samchain/econo-pairs-v1 huggingface dataset:
So let me start by giving you a banking supervisor’s view of internal controls. But first, what exactly do we mean by “internal controls”? The definition I would suggest, which is borrowed from the Basle Committee on Banking Supervision, is that internal controls refers to the ongoing process by which the Board of Directors and management of an institution ensure that the institution meets three key sets of objectives. First, operational objectives - the efficiency and effectiveness of the institution in using its assets and other resources and in protecting the institution from loss. Second, information objectives - the reliability and completeness of financial and management information needed for decision-making within the institution and for regulatory and other external uses. Third, compliance objectives - compliance with applicable laws and regulations, supervisory requirements, and internal policies and procedures, in order to protect the institution’s franchise and reputation. What, then, are the main elements of the sort of control systems needed to achieve these objectives? Basically, there are five inter-related elements: management oversight and the control culture; risk assessment; control activities; information and communication; and monitoring activities. The Basle Committee on Banking Supervision has recently put all this together into a set of fourteen principles for regulators to use in evaluating institution’s internal control systems. I do not propose to run through these one by one, but I would like to pick out one or two points so as to give you an idea of what I, as a regulator, see as the key ideas.

Since early 2003, we cut several times the core interest rate bringing it at its minimum historical level, 5 percent. In taking any monetary policy decisions we had considered the further invigoration of economic activity, keeping always an eye on inflationary developments and financial stability as well. As I would like to often mention in the IMF premises, Albania is considered as a successful story. The Board of directors have recently declared that Albania is enough mature to sign a new three-year agreement by the end of this year. The new arrangement will be a more flexible one leading Albania to a better access in the international financial market. Of course, what I mentioned above was just a brief resumé regarding the current situation of the banking system and the overall economic performance. There is no doubt that Albania’s attractiveness has further enhanced, and partially this reflects also the increase of confidence in the Albanian banking system. Using the opportunity of this very prestigious forum, I would like to share my voice with that of the Albanian representatives present in this panel, expressing that my country is more open, more consolidated, ready to absorb more ambitious projects and, of course, global projects. I wish you successful and fruitful proceedings of this meeting. Thank you. 2  BIS Review 41/2005
This trajectory assumes that the peso depreciation of recent months will pass through to prices as it has done historically; that wages will be adjusted in line with productivity changes; and that capacity gaps will remain stable over the projection horizon. About the real exchange rate, we use as a methodological assumption that it will stay near its current values, considering that it is within the range believed to be consistent with its long-term fundamentals. We also use, as a working assumption, that the monetary policy rate will not change in the short run. BIS central bankers’ speeches  3  The baseline scenario reflects those events believed to be the most likely to occur with the information at hand at the closing of this Report. There are risks, however, that, if materialized, could reshape the macroeconomic scenario and thus may alter the course of monetary policy. Abroad, there is the risk of when and at what speed the Fed will start raising its benchmark rate, and how this will affect financial assets. The risk of greater market volatility has increased because of the growing discrepancies between private expectations and the Fed’s announcements, plus the divergence of monetary policies of the main developed economies. In China, the risks about its performance have gained importance, reflecting its recent weakening. The evolution of the Chinese financial system and real-estate sector are the main focus of attention, as they could result in a sharper drop in the copper price.

To sum up, the present financial situation of enterprises and households, while still strong, is less comfortable than it was some years back, so it is not as strong to deal with a worsening of the domestic or international macroeconomic environment. Thus, it is important for agents to thoroughly assess their borrowing and lending decisions going forward. I would like to finish with some thoughts. Final thoughts 2014 has not been a good year for our economy: growth has been slow and inflation has surpassed our tolerance range for several months. The analysis I have shared with you today shows that to a great extent these numbers result from the natural adjustment of an economy experiencing major changes in both local and external conditions. These changes require big adjustments in relative prices to reallocate resources across sectors. We mustn’t forget that the external scenario has been greatly modified in the past few quarters. We saw the end of the so-called commodity super-cycle. Its negative impact on the copper price has affected mining investment, one of our economy’s main sources of growth in recent times. China’s economic situation has been weaker than forecast, as has been the situation of several other emerging economies. This has increased the volatility of the external financial conditions facing emerging economies, a phenomenon that has intensified as the normalization of US monetary policy approaches. We have been often asked whether the discussion on the reforms now being studied in the country has played a role in our economic slowdown.
The measures taken in October were successful in preventing a systemic collapse and in the first week of the New Year there were some signs of a more general easing of pressures in financial markets. However there have been many relapses in the last 18 months and yesterday we again saw renewed fears in the markets. On the policy side, it is worth remembering that it is possible to overdo the degree of support. But at present the risks remain clearly to the down side. Therefore, in setting policy, the authorities both here and overseas need to consider whether further action on interest rates (or other monetary measures) or fiscal action is required. They need also to consider whether to do more to underpin the confidence among banks and among investors that is necessary to support the lending the economy needs to emerge from recession.

The equilibrium may often be an evolutionary one, the type of which often arises in ecological and biological models. The  23  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  23  dynamics around this equilibrium are also often highly non-linear, and sometimes discontinuous, with a degree of non-linearity which is state-dependent (Taleb (2014)). The combined effect of non-stationary, multiple equilibria and highly non-linear dynamics makes for non-standard, and often highly non-normal, distributions for the variables in these systems. For example, they are more likely to exhibit excess sensitivity in their fluctuations relative to fundamentals. And they may also be subject to large dislocations or discontinuities. In consequence, they are liable to have much fatter tails than the Gaussian distributions that often emerge from linearised, DSGE models. (d) Matching the Dappled World These features of ABMs – emergent behaviour, multiple equilibria, non-normalities - can be illustrated using the original cellular automata example, Conway’s Game of Life. Take as the starting point the simple cellular structure shown in Figure 16. Now augment that with some very simple behavioural rules of thumb describing the evolution of the cells. 19  Then run this model forward to see what behaviour emerges among  the cells. As the simulation shows, even a simple cellular  Figure 16: Conway’s game of life  structure following simple decision rules gives rise to complex system dynamics. In this example, the properties of this system are clearly “emergent” – you would be hard-pressed to have predicted these patterns ex-ante.
Looking forward, however, the possibility of tighter global liquidity conditions has raised investor redemption risk for hedge fund managers, particularly as the share of less liquid assets has reportedly been increasing. At the same time, correlations of returns within some hedge fund investment strategies and among strategies remained high or even increased, raising the risk of disorderly synchronous exists from similar trades in an environment of unexpected market turbulence. This is illustrated in the chart on the right on slide 13. 6. Overall assessment  Having reviewed the developments in the key parts of the financial system, I will now turn to the overall assessment of risks to euro area financial stability. Let me first remind you of the scope and the nature of our financial stability analysis. In particular, drawing attention to sources of risks and vulnerability to financial stability does not seek to identify the most probable outcome, but it rather entails highlighting potential and plausible sources of downside risks, even if the probability of their realisation is relatively low. Let me now conclude by stressing that in June 2006, the financial stability outlook rests upon a delicate balance. On the one hand, the global economic activity is expected to remain robust and the shock-absorption capacity of euro area financial institutions has improved. But, on the other hand, risks and vulnerabilities remain and some have grown further.

Overall, while a positive outcome remains the most likely prospect, the possibilities that the risk-management systems and lossabsorption capacities of financial institutions may be severely tested, while still small, cannot be excluded. Finally, I would like to remark that many of the risks discussed in my presentation today have already been identified some time ago. The fact that they have not materialised to any significant extent does not mean that these risks have diminished. Therefore, we should not be complacent in the face of what might currently appear to be a reassuring stability in the euro area financial system. Continuing vigilance is required to safeguard financial stability in the euro area. I am now at your disposal to answer questions on the Review. BIS Review 50/2006  5
10  Adelino, M., Song, M. and Robinson, D. (2014), “Firm age, investment opportunities and job creation”, NBER Working Paper 19845, January. 11  The Financial Stability Board defines shadow banking as “credit intermediation involving entities and activities outside the regular banking system”, a definition which ranges from more transparent and regulated entities such as institutional investors and money market funds to highly complex and unregulated entities such as structured investment vehicles and special purpose entity conduits. 12  “Finance for Growth”, Report of the High Level Expert Group on SME and Infrastructure Financing, December 2013. 6  BIS central bankers’ speeches  quality securitisation in Europe, which the ECB and the Bank of England have been jointly pushing.13 Securitisation has the double benefit that it not only encourages existing originators to extend more SME loans, but to the extent that it partially removes credit risk from bank balance sheets, it may also help smaller, less diversified originators to enter the SME loan market. In this way, it could also mean that SME lending is less dependent on a few large banks in each country. It is worth reflecting, however, on what the new normal should be once the credit cycle picks up. On the one hand, there clearly benefits to having a more balanced financing mix. It is useful not only to provide a cyclical cushion in bad times, but also to increase market contestability and reduce over-banking in normal times.

The sector is in a phase of downsizing and structural change that will inevitably affect financial intermediation going forward. To think about how this will impact European and global growth, I think it is useful to recall an ancient Chinese fable. The fable is about a boy who lived near China’s northern borders, and whose horse one day wandered off into the territory of the northern tribes. Everyone commiserated with him for his misfortune. But not his father, a well-practiced Taoist. “Perhaps this will soon turn out to be a blessing,” he said. Then, a few months later, his horse returned, accompanied by a fine horse from the north. Everyone congratulated him for his luck, but his father was more sanguine. He remarked, “Perhaps this will soon turn out to be a curse”. The boy quickly became fond of riding the fine new horse, then one day out riding, he broke his leg in a nasty fall. Everyone again commiserated with him. But once more his father disagreed. “Perhaps this will soon turn out to be a blessing,” he said. Soon after, the northern tribes invaded the border regions. All able-bodied young men took up arms to fight the invaders, and nine out of ten died. Due to his broken leg, however, the boy did not join in the fighting. He and his father therefore survived.
The policy rate is the rate of interest applying to the Central Bank’s repo transactions with credit institutions, i.e. interest on liquid funds that they borrow from the Bank. Monetary policy has been the subject of lively debate in recent weeks and months and the Bank has been under steady pressure to cut interest rates. As the Central Bank has repeatedly underlined, its viewpoint has been that lowering interest rates entails a greater risk than waiting for a while for tangible signs that the assumptions behind the August inflation forecast will hold good. It is crucial to bring inflation down swiftly, since it goes without saying that inflation is the worst enemy of both households and businesses. A tight monetary stance inevitably has consequences which are sometimes painful for households and businesses. There is nothing to be done about that. Households and businesses alike must accept the consequences of their actions and it is obvious that many of them have simply gone to excesses in their consumption, investments and borrowing in recent years. They will need to reduce their spending, cut costs and put their finances in order. That cannot be avoided. BIS Review 95/2001  3  I also point out that the current account deficit is very large. Even though it has shrunk rapidly this year and will foreseeably continue to decrease substantially next year, it is still very large both in a historical and an international context. In order to achieve acceptable macroeconomic balance, a contraction in national income is unavoidable.

From all the above it is clear that the Central Bank of Iceland has undertaken the major responsibility of ensuring price stability, which in the sense used in the joint declaration by the Government and Central Bank means a twelve-month rise in the CPI of 2½%. It is not the Central Bank’s role to ensure a specific rate of growth or level of employment, since its instruments are incapable of having any impact on them in the long run. However, it is acknowledged that ensuring price stability creates vital preconditions for economic growth and prosperity. Inflation increased substantially this year and in June it passed outside the tolerance limits as defined in the March declaration. According to the Central Bank’s inflation forecast published in early August, the outlook that inflation would rapidly decelerate towards the end of this year and the beginning of the next, then would move inside the tolerance limits in the middle of next year, and the 2½% target would be reached in mid-2003. The forecast was based on the main assumptions of an unchanged exchange rate from the forecast day, a cooling of the economy and no wage rises in excess of agreements that had already been negotiated. The Central Bank will publish its next inflation forecast on November 8. Tight monetary stance The Central Bank has applied a tight monetary stance for some time now, as reflected in its high policy interest rate.
Some caveats are required here. In the survey responses there was an under-representation of younger firms. This makes the results less informative about the investment behaviour and financing needs of younger companies, particularly of start-ups. Moreover, as this is the first time such a survey has been carried out, we cannot evaluate the results through time to see whether and how firms' approach to investment has changed over the years. And of course the survey reflects the subjective judgments of the firms that responded. These need to be evaluated against the harder, aggregate data on investment. That said, the survey sheds light on a number of interesting aspects of firms’ behaviour and on the availability of finance for investment, which may go some way to explain the weakness of investment since the crisis. I want today to concentrate on two of these. First, the reasons why around a third of the companies surveyed believed they had underinvested over the past five years. And second, whether the rates of return firms require to invest suggest that there is now a greater risk premium that may be leading to lower investment more generally. The ‘Underinvestors’  One of main motivations for the survey was to shed light on whether the cost or availability of finance was acting as a constraint on investment. Corporate borrowing in general crashed following the financial crisis. This was clearly due to constraints on the supply of finance as well as a marked reduction in demand.

It is also conceivable that stock market investment is now considered to be somewhat less risky than before, in which case the expected return may have become somewhat lower. But the stock market reaction to these new signs may have been rather hasty. Experience has shown that financial markets are sometimes liable to overshoot when adjusting upwards or downwards. My intention today, however, is not to opt for a particular view. I am more interested in initiating a discussion and would like to take this opportunity of asking the share investors who are present here: Which conclusion do you find most valid? An increase of 3 percentage points in the growth of total factor productivity above the long-term trend leads to an upward shift in the real return to capital from 6.0% initially to 6.2% (1.031x6) after one year, 7.0% (1.035x6) after five years and 8.1% (1.0310x6) after ten years, that is, an increase of about 2 percentage points after ten years. BIS Review 137/1999  6
François Villeroy de Galhau: The challenge of an efficient European economic governance as a contribution to a prosperous global community Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Emerging Markets Forum, Paris, 11 April 2016. *  *  *  Dear friends and distinguished guests, Let us take the long view. This forum, thanks to Michel Camdessus and Harinder Kohli, is a rare opportunity to discuss what the global economy and its governance might look like two generations from now. In a moment, we will argue about global megatrends and alternative scenarios. With so many distinguished participants from emerging market economies and specialists of the international monetary system in the room, I would like to speak today as a European. As I see it, the European perspective is relevant in this Forum for at least three main reasons: •  Regional integration may be one of the megatrends: how it will affect the delicate balance between sovereignty and international cooperation is a question that the EU has been mulling over since its inception. •  Many of the global and coordination challenges we are facing have been confronted over the course of European integration, and are still at the core of the debate: economic spillovers and externalities, monetary stability, and effective governance.

And to avoid taxpayer bail-out, losses may need to be imposed on a wide class of bank creditors, including holders of debt as well as equity – for example, by “bail-in”. Over recent years, these resolution lessons have been enshrined in banking legislation. For example, in the United States Title II of the Dodd-Frank Act was passed in July 2010. It creates a new regime for the liquidation of financial companies, banks and non-banks, which pose a systemic financial stability risk. It enables losses to be imposed on creditors in resolution, while also prohibiting state bail-outs. Internationally, in November 2011 the G20 endorsed the FSB’s Key Attributes of Effective Resolution Regimes, developed by an international working group chaired by my colleague Paul Tucker. Efforts are now underway to align national resolution regimes with these principles. As part of that, in Europe a draft Directive on bank recovery and resolution was published in June 2012. These initiatives are an important practical step in the right direction, lowering the societal costs of bank failure. As with systemic surcharges, it is striking how much progress has been made in so short a space of time on so complex an issue. The practical question is how far this takes us towards removing the too-big-to-fail externality. During a bank resolution, one way of ensuring continuity of banking services is by transferring assets and/or liabilities of a failing firm to a third party.