samchain/econo-pairs-v1 huggingface dataset:
The argument would be that the apparent change in ability of markets to digest news is a mirage: the statistical analysis would prove to have captured a transient trend, and that intermediaries were never prepared to stand in the way of large market moves, during good times or bad. On this view, the reduction in balance sheet and the move towards electronic structures have been correlated with, but are not a cause of, the events we have seen. And the fact that the spikes in volatility have been visible in equity as well as bond markets, where market structure has not undergone as profound change as FICC markets, would be taken as supporting evidence. This view would caution against over-interpreting a few isolated case studies, where excessive market conviction – that the next move in US rates would  BIS central bankers’ speeches  3  definitely be up; and the Swiss peg was immutable – led to highly crowded trades accentuating the price moves and the impact on volatility. But this is not the interpretation I lean towards. Not least because we hear from market participants that, far from biting in extreme circumstances, these are issues that FICC businesses are grappling with on a daily basis. An eight standard deviation move in US Treasuries, on weaker-than expected US retail data, lies outside the bounds of what could be considered a transient trend. Consolidation and electronification have plausibly combined to accentuate the sharp moves seen last autumn and this January.

Moreover, longer-term measures of volatility have generally increased alongside shorter-term measures, as this chart which plots 2-year implied volatilities alongside 3-month volatilities suggests (Chart 2). We have also witnessed some very large moves in financial markets over the past six-months. Here I am going to draw on two examples – the 15 October increase in US Treasury yields following the publication of unexpectedly weak US retail sales data, and the 15 January appreciation of the Swiss franc following the SNB’s decision to remove its peg to the euro. The events had different drivers, but there are some common themes I would like to draw out. What unites the 15 October and 15 January episodes is that the immediate intra-day reaction to the news was unprecedented. The intra-day change in 10-year US bond yields was 37 bps, with most of this move happening within just an hour of the data release. The intraday range represented nearly eight standard deviations, exceeding the price moves that  BIS central bankers’ speeches  1  happened immediately following the collapse of Lehman Brothers. On 15 January, the Swiss franc appreciated by 14%. The intraday range was several times that number, and market participants continue to debate the highest traded value of the franc on the day. Such events could imply that a number of major asset markets may have become more sensitive to news, so that a given shock causes greater volatility.
Source: Financial Services Register Staff total correct as at end-September 2016. 2  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  2  In financial services here in the UK we have a mixed economy. The aim is that firms are owned privately (by their shareholders or members) and run for private interests, but within a framework of regulation which makes them internalise our objectives and therefore accommodate the public interest. This system is based on the premise that a healthy element of risk-taking in the financial system is an essential part of a well-functioning economy, but that such risk-taking may become excessive without some kind of check. Few people I know seriously contest that basic premise. But firms frequently contest how we are going about securing the public interest. That tension is natural, given the system we have chosen. There inevitably are and will be significant frictional costs, as the objectives of supervisors, employees, shareholders, members, creditors and customers jostle alongside one another. This means there will be disagreements. But we shouldn’t disagree without having made a real effort to understand each other’s perspectives. I am convinced that this system (including the judgement-based, forward-looking supervisory model we have adopted for the PRA), while imperfect, is much better than the alternatives of a financial sector owned by the taxpayer or a laissez-faire, tick-box regime – especially because history teaches us that the latter may well lead to the former.

The Financial Supervisory Authority was granted broad-based powers to intervene in failing institutions, and the Government was authorised to inject capital into new domestic banks. This so-called Emergency Act thus allowed new domestic banks to be created when the old cross-border banks failed and were placed in special resolution regimes followed by winding-up proceedings. The new banking system amounted to around 1.7 times GDP, compared to 10 for the old banking system. As a result of these measures, the domestic payment system functioned more or less seamlessly throughout, and customers had continuous access to their deposits. I have expanded at some length on the measures taken when the banks failed, as there are still a number of misconceptions about the process in international discussions. There have been claims that Iceland allowed its banking system to collapse, with what now seem reasonable results, and that others should consider doing the same. The fact is that Iceland kept the domestic part of the banking system running throughout; otherwise, the consequences would have been dire. Some have claimed that the banks were nationalised. They were not. The old banks are private companies. They are in winding-up proceedings governed by law; they are not under the control of the Government. The Government has a majority stake in only one of the new banks. Others have claimed that Iceland defaulted and got away with it. The opposite is true. The credit of the sovereign was preserved, and all debt obligations have been paid on time.
The Bank now requires for the simplification of disclosures by financial service providers and for the strengthening of the role of independent advisory services in the financial institutions. Financial institutions are also required to 2  BIS central bankers’ speeches  exercise a higher degree of diligence in ensuring that the respective products sold to consumers had to be commensurate with their financial capability and to steer financial consumers towards decisions that are in their interests, whereby choices are in the best interest of consumers. Approaches to financial education have also become more targeted in an effort to more effectively influence financial behaviour. This reflects the growing customisation of financial education programmes to target audience groups that are delivered at the right time and using the right channels. Programmes are increasingly being tailored to behavioural traits, demographics and stages in the financial lifecycle of individuals so as to appeal to the intrinsic motivations and incentives that would drive financial behaviour. The second development relates to the advances in technology that has had a profound impact on financial capability. While it presents new challenges for financial capability strategies, it also brings with it the potential to revolutionise how financial capability strategies can be designed and delivered, enabling policymakers and financial institutions to achieve what was previously not possible. Online classrooms and games, have for example, opened up new and engaging avenues for imparting important messages on financial management.

In the area of disclosures alone, there has been extensive improvements in the quality and consistency of disclosures, making it easier to understand through the use of plain language, and adopting the various approaches to bring important disclosures to the attention of consumers. For many regulators, the use of disclosures has been particularly useful to promote positive consumer outcomes, without creating distortions that could result from more intrusive policy interventions. On enhancing further financial knowledge, more than 50 countries have accorded priority to this agenda and have implemented or designed national financial education strategies. This will gain further traction with the publication of the OECD high level principles on national strategies for financial education in 2012. It will be further reinforced with the reporting of progress made by countries in implementing their national strategies. Of significance has been improvements to better coordinate and achieve greater alignment between the financial education strategies, the financial inclusion agenda and the consumer protection regime in order to maximise the impact of the respective individual initiatives and avoid duplication so as to optimise the impact of financial education efforts over the longer term. In the area of facilitating consumer choice, initiatives have been pursued to reduce exit and switching costs so that informed consumers can easily exercise their preferences and adapt to the changing circumstances.
Fritz Zurbrügg: Financial market developments, management of foreign currency investments and Libor issues Introductory remarks by Mr Fritz Zurbrügg, Member of the Governing Board of the Swiss National Bank, at the Media News Conference of the Swiss National Bank, Berne, 13 December 2012. *  *  *  In my remarks, I would like to examine three topics. First, I will expand on what, in our view, are the most important developments in the financial markets since the news conference in June. Afterwards I will address the management of our foreign currency investments. Finally, I will explore some of the issues surrounding the Libor rate, and the global discussion on reference interest rates in money markets generally. Developments in the financial markets As already mentioned by my colleagues, the situation on the international financial markets has eased somewhat since the last news conference. This stabilisation was mainly due to the announcement in late summer by various central banks of a further expansion of unconventional measures. In Europe, the unequivocal declaration by the European Central Bank (ECB) to safeguard unity in the euro area had an especially calming effect on markets. Under its Outright Monetary Transactions (OMT) programme, the ECB announced that it would purchase, under certain conditions, unlimited quantities of government bonds with a maximum term of three years. The bonds of peripheral euro area sovereigns, in particular, benefited from OMT. Yield spreads over German government bonds have declined, although they remain at a high level.

Thus at present, there are no consequences for the implementation of our monetary policy. Discussions are also currently underway at the international level on the meaning and structure of benchmark interest rates on money markets. The SNB, as member of a BIS working group, is also involved in these discussions. From the point of view of monetary policy and financial stability, the working group identifies core requirements for credible and robust reference rates. Central banks or banking oversight bodies could play a supportive role in reform efforts, inasmuch as the extensive use of benchmark rates affects the general public. However, since reference interest rates are primarily there to cover the needs of the financial markets, market participants are themselves ultimately under obligation. BIS central bankers’ speeches  3
Whilst the Government should take a leading role in creating an enabling environment and putting in place an effective regulatory framework, the financial services industry, to which you all here belong, can also make a significant contribution to the  BIS Review 105/2010  3  reduction in the cost of capital. I therefore wish to encourage you, through this platform, to provide accurate, reliable and high quality financial information on all business activities. The availability of firm level financial information will assist financial institutions in making informed decisions on granting capital to firms. This would in turn lead to a reduction in the level of risk premium loaded on the loan rates. Ladies and Gentlemen, allow me to conclude by stating that Zambia is a country in urgent need of investment. However, the high cost of finance has hampered the increase in investment. Therefore provision of appropriately priced financing and policy incentives to our business firms are important triggers to investment opportunities and increased productivity. The recent survey by Government and its cooperating partners on the cost of doing business has highlighted the need to ignite the SMEs by allowing them to come out of informality and contribute to job creation and poverty reduction. Although there are still many challenges remaining, I am particularly encouraged by the increasing number of financial service providers in the Zambian economy. This is important for competition. As competition intensifies, banks and other financial institutions would start to reposition themselves by lowering the cost of finance.

Although the degree of aggression may have somewhat subsided in the aftermath of this crisis, banks are still extending loans to persons they assess as creditworthy. Outside the banking system, credit availability by non-bank financial institutions has also increased in many forms with annual growth in direct loans disbursed by microfinance institutions and leasing finance institutions showing a significant rise. Chairperson, although these developments are encouraging and commendable, I do not think we should be fully satisfied with them. It is not enough to merely increase the number of financial institutions, nor is it enough to concentrate on building consumer loan portfolios to salaried workers only. In my view, the real gains should arise not only from increased accessibility to financial services by more of our people, but also the cost at which such accessibility is made possible. I am sure you will readily concur with me that access to finance in Zambia is still relatively low at 37.3% as at end July 2009. This is hampered in part by the continued high cost of finance and the limited financing options available to the larger part of the Zambian business sector, particularly the small and medium enterprises (SMEs). One can attribute this state of affairs to several factors which broadly are influenced by the macroeconomic environment as well as micro-structure and practices of our financial system.
The preparatory work for the Act states that the reason for the restriction is that trading in these securities involves a significantly greater financial risk than changes in policy rates and purchases of government securities. Given this, it might be easier for the Riksbank to justify sales than purchases. 47 The fact that the premiums have fallen on government bonds this year is hardly explained by the Riksbank's purchases. Our purchases have been small, at the same time as bonds have matured. Our nominal holding of government bonds has therefore decreased from SEK 383 billion at the beginning of the year to SEK 338 billion at the end of November. 25 [30]  However, it must be borne in mind that the effects of the asset purchases vary according to a number of circumstances. It is easy to understand that buying assets can have a major impact when markets are malfunctioning. It is almost as simple to realise that asset purchases can play a more important role in countries where long interest-rate fixation periods are common, and perhaps also in economies where many companies finance themselves in bond markets. It also matters what assets the central bank buys. Are they government bonds with a similar risk profile to central bank money? Or are they high-risk private assets? The value of asset purchases also needs to be set against financial risks and the ability of the central bank to handle losses.

The recent rapid interest rate increases show instead that the central banks do not hesitate to raise interest rates, despite the fact that this entails losses on their balance sheets. Bernanke (2020) says that the signalling channel has been important, but thinks that it works differently. According to him, market participants rely more on central banks' communication on future asset purchases than on their communication on future interest rate decisions. In addition, they expect the central bank not to raise the policy rate while an asset purchase programme is still in progress. By communicating a purchase programme with a certain duration, the central bank can therefore keep interest rate expectations low.18 Signalling in this way has hardly been important in Sweden, at least not as a conscious strategy on the part of the Riksbank. This is because the market's interest rate expectations during much of this period were lower than the forecast for the policy rate published by the Riksbank. This was most evident when the purchases started in February 2015, as shown in Figure 6. If our ambition was to push down expectations of the future policy rate, this should have been reflected in a lower forecast for the policy rate.19  18 I find it difficult to see the logic of this reasoning (why is central banks' communication on asset purchases  more credible than their communication on interest rates?) but recognise it from expectations that I have sometimes heard expressed by market participants.
Related to this is today’s debate on the economic soundness of the Stability and Growth Pact. Is it right to adhere strictly to the Maastricht Treaty’s stability requirement even if in Germany business conditions diverge strongly from the euro-zone average? The jury is still out. But in the eyes of most economists when asymmetric shocks abound, a uniform monetary policy and similarly restricted fiscal policies are not recommendable. In a longer-term perspective, the costs of the loss of monetary and fiscal policy independence will be progressively lower as the pace of economic adjustment accelerates over time. The speed with which the economy recovers depends largely on the flexibility of the labour market and on job mobility. When salaries develop in line with a regional economy, when direct investment is strong and when the workforce is mobile, regional shocks are more easily absorbed. This type of reasoning favours reform programmes like Hartz IV in Germany. Let me stop short. It is not my task to offer advice to European authorities in general or to German authorities in particular, all the more so since the creation of the European Monetary Union has proven a great success despite the inevitable teething troubles that regularly come with great innovations. I wanted to give a pertinent example of the work of economists in and for government. There were economists advocating an early European Monetary Union and they gave their reasons.

CEMFI is the outcome of the ambition of the leadership of the Banco de España in the late 1980s, who saw the possibility of innovating in the organization of a graduate programme comparable to the best programmes in Europe. It was Luis Ángel Rojo, at that time the Banco de España's Director General of Research, who invited Rafael Repullo to lead this venture. Precisely as a token of appreciation for his decisive contributions in the early days of CEMFI, the prize for the best Master student bears his name. The Banco de España is very proud of its ongoing support and collaboration with such a special institution providing first-class graduate education and research, contributing a host of public goods to the Spanish economy and generating valuable ideas for public policymaking. An excellent example of this collaboration is the co-organisation of the biennial Financial Stability Conference that concluded this morning at the Banco de España. Demonstrating an outstanding academic level and policy relevance, it has enjoyed the presence of a large number of distinguished visitors, including the Federal Reserve Board Chairman, Jerome Powell. Building on this example, I am pleased to announce a new collaboration between the Banco de España, CEMFI, and the Universidad Internacional Menéndez Pelayo, an annual conference on the Spanish economy, the first edition of which is due to take place next week in Santander.
No matter where the future takes us, a common vision – a Swiss Payments Vision – is needed in order to ensure that the financial sector and the SNB take the right steps together. This vision conceives the future of cashless payments in Switzerland as an efficient, reliable and secure ecosystem that is also fast and interoperable in terms of new payment solutions and new technologies, and across national borders. Page 10/11  The SNB projects mentioned earlier have precisely this goal. In the area of instant payments, we are laying the foundations for retail payments to be settled immediately and around the clock in central bank money in the tried and tested framework. As for token settlement, we are examining how central bank money could also be made available in a regulated token ecosystem, should the need for it arise. The Swiss financial centre can face the ongoing digital transformation with unflinching resolve. The SNB will make the necessary contributions to the further development of the payment infrastructure in Switzerland. Together we will overcome the challenges and ensure that we continue to have secure, efficient, fast and interoperable payments in the future. Thank you for your attention.

That’s why, in December, the Bank of England gave a clear statement about the appropriate baseline level of capital for the systemic part of the UK banking system. 2 Across major UK banks, no less than 3.75% of total assets should be funded with tier 1 capital. If risks were properly measured, this would translate into 11% of risk weighted assets. However, there are shortcomings in existing measures of risk, including banks’ own pension schemes, interest rate risk in banking books and concentrations of exposures. So on current measures, we expect major UK banks to fund no less than 13½% of risk weighted assets with tier 1 equity. 3 After a long march to build capital strength, UK banks are within a hair’s breadth of that today. And the rewards of greater resilience are being reaped. Our expectations for capital are founded on the need for a banking system that can serve the real economy, in good times and bad. Our aim is to be prudent and to make macroeconomic sense. Our aim is to be macroprudential. It’s clear why the approach has to be prudent. The wider economic costs of poorly capitalised banks can be immense. The cutbacks of credit, of market making, and of essential payment services under stress can be economically devastating. On average, during the Great Recession, output fell in those countries that experienced financial crises by nearly twice as much as in countries that did not. That gap in performance has persisted since.