samchain/econo-pairs-v1 huggingface dataset:
I’ll conclude by emphasizing two of the next steps that I think are most essential for the successful reform of LIBOR. First, the definition of LIBOR should be broadened so that it more accurately reflects the observed funding patterns of large banks and puts the rate on a broader, more stable base of observable transactions. The LIBOR administrator is actively considering ways to do this while remaining true to the spirit of LIBOR and how it is used in financial contracts. Accomplishing this will make markets that need a reference rate that embodies bank credit risk more robust and resilient and will strengthen the financial system. Second, we still face the problem that the reference rate for a large stock of derivatives contracts is based on a relatively small, underlying cash market. This means there still is a powerful incentive for individuals to attempt to manipulate the rate for their own gains. One promising solution, outlined in Governor Powell’s recent speech on reference rates, is to work with market participants to find an alternative reference rate that is based on a deeper underlying cash market and that meets the needs of all market participants. Of course, any rate that serves as a critical financial benchmark must meet the principles for good governance and production outlined by IOSCO.

Accordingly, some banks were alleged to have lowered their LIBOR submission below their actual likely borrowing rate to avoid the stigma associated with posting a higher borrowing rate and the possibility that their funding costs could increase as a result. Conflicts also reportedly abounded at the level of the individual submitters. Again, these highlighted profound compliance problems at some of the submitting banks. As I noted earlier, the intent was that the expertise of the submitter would be insulated from any internal pressures by the informational barriers within the submitting banks. The hope was that these informational barriers separating the submitters from the traders were thick and impenetrable. The investigations into LIBOR manipulation found that the reality was that they were often paper thin and porous. 4  See Darrell Duffie and Jeremy Stein. “Reforming LIBOR and Other Financial-Market Benchmarks.” September 19, 2014. BIS central bankers’ speeches  3  We have learned that false reporting and manipulative behavior was pervasive across firms and over time, took many forms and was often conducted in a nonchalant manner. This has been well-documented by the Commodity Futures Trading Commission in their published findings. For example, interest rate swap traders routinely asked colleagues to submit rates with an explicit goal to have the adjusted submission benefit the value of specific derivatives positions they held.
Growth above this level leads to decreased unemployment and vice versa. But it is not just the strength of demand growth that determines the level of unemployment. Other factors, such as economic structures, are also involved and at some level of unemployment the only result of additional growth stimuli is bottlenecks and shortages. Wage costs will then rise in a way that conflicts with low and stable inflation. The GDP growth rate of 3.7% for the first half of this year accordingly exceeds any reasonable assessment of the Swedish economy’s long-term potential. For a time, however, such a high growth rate can be feasible if firms are able to recruit the necessary labour, for instance because the economy is recovering from a situation with high unemployment. That has been the case in Sweden’s labour market and pressure from wages and prices has thereby been able to remain low. Neither are any dramatic changes foreseen in respect of wages in the near future. But how long can this situation last in the present economic upswing? How far can unemployment be reduced without firms encountering recruitment problems more generally? Even with the high unemployment at present, it is, for example, already difficult to recruit computer consultants and some other occupational categories. The situation in certain segments of the Stockholm labour market is also tighter than in other parts of Sweden. But so far, the bottleneck problems seem to be fairly restricted. As yet there are no indications of more widespread shortages.

It is not just total output that has exceeded expectations. The same applies to employment. In the first half of 1999 there were approximately 100,000 new jobs compared with the same period last year. Much of the increase occurred in the private sector. This has been accompanied by decreased unemployment, if one disregards the temporary seasonal upturn during the summer. However, the reduction of unemployment is less marked than the increase in employment because many people are returning to the labour market now that jobs are becoming available. Meanwhile, price increases have been moderate. The underlying rate of inflation (UNDIX, which measures inflation excluding interest expenditure, indirect taxes and subsidies) fluctuated during the spring between 12-month figures of 1.0 and 1.5%. Other indexes also point to low inflation, despite an increase in some commodity prices, oil in particular. Altogether, then, the Swedish economy is developing very well. We are now entering the seventh year of favourable economic growth – an average annual rate of about 3% – since the upturn in the summer of 1993. Today, moreover, there is no immediate threat to price stability. Market interest rates rising The better economic situation and expectations that inflationary pressure will be somewhat higher than before have caused a worldwide increase in market rates of interest. Sweden is no exception. During the summer the five-year T-bond rate, for example, has moved up just over 1.0 percentage point. Along with this increase, the spread between T-bond and other interest rates has widened.
THE CHALLENGE OF POPULATION AGEING  CHART 13  NON-FINANCIAL BALANCE OF THE SOCIAL SECURITY SYSTEM  DEPENDENCY RATIO % of over-65s relative to population aged 15-64  % of GDP  2.0  80  1.5  70  1.0  60  0.5  50  0.0  40  -0.5  30  -1.0  20  -1.5  10  -2.0  0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16  70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50 55 60 AIReF  pension spending GDP  n pensions population Dependency ratio  ∗  population n employees Inverse of employment rate  ∗  EUROSTAT  UN  INE  average pension total gross wages ∗ average wage GDP Replacement rate  α  SOURCES: Social Security and National Accounts, AIReF, Eurostat, United Nations and INE. sustainability of the system. I believe this is a structural issue that requires broader debate, not confined to the habitual annual budget discussions. Indeed, population ageing also has an adverse impact on the participation rate, productivity and potential economic growth, so a broad approach is needed to address this issue, both as to the time period considered and the set of economic policy instruments to be used.

Though the results of this journey may not be immediate, the transition must begin without delay. A key priority for financial institutions (FIs) will be to implement sustainability risk management practices. The VBIAF sectoral guides for the palm oil, renewable energy, and energy efficiency sectors, as well as the Climate Change Principle-based Taxonomy which are the outcomes of collaboration between financial regulators, industry practitioners and sector experts, have been issued during the past year. The former can provide context on the importance to incorporate 1/3  BIS central bankers' speeches  ESG considerations in FIs’ financing and investment decision-making process, while the latter can provide guidance for FIs to assess and classify economic activities that contribute to climate change mitigation and adaptation. This will allow a deeper understanding of the impact of climate risk to the FI, and enable leaders to better identify the organisation-wide strategies and resources required to manage such risks. Secondly, leaders must drive innovation to deliver value-driven and impactful solutions. This is very much in-line with VBI which advocates for positive and sustainable impact through the practices, offerings and conduct of institutions. Alongside regulatory efforts to rebuild economic and social resilience, FIs can play a leading role in making meaningful or impactful contributions to economic and social development through strategies that prioritise the triple bottom line. Value-driven and impactful solutions are more evidently required throughout this pandemic. The devastating economic impact of COVID-19 is apparent in certain sectors more than others, and especially for vulnerable communities.
The chart shows that the ratio between the median loan amount and the transfer value of the dwelling as stated in the transfer deed was very high and rising during the years leading up to the crisis. After the crisis, the ratio declined gradually, until it stabilised at around 80%. By contrast, the LTV was much more stable over the same period. The differences between these two ratios reveal two things. First, that the appraisal value was clearly higher than the transfer value before the crisis, the difference between them having subsequently been reduced. Second, that the appraisal value has been more cyclical than the transfer value: it rose more steeply during the upturn and fell to a greater extent 8/15  during the recession. In my view we can conclude that, to ensure greater stability in the property market, we need rigorous, prudent and, thus, less volatile appraisals. Naturally, the importance of the appraisal value was at its greatest when it justified, to a large extent, the granting of credit. This is another basic and, therefore, essential lesson which is also reflected in the new law, in so far as it requires that the solvency assessment must not be based primarily on the value of the collateral or on the hypothesis that the value of such collateral will increase.

Moving beyond risk measures to risk narratives Innovative risk management will also require new ways of looking at measures of risk. While financial measures of risk are not likely to go away anytime soon, a good place to start is by acknowledging that financial models do not, nor are they likely to, fully and perfectly account for how firms will be affected by risk events. In his book, “The End of Theory”, Richard Bookstaber who was also a former regulator at the US Securities and Exchange Commission, wrote that we cannot know where we will end up until we take the journey. And we cannot retake that journey once completed. This raises some important issues for how firms set and maintain limits that define their risk tolerance. It does not mean that we should necessarily throw out conventional risk measures. But it does mean that we need to supplement them with the ability to develop and maintain a richer risk narrative that is perhaps less precise, but much more informative. Moving away from more mechanistic approaches to controlling risk calls for strong discipline and higher levels of competence among business and risk managers. Where there are no bright lines, effective risk responses will depend on firms setting up a process that can bring together diverse perspectives and data sets; encourage rigorous debate and dialogue on risk developments; and build an informed consensus on how much risk an organisation should be willing and able to take to achieve its business goals.
This time I would like to delve into some matters of great relevance for our institution: (1) follow-up to the Independent Evaluation Panel’s recommendations that we shared with this House a year ago; (2) the impact on the Bank’s balance sheet of the of the unconventional measures implemented; and (3) the Bank’s progress from the technological point of view. III.1. Follow-up to the Independent Evaluation Panel’s recommendations In September 2018, the Bank’s Board agreed to commission an external, independent evaluation of the Bank’s performance of its main legal mandates over the past ten years. To this end, it convened five international experts in the fields of central banking, monetary policy, and financial stability. This Panel, chaired by former Central Bank of Israel Governor Karnit Flug 3, issued a report in September 2019, which, along with positively evaluating the Bank’s performance, made 40 recommendations for improvement. Of these, 24 referred to monetary policy, 14 to financial policy, and two to corporate matters 4. Of this set of recommendations, the Board dismissed two 5 and pledged to take action on the remaining ones. With a little less than a year to go, 23 of the 38 recommendations validated by the Board have been fully complied with, equivalent to 60% of the total; another 10 are close to completion, and five are still under study, four of which involve matters requiring legal reforms (Table 4).

To simplify somewhat, it can be said that the economic programme pursued by the Government with the support of the International Monetary Fund aims to restore trust: trust in the sustainability of public sector finances, trust in the stability of Iceland’s financial system, and trust in the stability of the Icelandic króna. These three elements of trust are so closely intertwined that if one of them fails, the other two are unlikely to remain intact. The past several months have seen a number of positive developments. The króna has appreciated, broad-based fiscal consolidation plan has been implemented, and the reconstruction of the financial system is proceeding apace. We must not sacrifice these improvements for momentary popularity. Consequently, supervisory bodies, governmental authorities, and the legislature must do everything in their power to ensure that these achievements are not squandered. There is good reason to take a closer look at what is at stake. Many of the world’s nations are on the brink of a sovereign debt crisis. Iceland has been among them but is well on the way out of those difficulties. The work this requires is painful but necessary. Substantial additional cost to the Treasury due to a new financial system shock, due to lack of action, would jeopardise the progress that has been made. It would undermine the Treasury’s creditworthiness and delay access to foreign credit markets, both for the Treasury and for Icelandic companies, or – at the very least – would affect the terms offered.
Research has shown that undertaking coordinated reforms in  2  See R. Bouis and R. Duval (2011), Raising Potential Growth after the Crisis: A quantitative Assessment of the Potential Gains from Various Structural reforms in the OECD Area and Beyond, OECD Economic Department Working Papers No. 835, OECD Publishing. http://dx.doi.org/10.1787/5kgk9qj18s8n-en. Fast implementation refers to phasing-in over 5-years, while slow implementation refers to phasing-in over 10-years. 6  BIS central bankers’ speeches  all countries can boost GDP more than in a situation where each country acts alone.3 A more widespread approach to reforms in all euro area countries can therefore contribute to a stronger recovery in the stressed countries and in the euro area as a whole, through positive supply and demand effects. Conclusions Let me conclude. The euro area has come a long way in addressing its problems. The progress that has been made is remarkable and covers a wide range of areas and actors. The ECB has been central in stabilising the euro area economy, smoothing the adjustment process of the stressed countries and restoring the proper functioning of the monetary transmission channel. At the supra-national level, EU governance has been strengthened and, in particular, the Banking Union is being established. And at national level, progress is ongoing towards restoring fiscal soundness and driving forward structural reforms. The pay-off from these reforms is becoming increasingly visible: in 2013, we already saw signs of a turnaround in most euro area countries.

Some crypto-assets have recently emerged that strive to minimise fluctuations in value against a currency of reference, but even they are no alternative to the euro. These so-called “stablecoins” broadly fall into two categories: those that are backed with an underlying asset and those that rely on an algorithm to continuously match the supply and demand of circulating units. Unsurprisingly, the stablecoins that show the least volatility are those that back every issued unit with an equal amount of fiat currency. Why use a proxy, then, if you can have the real thing – unless the issuers of that proxy seek to interfere with the control of trusted assets circulating in the economy The poor performance of crypto-assets is not an excuse for complacency, but rather a reminder of the importance of the central bank’s objective to maintain price stability. Fulfilling this objective is conditional on the independence of the central bank, as ensured by a narrow but clearly defined mandate. Central banks must not be overburdened with multiple goals without having the appropriate instruments to achieve them. This brings me to the role of the ECB in the oversight of market infrastructures. Less is more The ECB has a Treaty-based task to promote the smooth operation of payment systems, as part of which it takes a close interest in the regulatory framework for market infrastructures which clear and settle securities and derivatives in euro, in particular central counterparties (CCPs).
On the few occasions when a foreign bank has run into difficulties, MAS has managed to ring-fence the banks' Singapore operations in time – as we did during the Asian crisis – so that Singapore depositors did not suffer losses. However, as we liberalise, foreign banks will gain market share. Local banks will also venture abroad. The safety and soundness of both local and foreign banks will increasingly be affected by factors beyond our control. We have seen how in other countries even well-run international banks supervised by highly-regarded authorities can nevertheless run into financial trouble. Even as we strengthen MAS supervision, we cannot expect our supervisors to always be in time to pre-empt any difficulties that the bank has not prepared itself for. No government can promise to bail out depositors whenever a bank runs into trouble. If a government did so, depositors would lose the incentive to seek out sound banks, and banks would lose the incentive to lend prudently, knowing that even if they run into trouble their downside risks will be absorbed by the government. This is what bankers call moral hazard. However, in the absence of a deposit insurance scheme, there will be an implicit expectation, both by depositors and banks, that if something goes wrong, particularly with a large bank, the government will be there to pick up the pieces. And should a mishap happen, the government may come under strong political pressure to do so. This can be destabilising.

In the UK, the FSA has recently published how they will approach this international effort. 6 It is a formidable task. Working with the FSB secretariat, my role, as chairman to the CrossBorder Crisis Management Working Group, will be to help colleagues to flush out the issues, so that they can be properly debated and reviewed by G20 Ministers and Governors later next year. With the European Commission on the FSB and also the resolution working group, I hope that will also help to inform work at the European level. There will quite probably be hard questions. They could include whether something needs to be done about the complex structures and organisation of some banks. Another big issue might be which services truly need to be maintained. Whether there are conflicts between the insolvency laws and special resolution regimes of different countries that would materially impede effective resolution for some groups. And another would be whether losses can in the future credibly be made to fall on wholesale creditors. Maybe even about burden sharing amongst national authorities if fiscal support proves unavoidable when an internationally active bank fails. In all this the objective, of course, is to get to a place where taxpayers’ resources are not needed, implicitly or explicitly, to underpin the national and international credit systems. And some of those operational questions, therefore, shade into the broader debates about the structure and regulation of the financial system. 7 Of that list of issues, I should highlight two today.
Central banks have a big responsibility to make sure that such failures are avoided. For example, we should promote regulation that favours efficiency and counters undue risk-taking. We should also try to make sure that regulation is designed in such a way that there is no scope for circumventing regulation in order to avoid costs or administrative burdens. Last but not least, greater international co-operation and harmonisation is desirable also in the analytical field, as this would help to provide a more comprehensive global surveillance of financial stability and facilitate coordinated policy responses to financial turbulence. To this end, it is very welcome that the Financial Stability Forum and the IMF will intensify their cooperation in order to develop the assessments of financial stability risks on a global scale. Within the European Union, successful efforts have been made to establish a common framework for assessing the systemic implications of cross-border crises. The main purpose of this framework is to serve as a common language between authorities and countries for discussing the systemic impact of a financial crisis, thereby enabling them to reach a common view on the economic impacts of any particular crisis. This framework is still quite fresh and has not yet been implemented in most EU countries. Therefore, its use has been limited in the current crisis. However, when it is eventually implemented I am convinced that it will contribute significantly to the common understanding of the dynamics and implications of financial crises.

Noyer: There was probably during the period of time that preceded the crisis an excessive belief that the combination of the growing importance of emerging economies, which brought a disinflationary force in the manufacturing sector, and the credibility attained by central banks globally had created a world where inflation could be kept at bay quite easily. There was insufficient focus on some of the effects of low interest rates for a long period, like the fact that it facilitated asset bubbles and asset bubbles may lead to burst bubbles and economic and financial crisis or the transmission into pressure on inflation. We’ll probably be more attentive in the future. WSJ: The ECB has upped its vigilance on inflation in the euro zone, but if interest rates were to b e raised earlier than expected, it could be a problem for countries in the periphery that depend on the ECB’s support through its bond-buying program. Would it be possible for the ECB to raise rates to address rising inflation in core countries while keeping nonstandard measures in place to prop up peripheral states? Noyer: Generally speaking, it is technically feasible. I am not signaling that we are going to raise interest rates. As a matter of fact we have done a lot to start unwinding nonstandard measures. Excess liquidity in the euro-system has decreased dramatically and the situation has normalized. Now the market is working much better.