samchain/econo-pairs-v1 huggingface dataset:
6  BIS central bankers’ speeches  Historical examples of sharp intraday changes in U.S interest rates have tended to be associated with important economic events, such as major monetary policy announcements. There does not yet appear to be consensus by market participants around a single cause of the volatility on October 15. To be sure, a number of factors likely contributed, including concerns about the global macroeconomic outlook and the unwinding of positions by leveraged investors. Indeed, such concerns probably help explain why a modest surprise in U.S. retail sales could trigger such a strong reaction around 8:30. Publically available positioning data in the futures market does indicate that investors who take positions for purposes other than hedging had accumulated a large base of short positions in shorter-term interest rate futures contracts over the preceding months, and that that aggregate position unwound sharply in the weeks around October 15. Yet these factors are less convincing as explanations of the round-trip in yields witnessed more than an hour after the data release. Activity in this event window also appears unconnected to any other piece of incoming information. As a result, many market participants and members of the official sector have questioned whether recent changes in the structure of the Treasury market can help explain the move, and some have focused on the potential role of electronic and automated trading.

But the US risk capital market is, of course, considerably more developed and in Sweden the supply of risk capital is associated with specific problems, for instance as regards taxation, that ought to be looked into. The labour market is naturally a major factor, too. Besides being suitably competent, labour must be prepared to transfer rapidly to the sectors and jobs that arise as the new economy takes hold. Even with a good level of education in general and a rising number of university graduates, the supply of people with spearhead competence poses problems both because the output is too small and to some extent because qualified persons move elsewhere. One explanation is the lower return on tertiary education in Sweden compared with, for example, the United States. Compared with their American colleagues, moreover, relatively fewer graduates in Sweden start new businesses and exploit new commercial ideas. Neither does wage formation in Sweden function so well in general that the available job vacancies are filled without friction; in the United States this has played a central part in maintaining high growth and rising employment without strong upward pressure on wages. 3.3 Finally, as regards macroeconomic policy, the Swedish and American economies now have a good deal in common in that in both cases inflation is low. But it is only about five years ago that the sustainability of the Swedish economy was rather uncertain.
Tarisa Watanagase: The changing financial environment and implications for central banks Welcome address by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the 27th SEANZA Governors’ Symposium, Bangkok, 20 September 2008. *  *  *  Fellow Governors, Distinguished Guests, Ladies and Gentlemen, It is my privilege to extend a warm welcome to all SEANZA Governors and distinguished participants to the 27th Governors’ Symposium and the Central Banking Course. At the outset, I would like to take this opportunity to express my sincere gratitude to Mr. Jaime Caruana, the former Governor of the Bank of Spain, and currently the Counsellor and Director of the Monetary and Capital Markets Department of the IMF, who flew half way around the world to be with us today to share his views and enrich us with his experiences from a global perspective. This year’s theme of the Governors’ Symposium is “The Changing Financial Environment and Implications for Central Banks”. I believe you would all agree that the discussions on this topic couldn’t have come at a more appropriate time, given the current financial market turbulence we are encountering today. Right now, all eyes are focusing on what solution central banks will come up with to resolve the current global crisis.

It is also a pledge by the industry to provide the required support by allocating the needed resources in our endeavour to create and promote an internationally recognised Islamic finance professional body. Industry recognition to the bearers of CIIF qualification as highly qualified and competent professionals will give an added boost to the entity as it embarks on this important journey. Although CIFF is only being officially launched today, the entity has completed two guiding principles and two guidelines which will be launched today. These issuances will set the minimum requirements on the pathway of becoming Chartered Professionals and for financial institutions to become accredited institutions that would enable the training of staff as Islamic finance professionals. More is in the pipeline and I am confident that CIIF is committed towards developing the highest quality of guiding principles and guidelines that are in line with the current and future developments. Another bold action that we shall embark on is the transformation of The Association of Shariah Advisors in Islamic Finance (ASAS) to become the leading professional body for Shariah advisors. This transformation would further complete the Islamic finance service providers ecosystem. This is envisioned in the Financial Sector Blueprint, with standards to be set for professional programmes, qualifications and continuous professional education on Shariah. I would like to congratulate the Board and management of CIIF on its official launch. I am confident that CIIF can contribute towards higher professionalism for the Islamic financial services industry.
Svein Gjedrem: Monetary policy in an open economy Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the Confederation of Higher Education Unions, Kongsberg, 13 November 2002. The address is based on the assessments presented at Norges Bank's press conference following the Executive Board's monetary policy meeting on 30 October and on previous speeches. Please note that the text below may differ slightly from the actual presentation. Charts in pdf for this speech can be found on Norges Bank’s website. *  *  *  The long-term task of monetary policy is to provide the economy with what we call a nominal anchor, in other words low and stable inflation. Price stability is the best contribution monetary policy can make to economic growth and prosperity. Low and stable inflation is also Norges Bank’s operational objective. We have had four periods of very high inflation over the past 100 years; during the two world wars, the Korean War and a 15-year period from the first half of the 1970s to the second half of the 1980s. In Norway, very high inflation is a wartime phenomenon and a 1970s and 1980s phenomenon. The fourth period of high inflation was unlike the three previous periods. In the 1970s and 1980s, inflation accelerated gradually. It was not as high as during the two world wars, but it took a long time for the level to fall. The fixed exchange rate system of the post-war period, the Bretton Woods system, broke down in 1971.

This is particularly evident in foreign exchange and financial markets, where exchange and interest rates are influenced when participants shift large amounts partly on the basis of their expectations concerning economic policy and economic developments. The issues that receive attention, and that govern movements in exchange and interest rates, change. Financial and foreign exchange markets also have an inherent tendency to exaggerate - to be too optimistic or too pessimistic. When Norwegian households, perhaps with exuberant expectations of future income growth, encounter eager sales and marketing departments in banks, the result may easily be excessive borrowing. Equity markets have developed bubbles that burst. The exchange rate can be affected by short-term shifts in investments. At these times, it is important that the authorities conduct a policy that does not amplify this tendency, but rather tames the financial market. The authorities must not sow doubt; on the contrary, they must act in a long-term and predictable manner. The authorities must be credible and inspire confidence. There must be consistency between the stated objectives of economic policy and what is actually done to achieve them. This is the most important reason why the implementation of monetary policy is delegated to the central bank. In Norway, it was decided to delegate the responsibility for decisions to Norges Bank in 1986. In all the countries that normally figure in our comparisons, monetary policy has now been delegated to the central bank.
On the other hand, growth in advanced economies was weak and euro area GDP fell towards the end of the year. Central banks abroad announced that the key rates would be kept at a low level for a prolonged period. At the monetary policy meeting in March, Norges Bank underlined that weak growth prospects abroad and the strong krone were keeping inflation at a low level and curbing activity in some sectors. The key rate was reduced to 1.5 percent at that meeting. Europe is now in a downturn. Many countries are struggling with large deficits and mounting government debt. Structural reforms are being implemented, pension schemes are being tightened and tax systems are under review. At the same time, tighter credit standards and increased capital requirements will limit the supply of bank credit. In addition, a number of countries must restore competitiveness after a period of high cost growth prior to the financial crisis. In the short run, the tightening measures pull down activity and push up unemployment. Central banks in other countries are using strong measures to prop up activity and inflation. As shown in the chart, key rates among many of our trading partners are close to zero and are expected to remain low for a long period. In the US, UK and Japan the central banks have made large-scale government bond purchases in order to push down long-term interest rates. The European Central Bank (ECB) has also stretched itself, for example by providing long-term loans to banks.

This means that the interest rate should be set so that monetary policy mitigates the risk of a buildup of financial imbalances. Normally, the key policy rate cannot achieve several objectives simultaneously. In the case of conflicting objectives, the choice of interest rate path will involve a trade-off between different considerations. If monetary policy only took into account the low level of inflation, the key policy rate would be rapidly reduced and kept close to zero for a good while. Inflation might then pick up faster, partly as a result of a weaker krone. In the light of the trade-off against other considerations, however, the Bank does not want to accelerate the pace of inflation. The result would be a pronounced impact on output and employment and increased risk of a buildup of financial  BIS central bankers’ speeches  5  imbalances. A prolonged period of low interest rates may increase the risk that debt and asset prices will be driven up to levels that are unsustainable over time. When weight is also given to the two other criteria, the interest rate path therefore becomes higher even though the level of the key policy rate is low from a historical perspective. The Norwegian economy is well poised to face new shocks and challenges. While many of our trading partners are struggling with low growth, high unemployment and mounting government debt, the Norwegian economy still features buoyant activity, low unemployment and government budget surpluses.
The authors use data on 70 large internationally active banks and separate them into two groups: those with low and high concerns about MDAs due to different preferences over stable dividends. [10] By comparing how these two groups of banks behaved when MDAs were introduced and during the Covid-19 stress, they explore the effect of automatic distribution restrictions on banks’ capital surpluses to regulatory requirements and their willingness to lend. [11] They find that at the time MDAs were introduced, banks more concerned about distribution restrictions and with low capital surpluses above regulatory buffers worked to build greater capital surpluses than their peers. [12] MDA policy acted as intended, by incentivising banks to build and maintain their loss absorbency in normal times hence helping the banking system to become stronger against shocks. A less comfortable message comes, however, from the analysis of bank behaviour during the Covid-19 period. Bank boards are concerned with investor reaction in response to a dividend cut. But they are even more concerned with investor reaction in response to an AT1 coupon cut. One reason for this is the different claims on banks’ net assets that different investors have. Shareholders maintain their claim on banks’ future profits regardless of whether they receive a dividend in any particular period. This is not the case for AT1 holders – if they lose a coupon this period, they will not recover it thereafter. It’s instructive to note that regulators that restricted distributions during the Covid-19 crisis fell short of restricting AT1 coupons.

For example, systemic firms subject to systemic leverage buffers in the UK can use their buffers with no distribution consequences. 7. The analysis suggests that in 2007, the UK CCyB rate would have needed to be set in the range of 3.5%–5% for the UK banking system to have had sufficiently large usable capital buffers to absorb losses that followed the credit boom without severely restricting lending to the real economy. A complementary analysis based on historical data on bank losses conditioned on elevated risks environment suggested a UK CCyB rate of around 5% could be warranted in these circumstances. See Bank of England Financial Stability Report ‘Financial Policy Committee Record and stress testing results’, December 2019 8. The last three shocks that hit the UK economy – the Brexit referendum, the Covid-19 pandemic and the RussianUkrainian war – did not originate in the financial system and were not related to the credit and financial cycle. 9. BCBS (2021), ‘Early lessons from the Covid-19 pandemic on the Basel reforms’  , Implementation report. 10. A bank with a preference for stable dividends is expected to be more concerned about a policy that reduces their control over those distributions and introduces volatility in pay-out profiles through the triggering of automatic restrictions. Such a bank would have incentives to reduce the likelihood of triggering these restrictions by building material voluntary capital surpluses over their regulatory buffers, potentially by constraining lending. 11.
Although this process of financial market normalization is part of a necessary correction, it is neither easy nor prudent to express what this correction will finally be like. What can be said with some certainty, however, is that volatility will be here for a while and will be associated to lost or reduced access to financing from non-banking financial institutions or even particular banks. The longer and deeper this adjustment, the larger the effects on financial markets and the world economy overall. The most likely final effects will be increased risk premiums (an inevitable or even healthy correction), a deeper and more prolonged adjustment in the US housing market, and some less economic growth in the US and in the world. Evidently, a deepening of these problems could be more hurtful for global growth and the commodity prices. This adjustment comes on after a long period of very expansionary monetary policies in industrial economies that had begun a normalization process. But still, one should not overlook the fact that this correction finds the world economy close to completing the best five-year growth period since the early seventies, with large commercial banks in a very solid position, enterprises with good profits and the main industrial economies with flexible exchange rate regimes, controlled inflation and central banks that have gained great credibility for their commitment to price stability.

(2) Considers implicit volatility on option from US S&P 500 index. Sources: Bloomberg and JP Morgan Chase. 4  BIS Review 97/2007  However, even if this is a normalization process, the dynamics, deepness and extension of market adjustment are difficult to foresee. As with earlier episodes of sharp increases in risk premiums and market volatility, some market segments and specific agents have found themselves unexpectedly in weaker financial positions, which generate tensions and doubts about particular entities’ risk vis-à-vis their counterparties. In this sense, beyond the slow recovery of the past week, the risk remains being a worsening of the international financial scenario if this correction deepens, with more severe implications on the functioning of the principal markets and global financial intermediaries and, ultimately, on world economic activity. Although this correction was triggered by the deterioration of sub-prime mortgage debtors’ payment capacity in the US, what is surprising is that the exposure to such deterioration has spread to financial entities elsewhere, causing tension in the trade securities market and even in the global interbank market. These mortgages were originated by companies specializing in mortgage loans; then they were sold to institutions that packed them as bonds collateralized by payment flows associated to these mortgages, to higher quality mortgages and to other credits. These bonds are known as ABS. With the increase in sub-prime mortgage delinquency rates, widespread uncertainty arose regarding the value of the ABSs because of lack of clear information on their content of sub-prime mortgage credits and the increase in payment delays.
But it explains the bold and decisive steps taken by European governments, together with the International Monetary Fund (IMF), to begin to address market concerns. It also explains why after a rapid deterioration of public finances in Europe, collective monitoring of fiscal discipline and peer pressure experience a revival. Arguably, more importantly, several countries have embarked on a path that entails much needed structural reforms. This public debt crisis is multi-layered. It is clearly a crisis of market confidence and as such a liquidity crisis. The trigger was a classic fiscal crisis combined with severe competitiveness problems in the periphery of the EU. However, it is also an institutional crisis. The institutional mechanism to ensure fiscal discipline inside the Eurosystem was clearly insufficient. Obviously, part of the fiscal imbalances and the resulting build-up in public debt were directly related to the financial crisis and its aftermath. One part of the fiscal expansion can be explained by the direct fiscal effects of the measures taken to stabilize the financial system. Another part is explained by the drop in revenues and increases in social benefit payments in response to the post-crisis recession. According to recent IMF calculations, this accounts for about fifty percent of the increase in debt levels globally since the outbreak of the crisis. The other roughly fifty percent are unrelated to the financial crisis and its effects on the broader economy. 3 To put it differently, some countries had simply lived beyond their means well before the financial crisis erupted in 2007.

In other ways, though, the aftermath of the attacks on the US has highlighted the robustness of the international financial system. Although several firms suffered grievous losses of staff and destruction of equipment, overall the market place was back up and functioning remarkably quickly. I think there were a number of reasons for this. In the first place the Federal Reserve System did an excellent job in making the necessary liquidity available to markets, both in the United States and in other financial centres through swap arrangements with the ECB, the Bank of England and other central banks. Second, the authorities and systems providers were able to keep the main payment systems (Fedwire and Chips) open during and after the evening of September 11th itself. This was a significant achievement, enabling the huge daily volume of dollar payments to be made, including of course substantial dollar flows from the foreign exchange and other dollar markets based in London. Equally impressive was that most of the big firms affected were using their back-up contingency sites very quickly, allowing them to continue in business with a minimum of obvious disruption. Some of those contingency sites were in New Jersey, others put increased volumes through their London office. In New York itself, connectivity of telephone traffic was initially badly affected because of the routing of so much traffic through connections located downtown. But this problem was short lived.
Eddie Yue: Hong Kong as an international financial center – the China factor Introductory remarks by Mr Eddie Yue, Deputy Chief Executive of the Hong Kong Monetary Authority, at the “Hong Kong: China’s Global Financial Centre” conference, New York, 1 March 2011. *  *  *  Ladies and gentlemen, It’s my great pleasure to be here today. No doubt I fully agree with Ms Leung and Mr Wheatley as they have rightly set out the key strengths of Hong Kong in serving as a financial hub in Asia. But I would also like to go deeper into the matter and focus on one very important factor, which may explain why more and more asset managers have been looking to set up their regional operations in Hong Kong. And this is the China factor – a unique competitive advantage of Hong Kong that is difficult for other financial centers to replicate. The China factor is growing in prominence as China continues with its path of very impressive growth: over the past three decades, Mainland China’s GDP has registered an amazing 29-fold increase, from around $ billion to more than $ trillion in 2010, with an average annual growth rate of 10%. Today, Mainland China is already the second largest economy in the world and the single biggest contributor to the world’s economic expansion, creating nearly one-fifth of the world’s newly generated economic activities. As an international financial center of China, Hong Kong stands to benefit the most from the country’s phenomenal development.

Even over the next few years, while there are significant downside risks relating to the fiscal cliff and the eurozone, it is possible that the recovery could turn out stronger than expected. The underlying process of balance sheet repair is considerably advanced, housing is recovering and, as that occurs, our newly recalibrated monetary policy could gain additional traction. Thus, if uncertainties about the U.S. fiscal path and the future of the eurozone were resolved in a constructive manner, growth could pick up more vigorously than anticipated. 5  8  http://www.people-press.org/2011/11/03/section-6-generations-and-entitlements/  BIS central bankers’ speeches  This would be a wonderful outcome. The September FOMC statement noted: the Committee expects “that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the recovery strengthens”. Consistent with this, if we were to see some good news on growth I would not expect us to respond in a hasty manner. Only as we became confident that the recovery was securely established, would I expect our monetary policy stance to evolve to ensure that it remained appropriate to achievement of our objective: maximum sustainable employment in the context of price stability. Thank you for your kind attention. I would welcome a few questions.