samchain/econo-pairs-v1 huggingface dataset:
Most of us probably think, for example, that the decisions regarding the length of the runway at an airport should be taken by experts at the Swedish Civil Aviation Authority and that the approval of new drugs should be managed by the Medical Products Agency, rather than by political voting. But as I mentioned earlier, the delegation of an important social issue such as monetary policy also requires evaluation and accountability – necessary conditions for public support and legitimacy. This, and the need for openness in this context, is something I will now discuss in a little more detail. The need for openness and clarity Independence makes demands of evaluation and accountability Some of the demands made of us on the basis of our role as authority are fairly self-evident. We must, for instance, to the best of our ability try to meet the price stability target we have been allocated. In addition, we must also be able to explain to the general public in a suitable manner the motives behind our decisions. The Riksbank’s independence and the requirement for legitimacy also mean that it must be possible, not least from the point of view of democracy, to evaluate our work – how we have done – and to hold us accountable. How does this work?

These two shocks in combination with the initial conditions, pushed costs upwards, carrying global inflation to levels not seen in the last 30 or 40 years, and Chilean terms of trade lower. As a result of inflation surprising to the upside, central banks started withdrawing monetary stimuli far more aggressively than previously expected. The Federal Reserve led to an appreciation of US dollar, higher interest rates, higher term premiums, and spreads, negatively affecting financial conditions for emerging markets. Exchange rate has been in a depreciatory trend for a long time, currently stands 23% above the levels before the social outburst in 2019. A significant part of this depreciation has been for idiosyncratic reasons, probably associated to high levels of political and economic uncertainty. In this context it is very likely that exchange rate passthrough to domestic inflation is higher than in normal times. 6  Let me elaborate on these developments in the FX market and local inflation for a few minutes. The global tightening of financial conditions was exacerbated by local uncertainty in Chile. As a result, since the beginning of June 2022 and until the Central Bank announced the FX intervention program, the peso depreciated by more than 25%. This pressure on the FX market had a component of non-compensated flows that led to a spike in volatility levels and frictions in the process of price formation. Given these developments there was a concern about potential spillovers to other markets, especially fixed income, and the effects that this could bring to the real economy.
Weaknesses in security or operations at any point in the payment chain could threaten stability and trust in the whole system. It is vital to have a holistic view of CHAPS as a network, through which financial or operational risk can be transmitted. Addressing this was particularly important given the increased sophistication of risks faced by the payments system including, for example, cyber-attack. It was therefore agreed to bring the operation of CHAPS in-house. The transfer took place on 13 November 2017, and was smooth with no disruption to the availability of CHAPS for the banks or their customers. I’d like to thank the staff across the Bank, CHAPS Co, the participating banks and other organisations who made it possible. Effective risk management for CHAPS But that was just the first step and the Bank continues to enhance its approach to managing risks in CHAPS. As the systemic risk manager for CHAPS, we seek to ensure that end-to-end flow of payments is safe, secure and stable. We are now increasingly able to draw on the broader set of tools and resources available to the Bank to: identify, assess, mitigate, and respond to the full range of risks to the delivery of the CHAPS system. Our approach is to assign responsibilities for these risks according to where they can be most effectively managed and to coordinate with the owners of these risks (such as Direct Participants and Critical Service Providers) in order to seek assurance that the payment system is operating within our risk tolerance.

The Bank of England is actively researching both how technology is changing financial services today (through our Fintech Hub1) and how financial services might evolve over the next decade.2 We are assessing what technological change means for users, businesses, and the financial sector, as well as the risks that this might pose to the Bank’s mission. In the context of this rapid change in payments, an area of critical importance to the UK economy, the Bank is undertaking two major initiatives to strengthen core payments architecture, and to enable it to better meet the needs of the industry and the public. These initiatives are closely linked: renewing the RTGS service and bringing the operation of CHAPS into the Bank. Before I go any further, I will define these two acronyms that might sound unfamiliar, but whose role is crucial to everyone in this room - indeed to everyone in the country. The RTGS (Real Time Gross Settlement) service is the core payments infrastructure in the UK, providing the ultimate settlement for a number of payment systems and other financial market infrastructures, including retail systems such as Bacs. As part of this, it provides accounts for banks, building societies, and, from very recently, to non-bank payment service providers (PSPs),3 which use it to settle payment obligations. It is also the platform through which monetary policy decisions to change Bank Rate are implemented. Settlement takes place across the books of the Bank, in central bank money and in real-time. This is efficient, settlement risk free and irrevocable.
8/9  In the framework of the Eurosystem, an in-depth review of risk assessment processes is under way, aiming to ensure that all relevant factors – such as environmental ones – are taken into account for prudent central bank portfolio management. Consideration and application of these criteria is without doubt a new development, and also for central banks. In September, for instance, the Banco de España made its first green investment, participating in a fund launched by the Bank for International Settlements (BIS) that invests entirely in green bonds. With this type of initiative the Banco de España aims to include environmental sustainability goals in its reserve management. This is consistent with its membership of the NGFS, which less than two weeks ago published a Sustainable and Responsible Investment Guide for Central Banks’ Portfolio Management. Conclusions I wish to conclude by emphasising, once more, how important it is that the financial sector contribute to the collective effort that meeting the goals set in the Paris Agreement represents. The decarbonisation goals set by the Commission for 2050 pose a major challenge. 2050 may seem a long way off, but if we wish to meet these goals it is clear that the public at large, firms, banks, governments and public authorities will all have to start addressing the challenge today, with a sufficiently ambitious but also realistic approach. The path ahead, to incorporate environmental risk into internal control and management, is a considerable one and we, as supervisors, also have much work before us.

If we eliminate the bias in these findings resulting from the inclusion of construction and real estate activity, which should not be included under either polluting (“brown”) or “green” activities, polluting activities continue to have a lower default rate, although the gap between the two is much narrower. In any event, I believe the findings are unsurprising. Many companies labelled as “brown” have high profit margins and their ability to generate profit is partly a result of their being regulated activities and having, in many cases, a dominant market position. Moreover, to date these companies have not had to assume the cost of the pollution they cause, so in an energy transition scenario their advantage in terms of profit margin could be affected. The banking sector as a facilitator of change in the production model I should like to refer briefly to the second point I mentioned above. As indicated in the 2015 Paris Agreement, the banking sector has an essential part to play to facilitate change in the production model. Indeed this second goal is related to the first, as correctly measuring environmental risk should assist in the transition towards a more sustainable model and would, therefore, be a logical consequence of the first goal. As I have said previously, one essential feature of any viable business model is that banks identify and quantify all the costs and risks involved and pass them through to prices and capital.
Still, the FOMC recognizes that inflation persistently below 2 percent could pose risks to economic performance. As is always the case, there is substantial uncertainty surrounding this forecast. Moreover, there is always the possibility of some unforeseen shock. Thus, we will be monitoring U.S. and global economic conditions very carefully and will adjust our views on the likely path for growth, inflation and the unemployment rate accordingly in response to new information. So what does this all portend for monetary policy? As you are aware, at last week’s meeting of the Federal Open Market Committee we made no changes to our monetary policy. In particular, the Committee decided to continue purchasing long-term Treasury securities and agency mortgage-backed securities at a monthly pace of $ billion and $ billion, respectively. The FOMC statement reaffirmed the Committee’s intention to “continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability.”2 We also reaffirmed our forward guidance with respect to the federal funds rate.

Because your industry has taken a lead in learning from the past, in leading the changes needed and in having a sense of your responsibility to the wider economy. Yours is a model of engagement for others to emulate. And I look forward to continuing to work together. Thank you. BIS central bankers’ speeches  5
3 It also appears that the most important driving force behind the cycle is the monetary policy conducted in large countries, particularly the United States. Free capital movement makes it more difficult to isolate a country from the rest of the world – and indirectly thereby from monetary policy in large countries – even if it has a floating exchange rate. Some go so far as to say that developments on the financial markets have meant that the exchange rate is no longer a parameter for action in the trilemma. The trilemma has instead been reduced to a choice between only two alternatives – a dilemma: either one has free capital movement and accepts that it is then difficult or impossible to conduct a monetary policy of one’s own, or one conducts one's own monetary policy but counteracts the free movement of capital. 4 My main hypothesis: countries with floating exchange rates still have monetary policy autonomy However, this is probably going a bit too far as a general description of the actual situation in small open economies like Sweden. In a globalised world, developments abroad will always have great significance for what happens in your own country. Nevertheless, however, the situation seems to be that the choice of exchange rate regime plays an important part in how great the impact will be.

Variability of inflation increases uncertainty and exerts a major negative influence on investment and thus on potential output as well as on  15  European Commission, 2004, “A 3% R&D effort in Europe in 2010: an analysis of the consequences”, study prepared by the Research Directorate General of the European Commission. 16  OECD Education at a Glance 2006. 17  European Commission, 2003, “Chapter 3 - Education, training and growth”, in: The EU Economy: 2003 Review  BIS Review 82/2007  7  other components of aggregate demand. The environment of price stability, the credibility of the ECB in delivering price stability over time and therefore the solid anchoring of inflation expectations, are paving the way for sustainable economic activity. Conclusions Ladies and gentlemen, I would like to conclude by stressing a few points. Monetary Union has been effective – and very successful – in supporting growth. In 2006, real GDP in the euro area grew by 2.9%, which is the highest rate since 2000. This positive development is very encouraging, but this is no time for complacency. Europe still has some way to go to fully benefit from globalization and meet the challenges of rapid technological changes and ageing population. We should also keep in mind that in a context of monetary union, not only fiscal policies, but also price competitiveness and unit labour cost developments across countries should be continuously and closely monitored. That said, structural reforms are decisive to raise the long-term speed limit of the European growth.
But the fact of the matter is that hardly any far-reaching reforms such as those being drawn up for credit markets have been proposed. Those interested in this viewpoint should read the latest speech by Fernando Restoy, the vice-chairman of the CNMV (Spanish National Securities Market Commission). In it he suggests certain areas in which the regulation of these markets could be improved. I’m going to adopt a less ambitious approach, focusing on describing market behaviour from the standpoint of a country such as ours, which in recent months has had to tackle a lack of investor confidence. What have we learned from the behaviour of the debt markets in this second phase of the crisis? Perhaps one of the key lessons is that markets are capable of identifying certain structural problems which, for whatever reason, may affect an economy’s solvency. And this is why markets can offer us economic policy pointers, of interest not only to them but also to us. Restoring health to public finances, reforms to boost growth and reduce unemployment, the restructuring of our banking systems so they are positioned to promote growth when credit demand picks up, etc. are all pieces of advice of benefit to us and which are worth following. Admittedly, some may say, markets issue warnings. But they usually do so belatedly. And this is true.

Turning to Spain’s case, there was a more than 10-year-long boom during which credit hit double-digit growth rates and the current account, which was practically in balance in 1996, began to run a systematically and continuously widening deficit. Over this period the markets were not exactly profuse in giving signals about the imbalances that were building up. The markets, like Spaniards, thought the Spanish economy was doing fine. We should acknowledge, as Raghuram Rajan does when talking about the US economy, that this delay in realising the actual problems was shared by all agents in the economy. But that does not mean that, although they are late, the messages from markets do not merit being heard and given due assessment. If we think that investors’ evaluation of problems is reasonable, then the most recommendable response is to follow their advice. We’ve also learned that the markets may not only err when they are late offering their advice, but that their judgments may also be mistaken. Frequently, their information is diffuse or insufficient, and investors’ view of different economies is shaped in an overly simplistic  BIS Review 171/2010  3  fashion. What we’ve seen, when this is the case, is that criticising their ignorance is of little use in practical terms. The proper response is to provide them with the most and best information possible. Generally, when investors have the right information, they incorporate it appropriately into their judgments.
Also, several thousand experts, including auditors, consultants, appraisers, etc., participated in the exercise and strict quality assurance was enforced both at the level of the national supervisory authorities and by the ECB. The results disclosed yesterday show that European banks have, in the main, a comfortable solvency cushion. A good number of them have been able in recent months to reinforce their solvency levels notably, meaning that the capital measures needed to comply with the requirements arising from the exercise are modest in scope. However, the analysis has shown that some European banks are in a vulnerable solvency position, which they should redress as soon as possible. All told, as important as the solvency assessment the exercise provides is the detailed information furnished on each bank. In particular, the asset quality review offers significant data on the potential shortcomings of the way in which the financial information disclosed by banks reflects the risk they assume. Here it can be seen, once again, that there is no widespread material understatement of risk, in the form of valuation failings or provisioning shortfalls. But there are European banks where the asset review has evidenced shortcomings of some significance. In the case of Spanish banks, the analysis has offered fairly satisfactory results. In particular, the asset quality review situates Spain as the country where fewest failings have been detected in proportion to the sector’s aggregate assets.

For the moment, we are only at a preliminary stage, contemplating which tools a macro-prudential policy could be based on, and how these tools could be used. As regards supervision, this crisis has shown the merits of having the banking supervisor close to the central bank. The point is not to claim there is an optimal supervisory structure that fits any country’s circumstances. Rather, it is to note that a system such as the one we have in France has proved very useful in allowing for an in-depth knowledge of the banking sector and the various financial institutions. It also allowed for very swift and timely exchanges of information, and, as a result, allowed us at the central bank to quickly pass sensitive judgments, not least on the usefulness of injecting liquidity. Let me conclude by stressing what may seem obvious. We are going through very challenging times, in some respect even unprecedented times. In this context, policy making is also about confidence building and financial education. Thank you very much Ladies and Gentlemen. 4  BIS Review 9/2009
It was the Fintech of its day. On the back of this, markets for other types of insurance began to flourish, based on the same risk-pooling principle. Lloyds of London emerged in 1688. In the space of a decade, London became the pre-eminent insurance market in the world. And so it has remained. That first-mover advantage has locked in London’s dominance for 340 years. Within a mile’s radius of Monument today are hundreds of insurance companies writing billions of pounds of insurance contracts each working day. The Bank of England keeps an eye on this industry in its role as regulator. The impulse for that creative agglomeration came from the destruction of the Great Fire. 10 11  Museum of London and Demographia. https://www.london-fire.gov.uk/museum/history-and-stories/the-great-fire-of-london/ 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  A third creative response came during the 18th century. Until then, there was no public fire service in the UK. Companies hired private companies to fire-fight or had their own fire service. The Bank of England was in a particularly vulnerable position at the time, as one of the world’s largest paper factories. The Bank bought its own fire engines and hired its own firemen to help protect it from going up in smoke.12 With time, it became clear it made no sense for everyone to self-insure against fire risk. This risk was best collectivised through a municipal fire service - a “public good”, like lampposts and lighthouses.

The clause in the law dealing with the transfer to the Treasury makes some for provision for whether the Bank’s capital has reached a specified minimum relative to the size of the domestic credit system. The Central Bank Act states that an amount equal to two-thirds of the Central Bank’s profit shall be paid annually to the Treasury. However, the Bank pays only one-third of its profit to the Treasury if its capital is equivalent to less than of 2.25% of the amount of lending and domestic securities in the credit system. At present the Bank’s capital is still a long way short of this legal reference level, and its annual profit will not suffice to strengthen it markedly anyway. Growth has not only soared in the Icelandic credit system, but on an increasing scale each year has also been associated with foreign markets, where credit institutions’ activities have expanded enormously. These changes also give grounds for considering other terms of reference for foreign reserves than import levels alone. As the Prime Minister stated in his speech earlier, the government responded positively to the points raised by Central Bank and authorised it to borrow abroad in the name of the Treasury in order to strengthen its foreign reserve substantially, while the government was also mandated by parliament to strengthen the Bank’s capital position. The Board of Governors would like to thank the government for such a good, firm response.
The MPC intends not to raise Bank Rate or reduce the stock of asset purchases at least until the unemployment rate reaches a threshold of 7%, subject to three knockouts designed to guard against risks to price and financial stability. But abstracting from the details of these thresholds and knockouts, our message to you – the businessmen and women driving this recovery – is clear. You can plan for the future in the knowledge that the MPC intends to keep interest rates low until we have seen a prolonged period of strong growth, unemployment is significantly lower, real incomes are higher. Based on some of the reporting, you might be forgiven for thinking that forward guidance is far more complicated than this. To take just one example, let me read to you the opening sentence of an article last month reporting on the MPC’s November Inflation Report. Under the headline “Forward guidance fails”, the article began: “The Bank of England now expects the economy to grow strongly next year, highlighting the fact that its policy of forward guidance has effectively failed.” Strong growth, falling unemployment: if that’s failure, I wish I’d failed long before now! The aim of the Committee’s guidance isn’t to provide a commitment that interest rates won’t rise until some particular date in the future. Monetary policy has to respond to the changing state of the economy. We can no more commit to keeping our prices and quantities unchanged irrespective of economic circumstances than you can.

Undoubtedly, there are still many things to improve. Attaining a level of development such that prosperity reaches the whole population is still far away, but at least we are on the right track. Thank you. BIS central bankers’ speeches  5