samchain/econo-pairs-v1 huggingface dataset:
Let me turn first to updating you on the status of the Core Principles for Effective Banking Supervision. This is an initiative the Basel Committee embarked on in the mid-1990s in the belief that there was a need to foster more effective banking supervision throughout the global financial markets. In developing the Core Principles, the Committee sought to craft a document that would have the legitimacy, quality, and flexibility to meet the needs of bank supervisors around the world. To this end, the Committee made it a key point to consult broadly with other supervisors throughout the various stages of the project, particularly those from emerging market countries. The Core Principles document that resulted from this process brings together concisely in one place all of the fundamental elements needed to carry out effective banking supervision - a remarkable achievement in its own right. Equally important, in my view, the document also balances the desire to set high standards for supervisory practices with a pragmatic recognition that not all countries are in the same stage of financial market development. As such, the Core Principles document is of particular importance for emerging market countries because it establishes a clear set of standards against which each country’s current approaches and progress can be measured. I am convinced that the flexibility embodied in the Core Principles - combined with the valuable substantive guidance the principles provide - is the right model for achieving sustainable improvements in financial market practices.

Should we publish voting records and the minutes of the Executive Board’s deliberations? Central banks have chosen different solutions. In Sweden, the central bank publishes the voting records and provides an extensive report with the views of members by name. The Bank of England publishes a similar report of the minutes, but members remain anonymous. Norges Bank does not publish a report of the minutes of the Executive Board’s deliberations, but instead publishes a detailed account explaining the Executive Board’s background for the interest rate decision. The interest rate decision is based on a strategy that is described in the Monetary Policy Report. The Report also presents the analyses underlying the strategy. The basis for interest rate decisions is thus available to the general public. The difference in practices partly reflects the different character of the monetary policy committees in the three countries. 27 Sveriges Riksbank and the Bank of England have committees that are referred to as “individualistic committees”. Each member is individually responsible for his/her vote, and the decision 28 is normally decided by majority voting. In Norway, the Executive Board is more of a “collegial committee”, where the members are unanimous in their decision. The ECB’s system is of the same type. One cannot have both a collegial committee and minutes with individual views. If all members publicly explain their own views, communication may become unclear.
In that case, this option will be available and there should be no technical obstacles to using it. But there can be no commitment from the central bank to provide liquidity, and that’s a basic principle of central banks in general, not only for CCPs but for banks as well.16 In sum, while some of these tools appear more appropriate than others, all of them imply drawbacks, and authorities will need to proceed cautiously if they favour one over another. CPMI-IOSCO is currently reviewing existing CCP recovery mechanisms, including loss allocation tools, and will consider developing more granular standards for CCP recovery planning if that is needed. 15  See Duffie, D., “Resolution of Failing Central Counterparties”, Graduate School of Business, Stanford University, 17 December 2014. 16  The recent agreement between the ECB and the Bank of England is no exception to this rule. We’ll extend the scope of our standing swap line in order to facilitate the provision of multi-currency liquidity support to CCPs established in the UK and euro area, but again, there is no pre-commitment and the provision of liquidity remains at the full discretion of the central bank issuing the respective currency.

Benoît Cœuré: Ensuring an adequate loss-absorbing capacity of central counterparties Special invited lecture by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at the Federal Reserve Bank of Chicago 2015 Symposium on Central Clearing, Chicago, 10 April 2015. *  *  *  Ladies and gentlemen1 This Symposium organised by the Federal Reserve Bank of Chicago is a major event for discussions on key themes regarding central clearing, and it is a privilege for me to deliver this lecture in front of such a distinguished audience. I would like to make some comments on a topic which has been steadily going up the central clearing agenda, namely the need to increase the loss-absorbing capacity of central counterparties (CCPs) beyond their current levels. Because of their growing systemic importance, CCPs need to be exceptionally robust, and that means being able to cope with even extreme losses. And to achieve this, it may well be necessary to increase their existing loss-absorbing capacity. But what is less clear at the moment is whether this can be done by having CCPs observe the existing, tough international standards, which have been introduced only relatively recently. Or whether there is a need for new requirements that are more demanding or more specific. And if so, how can we best do that in a way that preserves the benefits of central clearing, provides the right incentives to CCPs and to their clearing members, and strengthens the financial system as a whole?
In building a resilient economy, prudent fiscal and monetary policy does help. As an automatic stabilizer, flexible exchange rate also helps. But, prudent macroeconomic management alone will not raise people’s living standard in the long run. We need a balance between prudence and enterprise or the ability to take risky action and make sound decisions on the part of the business sector. Otherwise, we risk either having a stagnant, inefficient economy or building a fast-growing one on a bubble; neither of which we can afford. Hence, the priority is the need to design a system that allows for constant self-correction – one that also lets the economy regain its strength quickly after a severe negative shock. That system should be underpinned by a strong link to the world economy, which will encourage innovation and efficiency. The competitive markets should operate under a clear rule of law with good governance. In support of them, we need an effective and honest government and supporting institutions that focus on improving resiliency of the economy and sustainable long-term economic growth. Ladies and Gentlemen, Advanced economies do have economic, if not also strategic, interests in the success of Asian emerging markets. An Asia that is well-adjusted and integrated into the world markets will add prosperity and stability to the world economy for years to come. 7  See Henry (2006) for a critical review of the literature on theory and evidence of capital account liberalization. BIS Review 99/2007  5  References 1. Abreu, D. and M. Brunnermeier (2003).

This process is indispensable to clean bank balances from investments that are burdensome and release funds that would be used for new credits. In this context, monitoring of loan quality and behaviour or difficulties that banks face in this process lays at the very centre of the supervisory activity. Second area concerns the cost of banking services for clients. On this issue, the Bank of Albania has conducted necessary analysis, which led to the conclusion that costs for a number of bank products and services, including payments and transfers, debit and credit cards, as well as some other forms of crediting, could be lower. In relation to this issue, we are focused on two aspects: First, promoting transparency in the banking sector on its relations with the clients regarding these services. For this issue, we have implemented requirements for the establishment of methodologies to determine effective crediting costs and clearly define contractual obligations vis-à-vis the clients. Banks are asked to provide all the information and explanations to the interested clients. In addition, following the same logic, we would ask from banks to establish methodologies to define their costs for bank services, mainly related to payments and transfers. 2  BIS central bankers’ speeches  Therefore, it will be easier for clients to compare between a variety of offers by banking institutions and, hence, be able to make their choice according to the most favourable alternative.
But the sub-prime mortgage market did not stand alone, and various events directly or indirectly related to it delayed expectations of a recovery, and the new lines of defence were drawn at the beginning of the year and in the weeks that followed. According to the Utopians, when annual results began to show after the first of the year and the genuinely positive state of events was revealed, the phantom problem would wash away on the outgoing tide. There is the danger that those who placed their trust in such a beneficent outcome used their time far less well than they should have from August 2007 onward. The CEO of one of the largest banks in the world said, “While the band plays, we dance.” He was forced to resign shortly thereafter, when the bank demonstrated a shocking operating loss, but with a fat fund in his pockets as a reward for his foresight and progressive thinking. For similar reasons, many will have more difficulty waiting for better times. Of course, it is far from inconceivable that strong gusts of wind could come from any direction, dispersing pitch-black storm clouds in a moment’s time, bringing leveraged buyouts of heavily indebted companies under the aegis of credit institutions offering minimum terms and slick collateral, and bright, sunny morning would smile on markets in Iceland and elsewhere.

The ABF Hong Kong Bond Index Fund made history by being the first bond exchange-traded fund launched in Asia. The PAIF has also set two records. It is the first listed Asian bond fund to invest in as many as eight bond markets in the region. As a listed fund, it allows easy access by both institutional and retail investors who wish to have exposure to the Asian bond markets in a cost-effective and convenient manner. Secondly, the PAIF is the first foreign institutional investor that has access to the interbank bond market of Mainland China. This is an important step in the opening up of China’s bond market to foreign participants. I am glad to see that the PAIF has played a catalytic role in development not only in China but also in all the markets in which the fund invests. 4. I take this opportunity to thank State Street Global Advisors (SSgA), the fund manager of the PAIF, for their commitment and dedication to the development of this innovative product and to the idea of an Asian bond market. We have seen a favourable response to the ABF Hong Kong Fund, and I hope that the PAIF, with its broader investor base, will also be well received by markets. I wish you every success in promoting the PAIF. Thank you. BIS Review 50/2005  1
Effective management of the credit risks of banks and determining how much capital must be held against contingencies that could arise from such risks are very important for the soundness and stability of the banking sector. The 1988 Basle Capital Accord that I mentioned earlier was the fruit of the work directed to this aim. The Accord targets a bank’s capital holdings as a proportion of the credit risk of their onbalance-sheet and off-balance-sheet business. For this purpose, investment instruments were classified into five main categories according to their risk, and a risk coefficient assigned to each group. The weighting formula for asset risk was intended to determine the capital coverage needed for a bank’s exposure to credit risk. But this arrangement dating from 1988 proved ineffective against newer developments emerging during the last decade, and work continues particularly at the BIS on how to reduce credit risk. Besides credit risk, the main risk categories that have been identified in transactions and markets: such as Market risk, Exchange rate risk, Interest rate risk, Liquidity risk, Operational risk, Country risk, Legal risk, Hedging risk, Systemic risk. I do not intend to go into the details of all these categories of risk. Of special interest, however, is the improvement of systems and techniques that aim; to reduce these risks by means of information technology. Once the risk is identified, measuring it accurately is generally accepted as the next step in  3  BIS Review 41/1999  preventing it from happening.

One of the first accomplishments of the Basle Committee was a study of banks’ capital adequacy. Issued in 1988, under the title ”International Convergence of Capital Measurement and Capital Standards,” this report was soon endorsed by many countries. Also known as the ”Basle Capital Accord,” the study took BIS Review 41/1999  2  account of credit risk. Although the variety of risks in the international markets is increasing, credit risk is still the most significant risk category for banks. Credit risk means the probability of defaulting on one’s obligation to the other party in any transaction. As I already mentioned, the growth of competitiveness in the international credit markets in recent years, the active participation of non-bank financial institutions in these markets, and borrowers’ resort to the capital markets for loans at lower cost, have all brought about a considerable narrowing of profit margins in credit transactions. This has forced the banks to make more loans in order to have a competitive edge. But they have encountered credit problems due to adverse developments in the economic and financial conditions. All these developments have resulted in the design of new methods for more effectively evaluating the risks and yields of credit transactions. Besides creating credit rating models for use within banks, these efforts have produced analytical methods calling for intensive data analysis such as retrospective analysis of credit losses, models of bankruptcy probabilities, and stress tests.
Two steps were taken in 2012 which fundamentally determined the balance sheet write-downs that Spanish banks’ income statements have had to absorb. The first was the requirement, laid down in the royal decrees of February and May 2012, to set aside provisions to reinforce coverage of loans to the real estate development and construction sector and of foreclosed assets. The second was the balance sheet writedowns stemming from the compulsory transfer to SAREB (the asset management company for assets arising from bank restructuring), at an agreed price, of the assets belonging to the balance sheet segments I have just mentioned. This transfer, made by banks under restructuring or resolution, affected assets totalling € billion in terms of their gross book value, with a transfer value of € billion. With this and other measures, Spanish banks’ exposure to the above-mentioned real estate risks has fallen since 2011 by slightly more than half, from € billion to € billion. In sum, write-downs by Spanish banks in 2012 totalled € billion, compared with € billion in 2011. Solvency Secondly, solvency. Despite the fact that the major clean-up and provisioning drive by the Spanish banking system in 2012 resulted in total losses of € billion, the system’s level of solvency has improved.

The European Parliament should shortly approve the legislation that creates the single supervisory mechanism, in which the European Central Bank is to play a central role. The single supervisor will become operational twelve months after this approval, but first the ECB must analyse the solvency of all the institutions it is to supervise, an exercise that will have to be incorporated into the new stress tests to be performed by the European Banking Authority next year. The Directive establishing the harmonised resolution regime – currently under debate at the European Council and the European Parliament – and the legislation to create a European authority and a common resolution fund are still pending approval. In the latter case, a proposal must be submitted, on a date yet to be specified, by the European Commission. Conclusions Ladies and Gentlemen, the theme of my speech has been the difficult adjustment that the Spanish economy is currently going through, which needs to be seen in the context of the largely unprecedented international and European setting. BIS central bankers’ speeches  7  The advanced economies, the United States, the European Union, the United Kingdom and Japan are operating under extremely loose monetary conditions, with exceptionally abundant liquidity and very low interest rates. Emerging from this situation without any impact on growth and without creating fresh financial turmoil will not be easy and considerable risks will be encountered along that path.
In some cases they have lent money for fifty years at around 4%, and the interest rate on long-term UK government bonds is at its lowest level for over 50 years. Low and stable inflation clearly explains much of the fall in long-term interest rates which fell sharply when the Bank of England was made independent in 1997. But over the past three to four years long-term interest rates around the world have fallen further to remarkably low levels. In the UK, the annual interest rate on 20-year index-linked government bonds, after allowing for anticipated future inflation, is now around 1%. For most of the past 25 years, that so-called “real” rate of interest has varied between 2% and 4%. Long-term real interest rates of no more than 1% would normally be a signal to spend more, save less, and to invest in physical as well as financial assets. But it is not at all clear that rates will persist at such low levels. So is this particular signpost reliable? There are broadly two types of explanation for the fall in long-term real rates around the world. The first explains low interest rates as the outcome of an increased propensity to save and lower willingness to invest in the world as a whole. The second explains them as the result of rapid growth in money and credit which, in a “search for yield”, drives asset prices up and interest rates down.

Across the world, the prices of all kinds of assets have risen - not just of government bonds, but also of equities, houses and other real estate, commodities and gold and other precious metals. Moreover, risk premia have become unusually compressed and the expansion of money and credit may have encouraged investors to take on more risk than hitherto without demanding a higher return. It is questionable whether such behaviour can persist. At some point the ratio of asset prices to the prices of goods and services will revert to more normal levels. That could come about in one of two ways: either the prices of goods and services rise to “catch up” with asset prices as the increased money leads to higher inflation, or asset prices fall back as markets reassess the appropriate levels of risk premia. In neither case would it be easy to keep inflation close to the 2% target. I do not pretend to know whether the signpost of low levels of long-term interest rates is primarily related to underlying preferences for saving and investment, or to the global growth of money and a possible under-pricing of risk, or, in all probability, to some combination of the two. Nor, since we do not know the causes of low long-term rates, can we be sure for how long they will persist.
BIS central bankers’ speeches  1  Following the financial crisis, of course, the developed world has been in exactly that position: the neutral real rate of interest has been extremely depressed, official interest rates have been pushed to the zero lower bound and central banks have employed unconventional means of easing monetary policy. Were it to occur right now, sustained deflation would therefore pose more of a risk than at times when the neutral real rate was higher. But, in my view, those risks are nonetheless relatively contained. For one thing I think the evidence suggests that unconventional policy is effective: even if they don’t circumvent it entirely, asset purchases help soften the constraint of the zero lower bound. Second, with the financial system gradually improving my guess is that the neutral real rate of interest is more likely to rise than fall over the next couple of years. Third, and most importantly, I think the chances of a sustained and widespread deflation are in any case low. That’s certainly what the international experience suggests. That experience is substantial: we have annual CPI data since 1960 for over 70 countries, a total of over 3,000 data points. In only 70 cases (barely 2% of the sample) have consumer prices actually fallen and in the majority of those inflation was positive the following year.

The 1988 Accord became outdated to a large extent because it was a relatively simple and static document: its one-size-fits-all approach to capital regulation represented an important advance as a universally accepted standard, but it did not provide a means to recognise more advanced risk measurement techniques. It quickly fell behind as the pace of innovation in technology, financial products, and markets accelerated. In response, the Committee designed the New Accord to be a more flexible document and one that would be more welcoming of improvements in risk management techniques. Its evolutionary approaches to credit risk and to operational risk, for example, give banks a range of options to choose from and create explicit incentives for banks to strive to adopt the most advanced approaches. The New Accord still has its limits, however. Members of the IIF and others have cited as an example the failure to recognise use of full credit risk models, which would adjust a bank’s capital requirements in accordance with the benefits of diversification in its balance sheet. As you know, the Committee evaluated proposals that would have allowed advanced banks to estimate the degree to which their assets might behave similarly or default together. For the time being, we have decided instead to establish standard estimates of diversification that banks would apply.