samchain/econo-pairs-v1 huggingface dataset:
BIS recommendations  • In the work on retail payments, central banks should focus on four important areas: - Ensure that the legal and regulatory framework is not an obstacle to innovation and development  - Monitor market structure, market developments and the market performance, and ensure that conditions are conducive to competition - Monitor the development of safety and operational standards and evaluate the effect of such standards on competition in the market - Provide settlement services in a way that contributes to efficient and safe solutions in the rest of payment system  The report considers how central banks should work in order to achieve the goal of efficient retail payment systems and it identifies four areas in which central banks can become involved. •  Ensure that the legal and regulatory framework is no obstacle to innovation and development. •  Monitor the market structure, market developments and market performance and ensure that conditions are conducive to competition. •  Monitor the development of safety and operational standards and evaluate the impact of these standards on competition. •  Provide settlement services in a way that contributes to efficient and safe solutions in the rest of the payment system. We will place emphasis on these recommendations in our future work on retail payment systems. The ECB has recently reviewed a proposal that key retail payment systems should also comply with six of the core principles for systemically important payment systems established by the BIS/CPSS.

 An automated market maker (AMM) platform inspired from the DeFi markets, which could serve as the basis of a multi-CBDC platform where different central banks come together to enable fast, automated and transparent settlement across currencies. Page 6 sur 7 I announce today that we engage the second phase of our experimentations program with 4 or 5 additional ones starting this semester. We want to get closer to a viable prototype, testing it in practice with more private actors and more foreign central banks in the second half of 2022 and in 2023. This work ensures that we stand ready to bring central bank money as a settlement asset as early as 2023, with the implementation of the European pilot regime. This pilot regime will offer a regulatory framework to support the financial asset tokenisation trend. Finally, these experiments conducted by the Banque de France contribute directly to the Eurosystem's existing task force, and future Governing council’s decision, on improving our services to the wholesale market. This leads to the key outstanding issue of the articulation of a CBDC with existing infrastructures, such as Target Services in the EU. Both must be made interoperable: on the one hand, distributed ledger technologies are still not mature enough to handle large volumes of transactions, and therefore will not replace conventional systems from one day to another; they will rather complement them. Centralised and distributed systems will thus have to coexist securely and efficiently.
Business investment in equipment and software is expanding, but investment in corporate office and other commercial buildings is weak. Some of the weakness in economic activity in the first half of the year was due to temporary factors such as the hit to household income from higher food and energy prices, and supply chain disruptions following the tragic earthquake in Japan. These restraining forces have abated and thus, we should see stronger growth in the second half. But it is clear that not all of the weakness was due to these one-time factors – and in light of this, I have revised down my expectations for the pace of recovery going forward. On the inflation front, the committee noted that inflation has moderated recently as energy and commodity prices have declined from their peaks – having picked up earlier in the year, mainly reflecting higher prices for commodities and imported goods, as well as the supply disruptions from Japan. Longer-term inflation expectations remain stable, and the committee now expects inflation to settle over the coming quarters at levels at or below those consistent with our mandate to promote full employment and price stability. In light of the current outlook, the FOMC in its statement noted that we now anticipate that we are likely to keep short-term interest rates exceptionally low at least through mid-2013. We also discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability.

2  BIS central bankers’ speeches  Turning to jobs, data for the second quarter of 2011 indicate that businesses in the region, on balance, expanded employment at a more rapid pace than the nation. Still, the number of jobs being created each month is not enough to sustain a robust recovery. Given the slow recovery of employment across much of the region, unemployment rates have edged up in most places. June’s unemployment rate of 8.0 percent in New York State and 9.5 percent in New Jersey remain unacceptably high. While Puerto Rico’s unemployment rate has fallen sharply in recent months, it is still particularly elevated at 14.9 percent. One factor that remains a drag on overall employment growth in much of the region is the weakness of the public sector. As we have discussed at previous press briefings, our state and local governments continue to cut jobs more sharply than governments elsewhere. The recent exception to this trend is Puerto Rico. While the island sustained deep cuts in government jobs in 2009 and 2010, a recent increase in this sector was a key reason for Puerto Rico’s relatively strong job growth in June. Overall, the weakness of the public sector continues to pose a risk to employment growth throughout our region going forward. Another potentially troubling development for the region is the recent weakness in the financial sector. The finance industry, which had begun to recover late in the cycle, appeared to be showing signs of expansion when we last met.
There is, I have to say, a sense of déjà vu here, in that twenty years ago, coming out of the recession of the early 1990s there was a concern about SME lending. Then, too, it was hard to untangle lack of supply and lack of demand as causes. A lot work was done then, including by the Bank of England, to seek to understand better the causes of the problem. This time, there remains a need for such work, a point that I will come to in a moment. But, as the central bank, we have this time put our toolkit to work more directly. It is important here to be clear on the role of a central bank. Our role is to ensure access to credit – to take steps to unblock the supply of lending. Although we can have some influence over the supply of credit generally, as we have with the FLS, it is not for us to judge the credit risks of, and hence the access to and price of credit (in terms of the risk premium above the risk-free rate) for individual borrowers. Coming out of the crisis, we want to see the market economy restored and functioning. We have recently announced an extension to the Funding for Lending Scheme, so that drawings are now possible until early 2015. We expect that this should provide confidence to scheme members to expand their lending to the real economy by virtue of them having greater confidence in their future access to funding.

But it is, at least, a job that requires very little investment in training or equipment: the only “capital” a rag collector will need is a pushcart, which might sell for $ Yet, despite saying they’d very much like to own their own, nearly all these rag collectors instead rent their pushcarts, at a cost of $ a month. They therefore spend in a matter of 3-6 months what it would cost to own the thing outright. This is an enormous, and self-imposed, effective rate of interest – an annual rate of somewhere between 200 and 400 per cent.3  1  Gathergood (2013). Laibson (1997). This would cover any depreciation costs, which the owner of the cart would have to bear. But these are likely to be only a small part of the rental cost. 2 3  4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  Mullainathan and Shafir document many such examples. And they go further: they claim, supported by the result of interesting experiments, that the tendency to over-weight the present, at the expense of the future, is itself increased by financial stress. The more cash-strapped people feel, the more prone they are to taking decisions that make the situation worse. Financial distress isn’t just the partial result of wanting things sooner rather than later: according to Mullainathan and Shafir it can also be the cause of it. The result can be what the authors describe as a “scarcity trap”.
For example, one might want to set the conversion terms so that the debt holders could expect to get out at or close to whole – at par value. This is important because it would reduce the cost of the contingent instrument, making it a considerably cheaper form of capital than common equity. Consider the advantages that such an instrument would have had during this crisis. Rather than banks clumsily evaluating whether to cut dividends, raise common equity and/or conduct exchanges of common equity for preferred shares and market participants uncertain about the willingness and ability of firms to complete such transactions and successfully raise new capital, contingent capital would have been converted automatically into common equity when market triggers were hit. If these contingent capital buffers were large, which they could be because the cost of these instruments should not differ much from straight debt, then the worst aspects of the banking crisis might have been averted. If shareholders had faced the potential of automatic and substantial dilution, they may have demanded better risk management and disclosure during the boom. If common equity had been automatically bolstered during the early part of crisis, investors would have been much less concerned about the risk of insolvency. Counterparty risk concerns would have been much less significant – potentially short-circuiting one of the important amplifying mechanisms of the crisis.

The inadequate level of transparency and disclosure, particularly in the market for structured products, were also important in making the financial system more fragile and vulnerable to crisis and in increasing the degree of uncertainty and contagion once the crisis was underway. Only by fully understanding these shortcomings can we construct solutions that will strengthen our financial system and make it more robust. The initiatives underway to strengthen our financial system span a wide range of supervisory and regulatory policy areas, including ongoing efforts to improve standards for both the capital and liquidity held by financial institutions, efforts to improve the risk management practices at financial institutions and efforts to strengthen the resiliency of market infrastructures. Today, I am going to focus mainly on the need to improve the capital standards for large, systemically important financial institutions. For initiatives in this area to be effective, we need to make progress on three distinct, but related fronts: •  a more thorough and complete risk capture so that the capital adequacy rules more effectively encompass a broader set of risk exposures than before,  •  rules that encourage the conservation of capital in adverse economic and financial circumstances, and  •  tougher regulatory requirements, including the use of a contingent capital instrument that would automatically replenish equity capital in times of stress. As always, my remarks reflect my own views and opinions and not necessarily those of the Federal Open Market Committee or the Federal Reserve System.
Since then, several decisions on measures to stimulate the economy have been taken in the United States and in European countries, but also, for example, in China. Despite these measures, the financial markets are still functioning much less efficiently than normal. Ongoing measures are therefore required to improve the functioning of the financial system. There is a need to reform the global financial system in order to reduce the likelihood of new financial crises. It is probable that the problems on the financial markets have been aggravated by weaknesses in regulation and supervision. There is therefore room for improvement. However, the changes that are made should be carefully prepared and fully justified so that regulations are not introduced that will have more negative than positive consequences. Allow me to mention a few examples of possible improvements. In the first place, we need to develop the supervision of the financial system. The basic problem is that the financial markets are international while supervision largely takes place at the national level. In Europe, there is therefore a need to strengthen the coordination between supervisory authorities in different countries. Work on this is already underway within the European Commission and in various committees. Supervision must also focus to a greater degree on macroeconomic problems. I personally believe that in the long run we should set up a European supervisory authority with responsibility for supervision of the financial institutions and markets across Europe. This must then cooperate with financial supervisory authorities in Europe and other parts of the world.

Svante Öberg: Sweden and the financial crisis Speech by Mr Svante Öberg, Deputy Governor of the Sveriges Riksbank, at Carlson Investment Management, Stockholm, 20 January 2009. *  *  *  Introduction When I began working at the Riksbank three years ago, I had not during the preceding eight years followed the development of the economy as closely as when I worked at the Ministry of Finance and the National Institute of Economic Research. I was advised by Staffan Viotti, who is a professor of financial economics and adviser to the Executive Board, to familiarise myself with the new financial instruments that had been developed in recent years. These were instruments that the banks used to convert loans into securities that could be sold on the financial markets. I attended a couple of conferences which clarified the advantages of the new instruments; for example that they spread the risks taken by the banks to a larger group of investors. There was really only one problem. Liquidity on the new markets could "dry up", that is, a situation could arise in which there were only sellers but no buyers, but this was considered to be a hypothetical problem. I also asked experts at these conferences about the possible nature of the next financial crisis. A typical answer was that it would be triggered by an event outside the United States and that the hedge funds would be involved. Now we know better.
BIS central bankers’ speeches  The benefits of reform Having argued for the extension of the reform race, I am conscious of the risk of fatigue. But as Ravi Menon argued more than a year ago: “it is imperative that we press on with the reform agenda and do not succumb to reform fatigue.”27 Already we can hear some of the runners, particularly those at the back, making world-weary arguments that more reform will hurt jobs and growth, and even that financial crises are just something that happens every five to seven years. If that were true, we are due for another crisis about now. Does anyone find that acceptable? As the memory of the crisis fades, it will be ever more important to explain the benefits of reform to counter the fatalism. So let me take this opportunity to take stock of the benefits of reforms, both of those already agreed and of the next phase of reform I have outlined. While we all recognise that future crises can never be ruled out, the steps taken to make banks safer and simpler have certainly reduced the likely frequency and severity of future financial crises. In doing so, they have reduced the exorbitant costs of instability. The Basel Committee assessed in 2010 that the economic cost of the median financial crisis amounted, over time, to 60% of national income. With a 5% probability of a crisis each year, that is equivalent to annual costs of 3% of GDP.

In addition, we reduced the annual commission rate of 0.02 basis points that had been applied since 1 February 2015 on euro-denominated accounts of banks and financing companies at the CBRT to a yearly 0.005 basis points as of 1 July 2015, and abolished it as of 27 July 2015 due to the recent developments in the euro area. 2  BIS central bankers’ speeches  Thanks to the tight monetary policy stance and the macroprudential measures, loan growth continues to stay at reasonable levels. Adjusted for exchange rate changes, loans provided to the non-financial sector increased modestly by 18.1 percent year-on-year in the second quarter of 2015. A comparison of consumer and commercial loans shows that commercial loans continue to grow more at a higher rate than consumer loans, partly due to BRSA regulations. The annualized growth rate of commercial loans dropped to 15.1 percent at the end of the second quarter of 2015, whereas this rate was 21.6 percent for exchange rateadjusted commercial loans. Likewise, comparing their growth trend to averages in past years, commercial loans are close to the average whereas consumer loans are significantly below the average (Charts 10 and 11). Due to the moderate economic activity and the recent tightening in financial conditions, loan growth is likely to slow somewhat in the forthcoming period. 2. Macroeconomic developments and main assumptions  Now, I will talk about the macroeconomic outlook and our assumptions on which our forecasts are based.
BIS central bankers’ speeches  1  Chart 2  Four years after the financial crisis engulfed the world, a European version has now emerged. Both market participants and the authorities failed in their assessments after the introduction of a single currency. Prior to the introduction of the Economic and Monetary Union, there were wide differences between interest rates facing different European countries, which primarily reflected different inflation expectations across countries. But through the 1990s, long-term interest rates drifted down to German levels. Over the next 10 years, sovereign interest rates were fairly similar – and very low – for all euro area countries despite wide differences in debt levels, budget deficits and growth rates. Market participants did not take into account differences in sovereign creditworthiness. Sovereign debt was treated as virtually risk-free, both in the markets and by the authorities. The period contrasts with the recent two to three years during which interest rates on sovereign debt have widened sharply. For many countries, interest rates have reached very high levels. In retrospect, we see that market participants failed in their risk assessment through the ten years following the introduction of the euro. Economic policy also failed. EU rules relating to budget deficits and public debt were disregarded early on when Germany and France exceeded the limits they had so eagerly advocated when the European Monetary Union was established. Other countries followed their example. Low interest rates made it easy to finance deficits by issuing new debt.

In recent years, with the financial crisis and the sovereign debt crisis, the real return has been lower, averaging about 2½ percent since 1998. We should be careful about taking a rear-view mirror approach to forming expectations about the future. Equity prices fluctuate considerably and there is a possibility that the results of the past few years will be counterbalanced by good years ahead. But changes in the global economy affect the growth outlook and the balance of risks, and hence financial market returns as well. Chart 7  BIS central bankers’ speeches  7  The yield on the presumably safest long-term government bonds can provide a basis for estimating the return on the Fund. Returns exceeding this will reflect the risk we are willing to take. In 2001, real interest rates on long-term government bonds averaged around 3 percent internationally. Real interest rates have since fallen and long-term real interest rates are now at a historical low of between 0 and 1 percent. Over time, we expect equities to yield a higher return than bonds. Over the past few years, the Fund has increased its allocation to equities, compensating to some extent for low bond yields. However, the excess return on equities must be considerable to keep up the overall return on the Fund. This is not impossible, but perhaps more than we can expect. A bolder investment strategy could compensate for low interest rates, although the risk of substantial losses would also increase. This is not a path we are likely to take.
A number of processes, such as those concerning government finances, are being modified. But this is accompanied by an increased need to discuss issues raised by the fact of monetary union. Now that the countries which will be participating initially in monetary union have been singled out, moreover, an informal group - the Euro 11 Group - is being set up for discussions among the ministers of finance and economy in the euro area. The idea is that this group will concentrate on matters that concern just the participating countries and cater to the greater need for dialogue and cooperation that they perceive in connection with the inception of monetary union. However, this is not a decision-making body and all matters considered by Euro 11 are prepared by the Monetary Committee, in which all fifteen EU Member States are represented. The crucial institutional change is, of course, that as of next year the conduct of monetary policy will be fully centralised. The Treaty explicitly states that the ECB is not to be swayed by political considerations; its task is to concentrate on monetary policy. But naturally a dialogue will be needed with the governments in the EU and euro areas, in the first place with the ministers of finance and economy. The Treaty actually provides for this in that the Ecofin president may participate in meetings of the ECB Governing Council and even submit motions. Moreover, representatives of the NCBs and finance ministries will continue to meet in the Economic and Financial Committee.

The fiscal policy rules that have attracted most attention are those for government budgets and debt. The Maastricht Treaty stipulates that budget deficits are not to exceed 3 per cent and that the government debt-to-GDP ratio ought not to exceed 60 per cent. This was intended to make monetary union candidates put their public finances in order prior to participation. The Stability and Growth Pact has clarified what will apply once monetary union has begun. The Pact can be said to consist of two parts: a surveillance mechanism for detecting at an early stage that a country is starting to have budgetary problems and is in danger of incurring an excessive deficit, and a mechanism for sanctions on errant countries. The first mechanism covers all the EU countries and requires them to present a fiscal policy programme. The sanctions mechanism, on the other hand, applies only to countries in the euro area. The purpose of the Pact is to strengthen political mechanisms at union level so that budget discipline is permanently maintained. There has been underlying concern that otherwise a country might be strongly tempted to shift a part of the adjustment costs for consolidating government finances onto the other countries. The Pact requires every Member State to aim for a medium-term budgetary position close to balance or in surplus. If the 3 per cent limit is exceeded, the Commission and the Ecofin Council are to follow a specified plan of action: examination, opinion, recommendation, publication and, as a last resort, sanctions.