samchain/econo-pairs-v1 huggingface dataset:
2  2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  One of the key ways central clearing counterparties – CCPs – help prevent panic is to be sure that as markets move, firms quickly pay for changes to their derivatives contracts, and insure against likely further changes. First, when derivatives contracts change value, the holders of those contracts exchange money right away. Losses and gains are promptly allocated to the firms on either side of the trade. This limits the chance that, if one side of the trade defaults, the other firm is left holding the bag for the defaulter’s bad trades. This is called variation margin. Second, CCPs require firms to place pre-paid self-insurance with the CCP to cover the predicted liquidation costs in the event of their default. Because derivatives markets can be fast moving, a key factor in how large this self-insurance needs to be is how volatile the markets are. This is known as initial margin. Importantly in times of market turbulence, both losses and gains of individual participants and required pre-paid self-insurance will rise. They are inherently pro-cyclical. As Deputy Governor Jon Cunliffe said last summer, this is a feature, not a bug.5  So did the simpler, post 2008- system work? In March and April 2020, we saw some of the biggest two-day price moves for some cleared products in the past decade. In a number of products the price moves were much larger than ever seen before.

As a supervisor and regulator, I have a duty to households and businesses in the UK to preserve financial stability – to protect the UK economy from disruption. So I need to know on an ongoing basis that large CCPs on which the UK financial system relies are robustly regulated and supervised. But that should not necessarily mean I have to do the supervision of non-UK CCPs myself. Indeed if every host authority supervised every CCP that offers services to its banks and other financial institutions it would be untenable. We cannot have 21 different regulators’ hands on the steering wheel when it comes to critical cross-border infrastructure. That would hardly be a good result for financial stability - especially in a crisis, where clear and quick decision-making is critical. The solution is proportionate and informed reliance.8 Informed reliance means that, with sufficient information and a deep cooperative relationship with the home supervisor, I can defer to them to ensure that a CCP is as safe to operate in UK as those I regulate and supervise directly. Proportionate means that for cross-border CCPs that are very important to the UK financial system, I will need more information and even  7 8  BoE calculations. Principles for Financial Market Infrastructure Responsibility E on Cooperation. 5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  deeper cooperation – and in the event that we are unable to secure this, I may need to resort to supervising the CCP directly.
The banking system has written off bad debts (equivalent to more than 10% of GDP in the last three-and-a-half years), the average size of banks has increased, capacity has been reduced and a process is under way to transform the savings bank sector, which will help these institutions to meet the new prudential regulation requirements and strengthen their ability to fund themselves on the markets. Yet, as I said in September when presenting the results of the recapitalisation required by the royal decree law passed early this year, the restructuring process cannot be considered to have been completed. In fact, insofar as the economic forecasts for 2012 have in recent weeks been revised drastically downwards and funding problems on wholesale markets have worsened for all European banks, the pressure  BIS central bankers’ speeches  5  on our credit institutions has intensified and therefore the need for adjustment and financial restructuring not only remains but has actually increased. During economic upturns the major danger is complacency, which leads one to think that reforms are not necessary because everything (growth, employment, government revenues) is going well. During crises however, the great danger is reform fatigue, tiring of reforms that have no visible effects in the short term. For this reason, we must not only press ahead with financial restructuring, but must also be open to the possibility of taking further action when this is considered necessary.

However, as I have repeatedly said, labour reform, accompanied by liberalisation processes to foster a more competitive environment, is the only way within the context of monetary union of achieving an internal devaluation within a relatively short space of time. This reform will not have immediate effects, but that only makes it all the more pressing. Without this reform, the recovery in competitiveness could only be achieved through an extremely slow and very painful, with unacceptable suffering for many Spaniards and negative consequences beyond the purely economic ones. Turning to budgetary policy, lowering the deficit is absolutely necessary given the stance of the markets, whose distrust of the sovereign debt of the euro area countries has been increasing in recent weeks. Admittedly, tough decisions have already been taken in Spain, such as the reform of pensions, which have served to reduce the deficit not only in the short run, but also in the medium and long term. However, there is still a long way to go merely to comply in 2012 with the 4.4% budget deficit commitment, whatever the final figure for 2011. Finally, some very significant progress has been made in Spain in recent years in financial restructuring.
Caleb M Fundanga: Financial sector development in Zambia Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the farewell cocktail hosted in honour of the Barclays Bank Zamia Limited Managing Director, Lusaka, 4 February 2010. *  *  *  The Chairman – Barclays Bank Zambia Plc, Mr J J Sikazwe The Chairman – Bankers Association of Zambia, Mr Saviour Chibiya Chief Executive Officers of Commercial Banks Outgoing Barclays Southern Africa Regional Managing Director, Mr Zafar Masud Acting Barclays Bank Plc, Managing Director, Mr Bret Packard Management and Staff of Barclays Bank Zambia Plc Colleagues from Bank of Zambia Distinguished Guests Ladies and Gentlemen Ladies and gentlemen I am privileged to officiate at this farewell cocktail as we say goodbye to Mr. Zafar Masud who has been the Managing Director of Barclays Bank Zambia since January 2008. In the past few years, Barclays Bank Zambia Plc has contributed to making banking more accessible through its outreach programme which saw an increase in its ATM and branch network to over 150 ATMs and 55 distribution points comprising branches and agencies nationwide. Clearly the grass-root population in Zambia has continued to benefit from this initiative. As is the case with a number of other banks, Barclays Bank Zambia Plc has continued to innovate and positively contribute to financial sector development in Zambia.

Modern markets are, in fact, dependent on the media, whether in their provision of real-time information second by second, or in the more reflective analysis of market trends, or in the exposure of scandals and malpractices. It is no coincidence that Hong Kong is both a financial centre and a world media centre. At least seventeen international news agencies, 29 international or regional newspapers, and another 29 magazines have a presence in Hong Kong, and all of them have some interest in financial affairs. We have 45 daily newspapers printed in Hong Kong and no fewer than 661 registered periodicals. Now, of course, some of these publications are what are known as ma ging (馬經) or racing papers, and not all of them have their dedicated financial pages. Even so, Hong Kong is remarkably well served by the financial media, and one thing that has never ceased to impress me during my sixteen years as Monetary Authority has been the quality and dedication of the many people in Hong Kong who make up the financial media. The many colleagues in the media play an extremely important part in the development of financial markets, and I should like to pay tribute to their professionalism.
2  Refers to households with mortgage debt to income ratios in excess of five. 3  The FPC is monitoring closely the impact that the recently announced tax changes have on activity. 4  BIS central bankers’ speeches  3. Objectives, strategy and outlook for monetary policy  The obvious question is, if the turn of the year heralded the normalisation of bank regulation and macroprudential policy, why not the start of normalisation of monetary policy? After all, the Federal Reserve raised rates in December. Might the ‘special relationship’ extend to monetary matters? Of course there is nothing particularly special about foreign central banks’ policy rates. What is most important is whether the shocks to which others are responding are similar to those with which the MPC must contend. To my mind, there are some important differences in this regard:   First, cost pressures are stronger in the US. American unit costs have increased by 3% in the past year and are growing above historical averages, while unit costs in the UK are currently rising by around half that rate or at a speed notably below that consistent with the inflation target.4    Second, the UK economy is twice as open as the US and is therefore more exposed to global weakness, dragging on exports.5    Third, this also means that pass-through of weak global inflation, compounded by exchange rate appreciation, is likely to exert a greater and more persistent drag on UK inflation.

For us, the Taylor rule derives its appeal from three features. The first is its simplicity in describing the behaviour of different central banks by estimating the policy reaction to deviations from the inflation target and to the output gap. The second is its quality as a benchmark in assessing the current stance of monetary policy with respect to the historical average for a similar macroeconomic situation. And, thirdly, the Taylor rule is appealing because it sets the standard by which monetary policy is introduced in macroeconomic models for forecasting and simulation purposes. The SNB’s monetary policy focus is on maintaining price stability, and we do not follow any explicit rule for setting the short-term interest rate. However, the Taylor rule serves as an important indicator in our decision-making process that helps us to conduct a systematic policy. Having talked about John the researcher, I would like to turn now to John Taylor the policy advisor. Time and again, John has merged research with policy making. On this account, his record is long and outstanding as well. He served as a member of the President’s Council of Economic Advisors from 1989 to 1991. He was on the Panel of Economic Advisers of the Congressional Budget Office from 1995 to 2001. And from 2001 to 2005, he served as Under Secretary of Treasury for International Affairs. His responsibilities included setting up a new currency in Iraq and getting terrorist financing under control.
I can also see a case for reporting how votes are actually cast. This is, in fact, already the practice of the US Federal Reserve and the Bank of England. BIS Review 58/1998  -4-  Monetary policy and asset prices Finally some words about a matter that is not directly on the agenda for our discussions. I am referring to how monetary policy should respond to asset prices. The reason for bringing it up today is threefold. First, it is a matter that is widely discussed today in many international forums as well as in many central banks. Second, as a practitioner I would like to encourage our leading international experts present here today to study it further in the years to come in order to develop more knowledge in this area. It could be the topic for a future conference. My third reason is more personal. Before I came to Sveriges Riksbank I was state secretary at the Ministry of Finance and involved in the management of Sweden’s financial crises. The obvious question for me is why did it happen and how can we prevent it from ever happening again. I have already touched on the question of monetary policy’s target variable, which, as we all know, is a very complicated matter. An additional dimension is whether asset prices more formally should be included in the target variable for monetary policy? The question about monetary policy and asset prices is by no means new.

In this supportive international environment, the euro area experienced a brilliant first quarter of 2011, emphasizing the robustness of the recovery. GDP increased by 0.8% over the quarter but as fast as 1.5% in Germany and 1.0% in France. All euro area countries, except Portugal, enjoyed positive growth rates. These developments no longer reflect solely the economic policy stimulus and the inventory cycle; they testify to a broad-based recovery, with a self-sustained private sector dynamics. One remarkable development of this first quarter is that French and German growth has been mainly driven by private domestic demand and, in particular, business investment. In France, it grew at a 1.9% quarterly rate, posting a fourth consecutive quarter of strong growth. The pace of recovery may slow in the coming quarters. Business climate indices, such as the Purchasing Managers Index, the Economic Sentiment Indicator or Germany’s IFO, have peaked at high levels. Beyond these observations, the crisis may have left scars on our economies. Potential growth may have been affected. The balance sheet repair process, involving both public and private agents, may also weigh on growth in the medium term. Still, prospects are encouraging. The OECD, which recently issued its latest forecasts, has just raised its growth forecast for the euro area to 2.0% in 2011 and 2012. All in all, we have strong reasons to believe that we successfully exited the economic crisis. There are increasing signs that the recovery is now well on track.
The reason is, of course, that the view I had on the system around the turn of the century was formed before one of the biggest stress tests of all time, when almost 90% of the banking system in Iceland collapsed in the autumn of 2008 in the wake of the post-Lehman intensification of the international financial crisis. So do I still have the same view? I will have to hold you a little bit longer in suspense on that question, as I should first discuss briefly how the financial crisis has played out here in Iceland. For more detailed account, I refer you to numerous publications, including a thorough and informative report of the parliament-appointed Special Investigation Commission, which reported last month on the causes of the financial crisis in Iceland. 3 To paint with a broad brush, we can say that economic and financial developments in Iceland during the last decade or so are a combination of two separate but interrelated stories. On the one hand, there is Iceland’s boom-bust cycle and problems with macroeconomic management in small, open and financially integrated economies. This is a well-known story that has played out in Iceland and other countries several times. On the other hand, we have the story of the rise and fall of three cross-border banks operated on the basis of EU legislation (the European “passport”) – banks that were mishandled by the owners and the bankers, and underregulated and undersupervised by Icelandic authorities.

The second cost is due to the fact that deflation, if it is unexpected, results in a redistribution of wealth from borrowers to lenders. The third cost stems from the real interest rate becoming too high in relation to demand. The IMF’s report on deflation last year pointed out these costs and emphasised that monetary policy must be preventive, vigorous and forward-looking with the aim of avoiding deflation. If deflation should nevertheless arise, what tools do we have to deal with the situation? If the scope for interest rate cuts has been exhausted, central banks must resort to other measures. These include, for instance, trying to influence interest rates on securities with a long time to maturity and creating confidence in a higher inflation rate in future. In addition, fiscal policy can be more expansionary. A boxed article in the October 2003 Inflation Report described the Riksbank’s views on the deflation problem. The risk of deflation was portrayed as slight, given the targeted monetary policy and improved economic activity. However, there are analysts, such as the American economist Paul Krugman, who see parallels between the situation in Japan ten years ago and the American situation now, for instance with regard to the low level of resource utilisation and the aftermath of large share price bubbles.
Prasarn Trairatvorakul: Global risks and the outlook for Thailand Address by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the Fitch Ratings (Thailand)’s 10th Anniversary Annual Conference, Bangkok, 1 September 2011. *  *  *  Distinguished speakers and panelists, Ladies and Gentlemen, I would like to thank Fitch Ratings (Thailand)’s for inviting me to give an opening address at this year 10th Anniversary Annual Conference. I also like to say that the conference theme “Global Risks and Outlook for Thailand” is most timely and should stimulate quite active discussion among the distinguished audience in this room. I am sure that the conference will help bring new insights on how we should look at the world, advanced, and Asian economies in the period ahead underlined by great uncertainties. For my part, I would like to highlight some key issues that can have potentially significant policy implications. I will touch briefly on three areas, namely the prospects of the advanced and Asian economies, Thailand’s economic outlook, and finally the key policy challenges going forward. At the outset, it is fair to say that prospects of the global economy could be quite murky over the year ahead. There are greater uncertainties with regard to the speed of recovery and additional policy actions in the US and Eurozone economies, and the risks of misforecasting are high.

Worth noting is that, similarly to Thailand, many Asian economies have also capitalized on the opportunities to lessen monetary policy easing during the period of good economic performance since the latter part of 2010. The main objective has been to preserve fiscal and monetary policy space for potentially more difficult times ahead. For Thailand, I believe that our policy space remains appropriate. But, any higher public spending should be done with special care. At this juncture, the need to increase government consumption is less urgent and the fiscal focus should be put on public investment to expand our potential output. 2  BIS central bankers’ speeches  Therefore, the stimulus should be prioritized and carefully planned to leave some policy space for future needs. Ladies and gentlemen, I would like to end my talk today by stressing that we now live in a different and difficult world. Current global risks from the slowdown in advanced economies have clearly heightened. Given good economic fundamentals, the Thai economy should be resilient enough to cope with such risks. I would like to urge investors not to swing between over pessimism and over-confidence and behave in a herd-like manner. Instead, all parties, public and private, should be cautious and prepared for the global risks in moving the country forward. It is my firm believe that protecting domestic purchasing power and let everyone have equal chance to benefit from the economic growth can strengthen the future well being of the Thai economy in a sustainable manner in years ahead.
Rather, the actions of all major countries have sufficient spill-over effects on other countries that they will then react in turn. The international economic system is better seen as a “game” in which there are many players of varying sizes, each adopting their own strategy. This has important implications. A world of atomistic countries requires no assumptions to be made about the objectives of others. The impersonal prices that we face contain all the information relevant to our own decisions. But in the international economic “game” it is important to know about the objectives, strategies – “policy reaction functions” – and policy decisions of other countries. In as much as these reaction functions are not well understood, the consequences of policy choices may not be reliably priced by markets. Policy makers, therefore, are more likely to make incompatible choices if they make decisions independently relying solely on international prices as their guide for the consequences of their actions. An international financial institution might, therefore, help in two ways. First, even if countries are not willing to cooperate in the formal sense that they agree jointly on macroeconomic policies, a forum which improves knowledge and understanding of other countries’ objectives and policy reaction functions may lead to more compatible policies. Second, such an institution might provide the public good of a dispassionate and independent analysis of the spill-over effects of one country’s policies on others.

One solution could be to create more flexible groupings within the Fund to discuss particular topics. For example, the Managing Director’s powers to initiate bilateral consultations about the policy choices of individual members could be expanded to cover multilateral issues discussed by the relevant group of members. If this does not prove practicable, other mechanisms will need to be found to introduce the requisite flexibility in how countries come together under the auspices of the Fund. The institution itself, though, also needs to change. The IMF has the great merit of being a universal institution. But it needs greater focus, independence and legitimacy. In terms of focus the members of the Fund, through the IMFC, could usefully restate the Fund’s mandate in terms of global economic and monetary stability. If it is to be able to meet its remit then surveillance should focus at least as much on balance sheets as on exchange rates. The mandate should make clear both what the IMF is responsible for and what it is not responsible for. But producing more focussed surveillance cannot be achieved in isolation from more fundamental reforms of the Fund. In terms of independence the responsibility for the delivery of a new mandate should be placed more firmly in the hands of the management of the IMF. At present, the Board involves itself in every aspect of the Fund’s activities.