samchain/econo-pairs-v1 huggingface dataset:
Mr McDonough comments on Capital Markets, Securities and Government Sponsored Enterprises Statement by the President of the Federal Reserve Bank of New York, Mr William J. McDonough, before the Committee on Banking and Financial Services, U.S. House of Representatives, Washington, D.C., on 3 March 1999. Good morning Chairmen Leach and Baker and members of the Subcommittee. When I appeared before the full Committee in October, I spoke about the near-collapse of Long-Term Capital Management and the events leading up to the private-sector recapitalization of its fund, Long-Term Capital Portfolio. At that time, I promised you that we would take a hard look at the issues growing out of that experience, particularly as they affect our responsibilities as bank supervisors. I am pleased to appear before you today to report on the lessons we have learned and the actions we have taken to reduce the possibility that such an episode could repeat itself in the future. As I indicated last fall, three issues require particular attention by banks and their supervisors in the wake of LTCM. These are, first, the adequacy of banks’ credit analysis processes; second, the effectiveness of exposure measurement; and third, the role of stress testing of counterparty exposure. In my remarks today I will detail the substantial progress that has been made, both domestically and internationally, to address each of these supervisory concerns.

For these reasons, I believe the most practical approach is to focus on financial institutions’ lending activities, because such an approach offers a near-term and cost-effective remedy to the systemic risks posed by HLIs. Challenges for the Banking Industry I strongly believe that both the official and private sectors have important roles to play in addressing the challenges arising from an increasingly complex and dynamic financial services industry. First and foremost, we hold banks accountable for ensuring that sound credit risk management standards are upheld and that these keep pace with financial market innovation. If competitive pressures lead to bad practices in one bank or the industry as a whole, our job as supervisors is to raise standards and ensure that sound practices are restored. In my remarks today, I highlighted a number of areas where progress has been made. Of course, there is more work to be done by banks and supervisors. High on the agenda should be the development of more meaningful measurement of risk exposure and the implementation of effective stress-testing techniques. Another important area that requires further industry attention is the measurement of leverage. Finally, I believe that the industry should devote more thought to the appropriate valuation of positions during periods of market stress and illiquidity – which is particularly relevant to the use of collateral to protect against credit risk. These are just some of the broader issues arising from the LTCM experience and the market turbulence last fall.
Lee Hsien Loong: Financial centres today and tomorrow: a Singapore perspective Address by Mr Lee Hsien Loong, Deputy Prime Minister of Singapore and Chairman of the Monetary Authority of Singapore, at the International Monetary Conference, Singapore, 4 June 2001. *  *  *  Mr Sandy Warner, President, IMC Ladies and Gentlemen:  Introduction I welcome all the delegates to this first IMC of the new century. Please allow me to share with you a Singapore perspective on financial centres as they are and as we expect them to be in the years ahead. In the last few decades the pattern of international financial activity has undergone major changes. Starting with a high concentration in a very small number of financial centres, activity then spilt over to more locations. But now with globalisation revolutionising the financial industry, and expanding the worldwide network of financial markets and activities, paradoxically the trend again seems to be towards concentration, with fewer mega financial centres, complemented by smaller centres with more specialised focuses. In Europe, London is the premier full-service centre, with others like Frankfurt and Zurich occupying strong niches - Frankfurt in the derivatives business and Zurich in private banking. In America, New York is pre-eminent with Chicago playing a specialised role in financial futures, and Boston in asset management. Both London and New York are not just continental but global financial centres, where the top financial institutions have congregated and capital markets run broad and deep.

To make the most of our talent, we must create an environment which encourages innovation and enterprise, rewards those who venture and succeed, and is tolerant of honest failure. This depends in part on the culture of the society, which takes time to change. But it is also affected by the regulatory and legal environment. Here we are working to remove impediments to enterprise, for example in the tax treatment of stock options. Singapore has long offered a good, wholesome living environment for international talent wanting to work or sink roots here. We are now paying greater attention to the less tangible aspects of the quality of life. Our arts and entertainment scene has livened up considerably in recent years. I would still hesitate to describe Singapore as funky, but certainly it is a far cry from being boring. The outcome of all our efforts is that one is beginning to hear a distinct buzz in Singapore. Develop sound and responsive regulation Third, specifically for the financial sector, we are constantly improving our regulatory and supervisory regime. Good regulation commands a premium. The rules must be aligned with the underlying risks, and kept constantly updated, following global best practices. Prudential oversight must be complemented by enhanced corporate disclosure and market discipline. BIS Review 50/2001  3  The regulator's touch has to be sufficiently flexible and light, to let market forces work, innovation thrive, and the industry develop. But the regulator must also be vigilant in enforcing prudential safeguards, with firmness where necessary.
From an economic point of view, the relevant question is whether the political and institutional framework which governs the euro area is designed in such a way as to ensure bright long-term prospects for the euro area in terms of employment, real growth and, more generally, living standards of its citizens? In this respect, while I see an urgent need for further structural reforms in the euro area, let me emphasise at the outset that I am rather optimistic as concerns the long-term growth and employment prospects of the euro area. Not least as the euro, together with healthy competition among differing policy designs of national authorities, will act as a catalyst for further reform and integration. In my presentation today, I will first briefly address the political and institutional structure underlying the euro area. Secondly, I will discuss some features of the ECB, the institution responsible for an area in which full integration has been achieved, namely monetary policy. Thirdly, I will discuss some of the challenges which need to be addressed to fully grasp the opportunities offered by the single currency, thereby further improving the economic prospects of the euro area. Finally, I shall argue that the unique institutional choice for the euro area brings many advantages and opportunities and thus, if properly handled and carefully further developed, is a very solid fundament for a substantially more dynamic long-term development of the euro area than most observers currently appear to expect.

As the responsibility for structural reforms in the EU and in the euro area rests with the individual Member States, a wide variety of institutional solutions and regulatory arrangements across countries and sectors exist. In many areas I consider this decentralised approach to be an opportunity, not a disadvantage. It makes possible healthy competition between differing policy designs of national authorities and enables solutions that are tailored to the particular needs of a country or region. This fact, which is a clear advantage of the euro area economy compared with other more centralised economies, is often not recognised enough. Decentralised policies offer a unique opportunity to explore different solutions in a competitive manner, allowing the testing of various approaches and, if thought useful, selection of best practices with a high degree of confidence. Fiscal policy is a good example of a field where Europe found an efficient solution in the form of common rules which keep the advantages of decentralisation and subsidiarity. As is well-known, budgetary policies remain under national responsibility, but effective common rules have been developed in the form of the excessive deficit procedure and the Stability and Growth Pact. These rules are designed to ensure that a high degree of fiscal discipline supports the single monetary policy in its primary objective of maintaining price stability.
In order to comment on whether the real interest rate today is low or high, it may therefore be more meaningful to look at a “representative” period when the structure of the economy was more similar to the current structure. It is most reasonable to examine a period in the recent past, for example the past 10-15 years. Markets were deregulated in this period, for example. For Norway, it would also be natural to study the period after 1994. In the period 1994-2002, the average real interest rate for Norway was 4.2 per cent, the UK 4.7 per cent and the US 3.4 per cent. Since 1994, the long-term real  3  Hammerstrøm, G and I. Lønning, “Kan vi tallfeste den nøytrale renten? (Is it possible to quantify the neutral interest rate?”). Penger og Kreditt 2/2000  4  BIS Review 46/2003  interest rate in Norway has varied between 3 and 6 per cent, reaching its highest level at the beginning of the period and its lowest in the years 1997-2001. Both the Norwegian and the global economy have now entered a period of low real interest rates. The low interest rate level must be viewed in the light of the possibility of persistently low inflation both in Norway and other countries. However, the real interest rate is not by any means as low as when inflation in Norway was high in the 1970s and 1980s.

The second challenge is that economic modeling requires reliable and regular data. This entails significant financial and human resources that are sorely lacking in statistical institutes in several countries. In this respect, I think that central banks, owing to their autonomy, can play an important role in research development and have a ripple effect on its ecosystem. This is exactly what we are trying to do in Bank Al-Maghrib. 4  In fact, we have always put research and human capacity building at the core of our strategic plans. Thus, alongside the various operational entities, we have set up since 2007 a division dedicated to research, whose task is to reflect on all strategic matters and issues related to the Bank's missions. Several cooperation programs were developed with the national and international academia, as well as with many central banks around the world. More particularly, we have launched the "fellow researcher" program which allowed the Bank’s executives to collaborate with experts from central banks of other countries such as the United States, Canada and Poland, and I hope we will soon be able to extend this cooperation to African researchers. In addition to our institutional publications, a series of working papers were drawn by the Bank staff, and are gradually becoming a reference for research in various areas directly or indirectly related to our missions. Moreover, the Bank organizes a series of timely or regular scientific meetings, such as the International Days of Macroeconomics and Finance, which we hold each year.
[2] Whilst waters were calmer at that time, we could see waves on the horizon. We warned that future cyclical and structural changes could materially threaten profitability and sustainability of certain business models. In the months since we sent that letter, events have unfolded – and indeed a war broke out – that now make this is all feel more present and real. Geopolitical and macroeconomic uncertainty is translating into market volatility. Meanwhile, digitalisation continues at pace, as new technologies, products and partners enter the financial services ecosystem. And the risks from climate change loom and threaten to change the very nature of the environment banks operate in. These are all key features of a new world facing investment banks. Like anyone preparing for an open water swim, if investment banks are to perform in these uncharted waters, they will need to challenge themselves on their true capabilities, be forward-  Page 3  looking, anticipate changing conditions, and prepare to encounter unexpected currents along the way. This will be a real test of their true mettle. So what does this mean in practice? Financial Resilience Investment banks’ business models have changed significantly since the Global Financial Crisis. Legacy balance sheets have mostly been cleaned up. Firms no longer look to boost returns from proprietary trading. Client-driven strategies have become the norm.

Today investment bank businesses have bifurcated: on the one hand, you have high-volume, low-latency vanilla flow offerings in liquid markets; whilst on the other hand, you have less liquid or more bespoke businesses (in the form of financing and derivatives-based activities). Both are predicated on facilitating client activity but they present very different challenges. Investment banks tend to think of ‘Good volatility’ as the friend of liquid businesses – client flows increase, bid-offer spreads widen, and firms position themselves to deploy capital and reap the benefits. Traditionally this provides a natural risk offset to less liquid businesses during a market correction. On the other hand, the more illiquid, complex and concentrated risk books often lose revenue in periods of volatility (for example, equities autocallables – a business that has experienced growth over the last ten years – tend to suffer losses during periods of stress, and frequently make headlines). But invariably these losses tend to be masked by greater than normal returns from liquid business lines. But what if this dynamic of liquid markets and supernormal profits during a stress, which people have started to regard as the norm, doesn’t play out next time? The last decade has been an era of global financial asset appreciation. Given the changing macroeconomic backdrop, traders, investment managers, and investors will need to be alive to the financial market environment in which they run their business. They should challenge themselves and whether their assumptions have been complacent in hindsight. What if, next time, “Good volatility” turns into “Bad volatility”?
The BIS FXWG formed a Market Participants Group (MPG) which includes representatives across the globe and includes the sell-side, buy-side, and market infrastructure communities. The regional FX committees are also integrally involved in the work. Issues addressed by best practices Let me now highlight how, in my experience working with New York Fed-sponsored committees, best practices can play an important role in addressing a range of issues. For example, best practices can identify emerging risks, solve “first-mover” problems, challenge long-established practices, improve market function, and assist control functions. Collaboration between market participants and central banks in groups like the TMPG or the FXC can promote identification of evolving or emerging risks and resulting best practices can publicize those risks, and suggest mitigants for them, to the broader market. For example, the FXC, recognizing the risks associated with the increased use of automated trading, published a set of recommendations in 2006 around “auto-dealing” in FX markets. The TMPG provided similar guidance in 2015. 12 Importantly, best practices can be a way to resolve first-mover problems. For instance, a sizeable portion of the non-centrally cleared forward-settling agency MBS transactions prior to 2013 remained unmargined, posing counterparty risk in the event one trading party were to default, and potentially systemic risk to the overall financial system. Margining such transactions is a common and sensible way to reduce counterparty exposures and systemic risk.

It has a long history – more than three decades – of publishing documentation to facilitate FX transactions and market functioning and to articulate best practices. 9 The New York Fed is also involved in the BIS FXWG to help establish and promote adherence to an FX Global Code, a single set of guiding principles for the FX market. These groups have confronted collective action problems where an individual firm may want to raise concerns, but be unable to drive market-wide improvements. Second, when central banks partner with private-sector participants to develop best practices, it can send a powerful signal to the market. For their part, private-sector  in TMPG-covered markets and received feedback from firms active in electronic trading and an industry association of proprietary trading firms. This feedback helped refine the proposed best practice updates. 6  The OTC Derivatives Supervisors Group originated in 2005 when the New York Fed hosted a meeting of major OTC derivatives dealers and their domestic and international supervisors. The Alternative Reference Rates Committee was convened by the Federal Reserve in 2014 in a meeting with representatives of major OTC derivatives market participants, their supervisors, and central banks. 7  Outside of New York Fed-sponsored groups is the Group of Thirty (G30). The G30 was established in 1978 and is an international body composed of senior representatives in the private and public sectors and academia. It has a broad mandate and works on various issues relating to international economic and monetary affairs.
Eva Srejber: The power of transparency for macroeconomic discipline Speech by Ms Eva Srejber, First Deputy Governor of the Sveriges Riksbank, at the 10th International Financial Economic Forum, Vienna, 11 November 2004. * * * The crisis encountered by the Stability and Growth Pact has put the new enlarged Europe at a crossroads: either we get our act together and produce better checks and balances in our institutions or we are going to move down a path of looser fiscal policy and tighter monetary policy. Both fiscal and monetary policy need the other to be predictable: a government needs the predictability of a transparent and consistent monetary policy to know how to conduct fiscal policy, and of course no monetary policy will be sustainable if poor fiscal policies lead to a rapid accumulation of debt. This is what Sweden witnessed in the 1980s and the 1990s. In the 1980s we had an unsustainable mix of fixed exchange rates and lax fiscal policy, which led to high inflation and eventually to a crisis that landed us with an even higher mountain of debt. When the regime collapsed in 1992 we introduced a target for inflation of two per cent, which today is hailed as a success. However, the real breakthrough for the new regime was in the mid 1990s when a forceful implementation of fiscal consolidation, supported by a broad political majority in parliament, made the whole macroeconomic set-up credible.

20  16-24 45-54 75-84  25-34 35-44 55-64 65-74 85 and over £ million 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 -500,000  Sources: Sources: Wealth and Asset Survey, ONS, and Bank calculations. BIS central bankers’ speeches  Chart 22 – Proportion of individuals by age that rent 1977  1987  1997-98  2007  Per cent  Chart 23 – Proportion of individuals by age that have a mortgage Per cent  70  70  60  2014  60  50  50  40  20 10 0  40  1977 1987 1997-98 2007 2014  30  25 30 35 40 45 50 55 60 65 70 75  80  30 20 10  25 30 35 40 45 50 55 60 65 70 75  0  Source: ONS. Source: ONS. Chart 24 – Real income before and after housing costs  Chart 25 – Rent as proportion of disposable income in 2014*  Indices 07/08 = 100  104 102 100 98 96  Median real income before housing costs Mean real income before housing costs Median real income after housing costs Mean real income after housing costs  2007/08  2009/10  2011/12  Sources: HBAI and Bank calculations.
Building on these principles, we will continue working towards a clearer consensus on the appropriate circumstances and scale for IMF lending, the possible need for additional financial instruments, and the adequacy of the present framework for the orderly resolution of sovereign debt problems. Fourth, the Fund’s role in low-income countries. Low-income countries present the international community with some profound challenges. Over a billion people live on less than a dollar a day, and hundreds of millions are affected by disease. Addressing the HIV/AIDS pandemic, in particular, will be critical for growth and poverty reduction in many developing countries. Achieving durable economic growth in these countries – which is essential for lasting poverty reduction and reaching the Millennium Development Goals – will therefore require a strong social framework as well as sound economic policies. On our part, the IMF can help countries put in place policies and systems to effectively manage the increased and large inflows of aid that could be forthcoming in response to the HIV/AIDs crisis. Importantly, lasting poverty reduction can only be achieved with stable and sustained growth. The IMF, with our mandate in promoting economic stability, can help countries to put in place strong macroeconomic frameworks that will lead to economic expansion and debt sustainability. As in everything else that we do, we must ensure that our assistance to low-income countries continues to fit their particular needs and circumstances.

Jean-Pierre Roth: No frontiers in monetary policy – from the fight to avoid internationalisation of the currency to the internationalisation of monetary policy Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the Swiss Institute of International Studies, Zurich, 6 May 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  In view of the challenges with which it has been faced, the Swiss National Bank (SNB) demonstrated its adaptability time and again. Over the past thirty years, for instance, it abandoned its endeavours to prevent the use of the Swiss franc as an international currency. Moreover, it has gradually incorporated international elements into its monetary policy strategy and its monetary policy instruments. The goal when making these adjustments was always to improve the effectiveness of monetary policy in order to protect the country from any inflationary trend. In managing the current crisis, both the internationalised monetary policy strategy and the internationalised policy instruments have served the SNB well thus far. BIS Review 552009  1