samchain/econo-pairs-v1 huggingface dataset:
Second, as I have already discussed, we have developed a toolkit for analysing how far different levels of financial resource can support the Bank’s operations under a range of severe but plausible shocks. And, third, we are in the process of designing a tiered, enterprise-wide framework of limits and thresholds, consistent with the resources available to the Bank, which (i) imposes macro-level limits that protect our capital base and (ii) sets a series of early-warning thresholds. These thresholds will not immediately constrain live non-discretionary operations, but they will flag buildups of risk concentrations and trigger internal discussion and review on whether the increase in risk is warranted by policy objectives. That could lead to adjustment of policy parameters, changes to the Bank’s financial resources or use of alternative Bank policy levers to mitigate the underlying risks. At a more granular level, nested within these balance sheet wide thresholds, the first line has discretion to impose hard limits on particular discretionary operations where it is feasible to do so (eg. on the Bank’s limited own-funds foreign exchange reserves operations). 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  (v)  Challenging new policy initiatives  One of the most profound changes to private sector risk management practice since the financial crisis has been the near-universal introduction of processes to ensure that the business and risk implications of new and sometimes complex products are fully understood before they can be launched.

20 Bank of England (a)  15  15  10  10  5  5  5  0  0 1830  0  1860  1890  1920  1950  1980  2010  Sources: Bank of England, Federal Reserve, U.S. Bureau of Labour Statistics, ONS and Samuel H. Williamson (2017), 'What Was the U.S. GDP Then?'. (a) Data as at February. Final data point shows the latest published balance sheet data, at 29 February 2016, plus the increase in the loan to the Asset Purchase Facility since this time. Excludes TARGET balances held at the Bank by European central banks in 1999-2001. (b) Consolidated assets of all Federal Reserve banks. Data as at end December. Three key developments disturbed that calm, and led to the introduction of our new financial risk framework. The first was the huge increase in the size of the Bank’s balance sheet following the start of the financial crisis. Today the Bank of England holds assets worth about a quarter of UK annual GDP: a five-fold increase on a decade earlier (Chart 2). In the early part of the financial crisis, much of that increase reflected large scale liquidity assistance to the banking sector. For example the Bank lent £ to RBS 3  4  and HBOS in 2008-9 , and its market-wide Special Liquidity Scheme peaked at £ in 2009 .
The pre-announced monthly cycle of meetings, regular quarterly Inflation Report forecasts, and set briefing routines, were very much part of the package. The goal of these new arrangements was to make the system understandable and predictable to outsiders. After a sharp burst of activity in the late 1990s, the processes and procedures surrounding monetary policy have now settled down. We still use much the same internal processes and means of communicating with the outside world as we did a decade ago. But the outside world has not stood still, in at least two respects. First, over time the MPC has established a track record of actions and communications which people have, as intended, learnt to parse with great precision. There is a cottage industry in interpreting its every utterance, in the light of its past behaviour, in order to predict its next actions. Any deviation from past behaviour is assumed to be deliberate and considered. A topical example is the market reaction to the latest interest rate rise. The formal position has always been that the MPC may change rates at any one of its policy meetings. And in the early days of the Committee that’s pretty close to what happened. But since 2001, as a matter of fact, rates have been much more likely to change in the months when we publish a new quarterly Inflation Report. That was why the January rate rise caused such surprise even though commentators were fully expecting a rate rise to accompany the February Inflation Report.

Our policy was guided by monetary targets until the end of the 1990s, and only recently, like most central banks, have we shifted our focus to price stability more directly. I would like to share with you some of the lessons we have learned from that period with flexible exchange rates and, in particular, review our recent experience of living on the edge of the euro area. Living on the edge of the euro area As you can imagine, the introduction of the euro in January 1999 constituted a sort of revolution in our monetary environment. For the first time in our history, we are now surrounded by a single currency area, which also happens to be the destination of 60% of our exports. In fact, our situation, in terms of economic power, can be compared to that of the State of Massachusetts in the United States. Can you imagine the State of Massachusetts having its own currency? The natural question is: How do we come to the conclusion that monetary independence is still desirable? Indeed, given our geographical position, we, Swiss, frequently have to explain why we decided not to adopt the euro or not to peg our currency to the euro, as Denmark has done. The first question I would like to address today is therefore: What are the advantages for Switzerland of retaining its national currency, as opposed to adopting the euro? I will then look at the conditions that are necessary for successful monetary autonomy.
The shocks hitting Iceland in 2008 were mitigated by the policy response, which had two focal points. First, immediate crisis management was based on several key goals: keeping domestic payment systems up and running, preserving common citizens’ access to their deposits, and ring-fencing the sovereign against the failing private banks. The tools used were to declare all deposits in Iceland safe and to carve domestic banks (1.7 times GDP) out of the failing banks. Second, Iceland went on a programme with the IMF, which had three main goals: stabilising the exchange rate, achieving fiscal sustainability, and rebuilding a sound, domestically oriented financial sector. Comprehensive capital controls were a key element in the programme. The recession that followed was the deepest in post-war history, with GDP falling by 12% from peak to trough and unemployment soaring from around 2% pre-crisis to a peak of 8–9%. The exchange rate fell by over 50% in 2008, taking the real rate to around 30% below its long-term historical average. That helped turn the huge current account deficit around to an underlying surplus but wreaked havoc on domestic demand and balance sheets, as ⅔ of corporate debt and 20% of household debt was in foreign currency, and an additional ¾ of household debt was indexed to the price level.

When the Executive Board met for the first time, it clarified the approach to be adopted in monetary policy. It was already the case that inflation measured by CPI was to amount to 2% with a tolerance interval of plus/minus 1 percentage point. The Riksbank had also previously announced that the target horizon would be 1-2 years in normal cases. We clarified that we can decide to disregard certain factors affecting prices which are not related to resource use in the economy and which only have a temporary effect on inflation. However, the prerequisite is that the effect on prices is temporary and should thus not affect inflation expectations. Subsequently, we have also said that there may be reasons for taking into account developments before and after the target horizon. When  3  BIS Review 98/2000  we depart from the main rule, we have undertaken to say that we are doing so and give reasons for why we are departing from the rule. The monetary policy decisions are based on forward-looking assessments of inflation measured as CPI. This assessment is based on the interest rate being unchanged during the forecast period. An important factor for determining inflation is the degree of resource use in the economy, the output gap. The thinking underlying this is that inflation will be stabilised if the increase in output is in accord with the long-term growth track.
This included a new program to purchase an additional $ billion a month of agency mortgage-backed securities (MBS). The FOMC reiterated in October that it will continue its purchases of agency MBS, undertake additional asset purchases, and employ its other tools as appropriate until there is a substantial improvement in the outlook for the labor market in a context of price stability. Monetary policy works in large part through its effect on financial markets and financial conditions. The impact on economic activity depends on the extent to which policy actions are effectively transmitted to key sectors of the economy. While actions such as MBS purchases help ease financial conditions more broadly, a key channel through which monetary policy affects the economy is through the housing and mortgage markets. An easing of policy lowers the secondary market rate at which mortgage-backed securities trade, which puts downward pressure on the primary mortgage interest rate. A lower primary mortgage rate enables borrowers to refinance their existing loans at lower rates, and increases demand for home purchases, supporting house prices and household wealth, which in turn may increase household access to credit. We have seen this channel in operation since the September FOMC meeting. Yields on newly issued agency MBS have declined about 45 basis points and the Freddie Mac survey 30-year primary rate has declined 23 basis points to 3.32 percent.

It finds a potentially material role for the decline in the value of mortgage servicing rights in particular, but concludes that the increase in the aggregate measure of profits and unmeasured costs is “not likely to be driven exclusively or even mostly by increase in costs”. This suggests that originator profits may have increased. The study examines a number of potential explanations. These include capacity constraints, market concentration, pricing 1  The Rising Gap Between Primary and Secondary Mortgage Rates. 2  We interpret originator to include all actors involved in originating and servicing mortgages. 2  BIS central bankers’ speeches  power over Home Affordable Refinance Program (HARP) refinance loans and pricing power on other loans. It finds that capacity constraints play a role and that there is evidence to suggest that originators enjoy pricing power and elevated profits on HARP and other refinancings. I encourage everyone to take a look at this paper. It represents a good starting point for today’s discussion. However, as the authors are the first to acknowledge, the increase in the primary-secondary spread and the underlying changes in originator costs and profits remain something of a puzzle. I hope today’s discussion will further deepen our collective understanding of this important issue. To sum up, for monetary policy to be as effective as possible in supporting economic recovery in a context of price stability it is imperative that the key channels of the monetary policy transmission mechanism are operating as effectively as possible.
Benoît Cœuré: The case for cooperation - cross-border CCP supervision and the role of central banks Introductory remarks by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at a conference on CCP risk management, organised by the Deutsche Bundesbank, the European Central Bank and the Federal Reserve Bank of Chicago, Frankfurt am Main, 27 February 2019. * * * It is with great pleasure that I welcome you to Frankfurt. I thank you all for coming, especially those who have travelled from far away. I am delighted to open this conference, which has been organised jointly with our colleagues from the Deutsche Bundesbank and the Federal Reserve Bank of Chicago. The idea behind today’s event is to establish a regular forum to exchange views on pressing issues around central clearing and its challenges in terms of risk management. Before briefly outlining what we hope to learn from this conference, I would like to say a few words in memory of our colleague and friend, Robert T. Cox, who passed away in December. Bob was not only a driving presence in all matters surrounding central counterparties (CCPs) – in his words: a CCP is a CCP is a CCP1 – he was also one of the pioneers behind this event. We will think of him, his family and his colleagues at the Chicago Fed as we discuss issues close to his heart today. This conference is a monument to his memory.

The smooth functioning of our payment systems, in turn, depends on the safe operation of clearing infrastructure and the mitigation of liquidity risk. Finally, central banks can act as a liquidity backstop or a lender of last resort. Such action could be needed if a banking default were coupled with severe market stress. In such a scenario, a CCP would certainly hold high-quality collateral, but it may be unable to generate cash in the market in the very short time it has to manage a default. Given the systemic importance of CCPs and the scale of potential funding needs, it is essential that CCPs have sound liquidity self-insurance so that a liquidity shortage remains an extreme tail risk and the associated moral hazard is mitigated. In light of these considerations, which apply across all locations, the ECB has a clear interest in ensuring the safety and soundness of euro clearing. To this end, we need to have a clear legal competence that, importantly, should cover both EU and third-country CCPs. Proposals to differentiate between EU and third-country CCPs would not only leave considerable pockets of euro clearing without appropriate ECB oversight, they would also raise concerns about market distortions or an unlevel playing field. For example, a responsible central bank cannot extend liquidity to any entity without having a minimum level of information and control over it.
But they are likely to remain part of our policy toolkit, at least for the foreseeable future, given the real risks to macro-economic stability that an environment of very low global interest rates poses. A third and more fundamental strategy has to focus on building greater depth in Asia’s capital markets, while ensuring that our banking systems remain sound. A good example of this strategy is in fact in Malaysia. Bank Negara’s Financial Sector Blueprint II (2012–2020), released as part of the government’s Economic Transformation Programme (ETP), will build on the solid foundations of Malaysia’s financial system, including developing a deep and vibrant bond market. The banks in several leading Asian countries, including Malaysia and Singapore, are generally well-managed and well-capitalised. They were a source of strength for us during the global financial crisis. However, Asia’s capital markets, and especially the corporate bond markets, need much more depth. Broader and deeper capital markets will allow investors to invest for the long term while hedging against risks. They will help us meet the growing infrastructural and other long term investment needs of the region. This is therefore a very important priority in the region, and there is in fact significant scope for future development of Asian capital markets. Regulators are working to harmonise rules and market practices across the region, such as issuance procedures and settlement standards. We also need to develop the securitisation markets, with appropriate safeguards, so that banks can recycle their capital.

Indeed, the bank can gainfully advance to venture abroad to explore new business opportunities in the regional markets. The growth prospects will also be further strengthened by the overall performance of the industry and the sound and mutually reinforcing inter-linkages of the various market components in the Islamic financial system. In closing, I would like to take this opportunity to congratulate BIMB Holdings Berhad, Bank Islam Malaysia Berhad, Dubai Financial LLC and Lembaga Tabung Haji for their contributions in the successful completion of the share subscription agreement for Bank Islam. I wish Bank Islam and its shareholders every success in taking the Bank to greater heights in its future endeavours. Thank you. 2  BIS Review 99/2006
First and foremost, shocks to the economy could easily adjust the timing and magnitude of interest rate increases….There is, in fact, a wide distribution of possible outcomes around any expected path for Bank Rate, reflecting the inevitability that the economy will be buffeted by shocks and that monetary policy will have to adjust accordingly.” Yet when – thanks precisely to such shocks – interest rates did not subsequently rise “around the turn of the year”, he was criticised for having misled people. Such criticisms, whether justified or not, are par for the course, and may not be that consequential in the grand scheme of things. But there could be a more material cost if, in mistaking conditional for unconditional statements, people come to rely on them at the expense of thinking about the economy, and its implications for interest rates, for themselves. As I said earlier, it’s an important part of the transmission of policy, and of the stability of demand more generally, that prices in financial markets respond to economic news as it comes in, without the need for any prompting by the central bank. That is precisely the purpose of the “Delphic” sort of guidance that, in the main, central banks have employed. But as Chart 3 demonstrates, the sensitivity of market interest rates to releases of economic data seems to have declined somewhat in recent years.

I’m glad to note the warm market response to our new grant scheme. Since its inception in May, nearly 30 applications from green and sustainable debt issuers have been approved and more than 40 are in the pipeline. 18. To further strengthen our green and sustainable finance ecosystem, the HKMA and the Securities and Futures Commission (SFC) co-established the Green and Sustainable Finance Cross-Agency Steering Group last year, with an aim to coordinating cross-agency 3/4  BIS central bankers' speeches  market development efforts on this front. In July this year, the Steering Group launched the Centre for Green and Sustainable Finance, which coordinates the efforts of financial regulators, Government agencies, industry stakeholders and academia in capacity building; and at the same time, helps improve data availability for the financial industry. 19. With these ongoing efforts and our strong commitment to green finance, Hong Kong’s role as a regional green and sustainable finance hub has been taking shape. But we should not stop there. I encourage all of you to continue to build on our strength as the leading financial centre in Asia to capture the enormous opportunities in this growing space. With our natural advantage to be the “green” gateway for China, we believe that Hong Kong can continue to contribute to this important transition in the region. Closing 20. I began my speech by highlighting the complex and far-reaching nature of the challenges arising from LIBOR cessation. Meeting these challenges would require tremendous efforts from all of us across the financial markets.
To optimize the business potential, Islamic financial institutions need to develop their niche strengths and leverage on Malaysia's resources to extend the operations to both the regional and global market. As a foreign Islamic banking subsidiary, the potential to provide greater market access in the domestic economy and improve the overall financial inclusion is also important. This includes the offering of new financial products to the different domestic economic segments. Concluding remarks On this occasion of the official launch of HSBC Amanah Malaysia Berhad, let me take this opportunity to congratulate HSBC Bank Malaysia Berhad on the initiative to establish its own of the Islamic banking subsidiary and for its commitment to contribute to the success of Islamic finance. By allocating dedicated resources in the Islamic subsidiary in Malaysia, HSBC Bank will enhance its potential to contribute to the advancement of Islamic banking business going forward. I wish HSBC Amanah Malaysia Berhad every success in its endeavours. BIS Review 146/2008  3

Likewise, the Governing Council intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past this first interest rate hike and, in any case, for as long as necessary to maintain ample liquidity conditions and an appropriate monetary policy stance. As concerns the PEPP, the Governing Council intends to reinvest the principal payments from maturing securities purchased under the programme until at least the end of 2024. In any case, the future rolloff of the PEPP portfolio will be managed to avoid interference with the appropriate monetary policy stance. As was to be expected, the monetary policy normalisation that began in December has translated into higher short and long-term interest rates in the euro area. Specifically, the 10-year OIS rate, which proxies the euro area risk-free interest rate, has risen by 143 bp since the beginning of the year, while the 12-month EURIBOR has increased by 170 bp. Over the same period, the risk premium on Spanish 10-year government bonds has increased by 44 bp. 4  The new Transmission Protection Instrument (TPI) The TPI is necessary to support the effective transmission of monetary policy. While we continue normalising monetary policy, the TPI will ensure that it is transmitted smoothly across all euro area countries. The creation of this new instrument stems from the conviction that the singleness of our monetary policy is a precondition for the ECB to be able to deliver on its price stability mandate.