samchain/econo-pairs-v1 huggingface dataset:
As regards the scope of supervision by the ECB, there were no doubts that all banks had to be covered. The problems often stem from small- or mediumsized banks, as we saw in Ireland and Spain. To ensure credibly vis-à-vis the markets, across-the-board coverage is necessary. BIS central bankers’ speeches  1  In practice, how will the tasks be divided between national supervisors and the ECB? The legal responsibility for supervision would be transferred to the ECB, but in concrete terms, national supervisors would continue to supervise banks on a day-to-day basis. In fact, it is a mechanism similar that of the Eurosystem: under the authority of the Governing Council, the supervision committee, bringing together the ECB and the heads of national supervisory authorities, will coordinate supervisory actions and the allocation of tasks with the national supervisors. In practice, the ECB would be responsible for major decisions regarding prudential supervision: assessing capital adequacy in relation to risk, compliance with regulations, etc. I would also like the ECB to have decision-making powers in dealing with cases of distressed banks. Questions remain as to division of powers between the ECB and the European Banking Authority (EBA) The distribution of tasks seems clear to me: the EBA is the European body responsible for banking supervision. It sets prudential rules and standards and ensures that they are applied; the ECB will be the euro area bank supervisor. The EBA’s governance arrangements will have to be changed slightly, as the Commission proposes, to take account of the banking union.

For all of these reasons, I do not fully understand the concept of separation, whereas I do understand that of stopping speculation. At the same time as bank failures are continuing, banks have obtained an easing of their liquidity constraints under Basel III. Isn’t this a paradox? That's not what it’s about. We have always believed that a liquidity ratio was necessary – and, incidentally, we have applied our national rules for many years, which is not the case everywhere. But the draft agreement was finalised too quickly and we had to rework it. We need to strike the right balance between strict regulation and supporting the financing of the economy. But will the timetable be put back? Yes, I am in favour of putting it back a bit, if necessary, in order to make these major tradeoffs and to give banks more time for the implementation phase so that they can adapt to the new standards. Should banks carry less sovereign debt? Banks should facilitate the financing of the economy; from this point of view, they should not hold huge quantities of sovereign bonds, even if these constitute liquid assets that are precious in assets and liabilities management. But the excessive concentration of liquid assets on sovereign debt in the calculation of the liquidity ratio can run into difficulties – either when the sovereign has its rating substantially downgraded or, on the contrary, when the country has low levels of debt, such as Australia or Switzerland.
The FPC will shortly be consulting on the scope and form of its application, and that will be a welcome debate. Getting the incentives right for banks in terms of the capital adequacy regime is hugely important. The leverage ratio is simple and that is its appeal, but on its own it could encourage banks to take more risk per unit of assets. In contrast, internal models and stress tests are complicated, and therefore carry the risk of opacity and model error. There is now a growing debate on the use of models and stress tests. In many respects, the debate has common ground, since models are intrinsic to stress tests. My view is that this is not a debate about whether or not supervisors should use models. That question was answered a long time ago in the reasoning for the switch away from Basel I. The design and implementation of Basel II was not done well, and a substantial charge has been required. A major lesson is that to use models and stress tests effectively requires intensive development and maintenance by firms and a highly skilled body of supervisors and a regime where judgement can be used. It also requires the supervisor to have a credible capacity to withdraw the permission given to a firm to use a particular model if the model is considered to be inadequate or the firm has not demonstrated the capacity to use it safely.

Mention should be made that banks showed caution in managing CHF-denominated assets and liabilities. III. The current economic environment  The analysis of the current economic environment reveals two significant characteristics. First, Romania has maintained sustainable macroeconomic balances over the last years, also as a result of the counter-cyclical monetary and prudential policies implemented by the National Bank of Romania. Romania further enjoys robust economic growth and solid growth prospects, of 2.7% in 2015 and 2.9% in 2016. The annual inflation rate has remained on a  4  BIS central bankers’ speeches  downward path, while the general government balance and the current account balance stand at sustainable levels. These arguments show that the movements in the CHF/RON exchange rate should not be seen as a depreciation of the domestic currency (which is supported by strong economic fundamentals), but as CHF appreciation following the Swiss National Bank’s decision. Second, the downtrend in interest rates on leu-denominated loans, also as a result of the NBR’s decisions to gradually cut the monetary policy rate and to pursue adequate liquidity management, is supportive of the solution of converting foreign currency-denominated loans into the domestic currency in the case of currently unhedged borrowers.
Micro-economic data such as these are essential for understanding the impact of regulatory policies – for example, macro-prudential policies which affect the housing market. For example, the Bank has been making use of the FCA’s Product Sales Database to get a more granular picture of the mortgage position of households. This is a very detailed database, covering over 13 million financial transactions by UK 29  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  29  households since 2005. By combining these data with land registry data, it is also possible to build up a regional picture of pockets of indebtedness. Chart 8 documents the evolution of high (more than 4.5 times income)  Chart 8: Proposition of mortgages with a loan-to-income ratio greater than 4.5  leverage mortgages since 2008, on a regional basis. Warmer colours suggest a higher fraction of loans at or above that multiple. What you will see is a gradual heating-up of the mortgage market over the past few years, with a clear epicentre of London and the South-East in the run up to the macro-prudential intervention made by the Bank of England’s Financial Policy  Source: FCA Product Sales Database; Land Registry; Bank calculations. Please see  Committee (FPC) in June 2014.  the speech website for the animation. One of the key features of an agent-based model is that it is able to generate complex housing market dynamics, without the need for exogenous shocks.

And, most striking of all, flows of information across agents and borders are occurring on an altogether different scale than at any time in the past. All of these trends increase the importance of taking seriously interactions between agents when modelling an economy’s dynamics. These benefits can perhaps best be illustrated by drawing out some of the key behavioural differences between ABM and mainstream macro-models. These differences should not be exaggerated: in practice, ABMs lie along a spectrum with micro-founded DSGE models at one end and statistical models at the other. But nor should they be overlooked. (a) Emergent Behaviour  In standard macro-models, system dynamics are fully defined by the distribution of shocks to the economy and the behavioural parameters determining how they ripple through the system. There is a classic Frisch/Slutsky impulse-propagation mechanism determining the economy’s fortunes. If the distribution of shocks and the parameters of the model are known and fixed, the dynamics of this system are well-defined and predictable. Complex systems, of which ABM are one example, do not in general have these properties. The Frisch/Slutsky decomposition is very unlikely to be stable, if it exists at all. The reason is that a complex system’s dynamics do not derive principally from disturbances arising outside the system but from interactions within the system. Dynamics are endogenously, not exogenously, driven. These feedback effects within the system may either amplify or dampen cycles.
However, as the structural changes take effect, they are likely to affect the balance between supply and demand, and monetary policy will need to respond accordingly. In the long run, the Fourth Industrial Revolution should substantially boost productivity and supply. Based on past experience, the productivity of roles experiencing high levels of automation could expand at rates in excess of 5% per year, and aggregate productivity growth could increase by as much as ½ to 1½ percentage 33  points per year. The increases in supply from automation and the Fourth Industrial Revolution should, in time, lead to higher demand as they flow through into higher incomes. With job destruction running ahead of the productivity and creation effects in the shorter term, however, demand is likely to be weaker for a period. 32  For more details, see ‘New Economy, New Finance, New Bank’, speech by Mark Carney at the Mansion House, June 2018. The lower estimate is based on the productivity gains realised from the introduction of steam power, while the upper estimate is based on the improvements harnessed from the ICT revolution. See Crafts, N (2015), ‘Economic Growth: Onwards and Upwards?’, Oxford Review of Economic Policy, Vol. 31, pp. 217-241 33  10  All speeches are available online at www.bankofengland.co.uk/speeches  10  As Chair Powell recently reminded us, the challenge for monetary policy during periods of structural change is to take into account its potential impact on the underlying dynamics of the economy.

Monetary policy has been designed and implemented in line with midterm country’s macroeconomic program: with specific focus on price and financial stability Let me now briefly summarize what I believe are the latest most important developments, and outline our economic outlook. Economic growth After the significant electricity shortages at the end of 2005, it appears that traditional growth promoting industries like services (tourism) and construction are growing at a stable pace, contributing at a sustainable economic growth. Building upon these developments as well as other positive indicators, we expect the economy will grow at a solid rate of 5-5.5 percent. The main challenge remains ensuring sustainability of these growth rates, even higher in the long run. I believe that respective Albanian authorities have already identified the major priorities of these challenges which fully converge with Bank of Albania views. Just to remind you I would briefly summaries some of these priorities. Building new, preferably alternative, energy sources and improving the efficiency is top priority. In our view, sufficient and reliable energy supply remains a main concern to achieving economic growth. Providing a solution to this problem is a priority in the verge of increasing global demand and energy prices. Speeding up the privatization process of the remaining state assets is another important step forward. Special attention should be paid to structural reforms, particularly property rights and legal framework. In our opinion services, construction and in particular agriculture will remain driving forces of the GDP growth in the coming years.
And they can be sure that their business partners are as well supervised as they themselves are. So, the playing field has become more even, which is essential if we are to achieve a truly European banking market. And that is our vision: a banking market that seamlessly covers the entire banking union; a market in which banks can offer their services to customers from all over Europe; a market in which they can compete on even ground. The benefits of such an integrated market are well known: it is more efficient, it is more innovative, and it is better able to support growth. This is true for the entire union as well as each country. Are we there yet? As I said, this is the vision. But are we there yet? No, not quite, but we are getting closer. The banking union has brought its members closer together; it has lowered some of the barriers that were standing in the way of a potentially seamless market. But it has not entirely removed them. While supervision has been harmonised, the regulatory framework in Europe remains somewhat fragmented. And this applies not just to minor details but also to big things. It runs counter to the idea of a single market and fosters regulatory arbitrage; and it violates the principle of same business, same risks, same rules.

So we have got rid of the politically unpleasant adjustment mechanism and have very little instead. Yes, the enlightened founding fathers (such as Otmar Issing) knew many of these things in advance and tried to minimize the free-riding by setting certain safeguards against it. Despite that, I believe many must be bitterly disappointed or shocked that many of these good rules proved to be so time-inconsistent, or dynamically inconsistent. Yes, many good rules have already been breached or are close to being breached (some of the Golden Rules of European law, one should add): •  the no bail-out clause  •  flirting with monetary financing of sovereign debts  •  consideration of something like potentially permanent public support for financial institutions operating on the single market  I believe that these rules are especially dear to this audience. So one has to ask: What are the prospects of the project when to keep it going you need first to breach some fundamental rules that should have created a solid and long-lasting basis for it? It is by definition hard to enforce rules among sovereigns, even when those rules are more important than fiscal or monetary ones – look at the United Nations, for instance.
•  The MPC’s objective is to deliver price stability – defined by the Government’s inflation target of 2% – and, subject to that, to support the Government’s economic objectives including those for growth and employment. •  The FPC’s objective is to protect and enhance the stability of the financial system of the UK – and, subject to that, to support the Government’s economic objectives including those for growth and employment. 1  See for example, R Bryant (1995) International Coordination of National Stabilization Policies. Brookings, Washington, and the many references therein. 2  See for example some of the material in N Acocella, G Di Bartolomeo and A J Hughes Hallett (2013), The Theory of Economic Policy in a Strategic Context, Cambridge University Press, Cambridge. BIS central bankers’ speeches  1  •  The PRA has two statutory objectives: to promote the safety and soundness of deposit takers, insurers and major investment firms and, specifically for insurers, to contribute to the securing of an appropriate degree of protection for policyholders. It also has a secondary objective, to facilitate effective competition in the markets for services provided by PRA-authorised firms. The PRA Board The PRA Board is the least well known of the 3 committees and so I want to say a few words about how it operates. I have been attending as an observer since I moved to the PRA on 1 June.

The key to solving this policy dilemma is to make sure that firms hold enough liquidity (and capital) in the good times so that, when a downturn hits, supervisors can take a relaxed view about firms using those holdings as buffers to absorb the macro shock. That was not the position post 2008/09 when banks had not been holding enough liquidity or capital in the good times. It is an aim of the new regulatory frameworks put in place post-crisis, that banks should hold bigger liquidity buffers in normal times. The Bank of England’s balance sheet can also be used actively to backstop liquidity for the system as a whole, via the banking system, and the new operating frameworks put in place over the past 5 years will allow that to happen more quickly and easily. How will this all co-ordinate in practice? When the Bank, HMT and FSA took joint action in 2012 to reignite the recovery via the Funding for Lending Scheme – reviewed in my two previous talks to you – the FSA, as predecessor to the PRA and having two members on the interim FPC, contributed by relaxing liquidity requirements and making it clear that liquidity buffers were there to be used. This was a crucial element of the package.
At the close of 2015, recorded total net funds assigned to supporting the Spanish financial system were € million, € million of which relate to public funds provided by the FROB and € million to private funds provided by the DGS. Naturally, these figures will vary depending on the recoverable value of the assets currently owned by the FROB and the DGS. In terms of the comparison with other developed countries, there are various metrics to evaluate the fiscal cost of public aid. The most general one is the outstanding balance of accumulated public debt. In gross terms, Spain’s public debt as a consequence of assistance to the financial sector was 4.7% of GDP in 2015 and 4.6% in 2016, in line with the average for the euro area. However, in terms of net debt assumed by the public sector (accumulated liabilities minus the value of publicly owned assets), the euro area average stood at end-2015 at 1.8% of GDP and at 1.9% in 2016. Greece and Ireland are the countries that have assumed most net public debt (around 20% of GDP), followed by Slovenia and Portugal (7-8% of GDP). In Spain’s case, this figure in 2015 was 3.7% of GDP, and it had risen to 3.8% in 2016. Conclusions I should like to conclude by summarising the reflections contained in the Report on the conduct of the Banco de España.

In and of itself, this shift seems likely to have made money markets more segmented, and more prone to the “turbulence” in response to shocks I mentioned earlier. Longer term, this regulatory shift has catalyzed a deep and complex impact on the structure of money markets, which is still unfolding nearly two years later. These effects have included an ongoing increase in the role of FHLB advances as means of intermediation between government money funds and financial firms, as well as ongoing efforts by a wide variety of borrowers and lenders to broaden their counterparty lists and consider new operating frameworks so as to best accomplish their business objectives in the new money market environment. For example, although the FHLBs for years focused their liquidity management on the federal funds market because it provides a high degree of intraday liquidity, they are now beginning to explore greater use of bilateral repo, as that market has similar characteristics and can at times provide them with a higher return. It is likely that these ongoing shifts in money market structure have contributed to fluctuations in rates and spreads, and that they will continue to do so. 11  I view fluctuations in term money market rates of the magnitudes seen recently as normal parts of market functioning during a period of structural change. Wholesale dollar funding, though more expensive, has remained readily available both in the United States and abroad.
The current move through SEPA is to establish an integrated non-cash payments system throughout the Union. This means that individuals, banks and financial institutions, corporations and all other entities in the Euro region will be able to make cashless payments throughout the Euro area from a single payment account anywhere, from any country, using a single set of payment instruments, easily, efficiently and safely on the same way that they make payments at the national level. 4. Lessons learned  It is worth mentioning some of the challenges and problems encountered in the SEPA process in order to avoid similar problems that may come up in establishing a SAARC payment initiative, or to remember them if and when SAARC countries wish to move towards a single payment area at a future date. It also highlights the need for a committed leadership when undertaking sophisticated region-wide projects like SEPA. From the beginning, when the SEPA policy framework was set by the authorities in the EU area, it was shared with the market led by banks and financial institutions which were entrusted to implement it. However, due to lack of high-level commitment, the difficulties encountered in the coordination of the diverse interests of the banking and financial service industry and the severe competition among service providers have caused delays in implementing this project.

Nigel Jenkinson: Promoting financial system resilience in modern global capital markets – some issues Speech by Mr Nigel Jenkinson, Executive Director, Financial Stability, Bank of England, at the conference, Law and Economics of Systemic Risk in Finance, University of St. Gallen, St. Gallen, 29 June 2007. This speech has been prepared with my colleague Mark Manning. I am very grateful to Mark and to Joanna Perkins for her input on legal risks, and to Ben Norman, Victoria Cleland and Andrew Bailey for their comments. *  *  *  The changing nature of risks Spurred by rapid innovation, we are currently witnessing a period of major structural change in financial intermediation and the global financial system. Financial market activity is growing at a tremendous pace. For example, over the past five years, the credit derivatives market has grown spectacularly from around $ trillion notional amount outstanding in 2001 to around $ trillion in 2006 (Chart 1) and the issuance of leveraged loans has increased almost three-fold (Chart 2). The balance sheets of the major global financial institutions (the so-called large complex financial institutions or LCFIs) have more than doubled since 2000, fuelled by an increase in trading assets (Chart 3). Turnover in the UK and US foreign-exchange markets has risen by around 50% in only the last couple of years. And capital market integration is rising rapidly as barriers to cross border flows have come down.