samchain/econo-pairs-v1 huggingface dataset:
See Potter, “Money Markets and Monetary Policy Normalization,” April 15, 2015, and Frost, Logan, Martin, McCabe, Natalucci and Remache, “Overnight RRP Operations as a Monetary Policy 10 / 13  BIS central bankers' speeches  Tool: Some Design Considerations,” February 19, 2015. 6 Designated financial market utilities may be paid interest on balances maintained at the Federal Reserve as  well, as provided for in the Dodd-Frank Act and Regulation HH. The payment of interest to these entities does not appear to have had a measurable impact on money markets to date. 7 Recall that federal funds loans are unsecured. Like the vast majority of central banks, the Federal Reserve  conducts its open market operations in the secured market. 8 Although households and firms do not directly transact in the federal funds market, the effective federal funds  rate is used as a reference rate in the setting of a variety of private sector contracts, including in interest rate futures and swaps. Many bank loans are priced to The Wall Street Journal’s Prime Rate, which since the mid1990s has been set by convention to 300 basis points above the FOMC’s target rate or range. 9 See Dudley, “The Importance of Financial Conditions in the Conduct of Monetary Policy,” March 30, 2017.

16 The U.S. regulatory capital rules include two leverage ratios: the tier 1 leverage ratio and the supplementary  leverage ratio (SLR). The tier 1 leverage ratio applies to all banking organizations subject to the regulatory capital rules. It is measured as tier 1 capital divided by weekly or daily average total consolidated assets. The minimum tier 1 leverage ratio requirement is 4 percent and is currently in effect. The SLR is effective January 1, 2018 with public disclosure requirement in effect starting in January 1, 2015, and will apply only to “advanced approaches banking organizations” That are defined as those with at least $ billion in total consolidated assets or at least $ billion in consolidated on-balance sheet foreign exposures. It will be measured as tier 1 capital divided by total leverage exposure, which equals the daily average of total consolidated assets plus month-end average of certain off-balance-sheet exposures. The minimum SLR requirement will be 3 percent. In addition, there will be an enhanced SLR requirement applicable to U.S. top-tier bank holding companies identified as globally systemically important banking organizations (G-SIBs). The enhanced requirement consists of a 2 percent leverage buffer above the minimum SLR requirement, for a total of 5 percent. 17 Burhouse, Feid, French and Ligon, “Basel and the Evolution of Capital Regulation: Moving Forward, Looking  Back,” January 14, 2003. 18 Other financial regulations, such as the G-SIB surcharge and the FDIC assessment fee, have similar economic  effects.
For some of the banks, the sources of financing of the credit activity were limited, acting as drag on their credit activity. Hence, the exploration of the individual bank data indicated that there are various reasons why the monetary measures do not yield the expected results and that different solutions are relevant for different banks. Lending survey has been widely recognized as an important source of relevant data on the credit market. In the midstream of the crisis, in particular, not only central banks, but also some international institutions started to conduct lending surveys to tackle the potential structural rigidities, precluding more rapid credit growth. In the case of Macedonia, we are running lending surveys since 2006. Ever since these alternative “soft” data have been an auxiliary, but at the same time a very important information source allowing us to detect the paths of the demand and supply of credits, the main determinants driving the two, but also the banks’ vision on the future developments. Very often, as policymakers, we go beyond the aggregate results and screen the results of the survey either by observing individual banks data, or data by group of banks (large, medium, small), as their behavior might differ significantly and can “be lost under the mask of the average”. This helps in better understanding the monetary policy shocks of different types of financial institutions (small/large, foreign/domestic, across different business models).

Its subsidiary EnterNext, which is dedicated to the financing and promotion of small and mid-caps, in turn enabled 26 companies to carry out IPOs, raising EUR 6 billion over the period. You are thus helping to bring about two important reconciliations: between the worlds of business and finance, and between France and its appetite for risk. What’s more you are achieving this with a European dimension. I can’t stress this enough: having a strong position in market infrastructure is vital for the French economy. I would like to look beyond Euronext now, and focus on two more general avenues for promoting equity financing. First, the French public needs to adapt its savings behaviour to the current low interest rate environment. This is a chance to encourage a “riskier” and more long-term approach to investment, in the interest both of savers and our economy. Today, only 31% of households’ financial investments are made up of risky assets, compared with 45% in the euro area. This means taking action in two areas: first, the decrease in interest rates should be gradually passed on to risk-free investment returns – which is why I proposed lowering the rate on the PEL, the French housing savings plan, and why we must continue to lower the returns on life insurance savings invested in euro funds; second, we need to develop new products: less liquid, and with or without a long-term capital guarantee, and which allow savers to benefit from the higher returns offered by equities over the long term.
On 14 September 1998, he wrote: “the more I think about it, the more sympathetic I become toward the Hong Kong Monetary Authority and its stock market intervention”. David Hale of the Zurich Group also said that: “it is difficult not to sympathize with the frustrations and anxieties which compelled... the government of Hong Kong to intervene in the stock market”. And last week George Soros said in Washington, when asked what he thought of Hong Kong’s actions in the stock market: “I can’t really disapprove”. My correspondence with Alan Greenspan is still ongoing: while I continue to point out to him that we were only trying to deter market manipulation, which in any case is against anti-trust laws in the US, he still has doubts. This is because of the difficulty in distinguishing between what he calls “conventional, albeit sharp-eyed, arbitrage and speculative BIS Review 85/1998  -2-  activities” in financial markets and what I call market manipulation. I shall persevere. In my view, whilst distinguishing between the two is difficult, it is not impossible, particularly when you are close to it. Perhaps I should deploy Chairman Greenspan’s argument for the Fed’s involvement in Long Term Capital Management in justifying our case. Instead of deterring market manipulation, I could say, in Alan Greenspan’s words, that we were trying to “avoid possible serious market dislocations that could have potentially impaired the economy”. But whatever argument we use, it is my firm belief that our actions, whilst controversial, are well justified.

The measures to strengthen our currency board arrangements have been effective. But basically what we have done, amongst other things, was to dampen interest rate volatility by accepting some fluctuation in our foreign reserves. In isolation this would probably not have been effective in deterring market manipulation. The timing for doing anything is of course an easy question to pose, but the reality is much more complex than that. One should realize that the system, before the introduction of the technical modifications, has served Hong Kong very well for almost fifteen years. Furthermore, there is no free lunch. Costs are involved. The larger fluctuations in foreign reserves may affect confidence. It may be seen as a sign of weakness, although with foreign reserves in multiples of the monetary base this should not be a cause for concern. Tightening the provision of liquidity to the banking system by denying access to the discount window paper other than that issued by the currency board may affect the development of the debt market. And making explicit the passive convertibility of the monetary base into foreign reserves may dampen activity in the foreign exchange market. The pros and cons must be considered carefully before making these significant changes. I think I have spoken long enough. I hope I have made my case convincingly. Thank you Victor for giving me this opportunity. In closing, may I quote Barton Biggs again.
In response, the Office of Thrift Supervision required fair values to be reported from the early 1990s.   “Timely risk management”  Perhaps the most recent of the arguments used to support fair values arises from its role as a risk management device. Market prices, while noisy, offer timely signals. They are likely to prompt early recognition and management of emerging risks and mistakes, by both regulators and the regulated. Sunlight is an effective disinfectant. In this regard, it is telling that more widespread marking to market accompanied regulatory efforts to improve prompt corrective action measures – for example, in the US through FDICIA. Among market participants, the use of fair values and fleet-of-foot risk management techniques is widely felt to have contributed to the relative success of some firms during the course of the crisis. Lloyd Blankfein, CEO of Goldman Sachs, certainly appears to think so. 16 For the prosecution, the main arguments also appear to be threefold. Essentially, these follow from the three commonly attributed failures of the EMH.   “Excess volatility”  If market prices exhibit greater volatility than warranted by fundamentals, this will be mirrored in the balance sheet footings and profits of entities marking their positions to market. This is far from a new phenomenon. Robert E Healy, the SEC’s first Chief Accountant back in the early 1930s, lamented that firms “can capitalise practically everything except the furnace ashes in the basement”. 17 The impact of fair values on profits may have been even greater over recent decades.

Banks’ profits have become significantly more volatile over the past few decades, with the standard deviation of banks’ return on equity trebling comparing the forty-year periods either side of  16  “At Goldman Sachs, we calculate the fair value of our positions every day, because we would not know how to assess or manage risk if market prices were not reflected on our books. This approach provides an essential early warning system that is critical for risk managers and regulators”, Lloyd Blankfein, Financial Times, October 13 2009. 17  Quoted in Seligman (2003). BIS Review 28/2010  7  1970. There is also evidence of banks’ equity prices having exhibited higher correlation as fair value principles have been extended. 18 Consider a hypothetical experiment. Imagine banks in the UK had been required to mark their banking books to market over the period 1999 to 2008, in addition to their trading book. Market prices are used to proxy different categories of loan. For example, Residential Mortgage Backed Securities (RMBS) and covered bond prices are used to proxy mortgage loans. As with banks’ trading books, all gains and losses arising on the banking book are assumed to flow directly to profits. Chart 6 plots the path of UK banks’ profits, both actual and simulated under the mark to market assumption. Simulated profits are around eight times more volatile. Between 2001 and 2006, UK banks’ cumulative profits would have been around £ billion higher than recorded profits, as the expected future returns to risky projects were brought forward.
Norman T L Chan: Hong Kong’s role in China’s reform and opening Speech by Mr Norman T L Chan, Chief Executive of Hong Kong Monetary Authority, at the 4th Annual China Bankers Forum 2010: “Global banking – restructuring and reform”, Shanghai, 17 September 2010. *  *  *  I am very pleased to be invited to attend the Annual China Bankers Forum 2010 today. The concepts of economic globalisation and financial globalisation have been around for decades. Yet, without the reform and opening up of China in the last 30 years and the rapid development of China’s economy which forms a major part of the global economy, globalisation would merely be a concept without important implications. Nowadays, the scale of the economy of China has exceeded $ trillion and China has surpassed Japan as the world’s second largest economy. However, when the reform and opening up policies were initiated in 1979, how many of us could ever forecast that China would be able to develop from a poor country to its current state? In 1979, the GDP of China was $ billion, with per-capita income of $ many of the daily consumables were in significant shortage and had to be allocated by the rationing system. At present, per-capita income of China is $ which is 14 times the level in 1979; and per-capita income in large cities, such as Shanghai, Shenzhen and Beijing, even reaches as high as $ China can now be regarded as having entered a “moderately affluent” stage.

Some said that the development in the last three decades was a miracle and was almost incredible. Instead, I would describe it as a “world-shaking” development. Having encountered enormous difficulties and challenges at every single stage of reform and opening up, China, as the country with largest population in the world, managed to carry out an unprecedented transformation from a planned economy to a market economy. As there was no precedent to learn from, China could only rely on its own efforts and took one step at a time. Hong Kong has played an extremely important and irreplaceable role during the process of China’s reform and opening up. At the initial stage of opening up, China focused on attracting foreign investors to set up manufacturing factories. Hong Kong manufacturers were the first to move their operations to Mainland China. In the past 30 years, Hong Kong has always been the largest source of direct investment in the Mainland. In 2009, Hong Kong invested $ billion in China, accounting for one half of the total foreign investment in the country. In the course of investing in China, not only has Hong Kong injected capital but, more importantly, it has introduced skills in production and management. In the past decade, the Mainland projects in which Hong Kong invested have gone through some significant changes. The focus has been shifted from investment in the manufacturing industry to a range of diversified and multi-dimensional investments that include investment in all kinds of service industries.
But keeping interest rates low in the future will boost future inflation, thus raising expected inflation and boosting activity today. The problem is that the central bank lacks the incentive to stick to this strategy once economic conditions have improved and the ZLB episode is past, i.e. the policy is time inconsistent. So the central bank needs to have some way of making credible a commitment to what will subsequently seem like future irresponsibility; words alone will not suffice, unless reneging on those words carries a significant reputational cost. It is important to distinguish this policy strategy from simply communicating that policy rates are likely to stay low because output and inflation are expected to stay low. That may help to align expectations with the views of the policy maker and be valuable in aiding transparency, but does not represent the pursuit of a policy strategy under commitment. As noted above, the earlier deflation scare, following the collapse of the dot-com bubble, had already persuaded the FOMC not only to keep the target Federal Funds rate at an especially low level, but also first to indicate that it would remain low for an “extended period” and then to indicate that the monetary stimulus would be withdrawn at only a “measured” pace. This has something of the character of attempting to reap the benefits of being able to commit in the future by sticking to past promises.

That was justified theoretically by appeal to the comparative advantage of monetary over fiscal policy in controlling nominal demand or to Ricardian Equivalence or to the argument that fiscal expansions were harder to reverse than initiate. 2. Monetary policy was therefore assigned the primary role in short-term aggregate demand management, with policy conducted through the manipulation of a suitable short-run interest rate. BIS Review 111/2010  1  3. The monetary transmission mechanism operated mainly through longer-term interest rates, asset prices and expectations of future inflation. Expectations of future policy rates were central and credibility was key. These channels might be augmented by a weak credit channel but the banking sector generally was conspicuous by its absence, particularly in the New Keynesian synthesis models, which also dominated thinking within central banks. The importance accorded to expectations led naturally to an increased focus on communication and transparency. 4. The conduct of monetary policy was best delegated to an independent central bank, free of short-term political considerations. That was buttressed by academic thinking which drew attention to the potential time inconsistency of optimal policy when expectations of future policy mattered and which suggested that monetary policy was best delegated to conservative central bankers with long horizons. 5. Intermediate monetary targets were not useful, because of their unstable link with the ultimate objectives of policy (though that did not preclude them being helpful at times as indicators of future demand and inflation).
If such a bank makes losses on loans in one state it can offset them with gains  BIS central bankers’ speeches  3  in another – thus at least in part internalising the costs. In the euro area, however, banks tend to have a more domestic focus, meaning losses in one country are more likely to exhaust the capital of the domestic banks. In the capital markets, the US has integrated equity and debt markets, allowing losses from bank failures and corporate insolvencies to be dispersed across the whole market. In the euro area, by contrast, cross-border capital markets are only partially developed, which means the effect of a negative economic shock is fully concentrated at home. In Germany and France, for example, around 85% of equity is held domestically. One should not underestimate the importance of this: it has been estimated in a paper that two-thirds of economic shocks in the US are absorbed via the integrated financial market.1 While the launch of the euro seems to have encouraged more private risk-sharing between EMU countries, it remains at much lower levels than between US states, and markets are vulnerable to fragmentation.2 This point underscores that the private and public banking unions are to a significant extent interdependent. Having a strong set of federal institutions can stop market failures such as a fragmentation during a crisis.

But to push this further – and perhaps too far – for the Financial Policy Committee’s role in relation to the financial system we need a rather different metaphor. The FPC is more like the safety authority for a race track. Its job is to see that the safety standards for the track and for the cars are high enough. That there are sufficient buffers on the bends if one of the cars comes off the track. And that, if there is a crash, the wreckage can be got off the road and does not cause a multiple pile up. But the track authority’s job is not just about ensuring the track is safe. If, when the race is running it starts to pour with rain and conditions become riskier, the track authority brings the “safety car” onto the track to slow the other cars down. Sometimes a race has to be interrupted because it has become too risky. The FPC sometimes has to do the same. BIS central bankers’ speeches  3  The safest approach of course might be to shut the track altogether. But the economy needs a healthy, thriving financial sector. It needs credit so that it can grow. Savers need to be able to invest. So the FPC needs to consider the impact of its actions on the economy. Adding more safety features or slowing the speed down can have an impact on the economy that has to be factored in to decisions.
While every situation is unique, and in some cases not all of the facts are known, many of the recent corporate governance breakdowns appear to have several factors in common:  BIS Review 38/2005  1  -  The board of directors failed to understand the risks that the firm was taking, and did not exercise appropriate oversight or questioning of senior managers’ and employees’ actions;  -  Conflicts of interest and a lack of independent board members and senior executives resulted in decisions that benefited a few at the expense of the many;  -  Internal controls were either weak or non-existent, or appeared to be adequate on paper but were not implemented in practice;  -  Internal and external audit “fell asleep at the switch” and failed to detect fraudulent behaviour, and in some cases even aided and abetted such behaviour;  -  Transactions and organisational structures were designed to reduce transparency and prevent market participants and regulators from gaining a genuine picture of the firm’s condition;  -  And perhaps most importantly, the corporate culture fostered unethical behaviour and discouraged questions from being raised. Fortunately, none of the high-profile corporate scandals of recent years have brought down banks. I would like to think that strong, effective banking supervision has been very helpful in that regard and I also believe that a sound risk management culture has become increasingly present in the banking sector in recent decades.

This does not mean that we can rest; banks are not immune from any of the factors that I have just described. Indeed, if we were to look closely at bank failures large and small over the years, I believe we would find that poor corporate governance lay at the heart of many of these failures. Why should we have higher expectations for the governance of banks than we have for other firms? Fundamentally, because banks must act in a way that promotes “confidence” to the public and the markets in general and, more specifically, to their primary stakeholders. Banks play a crucial role in the flow of capital within an economy and are charged with a special public trust to safeguard customers’ wealth. A stable and healthy banking system is critical to the long-term growth of an economy. Banking supervisors have long recognised the importance of good governance; supervision can not function properly if sound corporate governance is not in place. Experience underscores the need to have appropriate levels of accountability as well as sufficient checks and balances. For banking supervisors, although the range of topics that corporate governance may encompass is quite wide, the focus is mainly on those elements that relate to the manner in which the business and affairs of an organization are governed by its board and managers.