samchain/econo-pairs-v1 huggingface dataset:
The pace and sequencing of financial liberalisation are critical: •  The pace of liberalisation should proceed in accordance to the country’s stage of development. Progressive liberalisation at a steady pace is better than a ‘big bang’ approach. •  And financial reforms must be sequenced appropriately in order to ensure the stability of the financial system. Let me highlight three factors that must be in place for successful financial liberalisation: •  sound regulation and supervision;  •  a strong core of local banks; and  •  a selective admission policy. First, regulation and supervision. Financial crises following rapid liberalisation are often caused by excessive risk-taking by financial institutions against a backdrop of weak prudential regulation and supervision. The quality of prudential oversight, risk management, and corporate governance must keep pace as the financial sector grows. 2  BIS central bankers’ speeches  Second, a core of strong local banks. Sound banking systems need strong anchor players who are well-regulated, rigorously supervised, and able to take the long-term view, so that their interests are closely aligned with that of the domestic economy. •  This is why Singapore phased its liberalisation measures progressively, to give the local banks time to adjust so that they can compete effectively, while maintaining the stability of the financial system. •  It may be necessary to facilitate the consolidation of a fragmented local banking system to form a core group of strong local banks that are able to compete.

The lessons from the development history of many economies are compelling: financial liberalisation is integral to the development process but this liberalisation must be carefully sequenced if crises are to be avoided and the benefits of liberalisation maximised. In general, domestic financial reform should precede full capital account liberalisation. Let me conclude. Myanmar has embarked on a momentous journey to strengthen and develop its financial sector. Liberalising the financial sector is not a question of whether but how. MAS, through its growing partnership with the Central Bank of Myanmar, is happy to contribute to this effort where it can. We have been deeply engaged in many training programmes and stand ready to share our experiences where relevant. Singapore wants Myanmar to succeed and prosper, and realise its huge potential. I wish you fruitful discussions. BIS central bankers’ speeches  3
4 When the Reserve Fund “broke the buck” after Lehman’s failure, there was a run by institutional investors. The industry had to be given access to central banks’ liquidity facilities to contain the vortex. Many banking groups running supposedly arms-length money funds injected “capital” into their funds to keep them afloat. Yet the funds had not been consolidated, and their bank sponsors had not had to hold capital against such implicit support. Echoing the concerns that Paul Volcker is reported to have expressed at internal Federal Reserve meetings around thirty years ago, 5 the Bank of England believes that Constant-NAV money funds should not exist in their current form. They should become either regulated banks or, alternatively, Variable NAV funds that do not offer instant liquidity. Meanwhile, so-called “enhanced return" funds should surely have to make clear what they are and what they are not. Offering 300bp (or whatever) over LIBOR is to offer a risky investment. There is nothing wrong with that. But securities regulators should ensure that the marketing and distribution is appropriate. “Money fund” does not seem to be quite the right label. For both those riskier funds, and Variable NAV money funds, investors would clearly be exposed to risk, just as in mainstream equity and bond mutual funds. Finance companies My second example is so-called finance companies. They are prominent in, but by no means unique to, the US. Some operate globally.

In other words, across the system there was too great an element of banks (and dealers) having shed credit portfolios only so long as they could sustain their own repo financing. Meanwhile, firms such as AIG and funds of various kinds had bought ABS and CDOs financed by short-term repo, so that they held portfolios of household and corporate loans financed at very short maturities – just like a bank, so the argument goes. When the crunch came and ABS asset values fell, some of these firms and funds could not rollover their funding. In the case of some dealers and AIG, end of story. Indeed, towards their end, some could not even repo-out US Treasuries to raise cash! The chain of financing was too long and too fragile to prove resilient under stress. 9  The Securities Lending and Repo Committee is a UK-based committee of international repo and securities lending practitioners and representatives of trade organisations, together with bodies such as Euroclear UK and Ireland, the UK Debt Management Office, the London Stock Exchange and the FSA. It is chaired and administered by the Bank of England. The terms of reference can be found at: www.bankofengland.co.uk/markets/gilts/slrcterms.pdf. 10  For example, see Gorton G B (2009), “Slapped in the Face by the Invisible Hand: Banking and the panic of 2007”, paper prepared for the 2009 Federal Reserve Bank of Atlanta Jekyll Island Conference. 6  BIS Review 6/2010  What are the lessons?
The Executive Board decided at its meeting in April that the time was not yet ripe for this. But nor could we exclude the possibility that this might be possible further ahead, if the economic situation were to deteriorate more than we were assuming. During our discussion of this type of unconventional measure at our most recent monetary policy meeting I pointed out that the Riksbank is already implementing extensive measures through its lending to the banks. These measures will continue as long as is necessary. I also considered that it was not necessarily the case that we would need to take the same measures as, for instance, the Federal Reserve and the Bank of England. There are several different reasons for this. The companies in these countries are more dependent on market funding, while in Sweden the banks are the most important source of funding. I also said that we had not yet seen the full effect of the radical interest rate cuts we had made, which contributes to an even greater uncertainty in the question of whether further stimulation through unconventional measures is needed. When we meet in July we will present our forecasts for the economy and the repo rate over the coming three years and discuss once again whether there is a need to carry out other measures than those we have already carried out. We must always maintain the best possible level of preparedness to deal with various situations that might arise.

There is also a lack of information allowing an  assessment of the firms that could be most adversely affected by the transition and it is not easy to determine the exact consequences of the different future scenarios. Nevertheless, I believe that the banking sector should, to a large extent, already be considering transition risk. We should not forget that analysing the business environment is an essential part of the risk assessment and management that banks must carry out and that, unlike other ‘transitions’ prompted by sudden changes in technology or behaviour, the transition to a decarbonised economy has been announced and reported on. In order to foster robust management, a series of expectations from both the Single Supervisory Mechanism and the Banco de España, within the remit of their supervisory competences, on the appropriate measurement and management of these risks within the sector is expected to be published soon. Allow me to briefly refer to our work as macroprudential supervisor. I am sure you will agree that, in order to be able to conduct this type of supervision, we need to assess financial institutions’ exposures to high-carbon emitting activities, perform stress tests for the financial system as a whole and define the scenarios and methodologies that serve as a guide for banks. In this regard, in order to analyse the risks associated with climate change and environmental degradation, we are developing an internal methodology on the basis of the stress tests applied to the Spanish banking system every year.
Overall, we expect price stability to be maintained over the medium term, and the current monetary policy stance remains accommodative. The stance, the provision of liquidity and the allotment modes will be adjusted as appropriate, taking into account the fact that all the non-standard measures taken during the period of acute financial market tensions are, by construction, temporary in nature. Accordingly, the Governing Council will continue to monitor all developments over the period ahead very closely. Let me now explain our assessment in greater detail, starting with the economic analysis. Following the 0.3% quarter-on-quarter increase in euro area real GDP in the third quarter of 2010, recent statistical releases and survey-based evidence for the fourth quarter and the beginning of the year continue to confirm the positive underlying momentum of economic activity in the euro area. Looking ahead, euro area exports should benefit from the ongoing recovery in the world economy. At the same time, taking into account the relatively high level of business confidence in the euro area, private sector domestic demand should increasingly contribute to growth, supported by the accommodative monetary policy stance and the measures adopted to improve the functioning of the financial system. However, the recovery in activity is expected to be dampened by the process of balance sheet adjustment in various sectors. In the Governing Council’s assessment, the risks to this economic outlook are still slightly tilted to the downside, while uncertainty remains elevated.

On the one hand, global trade may continue to grow more rapidly than expected, thereby supporting euro area exports. Moreover, strong business confidence could provide more support to domestic economic activity in the euro area than is currently expected. On the other hand, downside risks relate to the tensions in some segments of the financial markets and their potential spillover to the euro area real economy. Further downside risks relate to renewed increases in oil and other commodity prices, protectionist pressures and the possibility of a disorderly correction of global imbalances. With regard to price developments, euro area annual HICP inflation was 2.4% in January 2011, according to Eurostat’s flash estimate, after 2.2% in December. This further increase was broadly anticipated and largely reflects higher energy prices. Looking ahead to the next  BIS central bankers’ speeches  1  few months, inflation rates could temporarily increase further and are likely to stay slightly above 2% for most of 2011, before moderating again around the turn of the year. Overall, we continue to see evidence of short-term upward pressure on overall inflation, mainly owing to energy and commodity prices. Such pressure is also discernible in the earlier stages of the production process. These developments have not so far affected our assessment that price developments will remain in line with price stability over the policy-relevant horizon. At the same time, very close monitoring is warranted.
This has been justified by saying that it might cause more confusion than clarity about the grounds for the policy. That has not been the Riksbank’s experience. Our view of inflationary pressure in the Swedish economy is published on a quarterly basis. The clear presentation gives observers a chance of understanding and questioning our assessments. As new information becomes available, moreover, they are in a position to relate it to our earlier assessment and continuously form a fairly good picture of how interest rates are likely to move in the future. BIS Review 76/1999  2  The publication of our inflation assessments has also facilitated decisions in recent years to raise or lower interest rates. In that the grounds for our actions are clearer, there is less risk of our being accused of heeding extraneous considerations, a worry that featured in the European discussion last autumn. It is my belief, however, that the ECB will become more open about its economic assessments as it settles more comfortably into its forecasting process and inflation assessment. Another difference in transparency concerns access to discussions at the decision-making meetings. The ECB has chosen not to publish any minutes. An important argument for this policy - and one that I find understandable but debatable – is that minutes disclosing how individual members voted might occasion a greater element of national considerations.

New conditions have been created not only for households and firms in the euro area and adjacent countries but also for economic policy. Sweden is by no means unaffected by this change, even though we are outside the euro area at the start. Economic development in the euro area is crucial for Sweden’s economy. As a member of the European Union, moreover, we are involved in many of the contexts where policy is formed. We have also undertaken to conduct our policy in accordance with the rules that have been established for the Union. Against this background it is important that we are engaged in the discussion of economic policy in Europe. My purpose today has been to highlight a number of issues of importance for the European debate. I have tried to describe how the ECB works, the rules that have been built up for fiscal policy and so on. I have also said something about events in the past six months and discussed some of the problems as I see them. One thing is certain: the euro’s introduction does not constitute the final step in the integration of Europe. The single currency will raise new questions that will be answered by degrees through the cooperation between the countries of Europe. It is important that Sweden takes an active part in that debate. BIS Review 76/1999  6  7  BIS Review 76/1999
In this context, the idea of a global currency did not prosper in the academic debates – and even less so in policy discussions. One recent exception stands out, to which I would like to pay a special tribute. In 2010, Michel Camdessus launched the Palais Royal initiative. This initiative sheds light on the shortcomings of the International Financial System, in particular its global governance and an overreliance on a single central currency. The initiative suggested a greater role for SDRs and enhanced cooperation between the World Bank, the IMF and the G20. However, other major projects have in parallel been assigned higher priority for instance the successful creation and development of the euro - or have been dictated by necessity - for instance the strengthening of the global financial safety net (GFSN) induced by the great financial crisis and then the Covid crisis. That said, there have been significant progress such as the increase of IMF resources, the two special drawing rights (SDR) allocations (including the last one of 650 billion USD in 2021) and the creation of the Resilience and Sustainability Trust (RST) on the 1st of May by the IMF, which will help deliver the G20 commitment to rechannelling at least 100 billion USD of this allocation to the countries in need. 2. The dangers of a fragmented financial system  Page 3 sur 7 But there are dangers ahead.

The market value of households’ financial and housing assets has fallen by over 10% over the past two years. Does this mean that there is some form of hole in households’ balance sheets that will weigh on the recovery as they seek to repair it? 2  This increase reflects purchases of assets. It does not include the returns from these investments. BIS Review 114/2009  3  Any real or perceived need for households to rebuild their balance sheets may play an active role in determining their levels of spending. 3 For example, the cost of financing debt and the uncertainty about future employment prospects may make households reluctant to exceed a certain level of net borrowing. In this case, the deterioration in the financial position of some households may cause them to spend less in order to repay debt or increase savings. The “payback period” I mentioned earlier. This possibility has focussed much recent attention on the state of households’ balance sheets. But standard measures of households’ financial position – such as the ratio of debt to assets – may exaggerate the severity of the problem. That is because these conventional measures suffer from a “missing” asset and a “missing” liability. Let me explain. The “missing” liability is the cost of purchasing a house in the future. This argument is directly related to the redistribution argument I discussed earlier.
I have always stressed that the phasing-out would be timely and gradual. It must be timely, because one should exit neither too early, nor too late – any ex ante bias is not justified. The phasing-out must be gradual, because the situation is improving only gradually and downside risks remain. Last Thursday we took a decision to initiate the gradual phasing-out of some of the extraordinary liquidity measures, as they will not be needed to the same extent as in the past. This will avoid distortions associated with maintaining non-standard measures for too long. It is important to avoid a situation in which banks are heavily dependent on exceptional central bank financing. In the context of a stabilisation in the money markets, incentives have to be strengthened for banks to restructure their balance sheets through recapitalisation. In addition, a timely and gradual phasing-out should help activity in the money market and strengthen peer monitoring among banks. It was against this background that the Governing Council decided to adjust the design of some of our refinancing operations. We will continue to fully accommodate banks’ liquidity needs at fixed interest rates in all our main refinancing operations for as long as is needed – and at least until mid-April next year. We thereby continue to provide liquidity support to the euro area banking system so as to facilitate credit provision to the euro area economy. But as regards our one-year operations, we decided to not engage in further one-year operations beyond the December operation that was already announced.

Economic activity in the third quarter is estimated to have increased by 0.4% compared with the previous quarter. In 2010 we expect to see a moderate recovery. This is in line with the latest Eurosystem staff projections, which were published last Thursday. However, this expectation remains surrounded by a high level of uncertainty. In the view of the Governing Council, the risks to the outlook remain broadly balanced. As regards price developments, inflation and inflationary pressures have remained low over recent months. In line with our expectations, inflation rates turned positive again in November, reaching an estimated 0.6%. Looking ahead, we expect inflation to remain moderate over the policy-relevant horizon, in line with a relatively slow recovery in demand. Indicators of inflation expectations over the medium to longer term remain firmly anchored, in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term. Our monetary analysis confirms the assessment of low inflationary pressures over the medium term. In particular, we see that money and credit expansion continues to decelerate. In the case of loans to households, the latest data provide further confirmation of a levellingoff at low rates of growth. The growth of loans to enterprises follows turning-points in the business cycle with some lag. The still subdued levels of production and trade, coupled with broader uncertainty regarding the business outlook, will dampen firms’ demand for bank financing also in the coming months, especially for short-term loans.
The equity prices of banks tumbled, falling 86% on average for the major UK banks between February 2007 and March this year (Chart 4). In money terms, that is a loss of market capitalisation of around £ equivalent to 20% of annual UK GDP. Underlying these price falls was a generalised loss of trust between banks and investors in banks, such as sovereign wealth funds and mutual funds. What explained this wholesale loss of trust? In the run-up to the crisis, banks’ business models were increasingly predicated on making loans for onward sale. Loans became tradable securities and long-term relationships gave way to short-term transactions. The perils of this practice were well understood by Michael Marks, founder of Marks and Spencer and of course one of the region’s greatest-ever entrepreneurs: “You either make things or you sell them. Don’t try both”. Banks tried both, making loans with an eye to subsequently selling them. This had unintended, but in fact entirely predictable, consequences. Without skin in the game, banks’ due diligence became slipshod. The quality of tradable loans fell as their quantity rose. Investors in these securities were not as canny as the landlady of the Esk Inn: they purchased them in size even though “they knew nought about them”. By the time the penny had dropped for these investors, the pounds had not taken care of themselves.

General Meeting of the OCBF 17 June 2022 Economic and financial situation and outlook in the context of the war in Ukraine Speech by Denis Beau, First Deputy Governor  Ladies and gentlemen, I am delighted to be with you today on the occasion of your Annual General Meeting. Last year, I spoke before you about the outlook for the euro area economy in the wake of the health crisis. Since then, new lockdowns in China and especially the war in Ukraine have created new shocks for the European economy and financial system. Today, I would like to share with you our analysis, at the Banque de France and the ACPR, of the outlook and the resulting short-term, macroeconomic and subsequent macrofinancial risks, which guide our actions as a central bank and supervisor in our mission to preserve monetary and financial stability. I will end my remarks with the longer-term challenges we collectively face, associated with climate change and the digitalisation of finance, which should not be overshadowed by the war in Ukraine and its consequences. These challenges still require resolute and immediate action from all of us, and in this context I will say a few words about the role we can play as supervisors and central bankers to help banks in their transition to a sustainable economy and digitalised finance. 1.