samchain/econo-pairs-v1 huggingface dataset:
They must have a clear idea where, in what form, and to what extent they can cover their liquidity needs and make the necessary limits and collateral available. In this process, it is crucial that banks interfacing with large customers - enter into agreements with one another, thus creating a high degree of transparency. The goal is to limit the range of unexpected behavioural changes by creating transparency and reaching an understanding. Looking at the issue from this vantage point also makes it clear that a strategy of avoiding transactions is completely contra-productive. Even though it makes sense to avoid settlement dates of forward contracts falling immediately before and after the millennium transition, it is vital that transactions can be carried out and that markets remain liquid. It is at least conceivable that smaller banks or those with a somewhat lower rating will be confronted with an outflow of deposits while the top names in the industry receive an influx of deposits. This generates stress which can only be reduced by efficiently re-channelling funds between banks. It is obvious that the availability of sufficient collateral is crucial. The availability of collateral - just in case - is therefore the central focus of liquidity planning. In the case of Switzerland, the potential re-channelling problem has both an aspect ameliorating the problem and one making it more difficult. What may actually ease the situation is the fact that the cantonal banks, with roughly one-third of the market share, operate with a state guarantee.

Two such advantages stand out: -  The collective efforts of our banking sector are governed by a natural leadership structure which facilitates and accelerates development processes,  -  and, secondly, the two big players act in some measure as know-how brokers, swiftly incorporating the Year 2000 experiences gained abroad into the process of solving the problem in this country. More generally speaking, our long tradition of practical cooperation between competitors and of close ties between regulators and banks is a distinct plus in the preparatory work. Jointly managed institutions like the Swiss Exchange, our central securities depository, or the Swiss Interbank Clearing System are well-known examples of this spirit of cooperation. 1  BIS Review 46/1999  I am confident that the large-scale interbank tests scheduled to begin in May will provide us with a positive picture of the state of preparations. Assuring liquidity From the viewpoint of a central banker, assuring adequate liquidity must be the prime concern. Based on the nature of their business, banks are inherently vulnerable. Withdrawals and redistribution of deposits can jeopardise the banks’ capacity to pay. Such effects, should they materialise at all, may take place as a millennium shadow before or during entering the next millennium. It is primarily the duty of individual banks to brace themselves for such events. They must undertake careful liquidity planning, comprising both a normal scenario as well as different stress scenarios.
But it should be seen as the working through of Basel 3 not as a new regime – a Basel 4. Before I test whether Wilde was right and turn my focus to market-based finance, I should observe that this is not because I think either that systemic risks from banking have disappeared or that the new regulatory framework is perfect in every respect. The UK banking system is much more resilient now. For example, major UK banks now have an average CET1 capital ratio of 12%, almost twice their average capital ratio in 2008. Their liquid asset buffers have trebled in size since 2008 and their short-term wholesale funding ratio has halved since 2006 (from 24% to 13%). Last year’s stress test showed that major UK banks could withstand a very sharp increase in unemployment, an unprecedented fall in house prices and with the Bank of England raising interest rates in the teeth of a recession. This year’s test, I should observe, will see if it can withstand the opposite – a prolonged period of deflation triggered by an economic collapse overseas. But while we are advanced in the implementation in the UK of a much stronger regulatory framework, and while UK banks already have much greater resilience, we have not abolished the credit cycle. We have I hope, turned off or dampened some of the more damaging amplifying mechanisms in the financial system that drive up risks and create booms and drive the economy down in the resulting bust.

Finally, before I leave the banking system, I want to highlight one piece of good news in recent market developments. We have had a number of incidents of extreme market volatility over  2  BIS central bankers’ speeches  the past year or so – the removal of the Swiss Franc peg; a 30 basis point fall within 90 minutes in UST yields on 15 October 2014; the so called ‘Bund tantrum’ earlier in the year; and the seizure of US equity markets this summer, against the backdrop of news about China. These have raised a number of issues about changes to market structure and market liquidity. But the one dog that has not barked, however, is the transmission of the shock from these market events to the core banking system that support markets. For example, the reaction in UK banks’ CDS premia to these disruptions has been small and not out of line with broader market movements. I would put this down in no small part to the reforms of bank capital and liquidity that have made banks more resilient. So while money was lost in these market episodes and some people had a very bad day at the office, they did not cause wider shocks in the banking system. And that leads me in to the other subject I want to talk about today – the changes we are seeing in the liquidity of financial markets, which some indeed ascribe to reforms of the capital and liquidity standards in the banking system.
Capital markets In addition to sound and forward-looking financial institutions, it is important that we develop broad and deep capital markets. These are two complementary pillars of a vibrant and dynamic financial hub. Our domestic markets alone will not sustain the depth, breadth and resilience needed by liquid capital markets. It is thus critical for us to develop the equity and debt markets to help service Asian needs, and be linked up with global markets. Foreign companies must find distinct advantages to list on SGX, or to issue bonds in Singapore. They want to raise capital at the lowest cost, and find liquidity and support for their securities in the secondary market. This requires adequate interest from local and foreign investors for securities issued in Singapore. We must thus offer investors easy access to trading securities and derivatives in Singapore, as a key Asian leg in their global cycle. Equities In the equities market, although SGX was the first exchange in Asia to merge and demutualise, in other areas, other countries are ahead. For example, we have been slow to develop online trading. To get more shares traded online, SGX will build up IT capacity and systems at the exchange and the brokerages, and ensure that prudential safeguards are in place. SGX is also considering faster liberalisation of commissions for on-line trading, so that it need no longer regulate what brokers charge and whether they give customers discounts. SGX must attract more foreign companies to list and trade actively in Singapore. This will not be easy.

That is the background to the common estimate that over a longer period the Swedish economy can now sustain an average annual growth rate of between 2% and 2.5%. There are certainly some encouraging signs in Sweden in the form of many new companies and young entrepreneurs in the new information technology. And people in Sweden rank high as Internet users. But this has not shown up in the macroeconomic statistics to such an extent that there would be grounds for supposing that the potential growth rate has moved up towards the US level. A good indicator of whether conditions are in place for stronger productivity growth in the future is the existence of a sufficiently high rate of economic transformation, for instance in the form of increased investment and a rapidly growing capital stock. There are few signs of this in the Swedish economy, at least if one compares the 1990s with the 1980s. BIS Review 6/2000  2  Neither do other countries in Europe yet show any widespread signs of what is called the new economy. One reason may be that Europe is still in an earlier cyclical phase than the United States, so that investment in new directions has not yet taken off. Given this optimistic interpretation, it should be just a matter of time before the positive effects also materialise in Europe.
In this respect, risk management should help driving the strategy and decision making processes by defining the extent of the risk appetite of the institution clearly and by establishing a clear enterprise-wide risk management system. In this context, the design and attribution of risk budgets and the clear communication of risks to decision-making bodies and to all relevant business areas should be ensured. A better due diligence in the risk management function requires reducing dependence on the output of specific risk models and on external assessments, such as those provided by rating agencies. The correct understanding and assessment of risks requires the development as much as possible of internal capacities to evaluate risks. In addition, it is essential to understand that historical data, opinions and models are just tools that aid the comprehension and communication of risks, but with limitations that need to be accounted for in the decision-making process. In this regard, I would like to emphasise that what constitutes a severe problem is not so much the use of risk measures such as Value at Risk, models like the single-factor Gaussian copula model for credit risk, and risk opinions like external credit ratings, but rather the lack of understanding of the limitations of those measures and models. Accordingly, there has historically been an over reliance and mechanical use of models and external opinions that constituted one of the critical failures of the financial system before and during the crisis.

Norway has had room for manoeuvre because solid state finances secure credibility and because inflation expectations are firmly anchored. Even though oil prices fell from close to USD 150 per barrel in summer 2008 to almost USD 30 at the end of the year, Norway’s state finances were not called into question. In addition, oil prices increased markedly as early as spring last year. The oil fund mechanism curbs the effects of oil price fluctuations on demand and output – as well as on inflation and the krone exchange rate. The Government Pension Fund Global is also an important source of funding for public spending in the next decades. Reductions in government welfare spending, which will probably be a matter of necessity with an increasingly ageing population, will be smaller than would have been the case without the fund. 10  BIS Review 69/2010  5. Challenges to the Norwegian economy  In the period 1992–2008 the Norwegian economy experienced a long upturn. In the 2000s, the cost level started to rise, partly reflecting a sharp improvement in our terms of trade. Prices for Norwegian goods, such as oil, gas, metals, minerals and fish increased sharply while import prices fell. Looking ahead, the impact of these driving forces cannot be expected to be as favourable. It is hardly likely that export prices will show a renewed surge. Moreover, our economy has become vulnerable. Norwegian labour has never been as costly as today.
The exchange rate has been relatively stable after the adjustment that took place in the first half of last year, and the króna is currently somewhat stronger than historical measures would warrant, although it should be admitted that determinism is probably not the most suitable approach for assessing currency developments. One reason for uncertainty about the exchange rate is the large current account deficit, as well as the fact that it can easily be driven by factors over which we have no control, given how closely Iceland’s financial sector is now integrated with global financial markets. A central bank with a legislative and regulatory remit to target inflation is of course pleased with such inflation developments, but would prefer them to be built on a more solid foundation. Domestic demand growth has declined, but rather more slowly than the Bank had hoped. The current account deficit is large and will also contract more slowly than the Bank would have desired. Demand remains buoyant in the housing market and there are indications that the rate of credit growth may be on the increase again. For these and other reasons, the Bank will remain on the alert and not ease its monetary stance until even clearer signs emerge that a lasting change has been established. Equity prices have soared in Iceland in recent years.

Here, the buyer makes a down payment equal to 20 percent of the asset value and borrows the other 80 percent of the purchase price in the form of a home mortgage. We would say that the borrower’s leverage is 5 (the asset value divided by the equity share). Now, it’s easy to see that reducing debt and reducing leverage are the same thing when asset values are constant. If the borrower in our example pays down half the mortgage and the house value doesn’t change, her leverage has fallen to 2.5. Unfortunately, house values fell from 2007 to 2011. So while households were trying their best to reduce their mortgage debt, their leverage was actually rising, since house values were falling much faster than debt. It was really only in 2012 that leverage in residential real estate began to fall, because house prices stopped declining faster than housing debt. In 2013, leverage continued to fall, even though net mortgage borrowing resumed, because house values rose even faster. I think this distinction is important, because if we think that households have been steadily deleveraging since 2008 we might wonder whether we were getting close to the finish line. 4  Meta Brown, Andrew Haughwout, Donghoon Lee, and Wilbert van der Klaauw (2011), Have Consumers Been Deleveraging? Federal Reserve Bank of New York, Liberty Street Economics blog, March. 4  BIS central bankers’ speeches  After all, the labor market has been recovering, albeit slowly, for several years.
Such tokens could be used in payment transactions between financial market participants in the same way as sight deposits are today, and could ultimately result in efficiency gains for financial market infrastructures. Taking Switzerland as an example, this would mean that the SNB would make Swiss franc tokens available to financial market participants. The financial industry and a number of central banks are currently assessing whether, and to what extent, tokens can bring efficiency gains. For instance, experiments and tests are being conducted with digital tokens in the areas of securities trading, settlement and management. It is hoped that ‘security tokens’ could be transferred between counterparties in near real time, resulting in more efficient management of securities. In a ‘Swiss franc tokens for financial market participants’ scenario it would be possible to exchange security tokens for token money on a delivery-versus-payment basis. In-depth analysis will be required to determine whether security tokens can indeed bring the desired efficiency gains. Besides the technical hurdles that would to be overcome, steps must also be taken to ensure that applicable legal and regulatory requirements can be met. Moreover, efficiency gains must never be allowed to compromise the security of technical systems. It is too soon to answer the question of how best to configure money flows in trading with security tokens. In certain situations, security tokens could be traded and settled just as efficiently if the transfer of funds continued to flow directly via the sight deposits at the  Page 6/7  central bank.

One of the causes was that the private construction of railways had been excessively boosted by the ample supply of capital during the expansion. The crisis hit those trading companies and banks that had been far too optimistic in their provision of loans. Stockholms Enskilda Bank, headed by A.O. Wallenberg, suffered the most when the public stormed the bank to withdraw their money. The finance minister of the time was forced to intervene and Stockholms Enskilda Bank and other problem banks were able to get liquidity assistance with the help of foreign loans. Lack of experience and underdeveloped risk culture paved the way for the crisis of the 1990s If we take a leap forward in history, then many of us probably remember the domestic financial crisis that began in the early 1990s. For a long period following World War II, the financial markets had been kept under very strict regulatory control by the Riksbank. However, the phase-out of the regulations began in the second half of the 1980s and culminated when the foreign exchange controls, which originally were part of the crisis regulations introduced during the war, were abolished in 1989. When the floodgates were opened there was no way to stop the rapid increase in the demand for loans, and there was no incentive to say no to loan applications. The risk culture at the banks was still underdeveloped. One consequence of this was that the credit risks on the overheated property market were underestimated and underpriced.
This will reduce barriers to entry by making it easier for third party providers to ‘plug into’ the banks’ systems to manage customers’ accounts on their behalf. Figure 1: Impact of reforms  The reforms are designed to increase innovation, competition and security in payments and banking services – to give us better information, more competitive pricing and new services in the use of the 97% of our money provided by the private banking system. They pave the way for improved and more secure smartphone apps, including the so-called ‘aggregators’ that aim to help customers shop around and switch providers of financial services frictionlessly. 15  15  The energy market is sometimes cited as a possible comparator for consumer switching. In that market, five and a half million customers in the UK switched provider in 2017. 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  Just as many of us have come to use our smartphones as a single tool for things that we used to do over multiple devices, so PSD2 and Open Banking could, at least in theory, enable apps that centralise our personal financial affairs, offer us advice on how we might more efficiently manage our finances (for example, by recommending that more money could go into a savings account, or rival bank that is offering better interest).

9. When introducing measures to tighten the underwriting criteria for mortgage loans, the HKMA has always strived to strike a balance to minimise the impact on end-users, particularly first-time homebuyers. Although we have already introduced five rounds of prudential measures on mortgage lending, we have sought to ensure that purchasers of residential properties at a value of $ million or below for self-occupied purpose would still be eligible for a maximum LTV ratio of 70%. In addition, purchasers who meet the eligibility requirements will be able to apply for mortgage loans of up to 90% LTV ratio under the mortgage insurance arrangements. According to figures provided by the Hong Kong Mortgage Corporation Limited, the value of properties involving mortgage loans with a 90% LTV ratio averages at around $ million. Therefore, I believe that the measures of the HKMA will have minimal impact on first-time homebuyers. 10. Changes in the property market cycle are affected by a host of internal and external factors, including land supply, interest rate movements, changes in household income as well as economic and financial market developments in Europe and the US. In view of the highly uncertain internal and external environments, the HKMA will continue to monitor the market situation closely and introduce appropriate measures in response to changes in the property market cycle to safeguard banking stability. 2  BIS central bankers’ speeches
In the first line of defense, operational risk management is conducted by staff in the front line units with support from first-line’s centralized risk management resources (usually as part of a business’ shared services function). The first line is responsible and accountable for the identification, analysis, management, and monitoring of the operational risks that arise as a result of its activities. Second line operational risk management is led by the Central Operational Risk Function in the Risk Group. Central Operational Risk provides independent assessment and oversight of first-line operational risks and risk management practices and is responsible for maintaining and enhancing the Bank’s operational risk framework. Our third line, Internal Audit, assesses the design and implementation of the operational risk framework and provides feedback on risk issues as an observer on governance committees. The foundations of the Bank’s operational risk program are the risk event reporting process and the risk and control self-assessment process. These processes are central to risk identification, analysis, and response. The risk event reporting process involves real-time collection, classification, analysis, and escalation of operational risk events including establishment of root causes and determination of remediation plans. You are all likely familiar with reporting risk events that have impacted your institution and categorizing them as low, moderate or significant. We do this as well. In addition, we require reporting of near miss events, which is when a control failure has occurred but we’ve been fortunate that there was no impact to the Bank.

There also may be externalities to actions taken in one business line that have implications for the risk of the institution as a whole; it is the second line’s responsibility to articulate that perspective to senior management. The second line’s responsibility for establishing a common framework for risk management creates benefits in terms of both efficiency and effectiveness. The second line is an institution’s center of excellence in risk management and is in an ideal position to identify and promulgate best practices and standards. In terms of efficiency, the second line is wellpositioned to collect and analyze risk information coming from all of the business lines, to provide common risk management tools, and to provide guidance to business areas to improve their risk management capabilities. The Bank’s third line of defense, Internal Audit, provides assurance to senior management and the Board of Directors that first and second line risk management and control activities are effective. Although I did not say it before, the second line is not fully independent of management. This is because second line risk management (in our case, the Risk Group) is involved in a broad range of management decisions related to the Bank’s risk controls, and, in terms of reporting lines, I am part of the Bank’s Management Committee and report to the Bank’s president. Our Audit Group, however, provides a fully independent, final layer of defense.