samchain/econo-pairs-v1 huggingface dataset:
This will ultimately enhance the liquidity of our markets. Recognising the potential benefits of establishing linkages, the ASEAN Finance Ministers have recently agreed to explore ways to forge alliances within the ASEAN securities markets. Forging successful exchange linkages is, however, not without its challenges. But these are not insurmountable. Let me briefly outline three of them. Firstly, exchanges’ technology and infrastructure will have to be updated and enhanced to cater to an increasingly integrated marketplace and a more sophisticated investor base. There is a need to ensure that the various IT infrastructures are interoperable and scalable, so as to allow partner exchanges to share common platforms and reap the benefits of economies of scale. Secondly, greater harmonisation of standards and regulatory requirements is a prerequisite for deeper linkages and alliances amongst the regional exchanges. Some regional exchanges and regulators have made a start by committing to work together under various MOUs. We should take the next step of looking at other initiatives to bring about greater convergence of standards in corporate governance, trading conventions, rules and regulations. Finally, the success of exchange linkages is highly dependent on investors’ interest in cross-border trades via the linkages. To achieve this, the linkages must provide a cost efficient solution for investors’ trading needs. There is also a need to cultivate Asian investors’ interest in cross-border investments. Asian investors’ investment portfolios traditionally reflect a strong home bias.

That minimum requirement must however be well-parametrised to take into account the special nature of the different institutions while preserving a level playing field both nationally and internationally. 3  The European case  Let me now expand a bit more on the European resolution framework which has played a key role in the policy response to the financial and institutional crisis in the EU and is subject to relevant specific challenges. The involvement of national governments in the resolution of the financial crisis established a perverse destabilising link between sovereign and financial risks which was at the root of the severe turmoil in public debt markets that started in 2010. That turmoil challenged the very existence of the single currency as it caused the reemergence of a country risk component in all relevant asset prices and impaired the correct functioning of the monetary union. The reaction by the authorities was to adopt an ambitious common framework not only for the prevention of banking crises – through the creation of the Single Supervisory Mechanism (SSM) – but also for the resolution of those crisis through the newly founded Single Resolution Mechanism (SRM). The SRM ensures not only that the resolution framework will be harmonised in the euro area – as provided by the BRRD – but also that resolution policy, at least for SSM countries, will be managed centrally by a Single Resolution Board (SRB), which will enjoy a high degree of 2  BIS central bankers’ speeches  autonomy.
Crisis prevention – the role of monetary policy… In recent years, perhaps the most influential view of how monetary policy should respond to a rapid increase in the price of an asset, and a possible associated credit expansion, can be described as follows. Let us, for simplicity, say that we are talking about an increase in house prices that has gone hand in hand with a substantial increase in household indebtedness. Monetary policy should only respond to a rapid increase in house prices and borrowing if the central bank’s forecasts indicate that it will lead to problems such as overheating and excessively high inflation. If this is not the case, the central bank should wait and see, but be prepared to quickly ease monetary policy if the housing market were to collapse and demand in the economy were to fall drastically. The main argument for such an “asymmetric” response would be that central banks are not especially good judges of whether there actually is an asset bubble or not. The fact that bubbles are difficult to identify is of course true. Nevertheless, house prices and borrowing can in some cases rise so quickly and by so much that it is difficult for policymakers to remain entirely passive – even if it is not possible to ascertain that there is a bubble building up. If a severe downward adjustment in house prices were to occur later on, it is probable that monetary policy would receive much of the blame for having been too passive earlier.

At the same time, it should be followed by an accelerated convergence process of the supervisory and regulatory practices according to the financial centres of influence. Fourth, the current crisis confirmed our concern related to the exposure of the Balkan region to a relatively small group of banking operators of vast regional extension. Shocks affecting parent banks would affect one or several regional countries. A similar risk still persists even in the case when one of the branches in the region is hit by a shock. Similarly, the contagion risk is still present. Fifth, I believe the region should scrutinize carefully lending in foreign currency. It is essential to set a better balance between lending in the national currency and lending in foreign currency. To this aim, the nature of the exchange rate regime and the impracticability of central banks in the region to act as lender of last resort should be taken into account. In this context, we should support a stronger role of the national currency in bank lending, making lending in foreign currency more costly for banks if it is not supported by savings in foreign currency. The strong reliance of banks on foreign currency financial resources to support the rapid lending should be addressed and managed timely. Sixth, I think the current crisis will make the financial funds, which for a long time have rushed in numerous forms across all former communist countries of East Europe, scarcer.
I think at some point we will have to clarify, what happens after September 2016 and what happens with what comes to maturity. Quite a lot of securities come into maturity into the early years after September ‘16, this is something the Governing Council at some point will have to decide and communicate. Some people say the ECB is dominated by the financial sector. I strongly disagree with that, it’s more the opposite. Since we implemented our Forward Guidance we have been signalling more of our reaction function. When we talk about our ability and willingness to act under a number of conditions, of course markets incorporate that. What’s your view on the need for further monetary policy action now? There will be different views as usual in the Governing Council, there will be a very good dialogue on the economic assessment. You cannot prejudge at this time the decision on what combination of measures to take or not to take. The staff has also been tasked to look at the impact of all measures on financial conditions, on the economy and on inflation. The Governing Council will discuss whether there is a case for further action in the context of heightened uncertainty. This is a key issue. What would be the impact on the banking system of an even-more negative deposit rate?

For example, we do not have a system where the private sector will share risks across borders, where capital and liquidity are fungible in pan-European financial institutions. A common deposit insurance would help, but it’s important to allow a European bank to be able to operate in the euro area as a single entity. Not all banks would be able to do that, but we need to have a timetable where we say, four or five years from now the banks that qualify in terms of quality and quantity of capital will get a European license. You need to put a very serious, technical, timetable for that, and announce it. That would create a new environment for banking. Is there a challenge to the ECB’s credibility because of the change of stance on the effective lower bound of rates? The story of the lower bound is a very simple one. For all non- standard measures there is not much historical experience, there was very little academic literature until recently. Many central banks thought the zero lower bound is zero, and when we initially decided to go for –0.1, we were not fully sure of the total impact on financial conditions in general and especially on banking. The negative deposit rate, like most non-standard measures – the forward guidance of July 2013, the LTROs starting in 2011, the TLTRO and the APP – delivered more than we expected in terms of their impact on financial conditions.
2  0609  0409  0209  1208  1008  0808  0608  0408  0208  1207  1007  0807  0607  0609  0509  0409  0309  0209  0109  1208  1108  1008  0908  0808  0708  0608  0  Source: TURKSTAT, CBT. BIS Review 103/2009  In this period during which the effects of the economic contraction on inflation became more pronounced, annual inflation declined in all main groups excluding food (Figure 4). The constant slowdown in the rate of increase in services prices continued amid weakening domestic demand. Price hikes in the goods group excluding food and energy remained low compared to previous years, which is attributable to the temporary tax cuts (Figure 5). Figure 4: Contribution to Annual CPI Inflation  Figure 5: CPI Sub-Groups  (Annual Percentage Change)  (Second Quarter Percentage Change)  Food and Energy Services  14  Tobacco and Gold Core Goods  8 7  12  6  2006-07 Average 2008 2009  5  10  4 3  8  2  6  1 0  4  -1 -2  2  -3 Food  Energy  0609  0309  1208  0908  0608  0308  1207  0907  0607  0307  0  * Food and Energy: Food, non-alcoholic beverages and energy. Goods exc. Food and Energy  Services  Source: TURKSTAT, CBT.

Ivan Iskrov: Conflicts and complementarities between monetary and macroprudential policies Opening speech by Mr Ivan Iskrov, Governor of the Bulgarian National Bank, before the International Conference on the Occasion of the 15th Anniversary of the Introduction of the Currency Board Arrangements in Bulgaria “Conflicts and Complementarities between Monetary and Macroprudential Policies”, organised by the Bulgarian National Bank, Sofia, 5–6 July 2012. *  *  *  Dear ladies and gentlemen, It is my pleasure to be here today with you and to open this conference under the topic “Conflicts and complementarities between monetary and macroprudential policies”. These issues have been discussed extensively in recent years by policymakers, financial market players and academicians alike. The ongoing financial and sovereign debt crisis has sparked a need to reassess the existing economic governance structure and to come up with options for better policies. And one of the key aspects of this debate is about the optimal mix of policies, which is precisely the topic of our conference. The BNB has decided to organise this conference because there is a big interest nowadays in the way monetary and macroprudential policies interact or, according to some, could be even in conflict. Since these issues to a great extent relate to the role and responsibilities of the central banks, the timing of this conference conveniently coincides with the 15th anniversary of the introduction of the currency board arrangements in Bulgaria.
Housing starts and sales are now on a clear upward trend, and a widely followed national home price index is up around 12 percent over the twelve months ending in April.1 Indeed, anecdotal reports suggest that this higher-than-expected increase in home prices is due to a lack of homes for sale. Unfortunately, the improvements in consumer spending on durable goods and housing are not yet showing through in the overall GDP growth rate due to the significant headwinds that we continue to face. First, federal fiscal policy has recently become quite contractionary. Estimates from the Congressional Budget Office (CBO) indicate that this fiscal restraint is on the order of 1.75 percentage points of potential GDP this year. In the period since 1960, there have been only two previous episodes of fiscal contraction of this order of magnitude  2  BIS central bankers’ speeches  – 1969 and 1987 – both of which occurred when the economy was on a more solid footing than it is today. Second, the euro area is experiencing a protracted recession and growth in many of the largest emerging economies has slowed. This has resulted in a very sharp slowing of U.S. exports, with an associated slowing in production and employment growth in the U.S. manufacturing sector. Thus, I continue to see the economy as being in a tug-of-war between fiscal drag and underlying fundamental improvement, with a great deal of uncertainty over which force will prevail in the near-term. This tug-of-war is clearly seen in the monthly employment data.

While most of the news focused on New York City, Long Island and New Jersey, parts of Fairfield and New Haven counties – cities and towns like Bridgeport, Stamford, Milford, and Fairfield – were severely affected as well. Thankfully, Sandy’s disruptive effect on the region’s economy seems to have been short-lived. Fairfield County did see some job  BIS central bankers’ speeches  5  losses during the winter months, and Sandy likely contributed to that. But, in the spring this area saw a strong and broad-based rebound in employment. In fact, in May employment in Fairfield County surged to a more than four-year high. Even with this recent surge in employment, however, the county has recouped only about 60 percent of the 36,000 jobs lost during the last downturn, whereas the nation has recouped close to three-quarters of its job losses and New York City has more than fully rebounded. And, at more than 7 percent, the county’s unemployment rate remains high. Another dimension of the local economy where we have seen modest improvement is housing. Homebuilding, as measured by housing permits issued, languished from 2008 through 2011; but last year, multi-family construction picked up noticeably, and this year single-family construction has begun to move up as well. Home values have also begun to recover. After falling about 25 percent between 2006 and early 2012, home prices have risen by 5 percent in Fairfield County and 3 percent across Connecticut overall.
Lending standards are thus geared to detecting the future ability to pay or, otherwise expressed, to measuring the credit risk of customers and firms. Banks also measure and manage other conventional risks, such as market and operational risk. But, to date, they will not have been fully considering the so-called physical risks, arising from the direct effects of climate change, and 1/3  BIS central bankers' speeches  they will have only partly weighed up transition risks, stemming from public policies and regulations, technological change and decarbonisation-related behaviour. I should stress that the incorporation of these new elements into the traditional management of bank risks poses no conflict whatsoever; the opposite is rather the case. Both physical and transition risks can ultimately affect bank customers’ solvency and the value of certain assets, which may be either traded or used as collateral. In addition, they may also experience an increase in the frequency and severity of weather-induced operational events. It is widely acknowledged that the transformative measures to change our productive model will affect bank borrowers. In some cases, opportunities will arise, but we cannot hide the fact that these changes will bear down negatively on certain sectors’ business models. By incorporating these elements into banks’ measurement of their classic risks, we pursue two goals. First, to improve the sensitivity and robustness of the management framework and, further, to promote the process of transition in the economy thanks to this better risk discrimination.

Beyond the direct trade policy shock resulting from a rise in import tariffs, two factors at least may amplify the decline in global GDP: a decline in investment demand caused by firms’ falling business confidence due to uncertainty, and a rise in the financing cost of capital due to an increase in actual or perceived borrower risk. According to Banque de France model estimates, the negative impact on GDP of higher import tariffs is 2 to 3 times larger when we account for these indirect channels. And this increase in uncertainty can produce front-loaded negative effects, even before the effective implementation of protectionist measures. That said, protectionism is first and foremost a negative supply-shock, with stagflationary effects. As such, the adverse effects of protectionism cannot and should not be accommodated by monetary policy. In spite of protectionist threats, the global economy continues to expand strongly, at 3.7% this year. We have used a lot in our latest IMF meetings, the nice French word « plateau » to describe global growth. But this “plateau” is not even: the strong acceleration in the US, even if it is temporary and fragile, is offset by a moderation elsewhere. In short, we are moving from synchronized growth to economic divergence. Consequently, countries might be suffering from the ongoing rise in US interest rates. Helene Rey’s famous paper in 20133 argued that floating exchange rates are not sufficient to give countries independence from US monetary policy if they have an open capital account.
This leads to the final topic I’d like to discuss, namely the issues related with the transition to the New Accord across the world. Broad application of the New Accord around the world, transition to Basel II In drafting a replacement for the 1988 Accord, the members of the Committee sought to ensure that the capital guidelines could be applied around the world to many kinds of banks. This means that our rules must build on the best practices, yet remain relevant to conventional banks in more traditional markets. The New Accord provides a “menu” of options for measuring risk, thereby offering the degree of flexibility necessary for banks of various sizes and strategic orientiations to adopt the new framework. Now that the New Basel Accord is moving away from a “one-size-fits-all” approach to capital, supervisors in every jurisdictions have the opportunity to evaluate what would be most appropriate for banks that are not large, complex, or internationally active. At the same time, we could say that Basel has moved away from a “one-schedule-fits-all” approach to implementing the new rules worldwide. Or, if you prefer, the Committee is saying to each country, “pick flowers when flowers bloom”. This suggestion is particularly crucial for supervisors who have adopted the 1988 Accord only recently. Some supervisors believe that their banks may still be strengthening their credit risk management functions and consequently would not benefit substantially from the New Accord at the moment.

In an economy with a developed banking system such as ours, financing for the internationalisation of the Spanish economy is largely conditional on developments at the international level. The best policy for promoting the financing of the international expansion of our companies is to ensure the financial stability and soundness of the Spanish financial and banking system. 6  BIS central bankers’ speeches
This reflects several factors. First, such institutions hold assets that are carried mainly on the books on an accrual basis. Compared with mark-to-market assets, such assets adjust much more slowly to changes in market conditions and the economic environment. Second, many of these banks have a much more concentrated exposure to commercial real estate, a sector that remains under considerable pressure. Not only have capitalization rates risen sharply – meaning the investors will pay much less for a dollar of rental income than before – but the rental income streams on these properties also have declined as the performance of the U.S. economy has declined. Together, these two factors have pushed U.S. commercial real estate prices down by about 40 percent to 50 percent from the peak reached in 2006. Loan losses in commercial real estate and consumer and mortgage loans seem likely to continue to pressure smaller banks for some time to come. This in turn means that credit availability to households and small businesses will still be curtailed. The improvement in the overall health of the financial system and in market function has allowed the Federal Reserve to phase out many of the special liquidity facilities that were enacted in response to the crisis. These facilities were generally successful in achieving their objectives – helping to restore confidence and rebuild market liquidity in a way that safeguarded the taxpayers’ interests.

Supervisory practices must be revamped so that supervision is also horizontal – looking broadly across banks, nonbanks, markets and geographies. This also means that regulatory standards need to be harmonized  BIS Review 14/2010  2  across different regions. Without harmonization, there will inevitably be a “race to the bottom” and regulatory arbitrage will be encouraged, rather than inhibited. Many steps are needed to make financial institutions and infrastructure more robust. For example, we need to strengthen bank capital requirements, improve liquidity buffers and make financial market infrastructures more resilient to shocks when individual firms get into trouble. In terms of capital requirements, many changes are needed, including global capital standards that put more emphasis on common equity, establish an overall leverage limit and better capture all of the sources of risk in the capital assessment process. Improved risk capture, for example, includes the trading accounts of banks. Some institutions had clearly not set aside adequate levels of capital given the risks that were embedded in their trading positions. It would also be very desirable to develop a mechanism to bolster the amount of common equity available to absorb losses in adverse economic environments. This might be done most efficiently by allowing the issuance of debt instruments that would automatically convert to common equity in stress environments, under certain pre-specified conditions. Such “contingent capital” instruments might have proven very helpful had they been in place before and during this crisis.