samchain/econo-pairs-v1 huggingface dataset:
Over-fitting the past makes for fragile predictions about the future. Unweighted measures, without noise pollution, have often been shown to do better. Whether they do so in bank regulation is, ultimately, an empirical question. The noise around estimated risk weights cannot be observed directly, but empirical evidence is illustrative. For example, if estimated risk weights can differ across banks by factors ranging from three to a thousand, this suggests a high, sometimes deafening, amount of model noise. Historical errors in estimated risk weights are also illuminating. For example, trading book risk weights during the crisis were found to be mis-calibrated by factors of up to 50. A common driver behind these fragilities may be the shortness of the samples used for model estimation. It is well-known that small sample problems are especially acute when the underlying distribution of outcomes is tail-heavy, as with financial time-series. The Basel regime imposes constraints on so-called “look back” periods. For example, the minimum sample period for VaR models in the trading book is one year, though most models in practice use between one and two years. For the banking book, the minimum look-back period is between five and seven years, with actual samples lying between five and twenty years. From a robustness perspective, samples this short are, quite literally, a recipe for disaster. At most, they would encompass one cycle or extreme event. Some would fail to cover even that. This would leave the tail of the risk distribution empirically under-fitted and the body over-fitted.

And so, in May 2000, the Finance Ministers of ASEAN+3 gathered in the idyllic city of Chiang Mai in the highlands of northern Thailand, to discuss the establishment of a network of bilateral swap agreements. Thus was born the Chiang Mai Initiative. By October 2003, thirteen bilateral swap agreements had been successfully concluded, with a combined total size of roughly $ billion. 5. In May 2007, ASEAN+3 Finance Ministers agreed to transform these bilateral agreements into a multilateral agreement that would also provide a platform for mutual surveillance and dialogue. The Chiang Mai Initiative Multilateralisation, or CMIM, thus came into being in March 2010, with a war chest of $ billion. The CMIM operates as a common US dollar liquidity pool. A member state facing balance-of-payments or external liquidity problems can swap its local currency for US dollars from this pool. The size of the swap can be up to a fixed multiple of its contribution. 6. Today marks another important milestone in that journey – the opening of the ASEAN+3 Macroeconomic Research Office, or AMRO. AMRO is not just any research outfit. It is a critical component of the emerging regional architecture, based on mutual co-operation, surveillance and solidarity. Singapore is delighted and honoured to host AMRO. 7. But before I say more about AMRO, I want to touch briefly on the role of regional safety nets, and how they complement global safety nets. BIS central bankers’ speeches  1  Why regional financial safety nets matter 8.
I hope today’s deliberations would guide the relevant committees and those who are associated in policy formulation to take this important initiative forward. Thank you. 2/2

The Supervisory Capital Assessment Program (SCAP) exercise that we undertook in the United States leaned against this. By forcing all the banks to have sufficient capital to withstand a stress environment, we increased the likelihood that all the big banks would be able to survive a stress environment. This generated an improvement in confidence and a willingness of banks to engage with each other. This also made it easier for banks to be able to tap the capital markets. The SCAP exercise made a bad state of the world outcome less likely, helping to create a virtuous circle rather than a vicious one. The SCAP exercise was conducted on an ad hoc basis. It probably would be much better to figure out how to do these types of exercises on a systematic basis. Such exercises may need to be hardwired into the oversight of the financial system. Capital requirements are one area where I think we could adjust the rules in a way to improve incentives. For example, imagine that we mandated that banks had to hold more  2  BIS Review 83/2009  capital, but that the added capital could be in the form of a debt instrument that only converted into equity if the share price fell dramatically. What would this do? It would change management’s incentives. Not only would management focus on generating higher stock prices, but they would also worry about risks that could cause share prices to fall sharply, resulting in dilution of their share holdings.
Chart 3 – Shares of world GDP and population 2010 figures  GDP at market prices  EU-27, 26%  US, 23%  Apac G10*, 27%  Other, 24%  Population  Apac G10*, 46%  EU-27, 7% US, 5%  Other, 43%  *: Apac G10: Asia-Pacific G10, including Australia, China, India, Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan Province of China and Thailand. Source: IMF World Economic Outlook, World Bank and Eurostat. The pattern of the past thirty years has, therefore, been of a successful Asian model of development spreading out and encompassing a wider range of countries with larger populations and becoming more self-sustaining. The most likely scenario is that this pattern will continue over the next 20–30 years as the strong economic fundamentals which have supported high rates of growth in recent decades continue to enable productivity levels and living standards to catch up with the West. As chart 3 shows, the ten leading economies in the Asia-Pacific region are home to nearly half of the world’s population. And yet they still account for only just over a quarter of world GDP. This shortfall largely reflects the relatively low average living standards in India and China, which together account for over a third of the world’s population.

Gertrude Tumpel-Gugerell: SEPA – a busy year is coming to its end and another exciting year lies ahead Speech by Ms Gertrude Tumpel-Gugerell, Member of the Executive Board of the European Central Bank, at the Next Generation Cards & Payments Conference, Brussels, 25 November 2010. *  *  *  Good morning ladies and gentlemen, Introduction Walking across the Grand Place and around the Bourse you can see busy preparations under way for this year’s Christmas market. I have been told that it will be opened tomorrow and exhibitors from all over Europe will be selling their goods. The guild houses and Town Hall will be beautifully illuminated and decked in festive garlands and I am sure that the Christmas song “Silent Night” will be played. In fact, today is the birthday of Franz Xaver Gruber, an Austrian primary school teacher and church organist who composed “Silent Night” at the beginning of the 19th century. On Christmas Eve 1818 “Silent Night” was performed for the first time, in a chapel in Oberndorf, near Salzburg and subsequently made its way throughout Europe and to the rest of the world. Talking about Christmas reminds us that 2010 is slowly but surely coming to an end. As in every year, the media will soon be producing reviews of the year’s events. When we look back at what has happened in the field of payments, it is obvious that Europe has invested a great deal of effort and substantial progress has been made.
It is important that the e-krona is included in this inquiry into the future payment market, and it will be interesting to see the conclusions. I also think that the e-krona, if it is issued, should have the status of legal tender, as cash has. It is important to also mention here that even if cash appears to be marginalised at a faster pace in Sweden than in other countries, Sweden is not in any way unique with regard to ideas about issuing central bank digital currencies. The Bahamas, for instance, has already introduced a CBDC, and in October last year we published a report, together with the central banks in Japan, the United States, the Eurozone, the United Kingdom, Canada and Switzerland, where we discussed the principles on which CBDCs should be based. 22 I notice that in international discussions there is a fairly considerable insight into the fact that central banks need to update their payment systems and their money to promote safety and efficiency as the payment markets become increasingly multi-faceted. I would like to say that the best thing for the economy is if the central banks can continue to play the same role as guarantor for confidence and as hub in the system as they have had before, but with methods that are adapted to the changing world. Image 1.

This is where money comes in and makes things easier for everyone; in that we agree what we will use as means of payment and store of value, Anna can give Pelle money for his work that represents the value of her harvest. The money is a representation of the work someone has done. 4 But for this to work, everyone must trust that it will be possible to buy what they want for the money, and that it must be easy and cheap to use money. This is where the central banks and other public authorities come in. The Riksbank’s role is to add efficiency and reliability for Swedish kronor and this is how we do it: • •  •  •  •  By ensuring that money retains its value. It is via monetary policy that the Riksbank holds inflation low and stable. By ensuring that one can rely on payments in Sweden. We need to know for certain when a payment has been finally executed, otherwise we would not be able to trade with one another. It is also possible that major risks could arise to the financial system if many participants had claims on one another. By supplying a payment system so that the banks manage their payments via the Riksbank we ensure that the payments are running smoothly. By ensuring that one can rely on the banking system where money is stored and created.
2 [9]  that there have not been excessive monopoly gains and inefficiencies on the payment market, which otherwise tends to gravitate towards monopoly. 5 The e-krona can fulfil the same function as cash has traditionally held An e-krona would mean that the functions of cash would remain, even in a digital future. On the other hand, if the Riksbank does not offer a new, modern, viable alternative, this means that we will be giving up a tradition and functionality that has worked well for 350 years. Over the years, it has been the state’s role to standardise and guarantee all money in society. The basic condition for the ekrona is that it, like cash, will be broadly available to all members of society. It must work with the existing systems and be exchangeable one-to-one for cash or money in private bank accounts. At present, many private solutions on the market function so that services are offered that at the same time tie up customers into specific systems or to specific suppliers. Ultimately, this can lead to poorer competition and innovation. The advantage of central bank money is that there is no commercial enterprise behind it and it is therefore always fungible (freely exchangeable). It is not only the Riksbank that considers it worth analysing the possibility of issuing central bank money in a new form to continue fulfilling their traditional role in a digital future; there are similar projects in several other countries.

As the Riksbank and the banks must have personnel in place, the system is only open during normal office hours, and even if these can be extended by an hour or so, it is not likely that we will operate it 24 hours a day. At the same time, we want all payments in Swedish krona to be settled in Riksbank money. This reduces counterparty risk in the financial system. If, for instance, a private bank were to run such a system, all participants would have a claim on that bank before the payments are settled. If that bank were to go bankrupt, all of the money would be lost. That risk does not exist if the central bank runs the system. Additionally, it would be preferable if the system were run by a competition neutral actor in the form of the central bank. We therefore want to ensure that all payments in Sweden will continue to be settled with us. However, instant payments require systems that can manage payments around the clock. The European Central bank, ECB, is in the process of developing a new technical platform called “Target Instant Payment Settlement” (TIPS). This will enable instant payments around the clock and it will be operational at the end of 2018. It will also be prepared to handle other currencies than the euro, for instance the krona.
-5 Aug IR May IR Business investment (LHS) UK uncertainty indicator (RHS)  -2  10 0  1  -10 -20 1985 1990 1995 2000 2005 2010 2015 Source: ONS and Bank of England calculations  4  Source: ONS and Bank of England calculations  1  I’ve excluded the World War periods because investment growth was so volatile it would have dominated the graph. During World War II investment fell almost to nothing. In 1945 this remained quite low, so in 1946 its growth rate jumped to 1,894%! 3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  One obvious reason for the volatility of investment is the natural gearing in such decisions. The flow of 2  investment spending is much smaller than the existing stock of capital . So small changes in the second can require big moves in the first. Suppose, for example, you regularly spend a steady but relatively small amount on repairs and maintenance for your house – something that counts as investment – and then decide, in one particular year, that you want to build an extension. This will have a much bigger proportionate impact on the flow of your capital spending than on the size of the building (the “capital stock”). It will also mean your investment spending is far more volatile, from one year to the next, than your consumption. Similarly, small shifts in a firm’s desired capital stock require much bigger proportionate changes in investment.

This is the right place to stress that the BNB is aware of its huge responsibility for the financial stability of this country and consistently works in fulfilment of the functions and tasks assigned to it by law. In its work, the Central Bank collaborates with many other international and national institutions, and whenever a need arises, it steps into the role of a constructive opponent. Because, as I have stressed on various occasions, it should not surprise us, nor should we show intolerance to the fact that the political institutions in the democratic countries are very sensitive especially with regard to quick achievements within the context of the electoral cycle. Whereas the tasks of central banks go beyond the horizon of the next parliamentary or presidential elections. We are guided by the understanding that we have to keep our reputation as institutions with national responsibility, holding as our priority the long-term economic interests of the people and of the state. Hence, the fundamental logic of the so very important (and very strictly adhered to throughout the EU) principle of national central bank independence and the need to provide independent analyses and information to the general public.
And we will work hard, as we have in the past, to try to find the right balance between the broad objectives of stability and security and the efficiency of the system. BIS Review 59/2004  5

And three points on what it will mean. On the “how”, the first thing to say is that going forward, banks are being required to carry considerably more capital and liquidity. Second, as is now well known within the industry, the international authorities have agreed a blueprint for resolution regimes to manage the failure of so-called Systemically Important Financial Institutions in an orderly way. G20 Leaders have committed to legislate that regime into their domestic systems where necessary. All resolution regimes have the effect of distributing the losses of distressed financial firms – ie losses already or prospectively exceeding equity – across unsecured, uninsured creditors. That is the only place losses can go if taxpayers are to be spared. “Bailin” has focussed minds on this, but is in fact just one method, albeit a very important one, for ensuring that uninsured creditors take losses. Those “how” points are very familiar. A few comments, therefore, on possible implications – all of which, looking ahead, point towards the crucial importance of our capital markets. First, in a world of less leveraged banks, a business model of Originate and Warehouse – because that is what it became by the middle of the past decade – is unlikely to be viable. Maybe a genuine model of Originate and Distribute will emerge, with something like agencytype market making and trading. Second, holders of bank paper – especially bonds – will be living in a different world. They will have a big incentive to monitor the riskiness of banks.
In other words, data on operations for all insurance companies should be captured easily for planning purposes; and  5)  Along the same lines, the insurance companies should focus on their core-insurance business, as this has the effect of reducing outflow of capital. If insurance companies had an avenue for co-operation amongst themselves, some arrangements to compensate for fore-gone income on ceded commission could be worked out under the co-insurance programme. In this regard, I call upon my counterparts at the Pensions and Insurance Authority (PIA) to strictly supervise the industry in order to ensure, among other things, the proper investment of the insured funds. On our part as the Bank of Zambia, we would like to assure you of our continued support, and our doors are open for consultations. As I do not want to take much of your leisure time, I wish to conclude by thanking you, once again, for according me the opportunity to share my thoughts with you. To this end, I wish you all a Merry Christmas and profitable New Year. Please, have a pleasant evening! I thank you. 2  BIS Review 74/2004

The other contributing factor was a rise in the price of beef, following the ban on transportation of cattle from Southern Province, a major supplier, to curb the spread of the cattle disease, Contagious Bovine Pleural Pneumonia (CBPP). Higher non-food inflation was due to increased household energy and transportation costs, following upward adjustments in prices of petrol and diesel in January 2007. During the second quarter of 2007, however, inflation is expected to slow down due largely to improved food supply. Already in April, inflation slowed down to 12.4% from 12.7% in March. What is your assessment of the recent developments in commercial banks lending interest rates? In line with lower inflation and yields on Government securities, commercial banks nominal average lending rate declined to around 28% in December 2006 from about 34% in December 2005. More recently, in April 2007, it declined further to 24%. BIS Review 55/2007  1  How would you describe the recent performance of the external sector? The external sector has continued to score remarkable improvement, as reflected in the overall balance of payments surplus of US $ million in 2006 compared to a deficit of US $ million in 2005. Furthermore, the preliminary assessment is that the current account deficit as a percentage of GDP (excluding grants) reduced to 1.1% from 11.5% in 2005. This improvement has been due to increased export receipts arising from record high copper prices and increased export volumes.
If the choice is to fight the fire, then once the fire is extinguished the job remains to aggressively act to remove the underbrush – thus the urgent need for regulatory reform. There were two necessary ingredients for a catalyst for a financial panic in the shadow banking system. The first was the realization by investors of the possibility of incurring significant losses on some securities. The second was uncertainty over which securities would sustain these losses and consequently who held these securities. This uncertainty enabled the financial crisis to also impact the banking system. Finding a way to reduce this uncertainty would prove to be a key step to dealing with the crisis. 3  For a good review, see Tobias Adrian and Hyun Song Shin. 2010. “The Changing Nature of Financial Intermediation and the Financial Crisis of 2007–2009”. Federal Reserve Bank of New York Staff Reports, no. 439, Revised April. BIS Review 92/2010  3  The housing boom had pushed house values significantly above fundamental values in some markets, creating the possibility of substantial losses on mortgages written on houses in these markets. The largest run-ups in house prices occurred in the “sand states” of Arizona, California, Florida and Nevada. One approach to measuring the degree to which houses had become overvalued is to compare the evolution of house prices to their replacement costs. For housing markets such as Las Vegas, which are surrounded by open land, the price of houses should not differ significantly from the cost of building a new house.

One name that has gained popularity is the “Great Recession”, which is dated as beginning with the bankruptcy of Lehman Brothers on September 15, 2008. This name conveys both the severity of what occurred, as well as the calamity of what was avoided. The contraction in real output in the six months following the demise of Lehman Brothers exceeded in size any other post World War II recession – in that sense, it was a great recession. However, aggressive monetary and fiscal policy actions both domestically and abroad were successful in preventing a complete meltdown of the U.S. and the world economy. In that sense, the name also emphasizes what the crisis was not. However, the name tends to focus one’s attention too much on the effect and not the cause of the crisis. An alternative name is the “Panic of 2007”, which is dated as beginning with the announcement by BNP Paribus on August 9, 2007, of its suspension of redemptions for three of its investment funds. This name stresses the financial crisis as the precipitating event leading up to the severe decline in real economic activity slightly more than a year later. The name conveys that at its very basic level, the crisis was a form of a banking panic. The parallel to the name “Panic of 1907” is also a reminder to us that history has a way of repeating itself unless we learn and apply its lessons well.