samchain/econo-pairs-v1 huggingface dataset:
The taxpayers of some of the most developed countries of the world have been called on to support global banks headquartered in their countries. Indeed, after the Lehman bankruptcy, it is fair to say that the entire global financial system was put at risk by the difficulties of some banks operating worldwide. It quickly became clear that an unprecedented and unacceptable level of systemic risk had built up over the “boom” years. And that a significant amount of taxpayer’s money had been put at risk as a result. This prompted a forceful, and understandable, reaction from all sides. The public, bank investors, regulators, supervisors and politicians alike all agreed that we needed a profound overhaul of the treatment of systemic risk. I believe that the reactions to this challenge from the G-20, at the highest political level, as well as from the Financial Stability Board (FSB) and the Basel Committee of Banking Supervisors (BCBS), have been proportionate to the size of the problems and risks we have encountered since the outbreak of the crisis. The costs have been huge and there is widespread agreement that we cannot allow this to happen again. Nevertheless, we should also recognize that a number of global banks have managed to navigate these rough and unchartered waters without capsizing, Indeed, if you allow me to extend the metaphor, some have even been able to help to calm the waters.

As a recent paper by IMF staff stresses, a branch model for internationalization may be cheaper than one based on subsidiaries. However, it may also be riskier, both for the host and the home markets. Although nobody expects that these banks will need to be liquidated, we have seen sufficient black swans in recent years to show us that we need to hope for the best but be prepared for the worst. And if liquidation were needed, a stand-alone subsidiary model would have important advantages over a branch model, especially if there is substantial deposit taking activity at the local level. I am not saying that the liquidation of a global bank organized through subsidiaries would be an easy task. What I mean is that it would be much easier than for global banks which are deeply interconnected across countries through branches. 2  BIS central bankers’ speeches  The stand-alone subsidiaries model has an additional advantage, from the perspective of the supervisor. It is far more symmetric for the local supervisor than the alternative model, allowing them to really supervise the institution. And as a home supervisor, if a foreign bank has a significant share of a domestic market, I would rather have the domestic supervisor deeply involved in the monitoring of that bank. Our experience has taught us that local supervisors usually have a deeper knowledge and more accurate information on developments in their home banking sectors than distant parent company supervisors.
ELA as part of general crisis management and resolution  Should a financial crisis occur, there are a number of measures that may be used by authorities to limit the consequences of the crisis. In addition to ELA, examples of these measures are financial support to protect the solvency of institutions, brokering of private sector support to or acquisitions of troubled institutions, management of deposit insurance schemes and insolvency procedures for financial institutions. In general, these measures may be undertaken by different authorities. A consequence of this is that cooperation between authorities is an important element of crisis management. The authorities must have a common strategy for how the crisis should be managed in order to avoid excessive support to the financial sector. Excessive support may lead to undue costs to taxpayers and to unsound incentives for the financial sector. In this context, it is important to emphasise that these effects can arise from all kinds of official support. Thus, the authorities must limit the support that is  1  BIS Review 42/2000  offered. Support may be warranted only when there is a considerable risk for a systemic crisis that may lead to a severe decline of real economic activity. Typically, real economic activity is affected by a breakdown of payments systems or restrictive granting of credit, a credit crunch. Traditionally, ELA provided by central banks has been seen as a measure to deal with pure liquidity problems in banks that essentially are solvent.

If any foreigner desired to avail himself of any services, he should necessarily have traveled to the country of services at great costs in terms of both time and money. This is why cross-border services were limited only to areas where foreigners could have them relatively at a low transaction cost. In this context, the services which played a prominent role in the global arena were shipping and insurance services where the service provider visited the buyer and travel, education and health services where the buyer visited the service provider. In all these areas, Sri Lanka had an upstart over other competitive countries. Sri Lanka’s university system at the time of gaining independence was one of the best in the world. It also had a very reliable and high quality curative health system. For shipping services, it had the best comparative advantage by being located on a very important naval route. Its ports in Colombo and Trincomalee had the best cost-advantage. Its highly literate work-force with professional qualifications from the UK and other advanced countries could have provided the best insurance and banking services to the rest of the world. But, due to the inward orientation of the policies adopted since independence, these comparative advantages got shifted to other countries such as Singapore, Hong Kong and Australia. For Sri Lanka, it is, therefore, a story of missed opportunities. It is too late now to lament over the failed past.
Resolution authorities must also ensure that a firm can continue to meet conditions for authorisation and to be sufficiently well capitalised to command market confidence post-resolution. These principles are reflected in the final TLAC calibration: we worked on the basis that minimum capital requirements would be eroded on the way into resolution, and that G-SIBs would need to be recapitalised to at least a level to continue to meet minimum conditions for authorisation and maintain market confidence on the way out. The FSB agreed that TLAC corresponding to 18% of risk weighted assets (RWAs), or 6.75% of leverage, would provide the minimum necessary to meet these goals, but that more may be necessary depending on  2  BIS central bankers’ speeches  firm-specific considerations. Indeed, in transposing TLAC in domestic regulation, several jurisdictions have already indicated that they consider higher requirements to be appropriate for G-SIBs based in their jurisdictions. But the common floor provides a base level that should allow G-SIBs to operate cross-border with something of a level playing field. If this is the agreed minimum end-point for TLAC, in the course of the last year, on the basis of a quantitative impact study (QIS), we also agreed a viable transition path for G-SIBs to implement TLAC. This is reflected in the two-stage conformance period under which G-SIBs need to comply with TLAC of 16% RWAs and 6% leverage by 2019 and at least 18% and 6.75% by 2022.

I have mentioned that finance for small firms should be available and appropriate, but it also needs to be accessible. UK banks and other finance providers have recognised this and have attempted to make themselves more user-friendly to their small business customers. Banks have devoted substantial resources to increasing the awareness and skills of lending managers at the branch level. As a result, many small firms now believe, and perception is important, that banks understand their business better. In recent years, the NatWest/SBRT Quarterly Survey of Small Business in Britain has consistently found that access to finance is not a significant problem for UK small businesses, with just 2% of respondents currently rating it as a key problem facing their business. The Cruickshank Review found no evidence that small firms currently have difficulty obtaining bank finance. The Review, however, did highlight some barriers to the raising of equity, including - again - problems of asymmetric information, the risk level associated with financing new firms with no established track record and the costs for the investor in structuring finance. It also raised issues about conditions in the banking market for SMEs; these have been referred to the Competition Commission. Technology-based small firms Perhaps I could conclude with some words about technology-based small firms. Technology-based firms are vital to the UK economy in maintaining competitive advantage in global markets. Technology-based firms are often themselves entrepreneurial. But just as they have a unique role in the economy; they also have unique financing needs.
10  BIS Review 143/2009  Figure 24: Contribution to GDP Growth Figure 25: Contribution to GDP Growth from Production from Spending (Percentage Point) 1  (Percentage Point)  0,5  6  0  3,6  4  -1  2  -0,5 -1,3  -2 -3  -2  -2,5 -3,1  -4  0,1  0,2  0 -0,8  -4  -5  -6  -6  -8 -7,0 Agricul. Indust ry Cons tr. Serv ices Net Tax  -6,4 Priv ate Co ns. -7 -8  -3,6  P riv. Inv. -7.0 P ublic Public Sto ck Cons . Invest. Net Exp. GDP  GDP  Source: TURKSTAT. Source: TURKSTAT. Compared to the previous quarter, the primary determinant of growth in the second quarter was private consumption demand that displayed an upswing, mainly owing to the fiscal stimulus package (Figure 26). While assessing whether the pick-up in private consumption demand indicates a lasting recovery trend or not, it would be wise to evaluate trend discrepancies in different sub-components and interpret data pertaining to the third quarter accordingly. Second quarter national accounts data confirm that the pick-up in private consumption demand stemmed mainly from fiscal stimulus-driven advanced demand for certain goods categories. Meanwhile, the demand for goods that were not subject to tax reductions stayed almost constant (Figure 27).

Figure 26: Contribution to GDP Growth Figure 27: Consumption of Resident and from Spending by Periods Non-resident Households (Percentage Point) (Seasonally Adjusted, at 1998 Prices, Billion TL) 8 7 6 5 4 3 2 1 0 -1 -2  19  7.1  14  5.9  13.5 18  13  3.8  12.5  17  12 16  11.5 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2  -0.1 GDP  -0.4  -1.0  -1.1  P riv. Stoc k Expo rts Public Privat e Imports Cons . Change Spending Inv. Source: TURKSTAT, CBRT. BIS Review 143/2009  2005  2006  2007  2008  2009  Co nsumption Co nsumption excl. Furniture, Housing Goods and Services, Trans portatio n, Communicat ion  Source: TURKSTAT, CBRT. 11  Recently issued data indicate that this trend continued in the third quarter as well and consumption demand has adopted a weaker course following its marked increase during the second quarter. Although private investment is expected to increase slightly in the third quarter, the low capacity utilization rate and the high uncertainty in demand is expected to hold back the recovery in investments. Accordingly, total aggregate domestic demand is expected to stay flat in the third quarter, after increasing significantly in the second quarter (Figure 28).
In order to mitigate the inherent pro-cyclical nature of financial activities, to which I will return later, the Basel Committee’s proposals also contain capital buffers and forward-looking provisioning. Finally, the proposals include global minimum liquidity risk requirements enabling credit institutions to withstand a short-term liquidity stress and aiming to ensure longer-term stability in their funding requirements. The objective of this comprehensive package is to enable financial institutions to better withstand the adverse effects of economic shocks. In order to assess the cumulative impact of the proposals, quantitative impact assessments are underway. The outcome will be available in the coming weeks, and will assist decision-makers in properly calibrating the measures. At this stage, therefore, it is premature for me to say anything about the desirable  2  BIS Review 87/2010  calibration of the measures. Nevertheless, I am of the view that the measures are warranted from a conceptual point of view, though their cumulative impact needs to be carefully assessed. Indeed, it is important that the right balance is struck between enhancing banking stability and maintaining a stable provision of credit to the economy. IV. What has been done? The main strands of the reform agenda I come to paint are at various stages of development. It is therefore useful to briefly run through what has already been achieved, in particular in Europe. Starting with the prudential framework for banks, most FSB members, including the EU Member States, have fully implemented the more risk-sensitive Basel II framework.

Among these were exuberant real estate prices, and a flourishing  BIS Review 87/2010  1  securitisation business, which facilitated excessive credit growth. A group of countries – including China, Japan, and oil-exporting economies – were saving too much, while others – such as the US – were heavily borrowing to finance consumption and investment. These developments were unsustainable in the long-run. At the same time, in an environment characterised by low interest rates, a global search for yield may have led investors to take on too much risk. On the micro side, it became apparent that market participants’ incentives were not aligned with the risks they were taking, and that some investors were not fully aware of the extent of their exposures, which contributed to the under-pricing of risk. In the banking sector in particular, deficiencies in the design of the prudential framework for banks, in the supervisory review of banks’ risk management procedures and in the rules for compensation and pay were some of the microeconomic factors leading to important vulnerabilities. III. Regulatory and supervisory initiatives currently under discussion  After witnessing the first global banking crisis since the Great Depression, it became clear that it was absolutely crucial to get the banking sector on a sound footing again. Policy makers responded rather quickly and forcefully to the crisis, which resulted in a wideencompassing reform agenda.
Without wishing to preempt what you shall be taught, I wish to only explain that good corporate governance is one of our strategic objectives and its inclusion as a strategic objective reflects our commitment to align our operations with world best practices, consistent with our vision ‘to be a world class central bank’. The module on Risk Management was included to provide you with knowledge that will enable you appreciate why the Bank has introduced the Risk Management Department. Director - Risk Management will do a presentation during which he will explain what risk management is all about and its relevance to Bank of Zambia. Finally, the inclusion of a module on the Core Functions of the Bank of Zambia is designed to provide you with knowledge on the operations for which the Bank was established. This is important for a number of reasons. First, we want to have a cadre of enlightened and well informed managers who will portray a positive image of the Bank and reflect our standing as a world-class Bank. As managers, you have to have a reasonable understanding of how the Bank’s core activities departments operate and are organised. Second, as managers, especially as “world-class” employees, you are also expected, by the public, to  BIS Review 125/2006  1  have a reasonable grasp of issues pertaining to core operations of the Bank.

•  But banks have held up well. − In the US, nearly all the largest banks have passed the Federal Reserve’s most recent annual stress test. − In Singapore, an industry-wide stress test conducted by the MAS indicates that Singapore’s banking system will be resilient against severe economic stress scenarios in the major economies and Asian region. •  And beyond the stress tests, the global banking system has remained relatively resilient through actual episodes of market stress in recent years: − the May 2013 US taper tantrum; − the Oct 2014 US Treasury “flash crash”; − the Jan 2015 Swiss franc de-pegging; − the Aug 2015 “Black Monday” selloff; and most recently − the Jun 2016 UK referendum. Third, bank lending to the real economy has been stable. •  Overall provision of credit to the economy has been maintained even as banks met higher capital and liquidity requirements. − According to the FSB, by the end of 2014, bank lending growth had resumed in all regions of the world. •  The cost of financing has not increased, although I suspect that this has had more to do with highly accommodative monetary policies. •  There has been no material shortage in the supply of long-term investment financing in most countries surveyed.
The holder of a single share would have been liable for the equivalent of four times the salary of a teacher of the time. It is not surprising therefore that within about a decade unlimited liability had all but disappeared from the British banking scene, to be replaced with regimes that limited the liability of shareholders in one way or another.2 I would not propose that we go back to a system of unlimited liability for bank shareholders. But the City of Glasgow Bank episode is interesting because it shows that the public policy challenges of dealing with failing banks are not new. When a bank fails, the money has gone. Someone has to pay for the losses, however. The question is ‘who pays?’ This question has probably be-devilled public policy since banks were invented. ‘Who pays?’ – the past It goes back much further than late Victorian Britain. The Code of Hammurabi – written by the King of Babylon in around 1,800BC – included a provision that if the harvest failed due to adverse weather then the ‘debt-tablet’ would be washed in water and interest on the loan would be cancelled for that year.

So the bank has to have enough debt that can be bailed in to restore its capital so it can continue to operate as an authorised firm while it is being resolved. Smaller banks can be more easily separated into the parts that provide critical economic services and that can be sold and those that do not and can go into insolvency. Only the critical parts would be recapitalised in resolution. They need less bail-in debt. The very smallest institutions do not need to be kept in operation. Their abrupt cessation of activity should not generate contagion or damage the economy. Insolvency rather than resolution is the proportionate strategy here. They do not need bail in debt. Gradualism The second key principle is gradualism. The Bank is proposing to allow the full four-year transition period for banks to meet their MREL requirements. This will allow the market for MREL-eligible debt to develop and allow banks to smooth out their debt issuance, minimising issuance and interest costs. Clarity The third is clarity. Banks and their creditors need to have clarity – clarity in relation to the requirements of the new regime and clarity as to their liability if things go wrong. So we need to avoid uncertainty and get on and implement the EU requirements that came into force at the beginning of this year. Bank creditors need to know where they stand if things go wrong.
These changes have also affected the central banks. With the onset of the crisis, the so-called conventional policies and instruments were reconsidered, the scope of our functions increased, and the expectations from us enhanced. Macroprudential function, bank resolution, consumer protection, financial inclusion and literacy are just some of the areas requiring from the central bank to play the leading role. The crisis itself and the subsequent changes to the overall central bank profile and decision-making infrastructure entail modifications in the scope, granularity, and the systematization of the available statistical data. A number of new statistical initiatives (such as the G-20 Data Gaps Initiative) aimed at enriching the statistical spectrum have emerged post crisis. The mere fact that global crisis arose exactly from the financial sector suggests that many of the post-crisis recommendations and needs for changes in the statistical system concern the central banks. The crisis has shown that excessive risk-taking can lead to a collapse of the financial system. Underestimation of the strength of the financial system’s links with the real sector and the cross-border exposures has led to inadequate assessment of macro-financial links within some economies, as well as of the global implications of shocks in some countries. This whole new context, as well as the unconventional responses of central banks to this shock had major implications for the requirements for expansion and modification of the regular statistics, as the most important “ingredient” for making appropriate monetary as well as micro and macroprudential policy decisions.

In this respect, I’d like to look forward and address some of the work we are doing to ensure that the new international capital standard - Basel II - remains flexible and able to adapt to emerging practices and risks. Many of you have a very strong interest in the efforts the Committee is undertaking to consider how best to apply Basel II to certain trading-related exposures using the latest tools being developed by the industry. While this work is still ongoing, I would like to share a status report with you on that effort. Finally, I will highlight some of the work that we are undertaking to promote a smooth and consistent transition to Basel II, including our plans to conduct a review of the calibration of the framework, as well as our efforts in the field of supervisory co-operation and validation, and the key messages that are coming out of these initiatives. The evolution of standards and regulatory burden Allow me to begin by sharing some personal thoughts on a topic that has captured some attention recently: The view, held by at least some in the financial services sector, that the tide of regulation has risen to a high water mark. In my own conversations around the world, I have heard similar concerns from some bankers. Some point to the long debates that have taken place in the accounting  BIS Review 17/2005  1  profession.