samchain/econo-pairs-v1 huggingface dataset:
This goes to a more general point: a variety of aspects of the UK’s monetary policy framework – including our open letters, our new MPR and greater clarity over forecast assumptions and sensitivities – are designed 20  All speeches are available online at www.bankofengland.co.uk/news/speeches  20  to help market participants, businesses and households understand the MPC’s reaction function and thereby anticipate how monetary policy will evolve with the economy. This makes policy both easier to predict and more effective. Second, monetary policy is also more effective when it is combined with vigilant macro- and micro-prudential policies. A frequently expressed concern is that low policy rates are generating risks to financial stability – often linked to undesirable “search for yield” behaviour. 24 While vigilance is required, it is essential to leverage the synergies of monetary and macro-prudential policies. In many situations monetary policy actions are complementary to financial stability. After all, stimulating more risk taking is one of the goals of low policy rates, whereas recessions emerge when demand shifts away from risky assets and towards safe assets. Easing monetary policy changes people’s incentives in order to mitigate that shift. 25 Low interest rates can also benefit financial stability by making debts more serviceable. More fundamentally, risks to financial stability should primarily be addressed by (macro and micro) prudential policy, with monetary policy as the last – not the first – line of defence.

They argue that successful decision-making under such uncertainty relies on collaborative processes, judgement, close attention to reliable data, and the use of narrative, rather than an overreliance on economic models. 1  Bank of England  Page 3  I want to frame my observations by going back twelve months. At that point the economy was recovering from the worst of the Covid pandemic and CPI inflation had started to rise. Market expectations showed a 50:50 chance that Bank rate would be increased from 0.1% to 0.25% at the upcoming December 2021 MPC meeting. Source: Bloomberg L.P., Tradeweb and Bank calculations Notes: Realised volatility is a 5-day moving average of the difference between the highest and lowest 2-year nominal UK government bond yield within a day. The MPC had recently published its November 2021 MPR, summarised in Table 1. The MPC forecast that GDP would continue to grow, though at a slowing rate, at 2.9% in the year to 2022Q4. CPI inflation would rise in the short term reaching a peak of 4.3% in 2021Q4, before falling back to 3.4% by 2022Q4 and be close to the 2 per cent target by  Bank of England  Page 4  2023Q4. Other forecasters were predicting a similar outlook for activity, although their average CPI inflation forecast for 2022Q4 was somewhat lower at 2.7%2 . In its November 2021 MPR, the MPC stressed that there was a high level of uncertainty around the outlook, including for energy prices.
Let me share with you some relevant statistics; a full time agent (which we understand makes up less than 40% of the total number of agency force) brings home an income of more than three times the national average income. What is clear is that part time work doesn’t cut it if we want to earn a decent income. Full commitment and dedication is required of an insurance or takaful agent if it is to become a viable career. Therefore, there is a strong case for part-time agents to significantly enhance their productivity in taking the profession more seriously by becoming full time agents. The Bank, through the LIFE framework, has set clear expectations, that going forward, we envisage that at least half of the insurance agents ought to comprise full time agents. Under the proposed framework, the Bank will take stern actions and heavier penalties against unfair business practices including mis-selling of insurance and takaful products through its market conduct supervision. We hope that the industry would study the concept paper thoroughly, before the Framework is finalised. As part of the reform in the general insurance industry, in particular the motor insurance industry, various measures have been introduced to improve the efficiency in motor claims assessments. The insurance and takaful industry has established a 24-hour nationwide toll-free call centre known as Accident Assist Call Centre which provides immediate roadside assistance to road accident victims as well as answers basic enquiries on motor insurance claims.

Obviously, their intensity should vary depending on the countries. France and Italy for instance are lagging behind and have to catch up, whereas other countries like Germany, Spain or the Netherlands, among others, have succeeded in carrying out in-depth reforms and are now reaping the benefits in terms of GDP growth and employment. I wish to stress that these examples show that economic success is fully compatible with the European social model that we share, which combines high standards of public services and low levels of inequality – much lower than in American society for instance. And clearly we can now expect an acceleration of reforms in France: this will be welcome not only for my country, but for Europe as a whole. The success of national reforms would be amplified if combined with two European reforms – the two other points of my triangle. The first one is microeconomic: the creation of a Financing Union for Investment and Innovation (FUII). The need for such a Financing Union comes both from a weakness, which is the persistent financial fragmentation in the euro area, and from an opportunity, which is the euro area savings exceeding investment by EUR 350 billion per year. An obvious way to boost growth is therefore to better steer our abundant savings towards the financing of investment and innovation across borders. And this implies providing businesses with more equity financing solutions.
We also have doubts about the existing deposit insurance system of full cover up to EUR 100,000 adopted at the start of the financial crisis. At the time, this measure certainly helped calm the public and prevent runs on banks. However, we feel that the time has come to consider a return to normal, to reintroduce the system where depositors are not fully covered, at least with respect to non-SIFI banks. I think the question that forms the title of this conference is very topical and relevant. We believe that the time has come to pause and try to discuss these issues seriously. BIS central bankers’ speeches  1  As to costs, supervisory authorities are also incurring high costs. On the European scale, we are recruiting hundreds of new employees to be able to meet the challenges of applying the new regulations. Mandatory impact assessments have been introduced, but these often sound like unconvincing or formal justifications for a result known in advance: “There will be costs, but the benefits will outweigh them in the long run”. As to complexity, we have plenty of evidence that the current sectoral approach to regulation does not make our life as supervisory authorities any easier. We are often creating three parallel but materially identical sets of basic requirements for banks, insurers and investment firms.

1/4  BIS - Central bankers' speeches  Before I go on, here's a reminder that you know all too well I cannot leave behind-and that's the usual disclaimer that the views I express are mine alone and do not necessarily reflect those of the Federal Open Market Committee (FOMC) or anyone else in the Federal Reserve System. Well-Functioning Markets and Monetary Policy I've long made the case that a well-functioning U.S. Treasury market is critical to our economy, and, in fact, the entire world.2 3 But now, I'd like to take it a step further to explain how critically important a resilient financial system-and especially a resilient U. S. Treasury market-is for monetary policy. In the current environment of high global inflation, central banks around the world have been taking strong, decisive actions to restore price stability. Restoring price stability is of paramount importance because it is the foundation of sustained economic and financial stability. Price stability is not an either/or, it's a must have. For monetary policy to be most effective, financial markets must function properly. Monetary policy influences the economy by affecting financial conditions, with the Treasury market at the center of it all. If the Treasury market isn't functioning well, it can impede the transmission of monetary policy to the economy. The Great Debate These issues recall a longstanding debate over what should be done when there is a trade-off between monetary policy and financial stability goals.
But there’s a lot of value in a common approach. If LIBOR ceases and different instruments that use it fall back to different rates or at different times, basis risk will be higher and hedging more difficult. So the ARRC started its fallback work by adopting a set of guiding principles to apply across all product types.15 Among other things, those guidelines suggested that, to the extent practicable and appropriate, market participants should (1) maintain consistency of fallbacks across asset classes and minimize basis risk between products; (2) use SOFR or a benchmark based on SOFR as the replacement rate; (3) minimize value transfer over the life of the contract if the fallback is triggered; and (4) include specific triggers that activate the fallback. Following these overall principles, the ARRC commenced consultations on specific fallbacks for 16 4/8  17 BIS central bankers' speeches  four types of cash products: floating-rate notes,16 syndicated business loans,17 bilateral business loans,18 and securitizations.19 In general, the consultations proposed that following a trigger event—such as LIBOR being discontinued—the instrument would instead pay interest at SOFR or a rate based on SOFR, adjusted so the new rate is comparable to the old one. ARRC’s consultations recognized that different solutions may be necessary or preferable for different markets and products, but promoted common approaches as much as possible. The comment periods for the consultations have closed, and the ARRC is now reviewing the feedback. Final recommendations are expected to be published very soon.

Finally, let me once again welcome our guests, the experts from the Czech Republic, who will pass on the Czech experience in the realization of the decade-long EU project – the establishment of the Single European Payment Area – SEPA. I believe that today’s panel discussions will encourage all stakeholders in the national payment system of Macedonia in creating realistically achievable integration initiatives in the area of cross-border payments in euros, which would open new opportunities for Macedonian companies and citizens for effective and cheap payments in the economic exchanges with the European Union. BIS central bankers’ speeches  1
Widespread acceptance in over 100 countries of the first Basel Accord as the international  “yardstick” has strengthened the capital base and leveled the playing field for banks that compete internationally. As you may know, by the late 1990s, it became clear that the original Accord was becoming outdated. Its broad-brush nature - where required capital generally does not differ by degree of risk - has had a tendency to discourage certain types of bank lending. It has also tended to encourage transactions whose sole benefit is regulatory capital relief. Further, the improvements in risk management tools changed the way that banks monitor and measure risk in a manner that the 1988 Accord could not anticipate or address. Today it is quite clear that the original Accord provides internationally active banks, for which it was intended, with less meaningful measures of the risks they face and of the capital they should hold against them. To respond to these challenges, the Committee began a few years ago to develop a more flexible and forward-looking capital adequacy framework - one that better reflects the risks facing banks and encourages them to make ongoing improvements in their risk assessment capabilities. The Committee believes that all banks should be subject to a capital adequacy framework comprising minimum capital requirements, supervisory review, and market discipline. These are the three pillars of the New Accord. As you may know, the current Accord only has one pillar - minimum capital requirements.

They review such issues as whether the model is based on reasonable assumptions, whether the firm is making appropriate use of backtesting, and how the model performs under normal and stressed market conditions. In addition, they are spending significant time on key controls related to the overall use of models, including the model validation process and the new product approval process. Likewise, as banks rely increasingly on their own assessments of credit and operational risk when determining their capital needs, our examiners will have to become well versed in the changing technical aspects of those models. Some of the conventional, static metrics that we now use - such as those to judge asset quality and to assess the adequacy of credit loss reserves - are likely to be supplanted by more quantitative and more sophisticated measures. As is the case with credit risk, supervisors are in the process of developing a more integrated framework for assessing the adequacy of banks’ operational risk management and measurement approaches. Our approach focuses heavily on how banks are managing operational risk from a corporate-wide perspective. As with any aspect of corporate governance, a key element of our analysis is developing a feeling for the “tone at the top” - that is, the board of directors’ and senior management’s commitment to effectively manage its operational risk.
The hope is that investors search for new investment possibilities and thereby push down other market rates that are more important for companies and households. When the level of interest rates goes down, the banks can expand their credit granting – the increased liquidity in the central bank can contribute here as it forms a buffer against possible outflows of liquidity that could affect the bank if it creates new loans. There are also other potential effects of quantitative easing such as a reinforcement of the credibility of forward guidance. In Sweden, the Riksbank’s balance sheet has increased heavily and the Riksbank now owns quite a large proportion of outstanding government bonds. Bernanke (2020) is one of those who has argued that quantitative easing has worked, in the sense that it has contributed towards making monetary policy more expansionary. Consequently, it may also become a permanent part of the monetary policy toolbox going forward – at any rate if the level of the real interest rate continues to hold short-term nominal interest rates at the lower bound. Quantifications made at the Riksbank also indicate that purchases of government bonds have had a significant effect. 11 However, there is a limit for how much long-term interest rates can be pushed down in Sweden. Partly, this is because the Swedish National Debt Office has a facility that creates possibilities for an arbitrage if the long-term interest rates are sufficiently far below the repo rate.

The conduct of CCPs depends on clarity and certainty. A regime that does not provide the same certainty as that set out in CCP rules runs the risk of undermining the very reasons why international leaders have placed CCPs at the heart of the response to the financial crisis. Conclusion To conclude. Anniversaries are not always milestones to celebrate – and the anniversary of the failure of Northern Rock is a case in point. But even where the lessons of the past were painful, their anniversary provide a chance to step back and consider whether they have been learned. The lessons of the crisis, of course, go much wider than resolution. The first defence against bank failure is to ensure that banks are properly capitalised to withstand losses and continue to serve the real economy. A vast amount of work has been done over the past 10 years to put in place capital and liquidity standards and stress testing regimes to ensure a much safer and stronger banking system. Resolution should be seen as an integral part of making the financial system safer and stronger. Credible resolution regimes that impose losses on shareholders and investors, rather than taxpayers, when things go wrong will incentivise banks to manage their risks properly.
For instance, it has become cheaper to manufacture steel in the US, instead of importing them from China where steelmakers have to transport iron ore from Brazil and Australia to the mills, and then ship the manufactured steel to the US. China has also recently agreed to pay close to 100% more for its iron ore. The costs are likely to be passed on to steel buyers and this could fuel inflation. Rising commodity prices have also increased the prominence of commodities in the financial markets. Commodity markets have in fact, become more financial market like. Traditionally, financial activity in commodity markets focused on exploiting arbitrage opportunities, with investors hedging their production or consumption in the futures market. The entry of new market players such as banks and hedge funds, with their different risk appetite and investment horizon, has given rise to varied trading strategies. They have also given birth to a wider variety of financial instruments in the likes of index and exchange traded funds, as well as structured commodity products. These new players also demand the sophistication that they are used to in financial markets. As a result, commodity markets have moved towards electronic trading, high speed communication links and greater efficiency in trade processing. There is also an increasing need for infrastructure such as commodity exchanges and clearing facilities to facilitate trading. While market development is generally welcomed, the risks have to be managed.

On this note, I wish you a fruitful discussion on the issues, challenges and opportunities presented by commodities. Thank you. BIS Review 90/2008  3
There were deposits from both banks and the state, as well as currency loans which funded some of the country’s foreign exchange reserve. There are several explanations why the balance sheets looked different in different countries. To a certain extent, it depends on the monetary policy regime. For example, the need to maintain a foreign exchange reserve may depend on whether the country has a fixed or floating exchange rate. To a certain extent, it depends on history and previous monetary policy regimes. The size of the gold reserve can often be explained by previous links between the currency and the gold, and the currency reserve can be a remnant from previous regimes with a fixed exchange rate. The way the balance sheet looks is also influenced by what tasks the central bank has and how profits and risks are distributed between the bank and its owners. 2 Figure 3 shows that many central bank balance sheets, including the Riksbank’s, have grown rapidly after the financial crisis. But how will the balance sheet develop when monetary policy is normalised? Should central banks strive for a lean balance sheet or is there reason to let balance sheets remain large? This review shows that there is no “normal” balance sheet that can be seen as an obvious benchmark. The development will instead be determined by central banks’ analysis of, for example, how the size and composition of the balance sheet interact with interest rate policy in normal times.

The support measures that may become relevant in special situations can either relate to market stabilisation, as was the case in the autumn of 2008, or to bond purchases as a complement to monetary policy when the policy rate is restricted by its lower bound. There is a great deal to suggest that real interest rates in Sweden and abroad will be lower in the future than they were during the decades preceding the financial crisis, partly as a result of demographic changes and a new saving pattern in the global economy. 15 As a consequence, several central banks, including the Riksbank, have revised down their assessments of what is a normal level for the policy rate. The likelihood is therefore greater than we will touch the lower bound for the repo rate in the event of economic slowdown. This means that we in the future more often may need to use bond purchases as a complement to the repo rate and repo rate forecast. So, even if I have argued that a portfolio of government bonds has a limited role to play in monetary policy in normal conditions, I nevertheless expect that the Riksbank, along with other central banks, will find itself in situations where bond purchases are justified as a complement to interest rate policy.
But the principle is clear that liabilities will be written down and converted according to the creditor hierarchy and, within a given class, all affected creditors will be treated equally. Moreover, there is an explicit safeguard that creditors shall be left no worse off following the application of the bail-in tool than they would have been in insolvency. This enables resolution authorities to act with sufficient speed and flexibility, whilst providing shareholders and creditors with an appropriate degree of certainty as to how they will be treated. •  Valuation: Determining the amount of write-down and conversion of debt required to recapitalise a failed bank and calculating the counterfactual insolvency valuation for the no creditor worse off test are at the heart of the bail-in. A series of valuations are therefore required in the course of a resolution transaction, as the BRRD sets out in some detail 5. First, a “going concern” valuation of the firm’s assets and liabilities will be used to the gauge the size of any bail-in that is required. A core purpose of this valuation is to quantify expected future losses and so the recapitalisation need at the point of resolution. Second, an equity valuation is needed to inform the terms of the exchange and the allocation of the net asset value generated via the bail-in to the liability holders that have been written down or converted.

In our note, we explain that the Committee is pursuing a “hybrid” approach to recognised operational risk capital across jurisdictions for such institutions. Under this hybrid approach, a banking group would be permitted - subject to supervisory approval - to use a combination of stand-alone AMA calculations for significant internationally active banking subsidiaries and an allocated portion of the group-wide AMA capital requirement for its other internationally active subsidiaries. As a consequence: First, a significant, internationally active institution will be expected to calculate its capital needs under the AMA on a stand-alone basis. It will be able to consider a well-reasoned estimate of diversification within its own operations, though not across the rest of its group. Where a significant internationally active institution is a subsidiary of a larger organisation, it will be allowed to rely on resources, data, and parameters calculated at the group level. Second, an institution that is not considered significant could receive approval from its supervisors to apply a capital charge against operational risk that is allocated to it from a group-wide AMA calculation. The principles articulated in the January note are intended to facilitate the implementation efforts. They should, moreover, ease the burden on institutions that adopt the AMA across jurisdictions yet still respect host countries’ laws that may require local subsidiaries to comply with a minimum standard on their own. Achieving this balance should encourage more institutions to improve their management of operational risk and to strive to adopt more advanced approaches as their capabilities grow.