samchain/econo-pairs-v1 huggingface dataset:
Time will provide an opportunity for deeper reflection, and it is important that careful thought does come before action. But I would identify three lessons. First, liquidity should be central to the regulation of banks. Regulation worldwide has paid insufficient attention to liquidity, focussing instead on capital. Northern Rock did not face a problem of inadequate capital. But it was vulnerable to a shock that reduced the liquidity in markets for securitised mortgages. Banks need to face the right incentives to manage their funding positions. Smaller banks with reliance on wholesale funding should be encouraged to put in place insurance. We should not, however, expect regulation alone to solve this problem. That is why I think it is so important to create the right incentives. Second, the single largest impediment to dealing with Northern Rock was the absence of a mechanism for intervening pre-emptively in a bank in trouble to separate the retail deposit book – the insured deposits – from the rest of the bank’s balance sheet. The ability to do this is central to the way the US and other systems operate, where the authorities are obliged to step in early – “prompt corrective action” – to protect depositors. One tool at their disposal, currently unavailable in the UK, is a special insolvency law for banks. Legislation to create the powers to deal with a bank in this way seems to me the single most important necessary reform. Deposit insurance is another area that requires change.

But fire services do not offer free insurance for people who smoke in bed or set fire to their own house, thereby encouraging them to take risks that endanger others. When it became clear that Northern Rock could not find funding elsewhere, it came to the tripartite authorities (FSA, Treasury and Bank) to seek financial support from the Bank of England. Rather than stabilise the situation, the actions of the authorities seemed, at least initially, to fan the flames. There are lessons for us to learn. And I will come to those in a minute. But let me return to the queues of depositors. Here is an extract from a local newspaper: “By noon on Friday, more than 40 … customers … were waiting in line at the branch … waiting upward of an hour and a half to withdraw money from their accounts.” “Anxious depositors clutching withdrawal slips filled the offices for a second straight day. … The company placed extra chairs in a waiting area and asked customers to write their names on a sign-in sheet.” This wasn’t Newcastle or London. It was Los Angeles on August 17 and 18. The bank experiencing the run was not Northern Rock but Countrywide, a US mortgage bank. It is a Tale of Two Banks – banks of similar sizes and facing similar difficulties with funding – just a few weeks apart. Like Northern Rock, Countrywide took risks and relied on short-term funding from investors. But the similarity ends there. There were two significant differences.
During the post-meeting press conference, Chairman Bernanke stated “While participants continue to think that, in the long run, the Federal Reserve’s portfolio should consist predominantly of Treasury securities, a strong majority now expects that the Committee will not sell agency mortgage-backed securities during the process of normalizing monetary policy, although in the longer run, limited sales could be used to reduce or eliminate residual MBS holdings.” Surveys conducted after this meeting revealed no expectation for agency MBS sales, and for the portfolio to be larger over time as a result. 21 “What explained markets’ strong reaction – and why did it surprise us? In retrospect, I think our view of market  expectations was too dependent on our survey of securities dealers. Futures markets gave us a reliable read of where markets thought the federal funds rate was going – but not for our securities purchases. For that, economists at the New York Fed asked their counterparts at the securities firms, who paid careful attention to every nuance of Fed policymakers’ public statements. In effect, our Ph.D. economists surveyed their Ph.D. economists. It was a little like looking in a mirror. It didn’t tell us what the rank-and-file traders were thinking. Many traders, apparently, didn’t pay much attention to their economists…” 22 These figures include results from the Desk’s September Surveys of Primary Dealers and Market Participants. The results from these surveys will be released tomorrow on the New York Fed’s website.

Other than the qualitative guidance I mentioned earlier, and an expectation that the level of reserve balances will be appreciably below that seen in recent years but larger than before the financial crisis, the FOMC has not specified how large the balance sheet should be.8 My colleague Lorie Logan spoke recently on the many technical drivers of this level, which include the mode of policy implementation that the FOMC chooses in the longer run, possible increases in recent years in the financial system’s demand for reserves and Federal Reserve reverse repo liabilities owing to new financial regulations and other factors, and the long-term evolution of demand for paper currency.9  Considerations in reducing the balance sheet size In theory, reducing the size of the balance sheet is quite simple. There are two ways to go about it.10 One approach is to simply let securities holdings mature. Principal matures on the Fed’s securities holdings all the time: Treasury bonds mature at specified dates, and agency MBS principal is repaid over time as home loans are paid back.11 For the past several years, the securities portfolio has been maintained at a steady level by reinvesting these principal repayments.12 This activity can be reduced or stopped. A second approach is to simply sell securities on the open market, using a similar procedure to the way the securities were purchased to begin with. Either way, the securities end up back in private hands. This is obvious in the case of sales.
Episodes of incipient or actual financial instability are often  BIS Review 67/2001  1  accompanied by failures in the corporate sector which may lead more generally to losses throughout the financial system. In some cases, the corporate failures reflect an inability to resolve temporary liquidity problems affecting a company that remains viable in the longer-term. Creditors may act without the benefit of all available information on a company’s solvency. This imbalance in information available to company and creditors can be compounded by conflicts of interest between different types of creditors, or between banks, bondholders and other financial institutions. The end-result is often the same: the unnecessary liquidation of viable companies, which represents a market failure capable of amplifying financial instability. That, in a nutshell, explains the Bank’s interest and involvement in this area. A country’s insolvency regime should seek to limit the costs arising from potential market failure, for example by supporting effective private sector mechanisms for reorganising viable companies. I would say it should do so partly by providing incentives for debtors and creditors to negotiate workouts at the pre-insolvency stage. This will hopefully reduce the risk of unnecessary corporate liquidations and avoid benefiting one group of creditors at the expense of others. Most of you, of course, will know that, guided by these principles, the Bank took the lead in developing a framework governing corporate workouts in the 1980s and early 1990s – the ”London Approach” or ”London Rules”.

We also need to build bridges to the future and shape a recovery that makes our economies fit for the future. But bridges need solid foundations. Europe’s future must be built on strong democratic legitimacy. Europe’s citizens must be at the centre of the debate about the Europe that we want to build as we emerge from the crisis. As their elected representatives, you, together with the European Parliament, have a crucial role to play in making their voices heard. I now look forward to our debate. [1] In French: “J’ai toujours pensé que l’Europe se ferait dans les crises, et qu’elle serait la somme des solutions qu’on apporterait à ces crises.” See Monnet, J. (1976), Mémoires, Fayard, Paris. [2] In French: “[la Communauté européenne] elle-même n’est qu’une étape vers les formes d’organisation du monde de demain.” See Monnet, J., ibid., p. 617. [3] Following a significant drop in the first quarter of 2020, euro area real GDP fell by 11.8% in the second quarter, resulting in a record cumulative decline of 15.1% in the first half of the year. [4] ECB staff macroeconomic projections for the euro area, September 2020. [5] Milasi, S. et al. (2020), “  The potential for teleworking in Europe and the risk of a new digital divide”, VoxEU, 14 August. [6] Lagarde, C. (2020), “Payments in a digital world”, speech at the Deutsche Bundesbank online conference on banking and payments in the digital world, 10 September.
And that they represent only a fifth or less of the credit markets in the U.S. And yet as I speak, depository institutions, including foreign banks doing business in the United States, have $ trillion in excess reserves on the books of the 12 Federal Reserve Banks. So one would be hard pressed to say that ending our asset purchases, which the depository institutions from which we buy them deposit back with us as excess reserves, would deny the economy needed liquidity. “Normalizing” policy The focus of our discussions now is when and how to “normalize” monetary policy. Given that we work directly with only 20 percent or less of the highly developed U.S. credit intermediation system, this becomes a complicated matter. It raises questions, for example, about whether we should focus on the federal funds rate, which has been our traditional fulcrum, or some other measure, such as the rate we pay on excess reserves or that we pay on overnight reverse repos or some mix thereof. You can expect to hear more about this as  BIS central bankers’ speeches  3  time passes. Today, I am going to focus on another aspect of “normalization,” and that is: Once we have wound down QE3, when are we likely to raise the short-term rate that anchors the yield curve? In the parlance of the trade, market operators and bankers alike are seeking “forward guidance” about our intentions.

It is unclear to me why the Federal Reserve would want to apply more stimulus at a time when market conditions were improving. This suggests that some variability in the trajectory of the Fed’s balance should be expected and might even be desirable. And, in fact, this is what we have seen in practice. Third, I am not worried at all that the Federal Reserve’s balance sheet expansion will generate an inflation problem. It should be emphasized that the Federal Reserve has the ability to manage down the size of its balance sheet over time once financial conditions and the economy improve. Many of the liquidity facilities will shrink automatically as financial conditions normalize. With the exception of TAF loans, all of the other Fed liquidity facilities charge rates that are higher than what one would expect during more normal financial circumstances. And, if we want the TAF loans to shrink, we can either shrink the amounts on offer or raise the interest rate we charge, or both. The other assets such as Treasury securities and agency MBS can be sold or the impact on reserves be offset by repurchase operations that drain reserves from the banking system. More importantly, the Federal Reserve now has the tools to allow the conduct of monetary policy to be separated from the size of the balance sheet and the amount of excess reserves in the banking system. In September 2008, the Federal Reserve gained the authority to pay interest on excess reserves.
The same declaration undertook to steer the group’s efforts to overcome poverty, ignorance and disease, as well as to raise standards of life and achieve a more equitable international society. 20 years later, in 1991, the Harare Declaration was issued. This declaration conceded that many Commonwealth countries were still poor and that they faced acute problems, including excessive population growth, continuation of poverty, debt burdens and environmental degradation. At the same time, it was acknowledged that while disparities among members appeared to have worsened, some favourable results were also being achieved. For example, despite the widening economic gap, many nations had been able to establish better democratic processes, good administrative frameworks, more independent judiciaries, keener respect for human, fundamental and labour rights, and several other social successes. Those were of course significant achievements, and we should all be proud that we have been able to create such conditions in our countries. Notwithstanding those gains as noted in 1991, and the many subsequent successes, we may still have to admit that our collective efforts to address one of the fundamental Principles of the Singapore Declaration, namely, that of addressing the issue of income disparity, has been, by and large, unsuccessful. Today, 35 years after the Singapore Declaration, it is actually becoming even more acute, and consequently, we need to respond to that widening gap appropriately, urgently. Your Excellencies, Distinguished Guests, As we all know, countries that are affluent today were not affluent at some point in time in their history.

In this context, despite many burning issues, we have managed to keep the focus on more structural issues such as digitalization by working on the first national fintech strategy, and on green finance by becoming a member of the international Network for Greening the Financial System and conducting the first survey on the current status of the green finance. All these should ensure sustainable and inclusive recovery, while confirming our strong commitment to adopting the EU standards and best practices that should enable faster convergence. Thank you! 2/2  BIS - Central bankers' speeches
Last, the shock experienced by the real sector will not overcome without leaving traces in the financial market and in the indicators of the banking sector’s business, as well. The dimensions and complexity of the crisis demand for a coherent and comprehensive response. Absolutely, public authorities have the primary role to play in this regard. The fiscal, monetary and financial stimulus, are essential instruments to boost the aggregate demand, mitigate the liquidity problems and avoid the long-term consequences of the crisis. Nevertheless, firms and banking sector should not consider themselves as passive consumers of the economic policies, but as exceptional actors in our efforts to resolve the crisis. The stimulus of public authorities could be neither effective nor potentially sufficient, without the adequate reaction of both firms and banking industry. Dear guests, Allow me to introduce briefly the reaction of public authorities, and further to share with you our vision on the challenges and role that the Albanian firms and banking sector should play. 1. Reaction by public authorities In the face of the unprecedented health emergency, the focus of public policies – in Albania and globally- was the undertaking of severe social distancing measures. Naturally, these measures have hit the economic activity and have demanded for a comprehensive easing of fiscal, monetary and financial policies. 1/4  BIS central bankers' speeches  Fiscal policy – rightfully- has been given a primary role in facing the situation.

But even if all organisations that were in trouble had been rescued, it would have remained necessary for central banks and governments on both sides of the Atlantic to take extremely bold measures in order to be prepared for systemic liquidity and insolvency risks. Question: How do you explain the fact that, despite the ongoing banking crisis, the ECB’s statistics do not yet indicate the existence of a credit crunch in the euro area? Answer: What is true is that we see a certain weakening in the dynamics of loans to enterprises. But the rate of growth of outstanding loans to non-financial corporations has remained robust in double-digit figures. However, since bank lending standards have been tightening significantly for some time and the financial crisis entered a new phase only in mid-September, we must observe all developments very closely and remain attentive to new facts and figures. Question: The major investor Warren Buffett once described credit derivatives as “financial weapons of mass destruction”. Do you share this view? Answer: I wouldn’t necessarily use that formulation myself. But the level of complexity and lack of transparency reached in the production, marketing and selling of these financial market instruments indeed proved to be destructive and contributed substantially to the fragility of financial markets. 2  BIS Review 1/2009  Question: The reputation of the ECB has been strengthened by the crisis. Has it also profited financially from the brisk demand for the greater amount of liquidity made available?
In my remarks today, I will (I) take stock of the NGFS’ achievements and then outline the decisive steps that are still ahead of us in order to (II) anticipate climate risks and (III) seize opportunities. ** I. The NGFS’ first achievements As highlighted by the winner of the 2018 Nobel Prize in economics, William Nordhaus, although “there is substantial uncertainty about the path of climate change and its impacts […] this does not reduce the urgency of taking strong climate-change policies today. iv” Tackling climate change to “prevent the airplane from crashing” is first and foremost the responsibility of appropriate public policies in energy – as  Page 2 sur 6 announced yesterday for France –, transportation, housing or – yes – taxation and carbon pricing. Finance cannot substitute them, but finance can help; and as central bankers and supervisors, we are determined to help. I would even say that this challenge is our “new frontier”, comparable to the financing of growth and major infrastructures in the 19th century or the management of great financial crises in the last 100 years. The progress report of the NGFS, released in October is hence an important step. Indeed, for the first time, this coalition of the 21 v willing central banks and supervisors, has unanimously agreed that climate-related risks – as a source of financial risk – are within a central bank’s mandate.

The NGFS will not stop there and next year will publish its first comprehensive report, which will provide – on a voluntary basis only – policy recommendations for central banks and supervisors. This will take place at the upcoming NGFS Conference, at the Banque de France in Paris, on 17 April 2019: you are all most welcome! To prevent the airplane from crashing, we can help by shedding light on climate risks in order to take accurate and timely decisions, and by seizing opportunities while aligning incentives and mobilising capital. II. Anticipating climate-related risks 1/ Our first priority should be the disclosure of existing exposures in the financial sector, what I call “the snapshot of risks”. The recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), chaired by Mr. Bloomberg with sponsorship from the Financial Stability Board (FSB), have been groundbreaking as they provide a practical framework allowing companies to disclose their climate-related financial risks. However, an accurate and consistent vision of the risks requires a wider implementation of the TCFD’s recommendations. Significant room for progress remains in this area. To enable markets to price risks, we need comparable metrics – thanks to a common taxonomy – and better access to higher quality and more consistent data. I therefore fully  Page 3 sur 6 support the work of the Technical Expert Group on Sustainable Finance of the European Commission which is concretely developing a taxonomy; our first NGFS workstream is also working in this field.
Essentially, it would not result in the marginalisation of anyone target group, in particular women. Such programmes would therefore best serve its purpose as part of the core curriculum. Indeed, the national education system can play a pivotal role in financial literacy within a country. The responsibility of promoting economic and financial literacy needs to be a collaborative effort amongst the authorities, the financial service providers and the community to connect to the different target groups including all social groups. These would include the lower income groups, workers and businesses. Important are programmes directed to families where women have an important role and to engage those we have not been able to participate fully to benefit from the favourable economic environment prevailing in the region. BIS Review 64/2004  3  Among the successful financial education programmes are those with specific objectives that are tailored to meet particular needs. This includes programmes to promote savings for specific objectives; for education; or for retirement. The education programmes can also be linked to other objectives such as good health, house ownership and so on. Financial products can be tailored for such purposes to not only to promote interest but to also meet these objectives. All distribution channels need to be relied on to maximise the effectiveness of financial education programmes. Formal training programmes can be reinforced by web based content via the Internet. The World Wide Web offers dramatic economies of scale in terms of distribution of content at low cost.

This has allowed the banking sector to have a different focus from the one it had during the global financial crisis in 2008 or during the local problems in the sector in 2014. In these previous episodes, the banking sector was mainly engaged in solving problems within the sector. In the Covid crisis over the recent two years, the banking sector was not concerned with its own problems, but mainly with alleviating the effects of the crisis on businesses and households and subsequently with the recovery and speed-up of the economy. In this sense, the Covid crisis legitimised an important qualitative change in the position of the banking sector – from a source of problems in the past to an important factor in their resolution in recent years. Significantly, the banking sector absorbed and implemented successfully and without shocks the anti-crisis package of measures approved by the BNB, amounting to about 9% of the GDP, as well as a private moratorium on loan repayments by businesses and households. At the same time, credit activity not only did not stagnate, but increased. According to the latest data from the 2021 monetary statistics, loans to businesses and households grew year-on-year by 4.1% and 12.5%, respectively. Good operational performance was underpinned by progress on important strategic tasks. October 2021 marked the one-year anniversary of the country’s accession as a full member to the European Banking Union. The assessment of this participation by both the ECB and the BNB is unequivocally positive.