samchain/econo-pairs-v1 huggingface dataset:
This latter solution could be implemented in part by restricting distributions such as dividend payments or staff bonuses, but it is also where the concept arises of having eligible debt that can be “bailed in”, whereby some debt instruments can become loss-absorbing capital under stress, to recapitalise the firm. For banks, building societies and investment firms the main capital reforms come under the umbrella of CRDIV which is the EU implementation of the internationally agreed capital requirements, as determined by the Basel Committee for Banking Supervision (BCBS). The Basel agreements are ultimately agreed and signed off by a meeting of central bank governors and heads of supervisory authorities. CRDIV is made up of the fourth Capital Requirements Directive (2013) which must be implemented through national law; and the Capital Requirements Regulation (2013), which is directly applicable to firms across the EU. Amongst other things, CRDIV enshrines enhanced requirements for the quality and quantity of capital and gives the basis for new liquidity and leverage requirements; new rules for counterparty risk; and new macroprudential standards including a countercyclical capital buffer and capital buffers for systemically important institutions. In general, it is fair to say that the implication of CRDIV is that banks will substantially strengthen capital standards relative to pre-crisis. That will mean that the cost of required capital to support banking activity could be higher than it was previously. However, this is not certain.

Inflation rates of countries whose currencies are pegged to the Euro rose to 10.2 percent from 4.4 percent. In this period, countries that avoid the nominal appreciation of their currencies have only exacerbated the inflationary effects of supply shocks. The necessary adjustments in real exchange rates have taken place through the rise general price level. 2  BIS Review 82/2008  Until recently, the common view among central banks of developed countries was to give priority to problems in financial markets in absence of inflationary pressures. However, they have slowly acknowledged the fact that the increase in inflation has reached critical levels. Accordingly, with uncertainties in financial markets diminishing, the FED and the ECB have hinted that they may resort to monetary tightening in the near future in the face of rising inflation. What should be the best reaction of monetary policy under these circumstances? Although the factors causing higher inflation are presumed to be exogenous and beyond the control of central banks, there is a lot of controversy on this issue. But before going into detail, let me question the validity of this debate first, because to what extent the increase in commodity prices is supply-driven is questionable in the first place. Certainly, there are structural reasons behind the recent run-up in food and energy prices. However, it is also undeniable that there are significant demand-driven pressures over commodities. Loose monetary policies adopted in early 2000s certainly played a key role, together with excess liquidity in the financial system.
Nevertheless, with the aim of reducing unwanted variation in risk-weighted assets, it is likely that capital requirements will indeed increase for banks that are using internal models in a more aggressive or inappropriate manner. In other words, given the aim of the reform, any resultant increase in capital requirements would be confined to the review of internal credit risk models, or to the possible limits on savings arising from their use. In general, the review of the standardised approaches should not result in increases in capital, as applied either to credit or operational risk. Conclusion To conclude, following our meeting in Basel, the challenge ahead for the Central Banks and Supervisors is to reach an agreement on a new capital framework that maintains a balance between risk sensitivity, simplicity and comparability. Reaching this agreement before the end of the year will be no mean task, and will require each of us to cede some ground. But a non-agreement scenario is not an option. Basel is a most valuable edifice that we must preserve so as to maintain a global banking system. A delay in the agreement is not desirable either. It is not a matter of merely patching up Basel III. I believe banks and supervisors would benefit from finalising the new framework, and allowing ourselves a regulatory breather. Thank you for your attention. 7/7

This would increase greatly the chances of Mackay’s “madness of crowds”. Finally, let’s try an interior solution – say 1,000 people each spending 10 hours. This is large enough a number to gather most of the benefits of diversity, but small enough to harvest the benefits of deliberation. It would blend expert and non-expert opinion in a way which would allow collective deliberation. This is the “wisdom of crowds” solution. Figure 2 plots the relationship between insight and the numbers of people providing information in a group, in stylised terms. You might call it the “Insight Curve”. The curve (shown in dotted lines) results from combining the effects of a downward-sloping “deliberation” curve and an upward-sloping “diversity” curve. Consistent with the evidence, both exhibit diminishing returns. The inverted U-shaped “Insight Curve” identifies the optimal number of people to draw on to inform a complex decision. The two corner solutions – the “Oracle” (single person) and the “Madness of Crowds” (population) – involve very different trade-offs between diversity and deliberation. A single source of information gives you plenty of time for deliberation – a hermit-like 10,000 hours. But it leaves you short of diversity of thought. A population-wide pool of information gives us as much diversity as you could ever wish. But it leaves you long fast-thinkers, short slow-thinkers and vulnerable to irrationality. 15  All speeches are available online at www.bankofengland.co.uk/speeches  15  Both are inferior to an intermediate solution – the “Wisdom of Crowds” solution.
In other words, the main inertia, which needed breaking, was that stemming from the resistance in peoples’ minds. This resistance still exists and repeatedly stands in the way of stability programs and efforts. However, since it is gradually being understood that inflation is also a moral issue, the fight against inflation is no longer the direct target. 2  BIS Review 36/2005  My ideas on the fight against inflation are presented in detail the interview given on January 16, 2005, which is available on our website. To sum up, the protracted chronic inflation made our economy highly vulnerable. It hindered the establishment of macroeconomic balances in the long run. Consequently, it induced a heavy cost on both our economy and social life. During the last three years, we have repeatedly explained the damage caused by inflation in every possible platform. Today we are content to see that a significant part of the society agrees with us. In the rest of my speech, I would like to focus on where we stand on fighting inflation, how we got here and what should to be done to preserve these gains and maintain price stability. With strict and efficient implementation of the economic program devised after the crisis, the thirty-year period of chronic inflation has come to an end in our country, and the focus has shifted to the declining inflation environment and permanence of price stability.

Well, returning for a moment to our earlier discussion. The owners, now in the form of hundreds of thousands of shareholders, have only limited “skin in the game”. Their personal or family wealth, outside of their bank shares, is not at stake if the bank fails and they can now in most cases exit from their shareholdings swiftly through trading on a stock exchange. So their perspectives can now be much shorter-term and, as they alone benefit from increases in a firm’s “value”, they may actually favour greater risk-taking to maximise share price valuation in that shorter-term. This “short-termism” mindset is more pronounced amongst some asset managers and hedge funds, which in recent years would appear to have accumulated increasing amounts of bank shares and become more proactive in  3  Capitalist Fools. Joseph E Stiglitz January 2009 (The Great Hangover: 21 Tales of the New Recession from the Pages of Vanity Fair). BIS central bankers’ speeches  3  exerting pressure on bank management. As these asset managers are themselves rewarded on the basis of the annual valuation of their funds’ holdings, including the bank shares, they have every incentive to push the banks to achieve higher profitability. So board directors and senior management were, and still are, under constant pressure to pursue higher RoEs. It is not difficult to see why capital raising, which improves the resilience of banks, is often rejected or delayed as it is negative for share prices in the short term. The result?
Otherwise we run the risk of a loss of confidence in those numbers in a crisis. Now I will turn my attention to risks in the life and general insurance sectors. I will also describe the supervisory work we are doing in response. In different ways, both life and general insurers are adapting to  1  Source: ONS statistical bulletin: National life tables, UK: 2013-2015 https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/bulletins/nationallifetablesunitedking dom/20132015 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  a world with lower returns on capital. They are also learning how to optimise their activities for the new constraints of Solvency II. Put the two together and we can think of a search for yield on Solvency II capital. General insurance risks and supervisory priorities  In the general insurance sector, underwriting returns remain soft. On 22 June, I wrote to Chief Executives with the results of our latest ‘Monitoring the Market’ survey of general insurers. One unsurprising finding was that premium rates had declined in most lines of business. A perhaps more surprising finding was that, on average, London Market insurers thought rate adequacy had improved slightly. They appear to be incorporating a more benign view of future losses into their technical pricing. Many insurers raised concerns about distribution channels, particularly in the wholesale markets. More generally, our supervisory concerns in the current market include:   Insurers may be tempted to release too much from prior year reserves to bolster current profits.

In our opinion, a convenient, large-scale voluntary funded pension system is needed to preserve the funded pension market given the expected long-term freezing of the funded component of pensions. In conjunction with the Ministry of Finance, we have spent a lot of time developing the Individual Pension Capital system. This involves voluntary pension deductions via automatic subscription. In our opinion, it is crucial to establish centralised administration of the system. It will provide a single window for customer service, and standardise and automate work, providing the public with a convenient service. Incidentally, we believe that having centralised administration would reduce the number of incidents where the public’s rights are infringed when transitioning from one non-state pension fund to another. As we see it, the draft bill is currently nearing completion. The government is working on removing disagreements and, all being well, the draft bill will soon be submitted to the Duma. Moving on to the insurance market. It is demonstrating growth and is, on the whole, marked by positive trends. However, there are problematic segments: mainly OSAGO. Resolving the issues linked to OSAGO is one of our near-term objectives. As of this year, it is mandatory for insurance companies to sell the OSAGO policy in electronic form. This helped provide access to the policy in problematic regions. In the first half of the year, seven times the number of electronic policies were issued than over the course of the whole previous year.
It lowers the real interest rate and contributes towards further increasing demand. When confidence in the inflation target is weak and inflation expectations are not well anchored, the result thus becomes larger fluctuations in the economy. We went through such a development in Sweden in the 1970s and 1980s, when the fixed exchange rate did not act as a sufficiently strong nominal anchor, which in turn resulted in recurrent cost crises and devaluations. The reason that debaters do not address the problems of abandoning the inflation target could, of course, be that they consider that the process of inflation has changed so much that central banks simply no longer can reach their inflation targets. This seems after all to be quite a common view in the debate. This would imply that it is not meaningful to set up targets for inflation, as it is determined by factors outside monetary policy. However, this is an assumption that, were it correct, would actually turn much of what is considered accepted within economic science on its head. Economic paradigms do change every now and again, of course. But, at a minimum, one may argue that quite a heavy burden of proof lies on those claiming it is no longer possible to choose an inflation target. Among other things, they would have to disprove Milton Friedman’s thesis that inflation is basically a monetary phenomenon. 17 Having said this, in practice, it is probably more of a gradual scale than a binary zero-one solution.

They admit that it has now become more difficult and more complicated to conduct monetary policy, when global real interest rates have fallen for a long time and are currently very low. This means that central banks’ policy rates are likely to reach their lower bounds more often and that monetary policy will occasionally have to be conducted using other means than policy rate cuts. They also agree that digitalisation and globalisation are making it more difficult to reach inflation targets. But, it is argued, even if these complications must be managed, there is nothing to indicate that the inflation process should have changed so much and so fundamentally that inflation targets have become unobtainable and that inflation targeting as such would have to be fundamentally reassessed. Financial Times columnist Gavyn Davies has described this debate as an implicit ideological struggle between Claudio Borio, chief economist at the Bank for International Settlements (BIS), perhaps the leading advocate of the new ideas, and the departing Chair of the Board of Governors of the US Federal Reserve System, Janet Yellen, advocate of the traditional view. 2 There are good reasons for looking more closely into this debate. One is that it will probably be an important part of international monetary policy discussions in the years ahead. Another is that the debate is not merely about practical monetary policy but in fact also about fundamental issues within economic science.
Last year, non-oil import prices rose, depressing the growth of real take-home pay. And oil prices increased further. On the demand side, our central view remains a relatively benign one. The economy slowed in the first half of last year, led by consumer spending. But growth has begun to pick up. Averaging the growth rate of consumer spending over the final quarter of last year and the first quarter of this, shows that consumption growth has returned to not far off its long-run average. Export growth and business investment both seem to be recovering. So in its May Inflation Report, the Monetary Policy Committee had, as its central outlook, a return to steady growth with inflation close to the 2% target. But there are many risks and those have been bought into sharp focus by the recent financial market turbulence. And, just as for England in the World Cup, the threats come mainly from the rest of the world. The recent volatility in financial markets is reflecting the real risks which face us as, after a period of robust world economic growth, we approach a somewhat bumpier stretch of the road. A rebalancing of global demand is desirable, but the way ahead may not be smooth. One risk is that during the fastest three-year period of world economic growth for a generation, monetary policy around the world may simply have been too accommodative. In the main industrialised regions – the US, Euro area and Japan – official interest rates were very low for a long period.

Mervyn King: Monetary policy developments Speech by Mr Mervyn King, Governor of the Bank of England, at a dinner hosted by Scottish Financial Enterprise (SFE) and Edinburgh Chamber of Commerce (ECC), Edinburgh, 12 June 2006. *  *  *  It is 230 years since David Hume died and Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations. Economists will be forever indebted to two of the greatest minds of the Scottish Enlightenment. Both Smith and Hume were members of the Poker Club in Edinburgh, formed, as the name might suggest, to stir up opinion and make the sparks fly. Alexander Carlyle described the Club as so “frugal and moderate” that “a very constant attendant told me that he never observed even an approach of inebriation on any of the members”. Perhaps that’s why it faded away in the 1780s. In any event, I’m glad we are not at the Poker Club tonight, but enjoying your splendid hospitality here. Given Edinburgh’s importance to the Scottish Enlightenment, it is appropriate that I start by discussing an intellectual puzzle. The puzzle is the following. After 1945 governments felt they had the secret to managing the economy. They thought that by boosting the level of demand through higher government spending and lower interest rates, they could secure permanently higher levels of output and employment. If we were prepared to accept a somewhat higher rate of inflation, then we could achieve a somewhat higher rate of economic growth.
But, the stress tests we have performed at the Banco de España to calibrate the potential scale of this risk for banks show, broadly speaking, that the policy followed in recent years of accumulating  4  BIS Review 44/2008  provisions and capital has given rise to a buffer that would enable shocks of an order of magnitude comparable to those experienced at the height of the crisis in the 90s to be absorbed. I now come to what I consider to be the main source of uncertainty at the present moment. This is none other than future developments on the international wholesale financing markets, where the possibilities of raising funds have been at extraordinarily restricted levels that are not in keeping with a developed international financial system. Spanish banks have so far largely managed to evade the consequences of this sudden financial market squeeze. Firstly, because their liabilities were issued at relatively long maturities, so that the need to refinance the loans granted is arising much more smoothly than in other systems in which the relative weight of short-term securities is greater. The low level of dependence on funds raised in the interbank deposit markets has been another mitigating factor. I should point out here that once the subsidiaries and branches of foreign banks have been excluded, whose liquidity management is strongly governed by the geographical diversification strategies decided by their parents, the rest of the Spanish credit system does not borrow in these markets but instead maintains a net credit position in them.

And I should not fail to mention either that the recent dynamism of Spanish households' deposits and the progressive return of credit to a more sustainable growth rate has also helped cushion Spanish banks’ funding requirements. In these conditions, the Spanish credit system has found alternatives to recourse to the markets for medium-term financing to cover its funding requirements. More specifically, issuance of shorter-dated securities, such as commercial paper, has been stepped up and more intensive use has been made of the leeway provided by the Eurosystem’s monetary policy operational framework to cover liquidity requirements. In relation to the latter, I should like to emphasise that this possibility has been available to Spanish banks, as it has to all other banks of the area, since the very outset of monetary union, and it therefore comes as no surprise that it is used to a greater extent at times like the present. That said, the use currently being made of this facility remains moderate, as shown by the fact that the liquidity raised by Spanish banks as a proportion of total Eurosystem operations is barely commensurate with the weight of Spanish GDP in the euro area, or that this facility accounts, according to end-2007 data, for only 1.3% of the total bank balance sheet. Clearly, recourse to these alternative facilities is to some extent temporary; it is taking place in a situation of heightened uncertainty and it is not reasonable to think that it is going to be perpetuated.
Conclusion In today’s world, technological, financial and commercial interlinkages are so powerful that only the very largest countries are able to be independent and sovereign at the same time, and even they cannot do so entirely. For most other nation states, including the European countries, these two characteristics do not coincide. The European Union is the institutional framework that has allowed the Member States to be sovereign in many areas. It is a shared sovereignty, which is preferable to none at all. It is a complementary sovereignty to the one exercised by individual nation states in other areas. It is a sovereignty that Europeans like. The European Union has been a political success built within the international order that emerged after the Second World War. It has been a faithful interpreter of the values of freedom, peace and prosperity on which that order was founded. The European Union has been an economic success because it has provided an environment in which the energies of its citizens have created widespread and lasting prosperity founded on the Single Market and protected by the single currency. The last decade has dramatically highlighted the shortcomings of national policies and the need for cooperation to evolve both within the EU and beyond. A long global economic crisis, unprecedented migration flows and inequality exacerbated by large concentrations of wealth resulting from technological progress have given rise to rifts in a political and economic order that was thought to be set. Change is necessary, but there are different ways of bringing it about.

That made no sense. The only possibility of a speedy pay-out of deposit insurance in order to contain contagion was for the authorities in the host countries to pay it and leave the issue of settlement with Iceland for a later date. And this was what they did. From the beginning, there were legal arguments about the merits of such claims. In spite of that legal uncertainty, the Icelandic Government took part in several good-faith attempts to reach a negotiated solution. However, it proved impossible to get ratification through the Icelandic political process, in two cases involving referenda. In retrospect, it is clear that the main reason for this was the Icelandic people’s unwillingness to shoulder financial liabilities that had not been clearly signed by those mandated to do so on behalf of the nation or  BIS central bankers’ speeches  3  proven in a court of law to be sovereign obligations. Instead, these were seen as the debts of reckless private bankers. Now the EFTA court has ruled that it was indeed not a sovereign liability. In any case, the recovery from the estate of Landsbanki will cover 100% of all deposits in foreign branches. Without the priority given to deposits in the Emergency Act of October 2008, the recovery to be paid to these depositors would be much lower. This case provides important lessons about the design of deposit insurance within the EU and the clarity of wording, or lack thereof, in EU directives.