samchain/econo-pairs-v1 huggingface dataset:
The UK, through the Independent Commission on Banking proposals, and the US, through Dodd Frank, are key examples of this. The EU have also proposed a structural reform measure of this nature. I do not want to go into the detail of the reforms, which can take very different approaches. The reforms are, in the general, complementary to the resolution agenda. By seeking to ensure that critical economic functions are insulated from riskier parts of the group, they make it easier for the resolution authority to protect continuity in those services through a resolution scenario. All entities within the group, of course, still need to be resolvable. When working out the details of implementation, we need to make sure they too line up with the grain of the resolution strategy adopted for the firm. For cross-border banks, that will require work to ensure that the application of different structural reform measures in different jurisdictions add up to form a coherent package for the group as a whole. Conclusion As I have noted, the crisis was not only hugely costly, but also complex and long lasting. It revealed wide spread weaknesses, and weaknesses of very different types, in the financial sector and in regulation and supervision. So the reform programme is complex and wide ranging. There are many elements I have not mentioned today. The overall message, however, is that the landscape must and will change very materially. The change is happening.

Which of the two ratios binds first depends on the kind of risks that banks are running. The leverage ratio automatically places tighter limits on expansions in the balance sheet through supposedly low-risk assets. The international community has made progress on the leverage ratio. The definition guiding how it should be calculated was agreed at the start of this year. This will provide the basis for banks to disclose the ratio over the next 3 years in the light of which the international community will decide in 2017 on the calculation of a minimum standard. A number of authorities, including the US, the Netherlands, and the Swiss, have already introduced or are considering a leverage ratio in advance of the international standard. In the UK, the Prudential Regulation Authority has already asked the eight major UK banks and building societies to take steps to achieve a leverage ratio above 3%. The Financial Policy Committee has been asked by the Chancellor to review whether a leverage ratio framework should be introduced in advance of the international framework. This could include a power for the FPC to vary the ratio to counter macro-prudential risks. The FPC will consult on the review and expects to publish its conclusions towards the end of the year. There is also important work underway to ensure the risk-weighted framework is robust. Reviews are underway to build a credible standardised approach to calculating risk-weights for banks’ trading activities and their loan books; this too should help reduce the system’s exposure to model risk.
However, like the ancient mariners, governments and corporates in EMEs would do well not to heed those sweet-sounding siren calls. A period of low global interest rates may be a good time to re-finance old debt but it is never a good time to accumulate excessive debt. 4  BIS central bankers’ speeches  The temptation is strong, especially when the domestic interest rates are higher. Central banks and regulators need to monitor the use of external financing by their residents to avoid an excessive build-up of short-term external debt. This was something we did before the Asian Financial Crisis and it proved to be prudent policy. At the same time, policy makers need to focus on reducing domestic economic vulnerabilities that make the economy dependent on external savings. In this respect, the high savings rate in Malaysia has been a key factor in ensuring that we did not rely excessively on external funding. The high savings rate is not an accident, but rather the outcome of policies that have nurtured and protected such savings. A related point is the need to be careful about the pace of capital account opening. Premature liberalisation can create instability in the domestic financial system. It may also that financial liberalisation may not work out as anticipated, or it may create vulnerabilities that were not foreseen. In this case, countries must have the policy space to step back. So, that is about addressing external vulnerabilities. Now what about having sound and robust domestic policy frameworks.

Note for example, the obsession of the financial markets with when the Fed is going to increase its interest rate by a quarter percentage point! Frankly, I do not think any one of the QE central banks is thinking of putting down its fiddle just yet. But the anticipation is certainly creating instability and over-reaction in the global financial markets, with EM currencies experiencing a high level of volatility. It is also not inconceivable that having run out of profitable opportunities in other parts of the markets, portfolio funds are now making currencies the next game in town. Implications for Malaysian economy and financial system These global developments obviously have implications for Malaysia. First, the volatility in the global financial markets will continue to wash on to our shores and create a challenging environment for both policymakers and participants in our financial markets. Such volatility does have an economic cost. Second, the fact that for the first time all the major economies are showing positive growth will provide support to growth of the Malaysian economy. However, until global growth can become self-reinforcing, the weak nature of external demand will remain a challenge. The significant contribution of domestic demand to growth in the face of the adverse external environment over the past several years is a tribute to the resilience of our economy and financial system. It is an outcome of not only the policies that were implemented during these years but also in the years before.
Thomas C Baxter, Jr: Financial stability – the role of the Federal Reserve System Remarks by Mr Thomas C Baxter, Jr, Executive Vice President and General Counsel of the Federal Reserve Bank of New York, at the Future of Banking Regulation and Supervision in the EU Conference, Frankfurt am Main, 15 November 2013. *  *  *  Today we gather to celebrate the career of a great central bank lawyer, Antonio Sáinz de Vicuña, who is retiring from his position as general counsel of the European Central Bank. The accomplishments of the European Central Bank (ECB) in a short period of time are a huge credit to the people who built the organization. Antonio is one of those people. He was there even before the very beginning, given his position as general counsel of the European Monetary Institute back in 1994. Many here have heard Antonio talk about those seminal first days, when European monetary union was considered nothing more than a remarkable experiment that would never become a reality. Of course, monetary union within the Eurozone has become reality, and the success of the ECB has inspired the ECB’s latest challenge. As Antonio retires, the ECB is taking the first important steps toward becoming a pan-European banking supervisor. The fact that banking supervision is being entrusted to the ECB is perhaps the best evidence of its overwhelming success as a European institution. Of course, it is rare that great success comes without hardship.

It also involves patrolling the frontiers of our powers and  6  Id. at 483. 7  Dodd Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111–203, 124 Stat. 1376 (2010). 8  12 U.S.C. § 5365. 9  12 U.S.C. § 5365(a)(1). 10  12 U.S.C. § 1842 (c)(7). 11  Ben S. Bernanke, Chairman, Board of Governors of the Federal Reserve System, September 18, 2013, Press Conference. BIS central bankers’ speeches  3  recognizing where and when the rule of law forecloses options. This is essential to the credibility of the central bank, a concept closely connected with the public’s trust. To conclude, I hope these remarks about financial stability also reflect on what our legal colleagues have accomplished at the ECB. In this regard, I pay tribute to the leadership of Antonio Sáinz de Vicuña, and to his work not only in presiding at the birth of the euro, but guiding the ECB to take the extraordinary actions necessary to preserve the euro. As President Draghi accurately forecast, they have been enough. Antonio, as you step down as general counsel, I congratulate you on the accomplishment of the mission, and applaud you for a job well done. Thank you, ladies and gentlemen, for your kind attention. Disclaimer: The views expressed are the views of the author and do not necessarily reflect the views of the Federal Reserve Bank of New York, or any component of the Federal Reserve System. 4  BIS central bankers’ speeches
There is, of course, a circularity involved, since liquidity depends on valuation, fair value must be based on a market price, and the ability to price an asset itself depends on sufficient liquidity in the market. The difficulty to get out of this circularity in periods of stress is currently creating significant uncertainty. o  Hence a dependence of the whole market on the rating process. In a securitized world, investors heavily rely upon rating agencies to provide information about the risks attached to various instruments. These agencies have been strongly criticized recently. It is not my purpose to enter into any blame game. Suffice it to say that there has been a deep misunderstanding between investors and rating agencies as to the scope and true meaning of ratings. Most investors were not fully aware that rating did not encompass liquidity risk; nor did they realize that ratings for structured products were intrinsically more volatile than for more simple "plain vanilla" securities. The use of identical metrics for rating what are fundamentally different categories of assets certainly did not help and may have contributed to the confusion. o  Finally the turmoil has revealed the fragility of off-balance sheet structures and vehicles which underpinned securitization. Conduits, especially SIVs, were not built to absorb shocks. Their relationships with sponsor banks are sometimes very ambiguous.

I would also like to thank the Co-lead Managers, DZ BANK AG, Hong Kong Branch, ICBC (Asia) and BMO Capital Markets Corp and Co-Managers, ANZ Investment Bank and Commonwealth Bank of Australia, for managing and distributing the issue. I look forward to your continuing support of our Corporation and its debt issuance activities. Thank you. 2  BIS Review 116/2006
To reach that goal we have based our monetary policy on two “pillars”. As regards the first “pillar” we have set up a quantitative reference value, namely 4.5%, for the growth of the broad monetary aggregate M3; last December, we have confirmed this rate of growth of 4,5 % as an important factor for stabilising expectations. It should be noted that the concept of a reference value does not imply a commitment on the part of the Eurosystem to mechanistically correct deviations in monetary growth in the short term. However, the reference value for M3 is consistent with, and helps to maintain price stability over the medium term. The second pillar of the monetary policy strategy is a very comprehensive set of indicators that are important in our eyes in signalling future price developments in the euro area. This strategy, which ensures a great deal of continuity with the monetary policies of the participating national central banks, appears to have been understood by financial markets and the public at large. In particular, the yields on long-term bonds denominated in euros indicate clearly that the Eurosystem has kept intact the legacy of credibility that it has inherited. d/ Finally, the credibility of the euro also results from the Eurosystem’s constant efforts towards transparency and communication. I must stress here that the Eurosystem is one of the most transparent central banks in the world.

The authorities thus received constant feedback on key indicators affecting national economic performance and could react accordingly. These indicators were sensitive, multiple and very reactive. In contrast to the pre-euro period, a loss of competitiveness will not show up quickly on radar screens like foreign exchange markets, interest-rate markets or the external accounts. As a result, economic managers must monitor the relevant competitiveness indicators with even greater vigilance. The sanctions for economic policy errors could come more slowly and insidiously via rising unemployment and weak growth. The rules of a market economy, especially competition, continue to apply to each economy. Jobs are created by consumers when they choose the goods and services they feel are the best value for money. Businessmen allocate these jobs to various possible locations in various countries according to the relative competitiveness of these locations. It is therefore necessary to monitor competitiveness even more closely than before through indicators such as unit production costs and the tax and regulatory framework. The close multilateral surveillance and the frank discussions provided in the context, inter alia, of the Eurogroup, will help monitor competitiveness trends with a view to ensure early warnings and appropriate reactions. *  *  *  Let me address, in conclusion, two questions: the issue of sustainable growth and the present diagnosis of the Eurosystem as regards the balance of risks. –  Growth: Central bankers are sometimes portrayed as being excessively cautious and reserved with respect to economic growth.
Thus, although overall private sector issuance may increase as a means of closing the sector’s financing gap, there is some evidence - perhaps not conclusive - that this may be at the cost of some hardening of yields relative to government yields, at least for lesser names. Of course, in some cases the increase in yields may just be the more straightforward consequence of a rising level of corporate gearing. There are also indications that increased debt market activity may have been more evident in the floating rate sector than for longer-dated fixed rate issues, where it may have been difficult to establish appropriate new benchmarks. Thus, although crowding-in may be occurring, the process is more complex than the simple like-for-like substitution of corporate for government paper. Another consideration for certain investors is that they increasingly have to accept that a strategy based simply on purchasing the paper of top-rated issuers such as governments or multinational organisations may no longer be feasible or economic. Yet, if they are going to embrace lesser-rated paper in their portfolios, they may need to shift their approach towards a somewhat more sophisticated 1  BIS Review 57/2000  portfolio strategy, which permits the holding of lower-rated paper at prices which appropriately reflect the risks, with the risks balanced across the whole portfolio. This may necessitate changes in the ways in which fund managers are instructed to address their task and in the tools which they need to perform it.

Given these developments, the role of credit rating agencies may assume a still higher profile in guiding investors. I have mentioned these global trends in order to illustrate how even those markets which are regarded as mature have to adapt continually to changing circumstances; and I haven’t even mentioned the potential role of internet trading, virtual exchanges and the like, which may pose still greater strategic, managerial and operational challenges. If we turn now to consider the debt markets specifically in this part of the world, we encounter at least as great an array of challenges, albeit in somewhat different circumstances: for example, in a number of Asian countries government issuance has still been on the increase. Last year saw something of a milestone for regional markets with the publication, by a working group under the chairmanship of the Hong Kong Monetary Authority, of the APEC compendium of sound practices to facilitate the development of domestic bond markets. This comprised a comprehensive list of recommendations covering topics such as government involvement in the market, level playing fields, consistent tax policies, sound regulation, clarity of responsibilities, transparency, robustness and efficiency of market systems, and so on. Crucial though these considerations may be for the foundation of sound markets, they are, by and large, just the basic tenets. Even when they have all been observed or put into practice, there is no certainty that active debt markets will emerge.
Earlier in my speech, I pointed to the imbalances in wage formation that could lead to inflation accelerating if they are handled incorrectly. This would make monetary policy tightening necessary that would risk interrupting growth and structural transformation, because the inflation target is mandatory and will not be given up. The Riksbank has both the instrument and the political mandate to achieve the target of 2%’s inflation. The issue then is not whether the inflation target will be met but the consequences that achieving the inflation target will have for the rate of growth and employment in the medium term. The Riksbank is responsible for achieving the inflation target, but responsibility for the positive development that we can now see in front of us being sustained over a longer period, is shared by everyone in Sweden. 5  BIS Review 126/1999

Even in cases where the authorities managed to be innovative, perhaps to an extent not normally expected of bureaucrats, and did the right thing, there is always the easy, popular but legitimate question of why action was not taken earlier. The Political Process of Monetary Management 6. In Hong Kong, the grievances of the community are enthusiastically and effectively aired by politicians. Whether directly or indirectly elected, the politicians have the BIS Review 87/1998  -2-  mandate of the people and the people of Hong Kong are well served by them. But one of the peculiarities of the system of Hong Kong is that the politicians, although having the mandate of the people, do not actually have the authority to direct government policies. A consequence of this is that the Administration is always kept on its toes, much more so than in many other jurisdictions. There are lively debates on almost all issues of significance, not to mention those that are controversial. This obviously has the benefit of ensuring that the Administration performs to its best ability. But the inevitable disadvantage is simply that there can be too much of everything, to the extent of eroding rather than enhancing the efficiency and effectiveness of government. But this is the reality of Hong Kong today and we all have to live with it. 7. The management of any public issue of significance involves first getting the technicalities right, then explaining them patiently and clearly to all those concerned, and then handling skillfully the politics surrounding it.
During those years, in its analyses on the Spanish economy and in its supervisory tasks, the Banco de España identified the main problems that were building up and signalled aspects such as the growing vulnerability of households’ and non-financial corporations’ financial position, associated with their growing and sizeable debt; the big increase in house prices; the excessive concentration of credit in the real estate sector; the excessive dependency on external funding; and the accumulation of losses in competitiveness in the Spanish economy. That said, as the Report states, they were considered to be downside risks, in a scenario that foresaw a move towards lower growth rates and a gradual correction of the imbalances. The Bank did not anticipate such an acute recession as that which took hold from late 2008, which would reveal the scale and gravity of the imbalances that had built up in our economy. The Bank adopted regulatory and supervisory measures which, over time, have been acknowledged internationally as advanced and innovative, even though they were questioned at the time by various national and international institutions, and by the Spanish banking sector, the latter understanding that they placed our banks at a competitive disadvantage.

My concerns arise from the fact that, while during the first G20 summit meetings, there was widespread consensus on the necessity of ensuring that no segments of the financial system are left outside the scope of the regulatory framework, over time, this resolve has dwindled and attention has mainly been focused on banks. Given the interconnectedness of markets, it is essential that investment banks, hedge funds and other institutions are also subject to adequate regulation. In particular, the supervisory authorities must have adequate information on the activities of these institutions in order to be able to evaluate vulnerabilities and possible contagion effects. The second line of action relates to the strengthening of the supervisory authorities, beginning with their independence. Only institutions independent not only of political authorities but also of market participants can have the clarity and the power to take measures to reduce the cyclicality of credit and financial activities. There are, therefore, concerns regarding the developments in the current  15  See, for instance, the Basel Committee of Banking Supervision, “Strengthening the resilience of the banking sector”, December 2009. 16  For example, in September 2008 the ECB announced higher transparency requirements, including the need for regular surveillance reports by rating agencies. In early 2009 it increased the rating requirement for newly issued ABSs to AAA at issuance and discontinued the acceptance of double-layer securitisations. In November 2009 it announced the eligibility requirement that, as of 1 March 2010, at least two ratings must comply with the minimum rating threshold applicable to ABSs.