samchain/econo-pairs-v1 huggingface dataset:
However, not all incumbent banks are able to fully bridge the technology gap, particularly for newer services; d. This results in migration towards digitally-focused challenger banks such as Atom, Fidor and Monzo that will provide similar services of traditional banks, but utilise technology to deliver faster and cheaper services that better meet the needs of customers; and e. The implication of this is that the landscape of finance will remain largely filed by banks, but a new breed of purely digital banks will gain in significance. The names that we immediately think of for financial services will change from the current banks that we are so familiar with. The fourth scenario is what I call ‘the Tech take-over’ a. Like scenario one, this is a more extreme and less probable scenario, but still one that is worth a thought. In this scenario, technology adoption by incumbent banks is low, with a high level of fragmentation among finance providers; b. However, in contrast to scenario three, technology firms enter as the new preferred provider, successfully capturing the loyalty of consumers due to superior ability in using data to deliver customer-centric solutions; c. Financial services will thus be offered via a wide range of providers such as social networks (e.g. Facebook, Wechat) and e-commerce platforms (e.g. Amazon, Alibaba); and d. Growing comfort with the ability of technology to ensure secured transactions also gives rise to the popularity of peer-to-peer financial services.

Finance has come a long way- from serving the basic societal needs to save and borrow at its infancy to its role today as the backbone of the global economy. In ancient days, kings and rulers look to astronomers, magicians and soothsayers to tell them about the future. The Greeks for example, consulted the Oracle at Delphi before embarking on major decisions. The world today is much wiser I hope, and we no longer believe that the future can be predicted with absolute certainty. What finance and technology can bring for the future of human kind is so exciting that it can go beyond containment. Yet if left on its own, the outcome can be perilous. Resisting them, however, is not an option. While we embrace them as they synthesise and evolve, we also need to shape and control them such that they would not lead us to face extreme financial market fragilities and devastation. In the words of Nassim Taleb, we need to make ourselves “antifragile” – not only able to withstand shocks, disruptions and volatility but able to position ourselves to take advantage of it. But I always like the quote by Peter Drucker, “The best way to predict the future, is to create it.”  5/5  BIS central bankers' speeches
The global dimension must be the responsibilities of the IMF and the FSB given their comparative advantage as international organization. And as I already noted, EWE by the IMF and the FSB should focus on monitoring the development of risk in the key global financial markets, risk linked to activities of the internationally-important financial institutions, and the economic conditions and policies of the systemically-important economies. These are the areas of risk that have global-wide implications but are not being monitored sufficiently relative to their importance. Third, the focus of the EWE at the country-level also needs to expand beyond detecting and avoiding local macro-misalignments, and to include assessment of the resiliency and robustness of the domestic economy and financial system to withstand large external shocks. The key point here is that, even with good policies, crisis can happen to an economy if the externally-induced factors overwhelm the abilities and the robustness of the domestic economy to cope with. 2  BIS Review 19/2010  And forth, the value of early warning is that warning leads to the needed actions being taken in advance. This means the EWE process should serve to facilitate actions to deal with the important risk and issues by the relevant parties. To serve this end, credibility and effectiveness of the EWE depends on appropriate degree of transparency of the structural models and its appropriateness to the context, whether national or markets, as much as its track record.

That selling pressure overwhelmed the capacity (or willingness) of intermediaries to warehouse those instruments, leading to sharp and disorderly price declines in core assets relied upon, directly or  Page 5  indirectly, by households, firms and governments to support economic activity. And central banks’ traditional tools, working through banks, were unable to direct liquidity to the source of the shock (Figure 1). European energy markets in Spring 2022 saw similar dynamics too, when sharp price movements triggered by the invasion of Ukraine triggered large margin requirements on energy derivative positions that thinly-capitalised intermediaries struggled to meet, driving liquidation of positions that further amplified the initial shock to energy prices. Some may argue that Covid, Putin and the UK’s autumn 2022 fiscal announcements are truly exceptional shocks that would challenge any market structure, and are unlikely to be repeated. Maybe. But the underlying vulnerabilities are real and growing, and hoping for calmer times is not a strategy. LDI was just the latest warning of the need for action. 2) Public backstops vs. private self-insurance Given that the evolution of this new form of systemic liquidity risk is real and growing, there is an important debate to be had about how responsibility for insuring against the social consequences of that risk should be shared between private and public interests. It is a core function of public institutions to provide a backstop against genuine tail risks. The alternative – systemic collapse – would be hugely costly to the real economy.
After his death, Collett’s heirs insisted on maintaining an extravagant lifestyle as if the income was still intact. Their wealth rapidly withered away and in 1829 the coffers were empty. The farm was taken over by the state. 1 The time it took Collett to make a fortune is about the same as it took Norway to build up its oil-based financial wealth. Nearly 40 years after Phillips Petroleum discovered commercially viable oil reserves in the Ekofisk field 2, we have an oil-based sovereign wealth fund worth more than NOK 3 trillion. Few other countries are sitting on such huge financial reserves. But our wealth primarily comes from other sources than the oil fund, now called the Government Pension Fund Global. The value of our current and future labour resources is more than ten times as great as the value of our oil and the oil fund combined. 3 The oil fund would be depleted in three years if government tax revenues were to disappear entirely. Our economic future depends above all on our capacity to produce goods and services that others value. But the visible oil revenues may give the impression that we have a huge treasure trove at our disposal. Sound wealth management is therefore first and foremost a question of maintaining and developing the value of our productive resources, particularly our labour resources. A nation that comes into a large fortune must make a number of choices and trade-offs. They can be considered from a legal, ethical or financial standpoint.

Instead, the industry must continuously evolve to meet the needs and preferences of its consumers which are rapidly changing. It must proactively and strategically position itself to offer products via diverse and innovative delivery channels to reach out to different segments of the population with varying levels of financial knowledge. In this regard, under the LIFE Framework, the Bank envisions the market share of regular premiums/ contribution products sold/ marketed via non-agency channels to exceed 30%. Currently the ratio is 14%, and this statistic provides compelling evidence that the industry must double its effort to reach the target of 30%. Similarly, for us to expand the penetration rate to reach 75% by 2020, the industry must add and expand the reach of its non-agency channels. Throughout the world today, financial inclusion has been identified as an important area of focus to achieve a more balanced and sustainable economic growth. Societies that are adequately empowered and supported by suitable financial tools can assist in helping them cope during temporary period of emergencies. Empirical evidence showed that microinsurance customers can be as valuable as a company’s any other customers. This is where the industry can play a major role to develop suitable microinsurance/ takaful products that would enhance the social safety net of this underserved segment enabling them to get back on their feet and become financially independent even after experiencing an adverse event. Yet many in the industry appears uninterested in microinsurance/ takaful for reason that it is a loss making venture and uneconomical to pursue.
Whatever is negotiated, in terms of both the final arrangements and the transition to them, the most important influence on demand in the short run will be the degree of access to the single market since the UK runs a 1.5% trade surplus in services and a 5% trade deficit in goods. 45  External demand for UK exports will also reflect the extent to which UK firms can maintain their positions in EU-based global supply chains. The proportion of UK exports that are intermediate components of EU value th  rd  chains has increased from about 1/5 of exports in 1995 to about 1/3 in 2014 (Chart 13). 46  Increasingly,  44  Literally: stepping back in order to jump better. The ultimate impact of Brexit on EU demand for UK exports depends on the extent to which UK access to EU markets resembles being a member of the customs union for goods and the single market, which covers trade in goods and services as well. 46 World input-output database. See also Credit Suisse, ‘Brexiting the supply chain’, European Economics Research 11 August 2016. 45  17  All speeches are available online at www.bankofengland.co.uk/speeches  17  the UK doesn’t so much export to Europe as through Europe; it is a supplier of components to final goods that are exported beyond the continent.

57  A point made by Ken Rogoff; see ‘Globalization and global disinflation’, Economic Review, Federal Reserve Bank of Kansas City, Issue Q IV, pages 45-78. In technical terms, Rogoff uses the Barro-Gordon inflationary bias framework to show that the increased competition that results from greater global integration reduces the central bank’s incentive to generate surprise inflation by: (i) reducing the wedge between the “efficient” level of output – that which would be produced if there were no nominal or real frictions in the economy – and the “natural” level of output – that which would be produced if there were only no nominal frictions – through reduced monopoly power in both the product and labour markets); and (ii) increasing price flexibility. Arguably, the increases in central bank transparency and accountability that have occurred over the past couple of decades have reinforced this decline in inflation bias. 24  All speeches are available online at www.bankofengland.co.uk/speeches  24
Relatively firm growth in domestic demand in the period ahead, coupled with the fact that it should become increasingly difficult for companies to boost output without also adding to their workforces, means that we foresee higher demand for labour in the coming years. The announced labour market policy programmes for next year entails that total employment will rise more than regular employment, but there should also be an increase in the number of regular jobs. Our forecast is that the number of employed will rise by 0.4 per cent this year and 1.1 per cent next year. Open unemployment is estimated to be 5.9 per cent this year, 5 per cent in 2006 and then to drop somewhat more. Wages are forecast to increase faster as the labour market improves. During the latter part of the forecast period growth in productivity is also expected to diminish, which is natural when growth in the economy will be driven to a greater extent by domestic demand and higher output in the private services sector. Overall, that means that companies’ costs will begin to increase faster again, but our assessment is that the rise will be comparatively slow and that cost pressures will be moderate throughout the forecast period. It is difficult to determine exactly how much the productivity upswing will be dampened. It is possible that the rate of increase in productivity has been raised on a more permanent basis compared with before.

Provision of Financial Services Broadly speaking, the fundamental purpose of banking is to provide financial services such as credit provision, payments, and deposit-taking to support sustained economic growth. This is true in normal times, and is even more true in the current environment. The Fed has taken a number of actions to help the U.S. banking sector perform these critical functions through changes to supervision, regulation and the provision of liquidity. Collectively, these steps are designed to limit the potential for financial channels to amplify the initial economic shock created by the COVID-19 virus. Beginning with supervision, the federal banking agencies, in consultation with state financial regulators, are encouraging financial institutions to work with borrowers in a safe and sound manner.1 The agencies view prudent loan modification programs as positive and proactive actions that can help both borrowers and lenders. This approach is consistent with the agencies' longstanding practice of encouraging financial institutions to assist borrowers in times of natural disaster and other extreme events. The Fed has also provided information to banks on how we are adjusting our supervisory approach.2 This includes, for example, monitoring and outreach to help banks of all sizes understand current challenges and risks; a temporary reduction in exam activities, particularly for the smallest and lowest risk institutions; and additional time to resolve non-critical existing supervisory findings. These actions should help financial institutions deploy their resources as efficiently as possible and continue to support their customers and local economies in a prudent and fair manner.
Firstly, there are the roles relating to supervision of firms and markets where financial instability could arise. Secondly, there is the oversight of the financial system as a whole - the systemic issues which could impinge on society. And thirdly there is the fiscal underpinning which may exceptionally be required to restore confidence in the event of failure. The fiscal underpinning is a role for Ministries of Finance. The other roles can either be combined institutionally or separated. I am sure each model is represented here today. In the UK, HMT has responsibility for the fiscal underpinning, FSA for the supervision of firms and market regulation, and the Bank of England for the stability of the system as a whole. ii)  The “Must Dos” for the Bank of England  The roles as such are set out with slightly more precision in the MoU, and it is from there that we start on our quest to decide what initiatives we – the Bank of England – should undertake, and how far we go with each. The MoU highlights three “must dos” for the Bank. I expect that these are similar in many central banks. They really define our mandate. a)  Assessment of Threats to Financial Stability  Firstly we need to assess the threats to the financial system. We need to be in a position to inform ourselves and to advise HMT at all times on the implications for UK financial stability of developments in both the domestic and international market places.

Instead I want to discuss how to approach some of the challenging issues faced by many central banks as we seek to decide how best to organise our work and to allocate resources in order to promote financial stability. We need to be clear, accountable and transparent as to how we devote our resources in this area. And just as the financial system becomes more complex, so the judgements as to what we do and what we do not do are increasingly difficult. That is why we need a framework – a set of organising principles – that enables us to provide context and understanding to our endeavours, to provide a source of focus and rigour to our approach, and to motivate our people. The issues are, I believe, of general application. Though you will forgive me I am sure if I start by looking at the framework within which the Bank of England, as a non-regulatory central bank with a remit for system-wide stability, addresses the vulnerabilities. 2. Challenges in Creating a Framework  i)  Monetary Policy  I want to start by considering the governance of the Bank’s accompanying mandate, the conduct of monetary policy. This highlights the clarity of our accountability in the monetary policy arena. In line with many central banks, we have a mandate in statute – the Bank of England Act – to conduct monetary policy. The Government sets a target inflation level which we are required to meet.
BIS central bankers’ speeches  Although Solvency II is a European directive, with the vast majority of the technical rules in place, a review is planned of the standard elements in 2018, as is typical with many directives post-implementation. In addition to establishing a European-wide regime, work is also underway to try and harmonise at least some elements of a global capital standard for insurers5. A simple Basic Capital Requirement (BCR) for Global Systemically Important Insurers (GSIIs) has already been agreed. The UK currently has two GSIIs – Prudential and Aviva – out of the 9 globally. Work is now ongoing on a Higher Loss Absorbency (HLA) Standard which will reflect the degree of systemic importance of the firm/group. The plan is that all GSIIs should meet capital requirements based on the BCR plus HLA by 2019. The third step in the international plan is to develop a risk-based global International Capital Standard which would apply to all Internationally Active Insurance Groups (IAIGs). That is likely to be challenging, not least because of the different accounting principles used in different jurisdictions, but that is the long-term direction of travel. Work is also ongoing in the IAIS to identify the assessment approach which most accurately identifies whether or not reinsurers pose systemic risk. The final element on insurers is that stress testing is also being applied to the sector.

Legislation to enable the IBC proposals was passed in 20138. The benefits from separation are several. Retail deposits tend to be a cheap source of funding. In part that is because retail deposits are protected up to a limit by statutory guarantee – so they tend be safe, and sticky. Banks that have a range of activities would have an interest in using cheap, protected retail funding to engage in its most risky activities – for which direct funding is likely to be much more expensive. Furthermore, historically, banks with large retail activities have also been viewed by credit rating agencies to have a large degree of implicit government support thus making their public debt issuance cheaper as well. The funding advantage from being seen to be “too big to fail” has been estimated from a range of studies to be equivalent to a subsidy on the scale of hundreds of billions of dollars globally,9 encouraging and enabling greater risk-taking by firms than true costs of funding would justify. Separation also means that the structure of firms is simplified and hence they would be easier to resolve if necessary. The EU more generally is still deciding on its precise approach to structural reform, although the Liikanen report (2012) took a slightly different approach from the IBC.
To answer those questions, I want to consider three possible explanations for why inflation has not so far risen despite substantial falls in unemployment and spare capacity. First, reforms enacted over the past twenty-five years have made the labour market more flexible and lowered the rate of unemployment consistent with stable growth in money wages. Incentives to work have increased - through initiatives like the New Deal and the Working Tax Credit. Benefits paid to the unemployed have fallen relative to earnings. And the share of wage settlements covered by collective bargaining has fallen sharply. Those reforms, and a steady growth in total money spending, ensured that unemployment fell in almost every quarter since 1992 while wage inflation remained broadly stable. Moreover, changes in unemployment have resulted in smaller movements in the rate of wage increases than in the past. It is possible that migrant labour may be easing the bottlenecks and skill shortages in what is undoubtedly a tight labour market. Reports from our business contacts around the country, collected by our Agents, suggest that migrant labour is indeed relieving some of those shortages, more so in recent months with recruitment from the new members of the European Union. Migrant workers are employed in fish processing here in the South-West, and even in the production of Cornish pasties, as they are in an increasingly wide range of industries in manufacturing, construction and services. That may be suppressing signs of underlying wage pressure that would otherwise have become evident by now.

6  See Financial Stability Board (2013), “Progress and Next Steps Towards Ending “Too-Big-To-Fail””. 7  For example, at the FDIC Systemic Resolution Advisory Committee Meeting on 10th December 2012. The webcast for the meeting is available online at: http://www.fdic.gov/about/srac/2012/2012_12_10_agenda.html  BIS central bankers’ speeches  3  (5)  The resolution agenda is not just about banks and dealers. It is about central counterparties too, for example  Banks became TBTF by accident. The G20 Leaders having mandated that standardised OTC derivatives must be centrally cleared, there is a risk that central counterparties (CCPs) will come to be seen as too important to fail as a matter of policy. That makes it incredibly important that CCPs are robust, effectively managed, effectively supervised, and have first rate recovery plans. And, beyond that, they absolutely must be subject to a credible resolution regime. I worry that CCPs are “for profit”, or are typically part of “for profit” groups. If a CCP fails and it turns out that its risk management was slack, this point is bound to come up in the public response. Policymakers should think about that now in the context of the governance structure they want for CCPs embedded in vertically integrated groups. Meanwhile, work is underway in CPSS/ IOSCO8 on loss-allocation rules. Unlike banks, CCPs are essentially rule-based machines for netting and allocating risks. Those rules need to be enriched so that it is clear what happens when, due to a member’s default , both the initial margin and default fund are exhausted.