samchain/econo-pairs-v1 huggingface dataset:
Contrary to the dynamics one would expect of an idealized perfect market, however, short-term rates have consistently traded at levels below the IOER rate, and Treasury bill and repo rates have occasionally gone negative, particularly when financial stresses increase the demand for very safe assets. Since IOER is available only to depository institutions holding balances at the Fed, many other money market participants cannot access it, either because they don’t earn interest on Fed account balances (like government-sponsored enterprises, or GSEs) or don’t have Fed accounts at all (like money market funds). Without such access, these institutions may have less bargaining power and may have to leave funds unremunerated at the Fed or place funds in the market at sub-IOER rates. This creates a potential arbitrage opportunity for banks, which can earn a spread between their costs of funds and their earnings on reserves, but not for other cash lenders. However, uncertain or rising balance sheet costs – likely related to new regulatory changes, including higher capital requirements, leverage ratio and liquidity requirements, and changes in the FDIC’s insurance fee assessment scheme – may have altered banks’ cost-benefit evaluations and tempered their willingness to arbitrage the differences in rates. Additionally, banks are reportedly unable to attract substantial funds because of lenders’ concerns regarding credit risks associated with uncollateralized lending and because lenders often distribute their investments among several banks, making their supplies of funds relatively insensitive to the interest rates offered by individual banks.

Such inducements to control the velocity of the monetary base might expose the Fed to intense scrutiny and criticism. The big banks that park the lion’s share of excess reserves with us are hardly the darlings of public sentiment. Raising interest payments to them while scaling back our remittances to the Treasury might raise a few congressional eyebrows. And as to our repo operations, we have never implemented them on anywhere near the scale envisioned. Of greatest concern to me is that the risk of scrutiny and criticism might hinder policymakers from acting quickly enough to remove or dampen the dry inflationary tinder that is inherent in the massive, but currently fallow, monetary base. In the parlance of central banking, the “exit” challenge we now face is somewhat daunting: How do we pass a camel fattened by trillions of dollars of longer-term, less-liquid purchases through the eye of the needle of getting back to a “normalized” balance sheet so as to keep inflation under wraps and yet provide the right amount of monetary impetus for the economy to keep growing and expanding? The first law of holes I have great faith in the integrity and brainpower of my fellow policymakers. I am confident that the 19 earnest women and men that make up the FOMC will do their level best under Chairwoman Janet Yellen’s leadership to accomplish a smooth exit that keeps prices stable and the economy in a job-creating mode.
A bank that is well capitalized can credibly state to its customers and clients that it can make good on its promise to pay. More and more, clients recognize this and differentiate among various banks on this basis. As financial services converge and competitive pressures increase, banks find that they must vie for capital, not only with their domestic and foreign counterparts, but also with investment funds, asset management firms, investment banks and insurance companies. This is equally true for emerging market banks that find they must compete with internationally active banks in what were previously thought to be solely domestic markets. These banks recognize that an adequately capitalized institution is a necessary, but not sufficient, condition to compete globally and to attract international funds and clients. It will be a challenge for these banks, and particularly those with high-risk profiles and opaque financial statements, to prove to clients, counterparties and stakeholders that they are operating safely and soundly. In the face of increasing competitive pressures, banks are focusing more of their attention on the role of capital, capital levels and targets, and how they relate to strategic plans and objectives. Many banks also are spending more time assessing their own risk profiles and evaluating the amount of capital they need to cope with adverse outcomes in normal times and under reasonable stress scenarios. The more sophisticated banks are in the process of developing internal systems and methodologies, including formal analytical models, that enable them to do this better.

Still other banks have greatly increased their transaction processing, custody or asset management businesses, in the pursuit of fee income. Looking forward to the next century, I believe we will see major strides in the area that I suggest we call “e-finance”. More banks will venture into the relatively new world of on-line PC banking or will expand electronic bill presentment and paying services. Banks will be motivated to overcome obstacles such as systems incompatibility and consumer privacy concerns, to achieve greater operating efficiencies and to protect their valuable payments franchise. Going forward, on-line purchases and sales of securities by individuals also will continue to increase, producing a growing source of commissions for financial institutions. For most banks, these developments will mean a further increase in the diversity and complexity of risks to which they are exposed, including, but not limited to, credit, market and operational risks. The challenge for these banks will be to develop risk management systems that are rigorous and comprehensive, yet flexible enough to address the newer risks they take on as they expand into less familiar product areas. Today, I would like to highlight these risks and focus on how important it is for banks to integrate their risk management and capital planning processes. Also, I would like to focus on how the changing nature of banking is challenging supervisors to rethink their approach to capital regulation and supervision.
The shift to a new policy took place between 1993 and 1995. 3  BIS Review 59/1999  However, it should be added with regard to the failed defence of the krona, that experiences of free capital movements were not especially extensive. The Government and the Riksbank and political analysts in Sweden did not have any experience of the conditions for economic policy in a globalised world. The new stabilisation policy regime The Government formulated the goal for monetary policy itself in January 1993. Inflation was to be maintained at two per cent per year with a tolerance interval of +/- 1 per cent. The goal is symmetric. It is as important to bring inflation up to two per cent when actual inflation is under two per cent as it is to bring down inflation when it is higher than the target. This can be said but a lot of practical issues remained to be resolved and the answers are not at all obvious: 1. How is inflation to be measured: by CPI, the GDP deflator, or some other measure of price movements? 2. Shall the Riksbank have other objectives besides price stability? 3. Shall policies be directed at controlling the money supply or inflation directly? 4. How is confidence to be established in the Riksbank’s policy and expectations about low inflation? 1. The inflation target The Riksbank’s objectives has been expressed in the following way in legislation: “The objective of the Riksbank’s operations shall be to maintain price stability.

In addition, the Riksbank shall promote a safe and efficient payment system.” The first objective has therefore been made concrete by the Riksbank itself as 2 per cent inflation with a tolerance of one per cent upwards or downwards. The second objective, stability in the payment system requires monitoring of the “infrastructure” in the payment system and of the major institutions that could be associated with a systemic risk for the banking system. The second objective is hardly known although important and it will also continue to be the Riksbank’s responsibility if Sweden joins the monetary union, the EMU. The Riksbank has opted to measure inflation by the consumer price index, CPI. This measure has certain disadvantages, although it has the great advantage of being known and spread among the general public. “Inflation” is understood by the general public as a slow rise in CPI. The disadvantages with CPI are that the measure itself is affected by the policy carried out by the Riksbank. If inflation is low and risks turning into deflation, the economy needs to be stimulated. The Riksbank then reduces the instrumental rate to increase activity and capacity utilisation in the economy. However, the first thing that happens is that inflation is further reduced or even becomes deflation as interest rates fall and housing costs become lower. These are namely included in CPI. Only after some delay is there an effect on the level of activity and inflation in the right direction. This can lead to misjudged policies.
•  Last July 3rd, the CBC Board approved the release for public consultation of stage two of the FX regulation modernization. This regulatory reform consists of four stages, the first of which was enacted early this year, simplifying the compliance with, and reporting of FX transactions to the CBC. •  This second stage will allow transactions in derivative products whose settlements or payments contemplate the physical delivery of Chilean Pesos. Additionally, upon the enactment of this regulation, non-residents will be able to open and hold an account in Pesos as well as ask for loans denominated in our currency, whether in the form of mutual, lines of credit, or other. •  Although these regulatory changes are part of our 2018-22 Strategic Plan, and have an independent agenda of implementation, they are of extreme relevance to the operation of CLS. Without these amendments, foreign settlement members would not be able to manage their accounts in Pesos or have access to the credit lines in Pesos, that are fundamental to perform the payment to CLS. •  Conversely, the FX changes should impact on the FX activity involving the Peso, increasing the systemic risk of settlement. CLS arises as the best-known alternative to mitigate those risks. Then, CLS is essential in this future FX context. VII. CLS and the current situation  •  Lastly, I cannot end my intervention without referring to the Covid-19 pandemic that is sweeping across our country and the world.

Page 1 of 4  Central Bank of Chile July 2020  •  Moreover, CLS improves the liquidity management of the financial institutions, particularly the banks that settle directly into the system, using an efficient multilateral net mechanism. •  Additionally, due to the high standards of currency eligibility and the efficiency of the operative process of settlement, when a currency is part of CLS it gives a strong signal of financial development. At the same time, important international players that only traded if the payment is performed through CLS can incorporate the Peso into their portfolios, thus increasing market competition. •  Finally, the CLS settlement of the Peso will improve the transparency of the currency markets’ transactions, incorporating over-the-counter transactions into an infrastructure, according to the international recommendations and principles. IV. Private sector involvement in the CLS system  •  An important part of the risk reduction and liquidity saving benefits is faced by the financial institutions participating in the system and, therefore, passing through to the rest of the financial markets, and ultimately to the users of the financial products, currency derivatives, and foreign exchange (FX) transactions. •  Moreover, as a financial market infrastructure, CLS interacts with other financial institutions, particularly with banks. At CLS, banks play different roles, such as Settlement Member, correspondent or Nostro service provider, and liquidity provider. •  The timely involvement of banks in the process is essential, considering the start of the implementation phase by the end of this year.
In order to put this figure in perspective, it may be worth remembering that around 200,000 people in Sweden today are openly unemployed and almost 400,000 people of working age are on sick leave. For safety’s sake, I should perhaps also stress that it is a question moreover of a shift in the timing of an employment upswing, and not a question of jobs having been lost for good. Allow me to round off this discussion. In my opinion, the shift to low inflation has worked well on the whole, considerably better than most people thought. This does not mean of course that our policy at various times does not deserve criticism, and recently the Riksbank has undeniably fallen short of the 2 per cent target. This spurs us to deepen our understanding of the inflation process even more. Nevertheless, some of the criticism that has been levelled at the Riksbank has been out of proportion and ill-founded. The unemployment problem is so serious that it deserves a better discussion. The current assessment By way of conclusion, I shall now comment on the Inflation Report that we published today and the decision we made yesterday regarding the repo rate. The main scenario In brief, the main scenario described in the Inflation Report can be summarised as follows. International economic activity is expected to continue to strengthen this year. Over the coming two years, growth is expected to be robust, although it will probably be dampened somewhat.

UND1X inflation is expected to be 1.4 per cent one year ahead and 2.0 per cent two years ahead, while the corresponding figures for CPI inflation are forecast to be 1.6 per cent and 2.5 per cent, respectively. This time, both the international and domestic inflation risks are judged to be balanced. On the international front, the main upside risk is that the oil price will develop more unfavourably and have greater contagion effects on other prices than is currently foreseen. The downside risks mainly consist of a number of financial imbalances that could contribute both to lower inflation and weaker economic activity. These include high house prices and an increase in household indebtedness in many countries, as well as the large deficits in the US federal budget and current account. On the domestic front, the risks are mainly related to productivity growth; more specifically to what extent the robust productivity reflects a more permanent structural phenomenon and to what extent it is due to cyclical  6  BIS Review 59/2004  factors. There is considerable uncertainty in this regard and there is a risk both of overestimating and underestimating future productivity growth. The balanced risk outlook means that the probability of inflation being higher than the forecast in the main scenario is judged to be equal to the probability of it being lower. In other words, the risk-adjusted inflation forecast is the same as the forecast in the main scenario.
This view is confirmed by the apparent difference between the ongoing recoveries in the US and Switzerland. While in the case of the US economy, the recovery is at the moment essentially focused on larger firms with smaller ones probably suffering from restricted access to credit, in the Swiss case, any diverging trend between big and small firms is not of major importance. Rather, the difference is more accentuated for firms that are predominantly export-oriented as opposed to those oriented towards the internal market. On the export side, the ability of Swiss exporters to continue redirecting their efforts towards the more  2  BIS Review 33/2010  dynamic regions of the world economy, in particular Emerging Asia may be a crucial test. This region is leading the world in terms of economic recovery from the crisis. It is clear here that the proponents of a reasonable version of the decoupling hypothesis are on the winning side of the intellectual debate. On a global level, inflation pressures are expected to remain subdued in most economies. In advanced economies, headline inflation is expected to pick up from near neutral levels in 2009, but remain low in 2010. For Switzerland, the path of inflation in the short term will be largely dictated by recent movements in oil prices and associated base effects. Inflation will nevertheless remain positive throughout 2010. This follows a negative rate of 0.5% in 2009. Assuming that monetary policy remains unchanged, the SNB’s forecast show that inflation will reach 0.7% this year.

These measures recognize that to avert or contain future financial crises, we need a financial system that can withstand large negative shocks. First, market participants must not have incentives to take excessive risks. Instead, incentives should reward actions that support economic growth and financial stability. And financial firms must set aside enough capital and liquidity so that when things go wrong they can absorb losses with their own resources. Finally, if these buffers prove inadequate and a financial firm veers toward failure, the official  BIS Review 141/2010  5  sector needs the tools to wind them down in an orderly manner without having to make the terrible choice between a chaotic failure that harms the whole economy and a taxpayerfunded rescue. Conclusion I appreciate the opportunity to talk to you about how my job at the New York Fed ties in with your lives and work here in Upstate New York. The links are many, including   How the Fed’s dual mandate for full employment and stable prices guides our actions and affects your lives;    How we rely on understanding economic conditions in Upstate New York as input when we formulate our policies; and    How our efforts to restore financial stability have provided a more solid foundation for lending to households and businesses – including small businesses.
Sources: Central Bank of Chile and National Statistics Institute (INE). BIS central bankers’ speeches  11  Figure 10 Nominal exchange rate (1) (index, 2-Jan-2006= 100)  Real exchange rate (2) (index, 1986=100) 120  120  110  110  100  100  90  90  90  80  80  80  70  70  140  140  130  130  120  120  110  110  100  100  90 80  06  07  08  OER  09  10  MER  88 92 96 00 04 08 RER 1990-2009 average 1995-2009 average  MER-5  (1) Vertical dashed line marks date of publication of the September 2010 IPoM. (2) Information at 16 December 2010. Source: Central Bank of Chile. Figure 11 MPR and expectations (percent) 9 8 7 6 5 4 3 2 1 0  07  08  09  10  11  9 8 7 6 5 4 3 2 1 0  12  Forward September 2010 IPoM  Forward December 2010 IPoM  MPR  FOS first half December 2010  EES December 2010 Source: Central Bank of Chile. 12  BIS central bankers’ speeches

This is due to increasing competition from fintech companies that are able to serve SMEs and the underserved market more effectively as compared to a traditional credit intermediating bank. Tawreeq, for example, a UAE-Luxembourg fintech platform, – offers supply chain finance solutions including Shariah-compliant trade finance securitisation – to SMEs and their corporate partners. How do we lessen the risk of being overtaken by such competitors? One way is for the Islamic finance industry, to tap into the expertise of fintech companies – by exploring mutually beneficial partnerships – to develop innovative financial solutions for the international business community. In Malaysia, the Regulatory Sandbox is supportive for industry players to explore innovative ideas and test prototype of technology solutions for trade finance. Increasing trade flow of halal products – also offers large opportunities for takaful operators to develop innovative solutions for trade-related risks. A good example is trade credit takaful. This however, necessitates the development of requisite expertise within the takaful industry and the need to increase awareness among traders on benefits of trade credit protection. Global large infrastructure financing needs The third and final trend that I would like to highlight today is the large infrastructure development taking place to cater to the needs of increasing global population. Global infrastructure development financing needs is expected to reach USD94 trillion by 2040 and close to USD52 trillion in Asia alone 7.
•  Neither macroeconomic nor sector imbalances, of which I have spoke before, must be tolerated for too long. •  The banks' risk management processes and procedures must be dramatically improved. This includes revision of the existing limits on the  BIS Review 18/2009  banks' exposure to certain risks, improvement of the stress-testing procedures and elimination of the weaknesses related to risk management which arise from the investments in structural financial products. We, as National Bank of the Republic of Macedonia, have adopted new regulations related to these issues and we continue to work on that with our banks. •  Strengthening of the principles for liquidity risk management, especially in crisis. Internationally, steps have already been undertaken. In April 2008, FFS prepared a Report and defined 67 activities for strengthening the markets and the resilience of the institutions. The Report pays special attention to liquidity, and on September 28, the Basel Committee on Banking Supervision announced the new Principles for Sound Liquidity Risk Management and Supervision. The responsibility is located with the banks and supervisors. We, as National Bank, have already passed new regulations for defining the main elements which the liquidity risk management system of each bank must incorporate. The aim is to ensure level of liquidity which the banks will be able to use as source for covering. •  The transparency of the operations of the financial institutions must increase through the type and the scope of the data these institutions will disclose.

For more information see: https://www.hyperledger.org/ 15 See FCA Discussion Paper on Distributed Ledger Technology (April 2017) at: https://www.fca.org.uk/publications/discussionpapers/dp17-3-discussion-paper-distributed-ledger-technology 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  Figure 3: The Promise of FinTech  As it does, risks will evolve. Changes to customer loyalties could influence the stability of bank funding. New underwriting models could impact credit quality and even macroeconomic dynamics. New investing and risk management paradigms could affect market functioning. At the same time, the resilience of the system could also be built, through greater diversity in provision of financial services as well as increased redundancy. A host of applications could reduce costs, improve capital efficiency and strengthen operational resilience. The challenge for policymakers is to ensure that FinTech develops in a way that maximises the opportunities and minimises the risks for society. We are ideally positioned to realise FinTech’s promise in the UK. The Bank will work with the market and other authorities to build the hard and soft infrastructure the system needs to support innovation and growth, consistent with the City’s best traditions. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9