samchain/econo-pairs-v1 huggingface dataset:
But we also believe that the quality and credibility of the regulations would be reinforced by the possibility of including certain limits, such as those currently being considered by the Basel Committee, to overcome the shortcomings and doubts mentioned. Arguably, the best way to achieve this aim is by converging the estimation methodologies used by institutions and supervisory practices in respect of model validation. However, under the Basel framework, considering the significant national differences, this is a very difficult task. Accordingly, we believe that setting certain explicit, verifiable and uniform limits on the models, without this resulting in excessive standardisation, would be a realistic and desirable goal. Striking a good balance between risk sensitivity on the one hand and simplicity and comparability on the other is the aim of the negotiations and reconciliation of positions under 5/7  way on the Basel Committee so as to shape the final design, thus bringing the reform of Basel III to a close. Issues outstanding for conclusion of the reform of the capital framework In January this year, the Basel Committee’s Group of Governors and Heads of Supervision formulated the two objectives of the reform: to address the issue of unjustified variation in risk-weighted assets, avoiding any significant across-the-board increase in capital requirements. The Committee has already published for public consultation a first proposal on ending the use of internal models to calculate operational risk, which henceforth would have to be measured using only the standardised approach.

These objectives of macro-economic policy – monetary and overall fiscal policy – will certainly be familiar to you in this country; they are at the heart of the policies being pursued right across Europe;  BIS Review 36/2001  1  and they are the policies endorsed, too, by all the members of the IMF in the Madrid Declaration adopted at the IMF Annual Meeting in 1994 and expanded and updated two years later. Of course on occasion the flesh proves to be weaker than the spirit – and achieving these macro-economic objectives is not easy in practice even as a technical matter. But the intention – the international commitment to macro-economic stability – is clear. Acceptance of the aim of macro-economic stability served to bring into sharper focus the structural, supply side, of the economy – that is the whole raft of influences that can affect the underlying growth rate of capacity and thus the growth rate of aggregate demand that can be sustained. And here, too, there has been a strengthening international presumption in favour of open markets and free competition – both domestically and internationally – with a continuing strong presumption against predatory trade or exchange rate manipulation. The justification is that undistorted competition contributes to potential global economic growth through increased efficiency and the more effective allocation of productive resources. Faster growth in turn provides a more favourable context for addressing social concerns, including the issue of poverty.
In this period, the financial sector has become very vulnerable and edged away from its main duty of financing production. Today, we are happy to see that enhanced competition and economic stability following the decline in inflation and ease of the impact of inflation-oriented uncertainties on financial markets, financial intermediation mechanism has started to operate more efficiently. Moreover, serious steps are being taken towards establishment of banking sector-real sector relationship. The ratio of total credits to total deposits, which has been on the rise since 2003, is a clear indicator of this process. However, let me draw your attention to one point. It is clear that, in order to maintain financial stability in the current environment of relative economic stability, the relationship between banking sector and the real sector needs to be developed not only towards credit utilization, but also with respect to risk evaluation. The progress of risk management in the banking sector will ensure that the companies have sounder financial structures, that they develop more transparent financial tables and adopt modern management style. To express it more openly, the progress of modern risk management in both the financial as well as the corporate sectors will prevent developments that may arise out of the imbalance between assets and liabilities, stemming from different perceptions in the process of transition to price stability, and jeopardize financial stability.

The breakthrough in financial theories has contributed to this development and made it possible to create instruments for buying and selling risks. When writing history, we must not forget IT developments. Without these it would not have been possible to rapidly calculate and update the values of instruments, model parameters and risks in individual cases or in portfolios. The emergence and development of markets for risk management instruments and even institutions’ internal risk management would have been delayed. The combination of new financial instruments and markets has led to better conditions for risk distribution, where those who are best-equipped and most willing to take on risks can do so, while those who want lower risk can reduce their exposure. Sometimes, risk distribution is seen as a zero-sum game, but this is incorrect. A financial agent may take on further risk if this covaries with other risks in such a way as to reduce the total risk in the agent’s portfolio. This example can be stretched to cover society as a whole, where there were probably people and companies who had not achieved the risk portfolio that best reflected their willingness and ability to take on risk, but will now be better able to do so with the new instruments and markets. My overall assessment is that there is no doubt that this development has contributed to the financial system’s capacity to carry out its fundamental tasks, while its resistance to destabilising shocks has been reinforced.
In these funds, the cost is the risk of suspension or the risk of dilution as other investors exit first. The opacity of those costs tilts the investment playing field towards funds that offer daily redemption. And that tilting of the playing field could have been a barrier to the opportunity to invest in the most illiquid assets – assets that require great patience, such as infrastructure, private equity or venture capital. The fund industry itself notes that funds offering daily dealing are “not realistic for funds investing in highly illiquid assets”. 20  See report by the Task Force on Climate-related Financial Disclosures (June 2019): ‘2019 Status Report’. See report to Government by the Green Finance Taskforce (March 2018): ‘Accelerating Green Finance‘. See page 49 of the Investment Association UK Funds regime working group report (June 2019) ‘Final report to HM Treasury Asset Management Taskforce’. 18 19 20  11  All speeches are available online at www.bankofengland.co.uk/news/speeches  11  So the unlevel playing field could have been a barrier to greater investment in patient forms of capital – a central tenet of the government’s framework for raising productivity.21  For a fair and transparent fight, the risk of suspension or dilution would be properly factored into the pricing and redemption terms of open-ended funds. If that were the case, those funds that invest for the long term and require more patience from investors could look relatively more attractive.

But falls in oil and commodity prices can have a more lasting impact on inflation – and hence become relevant for monetary policy – if they feed into core inflation. That can happen under two circumstances. The first is if price falls are symptomatic of weakening global demand, rather than a boost to global supply. Then, lower oil prices might be accompanied by declining net exports, which could in turn cause firms to cut back on investment and drag down core inflation. This blunts the growth-bolstering effect of lower commodity prices. Imported inflation might also be depressed as foreign producers cut prices in reaction to weakening global growth. The second circumstance is if there is a succession of supply shocks that keep inflation low for a long period and cause firms and households to revise down their inflation expectations. In that situation, low oil and commodity prices can have “second round effects” as lower expectations feed into wage bargaining and price setting, thereby affecting core inflation. Then, the effect of supply shocks becomes more similar to demand shocks. In both cases, central banks end up facing a situation not of a benign supply shock, but rather of an adverse demand shock that, if left unaddressed, could derail price stability over the medium-term. That would call for a more forceful monetary policy response. Importantly, there were signs in the past that such circumstances were present in the euro area.
Last but not least, let me say something about capability and capacity building in combating ML/TF. Private sector bodies such as ACAMS are important in the training of AML/CFT specialists, and will certainly complement the internal programmes of financial institutions. The need to deepen capabilities and enhance capacity applies equally to us as a regulator and to law enforcement agencies. 31. One newer development is the greater use of technology tools and solutions including in the area of data analytics. I know many of you, in your respective firms, are already tapping on technology tools to improve your ability to detect fraud or unusual activities. Some of you are aware of the ongoing discussions in Singapore to develop utilities that can streamline “KYC” processes and uplift the overall quality and consistency of such checks and customer onboarding. We can expect the increased use of technology especially in the areas of AML/CFT screening and risk monitoring. 32. As a financial regulator, the MAS is able to look for linkages and patterns across financial institutions. These may include emerging risks or irregular relationships, or networks and linkages between entities or actors. MAS is therefore also investing in the use of technology and analytics. Recently, we announced the formation of a dedicated Data Analytics Group which will complement and support the analytics units in our supervisory teams. This internal analytics “hub-and-spoke” model will deepen our “SupTech” capability, in turn allowing MAS supervisors to better tap the “RegTech” capability that many FIs have embarked on.

The bank then forwards this money to a subsidiary bank in another country. The subsidiary in turn lends the money to an end customer. If we now assume that the borrower is unable to repay the loan, for example because he has borrowed in a currency other than the one he has his income in, then the subsidiary bank may find it difficult to repay its loan from the parent bank. The parent bank may then in turn find it difficult to repay its loan. This means that the liquidity risk in foreign currency ends up in Sweden although the lending that created the risk took place outside Sweden’s borders. The best solution for limiting the liquidity risk is that the central bank or the supervisory authority in the country where the risk develops takes action. However, if the authority in this country does not deal with the situation we must ask ourselves whether the situation poses a serious risk to the Swedish banks and, if so, whether we should act, for example by introducing a reserve requirement in foreign currency for the Swedish bank. Action on the part of the Riksbank is a second best solution, but this alternative is probably still better than doing nothing at all. We will therefore investigate the measures we can take to better limit the risks that are built up outside Sweden in the future. In this connection, the possibility to set reserve requirements is one of the alternatives we are investigating.
Excessive risk taking or overly aggressive expansion usually lead to rather unhappy endings, as the financial history is littered with so many such failure cases. As for the regulators, they should stay true to the risk-based approach with the right sense of proportionality and should adopt an open mind on how the risk can be addressed. The regulators should stand ready to discuss with the industry to see if (c) there can be alternative ways of dealing with the risks identified. The industry is always closer to the markets and the clients they serve and should therefore have a better sense of how to get things done in a way that would cause less disruption or inconvenience. The regulators must not fall into the trap of complacency, and should constantly stay on alert and maintain a sense of unease even in good or peaceful times. Banking and (d) financial crises can never be avoided all together, but we can at least build sufficient buffers to lower their chance of occurrence or when they happen, the damage can be reduced or contained. The industry should stand ready to challenge the regulators if the severity of the risk is overstated or there are better alternatives than what has been put on the table. On the (e) other hand, the industry must avoid over-interpreting or gold plating the regulators’ requirements in such a way that is safe from the compliance point of view but would create bad customer experience without enhancing the underlying risk management outcomes. 16.

The northbound Stock Connect has presented a huge opportunity for Hong Kong to develop risk management capability for understanding of the risks and the pricing of such risks for offshore investors interested in the A share markets. Apart from helping to channel foreign investments into the Mainland market, the Stock Connect has also contributed to the inclusion of bigger weights of A shares in the global stock market indices such as the MSCI. Asian Equity Derivatives Hub 8. Another recent trend that is relevant is that several international financial firms have decided or are planning to relocate their Asian equities derivatives booking hubs from Europe to Asia. This is very logical as the underlying securities and clients are based in Asia. The HKMA welcomes these moves and stands ready to facilitate such moves, on the condition that the booking business must be accompanied by the necessary risk management functions. Again, this will enhance Hong Kong’s position as the risk management hub for Asian equities and derivatives, particularly Mainland related stocks. Bond Connect 9. By the same token, the launch of the northbound Bond Connect in 2017 has opened another window of opportunity for Hong Kong to enhance its risk management functions for offshore investors wishing to invest in the Mainland bond market. It is still early days yet, but I am confident that Bond Connect offers attraction to those investors who prefer using a nominee holding structure through the Central Moneymarkets Unit of the HKMA.
In this context, early next year the Governing Council will reassess the monetary stimulus achieved, the expansion of the balance sheet and the outlook for price developments. We will also evaluate the broader impact of recent oil price developments on medium-term inflation trends in the euro area. Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council remains unanimous in its commitment to using additional unconventional instruments within its mandate. This would imply altering early next year the size, pace and composition of our measures. In response to the request of the Governing Council, ECB staff and the relevant Eurosystem committees have stepped up the technical preparations for further measures, which could, if needed, be implemented in a timely manner. All of our monetary policy measures are geared towards underpinning the firm anchoring of medium to long-term inflation expectations, in line with our aim of achieving inflation rates below, but close to, 2%, and contribute to a return of inflation rates towards that level. Let me now explain our assessment in greater detail, starting with the economic analysis. Real GDP in the euro area rose by 0.2%, quarter on quarter, in the third quarter of this year. This was in line with earlier indications of a weakening in the euro area’s growth momentum, leading to a downward revision of the outlook for euro area real GDP growth in the most recent forecasts.

The latest data and survey evidence up to November confirm this picture of a weaker growth profile in the period ahead. At the same time, the outlook for a modest economic recovery remains in place. On the one hand, domestic demand should be supported by our monetary policy measures, the ongoing improvements in financial conditions, the progress made in fiscal consolidation and structural reforms, and significantly lower energy prices supporting real disposable income. Furthermore, demand for exports should benefit from the global recovery. On the other hand, the recovery is likely to continue to be dampened by high unemployment, sizeable unutilised capacity, and the necessary balance sheet adjustments in the public and private sectors. BIS central bankers’ speeches  1  These elements are reflected in the December 2014 Eurosystem staff macroeconomic projections for the euro area, which foresee annual real GDP increasing by 0.8% in 2014, 1.0% in 2015 and 1.5% in 2016. Compared with the September 2014 ECB staff macroeconomic projections, the projections for real GDP growth have been revised substantially downwards. Downward revisions were made to the projections for both domestic demand and net exports. The risks surrounding the economic outlook for the euro area are on the downside. In particular, the weak euro area growth momentum, alongside high geopolitical risks, has the potential to dampen confidence and especially private investment. In addition, insufficient progress in structural reforms in euro area countries constitutes a key downward risk to the economic outlook.
Again, as noted, we have a variety of tools to remove excess reserves at a time when that becomes appropriate. As a result, I agree with many forecasters who expect disinflation in the near term. The substantial excess capacity in labor markets that I mentioned earlier has caused compensation to decline quite markedly (see Figure 11). Because employee compensation is the main cost component for most companies, lower labor costs enable businesses to improve profit margins without substantial price increases – particularly as the demand for goods and services improves. This brings us back to Yogi Berra, who famously said, “When you come to a fork in the road, take it.” At times, a fork in the road is exactly what confronts monetary policymakers. We would face a fork, for example, if inflationary pressures were building despite a high unemployment rate. In this case, the choice between restraining inflation and supporting employment is a difficult one, and the policy decision becomes more complicated. However, with employment well below the level of full employment, and disinflation continuing to move us away from my own inflation target of 2 per cent, one does not currently need to make such trade-offs. Another possible complication could occur if very low interest rates were causing excessive, leveraged bets that were inflating the price of assets that have macroeconomic importance. While we need to be vigilant against the buildup of asset bubbles, there is little evidence of such a problem now.

Eric S Rosengren: Considering the routes to a policy destination Speech by Mr Eric S Rosengren, President and Chief Executive Officer of the Federal Reserve Bank of Boston, at the Money Marketeers of New York University, New York, 5 May 2010. Accompanying figures to this speech can be found on the Federal Reserve Bank of Boston’s website. *  *  *  I am happy to be with you this evening. I appreciate your warm welcome, and your invitation to join the long and distinguished line of individuals who have addressed the Money Marketeers over the decades. 1 I have always taken some delight in Yogi Berra quotes. As a Red Sox fan, I could always hope that garbled metaphors by the legendary Yogi would be as confusing to the players as they were to the public, which might translate into opportunities when the Red Sox came to New York. Alas, in the early going this season it is not the Yankees that seem confused. Yogi Berra was not only a great catcher and manager, but also an astute observer of the obvious.
Már Guðmundsson: Managing capital flows in a financially integrated area – lessons from the Icelandic financial crisis Remarks by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at a conference organised by the International Monetary Fund, Bank of Estonia and Sveriges Riksbank on Nordic-Baltic financial linkages and challenges, Tallinn, 13 December 2013. *  *  *  Accompanying charts can be found at the end of the speech. I would like to thank Eesti Bank, Sveriges Riksbank, and the IMF for inviting me to speak at this most interesting event. In my remarks, I will focus on those aspects of the Icelandic financial crisis that are most closely associated with the topic of this session, which is financial integration. I will draw out some salient features of that story and then link them to several lessons that might be of more general relevance. In the autumn of 2008, two separate but interrelated sub-stories of the recent Icelandic financial and economic saga converged in a tragic grand finale. These are: 1. Iceland’s boom-bust cycle and problems with macroeconomic management in small, open, and financially integrated economies. This is a story that has played out many times around the globe, and many of its elements have been seen before in Iceland. 2. The rise and fall of three cross-border banks operating on the basis of EU legislation (the European “passport”).

This story was much more unique, as it involved the first banking crisis in Europe since the EU single market was formed in the early 1990s. Let me briefly discuss each of these in turn, in order to set the stage for the policy discussions. First, the macroeconomic boom-bust story. All the usual suspects were present: very strong capital inflows fuelling a credit and asset price boom that subsequently turned into a bubble at the same time as the economy overheated and an unsustainable external position developed, as could be seen in a double-digit current account deficit. And macroeconomic and prudential policies were not up to the task. At the deepest level, this part of the story was related to three factors: 1. The complications that tend to arise with macroeconomic management as very small, open economies become more and more financially integrated;  2. The specific conditions of ample and cheap credit at the global level;  3. And major policy mistakes in Iceland, both of the type that would be deemed to be such in any book (such as giving an already overheated economy a demand stimulus), and those more closely related to the orthodoxy prevailing at the time: freely floating exchange rates, interest rate policy focusing mainly on low inflation in terms of goods and services, and good micro-supervision; and let the markets do the rest. The first factor is perhaps of interest here.