samchain/econo-pairs-v1 huggingface dataset:
When considering the favourable economic outlook for Switzerland, we must not lose sight of the fact that the latest tensions on the financial markets have increased the downside risks. Should these downside risks materialise and, via an appreciation of the Swiss franc, lead to a renewed threat of deflation, the SNB would take all the measures necessary to ensure price stability. In other words, the SNB would do whatever it takes to fight deflation and safeguard price stability in the medium- and longer-term. Switzerland has an obvious and enormous interest in Europe’s ability to manage through this public debt crisis decisively and ultimately successfully. Europe’s ability to navigate out of the current crisis is also very much in the interest of the United States and indeed the world. When I say this, I don’t mean to refer solely to the potential economic strains as a result of Europe’s public debt concerns. What is ultimately at stake is the vision of the founding fathers of the EU; the vision of a continent living in peace and prosperity and thereby contributing to a stable world order. 1  See Gerfin, Michael and Boris Kaiser (2010), “Auswirkungen der Immigration der Jahre 2002 bis 2008 auf die Löhne in der Schweiz”, in: Die Volkswirtschaft, No. 6. 2  In 2009, annual growth of private consumption amounted to 1.2% in Switzerland, while in the euro area, it contracted by 1.2%. 2  BIS Review 87/2010  Merely upholding this vision will not, however, resolve the debt situation.

Philipp M Hildebrand: Europe’s fiscal challenges Speech by Mr Philipp M Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at the Annual General Meeting of the Swiss-American Chamber of Commerce, Rüschlikon, Switzerland, 21 June 2010. *  *  *  I would like to thank Rita Kobel Rohr for her valuable support in drafting this speech. I also want to thank Matthias Lutz for helpful comments. I want to thank the Swiss American Chamber of Commerce for the kind invitation. It is a privilege to speak to you this evening at your Annual General Meeting. The last time I was with you – it is now nearly two years ago –, I paid homage to Albert Gallatin, the legendary Swiss-American Secretary of the Treasury of the United States at the beginning of the 19th century. On that occasion, I chose to honour Gallatin because I felt he incorporates fundamental values long shared by Swiss and Americans alike. As it turns out, recent developments in Europe and elsewhere demonstrate compellingly that one of the important lessons of Gallatin’s outstanding career remains particularly relevant today. He teaches us that public debt reduction requires unwavering political commitment to fiscal discipline. In my remarks this evening, I will attempt to put the fiscal challenges Europe is currently facing in a broader context. The handling of these challenges by Europe’s governments and its citizens will have implications for Switzerland, but also for the United States and ultimately for the world.
The fiscal policy rules that have attracted most attention are those for government budgets and debt. The Maastricht Treaty stipulates that budget deficits are not to exceed 3 per cent and that the government debt-to-GDP ratio ought not to exceed 60 per cent. This was intended to make monetary union candidates put their public finances in order prior to participation. The Stability and Growth Pact has clarified what will apply once monetary union has begun. The Pact can be said to consist of two parts: a surveillance mechanism for detecting at an early stage that a country is starting to have budgetary problems and is in danger of incurring an excessive deficit, and a mechanism for sanctions on errant countries. The first mechanism covers all the EU countries and requires them to present a fiscal policy programme. The sanctions mechanism, on the other hand, applies only to countries in the euro area. The purpose of the Pact is to strengthen political mechanisms at union level so that budget discipline is permanently maintained. There has been underlying concern that otherwise a country might be strongly tempted to shift a part of the adjustment costs for consolidating government finances onto the other countries. The Pact requires every Member State to aim for a medium-term budgetary position close to balance or in surplus. If the 3 per cent limit is exceeded, the Commission and the Ecofin Council are to follow a specified plan of action: examination, opinion, recommendation, publication and, as a last resort, sanctions.

But uncertainty had increased as a result of the financial unrest and we expected this to lead to some negative consequences for growth both internationally and in Sweden. This was why I concluded that it was still reasonable to count on roughly the same interest rate path as in June. But such considerations and deliberations are the final stage in a long process. For me and my colleagues on the Executive Board, the next opportunity for this will be at the monetary policy meeting at the end of this month. 6  BIS Review 112/2007
King John was paying his knights almost three times as much as Henry II (even though they weren’t as productive on the battlefield). 8 The daily rate for foot-soldiers had doubled. And limited evidence suggests the wages of skilled labourers on the crown estates probably increased by a similar proportion. 9 With pay growth approaching 20% a year, wages really were fizzing! 10 The underlying causes of this inflation are debated among historians, but the most convincing argument is that the inflation was a monetary one, albeit with a twist. Not  5  Harvey, P. D. A., (1973), “The English inflation of 1180–1220”, Past and Present, No. 61, pages 3–30. 6  Given the countless other abuses of authority that were going on at the time, one wonders why it was so problematic for the rents simply to be “renegotiated” periodically. In part, custom dictated that this was not the done thing. In part, the problem lay with the “sheriffs” in each of England’s counties. They were responsible for collecting the fixed farms from the King's assets. In normal years, they made an enormous profit, paying only a small fixed farm to the King, yet raking in a great deal more in terms of the real income of the counties. They were accustomed to keeping this surplus.

My heartfelt advice to you is to work as hard on expanding your EQ as you have on harnessing your IQ. You all have great futures ahead of you. You will get there just as fast, and enjoy it much more, if you remember that a sound mind resides most comfortably in a sound, well-rounded person and that a sound, well-rounded person has more than a superior education and brain. The whole person is as important an achievement for those few who have been admitted to the “society of educated men and women” as is the achievement of intellectual excellence. As a former midshipman, I have always been inspired by the creed of the father of the Navy, John Paul Jones, as written by his biographer Augustus Buell. “It is by no means enough that an officer of the Navy should be a capable mariner. He must be that, of course, but also a great deal more. He should be as well a gentleman of liberal education, refined manners, punctilious courtesy, and the nicest sense of personal honor. He should be the soul of tact, patience, justice, firmness, and charity. … Every commander should keep constantly before him the great truth, that to be well obeyed, he must be perfectly esteemed.” I would say that Jones (or Buell) nailed it.
The initial work will require a deeper assessment of the interconnectedness of firms and the prioritization of critical operations. We will be working with all of you to do that. Once we all have a better understanding of the areas of risk, we all need to focus on timely and centralized communications across all firms. Finally, while there is a lot of guidance in this area, we recognize that we need to review our supervisory approach and our tools to ensure we are in the best position to understand and assess vulnerabilities. This step is critical so that we can make timely and informed decisions that enhance the effectiveness of our supervisory framework for cybersecurity. I think we’ve done a reasonable job in developing rules and regulations to ensure firms are prepared to withstand the other types of shocks we have experienced in the past. But, cyber adds an element to planning for the next crisis that goes beyond what additional capital and liquidity, for example, can provide to the system. The topic is a daunting one, but one that we have to address in the very near-term. It is an area that will continue to warrant attention and will require a level of coordination and collaboration between the public and private sectors. In many respects, I think we are all in this one together. The second dimension is legacy: There is still so much “clean-up” to do to fix longstanding technology and data issues that have built up over the years.

As I said to a group of foreign firms a few weeks ago, all firms, regardless of size, need to keep this information in mind and get better at planning in advance, ensuring their recruiting efforts are providing a steady stream of qualified candidates, and looking for opportunities to move people around within the organization, particularly between the front office and control functions, to develop more well-rounded professionals. This is likely to mean more aggressive, creative and targeted searches and a commitment to ongoing training. As the competitive landscape and regulatory requirements change, firms will need to find the right balance between hiring new talent with specific expertise and training current staff to keep them up to speed and capitalize on institutional knowledge. 3. Continuing to Build Resilience – Stress Testing and Risk Management: No, I am not suggesting that all firms, regardless of size, are going to be required to participate in CCAR. However, I believe that incorporating the motivating principles behind stress testing into your planning – namely thinking about the many ways that tomorrow could be different from today and what that could mean for your business – is at the heart of managing your risk and your business with foresight and prudence. Sound risk management demands a thorough understanding of the organization’s full risk profile today and how it could evolve tomorrow. 1  Employee Tenure in 2014. 2  Talent Report: What Workers Want in 2012.
8 The discount rates on liabilities were linked to UK government bond (“gilt”) yields. This drew trustees to gilts, and away from equities, as a matching asset to their liabilities. The Pensions Act 2004 abolished the MFR and replaced it with a scheme-specific funding requirement that further embedded the market-value approach to liability valuation. At around the same time, FRS 17 required publication of corporates’ pension fund surpluses or deficits. This also had the effect of encouraging companies and fund managers to avoid volatile assets, such as equities, and purchase low volatility government securities to avoid large published swings in pension surpluses and deficits. These changes in regulatory and accounting rules are not unique to the UK. There have been a number of empirical studies of their consequences in other countries which point  7  This trend towards “de-equitisation” has been analysed, in a broader context, by McKinsey Global Institute (2011). 8  If a scheme’s solvency dropped below 90%, the employer had to restore it to 90% within one year; if a scheme’s solvency was between 90 and 100%, it had to be restored to 100% within five years. BIS central bankers’ speeches  7  clearly to them having encouraged a secular switch from equities into lower-duration fixed income securities, in particular government securities (Greenwood and Vayanos (2010)), Amir el al (2010), Andonov et al (2013)). Yet the consequences of de-equitisation, for the financial system and the wider economy, may be just as dreadful as the word itself (Furse (2014)).

Regarding policy implementation, besides monetary policy measures, we have also used non-standard monetary policy measures that are still in place, and additionally in several occasions we have modified some of the prudential measures for further strengthening of financial stability. Managing economic and financial cycle spillovers and putting them on the right track, go beyond monetary policy scope of operation and refer to the overall macroeconomic policy mix. Additionally, international developments and regulation could also affect domestic cyclical movements. Nowadays, we live in a world of ongoing recovery of the advanced economies from the long-lasting crisis, rising vulnerabilities of emerging economies, increasing and unpredictable volatility of the international financial markets and, on top of that, quite persisting geo-political risks. In this complex environment, we need to continue with internal policy coordination and international cooperation. Therefore, we have been discussing here today quite comprehensive economic phenomena that require multiple angles of observation and profound analysis. Although I believe that the research papers that are going to be presented today will shed light on some of the issues that I have mentioned, this will definitely be a challenge for the researchers in the period ahead, too. As policy makers, speaking today, many years after the onset of the global crisis, we can probably say that many policy challenges are already behind us, but still there are more to come.
Whilst it is true that this event was over in less time than it would have taken me to buy my regular morning latte, and as the BIS report noted, no systemic financial institutions appear to have incurred material losses, the reality is that our ability to describe how the flash unfolded doesn’t mean we can explain why it happened on 7 October. The events immediately after the referendum and on 7 October paint sharply different pictures about market functioning. As I noted above, the FX market functioned very effectively during the first episode, enabling the sterling exchange rate to act as an important initial shock absorber to the referendum news. But functioning in the second event was poor, with as large a move in sterling but without a fundamental trigger, creating a dearth of liquidity and for a short period of time the absence of a functioning two-way market for sterling. 3 4 5  And by 9% on a trade-weighted basis. The Amihud measure of price impact calculates the ratio between price moves and volumes traded. http://www.bis.org/publ/mktc09.htm 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  The proximity of these events points to a nuanced conclusion about market functioning. Modern, highly electronic markets can facilitate a rapid and orderly reaction to significant news, but resilience might depend importantly on preparation. Moreover, the events of 7 October also highlight the vulnerability of such markets to seemingly unprompted flash price movements.

The costs of higher capital adequacy requirements are limited and largely private, as opposed to the true economic costs. The advantages in the form of a safer banking system are considerable. A reduced risk of financial crises is good for the real economy, good for taxpayers and also good for the banks’ shareholders. The Riksbank will soon present a report that clearly shows that the benefits of higher capital adequacy requirements exceed the costs. An increased capital adequacy requirement may also need to be matched by a tighter leverage ratio requirement. The European Systemic Risk Board (ESRB) has recently submitted recommendations covering lending in foreign currency. We could see the risks of this type of lending to households at close quarters in the Baltic countries a few years ago. A few of the ESRB’s recommendations are (i) better consumer information and credit reviews of borrowers, (ii) taking exchange rate risk into consideration in the national capital adequacy requirements, and (iii) supervision of the risks in liquidity management. Swedish banks need to limit these risks better in the future. The Swedish banks’ liquidity measures need to take into account that it can be difficult to obtain certain currencies in stressed situations. Basel III’s short-term liquidity requirements also need to be met on a per-currency basis. Furthermore, we are examining whether the Riksbank’s reserve requirement can play a part in this regard. The low Swedish risk weights are a cause for concern.
Summary Today, future prospects for the Swedish economy are bright in many respects. The consolidation of the government budget, accompanied by growing confidence in and support for the low inflation policy, has paved the way for a marked reduction of interest rates. This favours domestic demand. Together with a continuation of strong exports and favourable productivity, this points to good conditions for growth in the coming years, with persistently low inflation. At the same time it is a major problem that growth does not seem to be generating new jobs to a sufficient extent. This suggests that to a high degree the unemployment is structural. Measures must therefore be taken to improve the functioning of the labour market. For further favourable economic development it is also essential that the efforts to reduce government debt are continued. The conditions for monetary policy in the years ahead will then be improved and greater freedom of action will be created for economic policy in the longer term. BIS Review 68/1997

Paul Tucker: Clearing houses as system risk managers Speech given by Mr Paul Tucker, Deputy Governor for Financial Stability at the Bank of England, at the Depository Trust & Clearing Corporation (DTCC)-Centre for the Study of Financial Innovation (CSFI) Post Trade Fellowship Launch, London, 1 June 2011. *  *  *  It is a real pleasure to be here this evening. The new “Post-Trade Fellowship” is an excellent idea, and I am delighted Peter Norman is the first incumbent. Like CSFI, Peter has made a very considerable contribution to thinking about the financial system – and no more so than in his latest book, The Risk Controllers. There is hardly a more important topic right now. The community has rediscovered the importance of the financial system’s plumbing. Your new Fellowship will help to sustain that interest as the years pass. And that is of special interest to the Bank of England given the government’s plan to transfer to us responsibility for supervising critical financial infrastructure – settlement systems and clearing houses. CCPs and the financial network Right now, the biggest “plumbing” issues follow from the decision of the G20 that more of the over-the-counter derivatives market should be cleared via central counterparties. But this is not just about derivatives markets. Compared to their origins in clearing commodity futures and then exchange-traded financial derivatives, CCPs have increasingly been clearing cash instruments – notably equities and, in recent years, government bond repos.
Market participants had little incentive to internalize the negative externality of the run-risk created by their collective choice of finance, and they made erroneous assumptions about the liquidity of asset markets and the capacity and willingness of banks to distribute central bank liquidity to the wider financial system during periods of stress. Because the boom years resulted in strong earnings, low price volatility and few credit losses, firms were able to operate at extreme levels of leverage. When housing prices started to decline, the vulnerabilities of this type of business model soon became apparent. Heavy reliance on short-term wholesale funding exposed the system to a series of intertwined downward spirals in asset and funding markets. This spread in waves. It began in the market for asset-backed commercial paper (ABCP) issued by off-balance-sheet conduits, and spread via auction-rate securities to the repo, money market and financial commercial paper markets that formed the core financing for market-based financial intermediation. Initial declines in asset prices especially for mortgage related assets forced leveraged holders with maturity mismatches to sell assets. This increased price volatility and further reduced the value of the assets that collateralized other firms’ borrowings. Higher volatility led banks and secured lenders to raise margins, while concern about counterparty risk and their own funding needs made banks reluctant to on-lend liquidity. The resulting higher margins on repo and increased collateral calls due to credit ratings downgrades reduced the quantity of assets that could be financed in repo markets and elsewhere, prompting further asset sales.

Thank you for your attention. 4  BIS central bankers’ speeches
In other words, a central bank policy of lending against only the best assets is likely to prove time inconsistent when it comes to the crunch. This is not an ivory tower problem. It is a real problem. It is why the Bank of England confirmed last year that we do stand ready, via our public facilities, to lend against a wide range of collateral, subject crucially to appropriate haircuts and other terms. To do otherwise would be futile; it would lack credibility. And to do so is consistent with Bagehot’s dictum that central banks should lend against “everything which in common times is good ‘banking security’ ”. 12 The Bank has already published an initial list of collateral eligible in its dedicated liquidityinsurance facilities. Looking ahead, the Bank plans to expand the list, and to promulgate detailed eligibility criteria reflecting its risk tolerance and experience gained from managing  England’s Market Operations: A consultative paper by the Bank of England”, October 2008. Mark Carney, Governor of the Bank of Canada, has also set out his principles for the Bank of Canada’s liquidity provision. 10  Broadly, if the monetary authority thinks it can achieve above “trend” output growth or employment for a while by reducing interest rates, it may be tempted to let inflation temporarily rise above the rate it has promised to deliver.

Second, the legislative amendments must strike an appropriate balance between the rights of creditors and those of debtors, especially the socially excluded, and I should like to highlight the advisability of concentrating efforts in the field of social policies: a country as economically, socially and institutionally developed as Spain has sufficient resources to face up to and resolve the most dramatic and unacceptable situations of exclusion and need without affecting financial stability in the process. All these issues have been duly discussed in this Congress, which is why I shall focus on the situation of our banking system and on our economic outlook. BIS central bankers’ speeches  1  Role and situation of Spanish banks I should first like to highlight the crucial importance of banks in resource allocation and their role of intermediation between those supplying and demanding financing. Mass access to owner-occupied housing would be almost inconceivable without their intermediation. Mortgage lending is a very important segment of the financial intermediation in which credit institutions engage. As at December 2014, mortgage loans for house purchase extended by credit institutions to households amounted to slightly over € billion, more than 40% of total bank lending. The number of outstanding mortgage loans for house purchase is at present 5.8 million, a large percentage of which (82%) are at floating rates, which has allowed for the transmission of the Eurosystem’s more accommodative monetary policy to household financing conditions.