samchain/econo-pairs-v1 huggingface dataset:
In particular, a recent report by Lord Grabiner indicated concern that the Bank’s systems and controls have not always kept pace with the changing role of the Bank. Today we are publishing the results of a thorough Review 11 of our MI function. From it I would highlight three key points that will remove some unconstructive ambiguities around the gathering of MI: •  First the Bank has published a “Market Intelligence Charter” which explains in clear language the terms of the Bank’s engagement with market participants, and its rationale for gathering MI. •  Second the Bank is strengthening the set of policies (including escalation, recording and compliance policies) that govern MI, and expanding the training accompanying those policies. •  Third, the Bank will establish a Bankwide executive level committee to oversee and agree the priorities for the Bank’s MI programme to ensure it retains flexibility, focus, and relevance to the policy challenges of today and tomorrow. In addition, a dedicated MI Division will co-ordinate, synthesise and disseminate MI around the bank. The ability of the Bank’s MI function to provide information to senior policymakers over the past 8 years, as the first waves of the crisis first rushed onto the Bank’s doorstep, and then as solutions flowed back out across the system, has been vital to our effectiveness. The staff who do this work are a credit to the institution.

This means facing up to transition now, taking action to ensure new issuance moves to robust alternative rates and concrete plans are in place to deal with  7  https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-0623/HCWS307/  8  All speeches are available online at www.bankofengland.co.uk/news/speeches  8  legacy exposures. The UK Government announcement on its intention to legislate and the finalisation of the ISDA protocol are important steps in the ‘endgame’ becoming clearer. There is more to do and work is underway to remove the remaining barriers to transition. After John has spoken we’ll be joined by the chairs of the UK and US industry groups who continue to lead this work, building consensus on key areas such as product conventions and cash fallback mechanisms. Hopefully, the message is now clear to those who have remained on the side-line: this is a necessity not a choice and there are eighteen months left to transition. And, for the avoidance of doubt, I’m taking it that eighteen months in Libor is past the middle of the seventh, so you don’t need to get up now, stretch and sing ‘Take Me Out to the Ball Game’ before John speaks. 9  All speeches are available online at www.bankofengland.co.uk/news/speeches  9
4  BIS central bankers’ speeches  The regulation of the financial sector affects the country’s citizens Policy discussions in Sweden, in the EU, globally  Could be perceived as abstract Often technical  Behaviour of the financial sector  Effects on the real economy  Swedish citizens and consumers  Crises cost society enormous amounts GDP growth in Sweden, 1960-2010, SEK billion  Source: The Riksbank  BIS central bankers’ speeches  5  The real effects have a high social and economic price Unemployment in Sweden, 1985-2000, percentage of labour force  Source: The Riksbank  Problems in the banking sector impact the country’s citizens in many ways Via the real economy  Problems in the banking sector  Directly against bank customers  Via the public sector  Weaker economic development  Deposit guarantee Need for capital injections  Increased uncertainty  New banking relationships  Higher unemployment Lower wages Lower pensions  Higher taxes Deterioration of public welfare  Higher interest rates  New terms  Poorer economy for households  6  BIS central bankers’ speeches  A financial crisis will ultimately threaten basic social functions The financial system is central in the society  Household  Who can pay whom in a serious crisis? Household’s bank Grocery shop  Grocery shop’s bank  ?

The Riksbank monitors the financial sector with a systemic perspective. If we hadn’t realised it before, one clear lesson from the crisis of 2008–2009 was that monitoring individual institutions is not enough. We and other authorities around the world learnt that we have to keep our eyes on the connections between the banks and how they are affected, as a whole, by developments on the markets. Among other means, the Riksbank influences financial market participants through the analyses we make and the recommendations we issue in the Financial Stability Reports. Another important role for the Riksbank is being the country’s representative in several forums that set the standards for the financial sector, primarily the Basel Committee on Banking Supervision, the European Systemic Risk Board (ESRB) and the Committee on Payment and Settlement Systems (CPSS). At the same time, it is worth pointing out that, at present, the Riksbank does not have any sharper tools than words in the preventive work or macro-prudential supervision. We can warn and recommend, but when it comes to real measures, other authorities currently hold responsibility. It is a difficult task. Always raising a warning when everything seems to be going well seldom makes you popular. Financial stability policy is of great importance for Swedish households Preventing future crises is an important task – as is being able to manage them if they break out anyway. I hope that this speech has clarified why Swedish households are dependent on financial stability.
Importantly, the exercise required firms to understand how their real economy customers were both exposed to these risks and the actions they would take to manage them. This was one of the most challenging aspects of the work – as it revealed gaps in real economy firms' understanding of what climate transition means for them. A gap I will return to. The CBES also showed that costs were lowest, and opportunities greatest, with an early and well managed transition. That underlines that while governments set public climate policy, banks and insurers have a collective interest in managing climate-related financial risks in a way that supports that transition over time. Managing climate related financial risks Second, interactions with banks and insurers had revealed them to be in the early stages of developing their climate risk management capabilities. To address this, we set the world's first supervisory expectations for climate risks in 2019 – expectations that became part of the PRA's core supervisory processes last year. 2/7  BIS - Central bankers' speeches  Our reviews and observations – including the CBES – have shown significant progress. However, a distance remains to the end-point and all firms need to invest to make further progress. We have given firms a huge amount of homework to do, as set out in our latest Dear CEOOpens in a new window letter and in direct supervisory feedback. I can assure you we will be marking that homework.

Eurofi – Prague, 9 September 2022 Mobilization of the Eurosystem against inflation Speech by François Villeroy de Galhau, Governor of the Banque de France  Page 1 sur 3 Ladies and Gentlemen, I am delighted to be talking to you today at this Eurofi edition, although I very much regret that I cannot be in Prague in person today. I extend my warmest thanks to David Wright and Didier Cahen for organising this event. Let me first express my heartfelt sympathy to our British friends: the Queen brought a sense of duty and a sense of stability which will hopefully remain a powerful lesson in this very volatile period. These are indeed times of extremely high uncertainty and difficulty. The European and French economies will face next year a significant slowdown, and we cannot exclude a limited recession. Let me quote, as I did some days ago in Jackson Hole,i two compatriots to give us some light: first, a philosopher – Voltaire – who said that “uncertainty is not a pleasant condition, but certainty is absurd”ii; second, an economist – Olivier Blanchard – with the following words “monetary policy must be closer to art when it is frequently confronted to new, poorly anticipated and poorly understood, contingencies”iii Well, between art and science, how did we deal yesterday with the present uncertainty? We decided to frontload on our monetary policy normalisation.
Distinguished ladies and gentlemen, I dedicated most of my last year’s speech arguing that the stable Denar exchange rate is still the best solution for the Macedonian economy. In the public debate concerning this issue last year, on many occasions, I presented additional arguments that underpin my view. On this occasion I will discuss the two theses recently presented by the advocates of floating Denar exchange rate. The first thesis is that the floating exchange rate will ensure more relaxed monetary policy, and accordingly, higher economic growth. The second thesis is that the Denar exchange rate is not realistic, i.e. it is overrated. Yet, so far, I still have not heard any explanation of how would the floating exchange rate relax the monetary policy, nor arguments supporting the view that the Denar is overrated. Considering the first thesis, note that the exchange rate regime does not determine whether the monetary policy will be restrictive or relaxed. You could have floating rate and restrictive monetary policy, or fixed exchange rate and relaxed monetary policy. What is important for the monetary policy is whether there are imbalances in the economy or not. Just because of the absence of imbalances in the Macedonian economy, as I elaborated at the beginning, we can afford relaxed monetary policy. Conversely, due to the nature of our economy, the floating exchange rate would fuel uncertainty and create imbalances and high inflation, the alleviation of which would require extremely restrictive monetary policy.

Undoubtedly, the monetary policy of the European Central Bank, which has successfully achieved its objective of keeping euro area inflation and price expectations under control, has had a sharply expansionary effect on the Spanish economy. Indeed, lower interest rates have facilitated the growth of corporate and household debt and boosted spending and activity. But this cannot be identified as the sole cause behind our growth, and nor does it suffice to explain our better performance, since other southern European countries have also seen their financial costs substantially cut and yet have not recorded comparable growth. Nor can there be many doubts about the favourable influence that the fiscal policies pursued since 1994 have had on economic agents' confidence. With the help of European funds, these policies have enabled the budget deficit to be reduced to the extent that, in the past two years, we have run a surplus. The beneficial effects of fiscal consolidation have been reinforced by the fact that the gradual elimination of the budget deficit has occurred without hardly increasing public spending relative to GDP. Among the causes of the boom, we should also acknowledge the currency devaluations in the early 90s. These took place as a result of the turbulence then prevailing and led to a peseta-euro conversion rate that placed us in a very favourable starting position for the competitiveness of the Spanish economy.
The imbalances and the low interest rates led to an increased demand for financial assets with a higher yield, which contributed to pushing down risk premiums to untenably low levels. Low risk premiums and low interest rates in turn contributed to overheating in the US housing market. Expansionary housing policy in the United States One important factor in triggering the crisis was the adjustment in the US housing market that began in autumn 2005. The housing market has been stimulated by an expansionary housing policy over a long period of time. The aim was that more households would own their own homes. To achieve this, targets were set for how much of the mortgage institutions’ lending would be granted to wage-earners with medium and low incomes. These targets were then gradually raised. The demand for owning one’s own home increased, and thus housing prices and household indebtedness also increased. Moreover, an increasing number of households had gained access to credit as a result of the deregulation of the financial markets. New financial products were created that enabled mortgages to be put together, repackaged and then sold on the financial markets. The idea behind these financial innovations was to spread the risks over more counterparties. Unfortunately the new instruments also reduced the possibility to assess where the risks lay. When the housing market bubble burst and house prices began to fall, the underlying problems rose to the surface.

A third argument is that Banking Union membership should benefit participating countries through the removal of an incentive for deleveraging on the part of banks with foreign capital. The on-going cross-border deleveraging process, while reflecting balance sheet repair in host countries, as well as constrained demand for new borrowing, must be monitored carefully. To give you an idea of the size of the phenomenon, as compared to the beginning of the crisis, external funding from parent banks has decreased in Romania by 35 percent, about half of the reduction occurring last year. The rebalancing of bank funding away from parent-subsidiary lines of credit and more towards domestic funding is necessary and appropriate (inter alia, it reduces loan-to-deposit ratios and the stock of foreign private indebtedness, both processes impacting financial stability favourably), but must not be unduly accelerated in the short and medium term, especially when superimposed on an on-going fiscal consolidation effort, as this puts excessive downward pressure on economic growth. As a fourth argument for Banking Union membership, there are also potential benefits which relate to eliminating the possibilities of jurisdictional arbitrage (for example, by preventing the widespread potential conversion of foreign-owned bank subsidiaries into branches), as well as to creating a more competitive market by reducing distortions and entry barriers. There is a lot of potential for increased efficiency of the banking sector by virtue of being a member of the Banking Union. A more efficient banking sector cannot but bolster the long-run growth potential of an economy.
The euro is the currency of an economic area with a population of nearly 300 million people and one-sixth of world GDP, which is significantly higher than that of Japan, although smaller than that of the United States. The euro area is the largest trade partner in the world economy with a share of 20.1% in world exports, followed by the United States with a share of 16.3% and Japan with a share of 7.6%. Given these facts, it is stating the obvious to say that the euro and the Eurosystem are likely to play an important role in the world economy. By reducing the number of key players in the international arena and by strengthening the awareness of each player to take up its respective responsibility, the euro will contribute – over time – to facilitating international cooperation. But the transfer of competence for monetary policy from the national to the Community level also implied that new arrangements had to be found in order to allow the Eurosystem to participate and represent the euro area in matters of its competence. Devising the appropriate arrangements was complicated because of two specific features: the first relates to the fact that membership in different fora (for example, the G7 or the G10) varies across euro area Member States. The second derives from the fact that full membership in intergovernmental institutions such as the International Monetary Fund (IMF) or the Organisation for Economic Cooperation and Development (OECD) is restricted to countries only.

While the risk of a pronounced slowdown of the US economy, with negative repercussions on the world economy, cannot be ruled out, such a scenario appears unlikely at present. However, a major challenge for the US authorities over the next few months is engineering a “soft landing” of the US economy. The Japanese economy now shows clearer signs that the protracted weakness of the last few years could come to an end. An economic consolidation and a resumption of capital flows to crisis-hit emerging market economies, especially in Asia, also contribute to this favourable outlook. Against this positive background, the challenge now is to ensure that the current recovery in the euro area becomes a period of prolonged non-inflationary and employment-generating growth. I will  1  BIS Review 116/1999  elaborate on the possible contribution of the ECB and the Eurosystem, but also on the limitations thereof, pointing to the necessary contributions of other policymakers. Looking back at the past ten months, I would like to recall that the introduction of the euro took place in an environment of price stability that only few observers would have predicted some years ago. This was the result of a process of economic convergence, in the course of which European inflation rates were reduced significantly. This development is very encouraging, since theoretical arguments and empirical evidence over several decades suggest that high and variable rates of inflation are detrimental to growth and employment in the long term.
Liquidity can be compared to the ability to pay one’s bills as they fall due. Even if you have large capital, you may not have good liquidity. This is particularly important for the banks. While they receive money from depositors and borrow on the market at fairly short horizons, their lending is usually long term – perhaps 30 years or more for a mortgage. This ability to transform short-term saving into long-term loans is the banks’ main function in society. It enables companies to invest and households to buy their homes. Normally, a shortage of liquidity does not present a problem. Withdrawals from bank accounts follow normal patterns and the banks are able to monitor this. If special needs arise, the banks can manage the situation by selling assets and thus acquire cash. Normally the banks have also been able to manage their short-term borrowing without problems. But during the crisis problems arose on many markets. In some cases there were quite simply no buyers at all and market funding ceased functioning. And as the banks had become dependent on short-term borrowing, there was little they could do when their financiers decided it was safest to demand their money back. Money the banks could not get hold of. In these situations there is not much a bank can do. The usual remedy is liquidity assistance from the central bank. But most central bank make tough demands regarding collateral for lending money to banks with liquidity shortages.

However, this comparison is not entirely valid, for two reasons. Firstly, the new regulations entail much stricter requirements regarding what is accepted as Tier 1 capital. In future a much larger share of this capital must be of the highest possible quality. This “common equity Tier 1 capital” is made up of equity capital and withheld profits (the red part of the columns in the figure below). This capital can immediately and without complication be used to cover losses. In addition, one must have additional capital – what is known as other Tier 1 capital – of good quality, which can also be used to meet losses in going concern (orange colour in the figure). One must also have further capital in the form of, for instance, subordinated loans (yellow colour in the figure). This part of the capital differs from the other two in that it can only be used once the bank has gone bankrupt. Secondly, one will to a greater extent assume that the asset values are overestimated. So the risk adjustments in the value of the assets that I mentioned will be much tougher. Quite simply, one will now assume that the values of many asset classes are more inflated than was previously assumed. So despite the increase in Sweden being only around 2 percentage points for Tier 1 capital, it actually entails a much tougher minimum requirement. But above all, it means that the global minimum level is raised substantially. Especially with regard to common equity Tier 1 capital.
The problems began in the subprime market As you all know, the recent credit concern began with problems on the US mortgage market. This applies in particular to the area offering so-called subprime loans. These are loans to mortgage customers with lower credit ratings – often households without a documented credit history and with a lower income than the average household. These loans doubled between 1996 and 2006, although they still comprise a relatively small part of the US credit market. The problems began to affect many borrowers back in 2005 in connection with the rise in interest rates. When loans were renewed at new, higher interest rates the loan costs for these borrowers rose substantially. And when property prices fell in many areas, there was no scope to mortgage the house so householders could borrow their way out of their problems. This was otherwise a common – albeit dubious – strategy during the years of rising property prices. Many borrowers could no longer make the interest and mortgage payments on their loans. This led in turn to substantial credit losses for many mortgage institutions. But the loan losses did not merely affect the banks and mortgage institutions that had originally issued the loans. As you all know, the problems came to have a much wider spread. And the problems spread as the risks were sold on The reason why the problems spread is the extensive securitisation of mortgages.

In connection with this, a number of provisions of a compulsory nature were introduced to prevent the possibility of the state being placed in a blackmail situation. For instance, an act was introduced that meant in principle that the Swedish Bank Support Authority could make decisions in the bank through a state compulsory purchase of the shares if the bank’s capital adequacy fell below two per cent. But these temporary provisions, like the general bank guarantee, ceased to apply in 1996. The Bank Support Authority was transformed into the Deposit Guarantee Board, which was given the task of managing the deposit guarantee and investor protection. Since then it is in principle only the general regulations for competition and liquidation and the system for the deposit guarantee that are available for managing institutions with problems. Unfortunately it is not particularly appropriate – if even possible – to apply the general competition regulations to banks. The regulations on competition and liquidity are primarily to protect the interests of the creditors. They are not particularly well-adapted to take into account society’s interest in maintaining the stability of the financial system. The primary task of a receiver in a bankruptcy is to safeguard the interests of the creditors. He or she has neither the authority nor can be expected to have the skills required to take the measures needed to safeguard the stability of the financial system. Problems which threaten stability require immediate action. Bankruptcies usually take years to resolve.