samchain/econo-pairs-v1 huggingface dataset:
3  But we won’t get there through compliance and risk management alone. We also need businesses – your businesses – to grab the opportunities presented by a post-LIBOR world to meet customer needs in better, safer ways. In the rest of my remarks I want to cover three main topics. First, I want to summarise the business problem LIBOR was originally designed to solve – and how the world has changed since then. Second, I want to sketch some of the opportunities that a post-LIBOR world may bring – and thus why there is a business, as well as a risk, imperative to shift. And, third, I want to explain some steps we at the Bank of England are taking to de-risk our own LIBOR-related business. Why LIBOR once made business sense – and what’s changed LIBOR’s origins date back to the syndicated loan market of the late 1960s. Risky borrowers from developing or emerging markets were looking to raise large sums, in dollars, at term. But the most plausible lenders – US banks – faced two problems. First, rapidly-rising inflation and short term interest rates made it risky to fix the interest rate on such loans for the full term. And, second, caps on deposit rates under ‘Regulation Q’ made it hard for US-domiciled banks to raise the necessary funding. In their place, banks in London – often US-owned, but unencumbered by onshore borrowing limits – formed themselves into ‘syndicates’ to take slices of floating rate, dollar-denominated loans, funded by short-term, offshore dollar deposits.

And it was that ‘design feature’, coupled with weak governance, and the huge stock of assets priced off LIBOR, which gave such a strong incentive for manipulation. Though governance arrangements for LIBOR have since been strengthened, the vast majority of term LIBOR rates remain largely or wholly based on judgment, reflecting the absence of any material underlying market (Figure 2). -  Third, despite these two profound drawbacks, the informational and liquidity advantages of using a common established benchmark, coupled with the deep embedding of LIBOR in a range of systems, accounting and regulatory requirements have meant moving away from the use of LIBOR has required determination, forward-thinking and co-ordinated effort – even for those large parts of the market where it is manifestly the wrong rate to use. 5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  Figure 2: Input sources for current LIBOR tenors 4  What opportunities will a post-LIBOR world offer? Taken together, these three observations show why LIBOR transition is both necessary from a risk perspective and beneficial for the long-term efficiency of the financial markets, whilst also being unpopular in terms of the one-off transition costs involved. Indeed, there is a material risk that those transition costs are obscuring a clear perspective of the commercial benefits to users of moving beyond LIBOR. What are those benefits? It would be brave for me as a public official to attempt anything approaching a complete answer to that question.
Total investment will amount to just under 13½% of GDP in 2010, while business investment will be about 9%. Over the period 1980-2009, total investment averaged 22% of GDP, while business investment averaged 13% of GDP. This year’s total investment ratio is the lowest since World War II. The ratio of business investment to GDP has been lower than in 2010, however: in 1945, in 1993-1995, and in 2009. Even in 2013, at the end of the forecast horizon, investment will be only about 18% of GDP, which is below the 20% needed to maintain 3% output growth in the long run. This development in the level of investment is not inconsistent with the experience of other countries with a high pre-crisis investment ratio. Nonetheless, it is cause for some concern, and it is important to ensure that these will be “only forecasts”, for nothing is inevitable in such matters. In speeches I have given in the recent past, I have emphasised that, although the interest rate level has certainly affected the investment level, it is probably far from being the most important determinant, particularly with interest rates as low as they are right now. I think other factors are much more influential, such as post-crisis risk aversion, uncertainty about demand and operating environment, reduced access to foreign credit, and impaired corporate balance sheets. These hurdles must be overcome, and they are one of the reasons that it is so important that progress be made in corporate debt restructuring.

This is equally true of monetary policy communication, the presentation and explanation of monetary policy. Monetary policy communication is simpler when it is possible to ignore the exchange rate apart from its effect on inflation, but an imminent systemic change such as financial account liberalisation adds to the complexity. Yet it is important to realise that the problems inherent in such a systemic change will be solved only to a limited degree with improved communication. The uncertainty is real, and the Central Bank cannot create more certainty than it faces itself. Experience shows as well that the market can get ahead of itself even if monetary policy communication is in good order. A number of factors indicate that, to some extent, the market misunderstood the Monetary Policy Committee’s August statement. We must learn from such occurrences, of course, and try to do better in the future. Some appear to have interpreted that statement to mean that plans to lift the capital controls have been abandoned temporarily – even for a period of years – and that this is why interest rates were lowered as much as they were. But to my mind the interest rate cut had more to do with rapidly declining inflation than increased uncertainty about financial account liberalisation, although such uncertainty did of course exist. The statement was made before the September Supreme Court judgment on exchange rate-linked loans and before it came certain that the third review of the IMF programme was not going to be unduly delayed.
They have to earn a decent return for intermediating credit, otherwise they will do less of it. Bank profitability has come under pressure from a combination of the three realities of the postcrisis financial landscape: slow growth, easy money, tight regulation. More work is needed to discern the impact each of these factors is having on bank profitability. Be that as it may, as we put the finishing touches to the Basel III reforms, it is important that the overall capital requirements on banks not be increased significantly. It is also quite clear that the cost of risk management and compliance has exploded and this is something regulators need to be alert to. According to a Thomson Reuters report, more than one-third of financial firms spend at least an entire day each week tracking regulatory change4. The headcount for legal, compliance, and regulatory matters has grown significantly in financial firms, in some case, even doubling. Third, have regulatory reforms contributed to strong, sustainable, and balanced economic growth? This is much tougher to answer, but this is the central question. Across most countries, overall credit provision to the economy has been stable despite higher capital and liquidity requirements. The cost of financing has remained low, although this has had do with highly accommodative monetary policies, which are not permanent. But there are distributional effects that we need to monitor closely. Studies suggest that small business loans have been shrinking as a share of non-bank loans in the US.

8 B. Boland, “M-Trends Asia Pacific”, www.fireeye.com, 24 August 2016, www.fireeye.com/blog/threat-  research/2016/08/m-trends_asia_pacifi.html  9/9  BIS central bankers' speeches
Traditionally, in exchange for being allowed to profit from taking risks inherent in providing liquidity, or monetary and credit services to the economy, banks have been subject to: prudential regulation; given access to liquidity insurance at the central bank; and required to finance industrywide insurance schemes. Those have been the key elements of the social contract for banking. This series of speeches explored in more detail how those components of the social contract need to be redesigned. 2  BIS Review 134/2009  On regulation, as Adair Turner has said, it is clear that firms need to hold more capital; and, as the Governor emphasised earlier this week, that that capital needs to be proper, lossabsorbing capital. It is equally clear that banks need to hold a portfolio of high-quality liquidity; that there should be no compromise about what counts as such liquidity; and that any banks thinking a decent treasury policy involves holding the bonds of other banks are way off-beam. That much has pretty well been agreed by international policymakers. The numbers remain to be set. Just as important is the necessity of reviving supervision. By that, I do not mean checking compliance with rules after the fact, punishing breaches; punishing offenders does not bring back to life a bank or the customer businesses that have collapsed with it. I mean forwardlooking judgments about the prudence of a firm’s management and the resilience of its business.

It would probably be hard to achieve that without influencing domestic credit-supply conditions, in booth the boom and contraction phases. (b)  Possible instruments: capital requirements, risk weights and haircuts  There are two dimensions to pursuing this objective. One is making the system more resilient in the face of severe shocks by acting on its inter-connectedness. The other is seeking to adjust the capital and liquidity resources of the system during the up and downswings of the credit cycle; that is to say, over time. Internally, we refer to these as the “cross-sectional” and “time-series” dimensions. I am going to focus mainly on the latter this evening. Work is already underway in Basel to reduce the pro-cyclical properties of the Second Capital Accord and to encourage dynamic provisioning against expected credit losses. On the face of it, that seems unlikely to be enough to deliver a “dynamic resilience” objective in the terms I have described, as it would not directly address stress scenarios. That is a point of departure for the wider debate on extra instruments. Much of the existing public commentary starts from an assumption that any such instrument should be variation in required minimum capital ratios over the course of the credit cycle. We are currently doubtful about that. But we agree that macroprudential instruments directed broadly at taming the credit cycle will be functions of – dare I say, derivatives of – micro prudential requirements on capital and liquidity.
Short-term inflation fluctuations around the central bank’s target, for instance, those observed in Russia in 2017, 2018, and 2019, with inflation expectations being relatively stable and even lowering, do not contradict price stability. Conversely, high inflation expectations that might entail a longer-lasting deviation of inflation upwards from the target involve significant risks to it. These are the risks of a decline in the purchasing power of incomes and savings, which is especially sensitive for the most economically vulnerable groups of the population. Monetary policy should mitigate such risks. Therefore, already in March 2021, as the economy bounced back to its pre-pandemic level, the Bank of Russia started to raise the key rate from its record-low of 4.25% to 6.5% p.a. following the July meeting of the Board of Directors. The Bank of Russia will make decisions on its further moves depending on the path of economic development and the trends of inflation and inflation expectations. Baseline scenario I would like to remind you that the Bank of Russia updates its medium-term baseline forecast four times a year in the course of the Board of Directors’ core meetings on the key rate. The forecast presented in the draft Guidelines was released earlier following the meeting held on 23 July 2021, but this draft extends the forecast horizon to 2024.

Review of monetary policy Winding up, I would like to remind you that the Bank of Russia has announced its plans to review its monetary policy over the period since the switch to the inflation targeting regime. Within this review, the Bank of Russia will analyse the actual results achieved, the changes in the economic environment over this period, and long-term trends that might impact the implementation of monetary policy in the future. The results of this work and the findings relevant for the parameters and practice of the Bank of Russia’s policy will be presented by the middle of next year and will be taken into consideration in the course of the elaboration of the Guidelines for 2023. Conclusion Recently, Russia’s economy has demonstrated multiple times its ability to adjust to the changing environment. Regardless of how the situation unfolds, we will do our best to create necessary conditions to further develop the country’s economy and enhance its resilience. Monetary policy aimed at ensuring price stability and enabling a countercyclical response to changes in the economy is an essential condition for sustainable and well-balanced economic growth. Thank you for attention. I am ready to answer your questions. 4/4  BIS central bankers' speeches
If you asked who or what was the best chess player in the world today the answer would be a human, albeit a human working with a machine. Chess has followed a co-evolutionary arc. Perhaps this is simply a matter of time. But our brains themselves are far from static. This is not a case of technological hare racing neurological tortoise. Our brains are more energy-efficient than super-computers, by a factor of perhaps 1,000.35 One reason is because they are hyper-connected, with around 100 billion neurons each with 1,000-10,000 connections. No digital web comes even close to this scale of connectivity. Moreover, these connections are not static; they are hyper-flexible. Our brains are not a plug wired once. They are constantly re-wiring themselves, a phenomenon known as neuro-plasticity.36 Unlike biological adaptation, this re-wiring takes place relatively rapidly and can be significant. This rewiring is particularly significant at times of extreme shifts in environment – for example, personal trauma or technological change. Guttenberg’s printing press did not just spark Shakespeare’s imagination. It sparked a re-wiring of all of our brains.37 As communication switched from word to print, different neurological processes were needed for comprehension and deliberation. In response our brains adapted, as had our homo sapiens brains years earlier. The future AI revolution could generate a similar re-wiring of the super-computer between our ears. Perhaps it has already started. When the AlphaGo algorithm beat Lee Sedol in 2016 the decisive move came in Game 2, Move 37.

Against this background, some further work needs to be done on the harmonisation of the oversight framework for securities clearing and settlement in the European Union. The continuous absence of such a harmonised oversight framework generates a number of undesirable effects. However, after the recent ECOFIN decision, I am very optimistic that we will soon see the finalisation and adoption of the ESCB-CESR recommendations for securities clearing and settlement. •  The relevance of collateral for liquidity issues has been clearly recognised by central banks. During the past ten years, central banks have – especially in the context of the Committee on Payment and Settlement Systems and other Basel committees – focused jointly their attention on the use of collateral in financial transactions,  6  BIS Review 130/2007  including the cross-border use of collateral. 4 Cooperation in this respect is very useful and, especially for emergency situations, I would think that central banks –by enabling the cross-border use of collateral – could make a positive contribution to financial stability. Ladies and gentlemen, let me now close my introductory remarks by once again welcoming you all and by thanking all of those who have been involved in preparing this conference, in particular Daniela Russo and Mark Manning. 4  CPSS report on “Cross-Border Collateral Arrangements”, Bank for International Settlements, Basel, January 2006. BIS Review 130/2007  7
The continued growth in the global economy as well as the experience of recent years has shown us how fast the oil market can spiral out of control, given the shortage of surplus production and refining capacity. Consequently, we cannot fully exclude the possibility that the current period of calm is only transitory. We are currently observing an unusual situation of weak volatility on financial markets and low risk premiums on investments. These two variables can change direction very quickly. Consequently, we must remain on our guard since abrupt movements in financial variables – in stock prices as well as in exchange rates – have an immediate impact on our economy due to its considerable openness to foreign transactions and its relative specialisation in the production of financial services. A comfortable position, in historical terms With the Swiss economy close to full employment, the stability of prices secured over a period of several years now and a liberal and open economy making it possible to make full use of monetary policy instruments, the Swiss National Bank currently operates in a comfortable environment. In this year – the year that marks the hundredth anniversary of the establishment of our bank – we should not lose sight of the fact that our predecessors often faced situations that were far more difficult than those we face today.

Solow, R (2015), ‘The Future Of Work: Why Wages Aren’t Keeping Up’, article in the Pacific Standard. Thomas, R and Dimsdale, N (2017), ‘A millennium of macroeconomic data’, Bank of England OBRA dataset, http://www.bankofengland.co.uk/research/Pages/datasets/default.aspx  27  All speeches are available online at www.bankofengland.co.uk/speeches  27
Over the years, taxation of the value of owner-occupied housing in Norway has gradually been reduced. The tax benefit for owner-occupied dwellings, introduced in 1882, was abolished in 2005. The tax allowance for debt interest, however, was retained. This system subsidises household borrowing, it subsidises owning rather than renting a dwelling, it leads to higher house prices than would otherwise have been the case and to overinvestment in housing capital. Households inflate their balance sheets and housing capital in order to take advantage of the tax benefit. Taxation of housing in line with other forms of capital implies taxation of the value of owning a dwelling, the rent saved and the rise in the value of the dwelling. Housing taxation reform can contribute to curbing the house price fluctuations that successive generations seem to be exposed to. 4. Conclusion  Developments in recent months indicate that the financial crisis in Norway will not turn into a crisis in the real economy. There has been no recurrence of the solvency crisis in the banking sector twenty years ago. The Norwegian economy has nonetheless been exposed to major shocks. Oil prices and prices for other important export goods rose sharply through the upturn. The liquidity crisis hit the banking sector as growth started to slow. The impact on unemployment has not been pronounced and inflation has remained low and fairly stable throughout. We can safely say that fiscal and monetary policy have been fairly effective so far.

This seems due, in part, to important fundamental improvements in policy credibility and economic performance. It may also reflect confidence that governments will ultimately act effectively to deal with these challenges. And it may reflect the inherent difficulty of assessing the risk in what may seem like low probability but very adverse outcomes. A number of fundamental changes in the U.S. financial system over the past 25 years appear to have rendered it able to withstand the stress of a broader array of shocks than was the case in the past. The core institutions hold more capital against risk. Risk management systems are more sophisticated and the internal control regimes around those systems are more robust. The earnings of many financial institutions are stronger and more diversified. Payments systems are stronger. Innovation continues at a remarkable pace, providing new ways to allocate and manage risk. Confidence in the overall resilience of the financial system needs to be tempered by the realization that there is much we still do not know about the likely sources and consequences of future stress to the system. Uncertainty is inherent in any process of change, but uncertainty is greater because much of the recent innovation has occurred against the backdrop of general economic stability and a sustained period of low credit losses, low risk premia and low implied volatility across many asset classes. This means that some aspects of the financial system today have not yet been subjected to the more exacting tests of macroeconomic or financial stress.
Even when looking at flows of workers, most regions are self-contained and local. 21  All speeches are available online at www.bankofengland.co.uk/speeches  21  Table 1: Commuting flows between UK regions (percentage of workers resident in each region)  Sources: Nomis and Bank calculations. Notes: Percentage of each region’s workers commuting from each residential region. These flow data provide a useful lens on local economic eco-systems. As an example, Chart 16 plots the time to get to work (in minutes) against the distance to work (in km) across the UK’s regions. Most regions outside London and the South-East are tightly clustered, with an average commute time of 27 minutes and distance of 16 km. Consistent with other evidence, this suggests most regions are local economically. 22  All speeches are available online at www.bankofengland.co.uk/speeches  22  Chart 16: Distance vs. time to work  Sources: ONS Labour Force Survey, 2011 Census and Bank calculations. Notes: Average distance travelled (km) and usual time (minutes) from home to work by NUTS 1 region in England and Wales. The situation is somewhat different in London. The average commute distance is materially shorter (11km) but the average travel time almost doubles at (40 minutes). A cartogram of commute times makes this point strikingly (Chart 17). Contrary to popular belief, London is life in the slow lane.

17  All speeches are available online at www.bankofengland.co.uk/speeches  17  Chart 13: Heat maps of health in Belfast, Cardiff, Edinburgh and Inner London  Sources: 2011 Census. Notes: Data show percentage of respondents declaring themselves to be in bad or very bad health at electoral ward level. I draw two conclusions from these micro-level visualisations. First, however striking the regional differences in economic and societal health across the UK relative to historical and international standards, these conceal even more striking differences in levels of health, wealth and happiness within regions. To the extent there is an inequality issue in the UK, it is as much or more a local rather than regional one. 18  All speeches are available online at www.bankofengland.co.uk/speeches  18  A second, nerdier, point is what this means for our understanding the economy. Many systems – social, natural and physical – exhibit a pattern in which the distribution of outcomes does not converge at higher resolutions; it remains constant or even expands. These systems have a fractal property with patterns that are self-similar at different levels of resolution. Snowflakes and shorelines are the best-known examples. The violins charts suggest economic systems may also exhibit some of these properties, with distributions which do not converge at higher resolutions and may even expand. Outcomes in these systems are not distributed like a bell-shaped, Normal distribution.