samchain/econo-pairs-v1 huggingface dataset:
The key here is to ensure that just because something is packaged in shiny technology we don’t somehow treat the risks it poses differently. Private Money: the basics Before I turn to stablecoins I want to spend a minute on one of the reasons why the idea of private money feels innovative and flashy. Even though most money we use every day is already private money, the vast majority of us don’t think about it. Luckily, regulation means we don’t have to. Popular culture often simplifies our ideas around what form our money takes and can reinforce the idea that banks are simply storing our sterling issued by the central bank for us, and that when we pay electronically, what is being moved is central bank-issued money. For example, remember those iconic scenes from ‘Mary Poppins and ‘It’s a Wonderful Life’ which feature people demanding that banks give them back their money. But in reality, when you tap your debit card in a shop or pay your friend back via a bank transfer, the money you are paying with isn’t sterling issued by the Bank of England with a promise to pay the bearer – it’s a bank deposit. Those are just a record of how much a private company – here, the commercial bank – owes its customers. Think of it as an IOU from the bank.

Stablecoins and other new forms of private non-bank money might be the next big thing. Or they might be a flash in the pan. I don’t have a bet here – I am a central banker not a venture capitalist. My job, as a central banker and regulator – in all of this – is to ensure that financial innovations, including new forms of digital money, do not impair the Bank of England’s ability to maintain monetary and financial stability. This shouldn’t be confused with preserving the status quo. Financial stability is n’t about protecting incumbent banks or other existing firms from competition. Instead financial stability seeks to ensure that people and businesses can rely on essential financial services – like the ability to make a payment or the ability to get a loan – in bad times as well as good. A regulatory framework Earlier this week, the Bank of England published a Discussion Paper that examines the implications of stablecoins for its financial and monetary stability mandate. In it we present an illustrative scenario to examine the implications of the emergence of stablecoins and other new forms of digital money. The discussion paper models what would happen if a large number of households and businesses moved their deposits from banks and into a stablecoin or Central Bank Digital Currency (CBDC). Contrary to some press headlines, even such a dramatic shift does not inherently constitute a financial stability risk as long as it happens in an orderly manner.
Moreover, in its latest review of the Lisbon strategy, the European Commission underlined research and development as a shortcoming, but also pointed to insufficient confidence in social security systems and a lack of efficient markets in primarily transport, energy and financial services. Here I would like to focus on three areas that I believe are important for both increasing potential growth and improving the competitiveness and dynamism of the European economies. The first is to consolidate public pension systems so that they can withstand the demands of an ageing population. The second is to overhaul the structure of tax and benefit systems in order to minimise their distortional effects on the labour supply. Last, but not least, we need to reform the functioning of the financial markets so as to increase efficiency and thereby also the willingness to invest. The economic crisis gave Sweden a better starting position With regard to Sweden, much has already happened to improve the functioning of the Swedish economy and increase potential growth. This has helped Sweden to come further than many other euro area countries in terms of living up to the Lisbon strategy. However, some of this has been due to economic developments as opposed to a political will to change. For example, the economic crisis at the beginning of the 1990s resulted in the winding up of low-productivity operations, thus increasing labour productivity. During the same period, Swedish economic policy was changed with a view to laying the foundations for longer-term, sustainable economic growth.

Changes in childcare fees, for instance, have also lessened the distortional effects for people who receive increases in income, which is also positive for the labour supply. But Sweden is not alone in introducing reforms in this field. As regards low-income groups several European countries are now making a concerted effort to reduce marginal taxes and change benefit systems with a view to increasing the willingness to work. Germany has decided to lower marginal taxes for low-income groups to 15 per cent, and for high-income groups marginal taxes are to be lowered to below 50 per cent. At the same time, more stringent rules are being introduced for unemployment insurance. Similar tax reforms have been implemented or will soon be implemented in France, Spain, the Netherlands and Belgium. The risk is therefore that the gap between Swedish income taxes and those on the Continent will widen over the coming years. The financial markets an important reform area An often overlooked area when it comes to structural reforms is the financial markets. An efficient financial system can raise potential growth markedly. This area has also become increasingly important for long-term growth as technological advances have made it possible to quickly obtain information about global developments and to rapidly transfer capital between different countries. Countries that are able to attract capital can thereby attain financing at a lower cost, which also boosts investment in these countries.
This is the key element of our duty, the feature of a good banker. By being active in AML, we are simply doing our job. Any negligence on this means we are not up to the requirements of our job. We need to emphasize that the key element in the process, is the strong commitment to understand and implement it. It is very important for such commitment to come from the highest management structures of the bank. If such commitment is missing, this will be immediately shown at the structures of the bank that are directly involved in the AML process, whose functioning will be negligible and full of formalism. Within the institution, this commitment should be shown: in the preparation and approval of the internal procedures on AML (including those of knowing the client), in setting up the proper entities and appointing the responsible persons (on monitoring the AML implementation process) with the proper professional and hierarchical qualities, in rightly defining their rights and responsibilities, in giving them moral and material support, in providing qualitative and continuous training for the staff, especially for those that have direct contact with the client and analyse its ML risk profile and in keeping up a positive pressure in the institution for such process to be implemented and be continuously functioning. In one word, the climate that should exist within the institution for such issue (but not only) should favour in any instance the responsible actions being taken from the bank staff on AML.

I am aiming at the need for the existence in any bank, of a real concern and of a positive pressure to make sure that those structures and procedures are applied to their real meaning, throughout the institution and down to any single employee. At the same time, I mean the real willingness of the bank for a careful and proactive role in the inter-institutional relationships, with the aim of leaving away the formalism and qualitatively improving the process of AML. I will be focusing in more details on these issues, as I proceed. Prior to proceeding with more details, allow me to put myself in each of your’s position. I feel I can do this, since I was one of you, as the executive director a commercial bank and head of the Association of banks. We have shared common concerns about the speed and about the quality with which the legal requirements on AML were approved and implemented in practice. I still believe that a law is good when its requirements are applicable in practice and when they represent affordable costs for its subjects. I must say that the existing law on AML, needs to be revised under these considerations. At the same time, we have often discussed about the concern that the way this process is being implemented is endangering to go in the opposite direction to our major objective of reducing the informal economy and bringing down the cash in circulation.
Under the new regulations, a bank will only be able to include debt instruments that can be converted into share capital if the responsible supervisory authority believes that the bank has problems that threaten its survival. 8 Leverage ratio One of the more discussed elements of Basel III is the introduction of a leverage ratio. The aim of this measure is to restrict the banks’ total indebtedness and to set a limit for how large a part of the balance sheet the banks may fund with debts. To comply with the new regulation, the banks must retain capital corresponding to at least three per cent of the value of their total exposures, or assets if you like. In contrast to the minimum capital requirement, the leverage ratio is not a risk-weighted measure. This means that the banks should not take into account to whom or for what they are lending when they calculate their total assets. In addition, most of the items off the balance sheet should be included at their full nominal value. One reason why this new type of measure has been developed is that a number of banks – not least the US investment banks and UBS in Switzerland – experienced major problems when the financial crisis began because of their high level of indebtedness. 8  For a debt instrument to be included as Tier 2 or Tier 1 capital the contract must clearly state that it can be converted into share capital if the responsible supervisory authority finds this necessary.

Investments into global sustainable finance stand at around USD30 trillion to date. Closer to home, the financial sector has been supporting the transition agenda through product offerings and solutions. Several banks are offering financing with preferential rates for green projects e.g., green manufacturing, clean and renewable energy, hybrid vehicles and green-certified properties. The Bank also recently introduced the Low Carbon Transition Facility (LCTF), with RM2 billion in funds to support SMEs in adopting sustainable and low carbon practices. One other aspect that we shouldn’t overlook is the emerging technological innovation that support businesses’ transition efforts. An example is the use of fintech to make transparent businesses’ supply chains, a critical element in informing investors and customers of the sustainability impact of a business. New technologies are also required to assist in the measurement of businesses’ transition journeys, given the relevance of novel forms of climate-related data, which require new methodologies to be translated into financially relevant information. Nevertheless, all these remain at a fraction of the commitment and capital needed to meet our national climate and environmental aspirations. This leaves a clear role – and abundant opportunities – for the private sector to step in and step up, reaping the benefits of supporting sustainability for themselves, their customers and communities. Second, capital is critical in building the next generation of digital infrastructure and business models. Over the past decades, investments and dedicated research have driven the rise of many innovations.
Final remarks on the current juncture We are currently enduring an international financial crisis that has no precedent in recent decades. How the world economic situation will unfold and for how long the recession will last is yet to be seen. Nonetheless, some reflections may be helpful at this point about the abilities of our economy to deal with the turbulences, in a scenario where our inflation rates are still very high and have to be brought down. One feature that stands out in solid economies is that they learn from their mistakes, and hopefully the world will come out of this episode as a strengthened international economy. In our country, we learned the lesson. The financial crisis of 1982 endowed us with a General Banking Act that has been perfected over time, and which establishes a framework that allows the existence of a dynamic banking industry together with good prudential regulation. The excesses of the US banking system could not have happened in Chile. Hence, the realestate bubble driven by fast and unhealthy credit expansion would hardly have formed in our country. In the first place, mortgage loans in Chile are different from those in the United States. There, these loans are issued “without recourse”, which allows the bank only to repossess the mortgaged property, but not other goods belonging to the debtor to recover the loan, as is the case in Chile.

In fact, this strategy is known as the Greenspan put, in reference to interest rate reductions in the aftermaths of severe financial turmoil, such as the stock exchange downfall of 1987, the collapse of LTCM in 1998, or the technological stocks in the early 2000s. 7 In fact, from the standpoint of liquidity provision and potential downward pressures on inflation, a reduction in interest rates is generally recommended. The problem is that this response provides an incentive to adopting more risk-prone behavior, since investors perceive that they will have the put option available later. Therefore, it is advisable to not only provide the liquidity, but also carefully monitor the market’s operation to prevent overexposure to these risks in the future. Indeed it can be argued that bubbles are difficult to identify. For example, Gürkaynak (2005) finds that, for every work identifying a bubble, there is another one finding the opposite. At the same time, it is not so clear how much of a given bubble can be affected by raising the interest rate and the necessary magnitude of the adjustment in order to make any difference, because, by definition, a bubble is determined by “non-fundamental” price movements. Thus, although after seeing the critical situation that developed financial markets have been enduring, a more proactive monetary policy strategy might have been advisable, but it is hard to believe that such a strategy could have averted this crisis by itself.
This is illustrated by the two horizontal lines in Figure 5. Changes in the capital requirement affect developments in the economy. For example, we can imagine that a tightening will reduce the banks’ credit granting and thus slow down demand in the economy. The green line shows the level of the capital requirement the financial supervisory authority considers to be best for each level of the interest rate. The red line correspondingly indicates the combinations of interest rate and level of capital requirement preferred by the central bank. The two authorities’ views of what can be considered an appropriate policy mix in a given situation thus differ. The financial supervisory authority is more concerned over systemic risk than the central bank. This is expressed in that for each level of the interest rate the financial supervisory authority wants a higher capital requirement than the central bank would have set if it had control over both tools. It is likely that the differences in the views of what constitutes a good policy mix are greatest when the interest rate is low, so let the curves in the figure apply to a situation with a low interest rate. I will return to this in a moment. Figure 5. Illustration of the interplay between the central bank and the financial supervisory authority  Let us assume that the interest rate and the capital requirement started off at the blue dot in the figure.

An illustration One can illustrate the complications that may arise in the actual work with the aid of the type of figure I showed earlier, where one marks the average squared deviations, the mean squared gaps, during the forecast period. For a concrete example of a time when the differences were particularly visible, we can study the forecast from September 2008. In addition to the repo rate path in the main scenario, the Riksbank usually also analyses two alternative repo rate paths; one that is higher than the one in the main scenario and one that is lower. The mean squared gaps for different measures of inflation and resource utilisation generated by these three interest rate paths in September 2008 are shown in Figure 2. 4  4  See, for instance, Blinder, A. S. (2007), “Central Banking by Committee: Why and How?” European Journal of Political Economy vol. 23, pp. 106–123. BIS central bankers’ speeches  Figure 2. Mean squared gaps September 2008  Source: The Riksbank Note: Red dots show the main scenario, blue dots show the alternative with a higher repo rate path and yellow dots show the alternative with a lower repo rate path. If inflation is measured in terms of the CPIF, that is, the CPI excluding direct effects of interest rates, and if resource utilisation is measured with a gap calculated on the number of hours worked in the economy, one obtains the three dots up on the left-hand side of the figure.
9  All speeches are available online at www.bankofengland.co.uk/speeches  9  This growing understanding will be crucial if we are to be able to identify and manage risks from this sector as it grows in size and spreads geographically. Greater understanding between national macroprudential authorities and their market regulator counterparts is important. But given the international nature of these markets, and indeed the benefits they can have in diversifying risks across borders, it is increasingly only at the international level that we can really get our arms around the risks and how to mitigate them. Fragmentation This brings me to my final set of risks – the potential risks not from market-based finance but to market-based finance that could arise from fragmentation and a rolling back and national ring-fencing of the global integration that has taken place in these market. Post-crisis, not only was market-based finance important for plugging the gap that banks were leaving, it also proved important for maintaining the flow of financing between countries. Cross-border bank lending fell sharply in 2009 as banks not only stopped lending but actively retrenched. International investment in debt and equity securities was substantially more stable (Chart 4). 19  My concern is of course heavily coloured by Brexit and by the prospect that it raises of fragmentation in European financial services.

However, and this is a point I have made elsewhere, monetary policy is too blunt an instrument for addressing specific risks to financial stability, and it can sometimes cause collateral damage to the rest of the economy if it tries to do so. [10] An integrated policy framework could perhaps shed light on the circumstances under which monetary policy could also serve financial stability objectives, and whether there are benefits to jointly calibrating monetary policy and macroprudential policy, as well as how this calibration should be done. The BIS and IMF have both been undertaking research on these issues. Central bankers have at the same time gained considerable experience in employing an eclectic mix of policy instruments, with varying degrees of success. There is merit in bringing these practical experiences to bear in formulating an integrated policy framework. Conclusion Developing eﬀective policy instruments and using them in a coherent fashion will enhance macroeconomic and macro-financial stability. It will help to make financial globalisation safer, especially for EMEs, at a time when there are growing risks of fragmentation in international economic relationships. Your task is therefore vital. I wish you a fruitful conference ahead. [1] IMF Balance of Payments, IMF International Financial Statistics, MAS calculations. [2] Fratzscher, M., Lo Duca, M. and Straub, R. (2013), “On the international spillovers of US quantitative  easing”, ECB Working Paper No. 1557; Bhattarai, Chatterjee, and Park (2017), “Global Spillover Eﬀects of US Uncertainty”, Fed Reserve Bank of Dallas, Working Paper No.
The bank ratings then started to fall in early 2008 and then plunged to sub-investment grade after the banks had collapsed. The sovereign rating, however, although it fell over the course of 2008, never fell to sub-investment grade with Moody’s and S&P, and it only fell below investment grade with Fitch Ratings after the president sent the so-called Icesave deal to a referendum in January 2010. It is now back to investment grade with all three agencies. It is interesting to see how both ratings and market perceptions evolved around two key dates in September/October 2008, when decisions were taken that could drastically affect sovereign risk. The first date was 29 September, when an announcement was made of the Government’s intention to take a 75% ownership stake in one of the three cross-border banks, an action that should increase sovereign risk. The other date was 6 October, when Parliament passed the so-called Emergency Act, which severed the nexus between the sovereign and the private banks and drastically reduced objective sovereign risk. Both the rating agencies and the market got the sign of the first event right: S&P downgraded the sovereign by one notch and Glitnir by one notch the day after; Fitch downgraded them the next day by two and three notches, respectively; and Iceland’s sovereign CDS spread shot up to almost 600 in the first two days after the announcement, from around just over 300 in the days prior.

The decision is not very popular, but it is necessary to ensure the economic efficiency of OSAGO. At the same time, we are looking for new growth areas together with the market. In particular, this is about developing life and medical insurance. We also had to take supervisory measures. As a recent example licence of a major market participant was restricted for two weeks. Certainly, the licence restriction of such a large player was an outstanding event for the market. As a regulator we realised the importance of such a step, but we consider it necessary for the benefit of consumers to implement all the available measures to restore order and eliminate unlawful practices such as imposing services, non-applying bonus-malus ratio, etc. We have established a consumer right protection service, and we pay special attention to processing claims. We will try to make the process of lodging claims convenient for citizens and will try to respond to claims in an efficient manner. One of our important objectives is to work out a concept of financial literacy. We also consider accessibility of financial services to be an important condition for proper functioning of the financial market. Another field of our concern is the development of the national payment system. In less than a year after the decision was taken, a processing and clearing centre was created and interRussian transactions of international payment systems were transferred there. Currently, we are actively developing our own payment card.