samchain/econo-pairs-v1 huggingface dataset:
The Eurosystem is well suited to take into account the existing synergies. The Treaty itself establishes price stability as a primary objective while at the same time calling on the European System of Central Banks to contribute to the smooth conduct of prudential policies and the proper operation of payment systems. Nonetheless, central bank policies must deal with a heterogeneous economic scenario where national economies retain distinctive features both in terms of exposure to specific shocks and as a  BIS Review 53/2006  3  consequence of the different functioning of domestic policies and allocation mechanisms. Moreover, while markets are increasingly integrated there are still frictions impeding sufficiently flexible flows of products, capital and labour. Even in the financial services area, and although progress in developing the single market is already evident, some transactions involving agents in several euro zone countries are still penalised in comparison with purely domestic operations. Against this background, the Eurosystem has had to face the challenges posed by economic heterogeneity and imperfect integration in two ways. Firstly, by complementing the monitoring of eurowide aggregate variables with the analysis of relevant national developments in order to identify the policy that best helps ensure price stability in the euro area as a whole. Secondly, by promoting a better integration of markets, particularly financial markets, in the euro area. Regarding this latter issue, the role of payment systems is crucial.

Put more plainly, we need to think about an environment where those in the position of most influence have the incentive to “poke holes” in myths via robust stress tests, and not the incentives to override their risk managers when the stress-test implications are not to their liking, or risk a near-term loss of clients or market share. Concluding observations New financial myths are regularly created. In closing, I will just speculate on where some may exist that interested parties should be exploring, now.   Potential Myth 1 – Sovereign debt problems will not be disruptive to the world economy. Not long ago, the sovereign debt problems were viewed as manageable and confined to one country. However, as interest rate spreads have widened – as shown in Figure 12 – investors are highlighting that problems in many countries  BIS central bankers’ speeches  5  have yet to be resolved. While I believe the most likely outcome is that there are no serious disruptions, interested parties should diligently consider scenarios that could be disruptive, involving various countries.   Potential Myth 2 – State and local financing problems will not be disruptive to the national economy. While much attention has been given to problems in state and local finances, it is generally assumed that the capacity exists to resolve these problems. While I expect these issues will be resolved without widespread or cascading problems, we should consider what scenarios could emerge if political impasses result in more disruptive outcomes.
The rapid pace of innovation in financial markets also promises better and wider distribution of risk which is good not just for the financial sector’s stability but should support more risk taking in the real economy. Greater investment could deliver stronger medium and long term growth. But there remain a number of sources of vulnerability in the world economy and in financial markets which firms need to bear in mind. Volatility is low, and as time passes longer memories are needed to remember when it was high. While there have certainly been improvements in macro performance in recent years, I do not know a central banker who is not surprised at the faith that markets appear to have in us to keep the great stability going. And the risks in the wider environment are as great as ever. 8  BIS Review 124/2006  It is not clear to me that these risks are fully priced into the market. Market forces may not have been able to correct any excess optimism given the incentives and constraints of participants operating in a world with a good deal of opaqueness about risk taking. In closing, I would stress that I am not saying market participants should avoid risk. But I do think it is important that market participants recognise that risk has not gone away, and that there are limits in the ability of financial engineering to insulate the financial system in aggregate against risk.

There were long periods when the Icelandic króna was pegged against or managed with respect to the currency of some trading partner countries or a basket of currencies, with varying degree of adjustability and commitment. During the 1980´s the exchange rate regime had been relatively flexible. But in the first half of the 1990´s it became much more stable,  BIS Review 21/2003  1  after the króna was fixed in December 1989. Exchange rate stability during this period was one of the cornerstones of the successful disinflation policy that took inflation in Iceland down from double digits in the late 1980s to below 2 per cent around the middle of the 1990s. Once the liberalisation of financial markets was more or less completed in the mid 1990´s, exchange rate flexibility was gradually increased. The margins around the exchange rate target were widened from 2¼ per cent in either direction to 6 per cent in September 1995 in order to allow for the possibility of greater fluctuations in the exchange rate with more volatile capital movements. In February 2000 the target band was widened further to 9 per cent in either direction in order to create greater scope for monetary policy which was increasingly focusing on the maintenance of price stability. Recent experience around the world has demonstrated that it is difficult to maintain soft exchange rate pegs with free capital movements, and the same has been the case in Iceland.
The global challenge of climate change; the shift in demographics as society ages; the growth of emerging market economies and opening up of their capital accounts - will all continue to drive  1  Post-trade generally refers to the processes applied to a trade subsequent to its execution. See World Bank and International Telecommunication Union, Individuals using the internet (% of population), World Telecommunication/ICT Development Report and Database. Available at: https://data.worldbank.org/indicator/IT.NET.USER.ZS 3 See World Bank and International Telecommunication Union, Mobile cellular subscriptions (per 100 people_, World Telecommunication/ICT Development Report and Database. Available at: https://data.worldbank.org/indicator/IT.CEL.SETS.P2 2  2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  changes in the global financial system. Large, interconnected and complex markets adapting to these changes require robust infrastructure underpinning them. So, finance is changing, and technology is both driving and enabling that change. The rise of fintech is one obvious manifestation, with the transformational role it is beginning to play in finance. The Bank recognises this, having a strategic goal of embracing fintech. The Governor spoke at last week’s Innovate Finance conference4, previewing the approach the Bank is taking to its work on the future of the UK financial system5 in response to key economic trends, and how we can provide a platform for a more resilient, effective and efficient financial system. I spoke too, highlighting the role of our Fintech Hub6 in delivering our goal. The pressure of technological change is pertinent to the post-trade system where, industry-wide our capabilities are likely lagging our potential.

The post-trade system is a collection of systems, infrastructures, and workflows that differ across firms, with low levels of interoperability. Many firms operate on legacy post-trade systems and technologies that require a lot of maintenance and upkeep, but are critical for the firm in its daily operations. The current system contains inefficiencies and complexities, with many firms running on systems which were developed in-house by firms during the 80s and the 90s. Many firms have run on the same systems over this time, patching and upgrading, whilst the environment we are operating in has developed, becoming bigger and more complex. There are obvious cost benefits in simplifying. But if you look at the kinds of innovation the sector has seen since it built the systems on which it runs, it is clear that there are also opportunities to take advantage of the benefits of new technologies and functions. As you would imagine, the Bank is not immune from the needs of change and development, and we have been investing in our own plumbing.
The matters of economic policy that are up for EU discussions are also more specific than before. How is economic policy to be formulated? How can the labour market be made to function better? At the European Central Bank we have missed the train on which the participating central banks designed their monetary policy strategy and decided how the functions of the system of central banks are to be performed. If we join the monetary union in the future, influencing the procedures of the ECB and the formation of monetary policy will be more difficult. In the economic domain the European Union is also increasingly tending to establish joint European positions, for example on such matters as the crises in Russia and Brazil, the role of the IMF, etc. Here, too, I consider we are in a formative phase. Guidelines are now being drawn up for how Europe is to be represented on international bodies and in the work of developing a new international financial structure. The questions include the future status of the G7, G10, G33 and other informal groups. In these contexts we are now becoming rather isolated. Conclusion Now for a brief summary and some conclusions. EMU is a part of the effort that has been in progress for more than five decades to bring the countries of Europe closer together. Today the monetary union is perhaps the most important EU project and as a member of the Community we cannot disregard it.

Furthermore, volatile ISK assets held by non-residents currently total perhaps a fifth of GDP and could rise to almost half of GDP if the failed banks’ ISK assets are recovered in full and paid out to creditors. Iceland has no excess foreign exchange revenues with which to unwind these ISK positions, however. The solution lies in spreading out repayments of foreign loans, solving the ISK problem related to the settlement of the failed banks’ estates in a manner that does not exacerbate the balance of payments problem, and opening up market access to resident entities. A number of possible scenarios that could achieve this are under scrutiny at this time, but there is no need to discuss them in detail here. But if such measures generate the results we are aiming at, it is important to ensure that the impact on foreign debt service, whether in domestic or foreign currency, is manageable; to safeguard Iceland’s public debt position, sovereign credit ratings, and access to capital markets; and ultimately, to provide domestic entities with access to foreign credit on acceptable terms. Some of these goals may conflict with one another, and this should be considered when a course of action is chosen.
The main goal of the Strategy was to achieve universal access to and usage of a broad range of quality and affordable financial services that meet the needs of individuals and enterprises and targets overall financial inclusion of 80% of the adult population by 2022; In 2017, under the National Strategy on Financial Education (phase I) financial education was integrated into both primary and secondary school curriculum; In 2019, phase II of the National Strategy on Financial Education was launched, to address the gaps identified under phase I; and Through the financial literacy campaigns, the number of financial services accounts designed for children increased to more than 20 compared to only 3 at the beginning of 2013. We strongly believe that the formulation and implementation of these national Strategies have provided a robust framework that facilitates effective stakeholder engagement between the Government, financial sector regulators, financial service providers and the general public. This collaboration has resulted in increased public awareness of the availability of financial products and services across the country, therefore contributing to the increase in overall financial inclusion in Zambia from 37.3% in 2009 to 69.4% in 2020. As financial sector regulators and services providers, we are obliged to disseminate information about the different types of services and products that are available to the public as well as some of the risks that maybe associated with them.

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In the EU, many dealers are “investment firms” and so are already subject to the same Directives as banks on capital adequacy. That is not true of finance companies in many jurisdictions. Perhaps there should be a size threshold for applying bank-style capital and liquidity regulation to such non-bank banks. BIS central bankers’ speeches  3  Securities dealers and the “rehypothecation” of client assets That last set of points was about firms acting as principals. Major issues arise from the use of client assets – money and securities – to finance the principal risk-taking of some financial firms. This has become apparent from the Lehman and MFG bankruptcies. Quietly in the background, something extraordinary has happened over the past decade or so. Let me explain. You place £ of your securities portfolio with your broker/dealer in safekeeping (as a subcustodian in a way). You borrow a much smaller amount of money from your broker and, reasonably enough, they take some of your securities as collateral; in effect, they have financed your holding of that part of your securities portfolio. An observer might think the rest of your portfolio would sit in a segregated client account. Not a bit of it. Unless you have been very careful, the broker/dealer has repoed out your securities for cash, and used the proceeds to finance its own businesses. To make this simpler, imagine you have placed surplus cash with your broker-dealer. As likely as not, it is being used to finance the dealer’s business.

If, against our hopes and expectations, that proves not to be the case, authorities in Europe and elsewhere will need to think through what if any measures we could sensibly take to make our part of the global financial system more resilient to the faultline that the money fund industry currently represents. One possibility would be for   bank supervisors to limit the extent to which banks could fund themselves short-term from US money funds and from other fragile/flighty sources, including CNAV money funds domiciled elsewhere. I should stress that such a policy need not be targeted at US funds per se. It is also a question of the prudence of the banks that borrow. So it could be cast in terms of the liability structure and sources of funding of the banking system. The Basel 3 Net Stable Funding Ratio may help a bit with this. And I should add that on some fronts – notably transparency – Europe should aim to catch up with the progress the US has already made. Securities dealers, finance companies Some shadow banks are “businesses”, not funds or vehicles. These non-bank financial intermediaries finance themselves externally in the markets. Some such financing is short-term and so effectively runnable, as events showed. In those cases:   If they are financed materially by short-term debt, they should be subject to bank-type regulation and supervision of the resilience of their balance sheets. That would apply to some kinds of finance company. It might apply to securities dealers too.
There could be economic policy mistakes; for instance, if the Central Bank’s real rate declines more than is justified by fundamentals, or if fiscal policy provides a similar stimulus. Were this to happen, the output gap would remain open longer and inflation would be higher. The correction, when it came, would be steeper, and the adverse impact on GDP growth would be more pronounced. The markets could undershoot or overshoot, derailing the economy at least temporarily. External shocks could strike as a result of trade disputes or further increases in oil prices, and indeed, the alternative scenario in the most recent Monetary Bulletin includes just such factors. Wage negotiations could result in broad-based pay rises far larger than the already sizeable ones provided for in the Bank’s forecast. The inflation outlook would then deteriorate, which would call for interest rate hikes. GDP growth would weaken as a result, perhaps even ending in a contraction. 2  But there is always some uncertainty in both directions, and naturally, we could end up on the receiving end of positive shocks that improve the situation. But under these conditions, it is likely that the risk to GDP growth is tilted to the downside. In this connection, it is important to remember that we have seldom, if ever, been as well prepared for adverse shocks as we are now. Our external assets exceed our external liabilities. Our international reserves are close to an all-time high and are almost entirely financed domestically.

But then, some may fear that instead of finding a black cat we shall find a fat tiger taking up much of the room, playing havoc, tearing up things, creating chaos and not wanting anybody to know about it. I firmly believe that the disclosure of relevant information by market participants will make markets work better. This could be done directly or indirectly through regulators and special purpose agencies such as credit registrars or custodians. The information should include data that will enable the financial position of significant market participants to be assessed objectively, such as their degree of leverage and their exposure to specific markets. This would help counterparties, such as the banks extending credit to them and the investors using their services and entrusting their savings to them, to take decisions based more on rational analyses rather than on herding behaviour. The information should also include data that will enable overall market positions and their concentration to be established. This would help the regulator in effectively ensuring systemic stability, taking regulatory action where necessary to manage or limit the systemic risks or simply to disclose publicly the relevant aggregate information for the benefit of all market participants. This is of course easier said than done. When you are dealing with international markets operating over the counter, with participants possibly registered in cyberspace, how and on what authority do you obtain that information, or impose regulatory measures, desirable as they may be?
Constantinos Herodotou: Speech - visit Ms Lagarde Speech by Mr Constantinos Herodotou, Governor of the Central Bank of Cyprus, during Ms Lagarde visit to Cyprus, Nicosia, 30 March 2022. *** It is such an honour for me to welcome to Cyprus a prominent European citizen. A reputable lawyer, a successful policy maker both during her term as a finance minister, as well as while being head of the IMF and the ECB. A great leader who during a turbulent time of serious and consecutive crises is steering us towards a better European Union, a more prosperous Eurozone and a more stable Eurosystem. We welcome today the President of the European Central Bank, Christine Lagarde. I would like to express to you, dear President my sincere gratitude for accepting my invitation to visit Cyprus. You visit our island as the head of the European Central Bank, is something that bears a twofold significance. Firstly, it emphasizes that in the effort to overcome the common challenges we face, all European countries stand together and united. We are working in a coordinated manner, in close collaboration and aware of the difficulties we encounter, both large and small countries, as one European family. Secondly, it is a recognition of the active role of Cyprus - and allow me to say the Central Bank of Cyprus in particular – in contributing to the shaping of the common European monetary strategy. And this is an acknowledgment that fills us with great satisfaction.

We, here in Cyprus, know what a challenge is and how to overcome it. A country at the edge of the Mediterranean sea, has managed to place itself to the political and economic core of the European continent. A small island with a part of it under occupation, thrives thanks to its extroversion and its people, who despite having been put to the test so many times in the past, have never stopped creating, evolving and moving forward. I have no doubt that together with our European partners we will take all the necessary actions to overcome this challenge as well, guided by our common core values and principles. As the great French novelist Victor Hugo said, "Changez vos opinions, gardez vos principes; changez vos feuilles, gardez intactes vos raciness" "Change your opinions, keep to your principles; change your leaves, keep intact your roots". Here in Cyprus we often say that "a captain is proven capable when she is in a storm". And hence, I consider ourselves lucky since our ECB captain steering us through both the Covid and geopolitical storms is Christine Lagarde, a leader of undoubted capacity and experience, whom I thank again for being with us today and would like to invite her to the podium to share her thoughts with us. 3/3  BIS - Central bankers' speeches