samchain/econo-pairs-v1 huggingface dataset:
The main issue here is that some financial market infrastructures, which are key for the EU, will soon become off-shore to the EU as a consequence of Brexit. This is particularly problematic when these infrastructures may put the EU’s financial stability at risk: some central counterparties (CCPs) for instance can be considered to be “too big to fail” entities, especially since clearing is mandatory. This is a specific concern for the euro, compared to other currencies, as European savings management is almost totally dependent on London-based financial players and market infrastructures. And yet we cannot reasonably expect that these global financial market infrastructures take into account, in their operations and risk management, the financial stability of the euro area, on top of the financial stability of their own jurisdiction. Page 2 sur 5  Therefore, since, regrettably, London will soon be outside the EU, the current setup is no longer adequate. Replicating for clearing activity in the euro area the extraterritorial approach developed by the US authorities cannot be a solution, because of the specific position of the EU capital market vis-à-vis London, and because we know by experience that in times of stress the views of the domestic authorities prevail when interests diverge. So, what should we do?

Complementary steps could include creating pan-European venture capital funds and leveraging on the development of FinTechs, while maintaining a high level of consumer protection and efficient conduct of business rules in a digital environment. ** Let me conclude with a general remark. After Brexit and Mr. Trump’s election, many expected a euro area crisis. So far, exactly the opposite has happened: European growth is accelerating, at close to the pace of US growth. The French election gave a fresh political impetus to stability and reforms; public support for Europe has significantly increased: up 18 percentage points in France from last year (56% in spring 2017) according to a recent survey by the Pew Research Center; and the same trend can be observed in a number of countries. Most importantly, we in the EU-27 should not devote all our energy to Brexit, at the expense of investing in our own future. In this regard, it is the right time to move up a gear. To boost European growth, financial levers are of the essence, but economic levers play a role too. This is the reason why I often speak of Europe’s “growth triangle”. In my view, Europe needs to activate three levers: the Financing Union for Investment and Innovation that I have just described, but also implement national structural reforms on the one hand and a better euro area policy mix on the other. National structural reforms are a prerequisite for each country to unleash our collective growth  Page 5 sur 5  potential.
There are still plenty of reasons to be cheerful: •  Growth is running at an annual rate of over 3%, above its historical trend and at the top of the G7 league table. Growth in the UK will probably exceed global growth this year, for the first time in over a decade. According to outside and MPC forecasts, UK growth is expected to remain at or above trend for the next few years. •  Recent revisions to GDP suggest that the UK experienced both a shallower recession, and a somewhat stronger recovery, than previously believed. As a result, the level of GDP reached its pre-crisis peak in the middle of last year, three quarters sooner than earlier estimates suggested. •  UK growth is reasonably well-balanced between consumption and investment, although net trade continues to disappoint. Business investment is growing at double-digit rates and has contributed fully a third to economy-wide growth since its trough. According to the MPC’s forecasts, investment will continue to grow at double-digit rates in the period ahead. •  Consumer price inflation, at 1.2%, has fallen below the Bank of England’s 2% inflation target, reducing the squeeze on households’ real disposable incomes. According to financial markets, inflation is expected to return and stay close to target over the medium term. •  Borrowing costs remain at exceptionally low levels. Secured borrowing costs for households and large companies are in the range 3%–6%, around 3 percentage points lower than in 2007. Measures of credit conditions have continued to ease.

3/18  On the latest Banco de España macroeconomic projections released on 20 March, the current upturn is forecast to continue over the coming years. These economic projections are expected to be underpinned by the continuation of the factors that have sustained growth since the start of the recovery. These include, in particular, the gains in competitiveness achieved since the onset of the crisis, the strengthening of the financial situation of firms, households and financial institutions, and the accommodative monetary policy stance. And we should add, in the short term, the prolongation of the expansionary stance of budgetary policy. This combination of factors would enable the economy to continue growing at a pace greater than its potential rate, which would support the absorption of the high unemployment generated during the crisis. Among these factors I would like to stress the role played by competitive gains and the improved financial position of households and firms. Both have helped make the Spanish economy more resilient. Indeed, throughout the recovery, thanks to cumulative gains in competitiveness, the positive developments in our export markets were conducive to the internationalisation of Spanish companies. That in turn boosted business investment and employment and, through this latter variable, consumption. As a result, the Spanish economy has managed recurrently to post external surpluses during the upturn, which was somewhat unusual in previous recoveries.
And firms’ derivative exposures are now more robustly collaterised ex ante and in large part cleared through central counterparties to prevent the procyclical spiral of demands for collateral (margin calls) that spread stress throughout the system as confidence in creditworthiness declined. 90% of new OTC single-currency interest rate derivatives are now centrally cleared in the US. And an additional $ trillion of collateral is now held globally against all derivative trades. These reforms have been built around internationally agreed standards and other jurisdictions have taken similar steps. While we might not be able to predict the extent, nature and trigger of the next crisis, we have much greater assurance now that the financial system could weather very substantial corrections in credit and asset values without failing in the way it did 10 years ago. The FPC has also focussed on borrower, as well as lender, resilience. As we saw in the crisis, significant cohorts of over-leveraged borrowers cut consumption when hit by a shock which can deepen and prolong the loss of economic output and, in turn, add to the pressure on the stability of the financial system.22  20  Stress tests might also serve the useful function of reminding bankers, and policy-makers, that tail risks exist and can be very expensive.

Or should we view them as or straws in a wind that will increase in force and respond by strengthening our walls and perhaps leaning a bit in the other direction? Conclusion Journalists frequently ask people in my dismal profession: “What keeps you awake at night?” They do so, of course, not out of interest in the sleeping patterns of central bankers but because they want to know, quite reasonably, what we fear the next disaster, the next great crisis, will be. And, of course, at any given time there are vulnerabilities and unknowns that one is concerned about more than others. 28 According to the FPC core indicator which tracks the mean over the median (that is, the average of the top half of the distribution). It is also true in the sense that the proportion of borrowers with high LTIs and high LTVs have been rising. 29 Leveraged lending typically refers to loans to non-investment grade firms that are highly indebted (debt of more than four times EBITDA) or are owned by a private equity sponsor. 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  I might have talked today about the rapid and extensive evolution of market-based finance in recent years such that it now accounts for nearly half of the international financial system. It carries different and perhaps lesser risks than the banking system. But we know much less about how it might respond in stress and have fewer policy tools to address vulnerabilities.
However, competition indexes show that the devaluation of the Turkish lira do not increase Turkey’s competitiveness in any way. The unfavorable impact of high inflation has also been the felt in the labor market and prevented it from functioning effectively. Economic growth within continuous expansion and contraction cycles made the labor force volatile. Those, who want to work in this volatile environment, especially unskilled workers, are the first ones to lose their jobs in periods of contraction and the last ones that are employed in expansion periods. This means that the period of high and chronic inflation experienced by Turkey is one of the underlying reasons for social problems triggered by the fact that sustainable employment growth has yet to be achieved. Meanwhile, alongside the tendency of currency substitution with high and volatile risk premium created by high inflation, real interests, which were high due to the problematic public debts, caused a debt spiral and the vulnerability of the economy to exogenous shocks increased. This situation both clouded expectations and hindered the effective utilization of monetary policy Inflation diminished the effectiveness of financial markets to intermediate. This is due to the fact that, in a highly inflationary environment, players in the market are unable to foresee the future as they lack the appropriate knowledge. This situation, combined with the problem of public deficit, led to a significant decline in the credits that the banking sector provides to the non-financial sector.

The monetary expansion measures taken by central banks are unquestionably vital for achieving the objectives in terms of inflation rates and credit flow stimulation and of the financing of the economy. However, sustainably bolstering economic activity and job creation requires the monetary stimuli to be accompanied by measures in other areas. In the European case, the reform drive has to be maintained to ensure the proper functioning of the markets and fiscal policies favouring growth while at the same time meeting the commitments assumed under the Stability and Growth Pact. Position in the cycle and monetary policies of the main developed economies To conclude, I would like to refer to the different position in the cycle of the leading developed countries. In the United States, and to a lesser extent in the United Kingdom, both of which are at a much more advanced stage of economic recovery than the euro area, the monetary policy debate now centres on when and how rapidly to start withdrawing part of the monetary stimulus, whereas in the euro area and in Japan further stimulus measures are being introduced. This difference in cyclical position is affecting prices on the financial markets, and particularly exchange rates.
Examples include using the Kuala 2  BIS central bankers’ speeches  Lumpur Regional Centre for Arbitration that offers services as dispute resolution for Islamic financial contracts; Hong Kong issuers tapping the Ringgit sukuk liquidity for cost-effective pricing given the depth of the sukuk market in Malaysia; as well as enhancing knowledge and expertise in Islamic finance through our higher learning education centres such as the International Centre for Education in Islamic Finance (or INCEIF). Forward-looking scenario – A common trading platform for sukuk Future growth prospect for the sukuk market is tremendous. Growth is expected to come from the GCC and Asian regions as infrastructure projects are estimated to be USD2 trillion and USD8.3 trillion respectively till 2020. Hong Kong, with its sizeable bond market to GDP of 72% can play a role in funding these projects. Moving forward, more efforts are needed towards developing financial inter-linkages between our two markets. One area is for our financial communities to explore a common sukuk trading platform for cross-border transactions. A common platform that incorporates international standards and best practices in all aspects of the sukuk trading is key to instil confidence in secondary markets. It can also increase cross-border activities. It has the potential to spur further diversification of product offerings, reduces cost of intermediation and boosts trading activities.

Nobody could tell, at the outset, to what extent the introduction of the single currency would affect the functioning of the single market of goods and services, or the very nature of financial markets or price and wage-setting behaviour across the euro area. Indeed, times of institutional change are arguably times in which private expectations may fail to converge on a focal point. The widely-held assumption has been that the statistical patterns emerging from an aggregation of pre-EMU data may not reveal much about the structure of the new economic entity, and any inference drawn on its basis may - in extreme cases - even be misleading. This is all the more likely when we consider the fact that, as far as monetary and financial convergence in the future euro area was concerned, it was based upon a concept of “benchmarking”, namely convergence towards the best performers, which suggests that aggregation of the EMS data might be even less predictive. Such a situation has called for a cautious interpretation of model results and, even more importantly, for a broad information basis in order to cross-check the interpretation of various pieces of information. This implies a need for detailed and high-quality statistics for the euro area. The construction of a comprehensive statistical support has confronted the ECB with a number of practical issues, to which I now turn. Statistics for the euro area: achievements and outlook Over the past ten years, major progress has been achieved in developing statistics for the euro area.
Dimitar Radev: The Bulgarian banking sector and the challenges in 2020 Publication by Mr Dimitar Radev, Governor of the Bulgarian National Bank, in the Quarterly Bulletin of the Association of Banks in Bulgaria, issue 60, January 2020. * * * The banking sector in Bulgaria ended 2019 with very good overall indicators and positive trends – high capital adequacy and liquidity, credit activity, improving asset quality and the historically highest annual profit of the sector. The asset quality review and the stress test conducted by the European Central Bank confirmed the resilience of the sector overall. The banking sector in Bulgaria will be strategically impacted by the developments in the process of accession to ERM II and the Banking Union, part of which was the assessment of six Bulgarian banks undertaken by the ECB. The final stage of this process is to unfold in the coming months. The fulfillment of the commitments assumed by Bulgaria, including strengthening the capital of two Bulgarian banks, will be followed by relevant external assessment. Following the set path, Bulgaria is drawing near to achieving a fundamentally new level of EU integration – membership in euro area institutions. This will bring about significant change in terms of banking supervision and bank resolution activities. The very onset of the process of establishing close cooperation of the Bulgarian National Bank with the ECB has already expanded the scope and enhanced the intensity of the two institutions’ joint work.

1) The changing nature of systemic liquidity risk Stripped of its superficial idiosyncrasies, the LDI episode provides an almost canonical example of the structural trends we identified in our BIS work: First, the growing use of LDI[6] increased the exposure of real people, in this case current and prospective UK pensioners, to developments in gilt markets. Second, key features of LDI funds left them, and their Defined Benefit (DB) pension scheme investors, exposed to very substantial liquidity risks in the event of a sharp change in interest rates. Those features were: large leveraged holdings of longer-duration gilts or interest rate derivatives; liquidity buffers for meeting margin or collateral calls that had not been rigorously stress tested for more severe shocks; and an overly cumbersome recapitalisation process that left DB schemes unable to inject resources quickly enough into their LDI funds, even where they had the means to do so. Third, in such circumstances, the LDIs’ business model was reliant on being able to liquidate their gilt holdings in size, and at stable well-defined prices. In markets where there was limited intermediation capacity and few if any other marginal buyers, that proved impossible. Expressed like this, and abstracting from the very different initial trigger, these features bear a striking resemblance to the 2020 dash for cash. A wide range of non-bank players with leveraged positions and thin liquidity buffers all rushed simultaneously to get out of positions in normallyliquid financial instruments in order to raise funds for margin calls and other liquidity needs.
Because, for the first time since launching the Small Business Credit Survey, we are able to identify and discuss the specific experiences of Latino small business owners. And that, in turn, matters as Latinos are the fastest growing demographic in our nation and Latino-owned businesses are growing in number and importance. The total Latino population in the United States was around 18 percent in 2017 and that number is expected to rise significantly in the coming decades. Amid lagging business start-up rates, immigrant and Latino business expansion has bolstered small business growth nationally, outpacing that of other demographic groups. Between 2014 and 2016, Latino-owned businesses grew by 13% compared with less than 3% for non-Latino businesses. Today, one in four new businesses is Latino owned, contributing more than $ billion in annual sales and employing millions of workers. On top of that, the Latino population is among the youngest of all demographic groups and its entrepreneurial class is equally young. In fact, nearly half of Latino owned businesses were started less than six years ago, all of which points to the continued growth and importance of this entrepreneurial sector. But why do we care about small business in the first place? Well, it’s quite simple. The Federal Reserve System, as the nation’s central bank, has important roles to play in supporting the vitality of our economy and promoting community development.

The underlying economic exposures involved are harder to assess in part because of the complexity of the instruments, the embedded leverage in many products and the difficulty of estimating correlations across different exposures. BIS Review 55/2006  1  For these reasons, the risk individual dealers attribute to exposures involving some types of credit derivatives exhibit a very large variance, substantially larger than one would typically find in measurements of traditional credit exposures. That variance illustrates the magnitude of the uncertainty involved in capturing the direct exposure in these markets. But perhaps the more difficult challenge is to capture the broader risks the institution might confront in conditions of a general deterioration in confidence in credit and an erosion in liquidity in these markets. This task, which is the province of stress testing and analysis of very low probability but extreme scenarios, is, of course, fundamentally difficult. The analytical challenge is magnified by the inherent difficulty in predicting how behavior changes in crisis, that is, how investors and counterparties would react to actual losses and the fear of future losses. This challenge is substantially more difficult in markets where there have been dramatic changes in the instruments involved, in the nature of the participants and in the structure of the markets. We tend to look more closely at things we can measure than those we cannot. We are drawn to approaches that offer the comfort of precision and tend to look past the wide band of uncertainty that surrounds those estimates.
The  2  See Adrian, Fleming, Stackman, Vogt (2015) Has U.S. Treasury Market Liquidity Deteriorated?, Liberty Street Economics Blog, August 17, for further analysis of Treasury market liquidity. 3  See Adrian, Fleming, Vogt, Wojtowicz (2016) Corporate Bond Market Liquidity Redux: More Price-Based Evidence, Liberty Street Economics Blog, February 9, for further analysis of corporate bond market liquidity. 4  See U.S. Department of Treasury, Notice Seeking Public Comment on the Evolution of the Treasury Market Structure, January 2016. 2  BIS central bankers’ speeches  stagnation in dealer assets might indicate that inventory risk has shifted from dealers to asset managers and other buy-side participants, reflecting a shift in market-making from a “principal” to an “agency” model. While increases in regulatory requirements have undoubtedly played a role, I think that other non-regulatory factors are also important. Liquidity provision is affected by changes in market structure, how trades are executed, and by competition from those operating outside of the regulatory boundaries that have been established for systemically-important financial institutions. Similarly, the demand for liquidity is also evolving with the growth of large asset managers, mutual funds, exchange traded funds (ETFs) and principal trading firms (PTFs) – which are sometimes referred to as high-frequency trading firms. In the U.S. Treasury market, for example, high-frequency trading firms have seized a large proportion of the interdealer market in recent years (Exhibit 8). In the credit market, a rapidly rising share of corporate bonds outstanding is now held by mutual funds (Exhibit 9).

This bolstered the confidence of counterparties in one another and restored market and funding liquidity. Of course, this type of lending is only feasible to an institution that is deemed to be solvent with sufficient collateral available to pledge to the lender-of-last-resort so that it can safely secure its loan. In practice, all of these methods are in place to address funding liquidity risk. Capital requirements have been increased; there is much better reporting about how firms will do under significant stress tests; liquidity requirements – such as the liquidity coverage ratio – provide a buffer that allows management more time to respond to problems; and, if necessary, the central bank can act as the lender-of-last-resort to support market confidence and funding liquidity. So, should more be done to support funding liquidity? In my view, an important issue is to identify and address gaps in the lender-of-last-resort function. In the U.S., some significant gaps remain. For example, the Federal Reserve has a very limited ability to provide funding to a securities firm, even on a fully collateralized basis. The Discount Window is only available to depository institutions, and Section 23A of the Federal Reserve Act severely constrains the ability of a depository institution to pass Discount Window funding along to its securities affiliate.