samchain/econo-pairs-v1 huggingface dataset:
The other voting members of the Committee – Adair Turner, Hector Sants, Michael Cohrs, Don Kohn, Alastair Clark, and my Bank colleagues Paul Tucker, Charlie Bean, Paul Fisher, and Andrew Haldane – make a formidable group with great experience. So what will we be doing? In devising new macro-prudential policy instruments, there is inevitably a degree of learning by doing. The FPC will be both doing and learning. In the wake of such a severe crisis, it is unlikely that excessive credit growth will be the major problem over the next few years. Indeed, the present problem is the reverse – lending is weak. We shall next week make recommendations in areas where in our judgement risks to the resilience of the system are increasing. In future, when legislation has been enacted, a key part of the FPC’s role will be to issue recommendations and directions to the new regulatory bodies, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority. The PRA will be part of the Bank, led by our new Deputy Governor, Hector Sants, and his Deputy, Andrew Bailey. Its objectives and style will differ from those of the FSA. The primary objective of the PRA will be to secure the stability of the UK financial system through its supervision of individual firms. It will not be to protect individual institutions from failure.

4  BIS central bankers’ speeches  latency where execution times converge on the speed of light.19 For social scientists, this is a financial arms race, a sub-second game of leapfrog. In their quest for speed, a number of firms are also engaged in a positional race. The shorter the cable to the trading exchange, the faster a trade can be executed. This has encouraged some firms to begin relocating their servers as close as physically possible to the trading exchange – so-called “co-location”. This is the financial equivalent of seeking the apartment closest to the sea. It, too, fuels arms-race behaviour: “however fast they went, they never seemed to pass anything”. Accompanying this shift in speed has been a dramatic change in the composition of trading and market-making. During this decade, so-called High Frequency Trading (HFT) has come to dominate. It now accounts for anywhere between a half and three-quarters of trading volume on the world’s major equity markets and a rising share of futures and other derivative markets.20 In some markets, HFT firms have become the de-facto liquidity providers or market-makers.21 Historically, designated market-makers were often granted privileges in return for agreeing to ensure trade and price continuity. No longer: the sleek have inherited the earth. This emerging topology of trading has had some clear benefits. This is manifest in narrower, sometimes dramatically narrower, bid-ask spreads for trading.22 For equity markets, these have fallen by an order of magnitude since 2004. This is typically taken as evidence of improved market liquidity and price efficiency.
As set out in the Statement of Policy, the indicative thresholds are 40,000 to 80,000 transactional accounts for partial transfer strategies, and a balance sheet size of £ to £ for bail-in strategies. 15 Details of the December 2020 update are here: Bank of England’s statement on MREL and Resolvability deadlines 16 Please see our Discussion paper for more detail: The Bank of England’s review of its approach to setting a minimum requirement for own funds and eligible liabilities (MREL) 13 14  6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  am not alone in recognising the feat of coordination which is required to deliver resolutions on a cross-border basis. The UK is a strong supporter of enhancing these mechanisms for engagement with other authorities – as both home and host authority. This interest is underpinned by a suite of cooperation agreements with our international counterparties and regular engagement with other jurisdictions to support cross-border resolution planning and policy development. This has included a series of exercises involving senior officials from a number of jurisdictions, including the United States and the euro area. Here we aim to have a shared understanding of the actions and decisions on the path to resolution for our firms, and agree ways to test our coordination mechanisms and our virtual communication capabilities.

The UK regulatory regime is not designed to ensure that no firm ever fails. Having a competitive market means lowering the barriers to entry and exit; the orderly failure of a firm with minimal financial stability implications is a natural part of an efficient economy. This is why we have modified insolvency rules for less systemic firms, which include an explicit objective to prioritise the repayment of eligible depositors by the FSCS within seven days, or have their accounts transferred to another firm. These powers also seek to act as a backstop, complementing other important supervisory tools such as having comprehensive recovery and solvent wind-down plans for firms to withdraw from the market before failure. Our disclosure requirements, as part of the RAF, also reflect this proportionality, with only the largest firms currently in scope of our reporting and disclosure requirements. We are also taking a proportionate approach in applying RAF for our international hosted firms20 by looking at whether they can achieve resolvability outcomes which are broadly comparable to our framework. In many cases these firms may be able to rely on group wide capabilities, avoiding unnecessary duplication. By requiring firms to meet outcomes and in not being prescriptive, the RAF also acknowledges that the depth and type of capabilities required to remove barriers will vary by firm and firms may be able to demonstrate that certain capabilities are not relevant to them – simpler firms will need to develop correspondingly simpler capabilities.
The final area in which recent innovations have improved market transparency is risk management. While we are far from being able to rest on our laurels, there is no denying the fact that financial institutions, their customers, and their investors have become more sophisticated over the past several years at evaluating, monitoring, and controlling market risk. If market participants better understand the risk of the positions they put on their books, they are more able to react effectively and efficiently when their assumptions are challenged or unwound. Although it is crucial that rapid innovations in trading and risk management practices continue, most of the institutions represented here have already made important progress along these lines in recent years. What needs to be stressed, however, is that it is not enough for a firm to develop - for internal purposes alone -- sophisticated new techniques to assess, price, and manage increasingly refined components of financial risk. If financial markets are to function most efficiently, shareholders, creditors, and counterparties of these firms also must be able to  BIS Review 60/1997  -4-  assess the risks when they make their evaluations. In order for them to do this, meaningful information about risks and risk management performance must be available. The Federal Reserve Bank of New York has been actively involved in encouraging an evolution of disclosure practices that will improve the functioning of financial markets.

The Federal Reserve Bank of New York has also been deeply involved in efforts to reduce foreign exchange settlement risk -- efforts that should further serve to improve market efficiency and overall financial stability. In October 1994, the New York Fed-sponsored Foreign Exchange Committee issued a major report on “Reducing Foreign Exchange Settlement Risk.” The Bank has also been working actively in this area with other central banks through the G-10 central bank Committee on Payment and Settlement Systems, or CPSS, which I have had the pleasure to chair in recent years. Building upon the work of the New York Foreign Exchange Committee, the CPSS published a document in March of last year, often referred to as the Allsopp report, that contains a comprehensive strategy outlining how the public and private sectors can work together to reduce foreign exchange settlement risk. The strategy was endorsed by the G-10 central bank governors and calls for specific action on the part of individual banks and industry groups. A survey conducted by the CPSS last autumn indicates that individual banks are answering the G-10 governors’ call for action. Many banks have made a good start in improving their ability to measure, manage, control, and net their bilateral settlement exposures, and they plan to push these efforts even further over the next year. While this is a very encouraging beginning, we can’t ignore the fact that more work must be done by individual banks.
In fact, at end-2021 a third of the banks under our direct supervision did not meet their internal targets for gender representation at board level. But, as I said, it is not just a matter of gender. The board of directors needs to have the appropriate knowledge diversity to be able to deal with the challenges facing the financial industry. I am thinking, for example, of digitalisation strategies and climate risks. This does not mean that members need to be experts on these topics, but they do need to have sufficient knowledge to understand these challenges in order to make sound decisions. At the end of 2021, only around a fifth of the largest euro area banks had sufficient IT expertise at board level. Increasing this ratio will be key if banks are to successfully navigate the digital era.1 Second, the involvement of board members is crucial. Members should exercise their duties responsibly and uphold professional standards. They should devote sufficient time to reading and understanding all the documentation in order to be well-prepared for their meetings. They should also have the opportunity to seek clarification in advance, if necessary, to ensure that they have sufficient knowledge to support or challenge decisions. Finally, as I mentioned earlier, independence is of course essential. Institutions should have a sufficient number of independent directors to contribute to decision-making in an objective manner and to ensure a neutral attitude within the board.

Many people have recently criticised the Riksbank’s communication for being unclear, with some claiming that it has sometimes been difficult to understand exactly why some decisions have been taken and why they have been judged to be better than the alternatives.1 What I intend to do here today is to provide my view of where the main divisions are and to describe how I came to the conclusions that I hold. I believe and hope that this review of the arguments can straighten out some potential questions and that it will form a good basis for continued discussions. Differences in views regarding monetary policy and what it can achieve Let me start by pointing out that lack of agreement among a monetary policy committee is not a problem in itself. The actual purpose of having a group of individuals decide on monetary policy is to create the right conditions for better decisions; it is namely so that groups tend to make better decisions than individual decision-makers. This is partly because the members’ experiences and skills are pooled and partly because the group acts as an insurance against the particular preferences of one individual being able to govern monetary policy; it means there are ”checks and balances”. The fact that different members make slightly different assessments and reach different conclusions is thus not so remarkable.
This can be  2  BIS central bankers’ speeches  done through proper organization, meaningful investment in technology and proper pricing of products. Lastly, let me remind all of us here that like any player seeking entry in the market, the cooperative bank which we wish to revive will be bound by the same legal, fiscal and prudential regulations as other players. It is therefore important for those who will be entrusted to manage the affairs of the institution to prudently provide leadership that seeks to promote the well being of all stakeholders. As such the aspect of good corporate governance practices in the banking and financial services sector cannot be over-emphasized. I thank you all for your attention! BIS central bankers’ speeches  3

BIS central bankers’ speeches  1  There are two objectives: first, to review the principles and refine the criteria that guide the choice of historical characters for banknotes; and second, to establish a process to ensure that potential candidates are consistently and transparently judged against those criteria. The review will be led by Chris Salmon, the Bank’s Chief Cashier, who will be meeting with interested parties as well as inviting feedback from members of the public via our website. The conclusions will be announced by the end of the year. Now let me introduce a real expert to tell you a bit more about Jane Austen and her time at Chawton. Elizabeth Proudman is Chairman of the Jane Austen Society, and I would like to thank her, along with Ann Channon and staff here at Jane Austen’s House Museum, for hosting today’s event. Elizabeth, over to you. 2  BIS central bankers’ speeches
This covers a lengthy time-series (often more than a century of data) across 12 developed countries. 11 It enables us to identify lower (than business cycle) frequency movements in credit, just as Comin and Gertler (2006) do for post World War II US GDP. 12 We concentrate on results for the UK and US, though broadly similar patterns are evident for the other ten countries. Table 1 presents some summary statistics (mean and standard deviation) of real GDP growth, real loan growth and real bank asset growth in the UK and the US since 1880. 13 The sample is split into four periods: 1880–1913; 1914–1945; 1945–79; and 1980–2008. Charts 4 and 5, meanwhile, plot loan or asset to GDP ratios for the UK and US over the sample. Several features are clear:   Average real GDP growth is little changed either side of the wars (Table 1). But real credit has grown around twice as quickly since 1945. In consequence, loan/GDP ratios trend upwards from around 1945, consistent with financial liberalisation and deepening (Charts 4 and 5).   The same general pattern is evident in the volatilities of output and credit. The variability of real GDP growth has, if anything, fallen in the period since 1945. The standard deviation of real credit growth rose in the years immediately following 1945 and has remained above those levels, especially since 1980.   Since 1945, the standard deviation of real credit growth has been around five times that of real activity.

A concern for reputation incentivises banks to seek risky ventures (to keep dancing), the more so the better is the market’s prior on the macro state (the louder the music). We also posit as a larger proportion of banks set risky credit policies, the larger the incentive to pursue similarly risky policies. When others are posting positive earnings, the reputational loss from foreclosing and taking losses is that much greater. This is the “Keynes constraint”. It is better for your reputation to fail conventionally than to succeed unconventionally. These conditions generate the potential for credit booms and busts. The better is the macro state, the greater banks’ incentive to pursue risky projects to preserve reputation, as the market attributes low earnings to low ability. But one bank’s announcement of positive earnings encourages others to announce positive earnings by setting risky policies too. In Rajan’s model this strategic complementarity between banks generates multiple equilibria: in sufficiently good states, banks coordinate on risky policies (“credit booms”), while in bad states they coordinate on tight policies (“credit crunches”). In between, either equilibrium is possible. Define the payoff function  . Substituting gives:  This captures the marginal return to adopting a risky policy. It allows us to define the regions of fundamentals over which risky policies and tight policies dominate respectively.
Now that this certainty is gone, debt sustainability may well rest on a more fragile and volatile basis. As we all know, debt sustainability depends on three variables: the primary surplus, the growth rate and the interest rate. The relationship between those three parameters and debt can be expressed through a simple equation, the famous “unpleasant arithmetic”. Assessing sustainability seems therefore relatively straightforward. Many economists and market analysts on sovereign European debt simply assume low growth and high interest rates forever in peripheral countries – which enables them to conclude categorically that debt is not sustainable. A (slightly) more sophisticated and developed version of that story takes account of the impossibility, for Euro economies, to depreciate their exchange rates, therefore locking them into a low competitiveness and no growth equilibrium. I see three major problems with those analyses. First, the competitiveness story does not hold. Take the UK, for instance. Its effective real exchange rate has depreciated by 23% over the last four years. And its exports have grown by a healthy 15%, in nominal terms, over the first six months of 2011. But Italy, Spain and Greece have done even better, with exports growing respectively by 16%, 19% and 37% during that same period, and, of course, no exchange rate adjustment. Equating competitiveness with exchange rate depreciation is therefore overly simplistic. This does not mean that efforts to improve competitiveness in many parts of the euro area should not be strengthened.

We have always been diverse, yet connected. I recall how amazed I was when, during my first visit to Portugal, two decades ago, I realised that in two countries located at the two ends of the European Union – Portugal and Romania (which were also the extremities of the Roman Empire) – a saying about the bare necessities of life sounds almost the same in the two languages. The sentence that really shocked me was the following: “In this house with a litre of wine and a kilo of beef, one cannot be dying of hunger or thirst”. This is not an exception, though. In Spanish and Italian, a lot of words are close to the 1/3  BIS central bankers' speeches  Romanian ones. A proof in this respect is that many Romanians have chosen to work or to live in those countries as they find it easy to adapt to the local culture and language. It’s like a home away from home. In the very heart of Rome, anybody can see Trajan’s Column, the monument commissioned by the Roman Emperor Trajan, born in Spain. It was completed in the year 113 AD and features a remarkable spiralling, sculpted bas-relief depicting the wars between the Dacians and the Romans. Trajan solved a budgetary crisis by crossing the Danube and entering Transylvania – the land beyond the forests in Latin (trans silvae) – to seize the gold of the Dacians. I wouldn’t say this would qualify as model behaviour nowadays.
Demands from customers change, expectations from shareholders fluctuate and the regulatory landscape you work within will continue to evolve to keep pace. Constant change – and commitment to evolution – is not a choice. It is the only way to survive, stay competitive and stay safe in a complex and vulnerable world. As it relates to cybersecurity, I believe we are at a pivotal moment: we know there is an issue; we will work with you on fully understanding the scope and breadth of the risk; we will be pragmatic and add value; we are looking at this holistically; and our goal is to come out with a set of next steps that will benefit all of us, including protecting the financial system and the U.S. economy as a whole. We need to address cybersecurity before we see a catastrophic event, not analyze it afterwards. Thank you. BIS central bankers’ speeches  7

BIS central bankers’ speeches  3  Second, we took additional non-standard measures to ensure that our interest rate decisions were transmitted effectively to the broader economy, despite the volatilities in the financial sector. If banks cannot easily access the money market or other sources of finance, they may not extend credit to households and companies, to the detriment of economic growth and employment. At the outset of the crisis in 2007, the ECB reacted immediately to the rapidly worsening liquidity conditions and heightened credit risk, particularly in the interbank markets. When stress in the financial markets re-emerged in the autumn of last year, the Governing Council of the ECB again took a series of measures to enhance the provision of liquidity to the banking system and to actively support lending, notably introducing two very long-term refinancing operations with a maturity of three years, which were conducted in December last year and in February this year. The exceptionally long maturity of these operations gave banks a longer horizon for their liquidity planning. It is also helping them to deleverage in a balanced and orderly manner over the medium term, thereby avoiding “fire sales” of assets and a downscaling of longer-term lending. At the same time, it is crucial that all the crisis measures taken by the ECB to ensure monetary stability in the euro area – the standard and the non-standard – do not create adverse incentives for market participants or unanchor inflationary expectations.