samchain/econo-pairs-v1 huggingface dataset:
I will share some of the challenges we see in the road ahead as the industry continues to adapt to and implement necessary changes. And then I’ll finish with a brief discussion of two of the issues that keep me awake at night. Progress to date Three years ago, I encouraged you to acknowledge that it is impossible to predict the nature or timing of a future crisis event. I posed a question about what a financial system better prepared to weather all storms would look like. As financial institution supervisors and as leaders of financial institutions, we all knew we needed to be better prepared for crisis events, whatever their character, source or timing. Since I made those remarks, a number of stress events have reinforced not only the need for continued substantive changes in firms, but also the benefits of the changes we have made so far. 1. Starting first with what has been accomplished to make financial firms – and the system – more resilient today to future shocks. First, in the area of capital resiliency, as a result of both new bank capital standards and our new stress testing regime, bank capital levels and the quality of capital have increased significantly – and on some measures, nearly doubled from pre-crisis levels. The banking system has more capital and, thus, a better ability to withstand stressful events when they arise.

Our policy rate is still in a positive territory at a level of 1.25%, alternative instruments are available for targeted actions, the level of foreign reserves remains comfortable and the banking system stable with NPLs ratio of only 3.4%, despite the pandemics shock and closure of a bank in the midst of the pandemics. Of course we have to be vigilant, and not only of conventional side effects of "too loose for too long" stance, but also of the possible adverse feedback  1/2  BIS - Central bankers' speeches  loop between real and financial sector, as well as of the so called "zombification" risk. As complacency is not an option, shielding against those risks asks for further strengthening of the financial safety net, which will remain one of our priorities. Thus, although still overwhelmed with the current challenges and the need for further policy support, we must not remain oblivious to the pre – pandemic strivings to increase the potential to grow faster, but in a sustainable and inclusive way. This requires gradual shifting of the focus back to the pre-crisis structural bottlenecks such as the quality of institutions, strengthening the rule of law, investing in human capital and in the potential to innovate, as well as to new structural hurdles that will be left as a legacy of the pandemics, which might not be even well known at the current juncture. Clearly, we as central banks cannot play a main role in these segments, but perhaps a supporting one.
By purchasing assets in a targeted way, the Bank can aid liquidity in these markets and so improve the availability of corporate credit. The Bank has been purchasing commercial paper for over a month now. It made its first purchases of corporate bonds this week. And we are reviewing the case for intervention in other corporate credit markets. Importantly, the objective of the Bank’s operations within corporate credit markets is not to purchase a specific quantity of assets; rather it is to improve the functioning of those markets. The scale of purchases required to improve market liquidity may in fact be relatively small: the very knowledge that the Bank stands ready to purchase assets may be as beneficial as the actual asset purchases themselves. Moreover, the required scale of purchases is likely to diminish over time as liquidity improves and private investors return to the market. It is important not to judge the potential significance of this channel by the scale of asset purchases. How can we monitor the effectiveness of the purchases? It is much too soon to come to a firm judgement about whether this programme of asset purchases is having its desired effect. In particular, the impact on the growth of broad money and credit will not begin to be discernible for several months yet. There are, however, some encouraging signs. Since the MPC’s announcement, yields on gilts have fallen by 40-60bp at the horizons at which the Bank is making purchases.

That is why in the minutes of its March meeting, the MPC  BIS Review 46/2009  5  indicated that, just as with its decisions on Bank Rate, we would review the appropriate scale of the asset purchase programme each and every month. 3. Conclusion  The extraordinary developments in the global economy since the autumn have been matched by the magnitude of the policy response. Monetary policy continues to play its part, with Bank Rate set at a historically low level and the launch of a large-scale asset purchase programme. Throughout these dramatic developments, the objective guiding the Committee’s decisions has remained the same: the need to keep inflation on track to meet the Government’s 2% inflation target. It was that objective that underpinned the decisions to reduce Bank Rate to unprecedented levels. And it was that objective that drove the MPC to adopt unconventional policy measures. The inflation target will also dictate the rate at which the stance of monetary policy is returned to normal as economic prospects recover. The outlook for inflation relative to the inflation target provides the natural guide to exiting from this period of exceptional monetary stimulus. Importantly, this exit strategy is clear, transparent and open to public scrutiny. Openness and transparency have been the cornerstones of UK monetary policy since the Monetary Policy Committee was established in 1997. That has never been more important than now. The inflation target is symmetric. That requires the MPC to set policy in a symmetric way.
Third, in relation to funding structures, the Central Bank is reviewing the liquidity rules governing the banks in order to strengthen management policies in this field, include binding regulatory limits on a consolidated basis, standardize the assumptions of our own models, expand information disclosure to the market about the liquidity position of each bank and move towards the new Basel liquidity standards. Finally, the bill of law sent to the National Congress to institutionalize the Financial Stability Board (FSB) is an important step, because it grants capabilities that provide more space to the authorities to monitor the risks facing the financial system and coordinate responses to them. To sum up, the Chilean economy is well positioned to address the changing internal and external conditions that we are already seeing. The adjustments observed in relative prices, the real exchange rate and interest rates have gone in the right direction to facilitate the adjustment of the economy. The Board follows closely the evolution of the external and domestic macroeconomic scenarios and their implications on inflation, and reiterates its commitment to conduct monetary policy in such a way that projected inflation stands at 3% in the policy horizon. At the same time, it will continue to improve financial legislation in order to maintain and enhance this resilience, in those issues that are legally mandated. Let me end with some final thoughts.

More will need to be done – both research and policy-wise – to prevent next time being the same. References Aikman, D, Alessandri, P, Eklund, B, Gai, P, Kapadia, S, Martin, E, Mora, N, Sterne, G and Willison, M (2009), “Funding liquidity risk in a quantitative model of systemic stability”, Bank of England Working Paper No. 372. Aikman, D, Haldane, A and Nelson, B (2014), “In search of macroprudential policy rules for the UK”, mimeo. Aikman, D, Haldane A and Nelson, B (2014), “Curbing the credit cycle”, The Economic Journal. Albert, R, Jeong, H & Barabási, A (2000), “Error and attack tolerance of complex networks”, Nature 406, 378–382. Arthur, W. Brian (2014), “Complexity and the Economy”, Oxford University Press. Barabási, Albert-László; Albert, Réka. (1999), “Emergence of scaling in random networks”. Science 286 (5439): 509–512. BCBS (2014), “The G-SIB assessment methodology – score calculation” available at http://www.bis.org/bcbs/publ/d296.pdf. Bems, R., Johnson, R.C. and Yi, K. (2012), The Great Trade Collapse, NBER working paper 18632. BIS (2014), Annual Report, No. 84, available at http://www.bis.org/publ/arpdf/ar2014_ec.pdf. Bisin, A, Moro, A and Topa,G (2011), The Empirical Content of Models with Multiple Equilibria in Economies with Social Interactions, Federal Reserve Bank of New York Staff Reports, no. 504. Burrows, O, Learmonth, D and McKeown, J (2012), “RAMSI: a top-down stress-testing model”, Bank of England Financial Stability Paper No.17. Carmassi, J & Herring, R (2014) “Corporate structures, transparency and resolvability of global systemically important banks”, The Systemic Risk Council research paper. Collinson, S, Jay, M (2012), “From Complexity to Simplicity”, Palgrave Macmillan.
International collaboration, data sharing, and the role of the IFC I would like to end my remarks with a call for even closer cooperation. To meet the future challenges of central bank statistics, we will need to continue fostering international cooperation, towards the harmonization of standards and the exchange of learning experiences. Articulating fruitful discussions and engaging the membership of the central bank community will remain essential to achieve these goals. Improved collaboration between the different bodies (OECD; IMF; Eurostat, CEMLA) is an important ingredient as well. Member experiences in overcoming legal constraints to enable data exchange within and between countries will be particularly useful. Official statistics provide the required information and data for credible policy making by central banks and other public institutions. Moreover, official statistics are also the fundamental basis for trust by the public on the state of economic reality. Fostering this public trust in an age of everincreasing complexity and diversity of data sources, and why not, fake news, remains critical. The basic duties of agreed, standardized methods and criteria, comparable across time and space, is the backbone of our profession. It will be an honor and a challenge to contribute to achieving these ambitions during my tenure as IFC chairman. 4

Due to the bullish gold market, this slight increase in our sales quota has had favourable effects. Translated into Swiss francs, the average selling price has settled at over Sfr 15,140 per kilogram. Since the sales began, the price per ounce has fluctuated between USD 256 and USD 330 (see graph). Recently, it has again surpassed the level of USD 320 per ounce. Such high levels had been recorded only during short periods in recent years, for example in reaction to the central bank gold sales agreement of September 1999. What is striking about the current gold rally is how persistent it has proved so far. Several factors have contributed to this new trend: •  A key factor supporting the high gold price is the mines' changed hedging policy. In order to reduce part of the price risk on their future production, the mining companies may engage in forward sales of gold and in similar hedging transactions. The commercial banks, in turn, which act as counterparties in these transactions hedge against the risk by borrowing gold from the central banks and reselling it immediately. This increases the amount of gold offered directly on the market. The gold lent by the central banks flows back to the lender upon expiration of the forward contract. If the mining companies hedge less, the gold on offer is reduced correspondingly. In the second half of the 1990s, gold producers massively expanded their hedge positions, which led to an increase in supply and thus contributed to depressing the gold price.
6 It is therefore difficult to understand why the effects should be so much bigger and more permanent in Sweden that the inflation target should be lowered here but not in any other countries, or why the rest of the world has not identified the problems. 7 It is possible that digitisation and globalisation have played some role in how inflation has developed in recent years, but the Riksbank’s assessment is that the low inflation seen in Sweden since 2010 is mainly explained by a strong exchange rate, a weak global economy, falling energy prices, and that companies have generally not been inclined to raise their prices. That prices have not been raised could be due, for example, to the fact that uncertainty has increased following the crises and that inflation expectations have fallen as inflation has remained low for so long. 5  Another way of expressing this is that inflation is fundamentally a monetary phenomenon. 6  There is a lively debate about the low interest rate policy also in the US, but it has a slightly different focus than the Swedish debate. Those who criticise the Fed for pursuing an overly expansionary monetary policy are usually convinced that inflation will soon return to the target even if the central bank tightens monetary policy (see for example George, 2015, and Lacker, 2015). 7  According to Hammond (2012), 27 countries were fully fledged inflation targeters a few years ago.

Central banks' response to the crisis History taught us that banking crises degenerate into deep and lasting depressions unless they are dealt with quickly and forcefully. Those lessons were not lost on both fiscal and monetary authorities and the policy response worldwide has, indeed, been exceptional by any historical standard. I would like to focus here on three characteristics of central banks interventions •  First, they have been fast and decisive. Indeed, the start of the crisis can be dated back to August 9 2007, when the Eurosystem provided up to 95 billion euros in exceptional liquidity support to the interbank market. As the crisis developed, those interventions multiplied and evolved, a point to which I will return shortly. The deterioration of the real economy and subsequent easing of inflationary pressures opened room for a substantial relaxation of the monetary policy stance. In the euro area, seven reductions in policy rates brought the interest rate on our main refinancing operations from 4.25% in October 2008 to 1% today. •  Second, those interventions have been flexible and highly innovative. Central banks saw as their mission to avoid the paralysis of financial intermediation and keep the monetary transmission mechanisms working efficiently. To achieve those objectives, they considerably expanded and diversified their tools and instruments. In countries where markets play an important role in the allocation of credit, they created numerous new facilities to provide financing and to lower spreads through the purchase of private and public debt securities.
Gas production continues to rise, and in 2007 production started on the large Ormen Lange and Snøhvit gas fields. The Ministry of Petroleum and Energy projects that total petroleum production will gradually decline in the years ahead. Prices for commodities excluding energy have increased considerably since 2002. The rise in prices was particularly pronounced in spring 2006, when metal prices climbed by a full 45 per cent from March to June. The rise in metal prices has been driven primarily by strong global economic growth, particularly in China and other emerging economies. Prices for food and other agricultural products have also increased in recent years as a result of rising production costs owing to higher energy prices. Increased demand for biofuel has also contributed as agricultural products and land are used in the production of biofuel. Growth in demand for commodities is expected to remain high in the years ahead and supply will probably also increase. Prices for metals are expected to fall somewhat, but probably not back to the level in 2002. 4  BIS Review 141/2007  Salmon prices fluctuate widely and are driven by a variety of domestic and global factors. Salmon prices rose sharply in summer 2006, driven by strong demand growth, particularly in Europe. Enterprises in Norges Bank’s regional network report growing demand for high quality salmon. Avian flu and other crises linked to meat products have increased the preference for fish products.

In this respect, the BCBS, which I have the honour to chair, has resolved to delay by one year (from 2022 to 2023) the implementation of the revised methodology of identification of global systemically important institutions and also the full implementation of Basel III. The BCBS has also postponed the end of the transitional period for capital requirement floors for banks using internal models to 1 January 2028. In any event, the BCBS has confirmed that all jurisdictions are committed to the full, consistent and timely transposition of the Basel III regulations in accordance with the new calendar. Second, in the accounting sphere, certain aspects relating to how the existing regulations should be applied to calculate credit risk have been clarified, to ensure that potential temporary delays in loan repayments by borrowers are not treated as if they were a case of permanent impairment of loan quality. The latter would lead to an immediate and abrupt correction in credit ratings and, therefore, to an increase in the provisions required, which  3  See P. Aguilar, Ó. Arce, S. Hurtado, J. Martínez-Martín, G. Nuño and C. Thomas (2020), The ECB monetary policy response to the COVID-19 crisis, Occasional Paper No 2026. Banco de España. 12  would ultimately lead to a decline in credit extended by banks. In exchange, especially should the crisis become prolonged, it is necessary to ensure that misuse of this flexibility does not lead to inappropriate accounting practices that may translate into delayed recognition of actual quality impairment of some credit exposures.
During this time the debate on financial reregulation has raged from public outcry over bonus compensation of bank CEOs to reregulation of financial services in the form of Basle III, Dodd Frank and similar regulations across the Atlantic. Under the current course, the trend towards tightened financial regulation is not likely to be reversed and we would all have to live to more regulation, though much of the new regulations were cure for diseases that were contracted elsewhere. 10. When speaking about financial regulation, I am reminded of the issue of transparency and governance. The investigation into the LIBOR scandal in major global financial centres and the consequent pursuit of similar investigation in regional financial centres point to the need for greater attention to market conducts. As market confidence is critical to the development of financial markets, any scandals may derail and set us back in the development process. We therefore have a duty to oversee that our markets function in a fair and transparent manner, to safeguard the reputation and trust of the users of financial services. In the past few years, the Bank of Thailand, with the help of key market participants, have put a great effort to promote our own reference rate – the BIBOR, so we have an interest to see that the market is transparent and inspire confidence among the users. 11. To enhance market conduct, the BoT in collaboration with the ACI are considering a code of conduct for FX dealers and brokers.

The crisis has clearly shown how inadequate regulation and excessive risk taking in the financial sector in developed economies can lead to unpredictable consequences in the real sector, both nationally and globally, stressing the need for a better understanding of the links between the financial and the real sector, such as and cross-border ties in the context of rising globalization. The fact that the roots of the global crisis were precisely in the financial sector suggests that most of the post-crisis needs for statistical changes touch exactly the central banks. Although the outbreak of the global crisis can not be attributed to the lack of statistical data, however, significant statistical gaps became evident and they are best reflected through the G-20 Data Gaps initiative for identifying recommendations to fill in these statistical gaps. The recommendations are mainly located in the following key segments: The first segment is better recognition of the increase in the financial sector risks. It was found that timely detection is extremely important for protection against crises. In this domain, emphasis is placed on developing a broader base of financial stability indicators, which we prepare on a regular basis. In fact, in the post-crisis period, this recommendation led to a dramatically increased number of central banks that prepare these indicators. Also, in the context of financial systems and markets, a focus was placed on detailed data on securities, in order to obtain a better analytical infrastructure to detect the risks of individual exposures and cross-sectoral spillover.
This will be influenced in the medium to long term by macroprudential policies that impact the efficiency of the financial system and through it aggregate productivity. ·  ·  ·  ·  ·  Comparing the FPC’s objective function with the more familiar monetary policy objective function helps illustrate the operation of macroprudential policy: 1. Clarity of objectives. The primary objective of the FPC, financial stability, can only be estimated; whereas that of the MPC, inflation, can be readily measured. As a consequence, FPC performance is best judged in the short term by intermediate indicators and drivers of financial stability; 2. Impact on growth. Although both committees are tasked with promoting the government’s economic objectives subject to achievement of their primary objectives, the MPC has very limited ability to influence trend growth. The MPC’s trade-offs, when they occur, are to limit excessive short term volatility in output and inflation, particularly in “exceptional circumstances,” circumstances that only extend modestly the policy horizon. In contrast, the FPC is more likely to face trade-offs between short term growth and its actions to achieve its primary objective. And the FPC can have  9 The recent interest in this concept is based on work by Tobias Adrian and co-authors (Adrian, T, Boyarchenko, N and  Giannone, D (2019), ‘Vulnerable Growth’, American Economic Review, 109(4)). For a discussion, see this article by Steve Cecchetti and Kim Schoenholtz. 10 Throughout this speech, deteriorations / worse outcomes for GDP-at-risk are referred to as when GDP-at-risk is increasing / high.

In a downturn, capital absorbs losses that could otherwise cause banks to restrict lending to households and businesses and make the downturn worse. If a bank fails, capital reduces disruption to the wider economy. And the market is more likely to continue funding adequately capitalised banks. For these reasons, higher bank capital requirements reduce both the likelihood and severity of future downturns, and so reduce GDPat-risk in the steady state. On the other hand, capital is relatively costly for banks to hold, which has a knock-on to the everyday cost of borrowing for households and businesses. So higher capital requirements also permanently dampen investment, productivity, and output. 23  All speeches are available online at www.bankofengland.co.uk/news/speeches  23  The FPC’s 2015 Medium Term Capital Framework24 calibrated the optimal structural (non-time-varying) capital requirement for the UK banking system by estimating the level of capital where the difference between these benefits and costs are maximised in the steady state. Chart 16 shows conceptually that this is where the marginal benefit of capital (smaller GDP-at-risk) is equal to the marginal cost of capital (lower investment and output). Chart 16: Optimal capital ratio where marginal benefits equal to marginal costs*  *Diagram is stylised. The ‘gross benefits’ curve in this analysis was estimated based on the historical relationship between banking system leverage and GDP-at-risk using a dataset for 840 advanced economy banks since 1980.