samchain/econo-pairs-v1 huggingface dataset:
Finally, let me offer a couple of specific lessons from the SNB’s gold sales that underline the benefits of transparency. Total official gold holdings by central banks and governments today account for approximately ten times the annual worldwide production of gold. Prospects of official gold sales therefore have an inherent ability to destabilize the gold market. The initial Washington Agreement and the follow up agreement have demonstrated that official sales are best conducted in the context of a clear and transparent overall framework. While the terms of the agreement were not rigid in their nature, they provided sufficient guidance to the gold market to prevent excessive market volatility. In the event that official gold sales continue to be meaningful beyond the current central bank agreement, a new set of parameters will have to be established upon its expiry. Moreover, should the IMF or any other official institution decide to sell substantial gold reserves during the next couple of year, it strikes me as essential that such additional sales get incorporated into the existing framework. Even within a broad international framework, national sales are best conducted on the basis of a clear and transparent sales strategy. In the case of the SNB, the specific sales programs evolved over time but the principles of regularity and transparency were maintained throughout. Market participants knew at all times what the SNB was doing with regard to its gold sales. Moreover, the market knew how the sales were conducted.

Between May 2000 and March 2001, the BIS sold 220 tonnes on behalf of the SNB. For the first 120 tonnes, the SNB paid the BIS a fixed commission while the performance risk resided with the SNB. For the next 100 tonnes, the BIS agreed to pay the average price of the AM and PM London gold fixing plus a small fixed premium. In April 2001, the Governing Board decided that there was no reason to continue to sell through the BIS. The SNB now had the necessary professionals, know-how, trading resources and contacts to the international gold market to trade directly. Two types of selling operations were subsequently pursued: spot sales in the market and sales programs with price caps. Over the next three and a half years, 730 tonnes were sold directly in the spot market. For these sales, the SNB used 25 counterparties in four different continents. In an effort to receive consistently competitive pricing, the Governing Board allowed the SNB traders to become two-way participants in the market. In other words, traders were allowed to buy gold on an intra-day basis up to two thirds of the daily allocated sales volume. Overall, the sales had to be conducted within a clearly defined corridor which was structured around daily sales volumes of approximately one tonne (Figure 5). Typically, the Bank of England was used for the physical settlement of these operations. Apart from spot operations, 350 tonnes were sold through option programs.
The protesters, it must be said, form something of a rainbow coalition. Some - at the violent end of the spectrum - appear to be pure anarchists who are clearly against the present system but offer no coherent alternative. Others - of whom there appear to be many more - seek to make either the more general point that the present international financial system operates unfairly in relation to poorer countries or does not take adequate account of wider social concerns like poverty or the environment, or they make particular points about the burden of third-world debt or particular development projects which they see as having unacceptable social or environmental impact on the countries in which the project is to be undertaken. Many of these issues are essentially the international dimension of issues that I have touched upon already in our own domestic context - though the contrast between poverty and affluence at the international level is of course even starker. And there is a good deal of underlying sympathy within the international official community with many of the points the protesters are seeking to make perhaps more than they appreciate. As a matter of fact I can’t remember a time when poverty reduction has been higher on the agenda of the international financial institutions. But the same harsh constraint - that we do not collectively have the resources to address all of these problems however much we would wish to do so - applies.

The tests include cyclical convergence and structural flexibility, the impact on investment, the impact on the financial services industry and the impact more generally on growth, stability and jobs. So the UK will not join EMU at the outset. But financial firms in London, whatever their nationality, see the euro as a key part of their business. With our support at the Bank of England, they have been actively preparing for the introduction of the euro. London thrives on liquid markets, regardless of currency. So the introduction of the euro is a major opportunity for London. BIS Review 11/1998  -2-  From the start, London will act as a link between New York and the euro area by providing a full range of euro services in wholesale financial markets. That includes euro payments and settlement, so that anyone who wishes to do so will be able to trade and settle in euro in London from the first day of EMU. But it also extends to euro banking, foreign exchange and derivatives trading, bond and equity issuance and trading, fund management, financial advice and professional support services as well. The City of London is Europe’s leading financial centre and one of the top three global centres, alongside New York and Tokyo. Here in New York, the financial centre is influenced by the size of the domestic economy. That is true of Tokyo as well. But London’s success has historically been due to its international financial business.
PRA Policy Statement 6/21 ‘Operational Resilience: Impact tolerances for important business services’, March 2021 6. PRA Consultation paper 5/22 ‘The Strong and Simple Framework: a definition of a Simpler-regime Firm’, April 2022 7. PRA PS7/19 ‘Credit risk: The definition of default’, March 2019 And PRA CP21/19 ‘Credit risk: Probability of Default and Loss Given Default estimation’, September 2019, 3 CP24/19 ‘Asset encumbrance’, September 2019 8. ‘New banks authorised since 2013’, February 2022 9. ‘The future of international insurance in the UK − speech by Alan Sheppard’, April 2022 10. HM Treasury ‘Review of Solvency II: Consultation’, April 2022 11. London scores highly in industry rankings of financial centres based on quantitative metrics. See for instance the Global Financial Centre Index. Research shows that human capital is a key determinant of financial centre success. See Karyal, I E and Karan, M B (2012), ‘The research on the distinguishing features of the international financial centres’, Journal of Applied Finance & Banking, 2(5), pages 217-238. Robust institutions and the rule of law are identified as important factors for maintaining competitiveness in Moosa, I, Li, L, and Jiang, R (2015), ‘Determinants of the Status of an International Financial Centre’, The World Economy, 39(12), pages 2074-2096. This conclusion is also reached in Eichengreen, B and Shah, N (2019), ‘The correlates of international financial-center status’, Review of International Economics, 28(1), pages 62-81. 12. Academic literature shows that large global financial centres with deep and specialised financial markets benefit from agglomeration effects and gain an ongoing advantage over smaller financial centres.

Another reason that our new objective should not encourage risky bets on regulatory standards is that we all remember what happens when such bets backfire. Over the last thirty years we saw the spectacular unravelling of the Bank of Credit and Commerce International, a subsequent small banks crisis, the equally spectacular collapse of Barings, and problems in the insurance sector including the closure of Equitable Life. And that was before we even got to the historic crisis of  Page 6  2007-08. In case anyone has forgotten, government support to the financial system peaked then at almost £ trillion. [15] The economic damage was immense and enduring. [16] Good prudential regulation – like a good immune system – remembers previous crises so that it can tackle similar ones when they come along in future. But to reiterate, strong regulation also needs to be responsive to the needs of the UK and to accommodate beneficial innovation. While I do not believe there is a fundamental tension between strong regulation and competitiveness for a global financial centre like the UK, it’s obvious that stronger and ever stronger is not the right answer. The PRA will not be turning the dial up to eleven. We will turn the dial down when we can. This is what we are doing as we go through the hard and unglamorous work of considering our detailed prudential rules to tailor them to the circumstances of the UK.
Over the past five years, domestic demand has risen by over 6% more than output - slightly more than the excess of demand over output in the late 1980s. In turn, net trade has made a negative contribution to output growth for six years in succession. A continuation of that trend would be unprecedented in Britain's modern economic history. The strength of consumption and the weakness of net exports have led to an imbalance between manufacturing and services. Manufacturing profitability has fallen by more than half over the past five years, while in less easily traded services profitability has been broadly unchanged. We, on the MPC, understand the problems facing many of you. So, let me explain what we can and cannot do about them. The need to rebalance the British economy is clear. Domestic demand is likely to be able to grow at no more than the rate of growth of total output; indeed, if the trade position is to improve it will have to grow by less. And within that figure, we need to allow room for the growth of public services. How will this re-balancing of demand come about? That is not yet clear. There are four key prices that will determine the extent of the re-balancing that occurs. They are the sterling exchange rate, the oil price, real wages, and interest rates. It is these prices that will provide the incentives for the required shift in resources. Let me consider them in turn.

But what should not be in doubt is that the MPC will take whatever steps are necessary in order to keep inflation on track to meet the 2.5% target. The challenge for monetary and fiscal policy is to restore domestic demand growth to sustainable levels. This would permit the stabilisation and eventual reduction of the trade deficit, while maintaining  2  BIS Review 26/2002  low and stable inflation, and high and stable employment, at the same time as resources move from private consumption to the provision of better public services. It is possible, perhaps likely, that the transition to lower growth rates of consumption will occur smoothly. And lower inflation now than in the past may ease the adjustment - the future is not what it was. For the Monetary Policy Committee the challenge is to keep inflation close to the target during a period in which a significant re-balancing of the British economy will take place. That will be a challenge, not just for the MPC, but for all of us. BIS Review 26/2002  3
In Europe, the ECB’s deposit facility rate was already at -0.5%, even before the onset of the COVID-19 crisis.6 Although the door is still open for future additional cuts in this interest rate, it seems evident that in the present circumstances there is relatively limited room for manoeuvre for conventional monetary policy, i.e. monetary policy based on controlling interest rates in the short term. The lower bound on interest rates introduces asymmetry into the way in which central banks implement monetary policy. As I mentioned earlier, if inflation rises above its target level, central banks may raise interest rates as far as is necessary to “cool down” the economy. However, when faced with deflationary shocks that take inflation below the target level and require that central banks lower their interest rates, these may ultimately “hit” the lower bound. This asymmetry means that monetary policy is potentially highly effective in combating inflation, but less so in combating deflation or even persistently low inflation. 3  Holston et al. (2017), for example, estimate that in 2016 the natural rate of interest was positive, but very close to zero, in the United States. 4 See, for example, Fiorentini et al. (2018). 5 See, for example, Brunnermeier and Koby (2018) for a discussion of the impact of interest rates on banks’ profitability and their ability to lend. 6 Arce et al. (2018) estimate that these negative interest rate levels do not necessarily shrink the supply of credit of European banks, and particularly of Spanish banks.

It was probably thanks to this flexibility, together with the large volume of asset purchases initially envisaged, that the announcement of the creation of the PEPP on 18 March served to substantially reduce interest rates on sovereign debt – especially that of countries at that time more harshly affected by the health crisis, such as Italy and Spain – and consequently, those on bank and corporate debt. To sum up, the PEPP cut short the downturn in euro area financial markets and gave way to the process of gradual easing of financial conditions which has continued up until the present day. This easing was essential for providing fiscal authorities in all countries in the area with room for manoeuvre, which has allowed them to deploy unprecedented measures to sustain the income of households and firms. Looking ahead, and without detriment to the use of the capital key as a guide for the distribution of asset purchases, the ECB has reiterated its willingness to continue to tailor the volume, composition and type of these purchase to the developments in economic and financial conditions in the euro area. 4  Secondly, we introduced a series of measures aimed at smoothing bank lending in the context of the COVID-19 crisis. In the euro area, banks are the main source of financing for households, the self-employed and firms (especially SMEs). It was thus vital to prevent a severe contraction in the flow of credit to the real economy.
Inflation was projected to stand at 1.2% in 2019 and, following a notable downward revision of 0.4 percentage points, 1% in 2020. In 2021, inflation is expected to stand at 1.5%, clearly below the monetary policy target. These developments have been accompanied by a reduction in long-term yields on sovereign debt markets, which have reached historic lows in most euro area countries and in the United States, as a consequence of the weakness of the macroeconomic environment and market expectations of the central bank response to this scenario of reduced economic momentum. In short, the macroeconomic context is characterised in the euro area, first, by a downward revision to growth forecasts, which were already relatively weak, which remain subject to downside risks, owing to the persistence of trade tensions and other geopolitical 4/13  uncertainties, such as those relating to the final outcome of Brexit, and which in some countries of the area even point to a risk of imminent recession; and second, by mediumterm inflation projections that have also been revised downwards and are well below the levels that could be considered compatible with the ECB’s price stability mandate. The measures adopted by the Governing Council of the ECB at last week’s meeting should be understood against this background.

4 Patrick Bolton, Morgan Despress, Luiz Awazu Pereira da Silva, Frederic Samama, and Romain Svartzman, “The  Green Swan – Central Banking and Financial Stability in the Age of Climate Change,” Bank for International Settlements, 2020. 5 TCFD site and review of annual reports, integrated reports, non-financial reports, sustainability reports and  standalone climate-related disclosure reports of individual GSIBs. 6 In the international context, see Enhancing Banks’ and Insurers’ Approaches to Managing the Financial Risks  from Climate Change, Bank of England Supervisory Statement 3/19, April 15, 2019; ECB Banking Supervision: Risk Assessment for 2020, European Central Bank; and Bolton et al. (2020). 7 Kevin J. Stiroh, New York Fed, Emerging Issues for Risk Managers, Nov, 2019. 8 Governor Lael Brainard, Federal Reserve Board of Governors, Why Climate Change Matters for Monetary Policy  and Financial Stability, Nov. 2019. 9 “Demystifying Climate Scenario Analysis for Financial Stakeholders,” Four Twenty Seven, 2019. “Climate risk  and response,” McKinsey Global Institute, 2020. “Fifth Assessment Report (AR5), the Synthesis Report (SYR),” Intergovernmental Panel on Climate Change (2015). 10 Fink, Larry, A Fundamental Reshaping of Finance, Letter to CEOs, 2020. 11 See The 2021 Biennial Exploratory Scenario on the Financial Risks from Climate Change, Bank of England  Discussion Paper, December 2019 for a discussion of relevant issues. 12 Carney (2015). 4/4  BIS central bankers' speeches
In quieter times, we contribute to the stability of the financial system by analysing potential threats and identifying possible action points. In order to assess risks, we use stress tests, among other things, to examine how well the banking system can cope with abrupt changes, such as sharp rises in interest rates. The SNB also designates the systemically important banks, which are subject to stricter equity and liquidity rules. We can also submit proposals to the Federal Council regarding adjustments to the countercyclical capital buffer. The SNB's contribution broadens when the stability of the financial system is threatened. In such cases, we provide illiquid but solvent banks with emergency liquidity in the form of loans. This is contingent upon FINMA having confirmed the solvency of such banks. By granting these loans, we can calm the situation and buy time in which to overcome a crisis. The Federal Council may ultimately decide to use taxpayers' money to stabilise the situation, whether this be in the form of state participation, as with UBS in 2008, or in the form of guarantees, as now in the case of Credit Suisse. Providing loans as lender of last resort in a crisis is one of the classic tasks of central banks. This task falls to central banks because only they are able to create liquidity in their own currency extremely quickly and in very large volumes. It is important to understand that even in crisis situations, this liquidity is not gifted.

The linking pin is membership in both policy boards by central bank’s senior management, which makes it possible for information and knowledge in one area to be usefully employed in performing the other, without compromising the mandate of each policy board. For example, detailed supervisory information about banks’ changing risk appetite and exposure to different economic sectors and markets – as well as how these risks are being managed – can provide useful early warnings about the health of the economy and potential systemic problems down the road. This can be a very important input for monetary policy board. On the other hand, central bank’s oversight of monetary policy and economic stability can strengthen and provide context to its supervisory responsibilities, for example, in identifying potential macro factors that may affect the health of financial institutions. Decisions about the stance and timing of prudential and supervisory policies in general can  BIS Review 32/2009  1  also be more appropriately made with the full knowledge of macroeconomic conditions and monetary policy. As can be seen, the two policies are essential to each other and hence it is useful or even desirable, in my opinion, for central banks to supervise at least the core financial sector, whether under a separate or integrated supervision model. This is most evident in times of systemic crisis where central banks’ last-resort lending is likely to be called upon and prompt decision is vital.
In Switzerland, responsibility for benchmarks lies, in principle, with the private sector and these benchmarks are not regulated. Nevertheless, the SNB is particularly interested that benchmarks for interest rates and exchange rates should be credible, since they are important for well-functioning financial markets and for the implementation of monetary policy. That is why the SNB has supported reform efforts in the area of benchmarks by taking part in various national and international working groups. I have reported here on these efforts on several occasions. The FSB has published two final reports since our last media news conference, so this provides me with a good opportunity to draw some initial conclusions. Benchmarks for interest rates As regards benchmark interest rates, the final report recommends pursuing two main approaches in the future. First, existing interest rate benchmarks should be further improved. Second, efforts should be made to develop alternative benchmark interest rates. Thus the two-pronged approach for the future envisages, alongside improved Libor interest rates which would still be based on unsecured money market transactions, the emergence of more benchmark interest rates related to repo transactions or other near risk-free transactions. The FSB’s final report states that significant progress has already been achieved with the Libor rates. However, not all of the requirements set by the securities regulators (IOSCO standards)1 have so far been met. In particular, it still remains unclear whether the markets upon which the interest rates are based are sufficiently liquid. A certain level of liquidity is needed to ensure robust benchmark rates, i.e.

In the OECD countries, especially in the US, there is solid growth with low inflation, BIS Review 112/1997  -4-  while we are seeing signs of broad-based recovery in Europe. Only in Asia have we seen a slowing of growth, but the growth rates have still been high by world standard and last year Japan grew by 3.6%, the fastest since the late 1980s. 15. Second, because of high global liquidity and low inflation, asset markets around the world are at record levels. Capital flows have increased with globalization, and added to record high stock and bond prices. The fact that Europe has recently raised interest rates, and the Fed is considering whether to pre-emptively raise rates to prevent wage-push inflation, has made the financial markets much more nervous despite the growth environment. This explains why the financial volatility in Asia has become global in nature. It is very flattering to know that Hong Kong can move even the mighty US and European markets, as much as the other way around. 16. Third, Asian fundamentals, and especially Hong Kong fundamentals, are strong. But there have been different degrees of strength in Asia with respect to the fundamentals. The adjustments in exchange rates of currencies in this region reflect partly the market perception of fundamentals. But as I said recently at the Per Jacobsson lecture, there is no perfect exchange rate regime.