samchain/econo-pairs-v1 huggingface dataset:
More recently, the FPC has taken a series of measures to address potential disruptions to financial services because of disorderly Brexit; to support a smooth transition in benchmark interest rates from Libor to SONIA; to address risks from open-ended funds and have also put in place structural measures to address risks from climate change. 14 As well, both the duration and amplitude of financial cycles has increased since the mid-1980s. For empirical evidence  on financial cycles, see: Drehmann, M, Borio, C and Tsatsaronis, K (2012), “Characterising the financial cycle: don’t lose sight of the medium term”, BIS Working Papers 380; Claessens, S, Kose, M and Terrones, M (2012), ‘How do business and financial cycles interact?’, Journal of International Economics’, Volume 87; and Aikman, D, Haldane, A, and Nelson, B (2013), “Curbing the credit cycle”, The Economic Journal, June. 15 Claudio Borio defines the financial cycle as “self-reinforcing interactions between perceptions of value and risk, attitudes towards risk and financing constraints, which translate into booms followed by busts. These interactions can amplify economic fluctuations and possibly lead to serious financial distress and economic dislocations.” See Borio, C (2014), “The financial cycle and macroeconomics: what have we learnt?”, Journal of Banking & Finance, vol 45, pp 18298, August. 16 This debate is an old one. Arthur Pigou described government as “the trustee for unborn generations as well as for its present citizens”; Frank Ramsey referred to pure time preference discounting as “a practice which is ethically indefensible and arises merely from weakness of the imagination”.

Enhancing the practical implementation of macroprudential supervision The systemically important bank – “SIB” – regimes will continue to be a priority area for the Committee over the coming years. Although the regimes for global SIBs and domestic SIBs have now been published, both will require a certain amount of ongoing maintenance and monitoring. Furthermore, as noted in the G-SIB standard, the methodology, including the indicator-based measurement approach itself and the cutoff/threshold scores, will be subject to periodic review and refinement every three years. Beyond this work, the Committee will now turn its attention to the practical implementation of tools and techniques to deal with systemic risks. This will include two complementary areas of work: •  Regulatory consequences of SIB classification: Being a SIB means more than just higher capital. In light of the risks they impose on the financial system, SIBs must be held to a higher standard with respect to supervisory expectations for risk management functions, data aggregation capabilities, risk governance and internal controls, all of which are topics that feature prominently in the Committee’s work plan. In addition, given the principles-based nature of the D-SIB framework, the Committee will monitor emerging practice as banking supervisors move towards implementation so as to facilitate cross-border cooperation and mutual understanding.
A recent publication by the Basel Markets Committee Working Group highlights how an overreliance on central bank  Page 8  interventions risks distorting market mechanisms and incentives and could increase system-wide externalities. [25] However, the results of the Liquidity Biennial Exploratory Scenario (LBES) stress-testing exercise conducted by the Bank of England suggest that banks would be unwilling to allow their LCR to fall below the 100% level, even in a severe stress. [26] Instead, in order to preserve the LCR, the hypothetical exercise suggested that banks would take defensive actions including cutting lending to households and businesses. These results, together with the experience from the pandemic, suggest that there is a liquid asset usability issue that needs to be addressed. Factors affecting HQLA usability We know that banks tend to have their risk appetite thresholds set well above the 100% LCR level. For example, a study of UK banks’ recovery plans showed that they typically have contingency plans in place to defend their liquidity positions with recovery triggers higher than the regulatory standard, meaning that urgent liquidity-increasing measures would be in place before crossing the 100% mark. [27] During times of stress, it might not be possible to adjust these thresholds quickly to allow banks to use more of their liquid assets, for example due to banks’ internal governance processes. Why are banks so reluctant to use their liquid assets? First, there is the regulatory environment and banks’ expectations around regulatory responses.

Figure 3: Actual MPR versus Taylor rule (†)  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0  0.0  -0.5  -0.5  -1.0  -1.0  -1.5  -1.5 2010  2011 Lag  2012 Inflation  2013 GDP  2014 2015 Shock  2016 D(MPR)  2017 2018 Taylor rule  (†) Source: Central Bank of Chile. Figure 4: MPR Chile vs US (†)  9  9  8  8  7  7  6  6  5  5  4  4  3  3  2  2  1  1  0 2000  2002  2004  2006  2010  2008  2012  2014  2016  0 2018  CHL: Monetary Policy Rate US: Fed Fund Rate (†) Sources: FRED and Central Bank of Chile. Some key factors supporting the roles of ER as a shock absorber of financial and commodity price shocks A flexible ER regime is not a form of snake oil to alleviate any sort of global ailment. ER volatility can, of course, generate major wealth shifts, and even solvency problems to agents with large balance sheet mismatches—including government. They can induce major losses in competitiveness, which may harm overall activity if winners fail to capture benefits as fast as 6  losers realize costs. Constituencies around fixed prices—including the ER—are very concentrated and powerful.
This is partly because debts and assets are unevenly distributed between households, unequally liquid and have different risk profiles, and are thus not affected by shocks in the same way. Vulnerability is then not necessarily a question of the households becoming insolvent, but rather of them reacting to shocks in a way that leads to a fall in consumption, and thus to a fall in growth and employment.3 The high debts in combination with mainly variable mortgage rates imply of course that the households are sensitive to changes in interest rates.4 To some extent this can be seen as an advantage as it means that monetary policy then has a greater direct impact on the economy. However, it may also be problematic for several reasons. The Riksbank’s repo rate is and should preferably be a blunt instrument that affects the entire economy, that is the households, the companies and the financial markets. It is not desirable for monetary policy to have a disproportionally large impact on a limited part of the economy, in this case on the indebted households. One should not expect that monetary policy will always be designed so that it is well balanced for just this particular part of the economy. This is exemplified by the monetary policy of recent years in which the repo rate has been set lower than justified by developments on the mortgage market.

At the same time, it is of course desirable that the measures targeted at household indebtedness and the housing market do not in themselves lead to an economic downturn or unnecessarily obstruct monetary policy. The primary aims of policy in this area must be to ensure that the build-up of household debt slows down, that the households gradually become more resilient to shocks of various kinds and that the housing and mortgage markets become more effective. This is thus a question of a long-term adjustment process that must take place in suitablylarge steps. The amortisation proposal – a step in the right direction I see last week’s amortisation proposal as one such suitably-large step in the right direction. As only new mortgages will be covered, increased amortisation will be phased in over a long period of time. In combination with many new mortgage borrowers already amortising, and because the proposal entails only a moderate increase in amortisation rates, this means that the macroeconomic consequences will probably be small during the first few years. According to the Riksbank’s estimate, the amortisation proposal will have reduced the household debt ratio by 0.6 percentage points after five years compared with a base scenario. This means that the proposal will increase amortisation payments by less than 0.1 per cent of GDP per year during the period.5 The amortisation proposal thus appears to be well balanced at the moment, but work on the long-term adjustment process must continue. There are many factors to take into account when considering further measures.
On 14 September 1998, he wrote: “the more I think about it, the more sympathetic I become toward the Hong Kong Monetary Authority and its stock market intervention”. David Hale of the Zurich Group also said that: “it is difficult not to sympathize with the frustrations and anxieties which compelled... the government of Hong Kong to intervene in the stock market”. And last week George Soros said in Washington, when asked what he thought of Hong Kong’s actions in the stock market: “I can’t really disapprove”. My correspondence with Alan Greenspan is still ongoing: while I continue to point out to him that we were only trying to deter market manipulation, which in any case is against anti-trust laws in the US, he still has doubts. This is because of the difficulty in distinguishing between what he calls “conventional, albeit sharp-eyed, arbitrage and speculative BIS Review 85/1998  -2-  activities” in financial markets and what I call market manipulation. I shall persevere. In my view, whilst distinguishing between the two is difficult, it is not impossible, particularly when you are close to it. Perhaps I should deploy Chairman Greenspan’s argument for the Fed’s involvement in Long Term Capital Management in justifying our case. Instead of deterring market manipulation, I could say, in Alan Greenspan’s words, that we were trying to “avoid possible serious market dislocations that could have potentially impaired the economy”. But whatever argument we use, it is my firm belief that our actions, whilst controversial, are well justified.

Within our senior management cohort, female representation has gone from 21% to 27%, and our graduate intake has gone from 26% female to 34%. The direction of travel is encouraging, but we are far from satisfied. Diversity will remain a key pillar of the Bank’s strategy. Our goal is to attract and inspire the best people to public service. We want people with diverse ideas, willing to challenge and debate, and we want them to feel empowered at all levels, to take the initiative. To support these objectives, we have introduced diversity targets that for the first time are reviewed and challenged regularly by Court. We have two Bank-wide targets for gender. The first is for 35% of our senior management staff to be female by 2020; a two thirds increase from its 2013 level. The second is to have an equal split of men and women in the organisation at all levels below senior management by 2020 (from our current 44%). But achieving these goals isn’t just going to happen. It requires: •  Focussed recruiting  •  Active mentoring  •  Consistent and comprehensive performance management, and  •  A flexible work environment that values diversity of thought  Today, each division of the Bank knows where it stands and has plans in place to improve, where necessary. So in this sense, the Bank has implemented two of the Report’s recommendations. The Bank has also recognised the importance of executive accountability for diversity, another key recommendation of Jayne-Anne Gadhia’s report.
2  BIS Review 41/2009  Image 2: Current account deficit as percentage of GDP 12  12 Kina  10  10  Sverige  8  8  USA  6  6  4  4  2  2  0  0  -2  -2  -4  -4  -6  -6  -8  -8 -10  -10 95  98  01  04  07  Källa: IMF  Image 3: Credit spreads* for corporate bonds in the USA Basis points 2200 2000 1800  Aaa Baa High-yield  1600 1400 1200 1000 800 600 400 200 0 2000  2001  2002  2003  2004  2005  2006  2007  2008  2009  *The difference between the yield on corporate bonds and the yield on treasury bonds. Source: Reuters Ecowin  The markets priced risk incorrectly This also laid the foundations for changes in the financial landscape. The good supply of capital available for investment and the low interest rates for risk-free assets increased the demand for assets with a higher yield, a ”search for yield” arose. However, investors all over the world, including many major banks, largely ignored the fact that, in the long term, higher yield can only be achieved by taking greater risks. This contributed to a dramatic increase in asset prices.

It is mainly the commercial banks that have knowledge about credit for non-financial companies. Primarily, the banks need more capital in order to increase their resilience to potential losses in the future. This can indirectly be expected to increase the banks' credit capacity. Many banks have already strengthened their capital base. The government's capital programme has also made it possible to inject further capital if the need arises. In the worst case, it may of course become necessary for the government to provide loans or guarantees directly to the non-financial sector in some way. But this is not primarily a task for the Riksbank. At the same time, it is more important than ever that the authorities co-operate effectively and pull together. Different phases and components of the crisis require different measures from the central bank and from other authorities. It is extremely important that these measures are well co-ordinated and that the division of work is clear. How can we prevent crises in the future? I have now talked about what public authorities can do to alleviate the financial crisis, how monetary policy is conducted both under normal circumstances and in the present situation, and about the increasingly clear link between monetary policy and financial stability. One very important question is of course what lessons we can learn for the future. How can we as public authorities help the financial system to avoid suffering similar problems in the future?
I find this comes quite naturally – it’s worrying intelligently that’s hard.”  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  Complacency gave way to crisis. Confidence in the banking system was destroyed. Although public bailouts – totalling $ across the G10 – shored it up, banks took emergency measures to protect themselves. The supply of loans collapsed. Companies and households were unable to refinance their debts. The result was economic disaster. In this country alone, close to a million jobs were lost and more than 100,000 businesses failed. Too much debt made the financial system, and the economy, unsafe. Too many people paid the price when those risks materialised. Since then there has been a programme of repair and reform. Britain’s households have paid down debt. The financial system has been made safer, simpler and fairer. 2  Banks, in particular, are much stronger. British banks have a capital base – their own shareholders’ money – that is more than 3 times stronger than it was ten years ago. They can absorb losses now that would have completely wiped them out ten years ago. During the repair of banks, there were suggestions that the repairs would hold back lending to the economy. That’s a bit like arguing that stopping to repair a punctured tyre holds back your progress towards your destination. Only once the puncture in the banking system was repaired was it able to get back to serving the economy.

These tests ask what would happen to lenders’ balance sheets in a very severe recession in the UK and the rest of the world, coupled with market turmoil and falling property prices. The tests are tough and they get tougher as the actual economic situation gets better; as unemployment falls, house prices rise, and credit expands. So just when lenders might be thinking risks have fallen, they are faced with the need to pass tougher tests by getting stronger. As the actual unemployment rate falls, the lenders have to be able to pass a test with a bigger rise in unemployment. And where debt levels rise, the test gets even more severe. This means that as the risks to the economy grow, the tests get tougher for everyone. All banks need to strengthen their balance sheets – funding themselves with more capital – to pass the tests. And those banks that have taken on the most risk will need to do even more than others. That concentrates the mind of the shareholders about any contribution their lending may be making to growing risks. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  Most importantly, it means the financial system can absorb very severe economic shocks without cutting back on its lending, cutting off one of the channels by which debt affects the wider economy. Last year’s stress test showed the major banks make losses of £ that’s substantially more than their losses at the height of the financial crisis.
Moreover, this board will manage a common resolution fund – funded by the industry – that over time would become a common backstop to cover resolution costs for all significant banks in all participating countries. Arguably, the envisaged system is relatively complex. Major resolution actions may involve not only the Single Resolution Board but also the European Central Bank, as a supervisor, the national resolution authorities, the European Commission and, finally, the Council. Given the limited time-span in which decisions must often be taken, swift interaction among those agencies in a resolution process will be required. Indeed, the coordination of the SRB and the ECB is crucial for the success of the SRM. Experience in most countries shows that the supervisor should be fully involved in decisions to trigger resolutions and in the design of resolution plans. Indeed, as of now, in many European countries the resolution authority is embedded in the supervisory agency, albeit in some cases with specific decision making processes. Although the draft SRM regulation envisages a framework for cooperation between the resolution board and the supervisor, more concrete arrangements are needed to ensure satisfactory coordination.

Nonetheless, had this economic outcome been offered as a forward contract in the early summer months, absolutely everyone would have been a buyer. So what explains this faster-than-expected recovery? And, crucially, will it persist in the face of the unholy trinity of risks from Covid, unemployment and Brexit that potentially lie in store? These are related questions because behaviours exhibited by households and businesses so far are likely to be revealing about what impact future risks might have. Habits tend to persist. That means, for all the uncertainty about the outlook, the UK’s recent economic performance does offer some signal about the future outlook. The simplest explanation for the upside surprises to UK activity over recent months would be that lockdown measures have been released sooner and faster than expected. But the pace of release from lockdown in the UK has in fact been broadly in line with what the Bank had expected in May. The biggest surprise has been the robustness of peoples’ spending behaviour in the face of lockdown constraints and other risks, not the evolution of these constraints and risks per se. 3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  The behaviour of UK consumers has been most surprising. Based on our suite of fast indicators, UK consumption has been rising by, on average, around 2% per week since May.2 As best we can tell, consumer spending now stands at around pre-Covid levels.
Nonetheless, as many before me have commented 3 the largest CCPs are becoming increasingly systemic and interconnected such that their critical services could not stop suddenly without risk of wider contagion. Thus, not only do we have to ensure that the level of supervisory intensity matches the risks, something my  1  http://www.financialstabilityboard.org/wp-content/uploads/r_111104cc.pdf?page_moved=1  2  http://www.financialstabilityboard.org/wp-content/uploads/TLAC-Press-release.pdf  3  Benoit Coeure, Central Counterparty Recovery and Resolution (Nov 2014); Paul Tucker, Are Clearing Houses the new Central Banks? (April 2014). BIS central bankers’ speeches  1  supervisory colleagues are very focused on, we must also address the issue of what should happen if a CCP were to fail. This is already widely recognised. So too is the need for an international solution to the questions that CCP recovery and resolution presents. The largest CCPs are systemically relevant at a global level, important for financial stability in multiple jurisdictions due to the nature of their business and the composition of their members and users. They serve multiple markets, having dozens of clearing members from different countries and clearing products in multiple currencies. A patch-work of approaches to recovery and resolution would risk regulatory arbitrage and competitive distortion and so, whilst the fiscal backstop against the unsuccessful resolution of a CCP is ultimately a national one, it is best that the answer on how to avoid this backstop ever being used is developed at a global level.

Durmuş Yilmaz: Press conference for the presentation of the inflation report Speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the press conference for the presentation of the inflation report, Central Bank of the Republic of Turkey, Ankara, 31 January 2008. *  *  *  Distinguished Guests and Press Members, Welcome to the press conference for the presentation of the Inflation Report that is one of the most important communication tools of the formal inflation targeting regime that we implement. In this conference, I would like to give you a short summary of our evaluations and the Central Bank’s inflation forecasts which appear in the Inflation Report that will be posted on our website shortly today. 1. An assessment of the year 2007  I would like to start by a general assessment of inflation developments in the year 2007. The monetary tightening exercised since mid-2006, has been successful in leading to a significant reduction in the underlying inflation. Especially the 3.6 percentage points fall in the services inflation, which confirmed the marked disinflation trend during 2007, was remarkable. The fall in headline inflation, however, was more limited, owing mainly to factors beyond the control of monetary policy, such as developments in energy, food, and administered prices. Accordingly, inflation realized as 8.39 percent at the end of 2007, breaching the upper bound of the uncertainty band of 6 percent.