samchain/econo-pairs-v1 huggingface dataset:
They claim these involve too much cost. But these are the rules of the game. The fact is that we at the Riksbank have spent considerable time estimating the effects of the regulations to be introduced. Next week we will publish some our estimates of the effects in our Financial Stability Report. And our calculations show – even if they, like all estimates are somewhat uncertain – that the negative effects will be fairly limited. Above all, the costs for the banks are expected to be slightly higher. It is expensive to create new systems and establish new routines to manage risks and money flows. Holding more capital means that one ties up money that could otherwise have been lent out and generated interest income. And the same applies to holding more liquid assets; there is a cost in the form of lower interest income than one would have had if the funds were instead lent out. The banks will probably pass on a small part of these costs to their customers in the form of slightly higher lending rates. But here we are talking about changes of some few tenths of a percentage point for the average customer – perhaps slightly more for households and less for companies. One can probably also expect a dampening effect on the banks’ profits, and it is fairly natural that the required rate of return for bank shares will decline as the banks become more secure. The banks may also experience increased costs for long-term funding.

Considering those characteristics, adopting any currency other than the euro would have serious drawbacks.8 Therefore, reforming the current regime appears preferable to a radical change should EMU membership be unattainable, at least for the next decade. The fact that the vast majority of small countries either use another country’s currency or pursue some type of rigid fixed exchange rate policy could indicate, however, that a floating currency may face difficulties over the long haul (Chart 3). Ladies and gentlemen: No monetary framework or choice of currency will solve Iceland’s economic problems once and for all. The set of solutions labelled “cure-for-all-ills” is an empty set. Protracted discussions of the contents of an empty set are not only empty in themselves; they are absolutely pointless. Irrespective of the framework, economic policy must be pursued with greater discipline than has been the case to date. However, imposing a framework that forces the authorities to adopt more long-term oriented policies could improve performance. One way to do this is to join a currency union. The experience of Greece and other countries on the periphery of the EMU shows, however, that if economic policies remain short-sighted and solving imminent fiscal problems is delayed for too long, the imposed discipline is anything but palatable. I think Iceland’s experience of its collaboration with the IMF indicates, however, that it would flourish under such discipline. But if EMU membership is not an option, that discipline must come from within.
That will be an important part of the reforms of microsupervision in the UK, as we prepare for the Prudential Regulatory Authority. Enhanced resolution regimes are aimed at putting asset managers at risk through their holdings of credit instruments, just as they accept risk as equity investors. That will affect the oxygen that bankers breathe. But we could underpin the positive incentive effects by paying part of the deferred element of the remuneration of bankers in risky debt securities as well as in equity; equity gives them upside as well as downside, whereas a fair chunk of their wealth being a debt claim on their bank would give them a powerful interest in its medium-term soundness. My guess is that senior bank management team would not object to that. But none of what I have said makes a case for placing all of our eggs in the resolution basket. Switching metaphors, we need belt and braces. Which is why the G20 agreed that the so-called Global Systemically Important Financial Institutions (G-SIFIs) should carry greater loss absorbing capacity (or GLAC) than implied by Basel III. First best would be equity. Indeed, Adair has argued this evening that ideally Basel 3 would have set a higher equity requirement. But that did not happen. In practice, we are going to have to be open-minded, but also principled, about quasi-equity instruments contributing to GLAC for SIFIs (sorry about the acronyms!).

It was a risk about which bank management, investors, regulators and supervisors were all myopic. The socalled Fundamental Review of Trading Book Capital Requirements is, as Adair said, a very important opportunity to correct this. 5  See the Bank’s paper: “The role of macroprudential policy: A discussion paper”, November 2009 and Tucker P M W (2009e), “The debate on financial system resilience: Macroprudential instruments” at the Barclays Annual Lecture in London. 6  Tucker P M W (2010), “Shadow Banking, Financing Markets and Financial Stability”, Speech at a BCG Partners Seminar. BIS central bankers’ speeches  3  What that amounts to in practice is recognising that the degree of resilience of market liquidity matters a lot. I have been arguing that a market’s liquidity is unlikely to be resilient if demand is dominantly from leveraged investors and traders. They buy when prices are rising, but stop buying or even sell when the price stops going up, leaving prices without a firm underpinning – and often with prices perched on a precipice. That element of recent events is missing from Shleifer’s set up, but in the real world it is precisely what we might expect if one joins up his story about innovation induced by myopia with Hyun Shin’s earlier paper7 about the association of leverage and asset-prices fluctuations. If securities are fundamentally mispriced because of blindness to a type of risk and, further, are held dominantly by leveraged players, the adjustment when it comes will be all the greater.
Bringing savers and borrowers together As we all know, starting a business, expanding an existing business, or embarking on any other kind of creative or entrepreneurial enterprise, requires money - investment capital. Therefore, any society’s long-term economic prospects are best served when households and businesses freely decide to save part of their current income. But the decision to save is not, in itself, sufficient to ensure economic growth and prosperity. Some institutional mechanism must exist through which society’s savings can be collected and channeled  1  BIS Review 27/2000  into productive investments. Moreover, because savers will naturally perceive risk in parting with their money, they must be induced to entrust their savings to that institution that can then put their capital to work in sound and productive ways. For this to happen, a class of financial institutions must exist that the public views as a safe and convenient outlet for its savings, where at least some fraction of those savings are maintained in the form of highly liquid assets, and assets by which payments for goods and services can be made quickly, easily and safely. The single dominant class of institution that has emerged to play this crucial role of intermediating between savers and borrowers is the commercial bank. In virtually all countries, banks function as the repository of a large fraction of society’s liquid savings and the entities through which payments are made.

In implementing this agenda, we should always keep in mind the fundamental objective - preserving financial stability so that banks and the broader financial system can effectively perform their critical functions in a market economy. There is no question that the more effectively a banking and financial system operates, the more likely the economy is to flourish and the citizens of that society to prosper. This is particularly true in many emerging market economies that have a relative scarcity of savings in relation to their large-scale investment needs. The banking sector in emerging market economies also tends to be more concentrated and represents a larger share of the domestic financial system, suggesting that, if problems occur, they are likely to have an amplified effect on the real economy and on the fiscal cost associated with bank rescue and resolution costs. In pursuing the objective of financial stability, we must also acknowledge that both the public and private sectors have a critical role to play. While the perspectives of market participants and official supervisors may differ from time to time, our objective is the same - to maintain a strong and vibrant financial system over the long term. Indeed, it is clearly evident to me, as a former commercial banker and now as a supervisor, that only if we work together, each meeting our responsibilities and reinforcing the other, will we be able to successfully manage and supervise a rapidly evolving, ever-more complex financial services industry. 9  BIS Review 27/2000
That transparency was given a further boost by the creation of the Monetary Policy Committee where the votes of all members are published along with the minutes of the discussion at MPC meetings. Despite its record on transparency, questions have been raised about whether the MPC could go further. Do the published minutes reveal enough about individual views? Should there not be individual paragraphs in the minutes explaining the position of each member? Why does the Committee not publish a forecast corresponding to the path of interest rates that it feels most likely to be necessary to meet the inflation target? Why does the central projection of the forecast always seem to end up at close to the target of 2.5%? It is helpful to step back and ask three more fundamental questions. First, what is the MPC trying to communicate? Second, how should it communicate? Third, what is the role of the inflation forecast? The basic message which the MPC is trying to communicate is that, over the medium term, inflation should be expected to average 2.5%, and that the Committee will respond to events as they unfold in order to keep inflation on track to meet that target. Hence the Committee needs to explain its view of the current state of the economy, how and why it has reacted to events that have already unfolded, and what it believes are the risks lying ahead. All of this can be encapsulated in its “policy reaction function”.

The fairly low level of growth in employment, as measured by the number of employed, must be seen in the light of the sharp decline in sickness absence through 2004 after rising for several years. The decrease in sickness absence has increased companies’ supply of  2  BIS Review 18/2005  labour and reduced the need for new employees. Measured in person-hours worked, employment growth was solid last year. Person-hours worked increased by 2.2 per cent from 2003 to 2004. A corollary to the increase in the number of person-hours worked is partly reduced sickness absence and partly three more working days in 2004 compared with 2003. An increase in available person-hours and increased competition and rationalisation in many sectors led to higher-than-normal growth in potential output last year. The economy has therefore been able to grow a fairly rapidly for a period without the emergence of bottlenecks in the labour market. In the business tendency survey, manufacturing industry reported higher output volumes and capacity utilisation. Average capacity utilisation in the manufacturing sector is now close to its historical average. Norges Bank’s regional network reports that nearly half of the contacts would have some or substantial problems in increasing production in excess of planned levels. This may indicate approximate balance between supply and demand in the economy, and that capacity utilisation is about normal. A normal level of capacity utilisation is consistent with an output gap – the percentage deviation between actual and potential output - that is now close to zero.
The aftermath of the shifting economic tectonics spurred countries to strengthen regional and bilateral cooperation. The impetus for regional integration in ASEAN deepened, and efforts were made to strengthen the regional safety net through bilateral currency swap arrangements and the Chiang Mai Initiative Multilateralisation. At the global level, the G20 was made the premier forum for international economic cooperation and the leaders involved have indicated their commitment to reforming the international financial architecture. Collectively, countries in this region are resilient with strong domestic savings, current account surplus and high international reserves. The strength and stability of this region could be further enhanced with increased regional cross-border investments, supported by a wide network of regional banks. While some central banks and sovereign wealth funds have taken the lead to invest regionally, the size of these cross-border investments in local currencies pales in comparison with investments in the dollar markets. Nevertheless, re-channeling savings into the region, albeit still small, is a welcome start. China: Roaring Dragon The story of China’s rise in the global economy is a remarkable one. Its integration and increasing influence in the global economy is becoming more pronounced. In 1990 its size was only 1.9% of the global economy. Now it constitutes close to 15%. Rapid growth of a staggering 9.4% between 1978 and 2012 led to this rise. In fact, if one measures the size of the economy by purchasing power parity terms, China is already the largest economy in the world.

1/5  BIS central bankers' speeches  In recent decades, however, the prime position of the dollar has been unchallenged. Its surpassing of the sterling occurred in the 1920s, although many historians would ascribe the preeminence of the dollar as coming to the fore with the Bretton Woods agreement in 1944. Since then, the “dollar dominance” continued unabated despite the US experiencing various challenges, including the breakdown of the Bretton Woods system in the 1970s and the recession in 1981. Closer to present times, the dominance of the dollar continues to hold even after the Global Financial Crisis, the most damaging crisis since the Great Depression. Although the privileged position of the dollar was not in question, the magnitude of its influence certainly varied across time. It was not linear, consistent nor smooth-sailing. In fact, over the past few years, it was a favorite past time of market commentators to call time on the ‘reign’ of the dollar as the world’s reserve currency. A few candidates were cited to supplant the role of the dollar in the past, including the yen, the euro and recently, the renminbi. Necessity for Economic Rebalancing In 1971, the US Treasury Secretary John Connally, famously said to the European finance ministers that the “dollar is our currency, but your problem”. This statement had validity then, as it does now. For emerging markets in Asia, this braggadocio or arrogance rings true.
Mugur Isărescu: Closing remarks - EUROFI High Level Seminar 2018 Closing remarks by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the EUROFI High Level Seminar 2018, Bucharest, 27 April 2018. * * * I am honored to be invited to give a few closing remarks at this EUROFI conference. EUROFI has turned, over the years, into a major European event that deals with financial issues. The Great Recession compelled governments and central banks, regulators and supervisors of finance, to put into motion a radical reform of the ways financial industry does function. I do not wish to bother you with remarks that repeat what seems to have become a new conventional wisdom. However, it is never redundant to remember that oversize, too high leverage, unconstrained and reckless risk-taking, dangerous financial products, insufficient transparency, and, not least, poorly understood systemic risks, have forced the content and the pace of reforms. The European Institutions created a new regulatory framework after the eruption of the Crisis. The European Systemic risk Council (ESRB) represents the attention we all give to interconnectedness, to systemic risks that show up in financial markets. Not long ago, our widely embraced practices and thinking in central banking, in the regulation and supervision of finance, seemed like indestructible building blocks. The expansion of shadow banking, Fintech, nonconventional threats under the appearance of cyber-attacks, tail events in general, keep us vigilant and ask from us open-mindedness and constant reexamination of our beliefs.

This takes me to the issue of integrated financial markets in Europe, not only in the euro-area. As Peter Praet mentioned in last year’s Eurofi held in Malta, “private risk-sharing was the general principle of the new European rules such as the Bank Recovery and Resolution Directive (…) making banks equally liable across countries for the amount of risk they want to take into their respective balance sheet”. A pending issue for the completion of the Banking Union rests with the home-host approach in the resolution process. One of the main tasks within the resolution planning process for groups is to identify the most suitable resolution strategy and ensure its viability. Most of the resolution authorities and banking groups have embarked in a Single Point of Entry (SPE) resolution strategy at European level, acting according to their declared standing and European structure. The Single Point of Entry (SPE) resolution strategy is, by definition, the reflection of the idea of unity and cohesion, the purpose of the European Union. When an MPE strategy is preferred, authorities must ensure the separability of the subsidiaries from the parent bank not only as a gone concern, but also as a going concern. If the local subsidiary does not act independently in its daily activities, it is unlikely that it will be able to do so in case of turmoil.
8  BIS central bankers’ speeches  Boston Evening Transcript (1892), “English financier honoured – Reception to William Lidderdale in New York” available at http://news.google.com/newspapers ?nid=2249&dat=18921117&id=s5E-AAAAIBAJ&sjid=SloMAAAAIBAJ&pg=5019,4090185 Bowman, W D (1937), “The Story of the Bank of England – From its foundations in 1694 until the present day”, Herbert Jenkins Ltd. Boyle, A (1968), “Montagu Norman: A biography”, Weybright and Talley. Capie, F, Goodhart, G, Fischer, S, Schnadt, N (1994), “The Future of Central Banking”, Cambridge University Press. Capie, F (2010) “The Bank of England: 1950s to 1979”, Cambridge University Press. Clapham, J (1958), “The Bank of England, A History Vol. 2 1979 to 1914”, Cambridge University Press. Crockett, A D (2000), “Marrying the micro- and macro-prudential dimensions of financial stability”, speech at the Eleventh International Conference of Banking Supervisors available at http://www.bis.org/speeches/sp000921.htm Galati, G and Moessner R (2011), “Macroprudential policy – a literature review”, BIS Working Papers No 337. Geddes, P (1987), “Inside the Bank of England”, Boxtree Ltd. Goodhart, C A E and Crockett, A D (1970), “The importance of money”, Bank of England Quarterly Bulletin, June, pp 159–98. Hennessy, E (1992), “A domestic history of the Bank of England, 1930–1960”, Cambridge University Press. John, S, Roberts, M and Weeken, O (2012) “The Bank of England’s Special Liquidity Scheme”, Bank of England Quarterly Bulletin, March, pp 57–66. . Kynaston, D (1994), “The City of London Vol. I – A World of Its Own, 1844–66”, London. Kynaston, D (1994), “The City of London Vol. II – Golden Years, 1890–1914”, London.

If not too big to fail, it was certainly large enough to look after itself – as the Bank found out in1860. Two years earlier, the Bank had abolished the right of other banks to come to it for cash by discounting bills. The banks took umbrage. With Overend and Gurney playing the role of shop steward, they collectively withdrew £ million from the Bank over three days in an attempt to bring the Bank, if not to its knees, then at least to its senses. Dark, anonymous messages were sent to the Bank, presumably not by Twitter, warning: “Overends can pull out every note you have”.1 In the event Overend eventually caved, returning to the Bank the notes they had withdrawn apologetically – or at least semi-apologetically, as the notes actually came back cut in half. Six years later in 1866, when Overend and Gurney asked the Bank for an emergency loan of £ the answer was “No”. The Bank won this battle, but was to lose decisively the war. Overend and Gurney failed. The City shook. Panic took hold. The Bank was forced to lend £ million – ten times the initial sum – to support other banks. There was a chorus of disapproval. The Bank’s role in crisis management would never be the same again. Supporting the financial system Criticism of the Bank’s role in the Overend crisis came prominently from Walter Bagehot, then-editor of The Economist and Bank-of-England basher of his day.
As I pointed out earlier, the costs of avoiding negative interest rates by substituting currency for deposits is probably lower for retail depositors than for larger, business and institutional, depositors. Because retail depositors can avoid negative rates on deposits relatively easily, it makes sense not to impose negative rates on their deposits. In addition, many retail depositors may have a visceral negative reaction to being charged negative rates, and may lack a clear understanding of whether their bank is minimizing the costs of storing their deposits. Recognizing these difficulties, the central banks that have negative policy rates offer zero rates on many of their deposits from banks, imposing negative rates on the “marginal” deposits. In this way, commercial banks can, in general, charge their retail depositors deposit rates of zero and earn zero at the central bank on at least a large portion of their reserve holdings. Observers report that retail depositors in Switzerland, Denmark, and Sweden do not face negative deposit rates. At the same time, many large business and institutional depositors do earn negative rates on their bank deposits. This state of affairs opens up new avenues, at least in theory, by which some can avoid negative rates: large business depositors could attempt to impersonate a host of retail depositors. While generally unrealistic, the possibility of such a ploy requires that some effort be expended to prevent that avoidance activity.

This was necessary to lay the foundation for our work and to exploit that we are one of the biggest supervisors of the world. We are exceptionally well placed to look for the best practices and to identify emerging risks by using our unique database. Good benchmarking combines strong analysis and data-driven assessment with expert judgement. It allows taking into account the specificities of individual banks while still fostering consistency of assessments across banks and countries. Good benchmarking looks at risks from multiple perspectives and helps to develop a deep, holistic understanding of each institution’s overall risk profile and viability. Third, we need to further analyse in detail and for each topic individually where we are able to create a harmonized approach within the SSM, where we are able to remove uneven playing fields. We already did so for the options and national discretion. In November we will consult on the legal text we drafted for executing the discretion given to us regarding the 122 OND identified and decided upon by the SB. Apart from the famous ONDs, the current legal environment in which we operate is characterised by many different interpretations and national gold plating. In this  2  BIS central bankers’ speeches  context, we face a particular challenge. It goes without saying that the SSM applies national law; consequently, the SSM is not always able to ensure a level playing field when national laws diverge.