samchain/econo-pairs-v1 huggingface dataset:
The only way to avoid that would have been to offer to lend to all banks at a rate that many others – in addition to  2  BIS Review 114/2007  Northern Rock – found attractive to pay. And to do that without drawing attention to Northern Rock’s take-up would have required a truly massive injection of cash into the banking system. That could happen only if there were no penalty rate or if conditions in money markets generally were difficult enough to make the penalty rate attractive to many banks over a prolonged period. Nothing would have been easier than for the Bank of England to lend freely without a penalty rate. Almost every actor in this drama saw advantage in cheap money and plenty of it. The role of the central bank is to ensure that the appropriate incentives are in place to discourage excessive risk-taking and the under-pricing of risk, and in so doing to avoid sowing the seeds of an even greater crisis in future. That we have done in each action we have taken – by maintaining the principle of the penalty rate. Some commentators have taken issue with these concerns about moral hazard, arguing, by analogy, that fire departments put out fires started by people who smoke in bed. I agree that we have fire services to do precisely that. And if a fire starts in the financial system, the central bank will put it out if it threatens to spread.

First, Countrywide had paid millions of dollars each year to big banks as a liquidity insurance policy so that, in the event of difficulty, they would provide it with long-term loans. So on August 17 Countrywide was able to claim on that insurance and draw down $ of committed credit lines. Northern Rock had not taken out anything like that level of liquidity insurance. So when it came to the Bank of England for support, it was important that liquidity was not provided free. Second, even though Countrywide had insurance, its depositors were still worried. On hearing that it had claimed on its insurance, queues formed. But those queues were short and soon dissipated. The depositors simply did not face the same incentives to withdraw their money. The United States has a well-developed insurance scheme for depositors. If a bank is forced into administration, there are mechanisms in place to repay depositors in full, up to $ per account. And most importantly, the depositors are paid within just a few days. Without such a scheme in the UK, once the queues started to form at Northern Rock, other depositors faced every incentive to join them. The only way to stop the run was for the Chancellor to announce a government guarantee of the deposits of Northern Rock, which today was extended to new depositors as part of the continuing stabilisation plan for the business. BIS Review 114/2007  3  So what are the main lessons for us from the recent episode?
The latter approach is called “certainty equivalence” in academic research and is a good policy only under fairly restrictive assumptions of how the economy functions. It is therefore probably less useful as guidance in policy-making. Moreover, the central banks’ actual behaviour and communication indicate that uncertainty plays an important role in the monetary policy decisions. 21 See Greenspan (2003). 20 [24]  A more useful approach is probably William Brainard’s insight that monetary policy should be conducted more cautiously when there is considerable uncertainty over its impact. 22 Brainard’s uncertainty principle is based on the insight that central banks’ actions can affect the uncertainty in the economy. If, for instance, a central bank were to act more forcefully to try to attain its inflation target more promptly – in a scenario where there is great uncertainty over the impact of monetary policy – there is a risk that it would instead miss the target by a wide margin. By acting forcefully, the central bank contributes to greater variations in inflation and also to greater uncertainty in general. To avoid this, the central bank should act more cautiously. This uncertainty principal is often referred to by central banks and can be one reason why central banks, who want to avoid making major mistakes in all circumstances, are sometimes perceived as “sluggish” in their behaviour. One of my themes today has been long-term trends. When such trends change, it often takes a long time before one notes the change and this can moreover be difficult to assess.

21 In other words, monetary policy decision-making is surrounded by various different types of uncertainty. At the Riksbank we grapple with issues such as: Which shocks are currently the driving force behind the business cycle? Which forecasting model gives the best forecasts? How large is the effect of a change in the interest rate on inflation? What characterises well-balanced monetary policy? How should the risk of low inflation be balanced against increased risks for financial instability? Is the data correct? Should special attention be given to really negative scenarios? Figure 13. The Riksbank's forecasts on labour force participation and GDP growth (a) Labour force participation  (B) GDP growth  Note. Thousands of persons, aged 15-74 and annual percentage change. The figure shows the Riksbank’s forecasts for labour force participation and GDP growth 2013–2019 (February). Sources: Statistics Sweden and the Riksbank  There has been greater interest in how to take into account uncertainty in the monetary policy decision-making process since the financial crisis. This has often been about finding a structured way to take into account the uncertainty in the monetary policy decision. Unfortunately, I must say that the answer to this question is not exactly easy and that it can probably be best summarised as “it depends”. In practice, there are three approaches a policymaker can take with regard to uncertainty. He or she can act more forcefully, more cautiously or as if the uncertainty did not exist.
2  BIS Review 76/2010  Development of insurance sector in Malaysia Despite the challenging external conditions posed by the global financial crisis, the Malaysian insurance industry has, on the whole, remained resilient. The industry-wide Capital Adequacy Ratio stood at 242% at the end of the first quarter of 2010, well above the benchmark supervisory target of 130% set under the RBC framework. Total net premiums and contributions for insurers and Takaful operators grew by 8.2% during 2009. This was driven by growth in the ordinary life segments of the life and family Takaful industry, and a broad-based demand in the general sector. Also of significance is that insurers in Malaysia have performed considerably well in managing and responding to the challenges of lower investment returns and the lower interest rate environment following the global financial crisis. Also notable is the rapid progress of Malaysia’s Islamic financial industry which has become a competitive sector and one of the key drivers of economic growth in the country. As Malaysia evolves and emerges as a major international Islamic financial hub, Bank Negara will continue to play an active role in promoting Islamic financial products and services, supporting the enhancement to the payment infrastructure and progressively deregulate and liberalize the financial system. More recently, the liberalization to allow for greater foreign participation in the domestic financial markets will create further international linkages for Malaysia’s Islamic banking and Takaful industries.

Zamani Abdul Ghani: Sound risk management to boost bottom line and strengthen resilience Keynote address, by Mr Zamani Abdul Ghani, Deputy Governor of the Central Bank of Malaysia, at the MII International Risks and Risk Management Conference (IRRMC) for Insurance Sector 2010, Kuala Lumpur, 1 June 2010. *  *  *  I am most pleased to be here today to officiate this International Risks and Risk Management Conference for Insurance Sector 2010. This conference is organized by the Malaysian Insurance Institute, with the theme “Sound Risk Management to Boost Bottom Line and Strengthen Resilience”. It surely provides an important platform to discuss emerging risks faced by the insurance industry and to share the latest developments in risk management standards and techniques in managing insurance business. Global economic developments and outlook The past two years have been a tumultuous journey for financial players in the global arena. The global financial crisis has tested the robustness and resilience of financial systems around the world, the after-effects of which are still being felt today. The implications of the financial crisis have shaken the foundations of the entire international financial system. Malaysia was most fortunate, however, to be mildly affected by the global financial and economic crisis. This is due to the swift and concerted policy responses by the Malaysian Government and the existence of a robust and resilient financial sector in the country. The dynamism and strong fundamentals of most Asian economies are also contributing factors.
We announced the details of this exercise on Wednesday last week.15 It aims to increase transparency, to identify the necessary corrective actions and to build confidence in the banking system. 13  See Sakakibara, E., 2000, Nihon to Sekai ga Furueta Hi, Chuo Koron Shinsha. 14  “G20 Principles for Cooperation between the IMF and Regional Financing Arrangements as endorsed by G20 Finance Ministers and Central Bank Governors”, 15 October 2011. 15  The comprehensive assessment entails three broad elements. First, a supervisory risk assessment to review key risks including liquidity and funding. Second, a balance sheet assessment to enhance transparency in banks’ balance sheets and their asset quality, collateral valuation and provisions, and so on. And third, a stress test to examine banks’ resilience to adverse scenarios. See European Central Bank (2013). “ECB starts comprehensive assessment in advance of supervisory role”, 23 October. 4  BIS central bankers’ speeches  With such steps, and provided that sources of capital are clearly identified, including public backstops when private sources have been exhausted, I firmly believe we can put the banking system on a sounder footing and enable it to support the economy’s recovery. The second response is to reduce financial fragmentation. Despite having a single market for capital in Europe, liquidity is not fully fungible between and even within cross-border banks. This means that liquidity usage is not optimised – surpluses in some countries are not used to fund deficits in others.

In spite of needing more flexible markets with its single currency, Europe faced stronger nominal rigidities than East Asia in labour and product markets.11 This limited the ability of euro area countries to adjust to asymmetric shocks, especially as cross-border labour mobility was low and public debt levels were already high. And finally, no mutual insurance mechanism was in place. But, and here comes the good news, unlike emerging Asia in the late 1990s, Europe had a well-established regional political framework to address its crisis. The framework of integration and cooperation among EU members is old and dense, building on the experience gained with the European Monetary System12. This made it possible to create the necessary instruments (the EFSF and ESM) for financial support for domestic adjustment programmes to come mainly from within the Union, with the IMF focusing on monitoring conditionality. 8  See Kochpar, K., P. Loungani and M. Stone (1998): “The East Asian Crisis: Macroeconomic Developments and Policy Lessons”, IMF Working Paper 98/128. 9  See Cavallo E.A. and J. A. Frankel (2008). “Does Openness to Trade Make Countries More Vulnerable to Sudden Stops, Or Less? Using Gravity to Establish Causality”, Journal of International Money and Finance, Volume 27, Issue 8, pp. 1430–1452. 10  See Loong, L.S. (2000). “Post crisis Asia – The way forward”, BIS William Taylor Memorial Lecture, 21 September 2000. 11  See Heinz, F.F. and D. Rusinova (2011): “How flexible are real wages in EU countries? A Panel Investigation”, ECB Working Paper No 1360.
The Study does, however, recognize the need to continue to develop the payment system and improve the flow of information between financial services providers as well as with their potential clients to avoid this becoming a binding constraint as the financial system develops. Third, the key constraint to expanding access related to the focus and strategies of individual banks and NBFIs. The Study points out that commercial banks have tended to provide financial services to a narrow group of clients (typically corporate entities and formal sector employees), at a high cost, within a narrow geographical location (typically the major towns and peri-urban areas, and they have made high returns in doing so (see Table 2). Disappointingly, NBFIs have typically served the same client base and have not offered effective competition to commercial banks. 4.1  Initiatives to expand access to financial services  There are a number of strategies being implemented by both the private and public sectors to make the financial sector more inclusive, thereby increasing the benefits to the poor of participating in the formal economy. 4.1.1  Financial service providers  Currently, there are signs that a number of financial institutions are re-positioning themselves in terms of location and product offerings. This is evidenced by an expanding branch network and the range of lower-cost products that are now available in the market. For instance, some commercial banks have begun to offer new financial products and services, particularly in retail and community banking.

At European level, we need to move finally towards a true economic union, in addition to the monetary union embodied in the Eurosystem. Only by optimising the governance of the euro area can we optimise growth. The current extremely accommodative monetary policy stance creates the ideal conditions for carrying out much-needed reforms. It should not be used instead as an excuse for putting them off: Europe and France urgently need to make the most of this opportunity, right now. Thank you for your attention. 4  BIS central bankers’ speeches
In Spain, neither conduits nor SIVs (Structured Investment Vehicles) were developed, because the Bank of Spain obliged banks to consolidate these vehicles and required capital of them for the attendant exposures, which eliminated at root any incentive to create these off-balance-sheet vehicles. Accordingly, Spanish banks had hardly any toxic assets. They did not use the originate-to-distribute model to distribute credit risk but pursued a retail banking strategy, in close proximity to bank clients, households and firms alike. On the liability side, when the mistrust and uncertainty worsened, European banks began to suffer the consequences, and their difficulties in raising funds increased. Nonetheless, the long-dated maturities on these products in the past (around 10 years) meant that Spanish banks did not undergo pressing short-term liquidity problems. The financial crisis passed through rapidly to the real economy, with output slumping heavily in late 2008 and over much of 2009. The economic downturn in Spain, and the subsequent recession, impacted banks and progressively raised their doubtful assets and, therefore, their provisioning requirements. Their volume of activity, and new lending in particular, decreased, and the high profitability of Spanish deposit institutions seen so far, began to be eroded. The impact of these developments was uneven, impacting with greater force those banks that had most grown in the expansion and, in particular, a group of savings banks that had concentrated a significant portion of their lending portfolio in financing real estate developers.

These rigorous asset classification criteria indicate that potentially problematic assets at savings banks in credit to construction and real estate developers are € billion, 46% of the total. The specific loan loss provisions set aside for these problem assets account for 31% (if we added general provisions, the figure would be 38%). Obviously, the specific provisions considered to compute these figures are those associated to this potentially problematic loans and not the total amount of specific provisions. Spain’s system of specific provisions has been tightened to drive banks towards making tougher and swifter provisions. A non-performing loan, once the value of the collateral has been taken into account, should be fully provisioned in one year. Collateral value is considered using significant haircuts, which range from 20% in the case of completed housing to 50% in that of land. Provisioning must also be made for foreclosures, up to 30% if they have been on the balance sheet for two years. The provisions are determined by means of transparent parameters, compliance with which is obligatory for all banks. This means they are not the subject of negotiation between bank managers and external auditors. In sum, Spanish deposit institutions are not hiding potentially problem exposures, and nor are the figures for losses small or the provisions made low or far removed from the fair value of these assets. We are very transparent and rigorous in valuing assets and we will continue to be so in the future.
A number of local payment systems concentrate the clearing and settlement of all retail national transactions. In addition, the execution of cross-border payments go through several dedicated arrangements such as international card schemes, banking “clubs” or the EBA’s STEP 2 system. The SEPA project aims to put an end to such fragmentation by introducing, as from 2008, European payment instruments which are going to replace national ones by end-2010. The vision is that by end2010 all retail payments in euro are carried out as easily, efficiently and safely across Europe as within national borders. For this vision to become a reality, a key enabler is that retail payment infrastructures become interoperable and consolidate. The outcome of theses changes on retail payment systems is uncertain. It may lead to various structures, ranging from a natural monopoly exercised by one infrastructure that would encompass most national and cross-border payment flows, to the competition between several systems. However, whatever the structure, the challenge will be to find the right balance between two objectives: (1) reaping economies of scale and scope and (2) fostering competitive market conditions and behaviours. 1.2. Keeping pace with technological progress  The second issue for payment infrastructures consists in keeping pace with technological progress. Payment systems are made up of IT networks, hardware and software. As a consequence, technological progress is a key driver for enhancing the way payment systems are designed, operated and used. I will highlight a few significant examples of recent technological developments.

Regulatory changes, adjustments in the structure of banks, and innovations in the fields of investment opportunities and payments undoubtedly play a major role. Moreover, with receding inflation rates the relative disruptive effect of such instabilities has increased. Certainly, it cannot be excluded that at some point in the future we will again see a phase of greater stability in the demand for money, but in the current environment such a change is not evident. The policy concept implemented by the Swiss National Bank three months ago is made up of the following three elements: an explicit definition - in terms of a figure - of price stability; publication of a three-year inflation forecast; and an operational implementation target in the form of a target range consisting of 100 basis points for the three-month Swiss franc/Libor rate. I need not enter into this in detail before this audience. The decisive test must be in the time path of the ultimate target variable - the price level - which we will achieve on this basis. As regards the concept as such, I should merely like to make two remarks pertaining to misunderstandings. First, the interest rate target defined as a target range is not a substitute for the money supply target of the concept formerly implemented by us. It is neither more nor less than an operational implementation aid with a much shorter time reach relative to the formerly used money supply target.
3 There is also evidence of a point of critical mass – when there are at least 3 out of 10 women on the board. 4 And it’s well established that diversity encourages debate, leading to more creative thinking, and that heterogeneous teams are more successful at solving complex tasks, particularly when people have a shared goal. 5 Almost all decisions in finance are taken under uncertainty. Even if there is a range of known plausible outcomes, distributions of these outcomes are unknown. This makes it especially important that decision makers are exposed to a range of views, with open debate that includes perspectives that challenge prevailing wisdom. Moreover, when there are judgment-based responsibilities – such as assessing appropriate values and conduct – diversity is crucial. The value of diversity permeates organisations. Sustained emphasis on diversity in hiring and development programs promotes improved values throughout an institution and acts as a catalyst to sustained behavioural change. In its first report on diversity and inclusion published in November, the BBA highlighted progress in the banking sector, driven in part by the Davies Review and important industry initiatives like the 30% Club. 6 Encouragingly, the proportion of FTSE 100 female board directors has risen from 12% in 2007 to 26% in October 2015. The BBA rightly stressed, however, that more needs to be done to raise the number of female senior managers, and, more generally, tackle the reputation of the industry for “pinstripes and braces”.

Third, the disruptive possibilities of the fintech revolution are beginning to touch the core of the financial sector. Now it is time for a similar transformation of the diversity of one of the most important sectors of the UK economy. In many respects, Jayne-Anne Gadhia’s report is long overdue. For too long the representation of women in middle and senior tiers of management has lagged that in other leading sectors. For too long, results have fallen short of good intentions. And for too long the financial sector has suffered the economic consequences of this inequality while society has borne the broader costs. Greater diversity – in all its forms, cognitive, gender, background, ethnicity, religion – can help transform the financial sector. Research has shown that companies with a significant proportion of women in senior management positions perform better in part because of some leadership behaviours that women exhibit more consistently than their male colleagues. 1 In particular, women are found to excel at people development, participative decision making, presenting a compelling vision and acting as role models – all drivers of financial performance. 2  1  http://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters. 2  https://hbr.org/2012/03/a-study-in-leadership-women-do. BIS central bankers’ speeches  1  Research on board membership has also shown that female directors enhance board independence, partly because women bring different perspectives and networks to the table, and partly because they are more likely to ask difficult questions.