samchain/econo-pairs-v1 huggingface dataset:
2/4  BIS central bankers' speeches  To help to meet these challenges, we at Banque de France are focusing our activities around two main areas: 1/ Support and implement regulatory frameworks and supervisory practices that promote innovation and the stability of our financial system Most of the current regulatory framework predates the technological breakthroughs that we are now facing. Accordingly, it makes sense to adjust the regulatory framework to these  technological developments, the challenges they present and the attendant risks. The same naturally applies to our supervisory framework and methods. For this reason, we are actively involved in multilateral cooperation work, such as the G7, the G20, the Financial Stability Board and the Committee on Payments and Market Infrastructures, particularly on crypto-assets and enhancing cross-border payments. We are also supporting the European strategies on digital finance and retail payments published by the Commission in the final quarter of 2020 and especially the two flagship initiatives, namely the draft Markets in Crypto-Assets (MiCA) Regulation and the future Digital Operational Resilience Act (DORA) Regulation on operational risks in the financial sector. 2/ Be involved as a participant in the evolution of payment systems However, adapting the regulatory framework will not be enough. At the Banque de France, we believe we also need to be part of the evolution of payment systems by pursuing, at this stage, two goals: facilitate and experiment.

As regards the first of these goals, we want to build on the major integration projects that have come before and promote the emergence of European initiatives that can strengthen Europe’s payment market. Right now, just one initiative looks capable of providing a satisfactory response to the challenges: the European Payments Initiative, or EPI. With this initiative now under way, we feel that it is vital for EPI to make good on its promises. On the experimental front, the Banque de France is currently conducting a programme exploring the use of a central bank digital currency (CBDC) to settle interbank transactions, to assess to what extent and under what conditions such a currency could make the settlement of financial-asset transactions safer and more efficient, while at the same time preserving the fundamental role of central bank money in the proper execution of these transactions. The Banque de France is also playing a very active role in the Eurosystem work, under the aegis of the ECB, on a retail digital euro. An ECB report published in October 2020 said that the Eurosystem should get prepared for the swift introduction of a retail digital euro should the need arise. The Eurosystem held a public consultation that closed in late January, attracting over 8,000 responses. The input from this will inform the meticulous examination of the reasons, consequences and prerequisites for the potential introduction of a CBDC that we are conducting.
Like the 70% guideline, the Link is maintained over the longer term for the greater economic well-being of our community, even though it might seem tempting from time to time to try to use monetary policy for short-term tactical gains. In fact, although the spotlight tends, quite understandably, to be on newsworthy issues - bank rescues, intervention in the stock market, the latest Exchange Fund results, the "alarming" strengthening of the Hong Kong dollar - much of the work of any central bank has to be focused on the longer term, on the implementation of sustainable, consistent, dependable policies on a horizon that lies well beyond the daily concerns of most of us. For this reason the general consensus is that a central banking institution must be somewhat set apart from the daily workings of government and politics. The HKMA, as Hong Kong's central banking institution, has, throughout the 10 years of its existence so far, always had a special position as an organisation that is a part of the Government and yet operates at some distance from the Government proper. This relationship between the HKMA and the Government has recently been set out in a series of documents produced in response to suggestions from within Hong Kong and recommendations by the IMF that the roles of various senior officials involved in monetary and financial affairs should be set out more clearly.

Our risk-based Minimum Liquid Assets framework requires every bank to hold a minimum percentage of its qualifying liabilities in liquid assets. We are now looking to adopt the Basel III LCR rules, with some enhancements to suit domestic conditions. •  Although Basel III applies the LCR framework only to internationally active banks, we propose to extend the LCR requirement to all banks in Singapore in the first instance and grant various reliefs on the basis of risk-mitigating circumstances. •  We will also have a tighter definition of what qualifies as eligible liquid assets and not recognise equities and mortgage-backed securities. MAS has issued a consultation paper on the implementation of the LCR framework and will carefully consider industry feedback. Constraining leverage The third important area of reform is in constraining the build up of excessive leverage. At the height of the crisis in 2008, the banking industry was forced by markets to reduce leverage in a manner that led to downward pressure on asset prices, which in turn led to losses, declines in bank capital, and contraction in credit. Even banks with high risk-based capital adequacy ratios were found to be excessively leveraged. Basel III’s leverage ratio seeks to set a 3% floor for the amount of Tier 1 capital that a bank needs to hold relative to its total exposure. The ratio is designed as a non-risk based measure to complement the risk-sensitive capital adequacy ratios.
The new figures thus confirm that there has been a sharp downturn in the growth rate and completely support the picture that could be discerned at our latest meeting. Increasing cost pressures have been an important factor behind the series of interest rate increases introduced by the Riksbank. The new figures from the National Accounts show that the figures for hours worked have been revised up-wards compared to the version available to us in September. Together with the marginal downward revision of the figures for growth, this means that productivity declined more than indicated by the preliminary figures. As the figures for labour costs per hour worked have also been adjusted upwards, the new figures show that unit labour costs increased by 5.3 per cent on a 12-month basis in the second quarter. This was almost a percentage point more than in the preliminary version of the National Accounts. The fact that productivity is weak may be because companies have not had time to adjust their workforce as the downturn in economic activity has been so sudden. We can now see that the number of vacancies is falling and that plans to recruit new personnel are being  BIS Review 113/2008  5  toned down. An adjustment is underway which will be followed by a recovery in productivity, in line with the Riksbank's forecast. Rising costs are of course a factor that the Riksbank has every reason to monitor and analyse carefully.

The increase may be a way of safeguarding the real economy in the long term A common reaction to the decision to increase the interest rate was that the Riksbank pays too much attention to inflation and too little attention to the real economy. I would like to comment on this claim. One reason for increasing the interest rate was that an increase was needed to prevent the high level of inflation from becoming entrenched. This could happen if the price increases for energy and food begin to spread to other areas. This could ultimately lead to a risk of the Riksbank's ability to hold inflation in check being called into question and of inflation expectations remaining at a consistently high level. This is what happened in the 1970s in many parts of the world, although inflation at that time became entrenched at much higher levels than would be the case today. But even though the levels are much lower today, it could still be relatively costly to get inflation back to the target. It cannot be ruled out that this could require quite a long period with high interest rates and restricted demand. There is thus a risk that conducting too expansionary a policy today would sooner or later give rise to costs in the real economy that, furthermore, could be quite considerable. I do not feel, therefore, that it is correct to say that the increase in the interest rate is an indication that the Riksbank does not care about the real economy.
These impediments can take the form of legal and regulatory inefficiencies, structural and performance weaknesses of the markets, the outmoded standards and infrastructure used, or the lack of attention by the central banks and regulatory authorities. While it is important for the national central banks to address these issues and find remedial action early, given the increase in trade, investment and crossborder financial flows, it is essential for the region to have a common understanding and apply, where possible, common standards. 7.3 The design of every payment system requires a series of trade-offs between the different elements of its objectives. The precise outcome of these trade-offs will vary, because they will be closely based both on national realities and international best practice. This emphasizes the need for close and continuous consultation in each country between the suppliers of payment services and the central banks as the overseer and regulator of the systems. The ultimate target of these consultations is to ensure the easy availability in each country of a payment system that meets the needs of its users, that enables the suppliers to cover their costs, and that does not absorb an excessive proportion of the national resources. That is why many regional payment system development initiatives have sprung up over the last few decades. For example, South African Development Community (SADC Payments Initiative – 1996), the Western Hemisphere Payments Initiative (1999); the Commonwealth Independent States Payments Initiative (2004); and the Arab Payments Initiative (2005) are some of the well functioning regional payment Initiatives.

When borrowers pledge eligible collateral or guarantees, and thereby reduce the potential loss on an exposure, banks will be able to hold less capital against that exposure than the 1988 Accord stipulates. This change is especially pertinent to SME lending, since national supervisors will be able to recognise several of the types of collateral and guarantees that SMEs provide. Results of QIS 3 How do we know that these adjustments will help SMEs? To ensure that we’ve got it right, the Basel Committee has conducted a series of “quantitative impact studies” with the active support of many commercial banks. Our most recent study, under the name “QIS 3,” was the most comprehensive, involving an extremely detailed survey of how capital requirements will change for over 350 individual banks in more than 40 countries, including in all EU countries. QIS 3 demonstrates clearly that the new rules will not increase the capital required for banks’ credit exposures to SMEs if we compare the new proposals to the current solvency rules. In fact, our studies show that, on average, banks’ capital charges on loans to SMEs included in the corporate portfolio will remain largely stable for banks using the standardised approach to credit risk and will decline by an average of between 3% and 11% for banks on the IRB approach.
Debit and payment card transactions have become faster and cheaper – in part due to regulation.11 As a result, new actors, including non-banks, have emerged – transforming the UK payments system landscape. These have added new services or functionality to existing payment systems or taken over some of the functions previously performed by banks. 10 HM Treasury has established and will chair the JACS Group, bringing together the Payment Systems Regulator (PSR), the Financial  Conduct Authority (FCA) and the Bank of England (BoE). This is within the context of the Government’s policy to safeguard access to cash for those who need it, whilst supporting digital payments. See the ToR at https://www.gov.uk/government/publications/joint-authorities-cash-strategy-group-terms-of-reference 11 Examples include the EU Interchange Fee Regulation and moves by the European Commission against certain card providers, aimed at promoting competition and reducing the cost of accepting cards for merchants. 7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  These include the so-called ‘E or electronic money’ providers who provide online payment services. The Bank of England is supporting these innovations. We are carrying out a major renewal and upgrading of the real time settlement system (RTGS), the central payments infrastructure which sits at the heart of all the UK commercial bank money payment systems. This will enable us further to support innovation and future developments in retail payments. We have already opened up direct access to the existing infrastructure from 21 firms in 2006 to 216 today, which now includes non-bank providers of payment services.

It has not been about the reliability and security of commercial bank money as it has become more dominant in the economy. It is interesting to observe that in the eighteenth and nineteenth century there was a similar shift from state money, in the form of coins, to private money, in the form of banknotes, which in those days were bearer claims issued by private banks. That eventually generated a very different reaction, with the result that private banks in most countries were banned from issuing bank notes. 4  And I think that the lack a similar reaction to the increasing use of private money at the end of the last century was in principle the right one. Unlike in the nineteenth century, commercial banks operate under public regulation and with a guarantee of retail bank deposits.5 While banks create the bulk of money in the economy, the overall supply is controlled by the Bank of England through monetary policy. In such a framework, there is the necessary assurance, albeit indirect, about the robustness and reliability of commercial bank money: that is, of the claims we all hold on the banks that are licenced to take deposits and that provide our transactional bank accounts. I have said that this was the right reaction ‘in principle’. In practice, we discovered in the great financial crisis that the prudential controls on banks that took deposits and the deposit guarantee scheme were not strong enough.
Our efforts to promote high standards of corporate governance and sustainable business practices build on principles and guidelines developed by organisations such as the UN and the OECD. As a financial investor, the fund is affected by the regulation of financial markets. We engage with regulators and participate in consultations on new regulations. We support the development of harmonised rules across markets. We express our expectations towards the companies in our investment portfolio through published expectation documents and direct engagement. So far, we have established three focus areas: climate change, water management and children’s rights. The documents set out our expectations of how companies should manage risk in these areas. Chart: Responsible investment II The purpose of our interaction with investee companies is to support the companies in their creation of long-term value. One of the most important tools at our disposal for exercising ownership rights is voting. We vote at nearly every annual general meeting of the companies in our portfolio. As mentioned, equal treatment of shareholders, including minority shareholders, is of paramount importance to us. Shareholders should have the right to nominate and dismiss directors, file shareholder proposals at general meetings and approve significant changes to the capital structure of a company. Chart: Responsible investment III We seek to identify, assess and report on different kinds of risks to future returns by analysing environmental, social and governance issues. The aim is to gain greater insight into companies and portfolio risks.

In that regard, the recent announcement by the European Central Bank of its determination to conduct unlimited intervention in the sovereign secondary markets, provided effective conditionality is fulfilled, constitutes a significant step towards the normalisation of market conditions in the euro area. Yet, the return to a smoothly operating monetary union cannot be completely achieved by simply relying on ad-hoc reactions by policy-makers. Institutional arrangements must be reviewed in order to restore adequate incentives for domestic authorities to prevent the reemergence of destabilising imbalances and to ensure that any residual risks arising in specific jurisdictions that could affect the area as a whole would be addressed by integrated mechanisms operating at the euro area level. The recent changes introduced in the European Union to strengthen the requirements and the mechanism for the surveillance of domestic fiscal policies and structural reforms, together with the creation of the EFSF and the ESM – which we now know will be soon be launched – are good examples of the required institutional reforms. BIS central bankers’ speeches  1  At the same time, a specific source of risks for the smooth functioning of monetary union that needs to be addressed directly is the financial instability experienced in specific jurisdictions.
17  The legislative changes also include adding non-bank payment providers to the list of regulated entities to whom the Settlement Finality Regulations apply and modifying the Payment Services and Electronic Money Regulations to enable safeguarded funds held by E-Money Institutions and Payment Institutions to be posted with the Bank. 18 These systems were brought within the Bank’s supervision, under Banking Act 2009 powers, because of the potential they have to threaten the stability of, or confidence in, the UK’s financial system or to have serious consequences for business or other interests throughout the UK in the event of their disruption. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  Changes to payments and customer relationships may have more fundamental implications for financial stability. Specifically, while FinTech may make conventional banking more contestable, improving efficiency and customer choice, the opening up of the customer interface and payment services business, could, in time, signal the end of universal banking as we know it. If today’s universal banks have less stable retail funding and weaker, more arms-length client relationships, the volatility of their deposits and liquidity risk could increase. In addition, with weaker customer ties, cross-selling (my old preserve as a teller) could be less prevalent, hitting profitability. The system as a whole wouldn’t necessarily be riskier, but prudential standards and resolution regimes for banks may need to be adjusted.

From a small base in the early 2000s estimates now suggest they (High Frequency Traders) account for up to three-quarters of equity trading volumes and around 40% of FX. 9  4  For now, however, every regulated financial institution must separately meet legal and regulatory requirements to establish customer identities. This adds cost and reduces choice, but safeguards privacy. 5 In 2015, total loans originated by peer-to-peer lenders were $ billion in China, $ billion in the US, £ billion in the UK and € billion across Europe. At least in the UK, there are signs that the rate of growth for new lending has slowed recently; down from 100% to 30%. 6 NESTA survey evidence suggests that around 55-60% of peer-to-peer business borrowers were refused bank credit while other SME firms have assumed they would not be offered bank credit. 7 In 2014, only around 10% of Chinese adults accessed credit from a financial institution and less than one third have a credit score. A number of organisations have been authorised by the government to provide alternative credit scores, including Ant Financial, which since it launched in 2015 has amassed 190 million users and made more than 400 billion yuan of microloans. Although they require no guarantee or collateral, default rates are currently reported to be less than 2%. 8 This shift has not been uniform, however. For example, while just over a third of US Treasuries are traded electronically, this figure is much smaller for UK and German government bonds.
The banking collapse triggered further currency depreciation and contributed to a significant destruction of household assets (e.g., bank equity, mutual funds, and pension assets). The third shock was the international economic recession in the fourth quarter of 2008 and the first half of 2009. The subsequent recession was shaped by the post-boom adjustment, the three aforementioned shocks, and the policy responses of the authorities. It is an interesting topic for future research to try to quantify the relative effects of the three shocks on the subsequent recession. We cannot take it for granted that the banking collapse is the most important one in that respect, although it commands the first place in the psyche of the population. The asset destruction that was associated with the banking collapse took place in several countries, mostly in Northern Europe, and in absolute terms the loss of the foreign creditors is bigger than that of domestic residents. The currency crisis and the banking crisis are linked, of course, as the banks exacerbated the former. However, with a floating exchange rate, the burst of the unsustainable macroeconomic boom was always going to be associated with a major depreciation, irrespective of what happened to the banks and whether Iceland had a cross-border banking system or not.

And LIFFE do not need me to argue their case for them. I see from the programme that they are sponsoring the coffee and the tea at this conference. As a regulator it will of course be quite impossible for me to accept such lavish and unreasonable hospitality, but the rest of you are welcome to do so. For the moment, LIFFE has a dominant position in short-term interest rate futures and is the leading contender to capitalise on that position, whether or not the UK elects to join EMU in the first wave. It has already amended its contract specifications and from March 1999 onwards these contracts will settle against the three-month interest rate for euros, a move which has been widely welcomed in the industry. The new euro bond market is likely to support a range of futures contracts, as I have said, and it is not impossible that more than one identical contract will continue to exist post-EMU, due to arbitrage opportunities, as happens now between the LIFFE’s and the DTB’s Bund contract. That will be an interesting competitive arena to watch. As far as OTC derivatives are concerned, there is little reason why London should lose its pre-eminent position as a result of EMU. OTC markets by definition have no centralised trading platform and their location will depend on, for example, the regulatory environment, the availability of staff of sufficient quality and in sufficient numbers and the other success factors I described earlier.