samchain/econo-pairs-v1 huggingface dataset:
In this way such an institution can serve to unlock further the financial potential available to spur competitiveness and economic growth without adding to the debt burden of the government. The funding model is based on the repayment of loans and thus is on a sustainable path separate from that of the national debt. This is why such loans raised by such institutions are not captured under the Maastricht criteria of debt to GDP ratios. However, such an institution has to be managed and administered in a prudent and responsible manner. 8  BIS central bankers’ speeches  The Central Bank has been looking more thoroughly into this matter and intends to put forward its submissions to the Government with respect to the rationale and feasibility regarding the setting up of such an institution. Conclusion: The importance of sustainability At a time of recession in Malta’s export markets, the preservation of competitiveness is a must, in order to sustain continuing economic growth. In today’s world, economic sustainability requires the adaptation to an evolving external environment and allows the continued improvement of the standard of living without jeopardizing that of future generations. In the eventual post-recession world, many of Malta’s competitors will have gone through a restructuring process and would pose an even stronger challenge. Sustainability has three dimensions. First, a sustainable financial system requires a prudent business model on the part of the banks and other financial institutions and a vigilant oversight of these institutions.

A subject that often comes up for discussion is the cost of living allowance or COLA. It has to be recognized that in Malta the allowance is determined on the basis of a basic or social wage, and COLA is a flat euro amount, granted regardless of the level of pay. This limits its impact on competitiveness. Nevertheless, the award of COLA is disconnected from productivity gains and hence may constrain firms’ ability to respond to changing market conditions. It also raises the risk of secondary cost increases after an initial price shock, which may come for example from an increase in imported prices. It may not be possible to neutralise such increases in imported prices and simply compensate for them in wages without significantly losing competitiveness of the enterprises concerned, especially if our competitors are absorbing these external shocks through an internal devaluation. It is relevant to note that the world economy is going through unusual times where some countries are undergoing internal devaluations. Malta cannot afford to be oblivious of the impact that these realities exert on its competitiveness. The list of euro area countries passing through significant corrections is impressive, namely: Ireland, Portugal, Spain, Italy, Slovenia, Cyprus and Greece. This apart from other non-euro area member states that are also going through difficult and corrective changes in their economies.
The crisis has also shown that firm-level data on financial intermediaries, including of a supervisory nature, might be critical to identify institutions of potential systemic relevance that warrant closer monitoring and to understand interdependencies among firms and markets – interdependencies which, if impaired, could have a strong impact on the overall stability of the financial system. The key data requirements relate to: i) the possibility of joint failures of institutions resulting from their common exposures at a single point in time (these exposures could derive from shocks that come from outside the financial system or inter-linkages among intermediaries), and ii) the fact that, over time, the dynamics of the financial system and of the real economy reinforce each other, increasing the amplitude of booms and busts, and undermining stability in both the financial sector and the real economy. The financial crisis has shown that monitoring aggregate data is insufficient and may not accurately indicate the vulnerabilities hidden in the financial system and that there is the need to link micro data to macroeconomic risks. As such, firm-level data (as opposed to, for example, estimates based on country or sector aggregates) have been recognised as essential for more accurate assessments of the potential impact of risks materialising, e.g. estimating the amount of losses for the financial  10  BIS Review 115/2009  sector, as well as for conducting system-wide stress testing, contagion analysis, or the assessment of feedback loops between the real and financial sectors.

Lorenzo Bini Smaghi: Macro-prudential supervision Speech by Mr Lorenzo Bini Smaghi, Member of the Executive Board of the European Central Bank, at the CEPR/ESI 13th Annual Conference on “Financial Supervision in an Uncertain World”, European Banking Center at Venice International University, Venice, 25-26 September 2009. *  *  *  Introduction 1 The recent financial crisis has produced a broad consensus on analysis and policy action in at least three areas, namely the need: i) to gain a better understanding of systemic risk; ii) to strengthen the macro-prudential aspects of financial supervision; and iii) to deepen central banks’ involvement in it. The establishment of a new body to conduct macro-prudential supervision at EU level – the European Systemic Risk Board (ESRB) – is one element in a comprehensive set of initiatives and responses in this field. My remarks today focus on the future work of this body and consist of four parts. I’ll first consider the origins, purpose and structure of the ESRB. In second place, I’ll discuss the concept of systemic risk, and how it can be monitored and assessed effectively. I’ll examine some analytical tools for systemic risk analysis in the EU and look at how these tasks could be organised in the context of the ESRB. In the third part, I’ll cover the ECB’s experience in conducting financial stability surveillance in the euro area and reflect on the vulnerabilities that we (and other authorities) identified before the crisis.
BIS Review 47/1997  -2-  I would like to point out that efforts since the second half of 1980 to keep the central bank’s balance sheet healthy have greatly streamlined control over the items on that balance sheet. In 1998, the evaluation account held 45 percent of the assets of analytical balance sheet. In 1996, when it showed a negative balance for the first time, the evaluation account’s share in the assets of the balance sheet fell to zero. Similarly, foreign assets accounted for 30 percent of total assets in 1988, compared to 76 percent in the balance sheet for 1996. In short, the principal source of the increase in central bank assets shifted from increased domestic assets to increased foreign assets, mainly borrowed. The Central Bank considers controlling the increase in domestic assets to be the most important aspect of its monetary program. Only by controlling the increase in domestic assets can we keep the increase in Turkish lira liabilities in line with increasing demand. The 1994 law requiring the Central Bank to gradually phase out its advances of short-term credit to the Treasury, formerly the main source of domestic assets, has been of great assistance in curbing their increase. The continued lowering of this ceiling in coming years will certainly make it much easier for the Central Bank to implement its monetary policy. It is my wish that in the near future, the Turkish Central Bank will see this practice abolished altogether, as it has been in other modern central banks.

It is also known that the financial system undergoes a relative expansion during such periods. Resources which have accumulated in the financial system cannot be rechannelled by the financial system to more productive sectors. BIS Review 47/1997  -3-  A stable financial system and stable prices therefore represent the normal environment that central banks are committed to pursue and maintain. A central bank that stabilizes prices increases its credibility. A central bank that protects the value of the currency also helps increase the credibility of the country. The success of the monetary policy implemented to stabilize prices depends on whether or not the financial system is stable. And the price stability and financial system stability that are the primary responsibilities of the central bank are necessary for achieving economic growth in the medium term. Let me mention some qualities that a central bank should have: · It should have continuity. Central banks should not be diverted from their permanent goal of price stability by short-term political pressures. · It should be competent. A central bank should be completely professional. It should be technically dedicated in its structure, thorough and clear in its expression, and transparent in its actions. · It should be a responsible institution. In other words, it should be an institution that is reliable and able to justify its monetary manoeuvres. These are the characteristics of a modern central bank. Central banks that have these qualities will unquestionably occupy a distinguished place in the international environment of the 21st century.
Sweden’s Riksbank and the SNB, however, lowered their reference interest rates almost to the 0% bound,3 thereby de facto exhausting their room for manoeuvre using conventional monetary policy measures. Movements in nominal exchange rates in Europe, which will play an important role in the second and third phases, varied from one country to another during this first phase. There was already upward pressure on the Swiss franc (cf. chart 5), due to the currency’s traditional role as a safe haven. In times of substantial global uncertainty, investors take refuge in such currencies, which subjects them to upward pressure. 1  Chart 3 shows consumer price indices in the Czech Republic, Denmark, the euro area and Switzerland. For Sweden, the CPIF, of relevance for the Riksbank, is shown; this is a consumer price index that assumes fixed mortgage rates and thereby excludes the effects that interest rate changes have on households servicing mortgage debts. In this chart and those that follow, data is shown only until the end of 2015. 2  Chart 4 shows the following reference interest rates: for Switzerland, the middle of the target range for the threemonth Libor; for Denmark, the central bank’s lending rate; and for the Czech Republic, the euro area and Sweden, the repo rate for monetary policy operations. 3  In Sweden, the overnight deposit rate was lowered into negative territory in 2009. This facility, however, was and is almost never used – rather, the intraday deposit facility is used, and its rate remained positive in 2009.

In order to deal with this problem, it is important that the new exchanges establish clear rules regarding participation and price quotation as soon as possible in the process of starting their operations. Finally, I would like to say a few words about electronic money. E-money is still very much in its infancy but has the potential to develop. In the euro area, various e-money schemes exist. Although the volume of e-money in circulation currently remains very low in the euro area, the number of devices already in circulation suggests that usage could expand rapidly ("Issues arising from the emergence of electronic money", November 2000 edition of the Monthly Bulletin of the ECB, p.49-60.) In this context, it was important that the regulatory framework was clearly set up at an early stage so as to reduce uncertainty. In my view, this will encourage innovation. I am glad to say that the framework adopted in the European Union has the advantage of ensuring a high measure of security for customers, in particular through providing protection against counterfeiting and money laundering. For monetary policy, there are three main issues arising from the emergence of electronic money. First, it is important that electronic money does not jeopardise the unit of account function of money. In other words, electronic euros stored on a payment card must have the same value irrespective of when and by whom the card was issued. This important principle has been safeguarded in European legislation through the imposition of a redeemability requirement for e-money.
The connections between activities carried out within the firm matter also. Lending, brokering, providing an exchange platform, clearing and settlement perform different economic functions that carry different risks. For financial market infrastructure firms, such as a central counterparty or an exchange or custody of assets (both/all of which activities FTX sought to undertake, the regulatory system and international standards in place aim to stop these important pieces of financial market infrastructure from taking on credit / liquidity / market risk beyond what is absolutely necessary to discharge their core functions. Where they happen within one group, regulation requires separate, independent governance, to ensure the risks inherent in each is properly managed. [1] FTX, along with a number of other centralised crypto trading platforms, appear to operate as conglomerates, bundling products and functions within one firm. In conventional finance these functions are either separated into different entities or managed with tight controls and ringfences. It is worth noting that this bundling appears to have been primarily organisational rather than technological – that is to say, the functions were offered by different parts of the FTX group but were not bundled in the sense of being run as one single piece of code performing multiple functions. I will return to the question of integration of functions in smart contracts later on. I have mentioned some familiar regulation issues around the organisation and governance of conventional financial firms. There appear, in the FTX case, also to be familiar issues around the financial instruments involved.

With these additions, we reaffirm the Board's decision to not only disclose rigorously how the institution is managed, but also use its autonomy to improve the quality and transparency of its processes beyond what it is strictly required by law. The Monetary Policy Report In recent months, inflation and growth were below the estimates in the June Report. However, the main differences were related to factors that we consider to be transitory, in particular supply-side factors that affected the performance of activity and the level of certain prices. For this reason, neither the outlook for the economy for the next two years nor the general orientation of monetary policy, differs much from the projections contained in it. In the baseline scenario I will examine in a moment, core inflation —the CPIEFE— will gradually return to 3% as from mid-2018, after several months around 2%, while headline inflation will rise somewhat faster, as prices of its most volatile components return to their historical patterns and market expectations about the world prices of fuel and foodstuffs are confirmed. We expect GDP growth to pick up beginning in the second half of this year. With this, the activity gap should remain fairly stable for some time, to begin closing gradually towards the second half of 2018.
International experience shows that countries’ export growth is driven mainly by new firms – in existing product categories and to existing destinations – with a stronger capacity for growth than existing exporters. 7 As some authors have pointed out, taking advantage of this growth potential requires fostering factor mobility across firms of different productivity levels. This process generates a major portion of the gains from economic openness, such that policies that hinder workers crossing over to other firms or that raise the cost of adjusting the scale of production weaken capacity for innovation. 8 Finally, and in the same token, it is clear that the opportunities that China’s strong growth generates for the region must be well used. For this to take place, not only will greater saving be required, but also more productive investment. In other words, one significant challenge facing the economies of the region – and Chile in particular – is to take advantage of this momentary boom in the terms of trade by promoting saving and investment, thus making sure that it does not simply translate into an unsustainable spending spree. To that end, fiscal policy plays a key role by setting up well evaluated investment programs, while maintaining the incentives that promote the accumulation of scarce physical and human capital among private agents. Policies that distort these incentives inevitable end up lowering the rate of saving and investment.

In view of the favourable economic climate, the Executive Board judged that a further increase of the repo rate was justified. In my opinion, the information that has subsequently become available does not warrant any change to this conclusion pending our next meeting. 2  BIS Review 11/2006
The Riksbank may buy and sell such securities if there are exceptional reasons, as stated in the act. In principle, this means that we must make the assessment that other measures would not have the desired effect on the economy. The new act now also gives the Riksbank an explicit mandate to trade in securities within the framework of our task of contributing to the stability and efficiency of the financial system. For instance, the Riksbank may buy and sell securities to temporarily support financial markets for the purpose of counteracting a serious disturbance in the financial system, if there are exceptional reasons. The Riksbank's mandate remains strong  3/10  BIS - Central bankers' speeches  I will not go through all the details of the new act that have a bearing on monetary policy. The overall picture is that some things have changed. But the important thing is that we can do what we need to do to fulfil our tasks, in normal times and in times of crisis. The Riksbank has a strong and clear mandate to conduct flexible inflation targeting, where the overriding objective is for inflation to be lastingly low and stable. This is important now that the inflation target is being seriousl put to the test in a situation where inflation significantly overshoots the target for the first time since its introduction in 1995.

I am not going to talk today about what banks must do, which is a lot. I will merely give some examples of the tasks outstanding for the authorities. With regard to cleaning up balance sheets and levels of capital, the latest reform has been a very important step, but nothing in life is final. If the Spanish economy eventually recovers, it will have been more than enough, but if the economy deteriorates by more than expected, then capital will have to continue to be increased and improved if banks are to remain solid. Also, new instruments to increase credit to SMEs will have to continue to be tested. Some of these were discussed at a workshop held by the Banco de España in February in collaboration with the Spanish National Securities Market Commission (CNMV). At some point political decisions will need to be taken in this area. Another area of work is to continue to reduce the size of savings bank governing bodies in order to avoid any duplication when they have transferred their financial business to banks they have set up, which must be stock-exchange listed when above a certain size. A more substantial alternative would be a law requiring savings banks to cease holding significant stakes in credit institutions, within a reasonable period, and to invest as they see fit, perhaps obtaining higher returns, in order to continue to pursue their welfare aims.
We have now lived with inflation targeting for almost twenty years. I am convinced that most people today would say that it has worked well on the whole – that it has fulfilled its purpose, and perhaps even exceeded expectations. But when one has got used to a particular system over a long period of time, it is fairly natural to start looking for faults and begin to question whether it might not be possible to make some modifications and improvements. And I do have the impression that inflation targeting in Sweden has recently been criticised somewhat harder and somewhat more often than usual. 1  For an interesting account of the situation at the Riksbank at this time, see Andersson, Krister (2003), “Utformningen av inflationsmålet och den penningpolitiska analysramen” (the shaping of the inflation target and the framework for monetary policy analysis), in Lars Jonung (ed), På jakt efter ett nytt ankare (looking for a new anchor), SNS Förlag. BIS central bankers’ speeches  1  Today I intend to discuss and respond to three types of criticism that have been put forward. The first is the claim that the Riksbank has an inbuilt tendency to set the interest rate too high and has thus caused unemployment to be unnecessarily high. The second criticism suggests that the target for monetary policy should be revised, by raising the inflation target and giving the Riksbank a numerical target not just for inflation, but also for employment or unemployment.

Such parallels would paint far too simple a picture of monetary policy and would give the impression that there is a precision and exactness in monetary policy – a possibility  18  For a slightly older, but still very readable article, see Rogerson, Richard (1997), “Theory Ahead of Language in Economics of Unemployment”, Journal of Economic Perspectives 11 (1), pp. 73–92. A more recent reference that is also relevant in this context is Carlsson, Mikael (2012), “Monetary policy and unemployment: A conceptual review”, under publication in Sveriges Riksbank Economic Review 2012:3. The problems with basing economic policy on estimated trends and long-run equilibria are illustrated in, for instance, Orphanides, Athanasios (2004), “Monetary Policy Rules, Macroeconomic Stability and Inflation: A View from the Trenches”, Journal of Money, Credit and Banking 36(2), pp. 151–175 and Orphanides, Athanasios and Simon van Norden (2002), “The Unreliability of Output-Gap Estimates in Real Time”, Review of Economics and Statistics LXXXIV (4), pp. 569–583. 19  There is support for this view in research, see for example Blinder, Alan S. and John Morgan (2005), “Are Two Heads Better Than One? Monetary Policy by Committee”, Journal of Money, Credit, and Banking vol. 37, pp. 789–812. BIS central bankers’ speeches  9  to “fine tune” – that simply does not exist. This would possibly give an illusion of “clarity” but would, as I see it, merely be a chimera.20 The Riksbank is hardly unique in this respect.