samchain/econo-pairs-v1 huggingface dataset:
It is simply not desirable for spikes in Libor rates, which banks are largely insulated from in terms of their own cost of funding, to nevertheless result in those costs being passed directly onto businesses and households. Interim Financial Stability Report, May 2020 – Box 1 The continued importance of the transition away from Libor, https://www.bankofengland.co.uk/-/media/boe/files/financial-stability-report/2020/may-2020.pdf 4  5  For example see How Correlated is Libor with bank Funding Costs? https://www.federalreserve.gov/econres/notes/feds-notes/howcorrelated-is-libor-with-bank-funding-costs-20200629.htm 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  The factors impacting Libor can be far removed from the risks reflected in the borrower’s own credit worthiness and can introduce significant, and for many impenetrable, volatility in interest rates. Financial markets should not amplify these risks and pass them through to the real economy. So what’s the alternative? So if Libor isn’t a robust and transparent basis for determining funding costs for firms and households – is it possible to create such a benchmark that is sufficiently robust? Well, some years ago now, working groups made up of industry participants in Libor jurisdictions recommended near risk-free rates as the alternative. And more recently we have seen the market develop products using these rates. It is a fact that homes and businesses with loans linked to these rates have seen greater direct benefit from the action taken by central banks during the Covid disruption and have not been as exposed to movements in Libor rates impacted by the scarcity of underlying transactions. Many more deserve the same protection.

BIS central bankers’ speeches  5
43 44  9  All speeches are available online at www.bankofengland.co.uk/speeches  9  The MPC’s policy actions in November were described as “taking its foot off the accelerator” to hold the car within its “speed limit”. This was intended to convey the sense of monetary policy slowing the economy slightly, towards its lower potential growth rate, while still propelling it forward overall. It was a visual narrative. Because most people (from Derry to Doncaster, Dunfermline to Dunvant, Delphi to Delhi) drive cars, it was a local and personal narrative too. The car metaphor was used extensively by UK media. There is a balance to be struck here, of course, a point beyond which simplification and story-telling morphs into dumbing-down and trivialisation. We need to recognise those limits. Equally, most of the policymaking world is at present some distance from these limits. In the transition, I’d be comfortable erring on the side of over-simplifying, rather than over-complicating, if policymakers and the public are to begin to forge a link. Let me give a concrete example: Quantitative Easing or QE. When QE was first introduced in 2009, the Bank made strenuous efforts to explain this new policy to the wider world. It published speeches and articles. It even did a Townhall tour of the UK to explain its actions. The conversations with the public about QE typically took the following form: Q: “Is QE money-printing? And, if so, can I have some please?” Bank: “No. And no.” Q: “Why not?” Bank: “QE is not printing money.

The minutes from the monetary policy meetings will now include the names of the Executive Board members in relation to the discussion and not merely if they enter a reservation against the majority decision. In this way it will be easier and clearer to examine the motives behind the monetary policy decisions and therefore also to form an impression of future decisions. These and all of the other changes we have made in recent years are intended to create the best possible opportunities to understand, evaluate and debate monetary policy. The debate on monetary policy is important and useful for us. It contributes to developing the way we work. The Riksbank’s openness, which we are now increasing further, enables a qualified public debate, which in turn is a part of how we can ensure accountability in a democracy. Thank you! BIS Review 54/2007  5
Resolution is the toughest nut to crack in the financial reform package, but it is also the one that I think does more to unlock other issues, including the appropriate steady-state endpoint for the bank capital regime. Put simply, the answer in my view is different in a world of effective resolution that ends too big to fail. But in the alternative outcome, where too big to fail remains with us and there are doubts around the effectiveness of resolution, it is hard to avoid the conclusion that higher capital requirements will follow, and cross-border establishment will be through subsidiaries. Let me also say that we have made more progress on resolution in the last few years than many people expected. To say that we are not there yet should not conceal the real progress made. And, an important credit on this goes to Paul Tucker who has led much of the international policy thinking on resolution. Paul leaves us at the end of the week for the calmer environment of Harvard – we shall miss him in many ways, and I hope that when we get to an outcome on bank resolution that meets our wish to reject the permanence of fragmentation, we will remember how much Paul did to get us there.

I’m glad to say that our efforts to reform and strengthen the risk focus have paid off. Excellencies,  2  BIS Review 15/2009  In summary, the Thai economy has achieved significant structural improvements since 1997. Our economy has strong fundamentals, underpinned by price and financial stability. Nevertheless, it is perhaps inevitable that we may yet see more negative impacts from the present international financial market turmoil before the improvement, since no one knows how much deeper or longer this global downturn will be. What we need to do now is to ease some of the pain currently experienced, build up safeguards and prepare for the eventual upturn. In Thailand, policymakers on all fronts together with the private sector are doing just that. BIS Review 15/2009  3
Technically, this project is a real challenge and it will contribute to the definition of smartcontract standards for the automation of tokenised financial markets and the interoperability of CBDCs. These standards are necessary to allow the tokenisation of finance to take off securely and to reduce fragmentation in this environment. In case of success, project Mariana could be an important step toward the improvement of cross-border and cross-currency payments. Confident in the strength of our cooperation with MAS, we hope that other joint experiments will follow the Mariana project. There is still a lot to be done, especially on more complex financial activities around the lifecycle of financial securities in a cross-border and cross-currency context. In conclusion, I would like to say that financial innovation is promising and exciting but can be for an institution like the Bnaque de France, which has among its core mandates to ensure financial stability, a source of issues if not concerns. It is therefore for us in any case very stimulating and leads us to reconsider and adapt our role, our policies and our services. To that end, with the help of our team in Singapore and the new leadership of Stéphane Latouche, I very much hope that we will be able to continue  3/4  BIS - Central bankers' speeches  working with you here in Singapour, and in particular with the MAS, to better master innovation and build the future of our financial system. Thank you all for your attention. 4/4  BIS - Central bankers' speeches

We nevertheless have reasons to cheer: in 2021 around EUR 100 billion were invested in the European technology ecosystem, almost three times the previous record of 2020, with around 100 new unicornsi. Furthermore, although technologies have not yet shown their full potential in terms of productivity, we may be at a turning point with the latest advances in artificial intelligence, biotechnologies or telework-related reorganisations - after a lag which corresponds to the process of appropriating these technologies by the economic fabric (investment, training, etc.). Page 7 sur 9 These disruptions are also reflected in the monetary, financial and payments spheres – which we scrutinise as central banks and supervisors –, where digitalisation is bringing about a triple revolution – and it is far from over: (i)  First, the arrival of new players: new actors born from the tech world – Fintechs and Bigtechs – are challenging historical players with radically new approaches to financial services and at present much less regulation;  (ii)  Second, the emergence of new assets: crypto-assets from the blockchain universe in the form of tokens: they will never according to me be credible as “crypto-currencies”, but could be used as settlement means – think of stablecoins for instance;  (iii) Lastly, the emergence of decentralised market infrastructures: new technologies tend to reduce the use of proven centralised settlement systems. These revolutions offer the potential for increased market efficiency while reducing costs and time.
7 [23]  emerging economies, as well as in the major oil-producing countries, contributed to the downward pressure on interest rates. This is because the large current account surpluses in these regions have been invested on the global capital markets, resulting in low real interest rates. The falling trend in real interest rates may also be due to a reduced willingness to invest. In an article that has attracted much attention, the famous American economist Robert Gordon claimed that the pace of innovation has declined sharply since the 1970s. 6 In his opinion, growth between 1870 and 1970 was abnormally high thanks to relatively simple and growth-promoting innovations, such as electricity and the combustion engine. According to Gordon, it will not be possible to repeat this growth as today’s innovations, such as the Internet and mobile technology, he says, do not provide any major productivity gains in the long term. A reduction in global willingness to invest may thus be due to a slower pace of innovation. This means there are fewer profitable projects in which to invest. ...but there may also be other reasons According to the theory of secular stagnation, the falling real interest rates may be a sign of a shortage of investment opportunities for companies. But has this actually been the case? One way of investigating this is to study the return on companies’ capital stock. Figure 4(a) shows the real return on capital in the US between 2000 and 2016.

It is not difficult to find reasons why this could be the case, particularly not in the period after the financial crisis. The supply of acceptable collateral on the financial markets decreased when a significant share of the assets were lost during the financial crisis. The sovereign debt problems in the euro area may also have reduced the supply of safe assets. The demand for safe assets may have increased due to new financial regulations, such as Basel III. Finally, central bank purchases of government bonds reduce supply on the financial markets. To summarise – making predictions about future economic development is, as everyone knows, very difficult. The economic system is complex and new innovations and changes that are difficult to predict happen all the time. The theory of secular stagnation was presented for the first time as early as the 1930s by the American economist Alvin Hansen. 8 It proved to be incorrect at that time and I have suggested that there may be reason to still be sceptical about it now. 9 The current low interest rate environment may very well have been caused by factors other than secular stagnation and need not therefore be long-lasting. A look-back in history shows that real interest rates often vary in longer cycles. They have been on the same low levels as today only to then return to more normal levels.10 The difficulty we now face is assessing how long this cycle of low real interest rates will last.
Lenders report that loan spreads have fallen for companies of all sizes, and that credit availability has increased, but the improvement has been less marked for small and medium-sized businesses. We have seen banks take different approaches to SME loans: one bank has scrapped some of its arrangement fees, another is offering guaranteed discounted borrowing costs and another offers a cash back scheme. So one can’t capture the impact of the FLS on the cost of borrowing for businesses in a single simple, headline, interest rate measure. Survey evidence from the Federation of Small Businesses suggests that the pricing of loans for small businesses was more favourable in 2013 Q2 than in mid-2012 – but availability was reportedly poor. So it’s a mixed picture overall for SMEs. Going forward, SME credit conditions should be supported by the extension to the FLS announced in April, which provides additional incentives for participants to increase lending to SMEs both this year and in 2014. A large proportion of FLS participants have indicated their intention to participate in the extended Scheme. It is likely that any person or business who has borrowed from a bank since the middle of last year will have done so at a cheaper rate than they would have done in the absence of the Scheme. If so then the FLS will have had a monetary impulse on the economy. We think that the FLS will continue to bear down on lending rates to households and businesses in the rest of this year and beyond.

Although it is clear that a number of firms must have made substantial losses on the positions they had, there have not been many visible signs of severe financial distress. For most longer-term investors the stress has been seen as rather limited. Credit spreads have not particularly blown out with rising “risk-free” rates. For example, yields on Italian and Spanish bonds were remarkably stable for most of this period; advanced economy equity prices largely recovered; and “cov-lite” loans have continued to be issued at a record pace. Overall the system seems to have survived in reasonable shape and for many market participants the “shock” is seen as a healthy correction to what had become a complacent outlook. As reported in the record of the recent FPC meeting published yesterday, staff from the FCA, PRA and Bank have carried out some analysis of the sensitivity of borrowers and financial institutions to upward movements in long-term interest rates and credit spreads.3 That preliminary work suggested that “a moderate rise in long-term interest rates did not pose an immediate threat to major banks and insurance companies. But borrowers would become more exposed to an increase in interest rates were debt levels to rise. And counterparty classes with higher leverage or exposures to market liquidity risk or credit spreads were more affected...”. The Committee did not draw too much comfort from this assessment and has asked that more detailed work be done to assess the risks. What have we learned from this episode?
And the G20 fulfilled the most optimistic anticipations as it reacted promptly and strongly to the crisis. Beyond this, the G20 has also agreed on an ambitious policy agenda, aiming for the long run. The G20 Roadmap does not only aim at one particular aspect of the global economy; it is very encompassing. One aspect of it is macrorebalancing, another is on financial regulation and global financial safety nets. The G20 agenda is focused on crisis prevention by coordination in order to avoid, or at least dampen overheating and boom/bust cycles. How are these issues related? First I will briefly tackle the important question of the link between the financial crisis and global imbalances. Second, I will go through the main implications of this link and outline the key features of the policy agenda of the G20. In this second part I will mostly focus on the so-called “G20 Framework for a Strong, Sustainable  BIS Review 93/2010  1  and Balanced Growth” and on financial safety nets. In the last section I will focus on financial regulation issues more specifically. Why and how do the financial crisis and global imbalances interact? An overwhelming body of research has established the clear relation between global imbalances and financial issues, some of which were behind the financial crisis. Indeed, global imbalances were not just the result of cyclical factors, such as business cycle fluctuations, changes in oil and other commodity prices, etc.

They were also, and to a large extent, the result of deeper, structural factors, as illustrated by the link between global imbalances and asymmetries in financial development. Ricardo Caballero focuses for instance on the notion of asset shortage: as safe financial assets were not readily available in some regions of the world (emerging Asia noticeably), net savings in these regions were channeled to the United States, which, in lowering financial constraints, amplified the current account deficit of this country. One may actually wonder whether this also partly contributed to the development of a financial bubble in the United States. The key idea I would like to take from this literature is that finance most certainly played a key role in the emergence of global imbalances. How and why may the G20 Roadmap help financial soundness and global rebalancing As the global economy is recovering from the crisis, the G20 roadmap aims first at ensuring the transition to a strong, sustainable and balanced growth. By “strong”, we mean that growth should converge to the growth rate of potential output over the medium term whereas that potential is enhanced by the implementation of more effective structural policies. “Sustainable” growth should be consistent with public finance sustainability, price and financial stability, along with social and environmental policy goals. Finally, “balanced” growth implies a growth that is broadly based across all G20 countries and all regions in the world, and as I said earlier, that should not generate persistent and destabilizing internal or external imbalances.
We need to link information on borrower decisions about the kind and amount of education they receive to long-run outcomes for them and for the overall economy. So I commend to you the work before you – finding new ways to get the information that policymakers need to answer important questions about how we finance higher education. I look forward to your insights and recommendations. BIS central bankers’ speeches  3

•  Second, maintaining price stability does not guarantee financial stability. In the euro area, the inflation mandate has always been fulfilled, but has not prevented the emergence of crises in the region. These crises have forced central banks to broaden their mandates to include financial stability in order to ensure the functioning of the monetary policy transmission channel as well as to guarantee the smooth financing of the economy. Stable inflation and financial stability are therefore two objectives that monetary and macroprudential policies respectively seek to achieve. •  Third, the Lehman episode and the euro area crisis have confirmed that financial crises do not stop at borders. Consequently, financial system regulation must be the fruit of international cooperation. These lessons, in the post-crisis world, are at the heart of policy-makers’ actions. Financial crises have led us to renew our approach to financial system regulation, and notably to supplement it with a macroprudential perspective. But what is a macroprudential policy? How can we define clear objectives? What are the policy instruments? How can we organise it? What imbalances need to be redressed? These are only some of the numerous issues that contributors address in this Review. In particular, the broad scope of policy action is a major challenge. We especially need to anticipate all possible conflicts with other economic policies, such as microprudential, monetary or fiscal policy. I will now identify at least two prerequisites to ensure that macroprudential policy is effective: First, if conflicts arise between macroprudential policy should prevail.
These challenges exist for all participants in these markets: for the institutions that underwrite, structure and distribute these risks; for those who trade or hold them; and for third parties, like the rating agencies. These challenges of complexity are significant as well because they can exacerbate the problem of dealing with classic principal-agent problems. You can see this in the subprime mortgage market where, for example, a person may be rewarded for generating new mortgages on the basis of volume, without being directly exposed to the consequences of default; but these problems exist wherever incentives diverge and contracting is imperfect. Financial institutions typically maintain a range of different checks and balances to deal with the risk of misaligned incentives: for example, between a trader and the principal whose resources are at risk, or between the mortgage broker or underwriter and the firm that ultimately ends up holding the risk. But these checks and balances depend in part on the capacity of risk managers to observe and understand the underlying economic risk in these instruments. Where that is harder because of this combination of complexity, imbedded leverage, and short loss history, then market discipline will be weaker. A third issue relates to the dynamics of failure and the infrastructure that supports these markets. The dramatic growth in the volume of over-the-counter derivatives and the growth in the number and size of leveraged funds inevitably complicate the resolution of the failure of a large financial institution that is active in these markets.

It is true that, more often than not, we come to the conclusion that the balance of advantage lies in not intervening; and, I must confess, I would be alarmed if we didn’t. Yet, in all cases, the decision is made positively, and not by default, and it is not the non-outcome of a do-nothing approach. But, there are many examples of the Government deciding, usually on the advice of its boards and committees, to intervene, in one way or another, in the free play of market forces.” Indeed there are many examples of intervention. We built the airport because, without government intervention, it would simply not have been economically viable. We built roads and bridges. We provided public housing, medical services, the list is long. But we tend to do less than other jurisdictions and so the size of our public sector in relation to gross domestic product is one of the smallest in the world. Specifically in the monetary and financial systems, there is significant intervention in the form of the regulation of financial markets and the supervision of financial institutions. This is precisely because we feel that, in the words of Sir Philip, ‘the balance of advantage’ lies in so intervening and because ‘imperfections in the operation of the market mechanism [may lead] to economic inefficiency’. In very much the same spirit, we intervened in 1996 and built a real time payment system because the private sector was not able to come up with this highly desirable piece of financial infrastructure.