samchain/econo-pairs-v1 huggingface dataset:
Clearly these are deliberately exaggerated descriptions, and can’t be used by themselves to quantify the potential gains from changes in individual or collective behaviour. But one academic attempt to do just that, for a specific segment of the market, is shown in Chart 5. The range of observed spreads for transacting in euro/dollar FX forwards was found to be strikingly wide (ranging from 2 ‘pips’10 for the 25th percentile to 52.6 pips for the 90th percentile) – and strongly inversely correlated with a measure of client sophistication. On average, the unsophisticated – and over half the sample trade with only one bank – appeared to pay a much higher spread than their sophisticated peers. That premium could be all but eliminated if they instead traded on a multi-dealer platform: a rent estimated by the authors to be worth over €  Chart 5: Relationship between spreads on EUR/USD FX forwards and client sophistication  Source: ‘Discriminatory pricing of Over-The-Counter derivatives’ by Harold Hau, Peter Hoffmann, Sam Langfield and Yannick Timmer, December 201711  These results should be interpreted with some care. Higher spreads for less sophisticated clients may be capturing more than execution costs alone (FX forwards involve a credit element, for example). And tighter observed spreads for those using platforms and those with greater sophistication may underestimate true effective spreads if prices regularly move against them, through information leakage or otherwise. Spreads A ‘pip’ is the smallest amount by which any given exchange rate can change.

As the UK’s Fair and Effective Markets Review argued in 201512, you can’t evaluate an FX transaction if you (or your agent) don’t know when it was executed (timestamping), why some trades were rejected and others not (reject codes), whether your counterparty was acting as principal or agent, how long your request to trade was held before a decision was made (hold time), or what was happening during that hold period. Good disclosures should not be documents written by lawyers for lawyers, aimed solely at limiting liability. They should be clear and practical tools to inform trader-to-trader contact. The FX Global Code13 stresses the importance of clear and effective disclosures in many of its high level principles. And in February this year, the Global FX Committee (GFXC) published supplementary guidance on the key characteristics that good disclosures should have, covering: content, accessibility, clarity and review frequency.14 At the Bank of England, we take disclosures from our own wide range of trading counterparties very seriously. We recently reviewed these documents to ensure firms were following through on their commitments under the Code. Most covered the topic headings we would expect to see, and the best scored well across a broad range of criteria. But few had been reviewed since the GFXC’s guidance came out. And in general we found significant room for improvement, in particular on clarity and accessibility. A recent review of public disclosures by Risk magazine15 came to similar conclusions.
Banks built their own staffs or outsourced the activity to another financial institution, a consulting firm or a boutique. In the early 1990s, some banks took an even more drastic step and sold the loans to firms that specialized in managing distressed debt. The key, however, was to get these exposures in the hands of those who could work with borrowers or the markets to maximize the value from problem portfolios. The workout process must not be allowed to interfere with the continued provision of credit to the economy, however. The key policy concern in the early 1990s in the United States shifted quickly from worries about bad banks to a credit crunch as banks aggressively tackled their loan problems. And that is why it is so important to segregate the “workout” portfolio from the remaining loan portfolio. When a dedicated staff is working out bad loans, the bank’s officers can devote their attention to the continued sound operation of the bank—the current agenda of serving the bank’s customers well and the forward agenda of developing and executing a sound business strategy. This is a key reason every country needs a strong legal framework for credit relationships and a robust bankruptcy process. Successful workouts cannot occur if the roles and responsibilities of creditor and debtor are not clear, and especially if there are no established processes that can be used as a fallback and discipline on debtors if all other means of recovery are exhausted.

BIS Review 86/1998  -3-  The basic financial analysis that is the foundation of the credit process may be affected by changes in both customer and counterparty behavior. For example, a lesson we have learned from the current turmoil is how complex the concept of leverage is in today’s markets, where leverage roughly describes the ratio of risk to capital. Where leverage once could be measured directly from the balance sheet, we’ve become aware that leverage can be achieved in a number of ways. These include holding a high-risk portfolio of assets, engaging in extensive derivatives trading, especially if it involves options, funding domestic currency assets with foreign currency liabilities, investing in long-term assets with short-dated funding and pursuing a high-risk business strategy. All of these effectively can create leverage. A related lesson learned is that collateral can mitigate credit risk, but it cannot eliminate it. One reason is that posted collateral inevitably lags movements in market prices and recognition of credit issues. In trading agreements, for example, gaps between the amount owed by the customer and the amount of collateral pledged develop surprisingly quickly. One costly solution is to hold large amounts of excess collateral, but that is most often unacceptable to the counterparty. Similarly, when the collateral is real estate, equities or high-yield securities, a gap can open up between the amount owed and the value of the collateral whenever the price of the collateral declines. We have seen both problems in the current turmoil.
A couple of years ago I held a speech in which I explained why it is not necessarily more unnatural to have a negative nominal interest rate than a negative real interest rate, that is, the interest rate discounting inflation. 7 Unlike a negative nominal interest rate, a negative real interest rate has arisen every now and then. The reason why one might think there is not such a big difference is that it is usually our purchasing power that concerns us. If one lends money, one will be able to consume less than before, both in the case of a negative real interest rate and a negative nominal interest rate. In the case of a negative real interest rate, this is because inflation is higher than the interest one receives, and one is therefore unable to buy as much for the sum of money one receives from the borrower. When the nominal interest rate is negative, one can say that the negative return is written into the contract from the start. But seen in terms of purchasing power, a negative nominal interest rate is not very different from a negative real interest rate. Since I held that speech we have had a negative repo rate for a further two years. My experience is that communication about the negative interest rate has not become easier, which I thought would be the case.

One possibility the Riksbank and other central banks have made use of to make their monetary policy more expansionary when the policy rate is at or close to the lower bound is to buy government bonds on the secondary market. This affects market rates and other financial prices through various channels. 15 What one normally talks about are the signalling channel – which works through the purchases signalling that monetary policy will be expansionary and the repo rate will remain at the lower bound a long time, the portfolio balance channel – which means that the purchases will have contagion effects on prices of other assets and the premium channel – that works through purchases reducing the supply of bonds, which pushes up bond prices so that interest rates fall. As this is a new monetary policy tool, it has given rise to extensive academic research that attempts to estimate its effects. The most common conclusion is that the policy has functioned more or less as expected and complemented the policy rate cuts in a useful way. 16 One problem for Sweden is that it will become more difficult to use government bond purchases as a tool in the next economic downturn as the Riksbank already owns a large share of the outstanding stock of government bonds, just over 40 per cent. These are not then available for trading on the market, which contributes to making the market less liquid and means it takes longer to make transactions.
In this regard, let us also recall that FINMA – together with the big banks and with the support of the SNB – has conducted a comparison of RWA calculated with the model-based approach and the standardised approach. The SNB suggests that banks consider the possibility of publishing the results of this analysis in appropriate form. In any case, the SNB remains convinced that banks which use the model-based approach for calculating their RWA must continue to improve their transparency with regard to their risks. Considerable  BIS central bankers’ speeches  1  progress has been made already, especially in terms of disclosing changes in RWA broken down by cause. Publishing a parallel calculation of RWA based on the standardised approach would greatly contribute to building trust and market discipline. Enhanced transparency is likely to be a key component of the measures that the Basel Committee will put in consultation. Domestically focused commercial banks I would now like to turn to the situation of the domestically focused banks. Risks facing these banks are still primarily connected with the mortgage and real estate markets. These risks have largely remained unchanged at a high level over the past six months. In the last half year, the momentum in the mortgage market slowed, with annual growth in mortgage lending slightly less high than in the previous quarters. The mortgage volume continued to rise more steeply than GDP, but the difference between the two growth rates has become smaller.

Emerging markets, in particular in Asia, are learning to live with heightened uncertainty in the world where the extent and the whereabouts of benefits from financial globalization to promote growth and development while ensuring our economic and financial stability. This, of course, necessitates that we have to be very focused on risk management. Ladies and Gentlemen, Asian economies have come a long way since 1997 in promoting economic and financial resiliency. We see a region-wide move toward a more flexible exchange rate regime, with a disciplined framework in the conduct of monetary and fiscal policies. As for the financial sector, the framework of policy has moved toward risk-based supervision, to an adherence to international standards, and to the undertakings of formal financial sector assessments under Financial Sector Assessment Program of FSAP. The macroeconomic policies also become more flexible, yet proactive, in dealing with changes in the market conditions and practices. When necessary, a tradition fiscal-monetary policy mix has been augmented by appropriate prudential measures of financial institutions. More importantly, legal and information infrastructure, including credit bureaus, has also been put in place to strengthen the foundation for financial system capacity for crisis prevention and resolution. These intensive reforms and institution building during the past decade may make it less likely that financial turbulence will trigger a sharp and broad-based dent to real economic outcomes, especially, since there is no significant build-up of sectoral imbalances in the region.
Several central bankers have spoken about FinTech in the last couple of years, but I bring a little difference; my Central Bank is in an emerging country, where the usual challenges of controlling inflation and securing financial stability are intertwined with the distinct features of a developing financial sector. This makes the achievement of central bank goals a little more difficult and underscores their relationship to longer-term development objectives. So in this keynote I would like to discuss the difference that FinTech can make to the delivery of the responsibilities of a Central Bank of an emerging country. Note in this respect that since banking regulation in my country is in charge of a separate entity, I will focus mostly on the macro stability dimensions of financial markets. Just in case I issue some nonconventional opinions, let me also state that they do not necessarily represent the official view of the Central Bank of Chile or its Board. [SLIDE 1] In what follows, I will first provide a quick overview of the main features of central banking and its relationship with the financial sector as well as the way the latter works in a developing country, including its role in the transmission of monetary policy. Then I will identify which features of FinTech development can have a greater influence on central banking, financial stability and financial deepening.

Revolutionary as they were for the public, these changes didn’t transform the banking business substantially. Banks kept taking short-term deposits to on-lend at longer maturities. They kept clearing funds and settling balances with one another and with the central bank to meet liquidity and reserve requirements. The main change for monetary policy in most countries was to switch from the control of monetary aggregates to the fixing of the policy rate for overnight liquidity operations. Technology is now creating opportunities for changes in financial services that are more farreaching, both for the public, financial institutions and central banks. Information technologies are doing this because finance is an information and record keeping business. By challenging the conventional centralized, multi-layered settlement and clearing system, distributed ledgers, supplemented by a number of other technological developments, create the possibility of an unbundling of financial services that question the very notion of a bank. These are exciting times not only for financial start-ups and the public, but also for leaders of developing countries, that see in these technological developments the opportunity to leapfrog financial development and remove one major roadblock to inclusive economic growth. To materialize this, however, policy makers—including central banks—need to make sure that they are not exposing people to greater risk, especially when they are using financial services for the first 18  Central Bank of Chile 29 June, 2017  time. Moreover, they may want enhanced access to financial services to facilitate formalization of economic activity rather than grow the shadow economy further.
This broad membership makes the TMA the authoritative industry association and focal point for treasury matters in Hong Kong. I am also glad that there are four committees established to focus on the four key areas that I have spoken about. We at the HKMA consider the TMA an important new element of our financial infrastructure. We are confident that the TMA will play a pivotal role in the maintenance of the status of Hong Kong as an international financial centre. May I congratulate you all on today's inauguration a nd wish you all the very best for the future. 2  BIS Review 4/2006

The BoA has progressed in reforming the banking system towards international standards, with the aim of the developing and refining the country’s banking infrastructure. AIPS, inaugurated in early March 2004, can be considered as the backbone of the whole banking system infrastructure. The BoA wishes to bring its central bank closer to that of the European Central Bank. Therefore, changes and amendments of the Bank’s regulations are aimed towards achieving this goal. BIS Review 49/2004  1
Foreign interest rates have been reduced substantially to counter a downturn. High and widening interest rate differentials have probably contributed to the appreciation of the krone. Cyclical divergence is probably also reflected in the substantially higher wage growth in Norway compared with other countries. In our view, the strong krone exchange rate cannot solely be attributed to the change in the fiscal policy guidelines introduced in March 2001, which allowed for a moderate and steady phasing-in of petroleum revenues. The strong krone is also the result of an overheated labour market and relatively 5 high wage growth in Norway combined with a global downturn following a long period of expansion. Results from recent empirical analyses at Norges Bank indicate that the positive and widening interest rate differential is the main reason for the appreciation of the krone from May 2000 and up to late autumn 2002. At the same time, the fall in equity prices and reduced volatility in foreign exchange markets have contributed to the appreciation of the krone. These factors have contributed because the interest rate differential has been positive. Thus they amplify the effect of the interest rate differential. 6 Part of the appreciation in the past year may also be due to higher oil prices. Previous research has shown that changes in the price of oil have an impact on the krone exchange rate particularly when the price falls below USD 14 or exceeds USD 20 per barrel.

Accordingly, the 2007 Monetary Programme has been designed to accommodate the expected economic growth of 7.5 per cent and the BOP surplus of US dollars 200 million while aiming to contain inflation at 8.5 per cent, as measured by the GDP deflator. It is also assumed that the velocity and multiplier would be around 2.52 and 5.2 respectively. While a significant moderation in inflation as measured by the Colombo Consumers’ Price Index (CCPI) is expected during the year, the Central Bank would be closely monitoring the CCPI behaviour in order to respond effectively to any unfavourable developments. While we believe that the tightening of monetary policy during the year should be mainly directed to contain private sector credit growth to a moderate degree, it is hoped that government borrowings from the banking sector too will be limited to the budgeted target of Rs. 16.7 billion. On the supply side, the expansion of production together with improved distribution systems is expected to have a favourable impact on prices. With regard to the key external factors, we anticipate that international prices of major non-fuel consumer imports would decline during the year while the impact of international oil prices on the economy will be contained to some degree through appropriate hedging mechanisms.
8  BIS Review 36/2005  Chart 1: The Maradona theory of interest rates in 2002 Feb IR  Per cent 8  May IR Aug IR Nov IR  7 6 5 4 3 2 1  2001  2003  2002  2004  0  Note: the black line represents the Bank of England official interest rate. The coloured lines represent the market’s expectations of future interest rates, as calculated in each of the four Inflation Reports published in 2002. Chart 2: Inflation and Unemployment 1993-2005 RPIX inflation (%) 30 25 20 15 10 5 0 -5 0  2 4 6 Une mployme nt (%)  8  10  12  Source: ONS. Note: The unemployment rate used here is the Claimant Count measure.

Within a few miles of this conference room are companies like Apple, Facebook and Google that have transformed the way in which services can be provided worldwide. And even the older services have become tradable – over the course of a century the All England Lawn Tennis Club Championships at Wimbledon have grown from a small local tournament to the world’s premier tennis event driven by a global television audience of around 400 million people in 187 countries (as many as are members of the IMF). But international trade requires a monetary system to flourish – the rise of the successful Asian economies would never have occurred if they had been restricted to barter. If flexible exchange rates were allowed to determine the relative values of different currencies in competitive markets, why should there be any need for “rules of the game” or an international currency? Indeed, is the phrase “international monetary system” an oxymoron? That leads to the question I want to discuss today: what is meant by the international monetary system and do we need one? Over the years, views on the need for “rules of the game” governing international payments have ebbed and flowed. So it is not surprising that France has chosen the international monetary system as a theme of its presidency of the G20 this year. Why not leave these issues to market forces? What are the externalities in the international monetary system which mean that one country’s actions distort the choices open to others?
When appropriate, U.S. authorities have adopted different standards than those proposed in international forums. Finally, following the financial crisis, the Federal Reserve developed a capital stress testing supervisory program—known as the Comprehensive Capital Analysis and Review (CCAR). CCAR has become an integral part of ensuring appropriate capital levels. By imposing a discipline of forward-looking capital assessment on our largest firms, CCAR helps protect the safety and soundness of the largest financial institutions—and therefore the stability of the entire financial system. The CCAR process consists of two parts. First, the quantitative assessment evaluates whether a firm holds a sufficiently large capital buffer so that it can continue to be a viable financial 3/6  BIS central bankers' speeches  intermediary even in a stressed market and macroeconomic environment. Second, the qualitative assessment evaluates whether the firm’s risk management and capital planning processes are well-developed and well-governed. CCAR has helped to strengthen the capital levels of the largest financial institutions, and has pushed these firms to steadily improve their risk management and capital planning processes. While appropriate capital and liquidity standards are necessary, they must be augmented by a supervisory regime that can assure the quality of a firm’s governance, controls, risk culture and compliance with applicable laws and regulations. As we saw with JPMorgan Chase in the “London Whale” episode and with Wells Fargo more recently, effective risk management and governance is a necessary complement to having adequate capital and liquidity buffers.

Thomas Jordan: Monetary policy in times of crisis. Why central banks talk to one another Summary of a speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Energie-Apéro Etavis, Zurich, 14 May 2012. The complete speech can be found in German on the Swiss National Bank’s website  *  *  *  Mandates differ from one central bank to another. So, too, do the economic structures and business cycles of different central bank territories. These factors speak in favour of an autonomous monetary policy for each currency area. This monetary policy autonomy has proved its value for Switzerland – also in the latest crisis. Nevertheless, central banks do work with one another in a number of different ways. They exchange knowledge on a continual basis, thereby helping to improve the foundations upon which their own monetary policy decisions are made. Central banks are also able to access foreign currencies by concluding swap agreements, allowing them to better counteract liquidity shortages on the international money market in times of crisis. Finally, joint measures can have a strong psychological impact since they signal to financial markets and economic agents that the central banks are speaking with a single voice. Autonomy and cooperation are not mutually exclusive. On the contrary. In a crisis, good cooperation supports and reinforces the effects of autonomous monetary policy measures.