samchain/econo-pairs-v1 huggingface dataset:
5  See the Annex for brief explanations. BIS Review 44/2007  3  hold tranches of other CDOs, which hold LBO debt of all types as well as asset-backed securities bundling together household loans. (The diagram may, or may not, help!) What is going on here? One possible explanation is that capital might be being allocated to wherever its cost is cheapest for a particular desired risk profile. That optimisation involves comparing the capital charges applied by regulators to regulated institutions; and by rating agencies to various types of vehicle (SIVs, CPDCs, CDOs, monolines etc). The “smart money” seems to be assembling its own portfolio of vehicles, so that it can choose from a menu of where to book transactions. One of the drivers is commonly referred to by practitioners as “ratings arbitrage”. Another was of course Basel I, which triggered the securitisation of high-quality credits, and for quite a few years fuelled a ballooning of vehicles whose existence depended on commercial banks providing zero-capital-weighted “liquidity” lines. Basel II will change all of that. Indeed, if central banks are to understand how the global financial system fits together, we will need to fathom the reconfiguration that Basel II prompts, including the potential for risk transfers between banks adopting different steps on the ladder of Standard, Foundation, Advanced approaches that it makes available.

In September 2007, Bank Negara Malaysia initiated the Financial Sector Talent Enrichment Programme (FSTEP) to train and prepare 1000 highly qualified graduates for immediate placements in banking and insurance institutions. This effort is undertaken in collaboration with the industry and training institutes and is aimed at boosting the supply of well-trained and competent personnel for the financial services industry. In the area of Islamic finance the continued international expansion has increased the demand for talent and expertise in the industry. The establishment of the International Centre for Education in Islamic Finance (INCEIF) in Malaysia in 2006 represents a structured investment in the development of human capital to support this global development of the  2  BIS Review 25/2008  Islamic financial services industry. The programmes are for practitioners and graduate students. In addition, it is envisioned that INCEIF will act both as a professional certification body as well as an education centre for post-graduate programmes in Islamic finance. With the firm commitment to build human capital, the challenge is to formulate the appropriate strategies and mobilise the resources necessary to produce results that will enhance the intellectual capital of the industry. This will require the combined efforts of internal strategies within banking institutions, that involves a holistic approach that coordinates the strategies for human resource management and development reinforced by strategies for organisational development. This will also involve putting in place the appropriate processes and structures. A total solution will be required. These efforts will also need to be supported by education providers.
2  BIS central bankers’ speeches  Banks with wide regional networks would possess the intimate knowledge of each economy and understands the unique requirements of SMEs. Such banks are well placed to serve and harness SMEs’ capability to participate more meaningfully in the region’s production networks. For ASEAN financial institutions, the prospect of regional financial integration will also serve to raise industry standards across the region. This includes enhancing the breadth and quality of financial products and services as a result of more efficient markets and the transfer of knowledge and technology. Financial institutions will also need to meet higher standards in how they manage risk and govern their operations. To some extent, this will be driven by regulatory efforts to elevate prudential and business conduct standards – a point which I will return to in a few moments. But aside from regulation, greater economies of scale and scope will also make it more feasible for financial institutions to invest in talent and more advanced technology and systems, to support business development and risk management. These benefits accrue not only to those individual financial institutions which are regionally oriented, but also more broadly to national financial systems. Greater market integration can contribute to the deepening of domestic financial markets which is important to encourage the more efficient allocation of capital and dispersion of risk more broadly, thereby strengthening the economy and financial system against external shocks.

I will talk about where we are in this process and some of the priorities for policy frameworks as well as for the management of risks by financial institutions as we move forward. This, I hope, will provide useful inputs for your deliberation and discussion in this conference. The case for greater financial integration ASEAN is home to more than 600 million people and if considered as a single entity, would represent the sixth largest economy in the world with a combined GDP of USD2.5 trillion. According to the OECD, the region is projected to sustain an average annual growth of 5.6%  BIS central bankers’ speeches  1  over the next four years and is expected to be the fourth largest trading bloc by 2050. Concurrently, the standards of living among the general populace will continue to improve. Household purchasing power has risen significantly over the last decade, transforming the region into a thriving hub of consumer demand. The size of ASEAN’s consuming class is expected to double from 81 million to 163 million by 2030. By 2020, Asia is estimated to account for more than half of the total global middle class population, with ASEAN representing more than USD2 trillion of additional consumption within the region. Also, as the sources of economic growth become increasingly domestic-based, this enables many economies to diversify their sources of growth. An important development is the significant increase in intra-regional trade.
This makes it necessary for the internal auditor to put him on a continuous learning path so that he could update himself of the new developments in banking as well as his own field. High tech and associated risks In modern banking, the internal auditor has been challenged by a new dimension of business process development in banks. This has basically arisen from the extensive employment of advanced technology, namely, information and communication technology, in banks and the consequential business process outsourcing that has sprung up throughout the world as an efficient cost-cutter for banking firms. The second would not have been possible, had the first had not taken place. With regard to the employment of high-tech in business processing, banks have been the pioneers in the game. With the rapid advancements that took place from around early 1960s, banks successfully resorted to advanced ICT so as to cut costs, have a wider customer outreach, supply a wide range of financial products and out-beat their less tech-savvy rivals. This resulted in a tremendous growth in banking business in the subsequent decades. The very same development has now paved the way for a further quantum leap type of business expansion in the form of business process outsourcing. Both have been beneficial to banks. Yet, they have brought new types of risks to banks as well. 2  BIS Review 143/2007  Internal auditor as the principal risk manager The internal auditor of a bank is the principal risk management officer as well.

Since banks are highly leveraged institutions, they also face different types of risks which other businesses do not normally face. These risks are numerous and usually range from operational risks to fraud risks to liquidity risks to reputation risks and so on. These risks, unless properly managed, are often fatal to a bank. It is, therefore, necessary that a bank should be adequately prepared to successfully mitigate or avoid these risks. The failure to do so will lead the bank to closure of business. A bank which operates well by any standard may soon find itself boggled with a serious liquidity issue arising from some external shock. If it is unable to raise funds quickly to meet liquidity, it will face a general bank-run forcing it to plead for assistance from other banks, authorities etc. The recent liquidity crunch due to the sub-prime issue is a case in point. It had been reported that one such bank that had faced this liquidity crunch severely had boasted of itself in August that it was indeed a well-run robust bank. To its much embarrassment, just one month later, it had to swallow its pride when it had to plead with authorities for assistance. This points to the fact that the internal auditor has to develop risk assessment and mitigation systems in a bank and take effective measures to give advance warning in the event of an impending risk crisis.
In the first place, let me tell you that it is very information-intensive. It requires a lot of detail on how a bank’s business is structured and run. And that information needs to be available at an early stage. Amongst many things, it includes details of netting and derivative contracts, and I am struck that, in the US, the FDIC now requires troubled banks to demonstrate that they could report each day the relevant details of derivative portfolios. The Bank of England plans to consider whether or not something like that might be warranted in the UK. More generally, the UK FSA has said that the authorities will need to be assured that firms are able to provide the necessary data to assess resolution options and to execute the authorities’ chosen strategy. But it is not just the resolution authority which needs lots of information. Potential bidders for all or parts of an ailing bank do too – of the kind typically offered to bidders in a “friendly” M&A transaction. Banks probably need routinely to maintain such “Data Rooms” as part of their contingency plans – something which the FSA is examining. As will be abundantly clear from this brief review, the “recovery and resolution plan” enterprise requires the regulators to work closely with the resolution authorities, and with central banks as liquidity providers.

The first is the entanglements and conflicts that can exist between home and host insolvency and resolution laws. There is, for example, a first-order difference between, on the one hand, countries whose regime effectively permits a de facto ring-fencing of locally domiciled assets for local depositors and, on the other hand, those that treat liquidation as a joined-up, global exercise, with all unencumbered assets shared pro rata across senior unsecured creditors. These issues are not new. They were highlighted nearly twenty years ago by the closure of BCCI’s operations around the world. 8 Subsequently, in Europe, insolvency law for banks was improved through the Credit Institutions Reorganisation and Winding-Up Directive. There is a single-entity insolvency regime for any bank incorporated in the EEA, applying to the parent bank and also to all its branches throughout the EEA. We also have, in the Settlement Finality Directive, a sound legal basis for the integrity of wholesale payments transfers in the event of a default, without which the effects of failure could be truly devastating. And in the Financial Collateral Directive, we have an assurance that national insolvency or reorganisation measures cannot be applied to prevent or delay counterparties of a failed institution from exercising their rights to close out, net and/or enforce their security interests  6  Financial Services Authority Turner Review Conference Discussion Paper, “A regulatory response to the global banking crisis: systemically important banks and assessing the cumulative impact”, FSA DP 09/4. 7  King Mervyn A.
3  New currencies have sometimes been introduced by executive decision and in an orderly way. The most obvious example is the euro. But when currency substitution has occurred naturally it’s almost always done so only after the incumbent currency has been debauched by hyperinflation. 4  Walport (2016). 5  Autonomous Research (2016). BIS central bankers’ speeches  3  Central bank digital currency: who can bank at the central bank? What, then, of the exchange of money, the particular asset for which the distributed ledger technology was originally conceived? Well that too has its own layers. Broadly speaking, at least for a given currency, there are two: commercial banks and the central bank. As we saw in Chart 1, most of what you and I consider money is held as liquid claims on commercial banks, i.e. deposits. Most transactions in the economy involve transfers of these claims. That’s obviously a straightforward matter if the two parties to the transaction use the same bank. When there are different banks involved – and that’s going to be true most of the time – there needs to be a means by which one can transfer money to the other. This is done using their deposits at the central bank – so-called “reserves”6. That’s why the central bank is sometimes called “the banker’s bank”, and why reserves are often described as “the ultimate settlement asset”.

By contrast, the central bank essentially holds nothing but liquid assets – largely government securities (Chart 49). Shifting deposits away from commercial banks, and towards the central bank, would therefore make for a “narrower” banking system – a “narrow” bank being one whose assets are as liquid as its liabilities. In principle, it would also make for a safer one. Backed by liquid assets, rather than risky lending, deposits would become inherently more secure. They wouldn’t be vulnerable to “runs” and we would no longer need to insure them. 8  Nor is it a live issue for the Bank. As the Governor recently said to the House of Commons’ Treasury Committee, “May I…be absolutely clear: there are no plans to abolish cash at the Bank of England”. 9  The Bank of England’s balance sheet has obviously grown following QE. Those operations have been conducted via the Asset Purchase Facility (APF), which is not directly on the Bank’s balance sheet – strictly speaking, the blue bar in Chart 4 is not direct holdings of gilts but a loan from the Bank to the APF. But the APF itself holds only gilts and, even before QE, the vast majority of assets on the Bank’s balance sheet were government securities. BIS central bankers’ speeches  5  The case for narrow banks has a long and distinguished pedigree. The classical economists Adam Smith and David Ricardo favoured such a system.
In some cases these might amount to tweaks to avoid unintended consequences; in other cases they will be in response to further evolution in the market itself. And although crystal ball gazing is always a perilous exercise, if you take the agenda for this conference as a guide, then one area likely to remain in focus in coming years is transparency. 5  http://www.globalfxc.org/consultative_process.htm 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  On the one hand the demand for market data will only continue to rise – for example, as end users demand transaction cost analysis tools and analytics to measure the quality of their execution and to predict the optimal time to execute trades. But on the other hand, growing market complexity and greater internalisation of flows tend naturally to reduce the ease with which such data can be accessed. So it’s not hard to imagine that post-trade transparency as one of the areas where further guidance may eventually be needed. Securing success  So far I have focussed on activities: encouraging firms to commit to the Code, investing to ensure it continues to provide up-to-date guidance. Ultimately though, the success of the Code will be judged on outcomes. The aim is to improve market practice and rebuild trust in the FX market – that is what the BIS Governors will be looking at when they come to review progress in three years’ time. Those outcomes are difficult to measure.

The work which I am presenting to you today is divided into three sections. The first tells the history of the SNB over the first seventy-five years of its existence. As the previous commemorative publications have already dealt in detail with this period, it was no longer necessary to recount all the events again. We thought that it would be more interesting to take a fresh and critical look at certain episodes from a historical perspective. This is why we called upon the services of three distinguished economists and historians, asking them to explore this period, and leaving them free to choose the salient points of their analysis. Michael Bordo of Rutgers University and Harold James of Princeton University took a detailed look into the first half-century of the SNB, in other words, from its Jean-Pierre Roth SNB founding in 1907 to the end of the Second World War. An exciting yet troubled time, which included the surge in inflation that came in the aftermath of the First World War, the laborious return to the gold standard, the 1936 devaluation, and the SNB’s activities during the Second World War. Peter Bernholz of the University of Basel is the author of the second chapter within this first part. He devoted himself to the period from 1945 to the early 1980s, including the return to convertibility, the Bretton Woods period, the transition to flexible exchange rates and initial experiences with an autonomous monetary policy.
Background and current situation of the Financial Education Plan The gestation and promotion of financial education started in 2008 with a project initiated by the National Securities Market Commission and the Banco de España, joined subsequently by the Ministry of Economic Affairs and Competitiveness. After its renewal in June 2013, a plan of activities was drawn up for the period 2013-2017, demonstrating a clear intention of continuity. The plan addresses two closely related aspects: the assessment and measurement of the financial literacy of young people and of adults. Activities in the education system Financial literacy consists of knowledge and skills that enable individuals to take informed decisions. One indication of the level of competence relates to young people (15-16 years old), and was obtained in 2012 within the framework of the PISA study of financial literacy. From this test, which reflects skills related to the use of means of payment and the understanding of risk, a number of conclusions were drawn, two of which I wish to highlight:  3/5     In every country for which information is available, the financial literacy of the youngest generation is not significantly better than that of the rest of the population. Spain is the country with the lowest proportion of students who receive some basic financial education at school. With the aim of promoting financial education in schools, the National Securities Market Commission and the Banco de España signed a collaboration agreement with the Ministry of Education in September 2009 to implement the Financial Education Plan.

This study, which we expect to be completed by the end of 2017, will include various original aspects to address the special characteristics of the Spanish case. First, educational skills are decentralised. Given the nature of financial competence, which varies significantly according to the level of education of the individual concerned, the project will use representative samples of the different levels in the various regions. Second, the financial knowledge of each individual may not reflect that of the persons who actually take household decisions. For example, in Spain, important financial decisions regarding house purchase and mortgage borrowing are taken at different ages than they are in other European countries, as a high proportion of young people live with their parents. As a result, information is sometimes needed on the financial competence of those members of the household who take saving and borrowing decisions affecting the whole household. 4/5  Apart from its financial knowledge, we have little evidence regarding the general economic knowledge of the Spanish population. Given this situation, questions have been included in the financial competence survey that aim to measure, inter-alia, knowledge of certain key concepts, such as inflation and money. In 2018 we will have the results of the survey, which will enable us to analyse on a sound basis the financial knowledge of the adult population in Spain and to identify those areas on which the Financial Education Plan needs to focus. Future activities will be based on this information.
However, these solutions are costly for end users and, at the global level, we are far from having a network (or set of interconnected networks) that would support quick and cheap transfers of funds. Second, and in close relation to the previous point, the DLT could help remedy the current limits of the existing wholesale market infrastructures. Those wholesale infrastructures also have various shortcomings. Since RTGS are not interoperable, correspondent banking is often the only solution to transfer fiat money across borders. However, correspondent banking is costly, and the perimeter of the AML/CTF and KYC checks is in some cases uncertain for the counterparties of a payment order. Furthermore, for security reasons, the access to payment systems is limited to a certain type of entities (mainly credit institutions, investment firms, ancillary systems, etc.). Finally, cross-border payments lack traceability. The DLT could also help improve current aspects of wholesale clearing and settlement mechanisms and facilitate in particular gross and simultaneous Delivery-versus-Payment processes, cross currency settlements and resilience and recovery from operational incidents. If the issues at stake are not the same in developed as in developing countries, the objectives of crypto-assets, and in particular stablecoins, are the same everywhere. They seek to shortcut central authorities and more generally financial intermediaries. However, they bring their own problems.

Regarding the first wave of crypto-assets which have been brought to the market, they are not a claim on any natural or legal entity, they do not have a guaranteed fixed exchange rate with the currency issued by the central bank and they rely extensively for their circulation on blockchain, a distributed ledger technology system using cryptographic techniques. A second wave might develop in the form of « stablecoin » with a potentially global reach, some of which sponsored by large technology or financial firms, whose distinctive feature, beyond their potentially large size and reach, is that they seek to stabilize their value by linking it to an asset or a pool of assets. What are the specific benefits of such blockchain-based initiatives? First, the blockchain technology and more broadly the DLT could help answer market’s needs and demands. There is in particular a strong demand for quick and safe cross-border payment solutions, available 24h/24, enabling smooth exchanges. There are a number of local instant payment solutions already in place in a number of countries in particular in Europe, available 24/7, settling retail payment orders up to 15 000 euros in less than 15 seconds. A i ns t 2/6  BIS central bankers' speeches  certain number of initiatives follow the European Payment Council SCTi ns t scheme. The Eurosystem has even launched its own service, under the name of TIPS to help ensure a panEuropean reach.