samchain/econo-pairs-v1 huggingface dataset:
Indeed, the major global custodians each posted growth in assets held in custody in excess of 20% in just the past year. 31 And differences between the regulatory regimes for incumbent providers of infrastructure and those for either commercial bank providers or smaller new entrants could tilt the playing field. For example, CLS is subject to close central bank scrutiny, operates as a narrow bank, and has to meet exacting – and costly – resilience standards. New clearing arrangements and bilateral netting schemes are now penetrating the foreign exchange markets, threatening the volumes passing through CLS. In messaging, too, SWIFT – which submits voluntarily to central bank oversight – is beginning to face competition in certain markets from new entrants not subject to oversight. Authorities must be alert to the challenges these competitive developments provide. 32 Other regulatory initiatives are contributing to a reshaping of the landscape. MiFID, in the EU, and RegNMS, in the US, have sought to encourage increased competition in trading; and the Code of Conduct, recently signed in the European Union, establishes terms under which infrastructures operating in one member state can clear and settle (initially equity) trades in another. More than 20 applications have now been made under the terms of the Code. 4  BIS Review 130/2007  33 Whether trading, clearing and settlement infrastructure markets can support a wide range of providers in the long-term remains an open question.

There is generally a tendency towards concentration in infrastructure provision because of increasing returns to scale in a fixed cost business and often powerful network effects. This applies equally in the case of commercial bank provision of infrastructure: ECB survey evidence reveals that the ten largest correspondent banks in euro account for around 80% of correspondent banking payment values; and the top-4 global custodians now account for three-quarters of total assets in custody. Indeed, regulators have been giving increasing attention to the potential systemic spillovers from operational or business failures at major commercial bank providers of infrastructural services. That has led, for example, to the initiative in the US to implement “New Bank”, a dormant shell company to take over the functions should one of the two major clearers in the US Treasury market cease operations. 34 It may be that a competitive environment can be sustained, particularly as the cost of technology falls, lowering barriers to entry, and liquidity bridges and other forms of interoperability are established between systems. But, the jury is still out. Recent evidence on the trading side, particularly in the US, is mixed: some trading platforms, such as Archipelago and INET, have been swallowed up by the incumbent exchanges; others, such as BATS Trading are thriving, keeping the pressure on the exchanges to cut costs and upgrade their services. 35 I suspect what we are seeing is a redefinition of the market on an international scale.
BIS central bankers’ speeches  5  How could we be ready for the unthinkable if we were not even ready to assimilate past experiences? Some have said that standard risk management models could not capture a “black swan” event. Well, in some cases they could not capture a white swan either. In this regard, stress testing is seen as one of the core elements of a modern risk management function. The design of plausible yet demanding (forward-looking) stress tests both at the business area and at a firm-wide level can significantly contribute to understanding the sources and the consequences of the risks faced by the different institutions. One of the key lessons that we have learned from the crisis is the interaction between different types of risk. This interaction sometimes leads to compounding effects that were not properly captured by the risk management tools available before the crisis. A comprehensive risk management framework should therefore not only be firm-wide, but also encompass and aggregate in a meaningful manner the different types of risks to which a specific firm or institution is exposed. We need to pay attention to inter-risk correlations (i.e. the interaction across different types of risks), as much as to intra-risks correlations, and build a portfolio that is as diversified as possible on both dimensions and that matches our hedging needs or our risk-return preferences. But the single most valuable lesson that we have recently learned is that crises are more frequent than what we tend to think.

The gradual adjustment to the new regulatory framework over a sufficiently long period, also to take into account the weakened economic position of many developed countries and financial systems as a consequence of the crisis, will mitigate the impact of implementing the new rules. In the medium to long run, the transition to a regulatory framework designed to improve the capital  4  BIS central bankers’ speeches  position and the risk management practices of financial institutions will play a major role in fully restoring the credibility and public confidence in the financial system. Further initiatives aiming to improve the governance and transparency of capital markets and institutions will also be needed to restore the orderly functioning of the markets. In this regard, the ECB has launched, in cooperation with market participants, an initiative to disclose loan-by-loan level data in the European ABS market, which in our view will help reviving such market and mitigate some of the risks associated to those products. Of course, this initiative relies on the will of market participants to improve the way in which due diligence is performed. The commitment of the ECB and the Eurosystem in this regard may serve market participants as a benchmark. It is the duty of public institutions to live up to the highest governance standards, and therefore we strive at continuously improving our due diligence and risk management practices. We expect that financial institutions and private investors in general also will rethink their governance and risk management functions.
And if many firms make these mistakes at the same time then the result is an unnecessary fluctuation in aggregate output. Another decision affected by uncertainty about prices is investment. Many investments are specific to a particular model or product, and so they become sunk costs. For such irreversible investments it may pay to wait before investing since time will resolve some of the uncertainty. A Premiership football team may decide to postpone the construction of a new stadium until their survival in the League is assured. Or a car manufacturer may postpone a decision about opening a new plant to see if a rise in demand is temporary or appears likely to last. And that uncertainty could stem from a difficulty in disentangling relative from absolute prices. In the language of finance, there is an option value to waiting when there is uncertainty about the returns on an irreversible investment. So a project must offer a rate of return sufficient not only to cover the cost of financing of the project, but also the option value to waiting. That may explain why surveys of firms show that their hurdle rates of return are often well in excess of the cost of either equity or debt finance. For example a CBI survey last year found that the average real hurdle rate for UK firms was 11.3% - down from rates of around 15% in surveys conducted in 1994 - but still well above the cost of financial capital.

By linking public investment and growth-enhancing reforms, it will help ensure a stronger and more uniform recovery across the euro area and accelerate the green and digital transitions. Euro area banking sector developments and financial stability issues The improving economic environment has contributed to a decline in near-term financial stability risks. Continued fiscal support helped the corporate sector recover from the pandemic, although the situation continues to vary across industries and firms. With corporate insolvencies remaining subdued, bank loan performance turned out to be more resilient than initially feared, although it is still too early to assess the full impact of the pandemic. Positive asset quality and financial market developments supported the return of bank profitability to pre-pandemic levels, and the ECB’s stress test results published in July showed that the euro area banking system would be resilient to adverse economic developments. Amid reduced uncertainty, the Supervisory Board of the ECB decided not to extend its systemwide recommendation on banks’ capital distributions. Instead, it returned to the previous supervisory practice of discussing capital trajectories and dividend or share buy-back plans with each bank in the context of the normal supervisory cycle. The ECB reminded banks to remain prudent when deciding on distributions and not to underestimate the risk that additional losses may later have an impact on their capital trajectories. As the economic recovery takes hold, financial vulnerabilities associated with an upswing are building up.
The prevention of excessive inflation and the alleviation of inflation fears is the best that a central bank can do to support long-term economic growth. As for money market liquidity and extraordinary crisis measures, they do not hinder the pursuance of the necessary interest rate policy. If it is necessary to continue fixed rate tender procedures with full allotment to guarantee the normal operation of the money market, it may also be a reasonable move when the monetary policy interest rates are already on the rise. In this case, one does not hinder the other. It must also be pointed out that contrary to the popular misbelief, general monetary growth in Europe has not been very rapid after the introduction of extraordinary measures. Recent data indicate that it amounts to only a couple of per cent a year, which is too little rather than too  2  BIS central bankers’ speeches  much. Meanwhile, extraordinary instruments in the market do not mean that the money market environment is too lenient, because the European central banks have performed monetary policy transactions to curb liquidity according to need. Naturally, if the arrangement principles of such tender procedures become obsolete, they should be reviewed immediately. The same principle applies to the impact of the state budget on monetary policy. The situation of the state budget undoubtedly has a great influence on economic developments and it plays a great role in the analysis of the economic situation.

However, this analysis does not give the Governing Council of the European Central Bank cause to worry excessively about the debt servicing costs of the whole euro area or its member states. Instead of monetary policy interest rates, the debt servicing costs of countries are still primarily influenced by the credibility of their fiscal policies – this is also reflected by the very different interest rates of public debts within the euro area. The government bond purchase programme that started last spring may understandably cause concern regarding the goals of central banks. However, that step had a specific goal, which was related to the situation in the financial market and not to fiscal policy. Central banks are not allowed to finance the state budget and no such financing has occurred within the Eurosystem during the crisis. It must also be emphasised that the liquidity provided to the markets as a result of these purchases has been eliminated by opposite transactions throughout the entire period. This also indicates that the euro area’s central banks regard the key monetary policy goal – price stability – as superior. Although the reorganisation of the state budget is a serious challenge for many European countries, there are other people and measures for solving this problem. Monetary policy will not be imprisoned by it. In conclusion, the containment of inflation is the only goal of the euro area’s central banks in shaping their monetary policy.
Do they need to adapt to the new situation and, if so, how? One important question is, as I see it: “How can we ensure that monetary policy continues to have scope to counteract recessions and increased unemployment?” Keeping inflation low and stable certainly has a value in itself. But I have also argued here that maintaining the inflation target is very important for being able to use the interest rate as a monetary policy tool in the future. Thus, the fact that the Riksbank’s forecasts do not quite attain 2 per cent should not be regarded as an indication that we have abandoned the target and intend to focus on something else in future. It merely shows that it will take longer time to attain the target than we usually assume. The policy will in accordance with this remain expansionary, with the tools at our disposal today. But in the situation that has arisen, it is also fairly obvious that fiscal policy needs to play a larger stabilising role than has been the case in recent decades. One idea that I would like to at least air here is that fiscal policy may not merely provide support for monetary policy with regard to counteracting recessions, but also explicitly contribute to maintaining confidence in the inflation target. The inflation target is, after all, not merely the Riksbank’s target but a societal target with a political majority behind it.

13 [15]  Diagram 3: Downward trend for global interest rates Per cent 6  6  4  4  2  2  0  0  UK -2  -2  USA Euro area Sweden  -4 96  00  -4 04  08  12  16  20  Sources: National central banks and the Riksbank Note. Real government bond yields, 10-year maturity  Diagram 4: Low neutral rate makes expansionary monetary policy more difficult  Policy rate  Actual policy rate Neutral policy rate  Time  14 [15]  Diagram 5: Less monetary policy scope with lower inflation target  Diagram 6: Difficult to forecast the policy rate The Riksbank  The Market  6  6  6  6  4  4  4  4  2  2  2  2  0  0  0  0  -2  -2  -2 06  09  12  15  18  21  -2 06  09  12  15  18  Sources: Thomson Reuters and the Riksbank Note. Per cent. The Riksbank's forecasts for the repo rate and market forward rates. Forward rates are a measure of the market agents’ expected repo rate according to different derivative contracts. They are estimated around the same time as the repo rate forecasts. 15 [15]  21
As we all know, the choice of exchange rate regime is of critical importance for a central bank. The empirical findings show that in economies with serious balance sheet mismatches, the policy makers prefer fixed or controlled exchange rate regimes 5 ..  2  Eichengreen, B.; Hausmann, R. (1999); “Exchange rates and Financial Fragility”; NBER Working Paper No:7418. 3  De Nicolo, G.; Honohan, P.; Ize, A. (2003); “Dollarization of the Banking System: Good or Bad?”; IMF Working Paper; WP/03/146. 4  Galindo A.; Leiderman L. (2003); ”Living with Dollarization and the Route to Dedollarization”; Inter-American Development Bank; Working Paper; 526; p. 14. 5  Choi, W.; Cook, D. (2004); "Liability dollarization and the bank balance sheet channel"; Journal of International Economics; Vol. 64(2), p. 247-275. 2  BIS Review 124/2006  On the other hand, flexible exchange rate regimes provide more room for monetary policy that enables to respond to external shocks freely. It has also been found by using cross-country data for the banking sector that more volatile exchange rates reduce the share of the foreign currency denominated loans and deposits 6 , thus contributes to prevent dollarization. However, even if a flexible exchange rate regime is chosen de jure, dollarization and high pass through effect from exchange rates to inflation may cause “fear of floating”, thus monetary authorities are put under pressure to intervene in fluctuations in exchange rates at all costs.

Secondly, Turkey had lived through the first stage of dollarization in which the foreign currency is used mainly as a store of value and partly as a unit of account, but not as a medium of exchange. In this context, the dollarization in Turkey can be called as financial dollarization. Distinguished Participants, After the 2001 crisis, the implementation of tight monetary and fiscal policies together with the structural reforms has enabled the country to bring the inflation down to single digit numbers and to reduce the ratio of public debt to GNP significantly. Also, financial markets have become deeper and less fragile. In this context, the banking sector reform that aimed to strengthen the regulation and supervision of the banking sector, restructure the public banks, improve the asset and loan quality and the capital adequacy ratio of the system has been of great importance. Additionally, the progress made towards economic stability, particularly the significant decrease in inflation, enabled us to drop six zeros from the Turkish currency. This currency reform has increased the credibility of the Turkish currency both in internal and external markets. The issuance of the New Turkish Lira debt instruments by foreign banks in the international markets is an important indicator of this increasing credibility. Consequently, the desire and the need to invest in foreign currency in order to hedge the value of wealth decreased significantly and investors have started to increase the share of Turkish currency assets in their portfolios.
On the one hand it is difficult to measure these intangible assets, but on the other hand one disregards a large part of the companies’ investments if one does not take them into account. US and European studies show that investment in intangible assets comprises around 10 per cent of GDP. 11 The most recent productivity growth and forecasts Let me now comment on the development of productivity last year and during the period to come. 7  Bloom, Sadun and Van Reenen (2007). 8  Håkanson (2007). 9  By productivity is meant total factor productivity, TFP. In the study the comparison has been made with the median company. 10  Brynjolfsson and Hitt (2003). 11  See, for instance, Corrado, Hulten and Sichel (2005), (2006), Hao, Manole and van Ark (2007), Haskel and Marrano (2007). 4  BIS Review 12/2008  Productivity growth in the business sector has been 4.4 per cent a year during the period 2002-2006. In the increasingly mature phase of the economic cycle where the economy is now, it is normal for productivity growth to slow down in connection with an increase in employment. This is also something the Riksbank has been expecting. However, the downturn in the rate of increase in productivity last year was stronger than motivated by the prevailing economic situation and the Riksbank, like many other analysts, was surprised by the strength of the downturn.

The significance of IT is visible in two ways; in production and use. If we look at the production of IT, we can observe that the telecom industry's share of total industry is relatively large in Sweden compared with many other countries. This means that the rapid development in productivity that has occurred in the telecom sector has contributed to pushing up productivity growth in the business sector as a whole. If we instead look at use of IT, Sweden has a relatively large share of IT capital in the total capital stock, compared with other countries. Sweden is in this respect more like the United States than continental Europe. The use of IT means that one can simplify and automate the work so that those who work can carry out more tasks in a shorter time, that is, productivity increases. The financial sector is very skilled at making use of IT to increase productivity. Its customers currently carry out many simple tasks from home in front of their computers instead of going to a bank office. During the second half of the 1990s, major investments were made in IT capital. These investments accounted for approximately half of the growth in productivity during the period 1996-2000 (see Figure 4). The investment upturn was broken in connection with the IT bubble bursting at the beginning of the 2000s. After that the contribution from IT capital to productivity growth has declined substantially.
The requirements were largely set out in the Public Administration Act of 1967 and the Freedom of Information Act of 1970. Today, transparency and disclosure requirements also apply to Norwegian enterprises, particularly to listed companies. 10 The legislation is to ensure that all shareholders receive adequate, correct and timely information from the company. Companies must be open and assure equal treatment of all owners. Well-functioning equity markets rely on confidence that everyone has access to the same information about the company. Transparency is natural in a democracy Transparency is natural in a democracy and is important to ensure accountability among decision-makers. The Danish Nobel laureate in physics Niels Bohr supposedly once stated that “The best weapon of a dictatorship is secrecy, but the best weapon of a democracy should be the weapon of openness”. Yesterday was the twentieth anniversary of the fall of the Berlin Wall. This event has become a symbol of the fall of the iron curtain. We recall from those times the Russian word glasnost, which means openness. Mikhail Gorbachev sought to modernise the Soviet Union and used glasnost as a means of reducing corruption and abuse of power. In western democracies, the term glasnost took on a broader meaning, and was associated with détente between East and West in the 1980s. 11 As mentioned, the shift towards a more decentralised economy both in Norway and abroad reflected the failure of centralised planning. Monetary policy is an important component of the economic policy framework.

49  As part of its project to disseminate information about the central bank to various target groups, the Reserve Bank of India has made several comic strips for the benefit of school children. See http://www.rbi.org.in/financialeducation/Home.aspx. 50  See article “Bergen fikk Bislett Games 2004 (The 2004 Bislett Games goes to Bergen)”, NTB, 6 October 2003. 51  A more detailed explanation was probably available but was not included in the media coverage. 52  My predecessor, Jarle Bergo, delivered a speech a few years ago where he presented a mathematical equation that illustrated the assessments underlying our interest rate setting (see “Interest Rate Projections in Theory and Practice”, speech at Sanderstølen, 27 January 2007). I remember that we were uncertain about the reactions to this. My Swedish colleague Lars Svensson had recommended that such a target function be published in the interest of transparency, but no central bank had ever done this before. There was no firstpage news of the type “this equation determines the interest rate”. Our “bold step” proved to be fairly undramatic. It would seem that this is really the rule rather than the exception every time we have moved towards greater transparency. Bergo’s lecture was included in the curriculum of economics Professor Michael Woodford of Columbia University in New York. 53  Norges Bank Watch 2008 writes: “Norges Bank should facilitate a more open discussion regarding the empirical performance of their (mechanical) forecasting models by communicating the role played by the “judgment component” more clearly.