samchain/econo-pairs-v1 huggingface dataset:
Speech  Embargo 8 November 2018, 6.30 pm  Ten years after the crisis: evolving markets and the challenges for the SNB Money Market Event  Andréa M. Maechler and Thomas Moser Member of the Governing Board / Alternate Member of the Governing Board ∗ Swiss National Bank Geneva, 8 November 2018 © Swiss National Bank, Zurich, 2018 (speech given in French)  ∗ The speakers would like to thank Dirk Faltin, Fabio Panzera and Nicolas Stoffels for their support in drafting this speech. They also thank Bernd Aumann and Alain Kouo as well as SNB Language Services. Page 1/9  Ladies and Gentlemen, I wish you a warm welcome to the Swiss National Bank’s Money Market Event in Geneva. Ten years ago, back in the autumn of 2008, none of us knew when or how the crisis would end. At the time, central banks adopted a raft of measures to tackle multiple challenges in quick succession. Having exhausted the conventional monetary policy toolkit, they turned to more innovative approaches, cutting their short-term interest rates to unprecedented levels and substantially expanding their balance sheets. Today, a decade later, the worst fears have evaporated, economic growth has returned to a robust level in many parts of the world, and some central banks have started to gradually tighten their monetary policy. For the SNB, though, it is still too early to contemplate taking such action. At our last monetary policy assessment in September, we decided to maintain our expansionary monetary policy stance.

Niklaus Blattner: IT in the financial sector - aspects of regulation and supervision Summary of a speech by Mr Niklaus Blattner, Vice-Chairman of the Governing Board of the Swiss National Bank, at 8. Berner Tagung für Informationssicherheit (8th Conference on Information Security), Berne, 29 November 2005. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The completeness, integrity, traceability and constant availability of data that has been securely processed are essential in order for the financial system to function smoothly. The Swiss Federal Banking Commission (SFBC) supervises banks and securities dealers domiciled in Switzerland. Its microprudential supervision focuses on the individual financial institution, in particular with regard to the protection of creditors and investors. By contrast, it is the task of the Swiss National Bank (SNB) to contribute to the stability of the financial system, i.e. it is engaged in macroprudential oversight. Banking legislation provisions governing the IT organisation requirements of a financial intermediary do not explicitly address the topic of information security, but rather focus on the notion of “proper and rightful conduct of business”. For the SFBC, information security is merely one concern among others. In one of its circulars it has, however, addressed several critical areas in greater detail, e.g. on the topic of external data management and outsourcing. The SNB’s mandate is limited to the payment and securities settlement systems.
Twice a year, for example, we publish a report on financial stability in the Swedish economy. In these reports, any risks we identify are highlighted with a view to creating conditions so that they can be corrected. On the basis of our assessments, we are also in a position to influence the course of events by proposing rule changes and legislative amendments. 6. Why is clarity important? The Riksbank’s work with an inflation target has been developed over the years. The decision to adopt an inflation target was made in 1993. Inflation indicators began to be published quite soon after that. Comprehensive inflation assessments appeared some years later, followed by inflation forecasts. The rule of action with a target horizon was then added, as well as the clarification of how monetary policy would be formulated in the event of different shocks. Future developments will no doubt exact additional requirements. Almost every time a new policy decision is at hand, any new information - on oil prices, taxes and price tendencies, for instance - has to be related to the intellectual framework we have gradually built up. As I mentioned earlier, in the next Inflation Report we intend to include a section on inflation in the somewhat longer run. We are also thinking of publishing probability assessments not just of forecast inflation but also of forecast growth. The approach we have chosen has a number of advantages.

Over the years there has been clear evidence of this in connection with excessively high expectations in the stock market or the property market, for example. In the end, it becomes difficult to justify prices in terms of economic fundamentals. Elements of this have been apparent in recent years, for instance in the United States. One issue is whether central banks ought to consider asset prices when setting the interest rate. The notion here is that asset prices may influence the path of inflation. An increase in household wealth on account of rising share prices, for example, is likely to affect consumption and thereby demand in general and the price trend. Effects from expectations are also involved. Rising share prices may mirror expectations of permanently higher corporate profits and lead to expectations of higher lifetime incomes. If confidence in the future becomes much stronger in this way, the effects on demand may be considerable. Share price increases may perhaps affect the corporate investment propensity in a similar way. The Riksbank takes this into account as far as possible in the inflation assessment. But much remains to be done, theoretically as well as empirically, when it comes to understanding the nature of these relationships. A lively discussion is in progress, at the Riksbank as well as among those who scrutinise us, about what a given development of asset prices should imply for monetary policy. There is even less agreement as to whether central banks should conduct policy so that the development of asset prices is affected directly.
In certain cases, their carbon footprint is as large as the one of 15.5 million petrol cars in a year.26 Sixth, since crypto assets can also be used for unlawful activities, including money laundering, financial integrity concerns follow. Such risks could be larger on account of the fact that transactions are performed through non-standard payment systems and their heightened degree of anonymity. Seventh, crypto-assets’ value could also become swiftly eroded on account of the limitations and problems associated with cyber risks associated to the technologies underpinning their operations, i.e. blockchains. This could occur due to a wide range of possible causes, such as their technical configuration placing constraints on the scale of operations, which would prevent growing public demand from being met. While progress is 23  Investment in or proprietary trading of crypto-assets or the purchase of structured products in which they are an underlying asset would appear to be the most common means by which they are incorporated onto banks’ balance sheets. 24  In certain cases (e.g. El Salvador), this state of affairs is deliberate. 25  See “Cryptoassets as National Currency? A Step Too Far”. T. Adrian and R. Weeks-Brown (2021), IMF blog, 26 July. 26  See “Hearing on Cleaning Up Cryptocurrency: The Energy Impacts of Blockchains”. US House of Representatives Committee on Energy and Commerce (2022). 7  being made in this field, these developments are still far from being mature enough.

The Committee is now finalizing the process of reviewing the comments received on this consultation and plans to issue a further consultation paper in the coming months. Let me offer some personal reflections at this stage, which should not be understood as preempting the outcome of this work. In particular, in deciding how best to harness the potential benefits from these markets while mitigating their risks in a world of uncertainty, in my view, it makes sense to err on the side of caution and prudence. In this regard, how many asset classes market themselves as being “stable” and “currencies” while often failing on both counts? We have witnessed some clear examples along these lines during the last few weeks. Additionally, as mentioned earlier, banks' crypto-asset exposures are currently limited, which means that there is currently very little activity that could even be shifted to the non-bank sector as a result of a conservative prudential approach. Finally, if there are unregulated areas of the financial system, including the emergence of a "shadow" crypto financial system, then the appropriate response is to bring these areas within the relevant regulatory perimeter, instead of diluting banking prudential regulation. The cross-border cooperation has been particularly visible in the adoption of international standards aimed at preventing the use of virtual assets in illicit transactions.
Michael C Bonello: Single currency issues – a central bank perspective Speech by Mr Michael C Bonello, Governor of the Central Bank of Malta, at the conference “The Euro - the impact on business”, organised by the Malta Federation of Industry, 16 January 2003. *  *  *  By way of introduction, it is important to stress that Economic and Monetary Union (EMU) and the euro are key aspects of the Treaty on European Union. They are a logical consequence of the process of European integration, and in particular of the economic rationale of increased trade as the driving force for the further integration of citizens, institutions and markets. Indeed, the arguments for more closely integrated markets, namely that greater trade and financial integration will increase economic efficiency and improve welfare, can equally be made for a single currency. In the case of the EU, the advantages of a single market postulated by economic theory appear to have been amply realised. Since internal borders were removed ten years ago, it is estimated that the Single Market has helped to create 2.5 million extra jobs; the EU’s combined GDP in 2002 was 1.8%, or euro 164.5 billion, higher than it would have been; and each household was on average 5,700 euro 1 better off. Market opening is, therefore, not only good economics but also very good social policy. Further benefits can be expected to flow from the introduction of the single currency.

Timing issues related to entry in ERM II In this process a first decision relates to the exchange rate strategy to be pursued in the interim period between now and entry into ERM II after EU accession. The EU Treaty is not restrictive in this regard. Any exchange rate strategy is acceptable as long as it contributes to real convergence and macroeconomic stability, and is compatible with ERM II by the time of entry in the mechanism. And since pegs to currencies other than the euro are incompatible with ERM II, our current exchange rate regime, which includes the euro, the US dollar and sterling, would need to change. In view of the positive experience with a fixed exchange rate regime and the absence so far of pressures on the lira during the on-going capital account liberalisation process, our strategy in this regard is to maintain this fixed regime but to gradually reduce the weight of the US dollar and sterling until the euro is the sole reference currency. This adjustment should not pose unsurmountable difficulties given that the euro already carries a weight of 70%. As for the timing and pace of the move to a full euro peg, these would depend, among other things, on the expected date of entry in EMU, which is conditioned by the two-year period embedded in ERM II, and also on the pace of the economy’s convergence to EU income levels and economic structures.
Table 1: Key flash episodes over the past decade  Year  Asset class  Markets  Price move  Duration (minutes)*  2010  Equities  S & P 500  -6%  5  2011  FX  USD/JPY  -4%  4  2014  Bonds  US Treasuries  +37bps  5  2015  FX  EUR/CHF  -41%  20  2015  FX  NZD/JPY  -10%  10  2015  FX  USD/EUR  -2%  4  2016  FX  ZAR/USD  -9%  15  2016  FX  GBP/USD  -9%  1  2017  Bond futures  French OAT  -11bps  1  2018  FX  ZAR/USD  -9%  1  2019  FX  USD/JPY  -4%  4  2019  FX  TRY/JPY  -10%  7  Sources: Bank for International Settlements, Bank Underground, Bloomberg Finance L.P., Cielinska,O, Joseph,A, Shreyas,U, Tanner,J and Vasios,M (2017), ‘Gauging market dynamics using trade repository data: the case of the Swiss franc de-pegging’, Bank of England Financial Stability Paper No. 41, Financial Times, International Monetary Fund, MarketFactory, Inc., Nanex, Reserve Bank of Australia, Securities and Exchange Commission and Bank calculations. *Approximate time space in which price moves from prevailing price to a new low (or high) price.

But others argue that it could accelerate further, as technology costs continue to fall, helping market users seek out more obscure venues where they might have an edge.5 Whatever happens, for today’s market participants, fragmentation is a fact. And that means – just like Lola – they can experience a markedly broad range of outcomes. That has important implications for all three of the characteristics – informational efficiency, resilience and fairness – I talked about a moment ago. Central banks are watching those issues closely.6 But today I want to focus on the effectiveness of the FX market in delivering the services needed by its users – using three storylines of my own. Our first fictional FX market user has never had it so good. With the resources and knowledge to connect to dozens of competing platforms and liquidity providers, analyse rich data sets in real time to work out the best way to deal, and using an array of algorithms (perhaps even arranged in an ‘algorithm wheel’) to execute at speed with minimal price impact, she gets an exceptional service from FX markets. I say ‘she’ quite deliberately here too – because, as I discussed back in June in a different speech,7 technological innovation means embracing diversity – of people, ideas, and working practices – is no longer a choice, it’s a business necessity.
Firstly, it is a means of payment, which means that a monetary value is transferred to the recipient when money is handed over. Secondly, it forms a unit of account, in Sweden this unit is krona and öre and in the United Kingdom it is pounds and pence, and so on. With a common unit of account, we all measure the value of goods in the same way, which makes it easier to compare the price or value of different goods. Thirdly, money is a store of value, which means that we can save by holding cash or money in bank accounts and thereby redistribute consumption from one day to another date in the future. Money is something we take for granted, but for money to work in practice, we first have to deal with a very complicated problem. This problem concerns trust, and trust in turn depends on many different things. However, the basic idea is that we must be able to trust that the money will retain its value over time - that we can still use it to pay with tomorrow. Otherwise we will not want to accept cash, for instance, as payment and we will try to get rid of that we have as quickly as possible. This is exactly what happens with hyperinflation. Money is exchanged as quickly as possible for bread, sanitary items, gold or something else that can in turn be exchanged for other goods or saved.

This is the holdings in accounts with the commercial banks. Such money is by definition a claim on these banks. However, banks may be forced to wind down, sometimes even going bankrupt, which happened to Stockholms Banco and as we saw in the most recent international financial crisis. This means that this money, the commercial bank money, does entail a risk even if the risk is slight. If the bank fails, you may not be able to redeem your entire claim on the bank from its bankruptcy estate. However, these days there is a state deposit guarantee that protects households up to a certain limit, EUR 100,000 per person and bank. Those with capital above this limit and legal entities do not enjoy this protection and so commercial bank money entails some credit risk for them. Commercial bank money is a claim on the bank and therefore a part of the financing of the bank. They are therefore transient, that is, the bank's customers can often move the money at short notice, either to another bank or withdraw it in the form of cash. The bank's assets, such as household mortgages, are not in general as transient. It is this that may create financial stability problems in the banking sector if the general public wants to withdraw their money and the bank cannot quickly sell assets to raise the needed liquidity.
And we want to encourage new entrants to step in and pick up where the major banks cannot. So the answer to the first question about the minimum allowance and asymmetric pricing structure is that they are designed to encourage more core lending from those banks who nevertheless must shrink their balance sheets in aggregate – the macro impacts of the FLS won’t be sufficient unless those banks have an incentive to participate. And the banks who can expand lending will benefit from the lowest price and greater proportionate access. The scheme is designed so that every firm has the potential to use it to support lending. But what this means is that we cannot expect every bank in the FLS to increase its stock of lending to the real economy over the 18-month period. It is to be expected that some firms still show an overall reduction, even if the FLS is successful. The crucial impact will be whether the FLS enables them to lend more than they would have done in its absence. The Bank cannot give details of an individual firm’s previous or new lending plans. It is for each of them to explain how the FLS enables them to support the economy. Most have already announced reductions in some interest rates or a loosening of other terms and conditions. Some will respond by lending to firms that they would previously not, because they can now earn a return that compensates for the extra risk. All these approaches will help.

But interest in this market at the retail level has been slow to develop. The paper is predominantly held by banks for liquidity purposes and a small part is held by institutional investors. There are a number of reasons behind this lack of retailer interest. First, at least until recently, the real interest rate has been low and sometimes negative, and so the yield of Exchange Fund paper has not been attractive. Second, as issuer, the Hong Kong Monetary Authority does not have the capacity to market the paper at the retail level. And, quite understandably, the banks who are recognised dealers and market makers are not keen to market the product for us in view of the possible impact on their deposit base. Third, there is no convenient market infrastructure, in terms of both market information and mechanisms for participation, through which retail investors can access that market. 1  BIS Review 84/1999  They may be other reasons. But to the extent that these three reasons are significant, our plan here to list the longer term paper, what we call the Exchange Fund Notes, on the Hong Kong Stock Exchange, and have trades settled through the established securities clearing system of CCASS, at a time when there is a significant positive real interest rate, should effectively address them. According to this plan, Exchange Fund Notes will be listed on the Hong Kong Stock Exchange on 16 August 1999.
1 Since the crisis, there have been hundreds of conferences on the future of finance. Typically, these are full-to-bursting with bankers, central bankers, regulators and academics. And, typically, they are in transmit mode. These are conversations among the elite in the language of the elite. The Open Forum was a different animal, its cast much wider, its language much plainer. Attendees were in receive mode. The most important and compelling message the Bank received at the Open Forum came in the first session. The Bank had conducted some polling of perceptions of the financial sector – for example, by asking people what one word best described the future of financial markets. Among the Bank’s usual contacts, including those in the financial sector, the most used word was “regulated”. Many of us will have heard that message from financial insiders concerned about the perils of over-zealous regulators. For me, the more revealing responses came from the general public, from the customers, rather than the producers, of financial services. The word most used by them when describing financial markets was a rather different one: it was “corrupt”. Not far behind were words like “manipulated”, “self-serving”, “destructive” and “greedy”. I am sure many of you have heard those messages too. They are certainly ones I have encountered frequently on my visits around the country. Chart 1 shows the “word clouds” from the two samples. For the Bank’s usual contacts, 69% of the most-used words were either positive or neutral.

The main themes from that exercise were outlined in the BSB’s first Annual Review published earlier this year. 35 Following several episodes of misconduct in wholesale capital markets, the Fair and Effective Markets Review (FEMR) was launched in 2014 to assess their functioning, overseen by the Bank, HM Treasury and the FCA. It reported last year, making a number of recommendations including the establishment of a FICC Markets Standards Board (FMSB). 36 The FMSB came together last year with a remit to provide guidance on appropriate standards of conduct in wholesale markets. Encouragingly, most of the major players in wholesale markets have joined the FMSB. Regulators will use these standards to inform their judgements under the expanded Senior Managers Regime. At an international level, the Financial Stability Board (FSB) agreed in early 2015 a work-plan to reduce misconduct risk, including in the area of key market benchmarks. 37 Following a recommendation in FEMR, work is underway to develop a global code of conduct in the foreign exchange market. Also in 2015, the G30 issued a report on Banking Culture and  34  For further details see http://www.fca.org.uk/consumers/financial-services-products/insurance/paymentprotection-insurance/refunds. 35  See BSB (2016). 36  See FEMR (2015). FICC here refers to Fixed Income, Currency and Commodity markets. 37  FSB (2015). 8  BIS central bankers’ speeches  Conduct. 38 And in the same year, the New City Agenda published its assessment of progress towards improving culture among UK banks. 39 This is good progress.