samchain/econo-pairs-v1 huggingface dataset:
At that meeting we reiterated our aim to conclude by the end of this year the reforms outstanding and thereby finalise the new capital framework known as Basel III. Basel III: lessons from the crisis and regulatory response The fundamental aim of the Basel framework is to offer, at the global level, minimum regulatory capital rules that ensure the solvency of internationally active banks. This is essential to preserve financial stability and to provide security to investors and depositors as to banks’ capacity to withstand risks, such as those arising, for example, from adverse economic scenarios, from inappropriate management decisions or, in general, from unexpected circumstances. The international financial crisis in 2008 highlighted the fact that these objectives have not been met, or not to the extent necessary. Although there were various causes behind the crisis, in the banking sector a series of grave weaknesses came to light. These included most notably excessive leveraging and credit growth; banks’ high exposure to systemic risks; and the absence of sufficient tools to properly address liquidity and funding problems. The Basel Committee’s response to these vulnerabilities was the approval, in 2010, of the new framework known as Basel III. Focusing initially on the numerator of the solvency ratio and its value, the framework substantially increased the minimum capital levels required and the quality of this capital.

In the process of finalisation of Basel III, the Committee has also stated its intention to improve the standardised approaches for credit and operational risk. Broadly speaking, the aim is also to make them more risk-sensitive. The standardised approaches are important per se, since they are used by a great number of banks worldwide; but as restrictions on the use of internal models are introduced they will become even more important. Thus, discontinuing the use of internal models to measure operational risk would mean that all institutions, irrespective of size, business model or type of business, would have to use the same standardised approach to measure operational risk. Measuring such a heterogeneous risk using a standardised approach clearly presents considerable difficulties. 6/7  The proposal published for public consultation by the Basel Committee has a series of limitations that must be remedied before it is approved. Regarding the use of the standardised approach to measure credit risk, the Committee is striving to make it more risk-sensitive and, at the same time, to reduce its excessively automatic reliance on external credit ratings. This is no easy task either, and the final outcome may possibly be less ambitious than was initially intended. It is important, however, that the approach be robust and correctly calibrated. The impact assessments being performed by the Basel Committee will provide more information in this respect. In accordance with the guidelines we all subscribe to, as I mentioned earlier, this package of reforms should not produce a significant widespread increase in capital requirements.
Food and energy prices continued to rise in the second quarter of 2008 and financial markets remained under stress. In the meantime domestic uncertainties have intensified, having further adverse impact on the medium term inflation expectations. Accordingly, there has been a significant upward surge in the medium term inflation expectations in the second quarter of 2008 (Figure 7). BIS Review 100/2008  5  Figure 7: Inflation Expectations* 9 12 Months  24 Months  8 7 6 5  07.08  05.08  03.08  01.08  11.07  09.07  07.07  05.07  03.07  01.07  11.06  09.06  07.06  05.06  03.06  01.06  11.05  09.05  07.05  4  *24 months expectations is available from May 2006 onwards. Source: CBT. In order to contain the deterioration in inflation expectations and to prevent the materialization of the second round effects of supply-side shocks, the Monetary Policy Committee tightened monetary policy in the past three months, increasing the policy rates by a cumulative of 150 basis points (Table 1). In current conjuncture, where the consumption demand keeps slowing down, I would particularly like to emphasize that the monetary tightening policy was adopted in order to halt the deterioration in inflation expectations and the upsurge in the risk premium. As a consequence, the deterioration in inflation expectations ceased and market rates declined in July (Figure 7).

I would like to underline that adverse impacts of the supply side shocks on the economy will be more limited should all the economic agents take these targets as a benchmark in forming their expectations. Prudent monetary policy is a necessary but not sufficient condition for attaining price stability. The support from fiscal policy and structural reforms are as critical as the monetary policy in this respect. Sound fiscal policy has been one of the main factors in driving inflation down to single digits. The role of fiscal policy will continue to be critical on the road to price stability. Preserving the resilience of the economy, especially under current conditions, requires the continuation of fiscal discipline and structural reforms. In this respect, the European Union accession process and the implementation of structural reforms envisaged in the economic program remain to be of utmost importance. I would like to conclude my remarks by stating that advances in structural reforms, which would improve the quality of fiscal discipline and enhance productivity, are monitored closely by the CBT with regard to their implications on macroeconomic and price stability. Thank you. 14  BIS Review 100/2008
This is why I don’t favor indiscriminately adhering to simple policy rules that exclude financial market conditions. I hope the FOMC can begin to raise its federal funds rate target next year. This would signify that the economy has made sufficient progress towards the FOMC’s objectives and that the time had finally come to begin to unwind the current high degree of monetary policy accommodation. Thank you for your kind attention. I would be happy to take a few questions. 8  BIS central bankers’ speeches

We have also been conducting several initiatives to help raise awareness of the importance of this issue, including workshops and meetings with the industry to learn more about how the sector is coping with climate change. Despite all these efforts, there are still obstacles and methodological challenges to overcome. These include the longer and uncertain horizon that must be applied to assess these risks, and the finalisation of a common taxonomy enabling us to distinguish what is "green" and what is "brown". I am sure our outstanding speakers today will help us to shed light on these issues, and I look forward to the discussions this morning. As I mentioned earlier, the slogan of the United Nations Climate Change Conference, COP25, is “Time for Action is now”, so I believe it is time for me to stop talking and move to Lord Stern´s presentation. Thank you very much. 9  Single Supervisory Mechanism. 5/5
15  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  15  On the other hand, the documents of the time make it clear that the government’s opposition to the sorts of rises in interest rates that would’ve controlled inflation stemmed from more than a parochial concern with its own finances16. Nor did some in government believe such rises to be necessary to begin with (inflation was often blamed on an unlucky sequence of cost shocks17). What’s certainly clear, looking at the longer run of history, is that there’s no simple measure of the fiscal position – the ratio of government debt to annual GDP, for example – beyond which inflation is bound to pick up. In 1970 public-sector debt was 60% of GDP, the lowest it had been since the eve of the First World War. Yet what followed was the most rapid inflation, over any 10-year period, in British history. Going much further back in time, government debt was higher than this in every year of the half-century before the French revolution in 1789 – higher still relative to the general level of taxation – yet the gold standard remained intact and inflation quiescent. Throughout, people were free to convert Bank of England notes into gold at a fixed price. In the 1790s, when war against the new French republic began, two things changed. One was the  Chart 11: The Bank of England’s balance sheet during the Napoleonic wars  scale of the resulting rise in government spending.

Most of the economic problems we face will be eased as growth recovers but, in my view, a return to boom conditions is unlikely in the UK anytime soon. If that is the outlook for growth, then what about inflation? That has been above target now for most of the past five years. But it would be hard for anyone to argue that inflation has been high because of excess demand growth in the UK. And because monetary policy works in large part by boosting or restraining nominal demand that would not seem to be the root cause of such high inflation either. Rather we have been subject to a range of cost or supplyside shocks including high energy prices internationally, compounded by the large depreciation of sterling during the financial crisis, and tax changes and other “administered” or regulated price rises reflecting difficult policy choices (such as producing cleaner energy). As a relatively small open economy, overly dependent on financial services, the UK has been more exposed than most countries to externally-driven cost pressures. It may sound perverse, but my concern for much of the past five years has been the risk of eventual deflation: that once the temporary effects of the various price level shocks work off, weak demand growth would leave us with a Japanese-style economic malaise which would have been very difficult to escape from. The asset purchase programme – or QE as it is generally called – has been crucial in avoiding that outcome.
Europe is particularly badly affected, as temperatures here continue to rise above the mean and, despite our efforts to reduce CO2 emissions, we lag far behind in terms of what we need to do to adapt to some of the inevitable consequences. It is time we face the facts. As citizens, as institutions, and as all actors in the economy – including of course banks. It is essential that banks share with their stakeholders detailed information on their exposures to C&E – risks. Only then can we all effectively work together to address the consequences of climate change. This is why today I would like to draw your attention to another important landmark in the ECB’s supervision of C&E risks: the publication of our second stocktake on the transparency of banks’ disclosures of their C&E risk profiles. The European and international agenda on climate Publishing this update is part of our supervisory agenda on climate. As you know, C&E risks have been one of our supervisory priorities for some years now and we have started treating them just like any other prudential risk. In this context, we have been rolling out a series of corresponding supervisory activities. In 2020 we published our guide on climate-related and environmental risks, which outlined our supervisory expectations relating to the management and disclosure of C&E risks. In 2021 we published a self-assessment benchmarking report.

Supervisory follow-up Let me now outline the next steps that the ECB plans to take to follow up on the results of our assessment of banks’ C&E disclosures. We have sent individual feedback letters to all banks under our direct supervision, setting out the key gaps in their disclosures and conveying our explicit expectation that they will take decisive action to address these gaps. In doing so, banks will ultimately ensure that their risk profile is transparently and comprehensively reflected in the information they disclose to the public. Addressing such gaps will also mean banks are well prepared to meet impending technical requirements. As I mentioned, the consequences of non-compliance with minimum transparency standards are only going to increase for banks, as legal and reputational risks are starting to materialise for banks which fail to step up the quality of their disclosures. More and more, clients, investors and other market participants want meaningful, comprehensive information on the climate-related actions of their banks. That way, they can make conscious, informed decisions about where their money goes. Moreover, failing to disclose exposure to risks, including C&E risks, constitutes a breach of the Capital Requirements Regulation. As such, we stand ready to use the full array of supervisory tools at our disposal to ensure banks’ C&E disclosures are up to our standards, and ultimately that eligible banks are prepared for the new regulatory requirements.
This implies that living standards in the euro area, in terms of real GDP per capita, continued to improve and developed more favourably than indicated by relative real GDP growth rates. At the same time, what is worrisome is that the gap in population growth has been even larger with regard to growth in the working age population, which manifests that Europe has a more acute problem of population ageing. IV. Economic growth in Europe: the role of institutions and values  IV.1. Market structures and economic institutions  Policy-makers in Europe have recognised the structural weaknesses of the European economy and have put together a range of reforms and policy measures seeking to remedy the deficiencies identified. The revised and refocused Lisbon strategy, which aims at making the EU “the most dynamic and competitive knowledge-based economy in the world” by 2010, outlines the main areas where policy action is needed (see European Community (2004) and Sapir et al. (2003)).

Furthermore, I believe that once the setbacks are eliminated right after the crisis and once the amendments are made in the Central Bank Act, we will be able to use short-term interest rates actively as a monetary policy instrument in the medium-term. A more efficient monetary policy implementation will be ensured through easing the fiscal burden on the financial markets and through reinforcing the banking sector, which will lay the ground for inflation targeting. In the near future, we will continue to do the technical works for inflation targeting. These works will include, choosing an appropriate price index; determining a transmission mechanism that would show how monetary policy instruments might influence the prices and how the pressures might come up on the prices; determining a targeting band and its period. In short, the Central Bank will shift from a post-crisis policy aimed at short-term financial stability toward price stability, once the necessary conditions have emerged. Let me point out that, developments in November 2000 and in February 2001 highlighted once again the importance of achieving the structural and financial reforms, which is one of the keystones for the medium- and long-term stability of the economy. At this point, I would like to underline that the existence of a healthy financial system can be considered as a public good with substantial positive externalities. Once the system is relieved from the burden of the state-owned banks, both the borrowing costs will decline and the Central Bank will get an upper hand in its monetary policy actions.
(2022), “Blockchain scalability and the fragmentation of crypto”, BIS Bulletin, No 56, Bank for International Settlements, 7 June. 3. It should be noted that holdings of crypto-assets are often concentrated in the hands of a few holders who could influence supply and prices. Moreover, some investments are the proceeds of illicit activities, which may be price elastic. 4. The market capitalisation of crypto-assets decreased from its peak of around € trillion on 10 November 2021 to € billion on 2 July 2022. By 14 June 2023 it stood at € billion. Source: CoinMarketCap. 5. See Auer et al. (2022), “Crypto trading and Bitcoin prices: evidence from a new database of retail adoption”, BIS Working Papers, No 1049, Bank for International Settlements, November. 6. See Panetta, F. (2023), “Caveat emptor does not apply to crypto”, The ECB Blog, 5 January. 7. See Panetta, F. (2022), “Crypto dominos: the bursting crypto bubbles and the destiny of digital finance”, speech at the Insight Summit, London Business School, 7 December. 8. Incidences of fraud, human error and manipulation have eroded the trust of crypto enthusiasts, leading to calls for scrutiny, oversight and public intervention. Research and analysis show that fully decentralised set-ups are often concentrated on few holders or require other types of human intervention. This makes them prone to manipulation and risks. See for example, Sayeed and Marco-Gisbert (2019), “Assessing Blockchain Consensus and Security Mechanisms against the 51% Attack”, Applied Sciences, Vol. 9, No 9, April. 9.

However, we cannot rule out that more serious events can occur with more severe and longer-lasting effects on global markets, in light of their renewed political difficulties to implement fundamental structural reforms, and where the banking sectors are still dealing with deteriorating portfolios due to slow economic activity. Another risk coming from abroad has to do with how the conventional and unconventional measures of monetary stimulus will ultimately be withdrawn in the United States. Having no history in this creates uncertainty in the markets, mainly about the financial effects it might have. There may be an overreaction of the markets, with increased stress and sharp rises in long-term interest rates. The rising cost of financing this would entail for emerging markets and some Eurozone economies more dependent on external financing, would pose important policy challenges for them. In Chile, this could lead to increases in both the cost of external financing of companies and banks and higher long-term interest rates domestically. As emphasized in our Financial Stability Report, it is important for banks in this context to keep the exposure of their balance sheets at bay. In any case, the U.S. monetary authorities have argued that if confronted with an unwanted reaction the process could be delayed or even reversed to some extent, so it is possible for the effects of the withdrawal to be fairly limited.
In Europe, the Single Resolution Board (SRB) is responsible for preparing the resolution of significant European institutions. This preparation has already included drawing up resolution plans for all significant institutions, analysing their resolvability on an individual basis and establishing a minimum requirement for own funds and eligible liabilities (MREL) that make it possible to comply with the paradigm shift I have just referred to. The SRB has also put in place effective mechanisms for cooperation with the national resolution authorities that (like the FROB and the Banco de España) participate in the drawing up of resolution plans and in determining the MREL, and in implementing decisions taken by the SRB, as well as developing their own responsibilities for less significant institutions. I should like to underline the importance in these European resolution arrangements of the requirement that European credit institutions (including Spanish ones, naturally) have sufficient levels of MREL. The paradigm shift from a bail-out to a bail-in system, and the other tools permitted by European legislation, require that banks have a sufficient level of MREL so that, if the case arises and there is a public interest involved, the institution can be resolved, while minimising the burden on the taxpayer and ensuring the continuity of critical functions and a minimum impact on the rest of the financial system. For some institutions, this requirement represents a considerable challenge for the coming years.

With some investors reaching for yield, there are reports that it has become an increasingly popular way to generate some income. Consistent with that, insurance premiums have fallen. Implied volatility is a measure of that. It captures the level of market volatility in future at which the options being sold would be expected to break even. Lower implied volatility equates to lower insurance premiums for a given excess. Across markets, implied volatility has recently been squeezed to near all-time lows. So far, so esoteric. However, two possible knock-on effects make this worth exploring further. First, to some degree betting on low volatility could become self-fulfilling. Dealers who buy the options that are being sold by investors have an exposure to market moves. That exposure gets bigger as market prices move close to option strike prices. When an option is close to being ‘in the money’ small moves in market prices have a big effect on its value. This ‘dynamic hedging’ means dealers trying to hedge their positions need to buy more of the underlying asset as prices fall, and sell more as they rise. They can add a stabilising influence to markets. As a result, the decision to sell cheap insurance can appear vindicated: betting on low volatility begets low volatility. 11  All speeches are available online at www.bankofengland.co.uk/speeches  11  Second, measures of actual and implied volatility are often used as an indicator of risk to inform investment decisions.