samchain/econo-pairs-v1 huggingface dataset:
We believe these policy actions, as well as those announced by the Minister of Finance in order to promote Chile as a Regional Financial Center, should greatly contribute to a more resilient financial sector, wider cross-border use of the Chilean Peso and a greater participation of non-residents in our FX market.   The Strategic Planning 2018-2022 of the CBC includes a thorough review of its FX regulation. Current FX regulations require most FX transactions to be executed through the “Formal Exchange Market” —which is comprised by banks and some stockbrokers— and to be reported to the CBC. These two elements have remained largely unchanged since the capital account was opened 20 years ago. Back then, re-imposing capital controls could not be ruled out, and that rationale underlies the somewhat cumbersome structure of the FX regulation. Currently, while capital controls are still part of the regulatory toolbox, re-imposing them could only be considered during an exceptional situation. Therefore, the CBC has decided to streamline its FX regulations and reduce the burden of compliance to the private sector, whenever possible, without affecting the quality of the statistical information or the capacity to act in an extreme scenario. The first part of this process, eliminating some of the existing reporting requirements, is about to be put out for public consultation. Page 13 of 20  Central Bank of Chile September 2019    Modernizing FX transactions goes beyond a review of existing reporting requirements and the structure of the regulation.

We will return to a further discussion of the resilience of the financial system when the Riksbank’s Financial Stability Report is published at the beginning of December. Does the hedge fund market require further regulation? As the hedge funds have grown, voices have been raised calling for more extensive regulation of the funds’ operations. Ordinary investment funds are regulated by the UCITS directive. UCITS regulates, for instance, the type of assets a fund is allowed to invest in, the information that should be given to 3 investors, and the diversification of risks. Hedge funds, on the other hand, are completely unregulated in many countries. In return, the authorities often require that investments in hedge funds should exceed a certain minimum level. 4 The purpose of this requirement is to limit the hedge funds' investor circle to wealthy and, presumably, well-informed individuals and thereby to protect "ordinary" consumers. Most hedge funds are constructed so that the investor, under unfortunate circumstances, may lose all or at least large parts of his capital. In the United States the Securities and Exchange Commission has long attempted to increase transparency in hedge funds. In February this year they introduced a new regulation that entails a registration requirement for most large hedge funds – even those invested off-shore. However, this regulation was declared invalid by a Federal court in June.
At the beginning of 2009, the severe downturn in the global economy had translated into a very serious threat of deflation in Switzerland. For example, the inflation forecasts produced by the IMF showed inflation in Switzerland to be in negative territory for two years in a row. Price stability was evidently not assured. The substantial increase in the value of the Swiss franc since the beginning of financial crisis represented an inappropriate tightening of monetary conditions. Yet, it was imperative that monetary conditions be kept as loose as possible, a fortiori to avoid a further monetary tightening. Given that the interest rate was effectively at a zero level, the SNB decided to prevent any appreciation in the Swiss franc with respect to the euro from March 2009 on. The SNB achieved this goal by repeatedly intervening in the foreign exchange market during the course of 2009. This policy was maintained until the monetary policy assessment (MPA) of December 2009. By the end of 2009, the economic situation was showing some signs of improvement and the threat of deflation was estimated to have diminished. As a consequence, the SNB decided that a certain appreciation in the Swiss franc could be allowed without price stability being compromised. At the December MPA, the SNB therefore announced that it would act  8  There are, however, twice daily margin calls in case of variations in the collateral market value. 9  Source: IMF (2003), “Deflation: Determinants, Risks, and Policy Options”, April 2003.

Firstly, it is a fact that SMEs present higher credit risk than well-structured corporate entities. SMEs may not have proper accounting records, may have severe governance issues which undermine accountability, have poor access to markets, poor skill levels including financial illiteracy by promoters, lack collateral which the lender can rely on in the event of failure, may not even exist in an appropriate legal form and even the assessment of the viability of a project might be difficult. Lending to SMEs can be a lenders nightmare for bankers. But it is also true that banks which are structured to deal with corporates are risk averse and inflexible when they deal with SMEs. Often when they bring inappropriate risk assessment tools, they may focus too much on collateral rather than project viability. They may even regard SME financing as peripheral to their business. Because of their limited knowledge of SMEs, they experience failure which itself reinforces the notion that SMEs are risky. What we want are financing institutions that are structured to respond to the unique characteristics of SMEs. Specialised SME lending institutions are more likely to handle the risk problem presented by SMEs as a challenge to be overcome with appropriate products and credit risk management strategies and not as a basis for inaction or avoiding the sector altogether. In short, lending strategies which ensure success with corporates do not necessarily ensure similar success with SMEs. Appropriate SME financing institutions must at the very least make lending to SMEs the core business.
Throughout the discussions on the current and expected economic developments, the Supervisory Council of the Bank of Albania concluded that the inflationary pressures balance in medium term horizon is in line with the Bank of Albania inflation target, notwithstanding the latest tendencies of consumer prices’ inflation. The assessments regarding the demand slowdown and the increase of negative production gap, the more controlled development of exchange rate and, the equilibrated expectations of economic agents about inflation, are  2  BIS Review 50/2010  factors which shall condition the development of inflation within the target of the Bank of Albania. At the conclusion of discussions, the Supervisory Council decided to leave the key interest rate unchanged, at 5.25 percent. This decision guarantees the appropriate monetary conditions on the preservation of the medium term inflation target. Bank of Albania, regarding the future, remains ready to operate in line with the real and expected performance of the economic indicators. In particular, its decision shall factorise the maintaining of inflationary expectations being anchored around the objective of the Bank of Albania regarding inflation, stability of financial system at home, in terms of maintaining and further consolidating the macroeconomic balances. In this view, Bank of Albania assesses that the recent correcting tendencies of the balance of payment indicators are encouraging developments for the long-terms sustainability of the country financial indicators.

Jaime Caruana: Implementation of Basel II and other key issues relating to banking supervision in Latin America and the Caribbean Opening speech by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the joint meeting of the FSI and ASBA, Miami, 25 April 2006. *  *  *  Introduction First of all, I would like to thank Rich Spillenkothen and Josef Tošovský for inviting me to participate in this joint meeting of the FSI and ASBA, during which we will be able to discuss various key issues for banking supervision in Latin America and the Caribbean over the next few years. Two things are evident from the agenda. The first is that there are a large number of key topics to discuss today and tomorrow, which demonstrates the importance and timeliness of this meeting, which I am sure will be fruitful for all concerned. The second is that Basel II continues to be a central and priority topic for supervisors and the banking industry alike, as evidenced by the presence here today of major banking representatives, whom I would also like to thank for attending. It is well known that the Committee has devoted a large part of its efforts over the past few years to first developing and then implementing the revised Capital Framework. Today, we have the opportunity to debate different aspects relating to its implementation and application.
The notable decline in nonperforming loans in the balance sheet of the banking system is the most prominent achievement 1/4  BIS central bankers' speeches  in this aspect. The measures taken in mid-2016 have produced a substantial effect, materialised in the reduction of non-performing loans by around 10 percentage points, below the maximum level registered in 2015. It is always a pleasure to note that credit growth has been positive. In particular, the lek credit has grown rapidly, compared to the foreign currency credit, which makes the banking system and the private sector healthier, and enhances the effectiveness of Bank of Albania’s monetary policy. Positive developments in the banking sector and the economy have supported the further improvement of capitalisation, liquidity and profitability indicators. Two months from the end of the year, in our assessment, the banking industry in Albania enjoys full financial soundness, against the backdrop of an optimal liquidity and capitalisation situation, a key prerequisite for financially supporting the economic developments of the country. We have also paid particular attention to legal, institutional, regulatory and supervisory developments, notably the drafting and implementation of the resolution law. Dear participants, This year marked 25 years from the establishment of a two-tier system in Albania, which stipulates the banking system as the provider of financial and banking services in the economy, and the central bank as the administrator of the monetary policy and regulator and supervisor of the banking system.

This framework should be accompanied by added transparency in all the phases of trading, with financial education assuming a special place. Only in this way would we be able to deepen and expand, in real terms, the financial market, and through it a higher efficiency in implementing economic and financial policies, in mobilising and using national savings, in financial inclusion, in economic activity growth, and in enhancing the welfare of the population in the long run. In the hope that the proceedings of this conference will be characterised by a fruitful exchange of ideas and views by the participants in this room, Thank you for your attention! 4/4  BIS central bankers' speeches
oil, energy and mortgage interest)  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2  Goods  Services  -3  -3  -4  -4  jan-95 Jan 95  jan-96 jan-00 jan-01 jan-02 jan-05 Jan 96 jan-97 Jan 97 jan-98 Jan 98 jan-99 Jan 99 Jan 00 Jan 01 Jan jan-03 02 Janjan-04 03 Jan 04 Jan 05  Note. 12-month changes in per cent. Inflation measures computed according to Statistics Sweden’s new method. Source: The Riksbank  3. Consumer goods 6  6  4  4  2  2  0  0  -2  -2 Importerade varor Imported goods  Inhemska varor Domestic goods  -4  -4  jan-95 jan-96 Jan 95 Jan 96  jan-97 Jan 97  jan-98 jan-03 Jan 98 jan-99 Jan 99 jan-00 Jan 00jan-01 Jan 01jan-02 Jan 02 Jan jan-04 03 Janjan-05 04 Jan 05  Note. 12-month changes in per cent. Inflation measures computed according to Statistics Sweden’s new method. Source: The Riksbank  8  BIS Review 25/2005  4.

To me, both types of institutional setup may have one important common weakness, that is, there does not seem to be the notion of a lead supervisor in either model. Allow me to elaborate on this point. In the case of separate authorities, it would be normal for each authority to assume that every authority is doing its job according to its mandate. Therefore, one would tend to focus only on its own mandate. This can be a problem if some authorities fail to do a proper job, others may not be able to take note. Worse still, if there are supervisory gaps, the chance of any one authority identifying potential adverse impact from areas outside of one’s own mandate is even smaller. Take the US as an example, the authorities and investors did not  2  BIS Review 32/2009  realize that credit rating agencies were not doing an adequate job in their rating of complex structured products. If there were a lead supervisor, would the whistle have been blown earlier? I believe that there would have been a better chance if there were a lead supervisor with a clear mandate to take the lead responsibility and who is risk focused. There would have been more dialogues through which weaknesses may have been identified and corrected. The idea of a lead supervisor has gained widespread support in the area of cross-border supervision, as it contributes to better coordination, which in turn could help to prevent or identify problems at an early stage.
This is usually a very effective risk management technique during periods when CDS markets function normally. But it is worth emphasizing that the embedded “jump to default” risks in credit products, coupled with liquidity issues during times of extreme stress, can make it very difficult to execute a dynamic hedging strategy in stressed conditions. In addition, and as already noted, CVA hedging is likely to be undertaken by buying CDS from another bank or a hedge fund. In this example we have tail-risk correlation not just with corporate and counterparty risk but with CDS market liquidity. If proper consideration to the correlation structure is not applied, the danger is clearly that the realized outcome in extreme scenarios would look very different from what was expected by senior management, regulators, etc., based on local analysis. A fourth example from the recent crisis was the “super senior” credit exposure from pools of US mortgage loans reinsured with monoline insurance companies (MBIA, FGIC, AMBAC, etc) or other insurers such as AIG. Banks and other originators of leveraged credit risk (either in cash form of CDOs or CLOs, or in its synthetic forms) needed to warehouse excess “super senior” tranches, which were considered virtually risk free, to support the origination business. After the volatility experienced in 2005, banks started to worry about controlling the mark-to-market volatility, even though the fundamental risk initially continued to be considered negligible. The idea came to lay off a significant portion of this negligible economic risk to reduce the short and medium term price volatility.

The perception was that the quality of the underlying assets was so good that the risk of a real loss (as opposed to some shorter-term mark-to-market fluctuations) was negligible, and that the returns accruing to the capital note holders and the asset manager were largely due to the funding arbitrage. Another way of explaining it would be that, because of the difference in liquidity, the “buffers” in the structure, the capital notes and the liquidity back-stop provider were effectively earning a risk premium for absorbing this liquidity mismatch between assets and liabilities. This view of the world made most of the capital note holders believe that the risk of any loss was very limited. We now know all of that changed when sub-prime mortgage assets had become a significant portion of the assets in a typical SIV. The US housing market had started to slide and the lax underwriting standards started to show their impact on recovery rates. Suddenly, investors in the ABCP market came to realize that the risk of actual loss was very real and that a game of “musical chairs” was unfolding in the roll-over process of the short-term debt. At this juncture, one would think that the optimal economic behaviour for the banks with outstanding SIVs, would be to let the SIVs unwind according to the legal construct in place, rather than accept responsibility. In fact, all the banks except one decided to collapse the structures and repurchase the securities10.
And they present new challenges for the framework of incentives and constraints that central banks and supervisors set for financial institutions. On balance, we believe these changes in the financial environment are likely to come with substantial benefits in terms of overall market efficiency. In the remainder of my remarks today, I will highlight some of these benefits, but will also consider some of the challenges they present for central banks and governments in determining where on the spectrum of efficiency and vulnerability to crisis the financial system should operate, and in crafting the policies consistent with achieving that objective. 2  BIS Review 85/2006  Changes in financial markets since the late 1990s In the United States and the other major markets, the policies designed to mitigate the risk of financial crises rely primarily on a capital-based system of supervision of the major financial institutions, reinforced by measures to improve market discipline. These policies have evolved to reflect both the fundamentally important role credit markets play in the economy, as well as the reality that these complex markets are susceptible to a range of potential market failures. In thinking about the potential supervisory and regulatory challenges presented by the broad evolution of the financial system over the past decade, it makes sense to first consider how some of these changes may have enhanced market functioning by mitigating at least some of the imperfections that characterize these markets.

That episode was characterized by a widespread reduction in the provision of credit by banks in response to loan losses and the need to raise capital. The resiliency we have observed over the past decade or so is not just good luck. It is the consequence of efforts by regulatory, supervisory and private financial institutions to address previous sources of systemic instability. Risk management has improved significantly, and the major firms have made substantial progress toward more sophisticated measurement and control of concentration to specific risk factors. What seems to have been most critical in preventing financial market turmoil from translating into a significant reduction in credit provision by banks and other financial institutions were the steps taken by regulatory authorities and financial institutions alike to strengthen capital in the core of the financial system, and to measure and manage risk. These efforts have most notably manifested themselves in increased levels of risk-adjusted capital in the core of the system relative to what prevailed in the early 1990s. In the United States, for example, tier-one risk-based capital ratios have stabilized near 8.5 percent, considerably higher than the estimated levels around 6.5 percent for the early 1990s. This is based on a relatively crude measure of risk, but the direction of the improvement is right and the magnitude of the change is significant.
The structures were a side-effect of the desire to avoid regulation It is also interesting that the abstruse structures, which led to the current financial turmoil and the bank crisis in the 1990s, were in both cases partly due to so-called regulatory arbitrage. The most recent wave of securitisation of the banks’ credit portfolios was partly propelled by deficiencies in the capital adequacy rules. Through securitisation the banks could easily avoid a lot of expensive capital adequacy. Since 2004 a new capital adequacy regime, Basel II, has applied. This is more finely meshed and does not allow the same possibilities to avoid capital adequacy through securitisation. However, it has not yet been implemented in all countries, such as the United States, for instance. The Swedish finance companies were in their day the result of regulatory arbitrage. Prior to the abolition of credit regulation in Sweden, the finance companies were often used as a means for the banks to get round the credit restrictions. This “grey” credit market was once substantial and an important source of additional income for the banks. Around 25 years ago I myself wrote quite a lot about this. Credit insurances existed then as now One can also observe another similarity, namely the occurrence of so-called credit insurances. A company that sold credit insurances to the Swedish banks in the 1980s and 1990s was Svenska Kredit. Many banks bought insurances against losses from their loans to property companies from this company.

But, there are also other parallels. This includes in particular the arrangements that made the banks’ real risk-taking more abstruse. The banks’ formal and informal promises of loans to special investment vehicles meant that the problems quickly bounced back into the banks' balance sheets. In the Swedish bank crisis one can say that the finance companies in some respects played a corresponding role to the special vehicle. It was the finance companies that primarily financed the expansion in the construction and property markets. The finance companies largely financed themselves in the short term by issuing so-called commercial papers in the  BIS Review 30/2008  3  fixed income market. When the property market folded, it was a finance company, Nyckeln, which in September 1990 was the first to throw in the towel when it could not renew its financing. Other finance companies then followed suit. Many of the finance companies were owned by the banks. And the banks were tied by both formal and informal commitments. The losses therefore soon returned to the bank system. In 1991 it became apparent that the banks had substantial problem loans through their exposures to the property branch both directly and indirectly through the finance companies they supported. The bank crisis had become a reality. Perhaps you begin to see a pattern now?