samchain/econo-pairs-v1 huggingface dataset:
As we all know very well, Estonia does not have oil fields at the expense of which we could become rich. Innovation and willingness to develop should become a pervasive way of thinking for us, there should be a change in our values. •  The world economy is currently going through changes in its fundamental paradigm and turning into a knowledge- and innovation-based economy, founded on creating, introducing, and applying knowledge. And the focus is on the latter, application of knowledge, i.e. innovation. •  Innovation can be defined as a novel and successful application of knowledge and technology in order to achieve a competitive advantage. The competitiveness of companies in knowledge-based free market economy essentially narrows down to their innovation, i.e. their ability to find and sustain their originality and thus a market position enabling high returns. It is international competition between companies that ultimately creates an opportunity for economic growth and thus for the increase in the society's welfare. BIS Review 26/2004  7  •  Innovation requires at least three factors: firstly, educated and competent people; secondly, a well-functioning financial system covering the whole chain of innovation; and thirdly, a culture favouring innovation and entrepreneurship. •  Is Estonian labour really competitive? Do we want to be price or quality leaders? If the goal is to be price leaders, our salaries should be as low as possible. If we want to be quality leaders, the situation is vice versa.

This requires that creditors and investors receive sufficient and timely information from HLIs and that they act upon this information. It is up to the prime brokers, for instance, to make collateral and margin requirements dependant on the transparency and risk profile of their HLI counterparties. Second, the private and official sector can make a contribution to regulation by developing best practice guidelines – or recommendations – for HLIs and large international banks acting as counterparties. A good example of recommendations for and by the HLI industry are the “Sound Practices for Hedge Fund Managers”, developed by the Managed Fund Association 10 . This is a promising approach, and the Financial Stability Forum (FSF) 11 thus encourages "the global hedge fund industry (to) review and enhance existing sound practice benchmarks for hedge fund managers in the light of expectations for improved practices set out by the official and private sectors". 12 A further private sector initiative, even if it is not focussed specifically on HLIs, is the extensive report of the Counterparty Risk Management Policy Group II 13 with guiding principles on risk management, risk monitoring and enhanced transparency for financial institutions. 8  The President's Working Group on Financial Markets, 1999, page C-12. 9  The President's Working Group on Financial Markets, 1999, page 18. 10  The Managed Fund Association (MFA) is the U.S.-based trade association representing the interests of the alternative investment industry such as hedge funds and fund of funds.
Noble Laureate, F.A, Hayek, arguing that inflation throughout the history has largely been engineered by the governments, made even the suggestion that the central banks should be dissolved and money supply should be de-nationalized (Denatinalisation of Money, Hobart Paperback No 70, 1978). Some have even cynically referred to central banks as “necessary evils”. Against this background, the issue of the independence of central banks is of crucial importance. In this regard, the independence of the Central Bank of Sri Lanka has been raised by many at numerous public fora. The question of Bank’s independence has come to limelight due to the Secretary of Ministry of Finance sitting as a vote carrying member of the Monetary Board, the highest policy making body in the Central Bank. The critics have argued that, since he is a government official, he would steamroll all other members of the Board and get the Central Bank to comply with government wishes. Many have found fault with Exter for making the Secretary to the Ministry of Finance a member of the Monetary Board. The criticism is that the Secretary, acting in his own selfinterest, would get the Central Bank to fund the government budget through money creation, thereby permitting the fiscal policy to override the monetary policy. It has been equated by some critics to the case of permitting a child to put his hand into a cookie jar as many times as he wishes.

It won't be a "cliff decision": a realisation phase will instead aim at preparing gradually and with experiments for a possible issuance by 2027. In a complementary manner, since 2020, the Banque de France and the BIS Innovation Hub have been conducting experiments on a wholesale CBDC, which attracts less public interest but has strong business cases. Today, I say this to commercial banks: don't be afraid! If a CBDC is needed and decided as a matter of public interest, don't oppose it. But participate actively in setting its designing, its parameters and mode of operation. There is no question of disintermediating existing or future private financial players. Money has for centuries been a positive and innovative partnership between public and private players. Notwithstanding our sometimes unwarranted old fashioned image, we central banks are keen to continue succeeding in our innovator's role with the private sector, not work against it. All economic agents need an anchor that guarantees the trust in the value of money, and central banks are the only ones fully able to preserve it. * ** To conclude, we are about halfway through a fascinating bildungsroman that has already offered many surprises, and will probably offer many more. As a committed reader and even stakeholder in this novel, I strongly hope that the plot overall unravels in the consistent way I described earlier.
Even if she’s not that sure of her initial 8% estimate – the blue line illustrates the case where the standard deviation around her prior is 2% points – it’s still likely to take more than 100 years for the observer’s central estimate to fall even half way to the truth (i.e. to 6%). If the observer’s wrong but confident (the red line illustrates the case with a 1%-point standard deviation around the initial 8% prior) one would expect it to take well over half a millennium to get to that point. King John and the  Source: Bank calculations. barons might have tightened prudential regulation in the Magna Carta and her acknowledgement of its benefits would even now be somewhat grudging. This is, as I say, a wholly unrealistic experiment because we get to see far more than the simple occurrence (or non-occurrence) of a financial crisis. Our sceptical observer would presumably be aware of the prudential legislation and, more importantly, its effects on things that relate to financial risk (asset valuations and banks’ capital ratios, for example). That information would allow a much faster updating of estimated risk than in Chart 9. In the real world, the information set available to the FPC, and by which its performance can be judged, is richer still. Having seen several such events, in many countries, we know quite a bit about what typically precedes them. Stress-testing gives us an extremely useful and powerful way to expand our knowledge about the impacts of “tail events”.

The cost would have been 3½% in foregone output and a rate of inflation more than a percentage point further below target. In a more recent study, Aikman et al. (forthcoming) come to similar conclusions. They find not only that monetary policy has relatively weak effects on financial stability, at least in the UK, but also the converse – that, partly because they’re directed more at mitigating tail risks, rather than affecting the most likely path of the economy, macro-prudential policies do not have very large effects on demand and inflation. Chart 6 is a summary of their results. The impacts of the two policies on growth and inflation are on the left-hand side, with the effects on measures of financial stability on the right. The responses to a change in monetary policy are in white, those to macro-prudential policy in blue. It’s very clear in this paper, at least, that the 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  comparative advantage of monetary policy is in  Chart 6: The impacts of monetary and  stabilising growth and inflation with financial stability  macropru policy  best left to macro-prudential policy10.
If, however, ON RRPs are offered above the level of money market rates that would be produced by IOER alone given prevailing frictions, ON RRPs should become attractive and help to form a floor for money market rates, either directly through increased take-up that reduces reserves or indirectly through the competitive pressure I described. Since money funds – the majority of the Fed’s ON RRP counterparties – don’t face the same balance sheets costs as banks, the floor formed by ON RRPs should be relatively firm. While ON RRPs are a potentially useful tool for monetary policy control with large amounts of excess reserves, FOMC and market participants have noted the potential for very large regular usage to alter patterns of financial intermediation. Further, a fixed-rate structure with no usage limits could exacerbate liquidity pressures during times of stress. 11 The FOMC recently authorized testing of a cap on the total daily usage of the ON RRPs that could help mitigate these risks. I’ll return to these risks and some ways that they may be mitigated in a bit. In sum, arbitrage activities by banks, complemented as needed by ON RRP operations, should cause a higher IOER rate to lead to higher levels of market rates. However, if the pressure on market rates from the Fed’s administered rates turns out to be insufficient, the Committee has a range of other tools – including term deposits, term RRPs, and asset sales – that could be used to help tighten the stance of policy.

However, such transitory movements should have no material effect on financial conditions or the broader economy. What matters for policy transmission is the predictability that on most days money market rates will be close to the target range set by the FOMC. 13 Of course, if rates were to move substantially outside the target range and those changes were expected to persist, the Fed would take appropriate action to assure that its intended stance of policy is achieved. In addition, as highlighted in minutes to the Committee’s recent policy meetings, an operating regime with a reasonably large positive spread between the IOER and ON RRP rates would support active trading in the funds market like we see today, and would likely prevent the Fed’s involvement in the repo market from growing too large. This would, in turn, lessen the possibility that patterns of financial intermediation could be altered in unanticipated and potentially undesirable ways by the Fed’s actions. Recent changes to the overnight RRP test exercise Now I’d like to return to the ON RRP testing that the Fed has been conducting over the past year, and discuss the changes to the testing exercise that were introduced following the September FOMC meeting. You’ll recall that we began testing ON RRPs in September 2013, when the Committee instructed the Desk to examine how a potential ON RRP facility might work and how it might affect short-term interest rates.
Ingimundur Friðriksson: The banking crisis in Iceland in 2008 Paper by Mr Ingimundur Friðriksson, Governor of the Central Bank of Iceland, prepared for a seminar which was scheduled to be held at the Bank of Finland, 6 February 2009. The author was unable to attend. * * * Iceland has been hit extraordinarily hard by the financial crisis that has swept across the globe. The rapid growth of the country’s financial system in the past few years rendered it much more vulnerable to global developments than it would otherwise have been. In my talk today, I would like to trace in broad terms various aspects of the runup to the Icelandic banking crisis, particularly from the point of view of the Central Bank. It will not be a complete picture. After Iceland’s banks were fully privatised early this century, they began expanding at a rapid pace, with the primary focus of that growth outside Iceland. They acquired financial companies in other countries, opened branches, and expanded their international business from their headquarters in Reykjavík. This rapid growth was facilitated by Iceland’s membership in the European Economic Area (EEA) through which the country had created for its financial system a regulatory framework that was rooted in the directives adopted by the European Union. Among other things, this meant that operating licences granted to Icelandic financial companies extended not only to Iceland but to all other EEA states. For example, they were permitted to operate branches anywhere in the EEA.

14.10.2019  Financial stability situation in Spain X Financial Sector Meeting/Expansión-KPMG Pablo Hernández de Cos Governor  Good morning ladies and gentlemen. Let me first thank the organisers for inviting me to participate in this tenth edition of the Financial Sector Meeting. On this occasion my address will focus on the Banco de España’s assessment of the main factors of risk to financial stability at present, the potential impact on deposit institutions and the tools available to the Banco de España and the other authorities to mitigate such risk. Assessment of the balance of risks to financial stability The balance of risks to the Spanish financial system’s stability has worsened somewhat in the past six months. This has been due in particular to the downward revision of the global economic outlook. Indeed, global GDP growth continued to ease, to a year-on-year rate of 2.8% in 2019 Q2, more than 0.5 pp lower than a year earlier. This slowdown is particularly affecting some emerging economies and Europe. Moreover, growth projections have been revised downwards in recent quarters in most economies. In fact, the increase in global GDP this year is expected to be the lowest since the international financial crisis. This downturn in activity has likewise affected the Spanish economy. As a result, the Banco de España revised its growth projections for our economy down last September, to 2% in 2019, 1.7% in 2020 and 1.6% in 2019.
Payments and monetary and financial stability  13 To ensure that its liabilities continue to be perceived of higher quality than those of any other issuer, the institution at the apex of the payment system – typically the central bank – has an incentive to exercise close control over the terms on which they are made available to the banking system. 14 That translates into the traditional monetary stability objective: preservation of the role of the ultimate settlement asset as a store of value and unit of account. It also gives the central bank a strong interest in the stability of the financial system. And within that a reliable and resilient infrastructure for distributing the ultimate settlement asset is a key condition of stability (and of implementing monetary policy effectively). 15 In an advanced monetary economy, of course, bank deposits constitute by far the largest component of “money”; in the UK they make up some 96% of the broad monetary aggregate, M4. Agents rely on interbank payment systems to facilitate the direct transfer of deposits between banks and thereby also preserve their role as a medium of exchange. And as the sophistication of securities and other markets has grown, the core payment systems have become intertwined with the settlement and clearing systems for the key markets. Together they have become a critical part of the infrastructure not just for the financial system but for the economy more widely.

In Sweden, the Riksbank has regularly highlighted many of the risks in the financial system. We did so most recently in our Financial Stability Report. There we pointed out, for instance, that the financial turbulence might worsen and that the banks' access to funding could deteriorate. At the same time, we have all along made the assessment that financial stability in Sweden has been satisfactory. We make the same assessment now, and the Swedish banks are financially strong. 2  BIS Review 115/2008  As we have seen, a lot has happened on the financial markets recently. We are following developments closely, constantly updating our analyses and we are prepared to take action if necessary. We have regular contacts with banks, market participants and other government agencies, as well as our central bank colleagues in other countries. There is a generally high level of uncertainty in the world economy at present and this will probably persist for a good while to come. I would therefore like to return now to what I mentioned at the beginning – the inflation target and the stability it offers to the economy, particularly when storms are raging all around us. Monetary policy – focus on the inflation target The objective of monetary policy is to maintain price stability and this has been established by law since 1999. To be more precise, inflation measured in terms of the consumer price index, CPI, is to be held at 2 per cent, with a tolerance interval of +/- 1 percentage point.
There is need of better transparency rather than further regulation The debate about regulation of hedge funds’ activities has gained fresh impetus in the wake of the crisis – somewhat surprisingly, since the blame can hardly be placed on the hedge funds. My view in this matter is that there is no reason to introduce specific regulations for hedge funds, apart from greater insight where it is lacking. Such measures threaten the positive contribution hedge funds make, not least under the conditions which we have now experienced. For those of us who reflect on stability in the financial system, it is however extremely important that the major banks’ and the hedge funds’ other counterparties can manage their risk. If they manage their counterparty exposures in a correct manner, that is they take sufficient collateral and can manage any liquidity problems, there is no reason to specifically regulate the hedge funds. However, periods of market turmoil tend to entail certain unpleasantness. I consider that the ensuing debate should focus on market discipline in a broad sense. Transparency is a key word in this context. By means of clear and open information about strategies and risk taking conditions are created for good market discipline. Good insight is also of the utmost importance to those of us who oversee financial stability. This gives us a chance to decide where the risks are. Now that I speak of the need for market discipline, I would like to mention the global association, the Financial Stability Forum (FSF).

This means that major risks can arise without either counterparties or authorities being aware of this. Two well-publicised cases in this context are the LTCM and Amaranth hedge funds. Both of the funds collapsed and the lack of insight appears to have contributed to the problems. LTCM was permitted a very high degree of leverage by its counterparties, which is remarkable and reflects the fact that there was no overview of the fund’s size and total risk. In the same way, no one observed in time the risks on the energy market that were being built up in the Amaranth hedge fund. The funds’ high leverage and lack of transparency has contributed to a lively debate about further regulation of hedge funds. I shall return to this in a while, but first of all I shall discuss the turmoil we have experienced in the financial markets in the past six months. What has this entailed for the hedge funds and how have they been affected by developments? Several hedge funds have been affected negatively by the recent turmoil As we know, the unrest in the financial markets has its origin in the US mortgage market, the subprime market. The problems in this relatively limited part of the US mortgage market spread to several financial markets at the end of last summer. A large share of the subprime loans had been re-packaged in various structured products and sold on to investors around the world.
But delivering it is as complex a task as any the financial sector has faced over the past decade, involving a global network of market participants and public authorities, and touching most systems, products and markets in some way. 1 Small wonder then that many firms see LIBOR transition as a ‘must do’ more than a ‘want to do’. But that perspective misses a key point: LIBOR is past its sell-by date – not just in risk terms, but in business terms too. It was designed to solve the problems of a very different era, when markets were far less transparent, and far less adept at packaging and repackaging risk. With the tools we have today, a post-LIBOR world offers many new and better opportunities: to meet the borrowing needs of households and firms; to allocate and manage risk; to express views on, or hedge against, the future paths of interest rates and credit risk; and to exploit new technologies. So more lightbulbs – fewer clenched fists! Firms who grasp these opportunities early will have a real edge. In sterling markets, we have already seen how quickly specific instruments can switch away from LIBOR when the necessary foundations have been laid and first-line business teams then put their shoulder to the wheel. In Floating Rate Notes, sterling securitisations and large swathes of the cleared derivatives market, innovation and competition has driven a virtuous circle of rising liquidity and rising volumes. Taken together, these changes put sterling markets at the leading edge of global transition.

A single curve would have many potential benefits:   It is the logical completion of the move away from LIBOR discounting to SONIA-referencing OIS discounting begun a decade ago, eliminating the basis between swap exposures and how they are valued, and thereby simplifying risk management of swaps portfolios;    It could simplify the risks arising from the optionality embedded in certain products such as credit facilities where funds can be drawn across multiple tenors of benchmark reference rates;    It would simplify curve construction and validation processes;  8  All speeches are available online at www.bankofengland.co.uk/news/speeches  8    A switch from term to overnight compounding would provide customers with the scope to construct a more complete interest rate hedge by using the minimum possible period for each observation 5; and    It could help guide further ‘electronification’ of the sterling market, through the provision of executable quotes and central limit order books, which itself could provide new opportunities for product development. The potential role that a well-specified SONIA curve could play in helping to price cash instruments has been the subject of a great deal of discussion amongst market participants. Many issuers have found it easier than had been initially expected simply to use compounded realised SONIA as a reference rate. This has rapidly become a convention for a range of sterling Floating Rate Notes and securitisations; and recent announcements suggest similar approaches are also feasible for a range of corporate bonds and loans.