samchain/econo-pairs-v1 huggingface dataset:
Those two components result in us “Thinking fast and slow” (Kahneman (2011)). Information prompts a chemical reaction in the impatient part of the brain. This provides the synaptic spark to re-optimise, to exchange, to transact, to befriend, to change our minds as never before. And change our minds, quite literally, it has. Some have argued that the information flood may have caused a neurological rewiring, the like of which followed previous IT revolutions such as the printing press (Carr (2011)). This may have reduced attention spans, perhaps permanently; it has hardwired myopia. While the neurology of this is new, the point itself is not. In 1971, information theorist Herbert Simon wrote: “In an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention” (Simon (1971)). In other words, an information surplus may cause an attention deficit. An attention deficit is likely to lower the quality of decision-making. For cognitive psychologists, it is a disorder – one whose reported incidence has sky-rocketed over recent years. If short-term reactions are clouding long-term judgements, the doer crowding-out the planner, the immediate the important, then more hurry may be generating less speed. This might be called the “information-rich-yet-attention-poor” property of connected webs. One manifestation is over-trading – over-trading in friends, partners, jobs, stocks.

In Spain’s case, in a setting in which the state of alert affected the last two weeks of Q1, we witnessed the biggest-ever contraction in GDP historically in a single quarter, namely a quarter-on-quarter rate of 5.2%. This decline was one of the most pronounced in the euro area, and was in response to several circumstances. These included a relatively greater severity of the lockdown measures (given, too, the greater intensity of the pandemic) and the presence of certain structural factors in our economy that make it more vulnerable to a shock of these characteristics. The most significant factor here is perhaps the high weight of the tourism-related sectors, which have been particularly affected by the social distancing measures. The reduction in hours worked, estimated at 5% in Q1, was also the biggestever in the time series and highlights the marked impact of the various measures affecting movement on the labour market in the early stages of this crisis. Admittedly, the restrictions on movement were gradually eased as from early May. But the state of alert ran for much of Q2, whereby a notable increase in the decline in GDP and in employment in this period is to be expected. The latest Banco de España macroeconomic projections, published in June against a background of unusually high uncertainty, posted estimates of quarter-on-quarter declines in activity in a range between -16% and -21.8%. And the information since available tends to confirm that the decline in economic activity in Q2 as a whole will have been in this range.
We expect that this research and development work will have important benefits for both the Bank and the fintech industry even if the eventual decision is not to introduce a digital pound. In order to proceed to the next stage, we need clarity about the model of a digital pound to be developed. The report published today sets out for consultation the key features of the model we propose to take forward. The report is accompanied by a Technology Working Paper that sets out an accompanying illustrative conceptual model and seeks feedback on potential approaches to key technology considerations. Before I set this out in further detail, there is one important point I should make. Given all the attention that the cryptoasset world, with its attendant gyrations and failures, has received in recent years, it is perhaps understandable, that the digital pound can be confused in peoples' minds with cryptoassets such as bitcoin. I should take this opportunity to correct this misapprehension. Indeed, nothing could be further from the truth. The majority of cryptoassets are highly speculative assets, whose value is extremely volatile, because there is nothing behind them. They have no intrinsic value. For that reason, they are not suitable and not used for general payment purposes. One can think of them as more akin to a bet than to trusted money. The digital pound would be a safe, trusted form of money accepted for everyday transactions by households and firms, in the same way as Bank of England notes are today.

We will be putting in place the capabilities and mechanisms to increase our technology expertise, and to enhance our ways of working with DLT technology providers and those seeking to deploy DLT in finance, both through the FMI Sandbox and the digital pound design phase. Throughout the next phase we hope to continue to benefit from a wide range of views and expert advice on the digital pound. This consultation is an important element in that regard, as is the continued work of the Engagement and Technology Forums which have supported the Taskforce through the first stage of its work and which will continue. Page 11  The money we use and the way we pay has changed throughout history, driven by technology and the changing needs of society. We have seen significant changes in recent years and current trends suggest that we are likely to see further major change as technology and the digitalisation of everyday life advance. The proposals set out today are designed to ensure that the UK is well placed to take advantage of the benefits that these changes can offer, while ensuring that we preserve the safety and uniformity of money in the UK. Thank you. I would like to thank Marilyne Tolle, Ali Aswad, Shiv Chowla, Katie Fortune, Stephanie Haffner, Dovile Naktinyte, Zaki Said, Simon Scorer, Danny Russell, Michael Yoganayagam and Cormac Sullivan for their help in preparing the text.
There is a case that we should take some notice of this in the way the regime operates, rather than just ignore it. In summary, our experience of operating the MA suggests to us that the broad mechanism works but that the EU design makes insufficient allowance for uncertainty, the difference in riskiness between assets, and signals from the market. As a result of this, we are concerned that it overestimates the portion of future returns which can confidently be assumed to be free of risk for insurance companies and therefore safely banked as capital up-front. Some might suggest that this is fine, because insurance capital requirements are set to cover a 1in-200 year stress. [6] But that mixes up capital requirements and capital resources. The risk of a weak MA is that capital resources could be over-stated, and strong capital requirements are no defence if the capital being used to meet those requirements is not sufficiently solid. [7] The system as currently set up provides a particularly strong incentive for insurers to hunt out assets which happen to have a high return relative to their credit rating. Here is an intuitive way to think about the risk in this if taken too far, which our team calls the “high-spread-for-rating assets” – or more colloquially the “too-good-to-be-true assets” – issue. Imagine you have two bonds. [8] Both mature at the same time, both are in sterling and both have the same credit rating.

One natural cross-check is market expectations about the future interest rate, as represented by implied forward interest rates (adjusted for risk and term premia). In addition, simple interest rate rules like the Taylor rule and other variants suggested in the literature provide potentially useful cross-checks. Experiences What are our experiences of our communication approach? The ultimate objective of our communication is to achieve better outcomes in terms of improved stability in inflation and the real economy. However, with less than three years of being fully transparent about our future policy intentions, it is too early to draw a conclusion regarding macroeconomic stability. An intermediate objective of communication is to provide a better understanding of the Bank’s reaction pattern. One test of this to consider the volatility of market interest rates on the day Norges Bank decides the interest rate. If the new communication approach has been successful, one should expect that the interest rate decisions are more predictable. Chart 5 shows the magnitude of market rate changes on the day the interest rate is decided. We see that volatility in market interest rates has on average been smaller after we started publishing our interest rate forecasts. Although one cannot exclude the possibility that the  4  BIS Review 94/2008  reduction in volatility is caused by other factors than policy communication, it seems that our reaction pattern has become somewhat better understood.
Thirdly, Regtech benefits regulators: Earlier, Deputy Governor Fan had this to say, “In the era of the digital economy, the financial business environment is opening up more and more, services are becoming more virtual, business boundaries are blurring, and financial risks are becoming more contagious.” We at the HKMA recognise the importance of Regtech in managing the risks associated with the digital economy. Regtech can play a critical role in helping banks to maintain operational resilience, and that in turn makes it easier for regulators to better manage overall risk in the financial system. 8. I particularly enjoyed the analogy made by Mr Benoît Cœuré. Indeed, we regulators are often 1/4  BIS central bankers' speeches  referred to as watchdogs. Benoit is more specific. He noted that banks are like greyhounds – usually fast at adopting new technologies; while regulators are like bloodhounds – a bit slow and stubborn but having financial stability as their key priority. In fact though, I have to say that the HKMA is increasingly acting like a greyhound in our efforts to promote Regtech. How to overcome Regtech adoption challenges 9. So we have put forward clear evidence that Regtech can benefit many different stakeholders. But we also know that there are challenges associated with Regtech adoption. Part of our Regtech 2025 vision is to see Regtech being extensively adopted by the Hong Kong banking sector. To facilitate this, we aim to share success stories of Regtech implementation – how others overcame the challenges and develop practical guidance to banks.

10. Many success stories have been showcased in today’s event. The Roundtable with Tech Giants session offered valuable insights into how to use Cloud and Artificial Intelligence to aid Regtech adoption. In the Pulse of Regtech and Masterclass sessions, our guest speakers shared real-life stories on practical drivers for Regtech adoption and factors in successful solution implementation. 11. We heard how organisations have successfully implemented Regtech solutions in a number of areas within their risk management and regulatory compliance functions. These areas included credit risk management, stress testing, sales practice and suitability, employee conduct and monitoring, regulatory reporting, and regulatory compliance obligations. It is therefore very clear that the use of Regtech goes far beyond anti-money laundering and financial crime compliance, although that area of use cases is certainly a very good place to start any Regtech adoption journey! 12. If you are like me, you would have noted down many practical tips offered by our speakers today. Let me share four key takeaways that I noted for overcoming the challenges connected with Regtech adoption: First, buy-in is crucial. A range of stakeholders from across financial institutions need to buy in to Regtech and collaborate fully in adopting it. We have heard how a supportive leadership can shape an organisation’s culture, and in turn drive Regtech-led transformations. Middle management and operational staff need to support this as well. Second, data is king. This point has been made repeatedly today.
One of the few countries here that has managed to turn the employment curve upwards from the mid-1980s is the Netherlands, as shown in Diagram 3b. In the course of a decade unemployment has been virtually halved, from 12 to just over 6 per cent. One factor behind this is a very moderate real wage rise, so that employment has risen on this account. The labour market has probably become more adaptable. Another phenomenon in the Netherlands is an increase in part-time employment; this probably reflects a change in labour demand but also a shift in supply. The case of the Netherlands shows that the employment trend can be turned. This indicates, in my opinion, that in the current discussion in Sweden about a new model for wage formation, the prototype ought not to be Europe as a whole. If the average real wage rise in Sweden were to match the rate observed in Europe in the past quarter-century, it might make a reduction of unemployment more difficult. The model should rather be the Netherlands. The pattern in Sweden resembles that for the EU area. In the period as a whole employment has hardly changed. As in Europe in general, real wages have risen relatively strongly, though the trend has been held back by a series of devaluations that pushed inflation up, presumably with a negative effect on production.

Towards the end of 1995 the growth of production slackened and the increase during 1996 probably stopped at between 1 and 1.5 per cent. However, the slowdown seems to have been relatively gentle. The demand situation appears to be good, particularly when one BIS Review 38/1997  -2-  considers that the growth of private sector production was held back by marked destocking in 1996. Stock adjustments are not uncommon after some years of rising output and they do not seem to have had negative effects on private consumption. In the second half of 1996 private consumption picked up and export demand went on rising. As the destocking comes to an end, domestic and international demand should therefore be able to generate an accelerating growth of production this year and in 1988. Considering the economy’s unutilised resources, I do not expect inflationary capacity restrictions to arise in the coming years. If inflation expectations also remain low and confidence in economic policy in general is stable, this, too, will contribute to a subdued development of future inflation. Since the autumn there have been some months in which the level of consumer prices was lower than a year earlier. In a price analysis, however, it is important to distinguish transitory effects on inflation from the underlying inflationary process. In January this year the level of consumer prices was 0.1 per cent lower than a year earlier. Strictly speaking, however, what Sweden is experiencing is not deflation.
Overall leverage seems lower relative to 1998, and may not look that high relative to banks and investment banks, but leverage is hard to measure and the quality of the data is not very good. While hedge funds are large enough to provide meaningful efficiency and liquidity benefits to some key markets, they are also large enough that the failure of a major hedge fund or  2  BIS Review 55/2004  number of funds could have a significant impact directly and indirectly on the major banks and investment banks in the United States. Within the clearance and settlement infrastructure, economies of scale have led to high levels of concentration in some areas. Two institutions together now handle the vast majority of clearing business for U.S. government securities and the associated triparty repo market in which over $ trillion turns over twice each day. The dramatic increase in the volume of transactions handled by the core parts of the payments infrastructure places substantially greater demands on the operations of those institutions. Moreover, many of the major payment and settlement utilities operate across national boundaries, raising complicated questions for the appropriate allocation of oversight responsibility. Alongside these changes in the relative size of institutions and in market structure, financial innovation has led to a dramatic increase in the complexity of the risk management challenge. The frontier of financial innovation inevitably advances somewhat ahead of improvements in the risk management and clearing infrastructure.

One example of the work done so far is the agreement in September on the Basel III framework, which in brief entails raising the requirements regarding the capital and liquidity that the banks are required to hold. I will return to the subject of regulations and supervision later. The crisis has raised questions regarding the functioning of the economy But crises also raise more fundamental questions regarding the way the economy functions in different respects. Are the economic relationships really as we believed them to be, or have our theories and models missed something? Could there be a reason to begin thinking differently? These types of question are often much more difficult to answer. It usually takes years of practical experience and theoretical and empirical research before one can draw conclusions with any reasonable certainty. But it is quite clear that the crisis has brought to the fore a number of interesting questions. I intend to take up three areas, which I believe will be discussed in the coming period, both in the central bank world and in academic research. What these all have in common is that, in one way or another, they affect the monetary policy transmission mechanism, that is, the way the central bank’s policy rate decisions affect the economy.
The reason for this conclusion is that that bursting the bubble sooner rather than later reduces the probability of a still larger bubble later on with an even greater downward effect on consumer price inflation. Hasn’t experience taught us that a growing risk of instability may be indicated by a steep increase in asset prices at a time when the credit supply have been expanding at an unsustainable rate for some time? If such a situation happens to coincide with low prospects for consumer price inflation, might there then be grounds for the central bank to depart from its inflation target for the time being in order to curb the increase in asset prices? That special circumstances might prompt a temporary departure from a central bank’s inflation target is not a novel suggestion. It has been discussed, for example, in the context of natural disasters, large supply shocks and so on. And what is a full-blown bank crisis if not a serious economic disaster? At the same time, curbing rapidly rising asset prices when prices of goods and services still show little sign of turning upwards is not exactly an easy task for the central bank. One of the difficulties lies in justifying this to the general public. Another is whether an asset price bubble is actually developing; does the central bank really have better information than the market participants? A third problem is that an interest rate hike might exacerbate the subsequent course of events when asset prices are corrected.

The overnight rate has remained stable around the repo rate. However, as in many other countries, Swedish interbank rates have risen. On the interbank market for loans from tomorrow until the day after, the interest rate has been higher than normal, and movements have been more volatile. But higher and more volatile interbank rates do not automatically mean that the banks will experience problems. Swedish banks have had good opportunities to obtain financing during the entire financial crisis, solvency is good and loan losses are currently small. The fact that we have not seen any major problems in Sweden is of course linked to the fact that Swedish banks have not been exposed to any great extent to the US subprime market. Nor has there been any “distrust” of Swedish banks. Ultimately, it is a question of a broad view that Swedish banks do not have problems. The fact that the overnight rate has been stable around the repo rate may also be linked to the way in which our monetary policy steering system is constructed. An increased demand for deposits with the Riksbank would have been visible in that banks with surpluses would have put their money in their deposit accounts. The return on this is 75 basis points lower than the repo rate, and thus poorer than the overnight market. It would thus be expensive from day one. This differs from systems with an average minimum reserve requirement.
To bring you another example that is close to my home, the Danish bank Danske bank has significant operations in many parts of Northern Europe. With its network of branches, it is now the fifth largest bank in Sweden and is on the verge of becoming systemically significant, at least by some standards. There are also some banking groups that have a significant share of their operations outside of their home country. Interestingly, banks from some small countries such as Belgium and Austria are responsible for a large part of cross-border banking investments. It is banks that may have systemic relevance in several countries, or are perhaps systemic in one country but not in another, or which are simply very large, and complex, with geographically widespread operations, that pose the greatest challenges to authorities. Fortunately, there are not too many of these critical banking groups in Europe at this point in time. According to an ECB study, there are 43 banks with operations in three or more countries. Of these only nine are truly pan-European banks. Nevertheless, a crisis scenario in any of these may pose serious difficulties to resolve. In the current system, the organisational structure of a cross-border bank – specifically, whether the bank is organised according to a subsidiary structure or a branch structure – affects the distribution of responsibilities between the home country authorities and host country authorities.

For instance, for a regional cross-border banking group, I imagine the supervisory team to be based in the relevant region, perhaps in the same premises as the national supervisor, and to consist of staff from that region. As for crisis resolution, one could think of the EU building up a deposit insurance fund for the largest cross-border banks, possibly within the framework of the new European supervisory agency, akin to the Federal Deposit Insurance Corporation in the USA. This would considerably reduce the risk of destructive negotiation games. Such a deposit insurance fund would certainly be better diversified than the national funds are today, which would, all else being equal, enable it to charge lower fees or hold a larger risk-adjusted buffer. However, the fund itself would lack the ability to handle the largest banking failures. In order to cope in the event of a really large bank or several large banks failing, the fund should be able to borrow in the capital market. To be able do this in a cost-efficient manner, it would need backing by a government guarantee from the 25 member states. In the event that the European deposit insurance fund is not able to recover enough money from a troubled bank to repay its creditors in the capital markets, a key for burden sharing would need to be in place. One could establish a system of committed payment obligations, where the fund has the right to receive contributions according to the agreed key to pay back its capital market loans.