samchain/econo-pairs-v1 huggingface dataset:
It is important that we as a central bank understand these changes. At the same time, the financial crisis has made us aware that there are matters to do with trading, clearance and settlement which need to be improved. 2  Multilateral Trading Facilities, which are not required to be a traditional exchange in order to organise trading. 3  One example is EMCF (European Multilateral Trading Facility N.V.), central counterparty for the clearance of Swedish shares that are traded on Chi-X and NASDAQ OMX Europe. Another is EuroCCP, central counterparty for the clearance of shares traded on Turquoise. 2  BIS Review 153/2008  In the United States, two problems have stood out in connection with trading in American credit derivatives. They concern the credit derivatives that are traded on the over-the-counter market. 4 One problem is the counterparty risks. The parties in a credit derivative trade have a credit risk towards each other – the risk of a party losing the whole of the underlying value in a transaction. The counterparty risks have been difficult to understand, which makes them difficult to value. The other problem is the lack of market transparency, which has caused pricing problems and poor liquidity in credit derivative markets. The question of how to reduce counterparty risks in over-the-counter derivatives trading has been raised by the US Federal Reserve and the European Central Bank. One way would be to clear credit derivatives with a central counterparty. How would a central counterparty improve matters?

First, modern ATMs can more safely dispense notes of a physical quality that as the issuing authority I would not wish to see in circulation (for example, heavily soiled notes). This is a mundane point, but the latest ATMs are harder to jam, unlike their predecessors. On the whole, financial institutions do not dispense what we regard as unfit notes, even though their ATMs might be able to do so, but as the issuing authority we now have to pay more attention to ensuring that this does not happen. The second development represents the connection between the physical quality of notes and denominational mix. We have most difficulty getting our low denomination note, the £ into circulation. The main reason for this problem is that few ATMs dispense £ The link to quality comes about because once our £ enter circulation, they stay in circulation and exchange hands more times before they return into the wholesale cash distribution system for fitness sorting, and thus can be taken out of circulation as unfit or re-circulated as a fit note. Put simply, since there are relatively few £ notes entering circulation they stay in circulation and are not banked and fitness sorted as regularly as they should be. Chart 9 illustrates this problem. It shows over the last nearly fifteen years the trend in how many times per year on average banknotes of each denomination are processed through the wholesale cash centre fitness sorting process.
As I have already noted, the fact that the Riksbank should take into consideration how economic activity develops receives support in the preliminary work to the new Sveriges Riksbank Act. 2  See the memorandum “The Riksbank’s inflation target – clarification and evaluation”, 4 February 1999, registration number 1999-00351 DIR, or Heikensten, L. (1999), “The Riksbank’s inflation target – clarification and evaluation”, Sveriges Riksbank Quarterly Review, 1999:1. BIS Review 29/2006  3  Communication regarding monetary policy As monetary policy is to a large degree concerned with making decisions under uncertainty, it is important that we are always as open and clear as possible regarding the basis for interest rate decisions. The intentions behind monetary policy must be understood and accepted in order to preserve the legitimacy of our activities and our actions. A well-balanced application of the inflationtargeting policy makes it particularly important to clearly explain the motives behind monetary policy decisions. There should be no grounds for suspicion that the considerations taken are used in an arbitrary manner. The Riksbank communicates its monetary policy in a number of different ways, including press releases and minutes of monetary policy meetings, press conferences and not least our Inflation Reports. The Inflation Reports contain our analyses of the deviations from the inflation target that have occurred, and forecasts for when inflation is expected to be back on target, given a particular monetary policy stance.

Developments in recent years, with strong production growth and falling or only slightly rising employment are examples of how contradictory the signals can be. One weakness in this context is that production data is revised regularly. This makes it particularly difficult to estimate the amount of spare capacity there is in the economy at present. The picture of how high capacity utilisation was at a particular point in time can look different when new data are received and earlier outcomes are revised. One example worth mentioning is that the first data regarding GDP growth in Sweden during the first quarter of 2005 was 1.4 per cent, while the most recent calculations indicate that the figure was actually 2.1 per cent. The fact that there is considerable uncertainty regarding such a central variable as capacity utilisation is, of course, a problem. Everything would be much simpler if it were possible to quantify capacity utilisation in the same way as inflation can be measured. However, as it is not possible, I believe it is wise not to pretend to have this knowledge. For similar reasons, precise money supply measures have also been abandoned. Our forecasts of growth and inflation must nevertheless essentially be based on a view of the position of the economy with regard to a situation with normal capacity utilisation. In practice, a large amount of information from different sources must be weighed together to make an overall assessment.
The Bank of Thailand has deployed accommodative monetary policies throughout these shocks, as has the government sector by deploying stimulating fiscal policy. Over the downturns during this period, Thailand’s economy has been maintaining strong fundamentals and stability, and thus allows policy makers to accommodate and boost the recoveries without much risk to future growth. The central bank actively takes part in building these strong fundamentals and stability. Ladies and Gentlemen, Now that we are on the same page about Thailand’s growth potential, I would like to turn your attention towards the present roles of the Central Bank in restoring growth through stabilization policies. The Thai economy is currently well below its growth potential. Particularly over the last 3 quarters, average growth is close to zero due to political uncertainty and payback period from earlier government policies, most notably the first-car buyer tax rebate scheme, which has dragged down private spending. A prolonged period of diminished economic activity eventually hurts growth potential. When businesses lose confidence, they draw down production and investment, which blocks progress in knowhow and technology. A steady growth path is desirable because growth stability helps the private sector make long-term decisions. This is why the monetary policy committee also takes a role in stimulating the economy towards regular activity. In this situation the monetary policy committee has taken a more accommodative stance since early this year to support the economy to reach its full level of activity faster without sacrificing the monetary policy objective of maintaining price stability.

Quoting from his paper: “the future policy that one wishes for people to anticipate is one that the central bank will not have a motive to implement later, if it makes its decisions then in a purely forward-looking way, on the basis of its usual stabilization objectives.” (end  BIS central bankers’ speeches  1  quote) This does seem like a hard conundrum to get away from, and probably limits the traction of this type of tool as a strong driver of longer-term rates. Partly due to these limitations, Central banks have also directly tackled the term premium by purchasing large quantities of long-term assets. The idea is that by removing some duration from the fixed income markets, private investors’ aggregate exposure to interest rate risk is diminished, leading to a lower required compensation for bearing such risk. Of course, this logic relies on some form of imperfections and/or market segmentation, but there is by now significant evidence, including some excellent papers to be presented in this conference, that QE has had a measurable impact on long-term rates through this channel. A similar logic applies to the default risk-premium: to the extent that returns on safer debt are compressed by central bank purchases, investors are tempted to reach for yield into other fixed-income markets, such as mortgages, corporate bonds, and emerging market instruments.
However, the fact that inflation has been so low has changed the conditions for monetary policy. The unexpectedly low inflation was the reason why the repo rate was cut in December last year by a unanimous Executive Board, at the same time as the repo-rate path was revised down substantially. At the most recent monetary policy meetings there has been greater focus than before on inflation. 18  The Canadian central bank governor recently described monetary policy as an exercise in risk management, where the risk of inflation falling and moving even further from the target has to be weighed against the risk of financial imbalances. He emphasises that the credibility of the inflation target cannot be taken for granted, but must be earned by clearly focusing monetary policy on attaining the target (Poloz, 2013). BIS central bankers’ speeches  11  Perhaps the lesson here is that a monetary policy that leans against the wind is difficult to combine with an inflation target. Although there may be justification for slowing down credit growth in some situations, it may be difficult to use monetary policy for this purpose if there is an explicit inflation target. In practice, one tries to attain two targets with one single instrument and there is then a risk that one will not be particularly successful in attaining either of them. References Adolfson, Malin, Laséen, Stefan, Christiano, Lawrence, Trabandt, Mathias, and Walentin, Karl, (2013), Ramses II: Model description, Occasional Paper no. 12. Sveriges Riksbank. Swedish Bankers’ Association (2013), Stärk amorteringskulturen amortisation culture).

  Firstly, there is the federal approach, where you allow for a full delegation of powers to the EU level, including regulation, supervision and crisis management (Figure 2).   Secondly, you can abandon the idea of the internal market and return to a system with full national control of domestic financial systems (Figure 3). Figure 2  Figure 3  The de Laroisière group opted for a third way – the middle way – to reform the EU financial system. In terms of the financial trilemma, this means keeping financial integration and, at the same time, trying to find a reasonable compromise between financial stability and national sovereignty (Figure 4). Somewhat stronger cooperation, but still resting on national sovereignty. Figure 4 Financial stability  Financial integration  National sovereignty  Given the present European crisis, you may well ask whether this is a possible compromise or whether it will be just another damp squib. Only time will tell. But within this concept, there is room to move towards stronger European cooperation. The EU’s new supervisory structure The de Laroisière proposal rested on two major institutional pillars. The first related to the previous “level 3” committees, which were to be strengthened, transformed into authorities,  2  BIS central bankers’ speeches  and given as much power as possible without having to change the European Treaty.
Looking ahead, one of the benefits of this transparent process is that it has set the tone for discussions between banks and supervisors as industry practices evolve going forward. We have also greatly benefited from the dialogue we have maintained with our supervisory colleagues outside of the Basel Committee. I believe that it is in many countries’ best interest to adopt the new Framework when they are ready, so it is critical that supervisors in these countries be part of the Basel II conversations. The Basel Committee has established several mechanisms for heightened dialogue with our fellow supervisors, and we are fully committed to further enhancing this dialogue. Principles versus rules A third lesson I have learned is that it is important to strike the right balance between principles and rules. Of course, we want to ensure that banks apply principles in the same manner and that supervisors interpret them in the same way even in different jurisdictions. 4  BIS Review 46/2006  But while the temptation is to do this through ever more detailed rules, I am reminded of the words of the famous Surrealist painter Salvador Dalí, who said: “Have no fear of perfection—you’ll never reach it.” We have learned from the Basel II process that adding detail to the rules does not guarantee a level playing field or equal application. The marginal utility of adding detail falls rapidly as you move ahead in a process such as Basel II, so we need more than detail and prescriptiveness.

Gent Sejko: Bank of Albania’s achievements in 2021 and challenges for 2022 Address by Mr Gent Sejko, Governor of the Bank of Albania, at the end-of-year meeting with the media and the Governor's Award ceremony, Tirana, 20 December 2021. * * * Dear ladies and gentlemen, After a hard period due to the pandemic while we all had to keep the physical distances, this reunion at the Bank of Albania premises to spend some time together as the year end approaches, embodies a special value. Overall, the end-year meetings accompanying the holiday season, serve as a balance to recall the achievements of the year we are preparing to leave behind, coupled with the challenges that lay ahead in the next year. The two past years were challenging to the entire globe, and particularly to Albania, as we before the pandemic had to deal with the devastating earthquake of November 2019. The todaymeeting makes us optimistic and gives hope that in the future we will have the possibility to communicate and collaborate in normal conditions and out of concerns and restrictions triggered by the pandemic. The shocks faced over the last two years affected sharply our way of living, tested the economic, monetary and financial equilibriums of the country and the stability of growth sources. They show that the sustainability of the economic and financial stability depend on the work of monetary institutions coupled with the ability and capacity of the entire society to act swiftly and efficiently in this fight against the pandemic.
As such, it is a key tool that the PRA uses to deliver its objectives. The SIMR is consistent with the provisions of the Bank of England and Financial Services Act 2016. So whilst the ABI is correct in its assertion that SIMR is not required by the Solvency II directive, it is the consequence of UK legislative choices and not simply an invention of the PRA. Second, there is the thorny topic of approvals under Solvency II and, in particular, internal model approvals. The industry is quite right to point out that the overhead to gaining model approval is considerable. In some cases, weight rather than page length would have been a more appropriate measure of application size. But remember that firms with approved internal models in effect set their own regulatory capital requirements. Once we grant model approval, the PRA has only a very limited ability to adjust a firm’s Solvency Capital 7  Requirement. And as my colleague David Rule previously commented “even acting in good faith, business pressure may create the risk that model changes generating lower capital requirements are favoured over time, and therefore that solvency standards might deteriorate”. In designing our approach, we were also mindful of the FSA’s experience in approving internal models for banks under Basel II, where promised future improvements tended not to materialise. It should therefore come as a surprise to no-one that we approach model approval diligently, sceptically and rigorously.

The US share falls from 28% to around 12%. The flow counterpart to these external stock positions is no less dramatic (Chart 20). By 2020, gross capital flows of the non-G7 countries are projected to exceed those of the G7 economies. By 2030, non-G7 flows are more than three times G7 flows. And by 2040, they are almost four times G7 flows. Even if these calibrations represent an extreme case, they are indicative of a striking power shift in the pattern of global financial flows. If this path were to be even broadly followed, it would have implications for the scale of global imbalances, which will tend to rise as gross capital flows outpace GDP growth. It would have implications for financial stability, as the scale of gross capital surges (fuelling bubbles) and reversals (fuelling crises) increases. And it may also have implications for the dollar’s reserve currency status. Differential savings behaviour. Consider next the possible future path of savings behaviour across the world’s major economies. There are likely to be many factors affecting crosscountry saving rates in the period ahead. Predicting these is fraught with uncertainty. But one key medium-term determinant of saving is demographics (Wilson and Ahmed (2010)). And demographic trends are something about which there is little uncertainty in the period ahead. 10  BIS Review 174/2010  BIS Review 174/2010  11  Chart 21 looks at projected changes in the fraction of adults in the age range 40 to 59 in developed and emerging countries – the “prime savings” cohort.
We do this by continually assessing threats to the system as a whole – “oversight of the systemic conjuncture” if you like. 2  BIS Review 36/2005  So we look beyond the risks in relation to individual institutions, to the aggregate problems that can arise: through networks and single points of failure; through dependencies and interdependencies of firms and markets. In other words to areas where, if market forces and market participants are left to their own devices, problems could threaten the stability of the system. This means that we need to have our finger on the pulse and to maintain regular contact with key firms and infrastructure providers. Market intelligence is vital in this area: it is not enough to read about issues, we need to be learning about them first hand from key players and analysing our findings from a financial stability perspective. The FSA also shares responsibilities in this area. They too will be asked for advice by HMT. Their starting point is the assessment of the strengths and weaknesses in the individual institutions and markets they supervise, and the potential consequences of problems or failures at individual institutions. An important factor for the Bank relates to London’s position as a major financial centre. Although our specific focus and interest is the systemic conjuncture as it affects the UK, possibilities of contagion in an increasingly global market mean that we have to be alert equally to developments in global capital and financial markets.

Typically we obtain intelligence about what is going on from a number of sources, including a group of experienced staff who are operationally active in financial markets. We then evaluate and assess the threats from this intelligence. This needs people who are motivated to think through and identify new aspects of risk and threats, who can move with intellectual agility and flexibility between risks as they arise. This enables in turn high level management to judge the risk and allocate resources accordingly for risk reduction – as well as stopping work if threats no longer seem relevant. A key challenge here is distinguishing between slow burn issues (such as a gradual shift towards more exotic financial instruments) and the more immediate issues relating to, say, the prospect of a major market default. In each case it is important to understand the potential threats to financial stability: but the timescales and tools are different. The matrix helps to start the process. Above all we have to clarify the types of threats we are looking for. An issue here is the risk of “missing something”. Not acting on something seemingly minor may have significant consequences for financial stability and costs compared to the resource saved by ignoring it. So the stakes are high in getting this right – though we need here to be realistic as particularly in the early stages the significance of developments can be hard to read. b)  Risk Reduction  Secondly, risk reduction or mitigation.
A central bank will also be keen to avoid the moral hazard involved in encouraging a commercial firm to undertake particular types of risk-taking activity. There are certain principles that a central bank should therefore observe: (1)  It should not lend to any bank whose prospective solvency is seriously in question. (2)  It should always take sufficient, good-quality collateral against its lending. (3)  Central bank operations should be designed to deliver public policy objectives, not to support the profitability of any particular commercial firm. 1  See the “The Framework for the Bank of England’s operations in the Sterling Money Markets (the ‘Red Book’)” at http://www.bankofengland.co.uk/markets/sterlingoperations/redbook.htm  2  See Fisher (2010), “Managing Liquidity in the System: the Bank’s Liquidity Insurance Facilities” at http://www.bankofengland.co.uk/publications/speeches/2010/speech450.pdf  BIS central bankers’ speeches  1  Bank of England consolidated balance sheet (a) Chart 1: Liabilities  Chart 2: Assets £ billions  £ billions  300  300 Notes in Circulation  Long-term repos 250  250  Short-term repos  Reserve balances Other liabilities  200  200  Loan to APF 150  150  Other assets  100  100  50  50 0  0 2006  2007  2008  2009  2010  2011  2006  2007  2008  2009  2010  2011  (a) Data to 16 March 2011  That may sound like a simple set of rules, but there are deep policy issues to consider when it comes to implementation.

On 11 February the Bank announced that, with effect from 1 July 2011, it will accept in its narrow collateral basket sovereign debt securities denominated in Sterling, Euro, US and Canadian Dollars and issued by the UK, the US, Germany, France, the Netherlands and Canada. That is a wider range of currencies than many of its international counterparts. For example, the ECB, Federal Reserve and Bank of Japan only accept securities denominated in domestic currency. The Bank of England takes a broader range of currencies, to make sure that the narrow collateral set is large and deep enough for our monetary policy operations not to cause frictions in the sovereign collateral markets. The risk is offset by additional haircuts for foreign currency. The choices of which currencies and issuers were to be allowed in the narrow collateral set were decided principally on grounds of liquidity, not credit. A number of AAA issuers are assigned to the wider collateral set principally because their debt stock in issue is too small and/or too tightly held such that bid-offer spreads are relatively wide and/or more volatile in the secondary market. Chart 3 shows a simple analysis of some of these factors. Those changes were not a response to short-term conditions in some sovereign debt markets. Rather, they form an important part of the transition to the Bank’s long-term collateral policy, which was initiated following the October 2008 consultative paper on the Bank’s market operations. The changes have expanded the universe of collateral eligible in the Bank’s operations.