimulating effect on the real economy. There are several reasons. First, household deleveraging has reduced households’ propensity to consume, particularly for the  BIS central bankers’ speeches  3  lower income households. Secondly, with interest rate close to zero in the US, and the cost of current consumption already very low relative to future consumption, further interest rate cuts would have little effect in stimulating households to bring forward future consumption. Thirdly, regulatory reform and economic uncertainty are restraining banks’ ability and incentive to lend. And we must not forget there is a price to pay for implementing quantitative easing, the interest income of depositors, including investment funds and retirees, is greatly reduced.

Andrew Bailey: Bank capital – debating again Speech by Mr Andrew Bailey, Deputy Governor of Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority at the Bank of England, at Barclays’ 2016 Financial Conference, London, 9 March 2016. *  *  *  Bank capital has been in the news again recently, or at least parts of the news – there are some other things going on. There are probably two reasons for this “news”: first, because we have entered another phase of highly uncertain conditions in financial markets, which has had a strong impact on the market value of banks; and second, as authorities we are pushing on with implementing the post-crisis reforms to capital standards, and in doing so we have reached a point where some of the important building blocks are now being put into place. Today, I am going to reflect on and draw some conclusions for what I would call the bigger picture, namely what sort of banking system are we seeking to create, what are we not doing, and why not. I will draw on the detail, and there is no shortage of that, but this is not a talk about the detail of bank capital, you can find that in plenty of other places. Another objective is to tackle some urban myths of today.