samchain/econo-pairs-v1 huggingface dataset:
Global fiscal and current account imbalances The negative correlation recorded during the crisis between the current account and the fiscal balances has been largely in line with expectations. In the long run, however, current account deficits could well increase again globally if the fiscal expansion which has taken place in recent years is not reined in. In fact, the available evidence suggests that the adjustment of current account imbalances has so far been largely cyclical. The reduction in trade imbalances following the crisis has slowed and, in several cases, has started to reverse. In both the United States and China we are already close to pre-Lehman levels in absolute terms. The sheer asymmetry in size and composition of the fiscal stimulus in advanced countries compared with any measures taken in emerging economies is likely to magnify the expected resurgence of current account imbalances. Similarly to the pre-crisis situation, advanced economies’ indebtedness would be financed with capital flows from emerging economies. This implies not only a massive misallocation of global capital, but also undermines the credibility of any initiative to rebalance savings and investments both within and across the main regions of the global economy. As a result, it risks creating – once again I should say – delusional expectations in financial markets about the sustainability of imbalanced financial and trade flows. Policy discussions are likely to return to where they were a few years ago. The crisis has given us the opportunity to question their analytical and practical basis.

Given that such a shift in resources cannot occur instantaneously, it should not be surprising if the US economy experienced a period of temporary higher unemployment. In that case, trying to stimulate growth and reduce unemployment to achieve the pre-crisis equilibrium through macroeconomic policies, as some are suggesting, might only delay the adjustment and lead again to an unbalanced path. On the other hand, some surplus countries, such as Germany, might be able to achieve higher growth than in the past decade, because of the increased potential resulting from their better positioning in international trade specialisation achieved over the years and if they are able to employ resources more efficiently in the non-tradable sector. The second issue that I would like to raise relates to the endogenous factors that induce rebalancing of growth between deficit and surplus countries. Theory suggests that if external demand falls, owing to the lower levels of growth in deficit countries, surplus countries will be able to export less and thus also experience lower growth. This would free up resources in the latter countries which should then be allocated to the non-tradable sector. Furthermore, the interest rate in surplus countries should fall, inducing residents to save less and consume more. However, these adjustment mechanisms may take time and may lead to temporary sub-optimal growth. It is necessary to investigate whether the adjustment process is indeed slow, especially after a crisis such as the one we have experienced.
Going negative has sharply lowered and flattened the yield curve in the euro zone, which is especially relevant given the importance of long-term financing. And so far the substitution for cash has also remained negligible. Yet, there are limits on how far one can go. Thus lower key interest rates should be combined with other non-conventional measures. In short, CBs have innovated a lot, both in terms of rates and quantities. We knew CBs could do a lot and they have actually done a lot, even if they cannot do everything. In the main advanced economies, the precise macroeconomic effect of large-scale asset purchases is still under discussion. But I can summarize the Eurosystem’s shared analysis and Mario’s recent statement: our purchases will add around half a point to inflation in 2016 and almost the same to growth. In the US case, the QE2 launched in late 2010 is the most similar to our QE. Controlling for its size, roughly half of ours, it has had a broadly comparable impact, even if published estimates differ somewhat. Fourth challenge: how to deal with the risk of a mismanaged exit from the ZLB and financial instability? Staying too low for too long would be counterproductive: ultra-low margins may discourage financial intermediation and lending to the real economy, while addiction to forward guidance may silence contrarians and hamper market information on fundamentals. Yet the exit may be bumpy and, hence, postponed or even aborted.

Considering all the new information and analyses which have become available since our meeting on 5 August 2010, we continue to expect price developments to remain moderate over the policy-relevant medium-term horizon, benefiting from low domestic price pressures. Recent economic data for the euro area have been stronger than expected, partly owing to temporary factors. Looking ahead, the recovery should proceed at a moderate pace, with uncertainty still prevailing. A cross-check of the outcome of our economic analysis with that of the monetary analysis confirms that inflationary pressures over the medium term remain contained, as suggested by weak money and credit growth. Overall, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with our aim of keeping inflation rates below, but close to, 2% over the medium term. The firm anchoring of inflation expectations remains of the essence. Turning to fiscal policies, current developments at the euro area aggregate level appear to be broadly in line with previous expectations. At the country level, any positive fiscal developments that may emerge, reflecting factors such as a more favourable than expected macroeconomic environment, should be exploited to make faster progress with fiscal consolidation. At the same time, in countries where there is still a need to take additional specific measures to achieve consolidation targets, such measures should be adopted swiftly to ensure that consolidation commitments are fulfilled.
This, in turn, raises issues of co-ordination and communication for both internationally active banks and also supervisors, about which I will say more later. Risk aggregation and quantification Collecting risk data across many business lines has catalysed further efforts to aggregate those measures of risk by quantifying them in a more rigorous and more consistent fashion. This quantification of risk is the second major risk management trend identified in the Joint Forum report. It is not a new concept. In the insurance industry, for instance, actuaries have long sought to estimate the likelihood of various events taking place. What is new is that, in recent years, financial risk managers and researchers apply mathematics, statistics and modelling to many risk exposures that were previously not thought to be readily quantifiable. In the banking industry, for example, statistical and computational analyses developed for evaluating exposures to market risk led, over the past decade or so, to the application of similar techniques to credit risk. The introduction of increasingly reliable estimates of the drivers of credit risk, such as the probability of default, led to many of the proposals that form the basis for the new Basel II bank capital framework. The Joint Forum found that the “ultimate expression” of risk aggregation is the summation of many types of risk into a single risk measure. This measure, often called “economic capital,” estimates the amount of capital a firm requires to protect itself against all risks with a certain degree of confidence.

Peter Pang: Developing critical financial infrastructure between Hong Kong and Thailand Opening remarks by Mr Peter Pang, Deputy Chief Executive of the Hong Kong Monetary Authority, at the HKMA-BOT Joint Press Conference on the Launch of US Dollar – Thai Baht PvP Link, Hong Kong, 28 July 2014. *  *  *  Deputy Governor, ladies and gentlemen, 1. Good afternoon. It is my great pleasure to welcome you all to this press conference jointly organised by the Hong Kong Monetary Authority (HKMA) and Bank of Thailand (BOT). I would like to thank Deputy Governor Mr. Krirk Vanikkul for joining me here to announce the launch of the payment-versus-payment (PvP) link between BAHTNET, the Thai Baht Real Time Gross Settlement (RTGS) system in Thailand, and the US dollar RTGS system in Hong Kong. 2. Time flies. About a year ago the HKMA and BOT announced in Bangkok to build this PvP link. With the concerted effort of colleagues on both sides, the link went live today as scheduled, after completion of the system development and meticulous testing with the users. The banks in both jurisdictions have been fully engaged to ensure maximum readiness, on both technical and business fronts, for the launch of the link. 3. This PvP link is an iconic project that symbolises the determination of the HKMA and BOT to work together to promote financial integration and financial stability in the region through the linkage of critical financial infrastructure. It will bring significant benefits in three areas. 4.
In other words, same risks same regulation. In the UK, recognising the importance of payments for financial stability, the Bank of England supervises systemic payments systems such as Bacs, the Faster Payments Service, CHAPS, and Visa. And internationally, there are principles – the Principles for Financial Market Infrastructure – which Benoit helped to create when he was at the helm of the Committee for Payments and Market Infrastructure - that govern how payments systems should be regulated and the standards they should meet. These standards form the basis of the BoE’s regulation. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  While same risk, same regulation may seem obvious, in many countries it will require changes to the regulatory framework. Where stablecoins are used in place of money, they need to offer the same protections as money. Problem 2 is how do you ensure the stability of the “thing” being transferred in the payments chain. Existing systemic payment arrangements transfer money that is stable and reliable – in bad times and in good. This generally takes two forms: public central bank money - either reserves held at the central bank or cash; or private commercial bank money – bank deposits. Prudential regulation, access to central bank liquidity, and deposit insurance give holders confidence that underpins their willingness to receive commercial bank money as payment. This gives payment recipients – shops and businesses - confidence that when someone taps their card or phone to pay, the amount promised will arrive in their account.

This is why the  7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  UK Financial Policy Committee has said that where stablecoins are used in systemic payment chains as money-like instruments, they must meet standards equivalent to commercial bank money in terms of stability of value, robustness of legal claim and the ability to redeem at par in fiat. Stablecoins’ borderless nature of course also means that international regulators’ coordination is necessary and work is indeed underway. A Financial Stability Board consultation is ongoing with supervisory recommendations for global stablecoins, aligned with the Bank’s view on same risk – same regulation. Is there a role for central banks (public money strikes back)? The changes in how we pay I described at the beginning of this presentation have not just involved a switch from physical cash to electronic payment. It has also necessarily involved a switch from public, central-bankissued money to private money. This is because central bank money is currently only available in physical banknotes or in reserves, which certain regulated financial institutions hold in accounts at the central bank. For the public and most businesses, the only current option to hold money backed by the central bank is in the form of physical banknotes. I’ve assumed in the story so far that the cash decline and the rise of online continues the march towards the dominance of private money in our transactions. But is this right?
Chart 1 shows that the decline in yields in the euro area was somewhat greater than in the US. The yields on ten-year German government bonds have fallen by almost 20 basis points since the end of June. In France and Italy, the decline in yields was more pronounced. Meanwhile, yields on ten-year US treasury bonds have changed relatively little. On the Swiss capital market, almost the entire yield curve has shifted downwards again since mid-year. Yields on Confederation bonds with terms of up to 13 years are currently in negative territory. This corresponds to three-quarters of the outstanding volume. At the beginning of December, the yield on ten-year Confederation bonds reached a new low of –0.4%. Most recently, it was trading at –0.25% or about 40 basis points lower than mid-year. BIS central bankers’ speeches  1  How negative interest works In the second part of my remarks today, I will talk about the way in which negative interest works. Since January, the Swiss National Bank (SNB) has been charging negative interest of –0.75% on sight deposits held by banks and other financial market participants at the SNB. Negative interest is a key instrument in our monetary policy. Together with our willingness to intervene on the foreign exchange market, it counteracts the overvaluation of the Swiss franc. When calculating negative interest, the SNB grants the banks exemptions so that the banking system does not have to carry the full burden resulting from the high level of sight deposits.

In place of investment quotas, they will merely need to be registered with the PBC. Shares of companies in emerging economies Since the beginning of the year, the SNB has also been investing in shares of companies in emerging economies. In view of the growing importance of these countries for the global economy and financial markets, this was an obvious step in further diversifying foreign currency investments. With this move, the SNB is now covering most of the market capitalisation of the global stock markets. The decision to invest in the shares of companies in emerging economies was taken during the regular review of our investment policy. It is guided by longer-term risk/return considerations and is independent of short-term developments on the financial markets. Equity investments in emerging economies are managed passively, in the same way as those from advanced economies, by replicating a combination of different indices. Overall, however, these investments only account for a modest proportion of total equity investments. BIS central bankers’ speeches  3  4  BIS central bankers’ speeches  BIS central bankers’ speeches  5
While the optimal supervisory structure of the EU is a topic that deserves a separate speech of its own, it may suffice to say that this supervisory review may be a very good occasion to consider the suitability of moving both supervision and resolution together into an even more European set-up. Likewise, there are already legislative proposals for a network of national EU deposit guarantee schemes, having the possibility to borrow from each other, if need be. I consider this as an ambitious plan which rightly mirrors the cross-border nature of our banks. In fact, such a mutually supportive structure of deposit insurance is not far removed from an EUlevel fund of funds, nor from an EU-level deposit guarantee scheme. Concluding words Let me conclude by saying that the seeds of an integrated EU resolution framework are already there today, but it is an open question whether the EU will have the audacity, and, in particular, the political will, to move towards that. I firmly believe that if we wish to preserve the benefits of integrated cross-border banks in Europe and globally we must built an European resolution regime that enhances market discipline by mitigating moral hazard, maintains stability by ensuring continuity of basic services of unwinding institutions, orderly allocates losses and protects taxpayers. To achieve this goal, we will have to make sure that our authorities speak a common language and that the thorny issue of public burden-sharing is replaced by private burdensharing as far as possible.

In the last rate tightening cycle, we observed that banks with larger concentrations of long-term earning assets experienced lower margins. It will be important for community banks that are very sensitive to interest rate risk to evaluate the risk management of their loan portfolios. Finally, when I meet with community bankers, I am often asked the following question: “When will we see regulatory relief?” My simple answer is soon, I hope. There is wide ranging consensus—across party lines and among regulators, the Federal 1/2  BIS central bankers' speeches  Reserve included—that we need to reform the regulatory requirements for small banks. As I have said, I favor regulatory relief for smaller banking organizations.2 Their size and complexity do not pose a significant risk to the system, and they lack the scale to absorb large compliance and other regulatory costs. Given broad agreement on this issue, I am hopeful that relief will be forthcoming. Let me conclude by saying that we continue to recognize the important role community banks play in our economy. According to a study by our colleagues at the Kansas City Fed, the U.S. banking system is unique because of its balance between a small number of large banks and thousands of community banks.3 That balance helps serve the needs of a large and diverse U.S. economy that includes businesses of all sizes and consumers with different needs and preferences.
The range of policy proposals that have been supported by G20 leaders and finance ministers, the Financial Stability Board, the Basel Committee on Banking Supervision, and international accounting standards setters, include calls for strengthening of micro- and macro-prudential regulations that aim at capturing risks of individual institutions and risk arising from interconnectedness of the financial system, as well as more robust governance framework. The shift in policy paradigm from this crisis has been the increasing recognition of the concept of macro-prudential policy in dealing with the problem of systemic risk posed by the interconnectedness within the financial system, as well as between the financial system and the real economy. The key macro-prudential policies are, for example, a proposal on build-up of capital buffer and the introduction of a simple leverage ratio as a supplement measure to the BIS ratio. We look forward to the BCBS’ proposals on these measures by the end of this year. While vital, this is a tall order, and demanding on supervisory capacity, especially in emerging markets. Let me highlight some of these challenges. The standards being discussed are complex, with still many unresolved issues on technical aspect such as calibration. Among the new guidelines, some key coefficients may be base on data of developed markets, and therefore might not be representative of emerging market conditions. Both calibration and actual implementation will require adequate data, which is often a constraint in emerging markets.

The principle of so-called “insignificant host”, as viewed from home supervisor’s perspective, may contradict with the agreed principle of the need for the host to oversee systemically important institutions. Thus, a host supervisor should receive better information and even be included in supervisory colleges by home supervisor, if the global bank branch operations are systemically important to the host economy. Colleagues, ladies and gentlemen, This is a challenging time, with new paradigm, and therefore leadership by all of us is required to ensure that we set a balanced agenda in our reforms going forward. I believe SEANZA forum would become all the more valuable in the future in cementing our network and friendship. Thank you for your attention. 6  BIS Review 146/2009
The major dealers and their principal supervisors met at the Federal Reserve Bank of New York about two weeks ago to review progress and discuss next steps. The dealers are now in the process of reaching agreement on a new set of proposals designed to build on the progress to date and produce a more mature, efficient and operationally robust post trade processing infrastructure for the OTC derivatives market. I want to conclude with a few observations about the role of supervision in encouraging progress in both these areas of risk management and the infrastructure for these markets. We live in a system in which nonbank financial institutions play an increasingly important role in a wide range of financial markets, in which the differences between the activities of bank-centered financial institutions and nonbanks has substantially diminished, and in which the largest banks and investment banks in the world compete together in the U.S. market and in other major markets. These changes have many positive implications but they also mean that differences in the incentives faced by institutions with different supervisory and regulatory regimes can have larger competitive effects, and the effects of regulatory arbitrage can reduce the impact of changes applied only to regulated or supervised institutions. They suggest that adverse developments outside the banking system, such as the failure of a major nonbank financial intermediary, can potentially cause greater damage to the core of the financial system than might have been the case in the past.

The importance of fisheries as a generator of foreign exchange revenue has diminished in relative terms - to less than a half of the total - while the importance of other sectors has risen, such as manufacturing industry, information technology and tourism. In these developments, Iceland is among other things drawing benefits from globalisation to strengthen the foundations of the economy. Foreign direct investment regulations are liberal with the exception that such investment is not permitted in the fishing sector. Foreign direct investment is most noticeable in power intensive industry, such as the production of aluminium, which is based on Iceland’s abundance of untapped renewable energy resources. Recent changes in corporate taxation in Iceland, lowering corporate taxes to among the lowest to be found, serve to attract foreign business to Iceland and encourage Icelandic companies with international operations to favour Iceland as the base of their operations. 2  BIS Review 51/2002  Direct investment by Icelandic companies abroad has risen rapidly in recent years and in a variety of areas, such as fisheries and fish processing, pharmaceuticals, retail commerce and financial services. These developments also benefit the Icelandic economy in the long run as they integrate Iceland further into the global economy, allow Iceland to draw more easily on the experience of others and bring in dividends.