samchain/econo-pairs-v1 huggingface dataset:
The four firms met at the Federal Reserve at 7:00 p.m. A draft term sheet was reviewed which provided detail with respect to the consortium approach. The terms and conditions were debated, altered in some places, and ultimately refined so that the four firms could present it to a wider group. Although Federal Reserve officials were present at the meeting, we did not participate in the discussion about terms and conditions. At about 8:30 p.m., a meeting of a wider group involving 13 firms began. Meanwhile, some representatives of the Core Group called Long-Term Capital to discuss the terms and conditions of the consortium approach. Federal Reserve officials did not participate in any conversations with Long-Term Capital regarding the terms and conditions. In the meeting with the wider group, Peter Fisher explained the importance of avoiding a disorderly close-out of Long-Term Capital’s positions. He also underscored the desirability of parallel efforts to resolve the problem. It was agreed that the group would reconvene at 10:00 a.m. the following morning. It was clear to everyone that time was of the essence. I returned to New York from London around midnight. During the early morning hours, I called various foreign central bank officials to inform them of the situation. At about 9:30 a.m. my colleagues and I met with the Core Group to review the status of the situation.

While hubris may have set them up for a fall, it was the extraordinary events of August in global markets that appears to have tripped them. On August 17, the Russian government announced an effective devaluation of the ruble and declared a debt moratorium, shocking investor confidence all over the world. Over subsequent days and weeks, equity and debt markets the world over became increasingly volatile, BIS Review 78/1998  -2-  with US equity markets falling and the spreads between US Treasury securities and higheryielding debt instruments widening sharply. The correction of stock prices was not of exceptional size or concern and, indeed, had been anticipated by a number of astute market observers. However, the abrupt and simultaneous widening of credit spreads globally, for both corporate and emerging-market sovereign debt, was an extraordinary event beyond the expectations of investors and financial intermediaries. The unusual widening of credit spreads also caused significant losses at LongTerm Capital. As markets around the world moved in the same direction at the same time, the diversification on which Long-Term had previously relied failed them utterly. Instead of offsetting positions, their losses were compounded. At the same time, the volatility in equity markets caused further losses. On September 2, the partners of Long-Term Capital sent their investors a letter acknowledging 52 percent losses on the year through August 31 and that they were seeking an injection of capital to sustain the firm. The existence of this letter became widely known and reported within a few days.
Such regulations are usually called into question by both the industry and the legislative authorities. BIS Review 113/1999  4  There is undeniably something to be said for their view of this matter as well. It is, moreover, easy to create the impression that the state by its control takes a special responsibility for the collateral in the bonds, which is not the intention. Perhaps one should also ask whether a gilt edge to the bonds would really give the effects hoped for. The large liquid securities with the best creditworthiness (AAA-rated) in the European mortgage market (Öffentliche Pfandbriefen) have in the first place collateral in loans to local governments or federal states and not in the market that the Swedish housing companies can use. They would rather issue “Hypotheken Pfandbriefe” with collateral in office premises and housing and both interest and liquidity are less favourable in the market. It does not seem either as if any uniform market for mortgages is in process of being established, but the regulatory framework differs considerably from country to country. Investors will hardly avoid making separate appraisals for each of these markets. Moreover, it seems, not wholly unexpectedly, as if EMU would affect developments in the direction from relatively rule-governed national markets such as the Danish and German to internationally open markets, where new instruments can be developed in a flexible way as the need arises.

Those wishing to sell housing loans on the Swedish market must, however, accept offering loans in kronor for the time being if they are to meet anything other than sporadic interest. This restricts competition to those who really actively want to sell their products in Sweden. If we enter EMU, it will be a different matter. We can then borrow in euro without being exposed to an exchange risk and access to potential lenders will increase dramatically. Mainly as a result of the deregulations in the 1980s and 1990s and the ensuing increasing competition, the Swedish housing loan sector has been condensed to five companies, of which four are subsidiaries of banks and the fifth is state-owned. These five companies cover around 95% of the market (figure 2). As housing loans are very standardised products, it is natural that the price, i.e. the interest rate, will be a crucial factor in competition for customers. This means in turn that refinancing costs will be absolutely decisive for running a profitable business. Market share for lending of major swedish banks end 1998. Per cent S E Bolån 10%  Venantius 2% Stadshypotek (inkl SHB Hyp) 32%  NB Hyp 12%  SBAB 14%  Spintab 29%  In the light of this, there is every reason to discuss what EMU and the euro can mean for the future financing opportunities and how Swedish businesses stand up to European competition?
Bastiat opined, “There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”14 The same might be said of regulators. As regulators grapple with implementation of the voluminous Dodd–Frank reform act, the unforeseen must be taken into account. The law of unintended consequences is always lurking in the shadows. To get regulatory reform right, we have a lot of “foreseeing” to do. One can envision, for example, that the potential cumulative impact of the many regulations demanded by Dodd–Frank will be to artificially raise the cost structure of the non-too-big-tofail depository institutions. Imposition of the new requirements and restrictions risks creating new economies of scale in banking generated by the costs of regulatory compliance, many of which could be fixed costs not fully proportional to bank size. To the extent that a large scale becomes necessary to absorb the regulatory cost associated with reform, Dodd–Frank could intensify the tendency toward bank consolidation, resulting in a more concentrated industry, with the largest institutions predominating even more than in the past. Such an outcome would appear to me contrary to the stated spirit and goal of the act. A more consolidated industry would only magnify the challenge of dealing with systemically important institutions and offsetting their historically elevated too-big-to-fail status.

I will not have time today to dwell on the details of the plan, let me just say that the plan is now complete and is currently being considered by the finance ministry, and is scheduled to come into effect this year. It is our hope that this continuing momentum of reform will help expand the competitiveness and the growth of the Thai financial sector and the economy in the years to come. I probably have used up my allotted time. Again, I want to thank Euromoney for the invitation. It has been a pleasure and thank you for your attention. BIS Review 76/2009  3
Given the novel nature of the instrument, its amount and the difficulties in reaching agreements in the EU on such multi-faceted matters, I must say that the outcome is very satisfactory in terms of underscoring the shared will to move the European project forward. The challenge now is to convert these funds that will be made available to countries into a fiscal impulse that accompanies and steers the recovery effort needed in our productive system. In this connection it would be advisable to prioritise, in the short term, public investment projects in innovation, technological capital, education and lifelong learning, and projects that contribute to the transition to a more sustainable economy, in line with the strategic guidelines recently laid down by the European authorities. The fact that the recovery fund agreed by the Council focuses on medium and long-term objectives means there is still a significant need in the short term to fund the Member States’ budgetary effort in combating the effects of the pandemic. Also, in the medium term it remains necessary to equip the EU with an appropriate institutional framework to address the asymmetrical effect of economic shocks, e.g. through the launch of a common budgetary macroeconomic stabilisation capacity, a cyclical stabilisation function or a pan-European unemployment insurance scheme. That would influence greater pooling of resources and risks in the budgetary arena and would enhance the resilience of the Union as a whole to negative shocks.

On one hand, banks have been able to gain access to the ECB’s long-term financing under most advantageous conditions thanks to the purpose-built programmes introduced by the ECB. On the other, the public guarantees on loans to firms and the self-employed approved by the Government have contributed to lessening financial institutions’ potential reluctance to take new risks on board in such an uncertain setting. Analyses by the Banco de España based on the evidence available suggest that these guarantee facilities are, in particular, paving the way for the financing both of firms facing greater difficulty gaining access to credit and of small enterprises, marked by having been affected by the impact of the health crisis and for having a greater risk profile. Thanks to the guarantees, SMEs have been able to finance themselves in recent months under more favourable conditions in terms of the interest rate, the amount of credit and, above all, the maturity of the operation, which on average has stood at close to five years. The role of lending to companies in the current crisis is thus proving to be of great importance. It is contributing to reducing the risk of bankruptcy for firms that are viable but which face temporary liquidity problems, with the adverse consequences this would have in terms of job destruction and damage to the productive system, and, in sum, to the robustness and momentum of the economic recovery.
BIS Review 131/2009  17  The swap arrangement involving covered bonds in exchange for government securities has made a considerable contribution to securing banks’ long-term funding. This spring we saw that the covered bond market started to reopen. The minimum price in the swap arrangement is thus adjusted to the interest rate forming in the market. The arrangement will be phased out in the course of autumn. Norges Bank temporarily eased its collateral requirements to facilitate banks’ access to borrowing in the central bank. Banks’ borrowing needs are falling, and a good supply of highquality collateral, particularly Treasury notes, has increased markedly. We are of the view that the conditions are now appropriate for reversing these temporary changes. We will also tighten the collateral requirements. Today the planned changes have been circulated for comment. The acceptance of new securities eligible as collateral under the temporary rules is now discontinued. Securities that were already accepted as collateral under the temporary rules can normally be used as collateral until they mature or up to no later than 15 February 2012 when the last long-term fixed-rate loan in Norges Bank has matured. We have also announced a change in the so-called bank quota. Under today’s rules, 35 per cent of a bank’s borrowing facility in Norges Bank can be based on collateral in bonds issued  18  BIS Review 131/2009  by other Norwegian banks. It is a disadvantage that the provider of the collateral and the collateral are from the same sector.

Pre-requisites to a stable Islamic financial system  Despite a more challenging environment, the development of Islamic finance as a viable form of financial intermediation has moved forward. It is while Islamic finance is still at its early stage of development that the opportunity has been taken to strengthen its foundations and put in place the pre-requisites that will pave the way for its development and safeguard the stability of the system. Not only has closer attention been given to the supervisory, regulatory and legal dimension but also to the development of the financial infrastructure and the markets as well to institutional development. In essence, the prudential regulatory design has been complemented by concurrent efforts to develop Islamic financial markets, the Islamic institutions and the financial instruments. Allow me to highlight the key areas that are important to this objective. First, effective regulatory and supervisory framework The hallmark of a well-developed financial infrastructure is an effective legal, regulatory and supervisory framework which would underpin the stability of the financial system. The regulatory and supervisory function is an indispensable and vital component of the financial infrastructure. For the Islamic financial system, this framework also needs to be consistent with the requirements of the Shariah principles, including the establishment of a Shariah council, which provide assurance that the strategic direction, the formulation of policies and the conduct of financial transactions are in compliance with the Shariah principles.
However, the very fact that interest rates must – eventually – rise again implies that credit expansion based on low interest rates cannot be viewed as a shift to a permanent higher credit level. At higher interest rates, credit demand will decline once again. To the extent that the credit expansion was driven by miscalculations on credit affordability, this may even lead to a crisis. 3.4. Behavioral biases  The latter remark leads to a fourth potential explanation, that is, credit expansion driven by behavioral biases. As highlighted by Hyman Minsky7, the credit cycle appears to be driven by “waves of optimistic and pessimistic sentiment”8. In an upswing, expectations about future developments may turn erratically exuberant. Observing a long period of price increases, investors tend to believe that new circumstances justify the perpetuation of the upward trend and act on this belief. Overconfident lenders and borrowers are increasingly ready to take higher risks. Ever increasing prices become a necessary condition to enable borrowers to service their debts. Then the tide turns. A few investors fail to meet their obligations, confidence crumbles, asset prices stop increasing or begin to fall and optimism turns into a wave of pessimism. Clearly, credit expansion driven by such erratic beliefs is a cyclical phenomenon and no viable explanation for a sustainable increase in the credit-to-GDP ratio. As we have seen, there are various potential explanations for an increase in the credit-toGDP ratio, some suggesting a permanent, structural increase in this ratio, others hinting at a temporary, cyclical upswing.

In this respect, I would like to thank the organization committee for their efforts in bringing these very interesting and enlightening studies under this conference. I wish the conference a complete success and I would like to thank all our guests for their participation. 2  BIS central bankers’ speeches
Under the influence of changes in banking practices, customers may be able to have access to a wider range of financial products and services. Furthermore, efficiency gains will allow products to be offered at lower prices. In the euro area, electronic finance thus compounds the effects of the creation of the single currency, adding impetus to progress towards integrated financial markets at an area-wide level. Monetary policy needs to take account of these developments. In particular, it is important to monitor the resulting modifications to the financial structure of the economy so as to be able to track changes in investor behaviour, not least in order to assess the transmission channels of monetary policy. Moreover, in this context the possibility of excessive risk taking in the banking sector should not be neglected. Faced with eroding margins in "old businesses", banks may develop their activities in heretofore unexplored fields, by geographical expansion or by product development. In such circumstances, some banks may misjudge the risks inherent in the new activities, as a result of a lack of information, knowledge or skill. In such a situation, the prudential supervision of banks can help by assessing whether the capital buffers of banks remain sufficient for the banking sector as a whole. In financial markets, the issues are broadly similar. It is widely recognised that financial markets have been significantly transformed by the emergence of on-line brokers and electronic trading systems over recent years. In general, these developments have the potential to improve the functioning of financial markets.

There even exist some banks with few or no physical branches, which rely on the internet and the telephone as their main channels of communication with clients. In general, the development of internet banking appears likely to reduce the franchise value of banks as it contributes to an intensification of competition in the banking sector. Certain commentators even consider that competitive pressure may lead to the separation of various banking activities traditionally performed under the same roof. In the view of these commentators, activities such as deposit taking, payment services and lending could be split up because Internet banking would diminish the traditional synergies between them. What I would like to bear in mind from the discussion on this issue is that, with new information and communication technologies, business practices in the banking industry can be expected to evolve considerably in the near future. For example, advances in data processing as well as in business models may make it possible for banks to make more efficient use of information on customers' business habits, and apply e.g. new credit scoring and other methods of analysis. Customers are likely to benefit from these developments in several ways. Thanks to intensified competition, they are likely to get better and more efficient financial products and services. In particular, new technology such as home banking should contribute to reducing the time and effort spent by customers in purchasing financial products and services.
Tightening up the process around supervisory model approval might be one element of that. One practical step would be to impose much longer look-back periods than the current minima. Another would be to require an extended period of out-of-sample testing prior to model approval. A third would be imposing direct restrictions on models - for example, by introducing floors on risk weights. Prompted by concerns about imprudently-low risk weights, a number of regulators internationally have imposed floors in the past year – for example, in the UK, Hong Kong, Sweden, Norway and Switzerland. In the US, the Collins Amendment to the DoddFrank Act requires banks using internal models to meet a 100% floor based on a simple, standardised approach. The imposition of floors can usefully help cut off the tail of firms, or portfolios, where low risk weights are being set. In that way, it can help prevent capital falling to imprudently low levels. But setting floors also poses some difficult calibration questions. At what level, and level of granularity, should floors be set? And based on what benchmark? Answers to those questions can fundamentally reshape incentives. For example, if a floor is set at 100% of the standardised approach, this will effectively remove incentives to move to models in the first place. Anything short of a 100% floor, while improving prudence, would not curtail complexity and inconsistency in capital adequacy standards.

In other words, estimated risk weights are very likely to be least reliable when regulators are most reliant on them. By construction, when it matters most, risk weights are likely to be long noise and short signal. 4  BIS central bankers’ speeches  Theoretical objections to risk weighting are no less deep-seated. One key issue is aggregation (Masera (2012)). Regulation has focussed on ever-more granular and precise risk estimates for individual assets. Fewer attempts have been made to consider correlations across broad asset classes, other than in parts of the trading book. Yet it is these correlations which fundamentally determine risk across a banking portfolio. Indeed, this is perhaps the key lesson finance theory has taught us over the past half-century. There is a cruel irony here. One of the great pre-crisis mistakes was to look at risk in the financial system institution by institution, atom by atom. Doing so resulted in regulators missing the systemic crisis of a lifetime. Yet an asset by asset, atom by atom approach to risk measurement still lies at the heart of the post-crisis regulatory framework. A second conceptual problem with risk-weighting is that it takes no account of the collective consequences of banks’ asset allocation decisions. For example, no account is taken of the externalities, positive or negative, that banks’ portfolio choices may give rise to. This may lead to risk weights being mis-calibrated from the perspective of the financial system as a whole and the wider economy.