samchain/econo-pairs-v1 huggingface dataset:
The most important result of international efforts aiming at sound financial markets was the approval of modern risk management techniques as a part of regular financial intermediation process. In this context the Basel II, the new capital adequacy framework, is a very important outcome of the action taken in the international arena. Although, the main aim of the original Basel Accord, which was applying institutionalized and international standards to the global financial system, has not changed in the Basel II Accord, the Basel II puts more emphasis on the risk management aspect of the financial intermediation process. It is expected that a sound and resilient risk management in the banking sector would also lead to more efficient risk management in the real sector. Therefore, in this way, as the financial system becomes more stable, less pro-cyclical and reinforced against shocks, more sources will be available for the real sector. However, it should also be considered that healthy and efficient risk management requires more than the three main pillars of the Basel II Accord. A good understanding of the risks that a financial institution might encounter, a clear definition of risk taking procedures, compliance of risk taking decisions with the strategic goals of the institution, ensuring the risks are within the limits that were set by the management and adequate capital for given risk structure are other essential elements for a more significant advance in risk management in financial institutions.

Only then are we able to exercise thoughtful judgment. There will be a balance between supporting innovation and technology use, while pre-empting new or heightened risks that these may present. MAS takes an even-handed approach by providing a regulatory regime that is risk-proportionate across the range of institutions involved in regulated financial activities. We seek to provide the environment, and even to encourage new FinTech and other players to establish themselves to compete, collaborate and innovate. We allow for adoption of technology and innovation in 3/5  BIS central bankers' speeches  financial services, especially those that hold promise in raising efficiency, in creating new opportunities, in enabling new or value-adding services or simply to manage risks better. MAS adopts a “materiality and proportionality” test, and seeks to right-size regulations to be fitfor-purpose; for both traditional as well as new business models, according to the risks the activity poses. For example, in the new Payment Services Bill that MAS has consulted on, regulatory requirements for payment activities will be differentiated according to the risks that specific activities pose rather than apply a uniform set of regulations on all payment service providers. Regulation comes in when the risk posed becomes material or crosses a threshold. The weight of regulation must be proportionate to that risk. Singapore is one of the first jurisdictions to have established regulatory sandboxes where firms can experiment their innovative solutions in a contained environment, with access to a limited pool of actual customers.
Collateral which the banks in many cases were lacking during the crisis, or at any rate to the extent needed to compensate for the enormous decline in funding on the international capital markets experienced by many banks – in Sweden and abroad. So central banks were forced to change the regulations so that the banks could pledge collateral with a less reliable value. But this solution is not sustainable in the long run, as it exposes the central bank – and ultimately taxpayers – to unacceptable risks. In practice, it means that the central bank is forced to act as dumping ground for bad assets as soon as there are problems in the financial markets. Of course, we want to avoid such situations in the future, and this is why the Basel Committee has produced a number of regulations aimed at making the banks less sensitive to liquidity problems. So what do the regulations entail? In future, a certain part of the borrowing must be longer term. Moreover, it must come from more stable sources of funding. In concrete terms, the regulations mean that one multiplies the amount the bank borrows from each type of funding source by a stability factor – in roughly the same way as for risk adjustment of the value of assets when calculating capital requirements. This gives a stability-adjusted funding profile for each institution that should better match the maturities for the banks’ lending.

Barbro Wickman-Parak: New international regulations for banks – a welcome reform Speech by Ms Barbro Wickman-Parak, Deputy Governor of the Sveriges Riksbank, at a meeting with Tjänstemännens Centralorganisation (TCO), Stockholm, 26 November 2010. *  *  *  Over the past three to four years the world has undergone the largest financial crisis since the Great Depression of the 1930s. The scope of the crisis and its catastrophic economic consequences quickly led to the realisation that something had to be done to avoid this happening again. As soon as the worst phase of the financial crisis was over, extensive work began on correcting the inadequacies in the regulatory systems that had come to light. The reform work is conducted in many forums at both national and international levels. And not least at EU level. But today I shall focus on the reform work in the Basel Committee on Banking Supervision, in which both the Riksbank and Finansinspektionen (the Financial Supervisory Authority) participate. This Committee is the international body that has established frameworks for bank regulation since 1974. In line with internationalisation that has taken place in recent decades, banks in different countries have become increasingly dependent on one another. This also applies to our Swedish banks, which to a great extent fund themselves on the international markets. Both Swedish banks and Sweden in general therefore benefit from banks around the world becoming more resilient.
In Switzerland by contrast, the collateral accepted in 99.8% of the transactions in the secured interbank market corresponds to the definition of the SNB collateral basket, that is, to the collateral accepted by the SNB in its own repo operations. The SNB’s collateral policy is based on a transparent, essentially rule-based approach. This means that when securities are excluded from the list of acceptable securities  2  See Diamond and Dybvig (1983). “Bank runs, deposit insurance, and liquidity”, Journal of Political Economy 1983, vol. 91, no. 3, pp. 401–19. 3  Typically, the total amount of the deposit will be some amount less than the value of the underlying asset, with the difference called a “haircut”. For more details, see Gorton and Metrick (2009) “Securitized Banking and the Run on Repo”, NBER Working Paper Series (NBER Working Paper No. 15223), August 2009. 4  This could be a reasonable approximation. See Gorton (2009): “Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007”, Prepared for the Federal Reserve Bank of Atlanta’s 2009 Financial Markets Conference, May 2009; and Gorton and Metrick (2009). 5  Chart 4 illustrates the average repo haircut on structured debt. This is a good indication for an overall “haircut index”, as shown by Gorton and Metrick (2009). 6  Another important difference is that the Swiss repo market is conducted on a highly efficient automated and centralised platform while US repo transactions are traded over the counter. 7  Hördahl and King (2008).

The results of this appropriate policy mix, which placed the burden of the response to the crisis on the shoulders of the SNB, can be seen in the remarkable accounts of the Swiss general government: public surpluses in both 2009 and 2010 (+0.8% and +0.2% relative to GDP, respectively) and a reduction of the debt level to less than 40% of GDP.11 One reason for the misperception is probably the view, propagated by the academic literature on the subject, that central bank interventions in foreign exchange markets are geared to achieving an exchange rate target and that they are generally unsuccessful at doing so. As has been repeatedly emphasised, this was not the objective for the SNB in 2009–2010.12 The SNB’s objective was to provide appropriate monetary conditions to the Swiss economy. A given exchange rate level in that context may be maintained for a limited time period, but it is subject to review as macroeconomic conditions evolve. And as the SNB’s experience in 2009 demonstrates (illustrated in Chart 7), influencing the exchange rate level temporarily is feasible and makes sense at the zero lower bound when the traditional monetary policy instrument is exhausted. III. Conclusion: how to judge whether interventions were successful? All actions by the SNB have to be considered in the light of its mandate. The primary goal is to ensure price stability, while taking due account of the overall economic situation. In this way monetary policy contributes to creating an environment that fosters prosperity and economic growth.
In 2006, as the strength of economic growth progressively alerted to the emergence of inflationary pressures, the monetary policy stance became less expansionary in virtually all economies, developed and emerging alike, and inflation rates held at low levels overall, without any substantial passthrough of higher energy prices to core inflation being discernible. Yet the reduction in spare capacity and labour market tightening will heighten inflationary pressures in many economies, and further oil price rises cannot be ruled out. Moreover, as the business cycle matures, the task of monetary policymakers may become more difficult, especially for certain central banks like the Federal Reserve which will have to square inflationary risks with those stemming from the economic slowdown. The euro area As already stated, the euro area economy finally managed to emerge from the phase of low growth experienced in recent years. GDP for the area grew at a rate of 2.9% in 2006, almost double that of the previous year and the highest rate since 2000. For the year as a whole, inflation, measured by the rate of increase of the HICP, stood as in 2005 at 2.2%, much influenced over the course of the year by oil price movements. Core inflation moved mildly upwards during the year, perhaps reflecting some  BIS Review 67/2007  1  minor indirect effect of the rise in energy prices against a background of strengthening activity and employment. Nonetheless, there has been notable wage moderation so far, perhaps in response to greater labour market flexibility and growing competitive pressures worldwide.

Today, I would like to give my views on the challenges that lie ahead this year. I believe that the four main challenges are to: •  Adapt to an environment that is still changing rapidly;  •  Resolutely pursue efforts to strengthen the resilience of the financial system by preparing for and implementing new regulations;  •  Further improve the competitiveness of the Paris financial centre;  •  Continue to support the economy by ensuring the best possible financing conditions. 1. A rapidly changing legislative and regulatory environment  First, your working environment will continue to evolve rapidly, in terms of both international financial regulation and France’s legislative framework. 1.1  A few words on the draft banking reform law in France  The financial crisis highlighted some major shortcomings of international banking and financial sector regulation as well as the inadequacy of the tools at the supervisory authorities’ disposal to reduce and address risks. The draft banking reform law reflects the commitment of the President of the French Republic to separate activities that are useful for the financing of the economy from speculative activities, which will either be ring-fenced or banned. This law sets out to enhance the protection of deposits and the security of market activities while – and I believe that this is also particularly important – striving to ensure that you are still able to offer a broad range of financial services that allow economic agents to hedge risk, borrow or invest.
But, the auditor’s role is simply to function as a pointer and not a financial crusader. If he chooses to function as a financial crusader, he may not only embarrass his masters, but also endanger his own position as well. Without any penal power vested in the auditor, it is also practically impossible for him to act as a penal authority. The auditor is a watchdog and not a blood hound Businesses today, specifically those involving banking institutions, are very much complex in nature. Hence, one may rightly question whether the old adage relating to auditing could still serve a purpose. Though the complexity of the businesses has grown tremendously, I feel that the old adage relating to auditing is still valid and relevant. It has demarcated the boundary within which an auditor has to operate. If he steps outside this boundary, the most likely consequence would be the creation of a hostile atmosphere for the auditor to perform his duties. No organization, whether big or small, could function effectively and efficiently in that scenario. This caution is equally valid for both external auditors and internal auditors. The role of the internal auditor Internal audit, as against the external audit, is the first safeguard available to the management and owners to run their business free from financial irregularities and misbehaviour. Internal auditor is available on site throughout the period and, therefore, can play his role as an effective watchdog continuously.

The main objectives are to reduce the probability of failure of such institutions and, in case a failure occurs, to reduce the impact on the financial system. In September 2010, the Governors and Heads of Supervision agreed that systemically important financial institutions should have additional loss absorbing capacity. Work is currently underway on how to define institutions that are systemically important, and how to determine the capital surcharges, contingent capital and other elements to limit systemic fallout. With the shadow banking system, we have to ensure that tighter regulatory rules do not provide incentives for financial institutions to shift their activities to unregulated areas. Oversight of the shadow banking sector needs to be improved. The FSB has already done valuable work – supported by the ECB – on shadow banking. In this context, the ECB is providing the Financial Stability Board (FSB) with flow of funds data on the composition of the financial sector concerning the euro area. The concrete challenges lie in the establishment of a suitable definition of shadow banking and outlining possible regulatory options to address the risks posed by this sector. Given the background of the crisis, regulatory effort on financial institutions has focused on banking, but there is important work underway also for other financial institutions, such as the further specification of the capital adequacy regime for insurance companies (“solvency II”). II. Market regulation  Let me turn to the second building block, namely regulation of financial markets. This area is as challenging and as complex as banking.
Prudential controls also limit bank exposures to exchange rate risk, thereby reducing a source of instability in the context of a pegged exchange rate regime with international capital mobility. In conclusion, EU accession and, in particular, the adoption of the euro would cement the strong links that already exist between Malta and the Union. From the Central Bank’s point of view, the prospect of EMU membership will reinforce the current commitment to price stability through the use of an exchange rate peg. Overall, the adoption of the euro would represent a logical step for an economy already closely integrated with that of the EU and influenced by the monetary policy of the ECB. We are, however, under no illusions: achieving this goal will require the continued pursuit of fiscal consolidation, structural reform and financial stability. But we are confident that these challenges can be met. 2  European Central Bank, ‘Financial Sector Developments and Convergence in Accession Countries: An Overview’, December 2001  4  BIS Review 46/2002

Mugur Isărescu: Gaps and economic crises in South-East Europe – present and past Opening speech by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the conference "Gaps and Economic Crises in South-East Europe: Present and Past", Bucharest, 28 October 2016. * * * Distinguished guests, Ladies and gentlemen, Allow me to warmly welcome you to the National Bank of Romania. The board of the National Bank of Romania and I are glad to host, for the second time, the Annual Conference of the South-East European Monetary History Network. Five years ago, in March 2011, when NBR hosted this event for the first time, we expressed our interest and support. We firmly believe that a good understanding of history, of how our forerunners addressed issues linked to monetary and economic developments, sets the foundation for finding solutions to present day challenges. This conference brings together central bank representatives from Albania, Austria, Bulgaria, Greece, Serbia and Romania, as well as prominent members of academic and scientific European circles. I welcome you to Romania and hope you will have opportunity to enjoy your brief stay. This year, the meeting is focused on economic cycles and economic crises in South-East Europe, both past and present. This is a generous and challenging research topic. All the more so, there has always been a permanent concern in the past 150 years for the policy makers in the region to reduce the economic gaps between the countries in South-East Europe and the developed ones.
This underlines my earlier point that strong institutions of prudential policy (macro and micro) are important to enable these decisions to be made.

As mentioned earlier, reflecting large fiscal imbalances and a loss of confidence on the part of investors, government bond spreads increased dramatically for some euro area countries and became very volatile in 2010. The willingness of investors to support governments’ financing needs declined, with the result that the governments of three euro area countries have since then required financial support by means of joint EU/IMF programmes. These programmes are subject to strict conditions on fiscal adjustment in order to restore public finances to health. However, the need to pursue more ambitious consolidation targets is more general. It is striking to see that there are currently only two euro area countries that are not subject to an excessive deficit procedure. Fiscal consolidation is essential to ensuring an environment conducive to output growth and price stability. Looking ahead, implementing fiscal consolidation and securing the sustainability of public finances are among the major challenges faced by policy-makers. The consolidation of public finances requires a comprehensive policy comprising: (i) the timely correction of excessive deficits; (ii) the reduction of government debt to more sustainable levels; and (iii) the reorganisation of banks in order to limit strong links between the balance sheets of governments and financial sectors, which typically result in the socialisation of banks’ liabilities in times of crisis. These measures need to be complemented by pension and healthcare reforms to alleviate the fiscal burden arising from population ageing.
Erdem Başçi: Commodity price volatility Speech by Mr Erdem Başçi, Governor of the Central Bank of the Republic of Turkey, at the “G-20 Commodity Price Volatility Conference”, Istanbul, 13 September 2011. *  *  *  Dear Colleagues and Distinguished Guests, Today I will discuss commodity price volatility, a topic which has vital importance for the global economy and thus for policy makers. In my speech, I would first like to discuss the possible sources of commodity price movements and then elaborate on the approach of the Central Bank of Turkey in dealing with commodity price changes in the past few years. Commodity markets cover a wide range of raw materials such as oil, metal and agricultural products. These commodities have different characteristics not only in terms of trade volume, supply and demand structure but also in terms of their exposure to financial market transactions. Understanding the sources of the volatility in prices is essential in order to give appropriate policy response. The challenges posed by high and volatile commodity prices are important worldwide, yet they are more immediate for emerging markets. For instance, the share of food in the typical consumption basket is higher in these economies than in advanced economies. The average weights of food in the consumer price index in emerging market countries and in developed countries are around 30% and 13% respectively. Besides, especially for the net importers of commodities, high and volatile prices pose significant risks on balance of payments and sustainability of growth in developing countries.

Initially, this strategy worked well and medium term inflation expectations were anchored despite the surge in headline inflation. Later, however, the uptrend in commodity prices turned out to be more persistent than anticipated, leading inflation to exceed the targets for two consecutive years by a significant margin, primarily due to the sharp increases in commodity prices. In response, we decided to set the inflation targets by mid-2008 for the following three years on a declining path. In this context, the inflation targets were set as 7.5, 6.5, and 5.5 percent, for the years 2009, 2010, and 2011 respectively. Later on, the inflation target for year 2012 was set at 5% in year 2009 and was kept at 5% for the following year 2013. These targets allowed us to accommodate relative price changes driven by global developments, which itself is the optimal response from a welfare perspective. Second, we wanted to anchor inflation expectations by setting a feasible and credible path for the medium term rather than leaving this job to central bankers’ own inflation forecasts in the interim period. The plan worked reasonably well. The deterioration in inflation expectations stopped right after announcing these targets and the targets were undershot in 2009 and 2010. During this period, many other central banks opted for changing their forecasts significantly above their target for a prolonged period of time.