samchain/econo-pairs-v1 huggingface dataset:
From the start of Economic and Monetary Union in 1999 to the present day the ECB has altered its official interest rate 25 times, including yesterday (see Figure 1). In that same time frame, the US monetary policy rate has been altered fully 45 times, almost twice as often. And we can see the difference also in terms of accumulated variations. For instance, the monetary tightening – or rather the abolition of accommodating monetary policy after the bursting of the dot.com bubble – which began in the United States in 2004 and in the euro area in 2005, was clearly different in intensity. The accumulated rise in the official rate through August 2007 was equal to 200 basis points in the euro area and to 425 basis points in the United States; from August 2007 to today the accumulated cut in reference rates was equal to 100 basis points in the euro area and to 425 basis points in the United States. How should we explain these differences in the degree of activism in monetary policy? We may consider three potential factors. The first concerns the macroeconomic shocks that have struck the two areas during this period. If the shocks have been different, then that may explain different monetary policy responses. The second criterion concerns the underlying economic structure in each area.

It should be a given that the euro area’s monetary and budgetary policies should be shaped by the underlying trends and political objectives in Europe. So it is on the basis of those trends and objectives that the policies should be judged. That does not mean that the economic policies adopted on either side of the Atlantic cannot be compared. But for such a comparison to be reliable, its control variable needs to be precisely the underlying trends and policy objectives in the two areas. In other words, there must be a symmetrical comparison conducted on an equal footing, capable of allowing us to explain any differences encountered, including on the basis of the distinct characteristics of the two economies. 1  My thanks to Roberto Motto and to Adina Popescu for their help in preparing this lecture. BIS Review 135/2008  1  Today I would like to present an analytical model that should help us to understand whether, and why, economic policies – with particular reference to monetary and budgetary policies – have been different in the euro area and in the United States. This may prove useful to those, especially in Europe, who wonder why certain decisions are made on our continent, and the reason why they sometimes differ from those reached in the United States. 2. Monetary policy  It does not take a huge number of graphs or tables to show that monetary policies in the euro area and in the United States have partly differed over the past ten years.
The changes happening in the technologies around money will have an impact on the business model of the retail banking system that has deposit accounts at its core and that has hitherto dominated the payment and settlement machinery. It is certainly not our job to protect or preserve any particular business model for the provision of financial services. But the banking system, operating within the framework of the Bank of England monetary policy to govern the unit of account and under the regulation and supervision of the Bank and the FCA, is at the centre of the creation and of the use of the majority of our money as a means of payment and as a store of value. 16  Over 90% of customers described themselves as satisfied with their bank according to a survey by GfK NOP commissioned by the Competition and Markets Authority for its investigation into the personal current account sector. 17 The unit is a joint initiative by the PRA and FCA to provide information and support for those thinking of setting up a new bank in the UK: https://www.bankofengland.co.uk/prudential-regulation/new-bank-start-up-unit 11  All speeches are available online at www.bankofengland.co.uk/speeches  11  Given this role of the banking system in our economy, we have to ensure that the banks and the system as a whole are robust and have the resilience to withstand very severe risks. Our framework of regulation and our annual stress test of the banking system is designed to give this assurance.

And it will continue to evolve with society and as the ‘technologies’ that support money change. But the underlying responsibility to ensure the machine runs in good order will remain. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13
The proposal will be based on an in-depth analysis and assessment of the situation on the Swiss credit market, which will, in principle, be carried out once a quarter. 1 The signs of a build-up of imbalances on the Swiss credit market relate to the residential mortgage segment. Thus, if the buffer had to be activated, it would be aimed solely at this segment of the credit market. When assessing the necessity of activating the buffer, the SNB will take into account the impact of other recently announced measures focusing on the mortgage and real estate markets. These measures include a further revision of the selfregulation rules and a tightening of risk weightings for mortgage loans. In addition, as part of its monetary policy mandate, the SNB will closely monitor the impact of a possible activation of the countercyclical capital buffer, in order to assess the consequences for the economy as a whole. The current situation justifies the fact that this instrument, scheduled for implementation under Basel III, has been made available to the Swiss authorities at an early date. Numerous past crises have highlighted the costs associated with credit market excesses. Even if the countercyclical capital buffer does not enable us to prevent the build-up of all imbalances in the Swiss credit market, it should help to reduce these costs in the future, provided it is activated early enough for its preventive properties to take full effect.

At the end of 2000, it probably will be in at least four euro area member countries and in a total of at least seven European Union Member States. Turning to the third condition, it is important to remember that the considerable improvement in the cost competitiveness of the French economy in the 1980s and 1990s played a very large part in the recent success of our economy, a fact that we perhaps tend to neglect a little today. If the French economy has grown more quickly than the other main European economies between 1997 and 2000, whilst recording the largest external surplus in Europe and the second largest in the world over the last three years, it is to a large extent because, thanks to our low inflation, average unit wage costs in the manufacturing sector have, since the start of 1987, increased significantly less in France than in the euro area as a whole (some 16% less), as can be seen from the following graph: Competitiveness of the French economy Unit production costs in the manufacturing sector (unit wage costs) Relative to Monetary Union Member States 120 115 110 105 100 95 90 85 80 75 Jan. 1986  Jan. 1988  Jan. 1990  Jan. 1992  Jan. 1994  120 115 110 105 100 95 Gains in competitiveness 90 85 80 75 Jan. 1996 Jan. 1998 Jan. 2000  Nominal exchange rate: from the franc to the euro (base 100 in 1987).
But there have also been downsides and one of these has been the new and increased opportunities for financial crime, particularly in a crossborder sense. 13. In particular, the externally orientated economy of Hong Kong means that geopolitical events, and the increasing complex global sanctions as a response to those events, continue to challenge the sanctions screening and compliance programmes of banks. The HKMA has identified sanctions compliance – in particular the risks emanating from DPRK – as a core supervisory priority in the year ahead, and I am glad that there is an opportunity for my colleague to share some of our work in this area in one of the panel discussions later today. 14. Now to be clear : the developments I mentioned have actually driven changes for good. And I can say without hesitation that financial institutions are undoubtedly more capable of 2/4  BIS central bankers' speeches  combatting ML/TF risks than they were 10 or 15 years ago. Let me illustrate. Over the past few years all of our banks have put in place an assessment of ML/TF risk across the institution which informs the design of AML/CFT controls – this helps to ensure resources are targeted towards areas of higher risk. The banking sector also continues to pull its weight in reporting suspicious transactions - last year we saw a 25% increase from 2016 in terms of STRs.

The second issue I would like to highlight is a emerging focus internationally on the sharing of information between the public and private sectors, which I believe offers great potential in enhancing the effectiveness of our AML efforts. Increasingly, law enforcement agencies, regulators and the financial sector are cooperating in ways that go beyond the filing of STRs and assistance with investigations although these, of course, remain essential. The focus is now more on two-way sharing of information on trends and typologies. 20. In Hong Kong, the Fraud and Money Laundering Intelligence Taskforce, led by the Police and with participation by the HKMA and the banking sector, was established as a pilot scheme in 2017. This is a public-private platform along similar lines to initiatives overseas, notably in Australia and Singapore, and while it is at an early stage, it has already shown concrete results, not least in the freezing or restraint of some $ million as well as 71 arrests over a 10-month period. I believe that this kind of cooperation shows real promise for sustainable 3/4  BIS central bankers' speeches  enhancement to the effectiveness of our framework, and the HKMA strongly supports its continuation and development. 21. The third issue is that we all need to keep under constant review whether we are getting the risk-based approach right. To implement AML efforts using an approach based on risk is the cornerstone of the FATF Recommendations. No one – neither institutions nor regulators – can be watching all risk areas all the time.
And second, we must ensure our institutions and markets are sources of strength for the global system. Fulfilling these dual responsibilities requires the highest standards of supervision and regulation, and a commitment to the most effective cooperation with other regulators. Let me take those in turn. III. The UK Targets a Level of Resilience Beyond Global Minimum Standards  As the FPC has repeatedly made clear, the UK financial system will require a post-Brexit level of resilience at least as great as that currently planned, which itself generally exceeds that required by international baseline standards. This imperative reflects the scale, complexity and importance of the UK financial system. This does not mean we are pursuing the stability of the graveyard. Rather, we are building the necessary resilience for our system as efficiently as possible by simultaneously implementing major structural reforms. Such “efficient resilience” allows the UK financial system to fulfil both its domestic imperatives and its international responsibilities. 7  See ‘The Promise of FinTech – Something New Under the Sun?’, speech by Mark Carney, 25 January 2017, available at http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech956.pdf. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  Efficient resilience is why our capital standards are simultaneously well above Basel minimum requirements and substantially below the levels that would be necessary if those banks could not be safely resolved if they got into trouble. 8  Efficient resilience is why we are ring-fencing the domestic banking services on which UK households and companies depend.

At first glance it would appear that card payments – which are 35 per cent cheaper for society to produce – should replace cash completely. But it is not quite so simple. There are major differences in how cards and cash are produced. Card payments require an extensive infrastructure of terminals, computers and lines of communication and have substantial fixed costs. But the cost of a card payment is always the same, regardless of whether one uses the card to pay for a purchase amounting to SEK 50 or SEK 50,000. For payments made in cash the variable costs are substantial. Cash payments require considerable physical management such as transport, counting, storage of banknotes, etc. The larger the transaction amount, the more expensive the actual cash payment will be, as it involves a larger share of this management. For payments of small amounts the cost of cash is therefore lower than the cost of a card payment. This means that from society’s point of view, cash may be preferable for making small payments. To obtain an idea of what the size of a transaction may mean, we estimated the costs to society of a cash payment and a card payment respectively as functions of the transaction amount. In this way we could also calculate when it was profitable to pay in cash. The results show that – at lease in 2002 – it was most cost-efficient to pay in cash for purchases amounting up to almost SEK 70. 7 Above this, card payments were always preferable.
Technology-driven innovation in the financial sector has a long history ranging from the development of double-entry book keeping, to the establishment of modern payment systems, and the more recent introduction of complex asset markets and retail financial products. Thus it seems that the emergence of fintech is only the latest wave of innovation to affect the financial industry. Then, why is fintech getting increased focus nowadays? In fact, in the last decade, a radical change has occurred in the way in which technology is used leading to proliferation of new financial products offered outside the banking system, which has brought significant competitive pressure on banks as traditional players, and created environment in which disruption can happen extremely quickly, thus urging traditional players to adjust faster to maintain market share. There are a couple of other factors that have contributed to proliferation of financial innovation besides the advancement in technology itself. Changing consumer behaviour, especially by trendy millennials, is by far the biggest driver, on the demand side. They want to engage in their own way with financial services providers, who must respond to changing demands, or risk being disrupted by entrepreneurial innovators. In a recent global study, the World Bank reported that COVID-19 is accelerating change across the board on how people interact with financial services.

Similarly, customers must also be engaged, as they play a crucial role in creating much needed demand for Fintech led transformation. Therefore stakeholders have to consider how to educate consumers and businesses about the benefits of Fintech as well as making them aware of risks and challenges, so that they build trust, and can make informed financial services decisions. Let me conclude with a final thought. The digitalisation of the financial sector will continue to accelerate over the coming years. To help capture the greatest benefit from continuing waves of innovation, we must build trust in new financial technologies - by promoting an atmosphere that encourages creativity and innovations to the benefit of our societies, but without sacrificing consumer protection or undermining the financial system stability. Thank you! 1 https://www.worldbank.org/en/news/press-release/2020/12/03/fintech-market-reports-  rapid-growth-during-covid-19-pandemic  4/4  BIS - Central bankers' speeches
Evidently, the situation we are in calls for a whole set of thoroughgoing reforms and measures, in step with the scale of the challenges facing the economy. And if the adoption of structural reforms always requires a particular effort on the part of the industries involved in economic, social and political terms in order to achieve the highest degree of consensus possible, such effort is evidently all the more necessary in the current exceptional circumstances. Now on to the last matter I shall address today: the situation of the Spanish financial system. The Spanish financial sector has been affected by the financial crisis since it began, although its effects have undoubtedly heightened since last summer. The current crisis has two characteristics. Firstly, it is an international crisis on a large and widespread scale, affecting different markets, numerous institutions in various countries, a wide variety of assets and the real economy. In a further manifestation of the process of globalisation, the problems generated in very specific geographical markets have ultimately spread to most countries, and it is not very realistic to believe that isolation from the crisis may be an option. Secondly, the crisis is going to cause an across-the-board reduction in the financial and banking business in particular. The excesses seen in financial innovation and in overly expansionary credit policies have caused many of the current problems, whereby there will foreseeably be a back-to-basics movement entailing a clear reduction in total turnover in the financial sector.

Yet in 2015, fewer than 5% of French companies and 6% of individuals had some form of cyber-insurance.3 Insurers can and should take inspiration from their own experiences in tackling cyber-risk, and use it to develop a more mature 1  Sources: Fédération Bancaire Française; Observatoire 2016 de l’image des banques, published by BVA and based on a survey conducted in May 2016, and Observatoire 2015. 2 Source: European Commission’s Digital Economy and Society Index. 3 Source: Le marché de la cyber-assurance : la révolution commence maintenant, PwC, January 2016. 3  French and European cyber-insurance offering. Second subject: data and big data, with the spread of connected objects that is triggering an exponential rise in the amount of data available on insurance policyholders. Naturally this represents an opportunity: the traditional business of insurance consists precisely in collecting and exploiting data in order to quantify and put a price on risk. Nonetheless, I would urge insurers to take a responsible approach: we need to strike the right balance between segmentation and the sharing of risk between policyholders – the basic principles of solidarity and risk-pooling that are intrinsic to insurance are at stake. And we must not lose sight of our collective values regarding individuals’ right to privacy. 3. What are the challenges for the French and European economy? Let me just remind you of two basic economic facts: there can be no lasting growth without a rise in productivity; and there can be no productivity without innovation and its diffusion.
Sometimes, it has been a bit of both. As I see it, the structural problems with forward guidance come in two flavours. First, the type of forward guidance that financial market participants crave is precise, time-specific guidance. This makes their job of pricing assets and inferring central bank signals easiest. But this is also the type of forward guidance central banks are, rightly, least willing to provide. The path of policy ought to depend on the path of the economy, not the passage of time. And that path is uncertain. So from a policymaker perspective, imprecise, state-dependent guidance is the preferred form. This difference in requirements gives rise to an inherent tension. Either guidance ends up being ex-ante over-precise and ex-post unreliable. Or it is ex-ante imprecise but then serves little or no ex-post signalling role. We have seen examples of both types in the UK, with early forward guidance erring towards the former and recent forms towards the latter. So-called “dot plots” combine, for me, the worst of both worlds. There is a second problem with forward guidance, first articulated by Stephen Morris and Hyun Shin several years ago. 42 The provision of public policy signals may dampen incentives among market participants to invest themselves in understanding the economy. These risks have I think been realised in practice, with forward guidance encouraging too much poring over central banks’ words and too little poring over the data on which monetary policy decisions are based. That is the wrong way around.

As other countries have found, the scale and scope created by a Development Bank is necessary to reach SME start-ups and scale-ups across all sectors and all regions. The best time to have put in place a UK Development Bank would have been 1929. The second best time is now. Until recently one of the great financial puzzles was that, despite waves of innovation, there was little evidence of its effects in measures of the efficiency of financial intermediation. At the macro level, the work of Thomas Phillippon suggests measures of banking efficiency in the UK and US have flat-lined.27 At the micro level, this lack of progress was well captured by the late, great Paul Volcker in 2009 when we suggested the only useful piece of financial innovation over the preceding 20 years had been the ATM. 26 27  Stamp (1931). Phillippon (2015). 16  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  16  Today, the winds of technological change are blowing a gale through finance, led by payments. New technological barbarians are appearing at the gates, transferring monies cheaper, faster and easier than ever. Many private sector initiatives are underway currently to develop so-called “stablecoins” – digital currencies backed by pools of safe assets.