samchain/econo-pairs-v1 huggingface dataset:
Fostering connections between community colleges and employers is one way we can help to make sure the next generation is ready for the opportunities our economy has to offer. We’ve published loads of research on this subject, and we’re putting some of our findings into practice with a series of roundtables, collaborating with colleges, workforce development organizations, and employers across the state. Displacement and equitable growth are areas where we can do more. I’m pleased to share that later this year we’ll be hosting a series of listening sessions on these topics. We plan to bring together community development experts and nonprofits to better understand what’s happening across the district. We want to know what’s worked in the communities that have seen equitable growth, the challenges for those that haven’t, and what we can do about it. We hope the findings from these sessions serve as a tool for those areas on the cusp of gentrification to ensure every part of the community benefits from local investment. Catalyze Finally, I’m going to turn to this idea of how we can be a catalyst for action. Our desire to create change is the reason we created resource guidebooks—publications that collate data, information, and contacts about specific communities. We’ve published guidebooks for parts of New York State and New Jersey, and we have another one in the works for Puerto Rico. They act as a starting point for local stakeholders and investors looking to support equitable growth in underserved areas.

Before I go any further I’ll give the usual Fed disclaimer that the views I express are mine alone and do not necessarily reflect those of the Federal Open Market Committee or anyone else in the Federal Reserve System. Dual mandate Apart from a stint running a pizza shop, I’ve worked in the Federal Reserve System for my whole career, nearly 25 years. And I’m not alone. When you ask people at a Federal Reserve Bank how long they’ve worked there, their response is often measured in decades, not years. What makes them stay? Working for a mission-driven institution. And speaking of our mission, the Federal Reserve has two goals: maximum employment and price stability. We want our economy to reach its potential in terms of jobs and growth and we want low, stable inflation. While these two goals are critically important, they are broad and highlevel. The monetary policy decisions we make have important effects on the overall number of jobs and wages, but they don’t determine what economic growth looks like across communities, or who benefits from it. That’s why our outreach and community-based work is a key priority. It’s an opportunity for us to take all of the data, all of the things we know about the economy, and help one another as we tackle the very real issues that shape the everyday lives of Americans. Equitable Growth We’re closing in on the longest economic expansion on record, unemployment is at historically low levels, and inflation is close to our 2 percent target.
In this regard, the risks to price stability remained persistently, up until our recent decision on interest rates, on the upside. According to the forecasts currently available, consumer price inflation in 2000 and 2001 is generally projected to be slightly below 2%. This is clearly higher than was expected in the respective forecasts at the end of last year and early this year. We should, of course, bear in mind that these forecasts are snapshots of economic prospects as they appear at a particular point in time. They are typically surrounded by a fair degree of uncertainty and they are highly conditional on a number of specific assumptions. Oil prices and exchange rates are prominent examples of such forecast assumptions. The movements in these variables in the past few months show how quickly such assumptions can move out of line with actual developments. Moreover, in the case of the forecasts currently available, some of these explicitly assume that short-term interest rates will rise over the forecast period. I think that it is fair to say that without this assumption projected inflation would most likely have been higher in the forecasts concerned. Thus, the inflation outlook for the euro area gave a very clear signal to monetary policy: namely that there was no reason for complacency and that monetary policy had to react. The developments in oil prices and the exchange rate have led to a strong rise in import prices.

Recent wage settlements have been relatively moderate, public finances have improved, deregulation and liberalisation are under way in a number of sectors, and there are signs that labour markets are gradually becoming less rigid. However, while it is acknowledged that progress is being made, it is also clear that there is still quite some way to go. Further efforts are required in all these policy areas in order to create the best conditions for the current upswing in economic activity to be turned into a period of sustained strong growth in an environment of price stability. For fiscal policies the challenge and opportunity is to use the current economic expansion to intensify the necessary further consolidation of public finances. In a number of Member States the budgetary situation is still too far from reaching the targets specified in the Stability and Growth Pact, namely that budgets are to be in surplus or at least close to balance. Moreover, the recent reduction in deficits has been greatly helped by the relatively low levels of interest rates and by improving economic conditions. According to most forecasts, fiscal trends over this year and the next even point to a procyclical stance rather than to prudent anticyclical policies. The overriding goal for fiscal policy should be to shelter governments’ budgets from normal cyclical fluctuations, but also from unexpected shortfalls in revenues and interest rate increases. In addition, governments’ budgetary policies also need to urgently address longer-term issues in the context of the imminent problem of ageing populations.
At the end of March, the FPC – consistent with its remit – announced that UK banks had around a £ billion capital shortfall against the 7% Basel 3 yardstick. To be clear, that £ billion referred to the shortfall in banks’ balance sheets at the end of 2012. And at the time of the FPC’s announcement, I said that firms had already made plans to deal with half of the £ billion number. The PRA has translated all of that into firm by firm numbers. And, the PRA Board is taking a view on whether for each firm it agrees with the quantum of capital implied by the FPC’s figure, and the timing of action it requires from banks. This is entirely consistent with the “comply or explain” nature of FPC recommendations to the PRA. We have not released bank by bank numbers because as a prudential supervisor we want to spend time discussing with each bank our judgement on the need for capital, and their judgement on the actions they can take. I make no apology for doing this quietly. I am much more interested in the outcomes that the running commentary. Within the past two weeks, you will have read that RBS and Lloyds now have plans to make good their capital shortfall without raising new equity. Some commentators have written that this means RBS and Lloyds have been let off the hook.

For this reason, it is useful to take a moment to recall the events of 1907. At the turn of the 20th century there was no Federal Reserve System. Banks then as today borrow short term in order to lend long term, making their profit on the difference in rates. At the time, the banks’ short-term liabilities took the form of demand deposits. If depositors began to worry about the quality of a bank’s loans and its ability to pay back its depositors, a run on the bank could develop. Once started, no bank on its own can stop a run by its depositors. To deal with these liquidity problems, the banks developed a clearinghouse system whereby member banks could backstop each other. This system would work well as  1  These views are my own and do not necessarily reflect the views of the Federal Reserve Bank of New York or the Federal Reserve System. BIS Review 92/2010  1  long as banking problems were sufficiently localized so that unaffected member banks could provide liquidity to those member banks facing a liquidity problem. The problem in 1907 was that credit was also being supplied by trust companies that operated outside of the clearinghouse system. Many of these trusts, including the Knickerbocker Trust, lent money to speculators in the copper market, which was experiencing a boom. So long as copper prices kept rising, these loans paid off.
14  It is of course difficult to gauge the probability of a stress event leading to a self-reinforcing downward spiral of redemptions and forced asset sales. The Bank of England has developed simulation models that give an indication of the point at which liquidity would break down and such effects could set off. 15  These are only simulations. But given that we are paid to think about what could happen – what is unlikely but plausible – there is enough here to be of concern to macroprudential authorities. This concern is the backdrop to the FSB’s recommendations on asset managers that IOSCO published in February this year. 16  From the Bank of England’s point of view, the most important recommendations are  around fund liquidity and ensuring that the liquidity offer matches the investment profile of the fund. IOSCO is also taking forward the FSB recommendation to develop better and more consistent leverage metrics for investment funds. The Financial Policy Committee of the Bank of England has also commissioned work on non–bank leverage. 17  Leverage, as we know, is usually somewhere at the bottom of a banking crisis and the last episode was no exception. Leverage is perhaps the core necessary element of the banking business model. But when it gets out of hand it stokes up the boom phase in the financial cycle and can leave banks with insufficient resources to cope with the correction, so amplifying the bust phase of the cycle.

Much of the post-crisis reform effort has been aimed at reducing the systemic risks that derivatives can create through the way they interconnect multiple actors in the system and can amplify market shocks. Mandatory margining, central counterparty clearing and trade reporting are all designed to create resilience and to simplify the network and make exposures more transparent. It may be however that widespread and increasing use of derivatives by market-based finance will over time make the opacity and complexity too difficult to manage. What is sensible for risk management at the fund level simply may be too difficult to manage risk at the system level. 18  Hedge funds and banks have different business models, which complicates comparisons of financial leverage. But, in aggregate, hedge funds’ non-derivative liabilities (made up primarily of borrowings through repo and prime brokerage) are roughly the same size as their total net asset value. Banks’ non-derivative exposures are over 15 times greater than their tier 1 capital. However, whilst the hedge funds industry’s financial leverage is lower than banks, some individual hedge funds make extensive use of financial leverage. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  Second, and more importantly, given the channel of interconnectedness created by funds’ use of derivatives, to what extent could the failure of a fund or a number of funds create systemic risk? Again, the post crisis reforms around margining and clearing reduce that risk.
Role of Foreign Banks 100% 90% 80% 70% 60% Domestic Private State Foreign  50% 40% 30% 20% 10% 0% EST  CR  LITH  SVK*  POL  LAT*  HUN*  Malta  SLO  Cyprus  * Percentage of foreign owned capital, other share of the assets controlled by foreigners  9  Who are the main players in the market of the new member states? Among the most influential institutions in the region we find Krediet Bank Bruxelles from Belgium, Erste Bank and Raiffeisen Bank from Austria, HVB Group and Bayerische Landesbank from Germany, Societé Generale from France and Unicredito Italiano from Italy. The limited group of non-EU banks is lead by Citibank and GE Capital. Unlike in Central Europe, in the Baltic states the foreign investors come from the Scandinavian countries, mainly Sweden and Finland - Hansabank, Group Nordea and Sampo Bank.

This could be illustrated on the table describing developments in the Czech Republic, Poland and Hungary in terms of inflation and GDP growth: 1991  1992  1993  1994  1995  1996  1997  1998  1999  2000  2001  2002  CPI Czech R. Poland Hungary  52,0 60,3 35,0  12,7 44,6 23,0  18,2 37,7 21,9  10,2 29,4 21,6  7,9 21,8 29,2  8,6 18,8 20,3  10,0 13,2 18,8  6,8 8,4 10,5  2,5 9,8 11,4  4,0 8,6 10,2  4,1 3,6 6,8  0,6 0,8 4,8  GDP Czech R. Poland Hungary  –11,6 –7,0 –11,9  –0,5 2,6 –3,1  0,1 3,8 –0,6  2,2 5,2 2,9  5,9 7,0 1,5  4,3 6,0 1,3  –0,8 6,8 4,6  –1,0 4,8 4,9  0,5 4,1 4,2  3,3 4,0 5,2  3,1 1,0 3,8  2,0 1,4 3,3  EIU Country data, national statistics  As already mentioned, since the financial sector consisted mainly of the banking sector, the impact of economic reform was felt mainly by the banks. There was no alternative source of financing for corporations, so difficulties in the corporate sector were passed on directly to the banks. The situation was complicated more by the fact that the government owned some of the most important corporations, as well as the main banks. Political rationale preceded economics. In most of the countries, the privatization of most firms happened early in the transformation process.
In our Sydney roadshow, I was particularly impressed by the keen interest and high level of curiosity of the Australian audience, who wanted to understand more what RMB internationalisation was all about and what it meant for them as corporates with trading and investment links with China. We were then at an early stage of this long and exciting journey of RMB internationalisation. At that time, the cross-border RMB trade settlement scheme was still a “pilot” and only covered selected provinces in the Mainland. RMB trade settlement handled by banks in Hong Kong was only some RMB100 billion a month, which is less than one-fifth of the RMB600 billion registered in March this year. 3. The offshore RMB market in Hong Kong has indeed achieved phenomenal progress in the past three years. Hong Kong’s RMB real time gross settlement system registered an average daily turnover of close to RMB700 billion in April this year, which is about twelve times the level when I visited Sydney in 2011. In the foreign exchange market – another area where activities have picked up sharply – we are seeing an average turnover of RMB spot and forward transactions of some $ billion to $ billion equivalent every day. I also note that remarkable developments have been achieved in Australia, with recent data suggesting that Australia’s RMB payments value increased by close to 2.5 times year on year.

Many of them need to use instruments to manage or hedge their RMB exposures. All these RMB related financial services and products can only be developed by the markets and financial institutions because they are closest to their customers and understand their needs best. That is why it is so important for the HKMA to collaborate with our official sector counterparts in Australia to create this private-sector led Dialogue. The first Dialogue was held in Sydney in April last year, which was highly successful. I am very pleased that it is Hong Kong’s turn to host the second Dialogue and I am confident that it will be equally if not more successful. I note that today’s Dialogue has a very rich agenda and I look forward to hearing useful and practical ideas and suggestions on what the private sector can do on its own or in collaboration with the official sector to further develop the offshore RMB markets in Australia and Hong Kong. 8. Thank you very much. 2  BIS central bankers’ speeches
Banks and investment banks sold insurance against what seemed like low probability events, but did so at what even at the time seemed like low prices. And on the assets they retained, these same institutions purchased insurance from financial guarantors and other firms that were exposed to the same risks. The crisis exposed a range of weaknesses in risk management practices within financial institutions in the United States and throughout the world. Today, a group of the primary supervisors of the largest banks and investment banks in the world released a comprehensive assessment of risk management practices in these institutions. This assessment will help lay the foundation for consensus on changes to supervision going forward in the major financial centers. The report examines a range of practices that helped determine relative performance during this crisis. Banks and investment banks with stronger risk management practices and cultures did substantially better. The most common failures were in how firms dealt with uncertainty about the scale of losses they would face in a less benign economic and financial environment; the scale of the cushion they built up against that uncertainty; how well they managed the internal tension between risk and reward; and how quickly they moved to mitigate risk as conditions deteriorated. The typical arsenal of risk management tools relies, by necessity, on history and experience, and as a result has only limited value in assessing the scale of potential future losses.

Many households – including those previously lacking access to credit or with access only to expensive credit – found they could borrow on a significant scale to finance the purchase of a home and other expenses. Prices rose across a range of real and financial assets, most notably the prices of homes. This constellation of broad economic and financial conditions was accompanied by rapid innovation in financial instruments that made credit risk easier to trade and, in principle at least, to hedge. These instruments allowed investors to buy insurance or protection against a broader range of individual credit risks, such as the default by a home owner or a company. Issuance of asset-backed securities (ABS), collateralized debt obligations (CDOs) and  BIS Review 27/2008  1  collateralized loan obligations (CLOs), as well as credit default swaps (CDS), expanded on a dramatic scale, particularly from 2005 through to mid-2007. And over this same period, the composition of the assets in ABS, as well as in CDOs and CLOs, shifted to higher credit risk mortgages and loans issued by noninvestment grade companies. Even though these instruments allow credit risk to be shared, their holders remain exposed to the less probable, but potentially very damaging effects of a significant increase in losses driven by macroeconomic factors. As underwriting standards deteriorated over this period, this exposure grew. And yet risk premia continued to fall, suggesting that investors did not fully appreciate the dynamic that was at work.
A number of the measures in the programme are directly relevant to foreign banks and you may therefore be interested to hear about what we have done so far, and what more we have in mind. The current state of the banking sector The Consultancy Study was conceived just before the outbreak of the Asian Crisis and took place during it. The Hong Kong banking sector has now come through the crisis, and can be said to have clearly demonstrated its resilience and underlying strength. It is true that the number of foreign banks in Hong Kong has fallen sharply over the last two years. This reflects the fallout from the crisis that has led to the demise of some banks and has required others to cut back on their overseas operations and return to their home base. Hong Kong has certainly not been the only financial centre to witness this retreat. However, the important point is that the core of the Hong Kong banking system - represented by the local banks and the large foreign players - has remained intact. Although bad debts rose sharply during the crisis and a few banks lost money, the banks generally remained profitable and financially sound. The capital ratios of the local banks actually rose during the crisis period. No banks failed and no depositors lost money. The Government was not called upon to provide financial support. The results of the banks for the first half of this year show that their recovery from the crisis is well underway.

These issues are already addressed in the Code to some extent, and perhaps if the spirit of the Code had been more closely adhered to, some of the recent bad publicity for the banks could have been avoided. However, it is evident that the Code needs to be made more specific in some areas, and the issue of how to ensure compliance must also be addressed. The Code of Banking Practice is not part of our reform measures, but I have digressed to talk about it for two reasons. First, as already indicated, it becomes all the more important in a deregulated environment to ensure that there is a fair and balanced relationship between banks and their customers. Second, the fact that we are going to have to devote resources to this issue for the rest of this year means that one of our reform measures, namely a review of the current three tier system of authorisation, will be postponed from this year to next. This will also allow us to take into account the results of our forthcoming review of deposit protection arrangements, which may have a bearing on the minimum size of deposits that authorised institutions which are not licensed banks should be allowed to take. Safety and soundness of the banking system Deposit protection is part of what might be called the safety net arrangements for the banking system.
The rapid growth in the trading of credit default swaps and structured credit products has resulted in considerable back-office backlogs (unsigned confirmations and master agreements, delays in trade capture into risk management systems, delayed notification of assignments of positions) that create significant operational risk for market participants. These types of operational problems have arisen more broadly in the OTC derivatives market over time and they have gotten worse with the rapid growth in activity by hedge funds. Efforts underway to automate matching and confirmation of credit default swap transactions should help address these concerns. But we need to see a stronger collective commitment by the principal dealers in these markets to reduce the outstanding backlog of confirms, shorten confirm times and move larger share of transactions in the more standardized instruments to automated platforms. And we’ll act to reinforce that commitment. These considerations are particularly important for the systemically significant financial institutions that stand at the core of the U.S. financial system. These institutions need to have exceptionally high standards in terms of internal controls, capital and risk management and governance. The greater complexity of their risk profile puts more exacting demands on the risk management architecture and requires a higher margin of capital than would be necessary for a business profile with less volatility and more predictability in returns.

The increase in the number of banks, branches and their agencies, as well as the growing number of bank employees have caused the coverage of the population to improve significantly. Thus, the number of inhabitants per bank, banking unit and per bank employee has decreased considerably. 2  BIS Review 101/2006  Table 2: Coverage with banking services 2003  2004  2005  2,236  2,816  3,479  161  188  250  149  176  217  13.9  15  13.9  bank  206,851  194,971  184,410  banking unit  20,815  16,593  12,539  bank employee  1,388  1,108  901  Number of employees Number of branches, agencies Number of employees per: bank banking unit 1  Number of inhabitants per :  Table 3: The expansion of the banks’ network by the end of the 9-month period of 2006Banks Nof No. Banks No. of Branches No.