samchain/econo-pairs-v1 huggingface dataset:
They can be divided into two categories: restrictions on the use of the SRR powers; and mechanisms for payment of compensation where property rights are unreasonably affected by the use of the special resolution powers. In the case of the restrictions, there is protection for netting and set-off arrangements, secured obligations and capital market instruments such as covered bonds and securitisations, to ensure that they are not disrupted by the transfer powers. This is an important part of the regime, and I want to emphasise that it is not in the interests of the authorities to disrupt instruments and markets that are of course of great importance to other banks. It would just be counterproductive to take that sort of action. In the case of compensation, the framework established by the Act ensures that the proceeds of the sale of a bank’s business are returned to the failed bank’s creditors and, if any surplus remains, to the shareholders, after meeting the claims of creditors in priority order. Moreover, creditors left behind in an insolvent entity – typically the rump of the business after other parts are transferred – are entitled to receive compensation to the extent that an independent valuer determines that they have received less than they would have done if the bank had gone into insolvency without the SRR being used. This is the “No creditor worse off” safeguard.

Andrew Bailey: The UK bank resolution regime Speech by Mr Andrew Bailey, Executive Director for Banking Services and Chief Cashier of the Bank of England, at The Institute of Chartered Accountants in England and Wales (ICAEW) Financial Services Faculty breakfast, London, 26 November 2009. I am grateful to Peter Brierley, Victoria Cleland, Iain De Weymarn, Geoff Davies, Tony Foster, Andrew Hauser, Orla May and Paul Tucker for their comments and assistance. *  *  *  The UK bank resolution regime Thank you for inviting me to speak this morning. One of the characteristics of bank resolutions, to which I will return later, is that they have to be done quickly to a fixed deadline and involve working through the night. They also require extensive involvement by accountants and lawyers, so, I have had some experience with spending nights and early mornings with accountants. The only, but important difference, is that I don’t get to choose when to spend my early mornings on resolutions, whereas you did choose to listen to me early this morning, for which I am very grateful. Some history The 2009 Banking Act, passed in February, created the new bank resolution regime in the UK. In its first nine months it has been used once, at the end of March for the Dunfermline Building Society.
Economic outlook and credit conditions Let me turn to the first of those areas, the current outlook for households and businesses, and what that means for your lending portfolios. Here the backdrop is clear. Over the past few years, the UK economy has faced a series of events which our Governor, Andrew Bailey, summarised in recent remarks4, including the Covid pandemic and the interruptions to economic activity that caused; and the rise in energy prices caused by Russia’s invasion of Ukraine. Andrew also outlined the challenging economic conditions we now face including through inflation, which at 10.1% 5 remains well above the 2% target and continues to outstrip wage growth, and a growth rate which the latest Monetary Policy Committee report6 estimates is around 1% per annum compared to a typical rate of nearly 2.75% in the decade leading up to the 2008 financial crisis. In response to inflation, the MPC has raised interest rates 11 times to 4.25%. Whilst inflation is expected to fall sharply by the end of this year and growth to pick up, the impact on the finances of the households and businesses that you serve has been significant. We have seen this through indicators showing consumer confidence at its lowest levels since the 1970s7, households increasingly focusing on value and cost savings in their spending habits, decreased demand for mortgage borrowing in the first quarter of this year8, and subdued demand for credit from corporates who remain under pressure from the impact of higher interest rates9.

We are particularly focused on your feedback in areas where our proposals will impact those products and services that are central to the mutual business model, like both owner occupied and buy to let mortgages. The consultation closed in late March. We are considering all the feedback received which will inform our final policies and approach to implementation, which we will look to communicate in due course. Strong and Simple Alongside that process and aligned with my earlier comments about tailoring rules to UK circumstances where appropriate, we are investing in our Strong and Simple project. Through this we will create a simplified prudential framework for domestically focused nonsystemic banks and building societies that is, when compared to the standards that apply today, more proportionate, easier to understand and less costly to implement. But importantly that simplified framework also has to be strong, by which I mean maintaining overall resilience which is equivalent to what we have today. Events in the global banking sector in recent months have clearly demonstrated why the ‘simple’ needs to be accompanied by the ‘strong’. As the target population of firms for the first layer of the framework is smaller domestic firms providing savings and lending products in the UK, many building societies are likely to be eligible to take advantage of the simplifications. Our Basel 3.1 consultation paper set out some proposed revisions to the scope of the first layer, including to address feedback on the definition of domestic exposures.
This distortion of the payment burden  1  The reason I am using 1996 as a starting point is that it is only from this year that price data is available for tenant-owned apartments. Price statistics for tenant-owned apartment are based on data from www.maklarstatistik.se. House prices are measured using Statistics Sweden's property price index for permanent houses. 2  See also Financial Stability Report 2005:2 for a detailed discussion of the Swedish housing market. 2  BIS Review 105/2006  towards the period directly after the loan has been taken thus acts as a liquidity restriction. Now that nominal interest rates have become much lower, the payment burden has become more evenly distributed over time, which means that this liquidity restriction is not as strictly binding and it is therefore possible for households to take out larger loans that can be used to finance housing purchases. This in turn pushes up prices. Another reason why house prices have risen is the good development in the Swedish real economy since the crisis at the beginning of the 1990s. Despite the fact that unemployment has become entrenched at a high level by Swedish standards, households’ disposable incomes have increased significantly. This has of course increased households’ payment ability and the demand for housing. A third reason is the limited construction of new housing. This in turn is partly an after-effect of the bank and property crises, but is primarily linked to the changeover in housing policy during the 1990s.

First, they demonstrate the Fed’s strong commitment to prevent lasting damage to the economy. Second, the scale and reach of the response is an indication of the gravity and unique nature of the situation we are facing. Although the facilities differ in important ways, reflecting the specifics of markets and sectors, they all share the goal of keeping credit flowing to households, businesses small and large, and other key segments of the economy. Since the announcements and rollouts of the various facilities, we have seen a significant improvement in the pricing and availability of credit.6 2/4  BIS central bankers' speeches  Somewhat paradoxically, despite the clear effect that these facilities have had on the availability of credit, actual take-up of the facilities has been relatively low. But this is in fact a measure of success—the existence of the facilities, even in a backstop role, has helped boost confidence to the point where borrowers are able to access credit from the private market at affordable rates. It’s worth noting that the Federal Reserve does not act alone. As my colleague Chair Powell says, “The Fed has lending powers, not spending powers. "7 Sound healthcare policy and the ability of fiscal authorities to put cash directly in the hands of Americans are both essential for the economy to endure this devastating episode.
Foreigners investing in Malaysia are also free to hedge with onshore banks their committed flow of funds such as the repatriation of investment proceeds, dividends and profits from Malaysia as well as the purchase of ringgit assets in Malaysia. There is free mobility of inward and outward movement of funds relating to both foreign direct investment and portfolio capital investments. The second key area that Malaysia can play a major role is sukuk issuance, origination and trading. The sukuk market serves as an important platform, complementing conventional bonds in enhancing the effectiveness and efficiency for the mobilization and allocation of funds within national financial systems and in the international financial system. Significant economic growth is taking place in Asia and the Middle East following privatization and implementation of infrastructure projects. This opens up tremendous opportunities for government entities, multinational corporations and multinational development institutions to raise funds through the issuance of sukuks to meet their financing needs. The phenomenal demand for sukuks has been spurred by the high levels of surplus savings and reserves in Asia and Gulf regions coupled with a rising demand for Islamic banking instruments from a growing Muslim population in Europe. Apart from the issuance of a sovereign Islamic sukuk by the Government of Malaysia, and the governments of Dubai (UAE), Qatar, Bahrain and Pakistan, an increase in number of multilateral agencies are also issuing sukuks to finance development projects. These developments signify the key role of the sukuk market in facilitating the economic development process.

But for any firm with less than average systematic risk and less than average leverage, the cost of equity would be lower; and at zero leverage, much lower, perhaps as low as say 6 percent. At that rate, even an all-equity bank with an expected return on assets of only 8 percent would not only be viable, but would presumably sell for a 1.3 premium over book value..... An essential message of the M & M Propositions as applied to banking, in sum is that you cannot hope to lever up a sow's ear into a silk purse. You may think you can during the good times; but you'll give it all back and more when the bad times roll around...... I can't  BIS Review 133/2010  11  who says “equity capital is very expensive to a bank” appears not to understand this. It might be fine for most people not to understand this – just as it is fine that most people do not understand what tensile strength materials need to have to be suitable to build a bridge with. But it is not fine if those that run banks, or regulate them, don’t understand it, any more than if engineers who design bridges don’t know about the strengths of building materials. In retrospect I believe a huge mistake was made in letting banks come to hold much less equity capital – relative to un-weighted assets – than was normal in earlier times.
-  Third, the absence of a fiscal union has meant that the policy response has been lacking, especially in the presence of a monetary policy dealing with the zero lower bound of interest rates. Furthermore, doubts about the long term fiscal position of certain Eurozone countries, such as Greece, Ireland, Italy, Portugal and Spain, increased to unsustainable levels their sovereign risk premia and their public and private sector borrowing costs. What has been the policy response within the EU? The EU crisis management policy aimed to contain and overcome its effects, but, to a large extent, it has been conditioned by some of the constraints I mentioned before. Monetary policy took the lead in providing countercyclical stimulus to the economy, with the ECB rapidly lowering its policy rate and injecting huge amounts of short and long term liquidity. Lastly, the announcement in September of the Outright Monetary Transactions by the ECB has been a turning point in regaining the trust of the financial markets. On the other hand, given the lack of space for stimulating fiscal policies, the public sector has been more interested in controlling long-term public debt trajectories, subtracting rather than adding to economic stimulus. To this end, the agreed fiscal compact and macroeconomic surveillance policies aim to put the Eurozone public finances into a sound and credible longterm footing. On the financial side, the EU has revised its financial architecture by establishing the EFSF (European Financial Stability Fund) and European Stability Mechanism, by agreeing to establish a single banking system supervisor.

WSJ: When you spoke of a quantum leap last year, you referred to quasi-automatic sanctions on excessive deficits. Governments so far haven’t come along. What makes you optimistic that you can still get your point of view adopted by governments? TRICHET: There are a number of elements that are important: the reinforcement of sanctions; the reinforcement of the independent diagnosis that would be made by Commission. It’s a set of quantum leaps, including the quasi-automaticity of the start of the corrective procedures and of the sanctions, which in our view is extremely important. Governance is now discussed by the European Council and the European Parliament. The Parliament has in the past always demonstrated a remarkable capacity to capture what is essential for Europe. So, the involvement of the Parliament is very important. WSJ: Last year, governments made a watery compromise on sanctions, weaker than the European Commission’s proposals. Should governments rethink that compromise? TRICHET: Even the initial proposals from the Commission seemed to us too timid. Our position has not changed. WSJ: You have called for maximum flexibility for the European Financial Stability Facility. There is discussion whether EFSF should take over all or part of the bond buying program from the ECB. If that were to happen, would you be relieved? 2  BIS central bankers’ speeches  TRICHET: As I said, they have to improve the stabilization fund in both quality and quantity. By quality I mean having a tool that is as flexible as possible.
However, so far, the implementation of these measures has been slow and incomplete. It is a far-reaching project requiring highly diverse measures, including most notably the creation of market infrastructure, the harmonisation of market regulation and supervision, and the strengthening of the European supervisory authorities. 6/7  There is also a need to move towards harmonising insolvency arrangements, both for banks and non-financial corporations, and to tackle aspects such as the bias in some countries’ tax systems towards debt as opposed to equity financing. Moreover, this project takes on particular importance in the context of the exit from the European Union of the United Kingdom, which currently plays a key role as a European financial centre. In connection with the Capital Markets Union, some initiatives have been adopted to provide financing for those segments with scant access to bank lending. One example is the innovation projects for which the promotion of venture capital funds is being considered. Measures have also been adopted to promote the use of simple, transparent and standardised securitisations in order to provide bank lending to small firms. These examples evidence the complementarities between bank markets and capital markets, and also how the Banking Union and the Capital Markets Union reinforce one another. Turning to equity markets, progress has been made to provide firms with access to these markets. Further, many studies have been undertaken to identify the obstacles to international investment. Yet, in order to equip the euro area with greater stability, resolute headway must also be made in European bank integration.

Giving a greater degree of legal security to rental contracts, and liberalising the related terms, is absolutely necessary for reducing rental costs and for making a smoother real estate adjustment, without a collapse of the value of the wealth in which Spaniards have their assets concentrated. Re-launching privatisation, liberalisation and the boosting of competition in numerous sectors is vital because, by reducing unwarranted business margins, workers' real wages can be increased without harming competitiveness. And thus we could say for many more areas of reform. But we'd need many more speeches to talk about this. And fear not, I won't be making them today. Thank you. BIS Review 18/2009  7
So, for example, an Austrian subsidiary to a German bank could be subject to a mixture of some Austrian and some German rules. If the Austrian subsidiary has a branch in, say, Poland, the Austrian supervisors will have the main responsibility for the supervision of the Polish branch, while the Polish authorities remain responsible for financial stability. So, the  BIS Review 39/2006  7  Polish branch could be subject to a mix of some German, Austrian and Polish rules and the German supervisor will be the consolidating supervisor of the group, but the Austrian supervisor will be the home supervisor of the Polish branch. A foreign branch will be part of the home country’s deposit guarantee schemes but could also opt to top it up by connecting it to the deposit guarantee scheme in the host country, if that is considered favourable. At the same time, basically the national jurisdictions of the host countries will be applicable for other consumer protection aspects of the bank’s operations regardless of whether it is a branch or a subsidiary. And if, for example, the German bank is bought by, say, an Italian bank, jurisdictions and supervisory responsibilities will change all over again… Are you still with me? If it sounds confusing, that is because it is confusing, even in this relatively simple case, involving just supervision in sunny weather. Now consider what would happen if we add to this scenario a financial crisis involving several large banking groups. Now, complications could add up really rapidly.

But, borrowing from the central bank is just a single transaction and the Treasury could use it immediately for making payments. Second, because of the limitations of the tax bases in developing countries, there is resource paucity for governments to undertake much needed infrastructure projects. Hence, it has been argued that the governments in developing countries could initiate the development efforts by mobilizing resources through inflation. The initial inflation so created would get reversed once the new economic development increases the production of goods and services and raises the market supply. So, inflation would become a self-destroying process and, therefore, it is argued that there is no danger of using inflation for economic development. Third, taxes are mandatory payments and therefore, there is resistance on the part of tax payers to pay the taxes. Because of the pressure coming from the lobbying groups, political authorities too sometimes are unwilling to raise the tax rates to generate higher tax revenue. However, the resistance of the citizens to inflation tax is virtually nonexistent. This is because no one realizes that they are paying a tax to the government, when the prices move up. Any resistance by them is not against the  2  BIS Review 64/2007  inflation tax per se, but against the inflation. That again takes place after sometime when they have been very badly hit by inflation. Fourth, inflation is said to be bringing about some salutary effects to an economy from the point of view of its long term growth.
What is more surprising is that the ONS estimate of the net rate of return, actual returns and, by implication, hurdle rates has been so stable around 12%, despite the historically low level of Bank Rate since 2008. Bank Rate has been at or below ½% for the past eight years and some of this has fed through to a lower cost of corporate borrowing. One might have expected the very low risk-free rate to have brought down the rate of return demanded by firms on investment. If, as seems likely, hurdle rates, like the ONS rate of return, were around 12% before the crisis, firms now seem to be looking for a 12% return over the risk free rate compared to around 7% prior to 2007. Some of this can probably be explained by the fact that the cost of financing investment has come down but not by as much as the risk-free rate. The weighted average cost of capital has come down since the crisis. But the reduction has been smaller than the reduction in the risk-free rate. This is because providers of debt and equity finance have increased the premium they charge for risk (Chart 4).

In this regard, entrant countries should pay specific attention to their current account deficits, which are referred to in the Protocol on the convergence criteria, because they have to be sustainable in order to ensure a smooth stay in ERM II and a good competitive position later in the monetary union. The economic rationale of the criteria is clear: membership of a monetary union entails abandoning monetary policy as a country specific adjustment tool. Diverging inflation rates become quickly unsustainable both because they create strong real exchange rates movements within the area and different real interest rates at the national level. In this context more inflation-prone countries would have too low real interest rates leading eventually to credit booms, domestic demand overheating, and loss in competitiveness and external deficits. Furthermore, in the absence of an independent monetary policy at the national level, fiscal policy becomes the main adjustment tool. In this context, fiscal criteria were designed in order to assess the ability of the government to conduct sound fiscal policies. Achieving strict and sustainable fulfilment of the Maastricht criteria involves in my view three elements. Sound fiscal and monetary policies are the minimum requirement in order to meet the nominal criteria. However, meeting the nominal criteria is not sufficient to assess that the economy of the candidate country is ready for monetary integration. The second element, a sufficient advancement in the process of real convergence, is related to the assessment of sustainability.