samchain/econo-pairs-v1 huggingface dataset:
While it is clear we have come a long way since 2008, we can’t just settle for making a promise that no bank will be ‘too big to fail’: as Resolution Authority the Bank must be able to deliver on that commitment. Fundamental to that delivery, the UK now has the requisite statutory tools, and powers to underpin a credible bank resolution framework. These are set out transparently in the Banking Act 2009 and there are  6  Also known as the Purple Book, and subsequently updated in 2017. As set out in the December 2019 Financial Stability Report. 8 The December 2020 Financial Stability Report sets out the FPC’s latest assessment. 7  4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  safeguards in place so that these powers can only be used in the right circumstances. These features allow market participants to have confidence in the integrity and predictability of our decision-making, which is supported by the UK’s strong and effective institutions. These powers also form an important complement to supervisory and prudential tools; that these are embedded within the UK legal framework ensures they function as a credible and independent backstop for banks at risk of failure. Flexibility and proportionality in implementation  While a credible and transparent policy regime is necessary it requires flexibility and proportionality in development and implementation to ensure overall effectiveness of the regime.

In one policy, it demonstrates our transparent, flexible, proportionate, and credible approach to resolvability. Making the UK resolution regime more transparent and better understood is at the heart of the aims of the RAF. Disclosures made by firms and the public statements with views on individual firms made by the Bank are a major component of the RAF – and my Dear CEO letter reinforces our existing expectations. Each of the major UK banks will assess their preparations for resolution, submit a report of their assessment and publish a summary of their report every two years. The Bank will also make its own public statement on the resolvability of these banks. Combined with our policy statements and our annual publication of loss absorbency requirements, this aims to help investors better understand the progress firms are making to become more resolvable, and what would happen in a resolution. This will ultimately help the UK banking system function more efficiently by allowing the public and investors to hold banks more effectively to account, with the confidence that any failure, should it occur, be more orderly. The RAF is an inherently flexible framework. The focus is on banks and building societies to do what may not come naturally – confront the difficult and complex judgements required in a resolution in advance and plan for them. Identifying and having flexible capabilities that give the authorities options to respond to a range of failure scenarios, rather than asking them to address a specific one, is important.
I think the answer is a clear “no,” principally because the returns earned by investors primarily are due to the absence of sufficient private balance sheet capacity rather than underlying credit risk. In fact, from the Federal Reserve’s perspective, the risk of loss is very low. Indeed, there are three layers of protection that stand between the Federal Reserve and losses. First, the underlying securities are AAA-rated, which means that losses on the underlying loans have to be unusually large to move that high up in the capital structure. And although some of the rating agency models have not held up well in the crisis, the consumer ABS models have proven to be reasonably robust. In other words, a AAA-rating still means quite a bit in this market. This is in contrast to the collateralized debt obligation or CDO market, where AAA-rated securities often used subprime and Alt-A mortgage loans as their raw ingredient. Second, as noted earlier, the Fed has taken additional haircuts against the underlying securities averaging about 10%. These haircuts provide additional protection to the Fed. Third, if the underlying collateral is put back to the Fed, the Fed puts the collateral into a special purpose vehicle. In such a situation, the Fed would be protected by the excess spread earned on the TALF loans and Treasury-provided TARP capital. Only if those buffers were wiped out, would the Fed suffer losses. BIS Review 69/2009  3  We have done stress simulations on the underlying loans.

Jean-Pierre Roth: Autonomy on the edge of a large monetary zone - the Swiss experience Address by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the Leonard Davis Institute for International Relations, Hebrew University, Jerusalem, 28 May 2006. This paper was prepared with the support of Ms Petra Gerlach-Kristen, Economic Research Section, Swiss National Bank, Zurich. *  *  *  This is my second visit to Israel and I am delighted to be back. I am especially happy to speak at this institute which, according to the will of its founder, Leonard Davis, should promote a better understanding of Israel external policy. The first time I was in Jerusalem was in November 2004 when the Bank of Israel celebrated its 50th anniversary. The Swiss National Bank is itself approaching an important anniversary. Next year, it will have been 100 years since we opened our doors for business. Since 1907, our institution has seen large changes in the monetary environment. When the SNB began operating, the Swiss franc's parity was defined in terms of gold and silver. In the early 1920s, Switzerland adopted a gold standard and fixed exchange rates remained the dominating feature of its monetary regime until the collapse of the Bretton Woods system. Since then, we have learned how to conduct our monetary policy independently and how to live with flexible exchange rates.
It has been plausibly argued that globalisation has played an important role in determining the low level of world real interest rates, for example as a result of emerging market savings having been mainly invested in developed economies due to a lack of investment opportunities in the respective home markets. 20 This has induced a decline in the equilibrium global real interest rates, which monetary policies have accommodated with low nominal interest rates. 21 Obviously there remain risks associated with a potential abrupt unwinding of global imbalances and investment strategies strongly influenced by a low interest rate environment. But monetary  20  See Caballero (2006). 21  See Bernanke (2005). 10  BIS Review 9/2008  policies have not played a role in the emergence of global imbalances and associated financial stability risks. Alternatively, it has been argued that the benign effects of global competition and low-cost imports on consumer prices might have led to an underestimation of the stimulating effects of a monetary policy, which is consistent with the preservation of price stability over the medium term, but which can be characterised as accommodative over the long term, as evidenced by buoyant credit and money growth over a prolonged period of time. 22 A strong and persistent expansion of monetary liquidity could fuel or even trigger an asset price boom.

But a more careful analysis shows that other factors played an important role, such as the rapid growth of new financial instruments, the increasing presence of very active and highly leveraged financial market participants. Moreover, ample market liquidity also reflected an increase in risk appetite and a rise in leverage. And the recent market developments showed that an abrupt and sizeable increase in risk aversion caused an evaporation of liquidity in many markets and a rise in market volatility. Therefore, although financial globalisation can play a role in containing market volatility, it cannot be expected to have a dominant and permanent impact. Impact on financial stability – the financial market turmoil What are the broader potential implications of financial globalisation for the stability of financial systems? How are real and financial shocks likely to propagate across borders and asset classes in a financially integrated world? On the one hand, there is obviously an augmented risk of cross-border contagion of asymmetric shocks to the rest of the world if cross-border asset holding is widespread. On the other hand, this risk has to be weighed against the positive side of the very same coin, which is the benefit gained from an increase in international risk-sharing by means of diversification. The resilience of financial asset prices to negative shocks is improved when the market is more liquid and the investor base more heterogeneous.
John C Williams: The economic outlook Remarks by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Foreign Policy Association, New York City, 5 March 2020. * * * As prepared for delivery Thank you so much for this award. It’s a genuine honor to be recognized in this way. And allow me to add my congratulations to all the other organizations and individuals that have been commended this evening. The work that you’re doing—particularly in the area of corporate social responsibility—is so important. On Tuesday, the Federal Open Market Committee (FOMC) lowered the target range for the federal funds rate by 1/2 percentage point.1 This action was in response to the evolving risks the coronavirus poses to the U.S. economy. Tonight, I’ll use my remarks to provide more context around that decision and about our response as we look ahead. But before I give this evening’s remarks I need to give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee or others in the Federal Reserve System. Economic Outlook To start, let me emphasize that the fundamentals of the U.S. economy remain strong. We’ve seen continued solid job growth, unemployment is at a historically low level, and we entered 2020 with very good momentum. After a year that was characterized by uncertainties, global growth appeared to be stabilizing, and geopolitical risks receding.

Something worked: the IMF, G20 and WTO The IMF is an organisation for international cooperation based on a system of mutual assistance among member countries. The IMF provides loans to countries experiencing balance of payments problems. The loans are financed by member countries. If the problems stem from economic policy mismanagement, the loan will be subject to specific requirements such as measures to correct policy. When the crisis occurred, the IMF reacted swiftly to accommodate the increased need for IMF services. The IMF’s role as lender and interlocutor with the authorities in crisis-hit countries probably helped to limit the crisis. The IMF provided support and assistance to countries that were directly affected by the crisis and countries that were innocent bystanders. The sharp increase in IMF lending reduced the financial resources of the organization. Member countries have now increased their contributions to the IMF. During the financial crisis, the G20 has played a prominent role in the international coordination of economic policy. The group launched several important initiatives during the crisis, which were subsequently placed under the responsibility of the IMF. All countries stand to benefit from the establishment of international meeting places that the major economies consider to be of interest. However, unlike the IMF, the G20 is not a representative body for all countries. Even if the G20 account for a large share of global output, most countries are not included, such as low-income countries and regions like most of Africa, the Middle East and the Nordic countries.
The Bank of England cannot effectively perform its role as lender of last resort without first-hand knowledge of the health of the banks to which it might provide support. In peacetime, regulation can be conducted outside the central bank. But in a crisis, decisions must be made quickly and decisively and the central bank, working with government which is always responsible for any use of public money, needs to be in charge. That was one of our painful lessons. In approaching our new responsibilities we shall build on the real improvements to its regime of prudential regulation made over the past three years by FSA. But the Bank will bring its own central banking culture. The focus of regulation needs to be on maintaining stability of the banking system as a whole. We shall be looking not just at those aspects of a bank that make it look unsafe in comparison with other institutions, but even more so at whether there are common features that threaten the stability of the system, such as the dangerously high leverage prior to 2007. We shall aim to avoid an overly legalistic culture with its associated compliance-driven style of regulation. That is an important reason for the separation of consumer protection and market conduct from prudential regulation. We will need to exercise discretion when setting capital and liquidity ratios for individual banks. And to do that properly will require changes to the current legislation and rule book. We must reverse the seemingly inexorable trend towards more regulation and more regulators.

Our second priority is to accept the challenge of the new responsibilities that you, Chancellor, have asked the Bank to take on in respect of micro prudential regulation and macro prudential control of the balance sheets of the financial system as a whole. I welcome those new responsibilities. Monetary stability and financial stability are two sides of the same coin. During the crisis the former was threatened by the failure to secure the latter. The experience of the financial crisis taught us two important lessons. The first is that, whatever its theoretical attractions – and there certainly are some – putting prudential regulation into the same organisation as the oversight of consumer protection and market conduct didn’t work in practice. The two types of regulation require different skills and a different approach. Separating them – the so-called “twin peaks” model of financial regulation – is the right direction of reform. That conclusion is not a reflection on the people who work at FSA. They are an able group and have worked hard to improve prudential regulation over the past three years. I look forward to working with them in the future. Nor does it follow from this first lesson that prudential regulation should necessarily go to the central bank. 2  BIS Review 84/2010  But a second lesson is that when banks hit trouble the central bank needs to be fully involved in resolving those problems.
It would consist of an agreement between firms and workers, under the social dialogue framework, to share the inevitable loss of national income that higher commodity import prices entail. 8  Fiscal policy should also play a key role, avoiding an across-the-board fiscal impulse – which would exacerbate the inflationary pressures – and the use of automatic indexation clauses in expenditure items. Conversely, efforts should focus on supporting lower-income households, who bear the brunt of inflation, and the firms most vulnerable to this new shock. Moreover, any measures should be temporary, so as not to further increase the structural budget deficit. They should also be designed to avoid significant distortions to price signals. But offsetting the adverse effects of the current supply-side shock also calls for ambitious policies to boost productivity growth and potential GDP. In other words, the optimal economic policy response to an adverse supply shock, such as the present one, entails structural reforms (including, naturally, of the energy market) to ease the supply-side tensions. The common European instrument to realise this ambition is the European Union’s NGEU recovery plan. Under NGEU, investment projects must be carefully selected in order to optimally complement, and act as a catalyst for, private investment.9 But they must also be accompanied by structural reforms to support, for example, the reallocation of resources across firms and sectors. At the same time, the sustainability of national public finances must be ensured; this is essential for the smooth functioning of the monetary union.

Statistics do not have a heart or a religion When we express our personal experiences, we step into a dangerous territory. Our personal experiences are guided by our emotional and subjective feelings. When we share them with others, we are inviting them to accept our emotional and subjective feelings as if they too have experienced the same. This is where we run into problems. Unless others too have the same emotional and subjective feelings, there is no reason for them to accept our experiences as their experiences. Hence, statistics to be shared by everyone should necessarily be based on objective considerations. In other words, statistics should not have a heart. Its religion should be pure objectivity. It should convey facts as has been observed by an individual free from personal biases or prejudices. Only such an impersonal statistical framework has the capability of serving people intending to use them for making judgments about the real world. How economic development occurs? An economy has to play a specific role towards its members. It has to produce and supply goods and services as demanded by them having consideration for timeliness, quantity and quality. When an economy produces these goods and services in larger and larger volumes year after year, new wealth is created, raising the well-being of its members. The continuous creation of wealth by people in this manner raising the overall welfare levels brings about what is called “economic development”.
The analyses show that a credit gap of more than 4 percentage points can predict almost 80 per cent of banking crises in a selection of countries. In some cases, the indicator also signals some banking crises that do not materialise. Accuracy improves when other indicators are included in addition to the credit gap. The credit gap for Norway was above the "critical" level prior to and during the crisis in the 1920s. This was first due to high debt growth and later to a fall in GDP. During the Second World War, private sector debt fell sharply, but was followed by a catch-up period. The next episode of a high credit gap was in the 1980s, prior to the last banking crisis. The gap is also high today. 4  Borio, and Lowe (2002): "Asset prices, financial and monetary stability: exploring the nexus", BIS Working Papers No. 114. 5  IMF (2003): World Economic Outlook, April. 6  Source: Norwegian Association of Real Estate Agents, Association of Real Estate Agency Firms, FINN.no (Norwegian search database for classified advertising, including real estate, on the Internet) and ECON. 6  BIS Review 25/2003  More sluggish developments in the Norwegian economy have contributed to a sharp rise in the number of bankruptcies over the past year. In spite of the pronounced reduction in interest rates in recent months, we must expect a large number of bankruptcies and somewhat higher bank losses in the period ahead as a result of continued rather weak economic growth in Norway.

The exchange rate may serve as an automatic stabiliser. In periods of excessive activity in the economy, or expectations of excessive activity, the exchange rate may appreciate, even if the sight deposit rate does not change. Similarly, the exchange rate may depreciate if activity is low. With inflation targeting, we no longer have a specific objective for the krone exchange rate. The krone is floating. The exchange rate represents an important channel through which monetary policy functions. Changes in the exchange rate are desirable when they contribute to stabilising inflation. To what extent the exchange rate will depreciate as a result of a reduction in the sight deposit rate depends on several factors. The more the krone depreciates as a result of a reduction in interest rates, the less the sight deposit rate will have to be reduced when it is appropriate to relax monetary policy. A weaker currency contributes to higher economic activity and thereby higher inflation. In addition, consumer price inflation will increase because prices for imported consumer goods will be higher if the exchange rate depreciates. The response to a change in the exchange rate will depend on how the change is judged to influence inflation. This is consistent with the way we normally take other asset prices into account. BIS Review 25/2003  7  Conclusion In conclusion, I would like to comment briefly on current economic developments. Global economic growth appears to be weaker than previously projected.
In the event, the damage was contained, and world economic activity is now recovering far more quickly than anyone could have expected. But, encouraging though it is, the recovery is taking place in a context of large external imbalances within the world economy and large imbalances between strong domestic and weak external demand in a number of industrial countries most notably in the US and here in the UK. The challenge now for the major industrial countries - as we discussed at the G7 meeting last weekend in Tokyo - is to secure a more balanced pattern of growth among our economies in order to help sustain the global expansion. This chain of international events has also had a major impact on the pattern of exchange rates. Many emerging countries and some transition economies saw their exchange rates fall dramatically; but there were also important effects on the relationships between the currencies of the major industrial countries. The dollar and sterling have in fact remained reasonably stable against each other for most of the time since sterling withdrew from the ERM. The yen, which had been notably weak on the Japanese recession, has since picked up strongly as the prospect of recovery in Japan improved. But the most puzzling development in the exchange markets has been the disappointing weakening of the euro since its historic introduction at the beginning of last year.

In many instances, depending on the particular international profile of the business, they are continuing to suffer, as a result of the global economic developments that I have already described. The resulting agony continues in many cases notwithstanding the present pick-up in world demand, and is particularly acute for those businesses and sectors most exposed to the continuing weakness of the euro. They no doubt include some of your own businesses. I realise that to say that I sympathise with those of you in this situation - and I really do sympathise with you - is scant consolation. But I want to assure you that we do not ignore the exchange rate in either our inflation forecasts or in our monetary policy judgements. The strong exchange rate in itself has both a direct dampening effect on our domestic price level and an indirect effect through lowering net external demand - and both of these effects we take into account as best we can. Absent those effects of the strong exchange rate - other things equal - policy would have needed to be correspondingly tighter. But while we do - and will continue to - try to make full allowance for the strength of the exchange rate there are limits to just how far we can sensibly go.