samchain/econo-pairs-v1 huggingface dataset:
Another important task for the financial system is to reduce risks for both savers and investors. The fact that some companies can involve greater risk than others can be balanced in a well-differentiated financial market by savers spreading their savings across different forms, buying different shares, bonds, shares in mutual funds that in themselves represent a risk spread, and by depositing some in banks. A company that takes on debt in order to make profits in future through sales on foreign markets can protect itself against exchange rate fluctuations by signing futures contracts, which state when and at what prices future income will be converted to kronor. The company can also buy input goods, such as oil, and sell, for instance, pulp at a forward rate, so that the company knows for certain what its future costs and income will be. It costs to do this, but the company then faces no risks. It is quite simply a form of insurance. BIS Review 9/2002  3  When it comes to smaller companies and individual households, the securities market is hardly a suitable alternative. The risks for operators on the capital market are difficult to assess and the costs of the transactions have to be spread out over large amounts. Instead, banks and insurance companies supply services to small companies and households. The banks act as intermediaries, who receive deposits that are liquid and convert them into long-term lending, so that savers' requirements can be reconciled with the needs of the investing company.

Key policy rate is low because inflation is low and because the downturn abroad and a strong krone are dragging down on growth in some sectors in Norway. Very low interest rates abroad and high premiums in money and credit markets reinforce this picture. There are unusually wide differences between various interest rates, reflecting the high level of money  4  BIS central bankers’ speeches  market and credit premiums. Many households are paying up to 4 percent on housing loans and interest rates on corporate loans range between 5 and 6 percent. When setting interest rates, the Bank does not give weight exclusively to bringing inflation back to target. Weight is also given to the effects of the interest rate on output and employment. At the same time, weight is given to the risk that a prolonged period of low interest rates can lead to elevated risk-taking and excessive debt accumulation in the household and business sector. Such imbalances may have spillover effects further ahead, with substantial effects on output and employment. In the March 2012 Monetary Policy Report, Norges Bank clarified how these considerations are expressed in the Bank’s response pattern. In that connection, the Bank adjusted the criteria to which it gives weight in interest rate forecasting. The key policy rate is set so that inflation is brought back to target. At the same time, inflation targeting is flexible, which means that the path for inflation should be weighed against developments in output and employments. Interest rate setting should also be robust.
In its conduct of monetary policy, Norges Bank focuses on the fundamental preconditions for achieving exchange rate stability against the euro. First, price and cost inflation must be brought down towards the corresponding aim for inflation for the European Central Bank (ECB). At the same time, monetary policy must not in itself contribute to deflationary recessions as this could undermine confidence in the krone. There are few significant differences between Norway's actual response pattern and that of countries with explicit inflation targets. Price and cost inflation must be steered towards that aimed at by the ECB. However, in Norway fiscal policy has traditionally had an important role in stabilisation policy. This has reduced the burden on monetary policy. In addition, the Norwegian wage determination system has probably contributed in periods to dampening the impact of shocks hitting the economy. Monetary policy influences price and cost inflation with a time lag of perhaps one to three years. In consequence, projections for price and cost inflation with a horizon of a couple of years play an important part in the setting of interest rates. From the time interest rate decisions are taken until the interest rate has an impact on prices and costs, various types of disturbance occur which influence price and cost inflation. Thus it is not possible to maintain full control over developments in prices and costs. Actual price and cost developments normally deviate somewhat from earlier projections.

And lastly, we will do more in the future to enhance the attractiveness of the Paris financial centre: the Government will do its part – the Prime Minister will talk about this later –; the Ile-de-France region and the Paris City too; and the ACPR will examine in a prompt way all applications in its remit coming from financial institutions that are already licensed in another EU member state. Of course, Paris is not the only financial centre in the euro area, but it has everything it needs to be one of the best. It depends on us, on all of us. Therefore, now more than ever, the time has come for Paris Europlace to take center stage. BIS central bankers’ speeches  3
For reasons set out earlier, it has probably also increased the chances of self-reinforcing and self-referential waves of collective irrationality taking hold. 35  If  so, these waves of collective irrationality could be becoming larger than ever. While a vestige of our hunter-gatherer past, the madness of crowds can these days spread to a global village. That leaves us with a conundrum. If decision-makers in complex environments were to draw on a wider set of non-expert opinion, what are they likely to encounter? Is it a case of harnessing the wisdom of crowds or avoiding their madness? Will greater public engagement help inform and improve expert decision-making by widening the pool of lived experience? Or will it hinder that decision-making by polluting the information pool with irrational or irrelevant opinions? Perhaps the most comprehensive study of the value of expert and non-expert opinion, as it applies to complex decision-making in the social sciences, has been provided by political scientist Philip Tetlock. Over a more than 20-year period, he has researched forecast accuracy and, most recently, run The Good Judgement Project. This explored the performance of a set of experts and non-experts in forecasting the outcome of a particularly complex set of decision problems. So what does Tetlock’s evidence suggest? That the usefulness of non-expert opinion in complex decision settings depends on how exactly this information is drawn in and drawn on. From Tetlock’s book with Dan Gardner in 2015, Super-forecasting, I would highlight two key findings.

Interestingly, these seek to strike a rather different balance between diversity and deliberation, both relative to the Athenian model and especially relative to each other. One is executive democracy. Under this model, an elected or appointed set of representatives take decisions on society’s behalf, often through a Parliament or Congress. This model underpins modern democracies in a great many countries; it has grown in popularity for much of the past 200 years. Such has been its success, many people these days would define democracy in terms of this model. For most of history, this was not the case. Aristotle was not alone in seeing an executive democratic model as an “elected oligarchy”. 42  At the time many executive democracies were being put in place, their Founding  Fathers (they were all still men) were often deeply suspicious of Athenian-style democracy. John Adams, second President of the United States, captured it thus: “Remember democracy never lasts long. It soon wastes, exhausts and murders itself”. 43  The Greek Empire lasted only 350 years before exhausting itself. 40  Hennig (2017), Van Reybrouck (2016). Gruen (2018), Fiskhin et al (2008). Politics, Aristotle. 43 From John Adams to John Taylor, 17 December 1814. 41 42  17  All speeches are available online at www.bankofengland.co.uk/speeches  17  While Adams was wrong about the durability of executive democracy, suspicions about whether it properly represents all slices of society have persisted. Indeed, these suspicions have risen recently.
Programmable money means embedding rules within the medium of exchange itself that defines its usage. These rules are retained even when the money is transferred. Why is this useful? Take for example, donations to charity. With programmable money, we can have better assurance that donations reach their intended beneficiaries and the funds are used for their intended purposes. We can programme the beneficiaries and purposes into the money itself. The programmability comes from tokenising the money and placing it on a distributed ledger. There are four options for programmable money: cryptocurrencies, stablecoins, tokenised bank deposits, and central bank digital currencies or CBDCs. Cryptocurrencies are a non-starter. They have performed poorly as a medium of exchange as well as a store of value. Given its volatility and speculative nature, cryptocurrencies do not hold promise to serve as money in the first place. Stablecoins are more promising. If well-regulated and securely backed by reserves – as per MAS' latest proposed regulations – they combine the benefits of stability and programmability. But their pervasive take-up remains to be seen. Tokenised bank deposits are digital representation of commercial banks' deposits that can be used as digital cash to make payments or buy and sell digital assets without going through the banking system. CBDCs, as direct liabilities of the central bank, marry the advantages of central bank issued cash with the advantages of the blockchain. They are essentially digital, programmable versions of cash. Where does MAS stand with respect to these four forms of programmable money?

Thus Hong Kong will adopt Basel II at the same time as other major international financial centres, such as London, Frankfurt and Tokyo. From a regional perspective, the implementation timetable in Hong Kong is broadly similar to that being adopted by Australia and Singapore. For several years now the HKMA has been developing its supervisory approach along Basel II lines, and this is leading to some significant changes in how supervision is conducted. Central to this is the issue of "process versus rules". Process versus rules The original Basel Capital Accord was developed when risk management was still very much in its infancy. It reflects what might be called a "rules-based" approach to regulation in the sense that it sets prescriptive standards that banks are required to follow. It relies largely on the application of simple, mechanical formulas for assessing how much capital a bank should hold. The essence of the old Capital Accord was that it represented an attempt to monitor the prudential soundness of banks by using a standardised risk measurement framework, which was applied to all institutions and which employed data based on a snap-shot of their balance sheets at certain specified reporting dates. The approach was standardised since regulators specify the precise form in which the calculation of capital adequacy is to be performed - for example, the specific risk categories into which assets are to be assigned.
As you may know, Peter Fisher, an executive vice president of the New York Fed, chaired a working group of the Euro-Currency Standing Committee of the G-10 central banks, which published a discussion paper on “Public Disclosure of Market and Credit Risks by Financial Intermediaries” in September 1994. This so-called Fisher report described how trading and financial risk management practices had developed far beyond the public disclosure of financial information, creating a gap between the precision with which a firm’s management could assess and adjust the firm’s own risk exposures and the information available to outsiders to help them assess the riskiness of that firm’s activities. Recognizing that such an asymmetry of available information could cause the misallocation of capital among firms and amplify market disturbances, the Fisher report recommended that all financial intermediaries -- regulated and unregulated -- move in the direction of publicly disclosing periodic quantitative information. The information requested would provide estimates relied upon by the firm’s management of: the market risks in the relevant portfolio or portfolios, as well as the firm’s actual performance in managing the market risks in these portfolios; and the counterparty credit risks arising from the firm’s trading and risk management activities. By and large, these proposed measures for reporting risk have been adopted voluntarily by many major banking institutions around the world, with many others moving in that direction. As such, they have contributed importantly to improved transparency in financial markets.

This is prospectively very positive. A couple of years ago I asked around London who were the best analysts of banks. Pretty well all those named were current or past equity analysts. A measure of success of our reforms will be that some leading analysts will concentrate on debt rather than equity, on the downside risks: credit analysts. They will be needed. Maybe there are some already. The upshot is that withdrawing the safety net from banks will require the other parts of the financial system to be sound, because they will have to stand on their own feet. It is sometimes pointed out that the insurance industry – other than AIG – did not benefit from state support. But, of course, insurance companies holding bank debt were the direct  BIS central bankers’ speeches  1  beneficiaries of state support for the banking system. Regulators of insurers – including, in this country, prospectively the Bank of England through the Prudential Regulation Authority – will need to take the changed regime for banks into account. We no more want insurance to be part of a “socialised” financial sector than banking. Finally on the “whats”, a world in which bank debt is perceived to carry risk is a world in which, as I have said before, it may be helpful for banks’ management to be remunerated partly through subordinated debt rather than just equity. Management would then have a clear personal incentive to focus on and contain tail risks.
And how agile and resolute is the bank in actually changing the beliefs, structures, dynamics and thus behavioural patterns that are preventing it from reaching, or restoring, its reputational and strategic goals? Conclusion Let me conclude. Some of you here today are non-executive directors at banks. As such, you play a vital role in setting the right tone for your entire institution. Your conduct is crucial in creating a healthy risk culture within your organisation, and you are responsible for nurturing behaviour which reflects the core values of your organisation and protects its best interests, not just in the short-term, but also in the future. Beyond your technical skills and your experience in banking, there are broader expectations regarding your conduct and behaviour as board members. You must ensure that there are concrete consequences for failing to adhere to prudent behaviour. Governance in the stricter sense deals with the structure which shapes a banks’ actions. Getting these structures right is of the utmost importance. But that is not the whole story. It is also relevant how people behave within these more formal structures and what the underlying cultural drivers of their  behaviours are. Banks would be well advised to seek to identify these behavioural patterns and to act on them if such patterns encourage conduct which is not in line with their values and risk appetite.

Mr Bäckström reports on the Swedish economy and monetary policy  Speech given by Mr Urban Bäckström, Governor of the Sveriges Riksbank and Chairman of the Board of Directors and President of the Bank for International Settlements, to the FöreningsSparbanken, in Malmö on 16 February 2000. *  *  *  The repo rate increases In order to understand why the Riksbank has raised the repo rate in two steps from 2.90% last November to 3.75% less than a fortnight ago, it is necessary to consider the situation in 1998. The mood at that time, in the global economy as well as in Sweden, was coloured by the Asian crisis, the suspension of Russian payments, the problems with the hedge fund Long Term Capital Management and falling stock-market prices. It was considered that in addition to direct problems, the financial crisis in the autumn of 1998 would have negative effects on real economic activity. Forecasters altered their assessments and the prospects for global output and inflation were revised downwards. Central banks around the world did likewise and the Riksbank was no exception. Instrumental rates were reduced in many countries. Between the early summer of 1998 and the spring of 1999 the Riksbank cut the repo rate by a total of 150 basis points, bringing it down from 4.40 to 2.90%. The actions of central banks probably mitigated effects of the various shocks.
Clearly, given that the Swiss franc is significantly overvalued, the earnings outlook for Swiss franc investments compared to those in other currencies is considerably reduced. BIS central bankers’ speeches  3  There is widespread discussion on negative interest rates, in part because institutional investors, and pension funds in particular, could now incur costs for holding liquidity. However, in the current environment, there are no real alternatives to our measure. Negative interest helps to reduce the overvaluation of the Swiss franc. If the Swiss franc were even stronger, this would have a direct or indirect effect on everyone in the economy: companies, households and the public sector. With all the concern about negative interest it is important to remember that when inflation is negative, real interest rates are higher than nominal interest rates. In the past, the inflation rate was often higher than the nominal rate of interest. In other words, in terms of real returns, there have been times when saving was less worthwhile than it is now, indeed, times when savings balances actually lost value in real terms. Moreover, in the current situation, efforts to circumvent negative interest rates by obtaining exemptions or shifting to cash are not in Switzerland’s general interest, since they undermine monetary policy intentions. It should be remembered, in this respect, that holding cash also entails substantial costs and is subject to a high level of risk. We will retain the current interest rate level for the time being. It will continue to support the weakening of the Swiss franc.

Andrew Bailey: The case for an open financial system Speech by Mr Andrew Bailey, Governor of the Bank of England, at the Financial and Professional Services Address, Mansion House, London, 10 February 2021. * * * As we look forward – and for so many reasons we must look forward – it is important to focus on the future of financial services, and the important role they play in our economy and internationally. This will be my focus today. I am going to look forward with the benefit of history and context and set out why open financial markets are in the interests of all – home and abroad – and something we should always strive for. I want to start with the Bretton Woods agreement towards the end of the Second World War. This was a fundamental and decisive commitment to an open world economy. This commitment did not come free at the time – the adjustment was hard for this country – and of course the more formal Bretton Woods system broke down in the 1970s. But that breakdown did not compromise the commitment shared broadly across nations to an open world economy. There have been times when the commitment has been sorely tested, but it has not been abandoned. What followed the breakdown was a shift of emphasis, not a free for all.
As you remember, around this period of last year, one of the issues that had attracted a lot of public attention was the continued influx of fund flows into the emerging markets including Thailand. But this theme has suddenly changed when the US Federal Reserve signaled in May its intention to scale down, and eventually terminate, its asset purchasing program. The signaling immediately sparked turbulence in capital and currency markets in emerging economies and certainly serves as a recurring reminder that the linkages in the international economy are as psychological as they are mechanical. From June to August, Thailand, like other economies in the region, continued to witness further episodes of outflows as investors continued to reform their expectations towards the exact tapering timeline. 4. In the recent months, turbulence in the markets seems to have somewhat been moderated. This possibly reflects the fact that much has been priced in during the earlier outflow episodes, as well as the fact that it has been clearer to the markets now that any further tapering by the Fed will likely be done in an incremental manner. This is, however, not to say that short-term volatilities are no longer with us. The challenges going forward for policymakers are, therefore, not only to have the right set of policy responses in place to deal with these short-term volatilities, but also to make sure that all the market participants are well prepared for the scenarios that could be expected. 5.

If today’s inflation targeting regime is to avoid the same label, it must be practiced flexibly so that it fosters economic stability over time. 16  BIS central bankers’ speeches  Confidence in low and stable inflation remains firm. That must always be the main task of monetary policy. Yet our own history and the recent experience of other central banks have shown that the system can come under pressure. When circumstances change, central banks must also be capable of adapting and new thinking. We must learn from the past, be prepared for sudden shifts and seek out new solutions. Come what may. BIS central bankers’ speeches  17