samchain/econo-pairs-v1 huggingface dataset:
Today’s world economy is no longer dominated by a small group of like-minded industrialised countries at similar stages of development; tomorrow’s will be even less so. A shared knowledge base will facilitate effective consultation and collaboration on complex and politically charged issues. This is essentially a public good. And while it is possible to envisage alternative arrangements for supplying it, a permanent international institution is likely to offer clear practical advantages. Second, the Fund already exists. It has the reach and experience to respond flexibly to the changing structure of the world economy. It has nearly universal membership, (now totalling 184 sovereign nations), an agreed legal framework, extensive relevant institutional capacity and a reputation built up over sixty years. Given the costs of acquiring such unique capacity from scratch in the modern world, the benefits of starting again would need to be very substantial indeed. This adds up to a strong pragmatic case for working with what we have. So what role should the Fund be playing? Mervyn King, in his speech in Delhi earlier this year, likened the role of the IMF to an umpire in cricket, ‘warning the players not to attack each other verbally and making it clear publicly when they believe the players are not abiding with the spirit of the game’. While I would be the last person to argue with Mervyn, at least about cricket, I initially found this analogy rather unconvincing.

First, instead of being required to raise permanent capital, institutions should arrange for capital to be infused when they are in trouble. One example of contingent capital is for banks to issue debt that Page 2/4  automatically converts to equity under specified conditions. The second type of regulation is aimed at ‘too big to fail’ institutions. Instead of limiting their size and activities, a more sustainable form of regulation requires these institutions to develop a plan that would enable them to be resolved over a weekend. Both of these measures proposed by Raghu have become fundamental elements of banking regulation in Switzerland since the financial crisis. Impressive policymaker I have known Raghu for many years. From my personal experience I can say with conviction that he is not only an exceptional scholar but also an impressive policymaker. His career as a policymaker began at the International Monetary Fund (IMF). In the aftermath of the 1997 Asian financial crisis, the IMF wanted to strengthen its financial expertise. Anne Krueger, then the IMF’s First Deputy Managing Director, asked Raghu if he would be interested in becoming the IMF’s Chief Economist. Raghu replied: ‘Anne, I don't know any macroeconomics’. However, this claim was neither convincing nor credible for the IMF’s Deputy Managing Director, and so at the age of 40, Raghu was appointed as the IMF’s Chief Economist. He was both the youngest-ever person to be assigned the position, and the first from an emerging-market nation.
Let me briefly outline our concept regarding the new investment process:  BIS Review 58/2003  3  •  The Bank Council approves the principles laid down for risk policy and the investment process. •  The Governing Board decides each year on the investment strategy based on the aforementioned criteria of liquidity, risk and returns. •  The organisational unit Asset Management, which is part of Department III, is responsible for the market-oriented implementation of this investment strategy. An investment committee chaired by the head of Asset Management makes the strategic investment decisions and sets the targets for each portfolio manager. •  A well-tested risk control process ensures that risk taking at the different levels is duly supervised. Responsibilities and competencies are clearly assigned at all levels of the investment process. Performance at the different levels is assessed through the consistent use of benchmarks and the corresponding measurement techniques. The process described above is applied to the management not only of the international reserves but also of the proceeds from the sale of gold no longer needed for monetary policy purposes. How the gold reserves deemed “free” at the time are finally used will be a political decision. Managing these assets is not part of the SNB’s statutory mandate. Thanks to the new NBL and the SNB’s internal know-how, however, the Bank is well qualified to perform this task. 4  BIS Review 58/2003

This first step was followed by other steps related to other segments of the financial market, such as the securities and capital markets, including the establishment of the relevant supervisory and regulatory institutions. Initiatives in these aspects have promoted a constant expansion of the financial market, in terms of both diverse institutions and number of financial products and trading volumes. Yet, despite these developments, the financial system remains dominated by the banking system and relevant developments in it. The last financial stability report of the Bank of Albania states that banks account for around 90% of total financial system assets, equivalent to 92% of the GDP, whereas the rest of the financial sector shares only 10% of the financial system total assets. Assessments and studies of the Bank of Albania, as well as comparative studies by third parties, particularly by the International Monetary Fund, show that the financial distribution and expansion in the Albanian financial market is close to the equilibrium, dictated by the Albanian economy and consumers. Moreover, financial intermediation indicators, as a percentage of the Gross Domestic Product, are at similar levels to those in other countries of the region. The dominance of the banking segment has naturally led to a higher level of concentration of financial products and services in its favour. More than 80% of resident investments in the financial system are in the form of deposits and current accounts in banks.
Against this background, central banks responded by further easing monetary conditions. In the euro area, the Governing Council of the European Central Bank (ECB) resolved at our September meeting to launch a package of measures. These included cutting the deposit facility interest rate by 10 basis points (bp) to -0.50%, strengthening forward guidance on  1  interest rates and improving the financing conditions of quarterly targeted longer-term refinancing operations (TLTRO-III). We also decided to resume net purchases under the asset purchase programme at a monthly pace of € billion as from 1 November and without a defined time limit. This additional global monetary accommodation is serving to stimulate growth and inflation. For instance, the IMF argues in its last WEO update that “the 2019 global growth estimate and 2020 projection would have been 0.5 percentage point lower in each year without monetary stimulus”. In the case of the euro area, it is estimated that the ECB’s measures since 2014, including negative interest rates, have been pivotal to easing financial conditions and, ultimately, to stimulating growth and inflation dynamics. Our analysis shows that the introduction of last September’s package is underpinning favourable financing conditions for all sectors of the economy. In turn, lower financing costs for households and firms are supporting consumer spending and business investment. This will sustain the euro area expansion, the build-up of domestic price pressures and, thus, the robust convergence of inflation on our mediumterm aim.

The medium-term perspective is decisive for us, most especially the question of whether we are dealing with a temporary soft patch or with a more prolonged weakness. And your response, particularly in view of the continuing weak data since the last Governing Council meeting? First of all, the data since the January meeting have not only held negative surprises, they have also contained a few positive signs such as the further decline in unemployment. But it’s also true that growth in the third and fourth quarter of 2018 and most likely also in the first quarter of 2019 is well below the potential growth rate of the euro area economy. So growth will have been below potential for three consecutive quarters and that’s not good news. The question now is whether there will be a rebound in the second quarter and beyond. A rebound is likely, but it is too early to say by how much. So would you say that the ECB’s Governing Council is becoming less confident that we are now merely seeing a temporary economic dip? The economic slowdown is broader and more persistent than had been thought and growth in the short term is likely to fall short of previous expectations. But as I said, what counts for us is the medium-term outlook and we see positive and negative factors there. What does that mean in practice? On the positive side, the situation for households and so for consumption is still favourable. That is a key driver of growth.
And I would like to share with you that some banks have launched what we may call a “pre-vetting” process for account opening. This means an applicant may request to first submit the documentation and information required for opening an account to the bank by mail, fax or email, and the bank will “pre-screen” or “pre-vet” them before arranging the applicant to have a face-to-face meeting in Hong Kong. I trust this change in process flow would be welcome by customers based overseas. 8. We are also working closely with the industry to explore the use of technology to enhance the efficiency of account opening processes, such as KYC Utilities (“KYCU”) and technology to allow remote account opening. You may have heard about KYCU, which are third-party platforms that aim to manage data as a strategic asset across banks to reduce duplication and cost and assist banks in making decisions, on all types of risks, including but not limited to AML, and as a result to make smarter business decisions. For example, a single source of customer data or documents would remove the need of a customer to provide KYC documentation to every bank, and may shorten the turnaround time for new account opening. We have had a number of discussions with major banks and relevant technology providers and steps have already been taken by both the HKMA and some major banks to take this work forward.

Budget cuts will only lead to lower growth, higher unemployment and larger deficits. I see no contradiction between fiscal consolidation and sustainable growth. In fact, the one is a pre-condition for the other. I do not deny that there are negative demand effects in the short-term. But for the longer-term, sound fiscal policies are essential to lower borrowing costs and encourage investment. Moreover, in those countries experiencing severe sovereign debt tensions, fiscal consolidation is unavoidable to maintain market access. That said, there is clearly a need to take measures to strengthen the growth potential of the euro area’s economies. These measures also need to have effect in the short-term so as to soften the short-term impact of fiscal consolidation. Recognising this, the European Council on 28–29 June agreed on a “Compact for Growth and Jobs”. This Compact aims to free up to 120 billion euro for growth and investment, representing roughly 1% of euro area GDP. This comprises a 60 billion euro increase in the lending capacity of the European Investment Bank; 55 billion through the reallocation of structural funds to growth-enhancing measures; and 4.5 billion of investment financing through a “project bond” pilot phase. On top of that, the European Council took a number of measures to improve the functioning of the Single Market and facilitate adjustment within monetary union. The single market in services will be completed, which is expected to yield economic gains of up to 330 billion euro.
The target is for the annual rate of change in the CPI to be 2 per cent, with a tolerance for deviations of plus/minus 1 percentage point. The decision to define the target for monetary policy in terms of a specific figure was of course partly due to the desire to create a nominal anchor that everyone could recognise and base their expectations on. However, another important reason was that a specific target would facilitate assessments of the Riksbank’s activities and make it easier to hold the Riksbank accountable, which was important when it had been granted so much independence. Inflation can be measured in many different ways. The Riksbank chose the CPI as target variable partly because it is a broad price index that represents typical purchases made by consumers and the index is familiar to the general public. But the development of the CPI cannot always indicate what monetary policy is needed at a particular time – no single inflation measure can do this. The Riksbank therefore uses various measures of underlying inflation to describe the trend rate of inflation and to justify the monetary policy conducted. Our most commonly used measure, with the not so pronunciation-friendly name UND1X, consists of the CPI adjusted for certain items that are very directly affected by fiscal and monetary policy. So, there are educational gains with using measures of underlying inflation.

Financial systems continuously need to adapt themselves to the rapidly increasing technological innovations. This also includes new products, necessitating increased awareness by the users and supervisors of the risks and benefits inherent in them. At this stage integrity and accuracy of data comes forward to facilitate risk management by the institutions and effective supervision by the regulators. The supervisory authorities increasingly need to be proactive and concentrate on consolidated supervision. In my opinion, it is crucial for policy makers to be aware of the dynamics in the highly correlated markets. Creating widespread transparency with regard to their objectives; identifying risks; sharing views with financial market participants to increase their awareness of risks and to act accordingly; starting or promoting initiatives to reduce the financial system’s vulnerability to crises and to reinforce financial infrastructure, especially in the field of payment services and securities settlement should be given priority. International initiatives ease this process by specifying best practices and defining principles. In these international platforms, we find the opportunity to cooperate and exchange information. As we would all agree, although it is highly comprehensive and demands our devotion, Basel II is a significant step towards that end. There is no doubt that the main pillar of Basel II regarding capital adequacy is a core requirement for the financial soundness of institutions. However, I want to point out the importance of its two other pillars. Supervisory Review is very essential to evaluate an institution’s risk management. Complementary to this is the effective corporate governance in an institution.
Measuring the climate impact of this market portfolio remains a developing science, and our disclosure report shows a range of possible metrics, including the commonly reported weighted average carbon intensity (WACI). More experimental metrics under development, are “portfolio warming potential” metrics, which attempt to assess alignment with international climate targets. One estimate suggests this is 3.5° for the CBPS, and so not aligned with the long-term goals of the Paris Climate agreement (Figure 7). Again that is, unsurprisingly, broadly consistent with the wider market. Other approaches lead to a wide range of different results for our portfolio, ranging from less than 1.75° to 4°, illustrating the considerable degree of uncertainty. 25  A 2013 Bank of England Quarterly Bulletin article by Nick McLaren and Tom Smith sets out the factors that are likely to determine the size and direction of future transfers. 26 “The Bank of England’s climate-related financial disclosure 2020”, available on the Bank’s website. 27 Eligible bonds are sterling investment grade corporate bonds issued by companies which make a material contribution to economic activity in the UK, subject to certain restrictions which are set out on the Bank’s website. Corporate bonds issued by banks, building societies, insurance companies and other financial sector entities regulated by the Bank or the Financial Conduct Authority are not eligible.

As for economic outcomes, inflation has been well below our 2% target for the past year, while measures of inflation expectations such as those from financial markets have been stable and consistent with the target – not what you would expect to see if QE was being used for purposes other than our monetary stability objective. In fact it is true that there are links, as I’ll set out, between QE and the Government’s finances – as there are for any of our other balance sheet tools. But these are very different from the charge of “monetary financing” that I have been responding to so far. Instead of reflecting deliberate deviations from our monetary policy objectives, they come down to more prosaic and technical, though very important, and hence understandably a focus of the IEO report, issues of risk management and accounting. Ben’s recent speech “Government debt and inflation” addresses this question comprehensively, as does Andrew Bailey’s recent speech “Modern challenges for the modern central bank”. 21  11  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  11  I’ll start, once again, with the Bank’s own balance sheet. Like any financial institution the Bank holds lossabsorbing capital to insulate it against unexpected losses.
The concern about empty shells arises because, given the uncertainty about the future relationship between the UK and the EU and the cost of making organisational changes, a good number of institutions are studying how to adapt to Brexit minimising the changes to be made to their structures, management and business models. They may be considering making extensive use of the capabilities of their UK headquarters through the use of back-to-back booking models for risk management, maintaining shared governance structures, extensive outsourcing within the group or keeping the bulk of their workforce in the UK through the artificial use of branches in the UK. Empty-shell banks do not have risk management and governance structures that ensure a safe continuation of the local business or a smooth wind-down in crisis situations, and may present operational risks and financial stability issues for the countries hosting them. For this reason, when assessing booking models, the ECB and national supervisors will pay attention to whether banks have adequate: (i) internal governance and organisation; (ii) access to financial market infrastructures; (iii) booking and hedging strategies; iv) intragroup arrangements; and v) IT infrastructure and reporting. Lastly, another very relevant issue with regard to Brexit that I would like to mention is that of the transition period. 5/6  EU and UK negotiators have reached agreement that a transition period should be a matter of mutual benefit and have set the principles for the negotiation of a transition period between the date the withdrawal agreement enters into force and 31 December 2020.

Let me now turn to the other side of the coin. Despite the above examples of areas where good prospects may arise for market activity, there are also elements of uncertainty on the horizon, and one of them is Brexit. Brexit On 29 March 2017, the United Kingdom notified the European Council of its intention to leave the European Union. This means that 30 March 2019 is, in principle, the “withdrawal date”. So far, in the draft Withdrawal Agreement, there is no specific regime with regard to financial services and this unquestionably generates a context of uncertainty that affects all market participants. Allow me to focus on how it affects banks. “Wait and see” is not an option. Banks need to prepare. Within the framework of the Single Supervisory Mechanism (SSM), the ECB, together with National Competent Authorities, is trying to communicate, to banks which may be considering relocating their banking activities to the euro area, the SSM’s supervisory expectations on different aspects such as: authorisations and licences to carry out banking activities in the euro area; internal governance and staffing arrangements; or authorisations and use of internal models. These expectations have a key underlying principle, which is the need to guarantee consistency across the existing and the relocating institutions, so that they both operate under the same regulatory, prudential and supervisory standards. There is another key aspect, which is the need to ensure that relocating banks are not empty shells.
Using its conventional tool for easing the stance of monetary policy, the Federal Open Market Committee (FOMC or Committee) lowered its target for the federal funds rate in a series of steps from 5¼ percent in mid-2007 to a range of zero to ¼ percent in December 2008. With short-term interest rates effectively constrained at their lower bound, the FOMC provided further monetary policy easing with two unconventional tools: Forward guidance on the expected future path of overnight interest rates and asset purchase programs aimed at putting downward pressure on longer-term interest rates, supporting mortgage markets, and making broader financial conditions more accommodative.1 Purchases of longer-term Treasury securities, agency debt, and agency mortgage-backed securities (MBS) expanded the size, duration, and interest rate and prepayment risk profile of the Fed’s domestic 2 1 / 13  BIS central bankers' speeches  securities portfolio.2 In total, from 2008 through 2014, the FOMC undertook three rounds of LSAPs, resulting in an extraordinary expansion in the size of the Fed’s balance sheet—from around $ billion (6 percent of U.S. nominal GDP) before the crisis, to $ trillion (23 percent of GDP) today. 3 For all but a brief period of that time and until last month, the FOMC maintained the face value of its securities holdings by reinvesting principal payments received on securities held in its portfolio. I will discuss reinvestments more specifically later.

Andréa M Maechler: Investment policy in times of high foreign exchange reserves Speech by Ms Andréa M Maechler, Member of the Governing Board of the Swiss National Bank, at the Money Market Event, Zurich, 31 March 2016. *  *  *  The accompanying charts can also be found on the Swiss National Bank’ website. The speaker would like to thank Dirk Faltin and Marco Huwiler for their support in drafting this speech. She also extends thanks to Sophie Faber, Peter Kuster, Sandro Streit, Jonas Stulz and Martin Weder for helpful comments, to the SNB Language Services, and to Adrian Avdyli for preparing the data. Welcome to the SNB’s traditional Money Market Event in Zurich. I am delighted that so many of you have responded to our invitation. A year ago, you were welcomed here by Fritz Zurbrügg, my colleague in the Governing Board and predecessor as the Head of Department III. It was only a few weeks after the minimum exchange rate had been discontinued, and monetary policy was the hottest topic in town. This year, I will focus on the Swiss National Bank’s investment policy. In the past few years, the SNB has become a big asset manager. Consequently, I want to look at two questions today. First, what are the reasons for the significant increase in our foreign currency investments? Second, how does the SNB handle these foreign currency investments? However, I can’t leave monetary policy out completely.