samchain/econo-pairs-v1 huggingface dataset:
Risk aversion is all very well for a time, but it doesn’t pay the rent! What we are now having to cope with are the economic consequences of the earlier financial disturbances. The inevitable counterpart of recession in much of the rest of the world is a sharp slowdown of net external demand – particularly for manufactures – in the industrial world. That has been reflected in growing weakness and falling business confidence in large parts of the manufacturing sector in both the United States and Europe. The prospective growth in world economic activity has already roughly halved – from its trend rate of about 4%. Unless this fall in net external demand is offset by sustained domestic demand growth in the industrial countries – unless, in other words, the industrial economies collectively accommodate the necessary improvement in the external current account position of the emerging countries, through a deterioration in their own current account positions – the prospects for world economic activity would be dismal. Happily, we start from a position of relatively low inflation throughout the industrial world and, faced with weakening external demand, we can afford to see higher offsetting domestic demand growth without jeopardising price stability. Indeed we need to see higher domestic demand growth than we otherwise would if overall demand is not to fall short of underlying supply capacity, and we need it, too, to offset the effects of weak world prices and of lower exchange rates in many emerging market producers on our own domestic price level.

So there is a lot you can feel positive about in the past year’s achievements and in the start you have made to 1999. But, looking ahead, the world prospect remains uncertain. Notably, the emerging markets crisis has had an immense impact on international financial flows, and the economic adjustments that those shifts will bring in their wake are likely to have important impacts on the bond markets and on your business activity. As a measure of the impact of the emerging markets turbulence, the Institute of International Finance recently published data which show that total net private capital flows to the emerging markets (broadly defined) fell from some $ billion in 1996 to around $ billion last year. Within this, nonbank lending and portfolio equity inflows also fell back by around $ billion (to around $ billion). Although direct investment in the emerging market countries held up pretty well (at around $ billion), and despite a big increase of nearly $ billion in official lending, there was a sudden huge decline in the overall availability of finance to the emerging market economies. And that left many of them with sharply weakening exchange rates, and little choice but to contract their domestic economies. The immediate international priority last year was to contain the financial contagion – and there was some progress in this direction following the initial shocks in Asia.
Securing success for the FX Global Code Speech given by Chris Salmon, Executive Director, Markets, Bank of England  TradeTech FX Europe, Barcelona Tuesday 12 September 2017  I would like to thank Tom Horn and Chris Cox for their help in preparing these remarks. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Good morning, I am delighted to be here at TradeTech FX Europe. Central banks have a deep and enduring interest in the effective functioning of markets. We sit at the heart of our financial systems, supporting their smooth running through our operations, and in turn relying on them ourselves in fulfilling our mandates. Our desire to promote effective financial markets manifests itself in many ways but we often act in a convening role – working together with the private sector to achieve the right outcome for the system as a whole. This has been enduring feature of the Bank of England’s activities, stretching back to some of our earliest efforts in the 1800s to marshal the resources of the City to rescue failing banks. Collective central bank action has long been a feature too; for example, CLS – which many you in the audience today rely on to eliminate foreign exchange settlement risk – was created at the encouragement of central bankers. 1  More recently, central banks have come together to address the systemic risks created by conduct issues within large swathes of wholesale financial markets.

Faced with these features, those of us involved in developing the Code quickly decided that it had to be based on a set of high-level principles. This enabled us to cut through much of the complexity within the market and should result in the Code providing greater constancy in advice than a detailed set of rules could achieve in such a fast-moving market. 1  See Settlement Risk in Foreign Exchange Transactions (1996), known as the Allsopp Report, prepared by the BIS Committee on Payment and Settlement Systems (CPSS); www.bis.org/cpmi/publ/d17.pdf. 2 http://www.bis.org/press/p150511.htm 3 www.globalfxc.org 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  The diversity of the market also led us to deploy a uniquely collaborative approach when developing the Code, with officials from central banks across the globe working with senior representatives from sell side, buy side, non-bank participants and infrastructure providers. Feedback was also sought from members of the various regional foreign exchange committees. The aim – which I firmly believe we met – was to publish a Code that was well informed by the full diversity of market participants and had the legitimacy to be adopted voluntarily. It will be important to maintain that collaborative spirit as we move forward. The Global Foreign Exchange Committee, or GFXC, was formed to facilitate exactly that. The Committee, which I currently chair, comprises public and private sector representatives from 16 of the largest FX trading centres, and has a mandate to promote and maintain and the Code.
Household wealth  Household gross financial assets have increased more than debt in recent years (measured in NOK). This financial buffer reduces some of the concern related to debt growth. Debt as a percentage of gross financial assets is lower today than at the end of the 1980s. Insurance claims account for a substantial share of household wealth. Insurance claims are illiquid, however, and cannot be utilised if payment problems arise. However, debt as a percentage of liquid financial assets, i.e. financial assets minus insurance claims, is also lower now than it was at the end of the 1980s. The strong increase in wealth indicates that the debt growth in recent years has not led to a reduction in saving. This contrasts sharply to the situation in the 1980s. At that time, debt growth was also high, but it financed consumption and not investment, and overall saving fell sharply. BIS Review 39/2005  3  In addition to financial assets, households also have housing wealth. There is considerable uncertainty attached to the estimates for housing wealth. A cautious estimate indicates that household housing wealth is 11 per cent higher than financial assets and more than 40 per cent higher than debt. Total debt is unevenly distributed One worrying aspect of these developments is that debt and wealth are unequally distributed across different household groups. Compared with the 1980s, the debt burden has increased in low- and middle-income households (deciles 1-6). Households with higher income (deciles 7-9) have the highest debt burden.

These rules set provisioning percentages based on risk and criteria so that banks may make an assessment of country risk by monitoring economic developments and the political and institutional situation; further, they contain exemptions arrangements, with such exemptions depending on the type of transaction, its term and the modus operandi. Notably, these rules do not affect foreign direct investment by the Spanish financial system, since they do not apply to debt instruments and to contingent risks, nor to risks vis-à-vis European Union countries. The impact of these rules on foreign trade is low since most trade finance products are not subject to country risk provisioning. Trade credits with a maturity not exceeding one year are exempt, as are pre-financing credits with a term equal to or less than six months for specific export agreements. The rules also provide for an exemption for CESCE insurance operations, which is an added incentive for banks to have this guarantee in medium- and long-term transactions since, in addition to eliminating default risk, they do not then have to set aside country risk provisions. The prudential treatment of instruments supporting internationalisation and, specifically, of instruments linked to short-term trade transactions draws on two significant regulatory frameworks: Basel III, at the international level; and the Regulation (which is directly applicable in all Member States) and the Directive on prudential requirements and their attendant supervision, drafted within the European Union, namely Regulation (EU) No.
My third issue is a reality. The reality here is that in finance, and perhaps in other areas, it is difficult if not impossible to find a textbook perfect market, where, for example, market participants are all price takers and not in a position – and therefore not having the incentive – to try and move markets in their favour. Fear or greed, fed by information or misinformation, stoked by manipulative or predatory behaviour by a few, often takes hold, to such an extent as to produce volatility well beyond prudent risk management parameters, threatening a complete meltdown of the financial system or other forms of systemic breakdown. As supervisors of financial institutions and regulators of financial markets, our duty is to do our best to prevent these situations from occurring, but we have to accept that we too are not perfect, particularly when supervision and regulation at the national level have their shortcomings in dealing with financial institutions and markets that are already global in nature. Whatever combination of market freedom and regulatory oversight one cares to design and try out, markets do fail, sometimes inflicting huge damage to the public interest, defined in terms of ensuring that the financial system operates effectively in support of the economy. The damage to the public interest could well be much greater than that arising from not allowing the free market to find its equilibrium on its own. We certainly hope that these situations do not occur too often.

For one thing, credit creation by the banks is continuing to be slow-moving. For another, the growth of the money stocks is considerably influenced by portfolio shifts, which are likely to be reversed once economic activity accelerates and interest rates begin to rise. We shall, however, continue to keep a careful eye on this development. As already stated, there are still certain risks that the economic development will not be sustained. The upswing in Switzerland should not be jeopardised by a premature changeover to a more restrictive monetary policy. We shall therefore continue our expansionary monetary policy and in this way further bolster the economic recovery. We are convinced that we shall have sufficient time to keep inflation within the bounds of price stability by tightening monetary policy at a later point in time. Should a possible marked appreciation of the Swiss franc vis-à-vis the euro threaten to cause an undesirable tightening of monetary conditions, we would again take decisive action. 2  BIS Review 58/2003  Inflation Forecast December 2003 with Libor at 0.25%  2003  2004  2005  2006  Annual average inflation in %  0.6  0.4  1.0  2.3  Inflation forecast of December 2003  New National Bank Law in the making On 3 October, the two Federal Chambers passed the new National Bank Law. We are very happy with the course of the parliamentary debate: only minor amendments were made to the draft of the Federal Council. The deadline for a referendum is 22 January 2004.
Clearly, the disappearance of 11 national currencies and the introduction of the euro as a major international currency had an immediate impact on the turnover and focus of attention in the global foreign exchange markets. This has been reflected, for example, in rather active and liquid euro/dollar trading in the foreign exchange market since the launch of the new currency. However, there are also indications that the euro has further potential to grow in other markets as the surprisingly slow development of euro/yen trading suggests. The euro can also be expected to become an attractive currency for the investment of official reserves. One of the key elements to further international portfolio diversification in favour of the euro is the creation of a large, liquid and integrated capital market in Europe that began with the launch of the euro. For short-term instruments, we are now dealing with a broad and liquid European money market that ensures very similar short-term interest rates for comparable instruments and credit risks. The development of this market has been strengthened by the Eurosystem’s operational framework of open market operations, which is mainly based on reverse transactions, and the implementation of the new TARGET real-time gross settlement system in participating countries. At the longer end of the maturity spectrum, market integration was jumpstarted by the redenomination of outstanding government debt in euro and by the convergence of interest rates to narrower spreads following the elimination of the exchange rate risk.

Denis Beau: What will shape the future of crypto-assets? Opening address by Mr Denis Beau, First Deputy Governor of the Bank of France, at the Banque de France webinar, 15 June 2021. * * * Good morning Ladies and Gentlemen, Crypto-assets is a stimulating topic for a Central Banker and one that cannot leave him indifferent! It should be remembered that, historically, crypto-assets have been designed to be issued in a decentralised manner, with the ambition to replace legal currencies: the very denial of the Central Banker’s functions. Clearly, the initial objective was not achieved. So far, crypto-assets have proven to be much less efficient than our traditional currencies, for different reasons, starting with price volatility, transaction costs and delays, which make them difficult to use as a means of payment, not to mention the risks they expose their users and service providers. However, we cannot ignore the potential for innovation of crypto-assets and their underlying technology, the technique of distributed ledgers or blockchain. Already in 2017, with the Madre project, the Banque de France was one of the first central banks in the world to use this blockchain technology for an interbank use case. At the rate of innovation, it is a long history, but since then we have been closely monitoring the development of this vibrant blockchain and crypto-assets ecosystem, the opportunities it creates and the risks it carries.
But, of course, it would also entail lower risk for bank equity and bond investors, and surely it is risk-adjusted returns that matter. And it would also deliver lower risk to society more generally, which matters hugely. To be clear, we want banks and the financial sector more generally to thrive. The institution I come from believes in a market economy, in capitalism. The financial sector has played an enormous role in the development of modern economies. But a regime in which banks can thrive standing on your own feet would be a better market – for all of us. BIS Review 83/2009  9

Such an occurrence can affect other economic agents. They may face illiquidity and even insolvency, affecting market interest rates, in turn leading to changes in trading activities and a disruption in market confidence Payment systems are an essential component in preventing such occurrences and a technical mechanism for the central bank to step in order to challenge contagion or potential contagion. The interest of central banks in financial stability was largely triggered by the Herstatt incident of June 26, 1974. German banks processed Deutsche Mark payments to Herstatt bank in exchange for US Dollars, to be delivered through Herstatt correspondent account in New York. Regulators, deciding to close the bank for lack of solvency immediately, failed to appreciate the time-zone difference between Frankfurt and New York, leaving transactions half-completed. German banks did not receive their US Dollar payments. Although the Herstatt incident did not lead to a financial-stability crisis, it made central banks aware of the risk and they started developing a continuous linked settlement platform, whereby commercial banks manage settlement of foreign exchange amongst themselves on a payment versus payment basis. Cooperation in this area led central banks to share experiences covering other areas of payment systems and financial stability. Well-functioning markets depend on the willingness to develop adequate solutions to ensure smooth functioning of payment systems. Ironically, part of the problem stems from the very fact that technological advances speed up the payment systems and make them more reliable. This in turn enables banks to economise on liquid balances.
The successful management of the so-called IT bubble at the beginning of the 2000s was regarded as an example of financial crises not needing to be particularly troublesome. What is clear today, but was not clear as recently as six years ago, is that this picture was far too optimistic. But then the crisis came along and turned most things upside down. Reassessment of the financial markets One obvious lesson from the crisis was that the financial markets were not functioning as well and as efficiently as we had believed. Instead of contributing to growth and stability in the economy through efficient risk spreading and credit allocation, they became a cause of  1  2  See for example Taylor (1998) and Bernanke (2004). BIS central bankers’ speeches  macroeconomic fluctuations. It became clear that the models on which policy decisions were based needed to be adjusted so that the financial markets no longer played the obscure role they had played prior to this. In recent years, there has been a dramatic increase in research on what are usually referred to as “financial frictions”, that is, mechanisms through which the financial system affects fluctuations in the economy (see Figure 1).2 One might wonder why this interest in the role of the financial markets did not arise earlier. The crisis that we in Sweden and some other countries suffered in the early 1990s also revolved to a great extent around credit booms and property market crashes.

It was thus long believed that one could “buy” lasting lower unemployment by allowing inflation to rise. However, this relationship was empirically proved not to hold in the long run. In the 1970s, for instance, there were periods with both high unemployment and high inflation, what is known as stagflation. Instead we now base our discussions on the assumption that there is in the long run a “natural” unemployment level that depends on the functioning of the labour market. This way of functioning can in turn improve or deteriorate as a result of economic policy measures in a broader sense. The problems cannot be tackled with monetary policy. If monetary policy tries to push down unemployment below this “natural” level, it will only result in higher inflation. This is because inflation expectations have great significance. Although there is a relationship in the short run between unemployment and inflation, the central bank cannot make use of this in the long run, as companies and individuals will realise what policy is being conducted and adapt their behaviour accordingly. For instance, wage-earners may demand higher wages as compensation for expected inflation, which will have a negative effect on employment, as the scope for new recruitment will decline. Monetary policy is thus unable to lastingly affect real variables such as long-term lower unemployment. But it can have a stabilising effect in the short run, particularly if inflation expectations are wellanchored so that temporary changes in inflation are not perceived as permanent.
20  19  https://www.imf.org/external/pubs/ft/scr/2016/cr16156.pdf The 2008 G20 Communique stated that “…intensified international cooperation among regulators and strengthening of international standards, where necessary, and their consistent implementation is necessary to protect against adverse cross-border, regional and global developments affecting international financial stability. Regulators must ensure that their actions support market discipline, avoid potentially adverse impacts on other countries, including regulatory arbitrage, and support competition, dynamism and innovation in the marketplace.” 20  14  All speeches are available online at www.bankofengland.co.uk/speeches  14  And given their growing importance and cross border nature – machinery for supervisory co-operation in respect of financial market infrastructure firms will become even more important going forward. Such co-operation is already part of the international standards. 21  A variety of supervisory cooperation  arrangements exist for financial market infrastructure firms. I mentioned the SWIFT arrangements earlier. Another example is CLS which is directly supervised by the US as home authority and with a college for representatives of the central banks of the 18 participating currencies. In the EU, regulatory colleges with statutory powers have been established by legislation on CCPs to bring together the home supervisor of the infrastructure firm and the supervisors of the major financial firms in other EU jurisdictions that use the infrastructure in question. These of course involve only EU jurisdictions and cannot provide for wider international cooperation.

But as well as accountability, we need independent assurance that we are meeting our aim to be at the forefront of effective, forward looking supervision of financial market infrastructure. Last year the IMF and CPMI-IOSCO published independent reviews of the Bank’s approach to supervision and how far it meets international standards. CPMI-IOSCO confirmed that the Bank’s approach is fully consistent with the international standards expected of FMI supervisors. 18  On leading international financial centre, see for example ‘The Global Financial Centres Index 20’, September 2016, published by the Z/Yen Group. Global clearing is based on Bank of England calculations using data from CPMI-IOSCO quantitative disclosures in 2016 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  The IMF’s Financial Sector Assessment Programme review of the UK, concluded that “supervision of financial market infrastructures (FMIs) in the U.K. has significantly strengthened in recent years; the Bank of England (BoE) is one of the leaders worldwide in shaping reforms in this area”. 19  The Bank is not content with simply confirming that it currently meets international standards as assessed by CPMI-IOSCO and the IMF. Independent challenge is also why the Bank of England’s Court commissioned an in-depth evaluation by the Bank’s Independent Evaluation Office (IEO) of the Bank’s supervision of financial market infrastructure firms. The IEO report and the Bank’s response are published later today.