samchain/econo-pairs-v1 huggingface dataset:
As mentioned in the EU regulation, the ESRB’s warnings and recommendations will be directed – I quote from the Regulation – “to the Union as a whole, or to one or more member states, or to one or more of the ESAs or to one or more national supervisory authorities”. Recommendations can be also directed to the European Commission, in the area of the elaboration of new EU legislation. Nowhere do the legal texts mention that the ESRB will address individual firms in its warnings and recommendations. But the industry also has to be aware that with the ESRB and the overall European System of Financial Supervision we will be in a different environment. Following deliberations by the ESRB, competent authorities may decide to utilise the tools that are designed to counter the build-up of risk in the financial system. Their tools, as you know, include possible capital addons, countercyclical capital buffers or maximum loan to value ratios. One of the first tasks of the ESRB could be to review existing instruments and those that are being created at the global and the European levels. More generally, micro-prudential instruments that are well known in the banking sector, would be calibrated and used with a macro-prudential orientation. I want to refer here to the concrete example of counter-cyclical capital buffers. In July, the Basel Committee on Banking Supervision released its proposal for countercyclical capital buffers. The aim of such buffers is to make banks build up capital when system-wide risk is increasing following excessive credit growth.

In most countries central banks play an important role in financial stability. Because of their monetary policy function, central banks have an indepth knowledge of the financial system. They are independent anchors for monetary stability. They also have a clear interest in financial stability because of its beneficial impact on the macroeconomic environment. And, last but not least, central banks are the ultimate source of liquidity. For all these reasons, central banks often have an explicit mandate in the area of financial stability. But typically this mandate is formulated in very general terms, and it would have been written before growing recognition of the key role of macro-prudential oversight. Financial stability is not and cannot be exclusively an issue for central banks, namely the ECB and the European System of Central Banks. It must be shared with micro-prudential supervisors. They have a key role, because stable institutions are an essential and necessary condition for achieving financial stability. This is also the reason why the ESRB and the ESAs will form together a European System of Financial Supervision (ESFS). So in the analysis of systemic risk, the three ESAs will also have an important role to play, both on their own and within the ESRB. In collaboration with the ESRB, they will develop a set of indicators to identify and measure systemic risk. On their own, they will further draw up guidelines and recommendations for individual financial institutions to take account of the systemic risk they pose.
(3) ROA is calculated as earning over assets; the leverage ratio as equity over assets. Source: Central Bank of Chile based on data from the SBIF; CMF; and Suseso. Now, regarding potential trade-offs associated to the Chilean regulatory framework: Has the Chilean regulatory framework in place be repressive? The evidence shows that Chile’s banking strength have not undermine its financial development under different perspectives. The Chilean financial system has evolved significantly in recent decades, and its contribution has been key in the economic development of the country and the construction of a more prosperous, healthy and modern economy. Today, the Chilean financial sector is one of the most developed in the emerging world. In five decades, it has gone from being almost exclusively made up of traditional banks, to include several other market participants, such as Pension Funds, General Fund Administrators and Insurance Companies, among others. The Chilean financial system relatively outperforms with respect to other comparable countries in dimensions such as market capitalization, number of branches per inhabitant, and participation in domestic credit. On the other hand, the banking system in particular is positioned among the strongest in the reference group of emerging countries according to comparable international assessments. Page 7 of 12  Central Bank of Chile September 2019 High-level Policy Seminar on Integration or Fragmentation?

That is because oversight is shared by several different entities, and the power to implement macroprudential tools is constrained. Another challenge is the diverse structure of the U.S. financial system, in which non-banks and capital markets play a substantial role in credit intermediation. Although the Financial Stability Oversight Council (FSOC) could conceivably play a greater role here, whether it will be able to do so effectively remains uncertain. Another issue that needs attention is the ability to resolve large, complex financial firms that operate on a global basis. The framework of requiring such firms to hold a large buffer of debt that could be converted into equity at the time of non-viability is an important step forward. But, the task of operationalizing this on a global basis in a way that is fully credible to these firms’ customers and counterparties has not been completed. Achieving clarity about the roles and responsibilities of home and host country authorities is still a work in progress. The Federal Reserve’s lack of authority to lend to a major securities dealer that gets into difficulty is another outstanding issue. The Dodd-Frank Act narrowed the Federal Reserve’s authority under Section 13(3) of the Federal Reserve Act. No longer can the Federal Reserve lend to an individual securities firm or non-bank financial intermediary. Such authority may not be as necessary now that the Federal Deposit Insurance Corporation (FDIC) has the power to lend under Title II of the Dodd-Frank Act and firms are required to have sufficient resources to support their resolution plans.
It would, therefore, be desirable for progress to be made in the determination of an administrative mechanism for winding up credit institutions that maximises the preservation of value and reduces both the timelines and the costs of the existing insolvency proceedings. Irrespective of the future scenario, the present crisis also poses an additional challenge for European banking sector profitability, which was already very low before the crisis. To address this challenge, banks must continue to raise their efficiency levels. This requires not only cutting costs, but also making the necessary investment in digitalisation and data exploitation that will allow them to offer higher quality service to their customers, while at the same time expanding their more profitable businesses, maintaining strict control of the risks assumed. Only in this way will banks be able to address the additional challenge posed by the potential entry of new competitors, such as big tech companies, in the lending market. In addition, there is still room for consolidation in the banking sector, and this can help strengthen banks and the banking system overall. I should recall, as I have indicated on several occasions, that corporate operations are for management teams and shareholders to decide on. The role of banking supervisors – of the Banco de España and the ECB – in the framework of the Single Supervisory Mechanism’s joint supervisory teams, is to analyse the viability of the merger projects that are submitted to us and, where appropriate, to monitor that such projects are implemented correctly.

The impact of the PEPP and of all the other measures on financial conditions is substantial, but it is also important to assess their effect on economic activity and, ultimately, on inflation in the euro area, given the ECB’s price stability mandate. Although it is still too soon to assess the macroeconomic effectiveness of the programme, the preliminary estimates of the Banco de España’s experts suggest that the PEPP will have considerable positive effects on the rate of growth of GDP, employment and inflation, in the euro area as a whole and in Spain. Indeed, the cumulative impact on GDP growth is expected to be somewhat 11  greater in the case of the Spanish economy, primarily because the programme is estimated to have had a greater impact on the reduction in the cost of sovereign debt in Spain.3 However, it is difficult to quantify the degree of financial and economic deterioration that would have ensued had the PEPP not been implemented. One of the main effects of the monetary policy decisions has been to avoid severe disruption in the financial markets that could have generated an even more profound and persistent economic crisis, with potentially dire effects on capital market stability. To conclude, the monetary policy measures adopted by the ECB in response to the COVID-19 crisis have had a stabilising effect on financial conditions and on economic activity, both in Spain and in the euro area overall.
Either because temperatures continue to rise as the transition is eluded; or because we face a disorderly transition - a so-called climate Minsky moment – as a significant number of otherwise productive assets have to be abandoned; or as asset prices adjust whilst risk and return are repriced. To avoid such outcomes, financial firms need to manage these risks not as they materialise but instead by looking ahead over much longer time horizons than they are used to. And, as our supervisory expectations of banks and insurers make clear, they need to act strategically and pre-emptively, taking different decisions today, well before the consequences of inaction become clear.3  Climate scenario analysis  Climate scenario analysis provides us with the toolkit for doing just that. To look forwards not backwards, with a horizon of decades not years. In recognition of the uncertainty we face about what might happen to our planet and our economy, some scenarios show the most efficient pathway to net zero, while others highlight the risks of fragmented policies or insufficient action. They can all help guide actions today. 3  See PRA supervisory expectations on the financial risks from climate change. Plotting the transmission channels of climate risks into economic and financial risks is a fiendishly complicated task [figure 2]. The channels from climate to financial risk are numerous, with significant interdependencies. The data and methodologies to translate climate outcomes into macroeconomic and financial risks are incomplete and inadequate.

The scenarios the NGFS have produced pull together, for the first time, both transition risks and physical risks, and their economic and financial consequences, in a coherent way. As a result, they are decision-useful, reflecting the totality of risks we will face. A guiding principle has been to try to shine a light on some of the uncertainties that exist. We have focused on multiple scenarios and multiple models to highlight the range of potential outcomes. Since modelling these impacts is subject to significant uncertainty and extensive academic debate, our work is open source and we seek your expertise and challenge. 4  The NGFS was founded by 8 central banks and supervisors including the Bank of England in 2017. Members are committed to sharing best practices, contributing to the development of climate and environment-related risk management in the financial sector and mobilising mainstream finance to support the transition towards a sustainable economy. It is currently comprised of 90 members and 14 observers. The first iteration of these scenarios, published in June 2020, drew from the existing work on mitigation pathways, climate change and adaptation that supported the Intergovernmental Panel on Climate Chance (IPCC) Special Report on Global Warming of 1.5°C.5 The NGFS will next month release an update, which will include bespoke scenarios, detailed macroeconomic modelling and a new online portal that can be used to explore physical risks. Insights from the design of the NGFS climate scenarios I would like to share some of the insights I’ve gleaned from this work.
The trade-off is subsequently performed between objective fulfilment in terms of inflation and resource utilisation during the forecast period, and the risk of very poor objective fulfilment further ahead due to a financial crisis. A consequence of this approach is that it has to be based on longer time horizons than currently since the build-up of financial imbalances occurs over longer periods of time. Norges Bank has chosen a different approach in which an explicit term is incorporated into the loss function of the monetary authority. The purpose of this term is to capture that, in addition to the price stability and sustainable resource utilisation targets, financial stability should also be accounted for. Whatever approach chosen, in order to give financial stability a greater role in the monetary policy decisions, the use of financial variables as indicators in monetary policy decisionmaking will increase. Measuring financial stability is often difficult To measure the extent of financial stability requires a broad approach which can often resemble detective work. The stability report which we publish twice a year is an example of  BIS central bankers’ speeches  3  the type of comprehensive analysis that is needed. It describes a series of indicators, for example credit growth, risk premiums, and the development on various asset markets. From this year, we have also introduced an annual report of our assessment of Sweden’s financial infrastructure. Taken together these indicators often give a good picture of the financial situation.

The individual responsibility to have in place a sound long-term retirement income strategy, that integrates private savings, contributions to the Employees Provident Fund and supplementary private pension and annuity plans, has therefore become important. Ladies and Gentlemen, This is not the first time that Bank Negara Malaysia has issued such bonds. The second and third series of the Malaysia Savings Bonds, which were issued in November 1999 and February 2002 respectively, had the same underlying objective. Each time, the features of the bonds have been enhanced. The Merdeka Savings Bond is for retirees who are 55 years old and above, and who do not have a full-time job. Armed Forces personnel who opted for mandatory retirement below the age of 55 are also eligible to purchase the bonds. The Merdeka Savings Bond, which will be based on the Islamic principle of Bai' Al-Inah, has several new features. Firstly, the bond will be issued on a regular basis over the next two years. Following the first issuance on 4 February 2004, there will be three other issuances on 1st April, 1st July, and 1st October in 2004. This will be followed by similar quarterly issuances in 2005. It is hoped that this regular issuance would provide interested investors, who may have their savings locked in other assets with the flexibility in the future to purchase the Merdeka Savings Bond. A total issuance of RM 2.25 billion has been planned for 2004 and 2005, with the first issuance amounting to RM 500 million.
Term structure models show that, over the past year, a rise in the term premium accounted for a significant portion of the increase in the ten-year OIS rate (Slide 11, left-hand side). The ten-year OIS term premium currently stands at its highest level since 2013 (Slide 11, right-hand side). The rise in the term premium reflects two interrelated developments. One is the fundamental change in the euro area’s inflation environment (the “nominal” term premium). The ten-year inflation risk premium increased sharply after a long period of persistently low inflation (Slide 12, left-hand side). About a year ago, it turned positive for the first time in almost ten years. The other development relates to the uncertainty about the future path of short-term interest rates (the “real” term premium). The increase in inflation uncertainty, together with the retirement of forward guidance on policy rates, has raised uncertainty about future policy rates and hence market volatility (Slide 12, righthand side). As it turns out, the changes in the ten-year OIS term premium can largely explain the gap that has emerged between euro area sovereign yields and the expected future path of short-term interest rates. [20] In other words, changes in the risk-free rate have been the prime market driver, so that the spread of the euro area ten-year GDP-weighted yield over the equivalent OIS rate has remained broadly stable over the past two years (Slide 13, left-hand side).

(2021), “Demand for central bank reserves and monetary policy implementation frameworks: the case of the Eurosystem”, Occasional Paper Series, No 282, ECB, September. 5. ibid. 6. See Schnabel, I. (2021), “Monetary policy and financial stability”, speech at the fifth annual conference of the European Systemic Risk Board, Frankfurt am Main, 8 December; and Schnabel, I. (2021), “Monetary policy and inequality”, speech at a virtual conference on “Diversity and Inclusion in Economics, Finance, and Central Banking”, Frankfurt am Main, 9 November. 7. See, for example, Cavallo, M. et al. (2019), “Fiscal Implications of the Federal Reserve's Balance Sheet Normalization”, International Journal of Central Banking, Issue 61, pp. 255-306. 8. See also Arrata, W. et al. (2020), “The scarcity effect of QE on repo rates: Evidence from the euro area”, Journal of Financial Economics, Vol. 137, Issue 3, September, pp. 837-856; and Brand, C. et al. (2019), “From cash- to securities-driven euro area repo markets: the role of financial stress and safe asset scarcity”, Working Paper Series, No 2232, ECB, January. 9. The latest adjustment on lending limits against cash took place on 10 November 2022. 10. These concerns were related to additional cash inflows from the Eurosystem’s non-monetary policy deposits, as the remuneration of these deposits was initially unclear. Ultimately, however, net inflows to  repo markets were limited during the episode of market strain, suggesting that behavioural factors have played a predominant role. 11. The remuneration of deposits held under the Eurosystem reserve management services framework was adjusted accordingly. 12. See, for example, Schnabel, I.
There are many examples from other industries where modularity in organisational structure has been deployed to enhance systemic resilience. Computer manufacture is one. During the late 1960s, computers were highly integrated systems. Gradually, they evolved into the quintessential modular system of today, with distinct modules (CPU, hard disk, keyboard) which were replaceable if they failed without endangering the functioning of the system as a whole. This improved resilience and reliability. In the computing industry, modularity appears to have had an influence on industry structure. Since the 1970s, the computer hardware industry has moved from a highly concentrated structure to a much more fragmented one. In 1969, IBM had a market share of over 70%. By this century, the market share of the largest hardware firm was around a third of that. Modularity has meant the computer industry has become less prone to “too-big-to-fail” problems.

Bigger and broader banking does not obviously appear to have been better, at least in a risk sense. In banking, as on many things, Merton may have had it right. (b)  Robustness  The Merton result holds in a world in which investors form judgements based on knowledge of the distribution of risk. But in complex dynamic systems, the distribution of risk may be lumpy and non-linear, subject to tipping points and discontinuities. 21 Faced with this, the distribution of outcomes for the financial system as a whole may well be incalculable. The financial system may operate in an environment of uncertainty, in the Knightian sense, as distinct from risk. There is a literature on how best to regulate systems in the face of such Knightian uncertainty. 22 It suggests some guideposts for regulation of financial systems. First, keep it simple. Complex control of a complex system is a recipe for confusion at best, catastrophe at  18  Beale et al (2009). 19  A Herfindahl-Hirschman index of revenue concentration is constructed to measure diversification, with a measure of zero meaning that the HHI = 1, i.e. revenue is concentrated solely on one activity. Revenue concentration is calculated across three buckets for the last pre crisis year (2006) – Retail and commercial banking; Corporate and investment banking; Asset and wealth management. 20  De Nicolo (2000). 21  Haldane (2009b). 22  See, for example, Aikman et al (2010). 8  BIS Review 40/2010  worst.
8 B. Boland, “M-Trends Asia Pacific”, www.fireeye.com, 24 August 2016, www.fireeye.com/blog/threat-  research/2016/08/m-trends_asia_pacifi.html  9/9  BIS central bankers' speeches

This of course puts upward pressure on prices, but also downward pressure when prices rebound and many people want to sell. In both Australia and the United Kingdom, prices have levelled out in recent months after short-term interest rates rising in these countries as their central banks increased their key rates. However, in Sweden both household borrowing and house prices appear to be continuing upwards, partly as a result of expectations of continued low interest rates. Moreover, the competition between banks has increased, which has led to more aggressive marketing, lower collateral requirements and longer amortisation periods. It is possible to begin to detect a scent of the reckless 1980s, one cannot deny it. There is therefore every reason to increase our vigilance, and we have recently emphasised the developments in credit and house prices as a further argument, although in my opinion perhaps not a particularly strong one, against more expansionary monetary policy. It is nevertheless important to point out that so far we have seen no signs of unwarrantedly large price rises and overheating in the housing market; in Sweden prices are still essentially governed by the normal supply and demand relationship. However, taking into account developments in asset prices is a further argument in favour of interpreting the inflation target with some degree of flexibility. Households and financial stability Let me now for a moment leave the inflation target and concentrate on some reflections regarding the Riksbank’s other objective, to promote a safe and efficient payments system.