samchain/econo-pairs-v1 huggingface dataset:
In short, the search for yield has broadened and deepened. We have, in one sense, been here before. Pre-crisis, low volatility justified high prices and high prices low volatility. The constellation of asset prices appeared consistent. Larry Summers famously commented that finance theory tells us how to price two bottles of ketchup, assuming you know the price of one bottle.8 Pre-crisis, the second bottle of ketchup looked fairly-valued relative to the first. But even if asset prices are consistent among themselves, this need not imply they are consistent with reality. So it was pre-crisis, as the price of risk became far too cheap relative to fundamentals. With the first bottle of ketchup woefully over-priced, finance theory ensured that the second bottle was similarly marked up. In this way, the seeds of the crisis were sown. 8  9  Summers (1985)  BIS central bankers’ speeches  Stein (2014)  5  The risk of this cognitive dissonance is once again rising. Low volatilities are being used to justify high valuations and vice-versa. The ketchup bottle looks fairly valued relative to other sauces. But what about the price of ketchup relative to fundamentals? Is the price of risk again becoming too low? Or is it the price of safety which this time is too cheap? I do not have clear answers, but I do know these are serious questions. In one sense, rising risk-taking is evidence of the monetary medicine working.

3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  To date, approaches to measuring and managing the financial implications of climate change for investments have been inadequate. Carbon footprints are not forward-looking, divestments only focus on the most carbon-intensive sectors, green investments are still small scale, and the impact of shareholder engagement is hard to measure. One of the most promising options is to assess the “warming potential” of investment portfolios. For example, GPIF, the world’s largest pension fund, estimates that its assets are currently consistent with a 3.7 degree path. Such a forward looking measure can help asset owners and asset managers understand the transition pathways of their investments and develop strategies to align financial flows with the necessary transition to net zero. Degree warming will reveal who is on the right and wrong side of history. It will provide a signal to governments about where the economy is on the transition path and therefore the effectiveness of their policies. It will empower consumers, giving them more choice in how to invest to support the transition. With our citizens, particularly the young, demanding climate action, it is becoming essential for asset owners to disclose the extent to which their clients’ money is being invested in line with the values of those clients. To this end, for COP26, the TCFD is establishing a subcommittee to consider how to standardise the methodology for measuring the warming potential of assets and expanding its use.
Basel II, in this way, has motivated supervisors to analyse more deeply all that surrounds banks’ main business with the benefit of a clearer understanding of the underpinnings of banks’ risks. Needless to say, the introduction of a risk sensitive capital framework is based on the idea that, as credit conditions deteriorate, minimum requirements must increase and consequently, more cyclicality is added into the system. Particularly, under the internal ratings based approach (IRB), capital requirements are an increasing function of the main credit risk drivers, probability of default (PD), loss given default (LGD), and exposure at default (EAD), obtained for each loan. The problem is that this formulation may have distorting consequences in the evolution of regulatory requirements along the economic cycle. That is, in downturn conditions these risk parameters would deteriorate, leading to  BIS Review 552009  1  greater capital requirements, whereas in upswings these risk indicators would improve, resulting in lower regulatory needs. Nevertheless, the new Basel II Framework itself offers specific guidance that may soften the cyclical fluctuations in capital requirements. The calculation of risk parameters consisting on long run averages and the inclusion of a downturn bias in certain estimates would provide more stable parameters and requirements without abandoning the advantages of a risk sensitive scheme across different banks. This approach has been the one mostly implemented in Spanish IRB banks. This is the guidance Basel II itself offers to mitigate procyclicality but one might think that it is insufficient.

The assessment of different alternatives for appropriate remuneration schemes, on the basis of correct incentives and horizons, constitutes the right starting point from which to explore how excesses or bad alignments may have contributed to accelerate or amplify disorders within the financial system. As you have seen, we are not lacking ideas on how to reduce procyclicality. Rather, our main problem is to select what are the best tools to include in our toolbox. In this sense, I am sure that your contributions in this seminar will be extremely useful for this purpose. Now, let me give the floor to Mr. Josef Tošovský, with whom I have the honor to chair this opening session and to whom I personally thank his presence in this conference. BIS Review 552009  3
Panetta, F. (2021), ““Hic sunt leones” – open research questions on the international dimension of central bank digital currencies”, speech at the ECB-CEBRA conference on international aspects of digital currencies and fintech, Frankfurt am Main, 19 October. 10. Panetta, F. (2022), “For a few cryptos more: the Wild West of crypto finance”, speech at Columbia University, New York, 25 April. See also Hermans, L. et al. (2022), “Decrypting financial stability risks in crypto-asset markets”, Financial Stability Review, ECB, May. 11. In particular, it would be important for stablecoins with an algorithm-based stabilisation mechanism to be treated as crypto-assets other than e-money tokens (EMTs) and asset-referenced tokens (ARTs), and they should not be used for payment purposes. Given that some algorithmic stablecoins have failed in the past (including the recent collapse of TerraUSD), algorithm-based stabilisation mechanisms without a reserve have proven to be conceptually flawed and have performed no better than bitcoin in terms of stability. This means that algorithmic stablecoins without an issuer and a  reserve should be treated in the same way as crypto-assets other than EMTs and ARTs. Moreover, as crypto-assets are not of sufficient quality to back up the value and maintain the stability of ARTs/EMTs, the reserve assets of ARTs/EMTs should not include any crypto-assets – ARTs, EMTs or crypto-assets other than ARTs/EMTs.

Muhammad bin Ibrahim: The dawn of a new era in Malaysia's payment systems Keynote address by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Malaysian E-Payments Excellence Awards, Kuala Lumpur, 22 May 2017. * * * I am glad to be with you at this 2nd Malaysian E-Payments Excellence Awards organised by MyClear. This evening, we are recognising the contributions of the financial industry, businesses and government agencies to the country’s e-payment agenda. The achievements showcased by the award winners today reflect the broader innovations and involvement that we continue to witness in the payment space to make e-payments more convenient, cost-efficient and safe for users. I am encouraged that contactless payments, for example, are gaining greater appeal for smaller value payments. Equally important have been the collective efforts made to educate and inform users. This helps to drive changes in payment habits away from cash and cheques to epayments. Malaysians are increasingly embracing e-payments Malaysia has long recognised the importance of e-payments as a key enabler to drive national efficiency and competitiveness, and as a catalyst to facilitate the creation of new sources of growth. Promising progress has been made in achieving the country’s e-payment targets. In a period of 6 years between 2011 and 2016, the number of e-payments per capita has almost doubled from 49 to 97 transactions per capita. This largely reflects the accelerated adoption of electronic fund transfers to displace cheques.
The euro area is widely perceived as lacking a coherent strategy to calm markets and stabilise economic activity. It is also seen as the prime source of shocks affecting the global economy. Indeed, I sometimes have the impression that global volatility is solely attributed to the shortcomings of Europe, and that challenges to the sustainability of growth in other large economic regions are conveniently downplayed. At present, three critical views are particularly prevalent. •  The first is that Europe does not have the right tools to fix the crisis. •  The second is that Europe focuses only on fiscal consolidation and not on growth. •  The third is that the euro cannot overcome its design flaws. While I acknowledge the reasoning behind these views, you will not be surprised to learn that I fundamentally disagree with them. In all three areas the reality is more complex. Looking only at the outcomes of the European Council and Euro Summit on 28–29 June, these critiques do not hold up. Europe is making more progress than many external observers acknowledge. 1. Instruments of crisis management  Let me begin with the first criticism: that Europe lacks appropriate instruments to deal with the crisis. To start with, one needs an appropriate sense of perspective. It is unrealistic to expect the euro area to have the reaction-function of a nation-state like the U.S. The U.S. has spent more than 200 years establishing institutions to run a vast and diverse economic area and to manage crises.

Third, the decisions to waive seniority and make full use of the EFSF and ESM instruments send an important signal to markets. That signal is: policymakers have understood the complexity of the crisis and are prepared to exploit the flexibility of the rescue funds to address it. This is also evident in the decision by the Euro Summit to allow EFSF/ESM assistance for countries respecting their fiscal and structural reform programmes, reducing the stigma of requesting support. The ECB will play its part too by acting as agent for the EFSF and ESM to facilitate effective market operations. Overall, it is difficult to uphold the caricature that Europe does not have the tools to handle the crisis. If anyone had known, in 2010, that within two years there would be a firewall of 700 billion euro usable for loans to sovereigns, bond purchases and bank recapitalisation, the euro area would have been called ahead-of-the-curve. Now that this exists, it is criticised for being insufficient. This is simply the nature of evolving expectations. But it should not distract us from the steps that have been taken. They are impressive both in historical comparison and in their own right. 2. Fiscal consolidation and growth  The second current criticism of the euro area is that its focus on fiscal consolidation is destroying growth prospects. The argument goes that in a weak economy experiencing  2  BIS central bankers’ speeches  private sector deleveraging, an active public sector is essential to maintain demand.
The end of the current growth model is characterised, at least in short term, by catastrophic contraction in trade in the whole world. At the same time it has to be borne in mind that in the case of free market economy, a temporary fall is always replaced by a rise. All major crises are almost always caused by national policies, which affect people's expectations and decisions made on the ground of these expectations. When trying to make up for previous mistakes in a crisis situation, national policies have often stood in the way of free market economy corrections and thus also the recovery of growth. This was the case also in the 1930s, when recuperation from the Great Depression was too slow in many countries. Governments mistakenly thought that the best choices would be hindering external trade, artificially high wages, administrative regulation of production and protectionism. This resulted in a further decline of private demand and corporate production and investment. Thus now, at the start of the 21st century, the most important thing to do is to refrain from protectionism, restrictions on the movement of goods and capital. The current global crisis is not a market economy slump, but a crisis of national policies amplifying discordances and imbalances. As I mentioned before, fiscal policy was too weak in good times and reforms needed for balanced economic growth have in several cases been insufficiently implemented. This does not mean the state should now do nothing at all – vice versa.

In closing this section of my statement, I do not think it is possible to over-emphasize the importance of testing to help improve readiness. To illustrate this point, I would like to draw on our experiences with Fedwire, the Federal Reserve’s wholesale interbank payments system. Much of the current Fedwire software application was written in the last five years, with the Y2K problem in mind. Nevertheless, some of the older software code that was carried over into the new application was not Y2K-compliant. Without the rigorous internal Y2K testing program that the Federal Reserve adopted, our Y2K remediation efforts might, therefore, have been incomplete. I think of this experience whenever I hear it said that some countries are immune to Y2K because they have only recently introduced information technology and that recent software programs are less affected by Y2K. I ask whether those programs have truly been thoroughly tested for Y2K compliance. Contingency Planning Efforts The third major role of the Joint Year 2000 Council will relate to contingency planning. In this context, I should note that contingency planning is something that most financial market authorities, particularly central banks, undertake regularly with regard to a wide variety of potential market disruptions. Most private-sector financial firms, as well, have well developed contingency and business continuity plans in place for their operations. Nevertheless, it is clear that contingency planning for Y2K problems has a number of unique characteristics.
It might have been somewhat more extreme this time around, but it wasn’t fundamentally different. 2. The rise and fall of three cross-border banks operating on the basis of EU legislation (the European “passport”). This story was much more unique, as it involved the first banking crisis in Europe since the EU single market was formed in the early 1990s. The combined balance sheet of these banks was 10 times Iceland’s GDP, and their combined bankruptcy, measured by the size of balance sheets, ranks third in size in the international history of corporate failures. And this happened in a country that ranks among the smallest in the world! We are still dealing with the repercussions of it, as can be seen in our overblown and unbalanced IIP and the controls on capital outflows. Before the collapse, the banking system had expanded very rapidly, growing in just five years from a combined balance sheet of less than 2 times GDP at the end of 2003 to the  BIS central bankers’ speeches  1  aforementioned 10 times GDP. Most of this expansion was cross-border, and a significant part of it was really off-border, having little to do with Iceland, as both financing and investment took place abroad. Around two-thirds of the balance sheet of the three crossborder banks was denominated in foreign currency. As is typical for banks, the FX part of the balance sheet had a significant maturity mismatch.

First is Patrick Honohan, Governor of the Central Bank of Ireland, who took office in September 2009 and has played a key role in dealing with the crisis in Ireland. Then we will hear from Geir Haarde, Prime Minister of Iceland in the autumn of 2008, who oversaw both crisis management during the banking collapse and the design of the economic programme with the IMF. Our final speaker is Franek Rozwadowski, who until recently was the resident representative of the IMF in Iceland. It is well known, both in this country and among scholars of the international financial crisis around the world, that almost 90% of Iceland’s banking sector failed in the first week of October 2008. What is probably less well known is that at that point, Iceland was already on its way into a recession after an unsustainable boom and serious overheating during 2005–2007 and a currency crisis in the first half of 2008. The banking collapse and the associated wealth loss and further currency depreciation made the recession significantly worse, of course, as did the recession that hit the global economy in the fourth quarter of 2008. That autumn, two separate but interrelated sub-stories of the recent Icelandic saga converged in a tragic grand finale. These are: 1. Iceland’s boom-bust cycle and problems with macroeconomic management in small, open, and financially integrated economies. This is a story that has played out many times around the globe, and many of its elements have been seen before in Iceland.
However, an expansionary monetary policy could not explain by itself the severity of the financial collapse the world is seeing today. There are countries where the monetary policy was expansionary, with interest rates at their minimum, and no housing bubble occurred. A couple of examples are Canada and Chile, two inflation targeters where, consistently with this policy framework, interest rates hit very low levels not so different from the Fed Funds rate (Figure 3). Still, housing prices generally did not experience increases comparable with those of other economies, and their financial systems have remained sound. Furthermore, in some cases housing prices did go up high, with clear signals of a bubble being formed. However, their financial systems made it through and remained stable and, despite the current difficulties including very recessive episodes, have avoided acute financial crisis. This is the case with, for example, Australia and Spain. Naturally, when facing disproportionate increases in the price of housing, both the level of borrowing and the building boom associated with it are symptoms that the downturn that comes with the cycle will be severe. This is because of the deleveraging that households will have to undertake and the contraction of the building activity. Still, this need not result in a systemic financial crisis. In any case, monetary policy can and does help in the creation of bubbles, although not so much by the level of the interest rate but by the monetary policy strategy with which financial turmoil is dealt with.

Norman T L Chan: How can the banking industry regain the moral and ethical high ground it once enjoyed before the Global Financial Crisis Speech by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the Asian Banker Summit, Hong Kong, 15 April 2015. *  *  *  Emmanuel (Daniel), Helen (Wong), Hans (Eichel), Gary (Stern), Ladies and Gentlemen, 1. It is always good to see the Asian Banker Summit return to Hong Kong. It has been four years since our city last hosted the Summit in 2011 when I talked about the Monetary Authority’s supervisory philosophy on universal banking. A lot has happened since then. But of particular relevance to us here today are the significant waves of regulatory activity we have witnessed in those intervening years. Activity both in terms of rolling out new standards but also, very visibly, in enforcement action. Libor manipulation in 2012, followed by Forex rigging, sanctions breaches, money laundering and a fairly constant stream of mis-selling allegations – structured bonds, mortgages, Payment Protection Insurance. 2. Against this background, I have to say that I was pleased to see the thorny subject of ethical behaviour within the financial services industry as a key theme for this Summit, although I would like to confine my remarks today to the banking industry and not the entire financial services industry.
So, establishing and maintaining financial stability should be high up everyone’s agenda, and we should embed financial stability as the objective of public policy towards regulating the financial system. You can reasonably ask, why is this difficult to achieve? Financial stability is difficult to define quantitatively and precisely. Some people say that you know it when you have it, but it might be better to say that you know when you don’t have it. What is being done to tackle the issue? A month ago, the Government issued a consultation paper which seeks to define the financial stability objective that will be given to the new Financial Policy Committee of the Bank of England under its plans. The objective is defined at the high level as protecting and enhancing the stability of the financial system of the UK. More precisely, the Bank’s objective “relates primary to the identification of, monitoring of, and taking of action to remove or reduce” risk to the stability of the UK financial system as a whole or to a significant part of the system, “with a view to protecting and enhancing the resilience of the UK financial system”. But the paper goes on to include in the objective the statement that: this does not require or authorise the Bank “to exercise its function in a way that would in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term”.

It was not until 2007 that it became self-evident that this was not a tragedy but an opportunity for Poland, which got a million ‘ambassadors’ in Europe, who were hardworking, acquired new experience and spoke foreign languages. Similarly to the Global Scott Network, the Polish diaspora emerged in the European Union. Over time, this diaspora turned into the Global Polish Network. Therefore, we were successful in turning the brain drain into brain gain. Obviously, the Global Polish Network would not have been possible without the E-Ambassador Internet System, which was set up in 2007. Whenever the Globals want to look together through the world news on issues they are interested in, they sit down so as to see the screen from different angles and each of them, holding their respective coffee cups and remote controls, looks through the Internet special edition produced by the aggregator. If they want to hear the sound, they just put on earphones. 7:00 a.m. After breakfast. Lucky. He can always get what he wants. Lucky is a Bavarian Mountain Hound. He loves long walks, freedom and, above all, he adores roaming the neighbourhood. Obviously, Lucky has a microchip implanted behind his ear, and John Global's bicycle is equipped with a GPS, which keeps track of Lucky's every move.