samchain/econo-pairs-v1 huggingface dataset:
In principle, households and companies could be granted access to digital central bank money via both a token-based and an account-based system. Broad access to digital central bank money would call the existing two-tier banking system into question. Instead of being the banker to the banks, as it is today, the SNB would act like a commercial bank, taking on the role that is currently played by the private sector. Moreover, broad access to digital central bank money could pose a threat to financial stability. Switching over from bank deposits to digital central bank money is easier than changing to physical banknotes. In a crisis situation, this could increase the risk of a bank run. Thus, overall, the implementation of this proposal would have far-reaching consequences not just for banks, but also for the entire financial system. These fundamental concerns would argue against opening up access to digital central bank money to all households and companies. Furthermore, cashless payments in Switzerland are already reliable, secure and efficient and the system is continuously being updated and refined. So from that standpoint, too, access to digital central bank money for all households and companies, whether in the form of Swiss franc tokens or sight deposits, would bring virtually no advantages. Now let’s turn to the second potential area of application for state-issued digital tokens: digital token money exclusively for financial market participants.

For our guidance to be reliable, we need to be as clear, credible and consistent as possible. We cannot be clear like a train timetable but more like how a captain sets a course and adapts to the wind and the waves. So our sequence of steps for policy normalisation is very predictable: First, we halved our net asset purchases to 15 billion this month and will very probably end them in December; 1/4  BIS central bankers' speeches  Second, we set down a guide post with our long-dated forward guidance: we will maintain interest rates at current levels until at least through the summer of 2019; And third, we will retain our stock of assets for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. Let me insist on this: the end of the net asset purchases will not be the end of our monetary stimulus, far from it. Moreover, this sequence doesn’t depend on the fiscal uncertainties that can appear in member states. The Governing Council is clear about the fact that there is no fiscal dominance in the euro area and no influence of any national fiscal policy on our common monetary policy. In addition, our past consistency forges our credibility for the future. Since March 2016, we took decisions on the evolution of our net asset purchases at intervals of approximately 9 months.
In the slightly longer term, questions also remain about the outlook for global trade at large, a factor that has a substantial impact on an export-dependent country such as Sweden. According to some analysts, the development of global trade is now weaker than implied by historical links with global growth.10 If this is the case, is it because companies have less access to trade credits in the wake of the financial crisis or because there has been a structural shift in the growth curve for global trade? It is perhaps not reasonable to expect the high rates of growth that we saw in the early 2000s – and which were boosted by globalisation in the wake of technological development, lower transports costs, increased specialisation, China joining the WTO and so on – to continue. It is also important to monitor how Swedish exports develop in relation to global trade. These are complex questions that it is probably too soon to answer. However, there is every reason to return to these questions too, particularly with regard to the potential consequences for Sweden. All in all, the Riksbank’s assessment from the September Monetary Policy Update is nevertheless that  10  See, for example, the World Trade Organization (2013)  BIS central bankers’ speeches  9  economic activity abroad will, if only gradually, make a positive contribution to Swedish growth. Figure 7 What can we expect of world trade?

Sveriges Riksbank (2012), “Long-run developments in the Swedish labour market” article in Monetary Policy Report, July 2012. Sveriges Riksbank (2013),”Financial imbalances in the monetary policy assessment” article in Monetary Policy Report, July 2013. The World Trade Organization (2013) “World Trade 2012, Prospects for 2013” Press release April 10, 2013. Williams, J.C. (2013), “A Defense of Moderation in Monetary Policy” Working Paper 2013:15, Federal Reserve Bank of San Francisco. Woodford, M. (2012), “Inflation Targeting and Financial Stability” Economic Review, 2012:1, Sveriges Riksbank. 12  BIS central bankers’ speeches
By deepening our insight into a bank’s risk management, we gain a much better understanding of its strategies and controls. We learn what risks the bank believes are ahead and what measures it takes to mitigate them. We also develop a more refined sense of a bank’s sensitivity and ability to adapt to potential conditions in the future. This first trend of adopting a more “risk-focused” approach to banking supervision has a positive effect on banks as well. When we examine the quality of a bank’s risk management, we demonstrate to management the importance that we ascribe to developing and maintaining safe and sound control structures. A risk-focused approach thereby creates implicit incentives for bank management to understand and to find better ways to control its risks. What results is not just a more proactive risk management function, but also a greater commitment to sound corporate governance across the bank. 2.2  Second trend: incorporate incentives into supervision  Basel II recognises this result and goes one step further by creating not just implicit but also explicit economic incentives for banks to improve the quality of their risk management. The inclusion of incentives directly in the regulatory framework represents the second important trend in supervision. The proper use of incentives can help to align a bank’s objectives more closely with public policy goals of safety and soundness.

As we review the text of Basel II to consider our next steps, it is easy to be impressed by some of its advanced techniques for quantifying the risk of loss. But the formulas in Basel II are not revolutionary. The advanced approaches to credit and operational risk contained in Basel II reflect the tremendous advances in risk management achieved among some of the most sophisticated banking organisations. Indeed, rather than inventing something new, the Committee adopted many of the sound practices that the industry had already identified. What is new in Basel II, and what matters most for supervision, is the marriage of two important trends. By building on these trends, Basel II will incorporate principles that are relevant for all supervisors. 2.1  First trend: qualitative assessments of internal controls  The first trend that is captured in Basel II represents a shift in the focus of safety and soundness evaluations. In the past, supervisors emphasised the use of backward-looking evaluations of a bank’s performance to determine its financial condition. This drew our attention toward past results rather than future risks and a bank’s readiness to manage them. In contrast, today many supervisors focus more on qualitative reviews of the internal control structures that protect a bank against its specific risks. This represents a far more difficult way of evaluating a bank’s safety and soundness. It requires that we look beyond the numbers and into the bank’s internal processes.
Even if we cannot reduce the gradient of the rock faces significantly, we can make sure firms understand the nature of the path ahead so they can adequately plan and be well prepared as the demands become more complex and as investment in more specialised equipment is required. Many of the new banks authorised since 2014 seem to have underestimated the development required to become a successful, established bank. It is however in all our interests to work together to mitigate the risks that such growth might entail. A common theme with new firms that encounter problems is that they have not anticipated, and put in place steps to mitigate, the risks they face. Inadequate underwriting skills can translate into loan losses further down the line, just as poor anti-money laundering procedures can result in problems with financial crime and costly remediation programmes. It may be tempting to start up the mountain at a sprint. But those that take their time, ensure their crampons are firmly in place and plot their path for each stage of the climb are much less likely to come unstuck later. Stumbling on the path and having to re-climb a section of the mountain can be scary, frustrating and costly in equal measure. The view from the summit Of course, in climbing any mountain, the conditions play an important part in success. We need to ensure that those at the top of the mountain do not have an unfair advantage, perhaps because of access to some better weather at the top.

Climbing Mountains Safely  Speech given by Sarah Breeden, Executive Director, UK Deposit Takers Supervision  Building on remarks given at the PRA Annual Conference for Chairs of the Non-Systemic UK Banks and Building Societies on 6 July 2020 22 July 2020  I am grateful to Nick Lock, Will Saunt, Philip Sellar and Alex Stringer for their assistance in drafting these remarks 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction Today the Prudential Regulation Authority (PRA) is launching a consultation1 on a new guide for banks – a guide that is designed to help new and growing banks scale the mountain from initial authorisation to becoming an established player in the banking market. The guide builds on the steps we have already taken to lower barriers to entry for new firms, and which over the past few years have helped support real change in the UK banking system. But there is more to do. And we hope these clear expectations will promote continuing competition in the sector by allowing firms to plan a safe route higher up the mountain. As firms plot their path out of the Covid stress, we must do our best to support competition, not risk a return to the ways of the past. The start of our climb In the years following the financial crisis, consolidation rather than competition seemed to be the norm.
These bills were bought by the Bank and stored in its vaults, in what became known as the “cold storage” scheme.5 By freeing the banks’ balance sheets in this way, the cold storage scheme was intended to stimulate credit. It was only a limited success, with the banks still fearful about making new loans because of the rising risk of default by overseas borrowers. In response, the government announced an extension to the scheme, with the government effectively insuring the banks against the credit risk on these assets too. It worked. Within a couple of months, money market conditions had stabilised and credit was once more flowing. Cunliffe’s cold storage plan had averted a credit crisis. The cold storage scheme was a piece of clever financial engineering by the Bank, designed to support credit and the wider economy. In the past few years, with credit growth and the economy weak, the Bank has been in the vanguard of creating new pieces of machinery to serve a similar end. In 2008, the Bank introduced a Special Liquidity Scheme, or SLS, to help finance UK banks’ legacy asset portfolio. Over £ billion of support was provided to the banks and has since been repaid.6 The SLS bears more than a passing resemblance to the first phase of the cold storage scheme. In June this year, the Bank announced a second scheme, the Funding for Lending Scheme, or FLS.

The relationship between economic activity and inflation is not particularly stable either. In the difficult deliberations we had to make in September we Executive Board members reached different conclusions, with a majority voting to raise the repo rate while the minority to which I myself belonged voted to hold the interest rate unchanged. On this occasion I shall not go into the various reasons for my stance in depth; they were clear from the separate minutes of the monetary policy meeting and I discussed them in a speech I held a couple of weeks ago. 6  BIS Review 121/2008
By that metric, the contribution of equity markets to economic growth in the US, Europe and Asia has been static, at best mildly positive, during the course of this century. Yet that picture of apparent stasis in equity markets conceals a maelstrom of activity beneath the surface. To see this, Chart 2 plots stock market turnover in the US, Europe and Asia over the same period. It shows a dramatic rise, especially in the world’s most mature equity market, the United States. Equity market turnover in the US has risen nearly fourfold in the space of a decade. Put differently, at the end of the second World War, the average US share was held by the average investor for around four years. By the start of this century, that had fallen to around eight months. And by 2008, it had fallen to around two months. What explains this story? Regulation is part of it. Two important, and almost simultaneous, regulatory developments on either side of the Atlantic changed fundamentally the trading landscape: in the US, Regulation NMS (National Market System) in 2005; and in Europe, MiFID (Markets in Financial Instruments Directive) in 2004. Though different in detail, these regulatory initiatives had similar objectives: to boost competition and choice in financial market trading by attracting new entrants. Central exchanges for the trading of securities evolved from the coffee houses of Amsterdam, London, New York and Paris in the 17th century.

5/19/2020  Pandemic central banking: the monetary stance, market stabilisation and liquidity  SPEECH  Pandemic central banking: the monetary stance, market stabilisation and liquidity         Remarks by Philip R. Lane, Member of the Executive Board of the ECB, at the Institute for Monetary and Financial Stability Policy Webinar, 19 May 2020 19 May 2020 In my recent blog post, I described the range of scenarios that have been developed by ECB staff to support the analysis of the near-term and medium-term macroeconomic dynamics in the context of the coronavirus (COVID-19) crisis. [1],[2] I also explained the current monetary policy of the ECB and outlined our approach to setting the future course of monetary policy. My remarks today aim to reinforce these points by presenting some additional empirical evidence. Macroeconomic outlook Chart 1 shows the three scenarios developed by ECB staff that were published on 1 May. Since then, the Eurosystem staff have continued to track the incoming information (both the economic data and the public health data): the forthcoming June Eurosystem staff macroeconomic projections will provide an updated assessment of the economic outlook. Still, the 1 May scenarios provide an excellent framework for understanding the environment facing policymakers. In all scenarios, the current quarter represents the trough of the crisis, with a cumulative decline in the range of 10 to 20 percent of GDP since the start of the year.
The core of the discussion is that house prices and lending sometimes develop in a way that does not appear sustainable – in a way that entails risks that are difficult to quantify or to even capture in analyses and forecasts. These are risks of events that often have a low probability of occurring, but if they do occur could have very serious consequences for the economy. So what is so special about asset prices rising and why do “bubbles” arise? Rising asset prices are not necessarily a bubble… The prices of many assets, such as houses or shares, rise and fall in cycles. And asset prices can rise substantially without this entailing an over-estimation or a financial bubble. A  BIS Review 70/2010  1  bubble is among other things based on speculation and a strongly over-optimistic view of the future. If, for instance, property prices increase substantially this may actually be justified on the basis of fundamental driving forces and realistic views of the future. Factors such as growth, incomes, construction and housing costs may develop favourably. And if one does not, for instance, build new housing at the same rate as the demand for housing increases, then it is not exactly surprising that the price of the existing housing should rise. Even if prices soar during a brief period, grey reality usually catches up before a bubble has arisen. When this happens prices usually adjust without any great drama and do not have any major effects on the rest of the economy.

In other words it’s a matter of supply not demand. Chart 6 gives a stylised description. In a competitive market the demand curve facing an individual firm (and those in a relatively small country) is essentially flat. Domestic events don’t have much effect on the global price. When the currency falls, pushing up prices and profits of outward-facing firms, the response of export volumes depends on the slope of the supply curve: to what extent do firms in the tradable sector have the capacity to raise output and, where that is insufficient, the willingness to invest in more? Chart 6: For a small open economy tradable demand is highly elastic  Chart 7: Depreciations push up the sterling price of goods exports as well as those of imports  Source: ONS and Thomson Reuters Datastream. * excluding oil and erratics. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  Now commodities may be an extreme case. They’re essentially homogenous – one country’s output is much like another’s. But even in non-commodity goods markets you find a similar pattern. The UK is relatively small, accounting for only 3% of international goods trade (even including oil). Many UK firms are to a significant extent “price takers” in international markets. And you can see from Chart 7 the close correlation between the sterling price of the UK’s (non-oil) goods exports and the exchange rate. The reaction is a bit less than one-for-one but in general no less marked than that of import prices.
Global market conditions continued to deteriorate throughout 2007: share prices plummeted, access to credit became much more limited, and interbank business transactions more complicated at best. CDS spreads widened, including those of all the Icelandic banks. Many clung to the hope that conditions would improve in early 2008. That hope proved fruitless. Market conditions continued to deteriorate, and the supply of credit became tighter than ever. The Icelandic banks’ CDS spreads rose to very high levels. As I have mentioned, the banks began to increase their deposit business after the experience of early 2006 by offering favourable premiums. Retail deposits in branches and subsidiaries abroad grew quickly and soon became an important source of funding for two of the banks, particularly in 2007 and early 2008. But the bond markets remained virtually closed to them as the year 2008 progressed. At the beginning of May 2008, the Central Bank published its annual Financial Stability report, which included a detailed analysis of the state of and prospects for the financial system. The report pointed out vulnerabilities but also identified elements that tended to strengthen the system. The title of the Central Bank’s analysis was: “Current conditions test the banks’ resilience.” The report stated that the system was considered broadly sound but that contingency measures were needed. The chief risk factors were a vulnerable foreign exchange market and limited access to capital, which represented a short-term risk.

BIS central bankers’ speeches  1  We need to build a new system – one that delivers sustainable investment flows, based on both resilient market-based, and robust bank-based, finance. We need finance for the long term. We need a financial system that is F-A-I-R: that is Fair, Aligned, Inclusive and Resilient. Let me expand briefly on each, beginning with fairness itself. (i)  Fair  The twin crises of solvency and legitimacy undermined trust in market mechanisms and the effectiveness of the financial system. Banks were undercapitalised, mismanaged and operated in a privileged heads-I-win-tails-you-lose bubble. In parallel, there was widespread rigging of some markets for personal gain. By replacing such implicit privilege with the full discipline of the market, social capital is now being rebuilt and economic dynamism restored. G20 leaders have endorsed a wide range of measures to end too-big-to-fail in banking. The Financial Stability Board 6 is now working on a series of initiatives to make the system more fair and effective, including examining governance and compensation arrangements to ensure they promote good, and punish bad, behaviour. 7 In the UK, authorities are pursuing reforms that will increase individual accountability, particularly in wholesale financial markets. 8 Such initiatives are beginning to turn the tide of ethical drift which has plagued the system and would hold back the SDGs if left unchecked. (ii)  Aligned  Aligning incentives will increase finance’s potential to support the SDGs. Alignment requires transparency. Consider the example of climate change.
That is to say, if there were a business segment of this type, it would be very small. Bad debt ratios in the Spanish mortgage market stand at 0.4%, compared with 4% in the United States. The information available for Spain therefore precludes talking of a market of this type. Regarding bad debts, the aggregate ratio for the sector during 2006 was on a declining trend and, in any event, is holding at minimum levels, whether analysed from a historical perspective or in comparison with institutions in other euro area countries. In other words, this indicator of the credit risk borne by institutions is not currently showing signs of difficulties feeding through to the industry, and this despite the higher growth of doubtful assets over the course of 2006. This higher growth, however, must be analysed bearing in mind at least two considerations. First, the increase in doubtful assets is due in part to the strong growth in activity recorded in recent years. In an expansionary setting it is logical that, if the volume of credit increases, the volume of doubtful assets will afterwards increase with some delay even if default probabilities hold constant. Second, it should not be forgotten that the changes in accounting rules introduced by the Banco de España to adapt to International Financial Reporting Standards mean that doubtful assets must be recognised earlier and in a higher proportion.

This was the advice Benjamin Franklin gave to inhabitants of Philadelphia, on the subject of firefighting, writing anonymously to the Pennsylvania Gazette in 1735: “In the first Place, as an Ounce of Prevention is worth a Pound of Cure, I would advise 'em to take care how they suffer living Coals in a full Shovel, to be carried out of one Room into another, or up or down Stairs, unless in a Warmingpan shut; for Scraps of Fire may fall into Chinks and make no Appearance until Midnight; when your Stairs being in Flames, you may be forced, (as I once was) to leap out of your Windows, and hazard your Necks to avoid being oven-roasted.” 32 A firm’s overall loss absorbing capacity is the sum of its capital and subordinated long-term debt which can be bailed in. 33 Of course, it is not the case that changes in banking system capital requirements have no bearing on developments in the wider economy; such changes are likely to impact the price and quantity of credit provided by the banking system and, via this channel, economic growth. But the best empirical estimates we have suggest that this channel is likely to be weak during credit booms, when it’s most needed (Bahaj et al, 2016). Moreover, changes in banking system capital will have no direct impact on build-ups of risk in the market-based financial sector.