samchain/econo-pairs-v1 huggingface dataset:
Since then, ETFs have been the recent focus of much international attention, including at the BIS, the FSB and the IMF (see  10  BIS central bankers’ speeches  Chart 15 Global ETF assets under management $ billion 1600 1400 1200 1000 800 600 400 200 0 1999  2001  2003  2005  2007  2009 2011(a)  Source: Blackrock Global ETF Research and Implementations Strategy Team. (a) Data to end-May 2011  Take for example synthetic ETFs provided by asset management arms of banks. These ETFs replicate an index return using derivatives but without necessarily physically purchasing the underlying assets. Synthetic ETF providers (typically banks) might have an incentive to collateralise the total return swap with illiquid collateral that is expensive to fund elsewhere in the market. If the swap counterparty defaults on its leg of the transaction, the ETF (and hence the end investor) would be left holding this collateral, which might have very different liquidity and credit characteristics to the securities it originally planned to invest in. In particular, if the investor unwittingly takes on collateral whose value is highly correlated with the ETF provider (i.e. if there is so-called wrong way risk), then the collateral is likely to have relatively little value in the event of default. Some of these issues are discussed in the June Financial Stability Report. The examples I have cited above involve fundamentally good financial products which should improve economic efficiency and hence the welfare of society as a whole.

There was considerable uncertainty over who was actually holding the bad loans and the problems quickly spread around the world. The uncertainty increased over the summer when credit rating agencies downgraded many of these products. During the third quarter of last year several investment banks reported large write-downs as a result of the bad loans, and in connection with this uncertainty once again increased. In recent months the situation in the financial markets has been characterised by considerable uncertainty over future risks, large write-downs and funding problems for financial institutions. The instability has led to a fear among the banks that they may face liquidity problems, that is, experience difficulty taking new loans when the old ones fall due for payment. It has also lead to fears of an increased credit risk when lending to other banks. This means that the banks have preferred more liquid and risk-free investments, while more banks have experienced difficulties in financing themselves in the interbank market. As a result, government rates have been pushed down, while interbank rates have risen. We have seen this development in many large economies. The interbank markets have been much more volatile than normal. In many countries they have at times functioned poorly in the sense that there has been reluctance to lend money to some banks. In some countries, such as the United Kingdom and the euro area, the considerable uncertainty has led banks to prefer to invest safely in the central bank instead of on the interbank market.
1 b) ... as their failure would come at too high an economic cost  If a ‘too big to fail’ bank gets into distress, it jeopardises not just itself but also the stability of the financial system as a whole and, as a direct consequence, the real economy. The high economic costs can be illustrated using two mechanisms. The higher the bank’s market share of lending business, the greater the probability that the economy will not be provided with enough liquidity if that bank gets into difficulties. First, finding alternative credit providers will take time. Second, in the event of the failure of a systemically important bank, the assets of households and companies will – at least  1  So even though in most cases – including here – the term used is ‘too big to fail’, it is not just an institution’s size that makes it systemically important. In addition to size and market share, its risk profile, economic interconnectedness and (organisational) complexity are important variables. As a result, the terms ‘too important to fail’, ‘too complex to fail’ and ‘too interconnected to fail’ are also used. Page 3/14  temporarily – be frozen, with the attendant negative impact on consumption and investment. Here too, the maxim applies: the higher the institution’s market share of deposit business, the greater the fallout in the event of a crisis. The second mechanism is based on the fact that, as I have already mentioned, banks are closely interconnected.

Philipp Hildebrand: Financial market turbulence and the economic outlook Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Handels- und Industrieverein des Kantons Bern, BurgdorfEmmental section, Burgdorf, 25 October 2007. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  It is very difficult to assess how the shifts in the credit markets triggered by the US sub-prime mortgage market will impact on the real economy. As a result, the uncertainties with regard to the economic outlook have increased considerably. The evaluation of structured credit products, some of them very complex, is based on models. Because of the difficulties this evaluation poses, the market for such products gradually disappeared. The uncertainty as to the degree of exposure of individual banks in the structured credit market led to illiquidity in the unsecured interbank market. Central banks around the world have reacted to this unusual situation with injections of liquidity. An adequate supply of liquidity to the economy is essential for our economic system to function. A favourable aspect of the situation was the fact that the credit market turbulence occurred at a time when the global economy and the Swiss economy were both in good shape. BIS Review 121/2007  1
The record of the past indicates that the temptation to “let the good times roll” is deeply embedded in the political economy of regulation. Macro-prudential regulation can also lean against the tendency otherwise of micro-prudential regulators to toughen up their regime in the teeth of the storm. At the heart of this new approach to making policy is a very simple observation, namely that changes in regulatory intensity in this area can have an impact on credit availability and thus the performance of the economy. There are two legs to this argument, and it is important to understand both. The first leg involves the simple proposition that a well capitalised banking system is more likely to support credit creation in the economy. We see evidence today of better capitalised banks tending to see more rapid growth in lending. It is with this objective in mind that the Bank of England’s Financial Policy Committee has recommended that the major UK banks as a group should increase their equity capital resources. The whole point of this action is to enable forward-looking judgemental regulation to take effect in a system where balance sheet strength  4  BIS central bankers’ speeches  is a necessary pre-condition of stronger lending to the economy as a whole. In the same vein, last summer the Bank of England and the FSA took steps to implement a clearly counter cyclical response to a situation which was a problem to for the economy as a whole.

Alongside that evidence, we could see that the sum of the projections for lending in the two years ahead for the UK banks was substantially negative. The case for acting was therefore strong, but the challenge was also that in its first year, success for the FLS was in some ways to prevent the most negative outcome for lending, which in an absolute sense would not look great. What we have seen over the last year is quite a substantial change in the funding costs of banks which has fed through into lower lending costs, but more so in terms of the amount of lending in the mortgage market than for small firms. Funding for the major banks have also become less disposed, which has probably increased the willingness of banks to compete on lending. But the uneven pattern of lending meant that we thought it was sensible to increase the incentives for banks to lend to small firms. We cannot say that this will conclusively deal with the question of whether the problem is a lack of loan supply or demand, but we can say that we have used our toolkit to create a big incentive for banks to lend to small firms. In summary, there is a strong public interest in the banks, which has been sharpened by the crisis. One element of that public interest is permanent – the role of banks in supporting the real economy.
What was missing was a generally accepted means of exchange, i.e. money. Cost efficiency as a driver of innovation Let us conduct a brief thought experiment. Imagine for a moment that the boat owner had accepted gold as payment, and that Cameron had had some with him. The payment process would have been good deal easier and faster, which would have benefited both parties to the transaction. Having said that, the transaction would still not have been entirely free of costs and risks. After all, who would have been able to guarantee via-à-vis the boat owner that the gold was genuine and of the desired purity? In addition, gold is heavy and involves transport costs, and the risk of loss due to accident or theft (especially when travelling) is considerable. The desire for cost efficiency and security has always been a major driver of innovation in the realm of payments. Way back in the 7th century BCE, the Lydian kings began issuing small, standardised gold coins and stamping them with royal emblems. By embossing the coins in this way, the kings could guarantee both the weight and purity of the gold coins they issued. 2 In my first slide – a highly simplified depiction of the history of money – this is the initial phase: the transition from privately owned gold to gold coins guaranteed by the state. This was a milestone in the evolution of trade and prosperity.

Speech  Embargo 28 March 2019, 6.00 pm  The evolution of payment systems in the digital age: A central bank perspective Money Market Event  Andréa M. Maechler and Thomas Moser Member of the Governing Board / Alternate Member of the Governing Board ∗ Swiss National Bank Zurich, 28 March 2019 © Swiss National Bank, Zurich, 2019 (speech given in German)  ∗  The speakers would like to thank Dirk Faltin, Mico Loretan and Andreas Wehrli for their support in drafting this speech. They also thank Giuseppe D’Alelio, Lukas Hauri, Sébastien Kraenzlin and Nicolas Stoffels as well as SNB Language Services. Page 1/9  Ladies and Gentlemen Welcome to the Swiss National Bank’s biannual Money Market Event. Tonight, we have chosen to focus on a subject that is becoming increasingly topical in light of developments in digitalisation: payment systems. This is a fascinating field, not just for the private sector, but also for central banks, as payment systems and monetary policy are closely interconnected. The SNB’s monetary policy is designed to ensure price stability, which in turn maintains confidence in the value of our currency. At our quarterly assessment last week, we decided to leave our expansionary monetary policy stance unchanged. For the year 2019, we expect growth of around 1.5% in Switzerland, compared to 2.5% growth in 2018. The inflation forecast has been revised downwards. We now expect an inflation rate of 0.3% for 2019. The Swiss franc is still highly valued and the situation on the foreign exchange market remains fragile.
Over 26 million people are unemployed in the EU today, almost 10 million more than in 2007. Low growth, high unemployment and high debt levels are not a good combination. Even though there are signs of a moderate revival of activity abroad, growth may remain low for a protracted period. Real wage growth in Norway has diverged substantially from that observed in Germany and the US. This is attributable to the sharp price rise for Norwegian goods in recent years. Norway’s terms of trade have improved and the gains shared between owners and workers. The wage share has remained fairly stable. Chart 5: Real wages and productivity for mainland Norway Strong growth in activity in the petroleum sector has for many years been an engine of growth also for the mainland economy, generating high growth in output and employment. Since a share of the terms of trade gains has benefitted wage-earners in the form of wage increases, real wage growth in Norway has been considerably higher than productivity growth. But the economic picture for Norway may be changing. We cannot assume that Norway’s terms of trade will continue to improve. Investment in the petroleum sector is levelling off. Output growth in the mainland economy has slackened. When activity in the petroleum sector eventually declines, there will also be a need for economic restructuring in Norway. The business sector will have to seek new markets where competition may be intense. Restructuring may prove particularly demanding given Norway’s high cost level.

In the case of the Federal Reserve, the pre-crisis framework worked well at targeting the federal funds rate and we have high confidence that a similar system could work again in the future. But can we do better?4 In light of recent experience and changes, are there more effective, transparent, or flexible implementation frameworks that would give policymakers capacity to better steer the economy in the direction they need to satisfy their mandate? Recent experience suggests that the Federal Reserve’s new tools – interest on reserves and term deposits5 – as well as its application of old tools towards new purposes – fixed-rate reverse repos and large-scale outright security purchases – can be very helpful, but we can probably still learn more about how best to employ them. We can benefit collectively from studying the impact of differences in the implementation of similar tools across central banks.6  3  An extended effort to evaluate potential long-run monetary policy implementation frameworks was announced in the July 2015 FOMC meeting minutes. 4  For example, some have suggested that the Federal Reserve could target a repo rate, rather than the federal funds rate (see Bernanke, or Gagnon and Sack). Targeting a repo rate could have some benefits, but may entail a number of complications, so more work would be necessary to evaluate the potential consequences of such a change.
Let me take this opportunity to congratulate Governor Gjedrem for the achievements of the Bank under this leadership during his twelve year terms in office. My remarks today will focus on the role of central banks from the perspective of emerging economies and more specifically in the context of central banking in Asia as we confront the challenges in this rapidly changing global economic and financial environment. Central bank mandates While there is no unique blueprint for the design of the institutional arrangements for a central bank, of importance is that it needs to be relevant to our own circumstances. But of importance is that there is clarity on the mandate, the governance framework and the areas of accountability of the central bank. And that needs to be supported by the empowering legislation to ensure that the central bank has at its disposal the capabilities to deliver the mandate. Central banks in emerging economies generally have a broader mandate beyond the traditional mandates of monetary and financial stability. Even within these traditional mandates, the role of central banks have varied considerably. In the mandate of monetary stability, it has ranged from having the narrow mandate of price stability to the mandate where price stability is the primary role of the central bank while due consideration is also given to economic and employment objectives. While for some the mandates are clearly hierarchical, for others, the multiple mandates involve assessments of the trade-offs.

The central bank mandate of financial stability is less clearly defined particularly in circumstances in which the supervisory function does not reside in the central bank. The majority of central banks in emerging economies in Asia, however, has the responsibility of the supervisory function although for three of the region’s major economies – Japan, China and Korea, this function resides in a separate agency. Even for central banks that has the responsibility of the supervisory function, the specific outcomes to be achieved are less clearly defined compared to the mandate for price stability. In Malaysia, our new Central Bank Act of 2009 has defined this mandate in terms of the risks to financial stability – that is,  BIS Review 155/2010  1  the risk of the disruption to financial intermediation, the risk of disruption to the orderly functioning of financial markets and the risk of loss of confidence in the financial system. Common to most central banks in emerging economies is the mandate to develop the financial system. Given the stage of development of financial systems in emerging economies, this is an important mandate not only to enhance the financial intermediation process in the economy but also for the purposes of facilitating the mandate of monetary and financial stability. This mandate has involved institutional building, financial market development and the strengthening of the financial infrastructure including that of the payment systems and the legislative framework.
A repo is a sale of a security with an agreement to buy it back on a later date (the most common term for a repo is overnight, but the term can be for a longer period, such as one-month as well). The difference in the purchase and sale prices constitutes a rate of interest paid by the institution that is borrowing the money (or selling the security). The advantage of the sale and resale arrangement is that, in the event that the borrower does not return the money it owes, the party that purchased the security can keep it, avoiding the costs, delays, and uncertainty associated with making its claim in bankruptcy court; these advantages are confined to certain types of securities and has been allowed by supporting legislation. Repos are just one such way that a private intermediary can provide a high degree of safety to its lenders, and others include asset-backed commercial paper, money market mutual fund shares, and auction-rate securities. However these private money-like assets are created,  BIS central bankers’ speeches  5  those that succeed in providing that elusive money-likeness confer significant benefits on their creators. A now widely confirmed finding regarding the issuance of money-like assets is that they can be issued at lower interest rates than other types of debt, saving the issuer from greater interest expense. That result comes in two steps.

The FPC was able to do so because of its policy I mentioned a moment ago: it maintained a non-zero UK CCyB resting rate in normal times, which was its assessment of the financial system before the pandemic struck.10 A regulatory buffer is said to be usable if banks will dip into it when faced with shocks – that is, they will willingly allow their capital (or liquidity) ratios to decline below it – without taking actions that could have undesirable consequences either for micro-prudential resilience or for macro-prudential stability, including restricting lending to the real economy in a way that amplifies the initial adverse shock. In practice, there is an observable spectrum of usability (Chart 3). 10  See Bank of England’s December 2019 Financial Stability Report (pg 8) 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  Chart 3: Spectrum of usable and releasable buffers  At the more usable end are management buffers: firms can dip into these with no regulatory consequences, although even here they may be reluctant to do so. That reluctance may stem from their internal risk appetite and/or because the market judges that regulatory buffers are insufficient to absorb losses. At the other end is the Capital Conservation Buffer (CCoB): use of this regulatory buffer triggers distribution restrictions which firms may prefer to avoid if they believe reductions in dividends (for example) are viewed as a sign of weakness by investors.
I should add that the International Association of Insurance Supervisors (IAIS), a fellow association of supervisors in the insurance area, is now discussing a supervisory framework that would apply to all insurance regulatory systems globally. Evolution in risk management and the reform of financial supervision should complement and reinforce each other, and the progress in each area will be influenced by the work underway globally to revise accounting guidelines. The Geneva Association has taken a great interest in this topic, so I will conclude my remarks with some brief thoughts from my perspective on the convergence of accounting standards, advances in risk management, and supervision. II. Trends across financial services sector  Allow me to begin with an overview of recent trends in risk management. Last year, a body representing major financial supervisory agencies conducted a study of 31 banks, securities firms, and insurance companies in 12 jurisdictions. This body - called the “Joint Forum” - consists of expert supervisors from member agencies of the Basel Committee, the International Organisation of  BIS Review 32/2004  1  Securities Commissioners (IOSCO), and the IAIS. The Joint Forum seeks to identify best practices and develop guidance for activities across the financial services sector. In its report, which was published in August 2003, the Joint Forum identified two important and recent trends among large, complex firms engaged in banking, securities, or insurance, or in some mix of these activities. a.

Inadequate and old-fashioned supervision based on rigid regulations will do right the opposite. And supervision is a dynamic concept. The tools and art of supervision must, in all countries, continuously improve along with the development of markets and market technology. BIS Review 66/2000  8