samchain/econo-pairs-v1 huggingface dataset:
On the one hand, aiming at containing systemic risk might be phrased in too vague terms; on the other hand, the specification of explicit (quantitative) targets might be inappropriate. Some experiences in introducing prudential policy instruments in the past seem to suggest that while these were congruent with micro-prudential policy objectives, the macro-prudential dimension may be missing in their design or calibration. 2. Further consideration also needs to be given to enhancing the understanding of macro-prudential policy transmission channels. The task of understanding transmission channels and assessing the potential impact of measures poses a number of challenges. For instance, it needs to take account of substitutability and competition between institution and market-based sources of credit. As such, the choice of the appropriate policy instruments may depend on country-specific factors such as the structure and features of the financial system. A better understanding of the transmission channels of macro prudential policy is critical, also on account of possible interaction with other policy areas, in particular with monetary policy. 3. Consideration also needs to be given to the potential for regulatory arbitrage. Pursuing macro-prudential policy action is likely to require a great degree of international coordination, in order to keep the scope for cross-border and crosssector arbitrage contained. This aspect is particularly important within the European Union (EU) which is characterised, among other things, by a high degree of policy harmonisation in the financial sector. 4.

In this context, the ECB and the 3 Level 3 Committees, predecessors of the ESAs, are proceeding in a dialogue on issues of common interest. V.  Concluding remarks  Let me conclude. The ESRB will have a challenging task considering the high level of expectations about its impact as well as the difficulties surrounding the area of financial stability which I mentioned earlier. The success of the ESRB will also depend on the commitment of all stakeholders to contribute effectively to its mission. The ECB, on its part, is fully committed to ensure all the necessary support to allow the ESRB to fulfil the important responsibilities assigned to it by the Member States. The ECB is committed to continue to invest on its analytical capabilities so as to enhance risk surveillance processes and produce high quality risk assessments with a view to inform ESRB decisions. It is also committed to devote efforts to develop a coherent macroprudential policy framework, thereby contributing to the efforts being done at the global level in this domain, also well reflected in this conference. Having said this, let me recall that the most important contribution that a central bank can provide to the maintenance of financial stability is to preserve price stability. Maintaining price stability has been, and will continue to be, the primary mandate of the European Central Bank, and it will not be affected at all by the assignment of new responsibilities in the macroprudential area. BIS Review 125/2010  5
Since bottoming out in late 2009, employment here on the island has rebounded by almost 2 1/2 percent. So we’ve come a bit more than halfway back to the early 2008 peak. Moreover, these job gains have come despite ongoing job cuts in local government. While other parts of the region sustained job losses in local government starting in 2010, Long Island’s just started in the spring of last year, creating a drag on the labor market overall. Nevertheless, the private sector has picked up the slack. This is most pronounced in professional and business services, finance, leisure and hospitality, and health care. Even the island’s manufacturing sector has added jobs over the past year. Another sign that a recovery is taking hold on Long Island is that banks that were created just before or just after the financial crisis – while only a small portion of the local market – are starting to show signs of growth. Long Island’s labor market has also been aided by its proximity to New York City. With a large portion of the island’s workforce commuting to New York City, especially from Nassau County, the brisk job creation we’ve seen in the city has helped matters here as well. Unemployment here on the island topped out at 7.6 percent back in late 2009, and it has hovered around 7 percent for most of the past year – a high rate to be sure, but well below both the national and state levels.

2  As measured by the 12-month change in core CPI. 3  See for instance, the behavior of the three- and six-month core CPI. 4  BIS central bankers’ speeches  Turning to the housing market – there matters are more dreary. After more than doubling between 2000 and 2006, home prices on Long Island are down more than 20 percent from their peak and prices have yet to show any strong signs of bottoming out. This weakness is underscored by our latest quarterly consumer credit panel data. This dataset shows that mortgage delinquency rates on the island are much higher than in other parts of the state and continued to edge higher in the fourth quarter of last year.4 The housing crisis also has also put pressure on local school finances. Historically, the island has been heavily dependent on local sources for its school funding, and the housing debacle has generated a sharp drop in local property tax revenue. State aid has been generally insufficient to make up for these losses and school administrators have been forced to cut both instructional and non-instructional spending. Despite some of these ongoing problems, I believe that the long-term outlook for Long Island’s economic growth is quite positive. The island’s workforce is particularly well educated, with well over a third of adults holding a college degree. It has a sizeable industrial base, which is concentrated in high-tech manufacturing.
But could the Bank have gone further; for instance, by buying even more foreign currency or by lowering interest rates more than was warranted by economic conditions and the inflation outlook? Certainly it could have done so; it could even have gone as far as to more or less halt the appreciation of the króna. But 4  then large interest rate cuts would probably have been needed alongside the foreign currency purchases, perhaps even bringing real rates into negative territory, which is ill-suited to an economy with a positive output gap and very strong GDP growth. The reason is that in order to lower interest rates enough to materially increase residents’ appetite for investment in foreign securities, an interest rate cut of 0.25 or 0.5 percentage points would not be sufficient because of how wide the interest rate differential currently is. It is not a given, either, that long-term interest rates in the bond market would have followed suit in full, and bond market rates are more important for investments by pension funds and other investors than the Central Bank’s short-term rates are. The reason for this would have been that inflation expectations had risen, and if the reduction in short-term interest rates had not been in line with economic developments and prospects, expected short-term interest rates would have increased. This would not have occurred without severe side effects.

However, it is an unrealised accounting loss, and it would reverse if the exchange rate should move in the opposite direction. No assets have been lost. The foreign currency value of the reserves is unchanged, and the purchasing power in terms of what the reserves would be used for is intact. Other aspects of the matter are of greater concern: the negative interest rate differential resulting from investing the reserves at historically low foreign interest rates and the interest expense on the Central Bank’s króna-denominated liabilities, which bear much higher interest. Extrapolations to 2025 indicate that, other things being equal, the Central Bank will record losses of 18 b.kr. per year from 2018 onwards, and the Bank’s equity will be negative thereafter. This in and of itself is not Armageddon, and many central banks have functioned quite successfully with negative equity. Nevertheless, it is better for a number of reasons if the Central Bank has an acceptable capital position. Extrapolations carried out by the Bank show that with various measures and appropriate distribution of the cost of the reserves among the parties that benefit from them, the gap can be closed. Among the measures is the possibility of increasing returns on the reserves by splitting them up into two or more tranches based on term and yield. The question has arisen whether the foreign exchange reserves are too large, or in other words, whether the costs outweigh the benefits.
Looking at the post-war period, whenever the unemployment rate has increased by more than 0.3 to 0.4 percentage points, the economy has always ended up in a full-blown recession with the unemployment rate rising by at least 1.9 percentage points. This is an outcome to avoid, especially given that in an economic downturn the last to be hired are often the first to be fired. The goal is the maximum sustainable level of employment – in other words, the most job opportunities for the most people over the long run. Some of you may be wondering whether the risk of a recession isn’t already quite high? And, if so, doesn’t this imply a need for special care in adjusting monetary policy? After all, the current economic expansion is more than six years old – a bit long in the tooth by post-war standards. Even so, recession risk did not play a major factor in my thinking. Economic expansions don’t simply die of old age. They primarily end either because monetary policy is kept too loose for too long, thereby necessitating a subsequent sharp tightening in monetary policy to prevent a significant inflation overshoot, or because some large adverse shock hits the economy that the central bank cannot easily offset. Mitigating the first risk of being forced to choke off the expansion argues for getting started with policy normalization now rather than holding off. With respect to the second risk of unanticipated shocks, this is obviously very difficult for the central bank to insulate the economy from.

QE and climate considerations  A second aspect of QE that has received close external scrutiny is its relationship to climate change. Responding to climate change is a strategic priority for the Bank; we continue to work towards promoting safety and soundness by enhancing the Prudential Regulation Authority (PRA)’s approach to supervising the financial risks from climate change, and towards enhancing the resilience of the UK financial system by supporting an orderly market transition to a low-carbon economy. In particular we have supported the Financial Stability Board’s work on climate disclosure through the Task Force on Climate-related Financial Disclosures (TCFD). To show its commitment last June the Bank published a report disclosing for the first time its own approach to climate risk management for all its operations.26  Attention, however, has understandably focused on the £ corporate bond purchases that form part (around 2%) of our QE programme, and whether more should be done to account for climate considerations in these holdings. Our approach to date has been to invest in sectors in proportion to the total outstanding eligible issuance accounted for by each sector in the UK economy.27 An important part of the design of the CBPS back in 2016 was to achieve the MPC’s aim of imparting monetary stimulus in a way that was sector-neutral, consistent with the remit given to the Committee by the Chancellor. As a result, the carbon footprint of the APF Corporate Bond Purchase Scheme (CBPS) portfolio is broadly representative of the sterling investment grade corporate bond market (Figure 7).
Bekaert, Geert, Harvey, Campbell R. and Lundblad, Christian: “Does Financial Liberalization Spur Growth?”, NBER Working Papers, No. 8245, 2001. Calvo, Guillermo A., Leonardo, Leiderman, and Carmen, M. Reinhart: “Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors”, IMF Staff Papers, Vol. 40, No. 1, March 1993, pp. 108–151. Calvo, Guillermo A., Alejandro, Izquierdo, and Meija, L.F.: “On the Empirics of Sudden Stops: The Relevance of Balance Sheet Effects”, NBER Working Papers, No. 10520, 2004. Calvo, Guillermo A., Alejandro, Izquierdo, and Rudy, Loo-Kung: “Relative Price Volatility Under Sudden Stops: The Relevance of Balance Sheet Effects”, Journal of International Economics 69(1), June 2006, pp. 231–254. Dooley, Michael, Eduardo Fernandez-Arias, and Kenneth, Kletzer: “Recent Private Capital Inflows to Developing Countries: Is the Debt Crisis History?”, The World Bank Economic Review 10(1), January 1996, pp. 27–49. Edwards, Sebastian: “Thirty Years of Current Account Imbalances, Current Account Reversals, and Sudden Stops”, IMF Staff Papers 51(2004): pp. 1–50. Edwards, Sebastian: “Capital Flows and Economic Performance: Are Emerging Economies Different?”, NBER Working Papers, No. 8076, 2004. Eichengreen, Barry: “Capital Account Liberalization: What Do the Cross-Country Studies Tell Us?”, World Bank Economic Review, Vol. 15, No. 3, 2001. Eichengreen, Barry, and Muge, Adalet: “Current Account Reversals: Always a Problem?”, NBER Working Papers, No. 11634, September 2005. Fernandez-Arias, Eduardo, and Peter, J. Montiel: “The Surge in Capital Inflows to Developing Countries: An Analytical Overview”, The World Bank Economic Review 10, No.1(1996): pp. 51–77. Frankel, Jeffrey: “The Effect of Monetary Policy on Real Commodity Prices”, in John Campbell (ed.)

This balance is critical to deliver the welfare benefits of financial innovation and avoid stalling the development of digital finance with the risk of leaving someone behind. I look forward to the presentations and discussions by the participants at the conference that I am sure will provide interesting reflections on the abovementioned challenges casting light on the fast changing financial innovation landscape, especially in the payments area. I wish all of you an enjoyable and rewarding conference in Ohrid, our charming city, protected by UNESCO for its natural and cultural heritage. Thank you! 1 The Pulse of Fintech 2018: Biannual global analysis of investment in fintech, 2019,  KPMG,  assets.kpmg/content/dam/kpmg/xx/pdf/2019/02/the-pulse-of-fintech-2018.pdf 2 The future of banking is open: How to seize the Open Banking opportunity, 2018, PricewaterhouseCoopers LLP,  retailbankinginnovation.fintecnet.com/uploads/2/4/3/8/24384857/the_future_of_banking_is_open.pdf  4/4  BIS central bankers' speeches
With respect to the retention awards owed to FP employees under their pre-existing contracts, we believe that Mr. Liddy weighed a number of factors in deciding not to attempt to prevent payment, including: •  the likely negative effects of disruption in staffing at FP in managing its multi-billion dollar exposures;  •  legal advice that the contracts were valid – meaning that breaking them would likely increase the amount of company funds ultimately paid to the covered employees; and  •  the negative consequences to AIG's business that could result from the public abrogation of contracts. In conducting our oversight as lender, the New York Fed did not see reason to disagree with Mr. Liddy's judgment from a risk perspective. Equally important, we did not think it was legally permissible – or within the proper role of the New York Fed – to attempt to substitute our judgment for that of Mr. Liddy in this circumstance, even though we found the payment of the retention awards extremely distasteful. The broad public disapproval of sizeable retention payments being directed toward the unit most responsible for last fall's downfall of AIG is understandable. Americans naturally feel outraged when confronted with news of such payments to an entity that worsened the financial crisis and that is dependent on taxpayer funds to stay out of bankruptcy court where these contracts would not have been fully honored.

Supervisors and regulators are required to review the efficiency of banks’ risk management practices and capital allocation methodologies, and empower market participants to make informed judgments on the efficiency of banks. Despite challenges, many researchers suggest that Basel II leads to rising rewards and discipline in banking industry. The indicators are that pay back for getting Basel II right and for looking beyond mere compliance to the real business benefits will be greater than originally anticipated. Encouraging banks to understand and believe that enhanced economic capital framework would be the key to high performance is undoubtedly a regulatory challenge. 17. I believe the deliberations of this seminar will improve our knowledge on ways and means of dealing with regulatory challenges posed by Basel II and operational risk mitigation measures. I wish the seminar a success and thank you all for your attention. 4  BIS Review 88/2005
Typically in a liquidity trap, the equilibrium real interest rate is negative, creating a persistent inability to match aggregate demand and supply. Before proceeding, I should make clear what I mean by the equilibrium (or natural) real interest rate. Let me use Roger Ferguson’s definition: it is the level of the real policy rate that, if allowed to prevail for several years, would place economic activity at its potential and keep inflation low and stable. For small open economies, like the UK, that equilibrium real rate is determined at the global level by the balance of the supply of savings and demand for investment. In the run-up to the crisis, that balance had shifted decisively as what Chairman Bernanke christened a “savings glut” from emerging economies developed. The flipside of that was low demand for advanced economy exports and low domestic demand in emerging economies. Only very low global real interest rates could spur sufficient domestic demand in advanced economies to maintain activity at its potential level. The problem of course was that the expansion of demand in advanced economies largely took the form of unsustainable consumption rather than business investment. The ensuing financial crisis pushed the equilibrium real interest rate down further and, with nominal interest rates stuck at zero and inflation low, monetary policy was unable to push actual real rates to a level low enough to maintain full employment.

This is especially true for banks, which are operating in an intensely competitive and dynamic environment. They need to muster all their talents and energies on the financial business, instead of dissipating them over many different businesses. For these reasons, banks should not commingle financial and non-financial activities. However, this does not mean that banks must refrain from engaging in venture capital or merchant banking business, which involves taking an equity interest in a diversified portfolio of non-financial companies for some period. It is not uncommon for the merchant banking business of well-run, international banks to take stakes in non-financial companies for three to five years. These activities are natural extensions of the lending business of banks. They are, however, quite different from taking long-term strategic stakes in non-financial companies which tie a bank’s reputation to these companies. In addition to the separation of banking and non-banking activities, regulators in several developed markets have also advocated dispersed ownership of banks. Often this has been achieved by legislation or via the bank’s own memorandum and articles of association, which sets limits on shareholdings to prevent any single shareholder or group of shareholders from dominating the bank. The result has been a “clean” corporate structure for their banks, i.e. there are no cross-shareholdings between banks and non-banks, and there is clear separation of ownership from management. Practice in other countries The US is an example of a financial system which has prohibited commingling between banking and commerce, and required dispersion of bank ownership.
And it is accelerating economic trends that had previously been slow to reveal themselves. Those trends bring many challenges – but they also bring opportunity, amongst them the chance to advance the pace of climate transition. 1  https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1657 See eg https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter 3 http://www.climateaction100.org/ 2  2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  The need to do so is pressing. The UN Environment Programme estimates that global greenhouse gas emissions must be cut by 7.6% in each and every year from now until 2030 to meet a 1.5°C temperature goal.4 To put that number in context, it’s roughly the decrease the International Energy Agency expects to see this year as a result of Covid-19.5 Repeating that reduction every year for a decade is hard to comprehend. It will certainly require huge investment, estimated to be at least $ trillion per annum, for the foreseeable future.6 That’s a doubling in capital spending in the power sector alone. Chart 1: Excess returns of green equity indices  Chart 2: Excess returns of green bond indices  vs relevant market-wide benchmark  vs relevant market-wide benchmark  Source: MSCI, Bloomberg Finance L.P. and Bank calculations. Source: FTSE Russell, MSCI, S&P Dow Jones Indices and Bank calculations. Funding those massive sums will fall, in part, to governments around the world, and in part to the banking system. A lot has been said about the challenges that will pose.

Such discipline would bring about credibility which is crucial to maintaining the attraction of the region and continued foreign investment. So far, much progress has been made and vast opportunities can be seen going forward. We are well aware that greater benefits are achieved from synergies and coordination rather than autonomous actions. Further efforts to Connect, to collectively enhance Competitiveness and to promote a sense of Community – the 3C’s, must be pursued – both in trade and in finance, and within the public as well as the private sector. Ultimately, strengthening the Greater Mekong Subregion would be our best contribution to reaching the goal of our ASEAN Economic Community. On this note, let me thank you for your attention and for your interest in our region. BIS central bankers’ speeches  3