samchain/econo-pairs-v1 huggingface dataset:
Market making means the temporary transfer of risk to intermediaries to smooth out imbalances of supply and demand. But market makers have to be able to bear the risks. Pre-crisis, market makers funded their inventory with short-term borrowing and very small amounts of loss absorbing capital. As a result, when exposed to a severe stress, market makers simply disappeared from the scene. So liquidity is a good thing. It does play a key role in the functioning of effective markets. And financial market intermediation and engineering can help ensure the price is as low as possible, consistent ultimately with an asset’s underlying characteristics. But taken too far, these can create the illusion of liquidity rather than liquidity itself and expose the system to risk when the illusion disappears. We should not in particular refer to metrics of the pre-crisis period to see what some “good” level of liquidity looks like. Some markets may indeed not function as smoothly or cheaply as they did in the run up to this crisis. But that may well be the counterpart of less poorly priced liquidity risk in the system. Promoting true liquidity That is not to say that nothing can be done in this area. First, we should ensure that regulatory changes are coherent. Regulators have dealt with the under-pricing of liquidity risk in part by remedying inadequate capital requirements.

But, as I said earlier, it is quite conceivable that given the range and speed of regulatory reforms, there are parts of the framework that might not work in the way we intended. As I mentioned, the Open Forum on 11 November will be another opportunity to assess this issue. The aim is to bring stakeholders together from across financial markets to discuss how we build markets for the public good. Second, changes in market structure and the ability of technology to connect buyers and sellers may increase liquidity. There are a number of suggestions that with the growth of assets under management asset managers and institutional investors may in future need to deal more  BIS central bankers’ speeches  5  directly with each other and might be better placed to take on some of their risks. Technological change would certainly make this increasingly feasible. It remains for me, however, an open question whether such liquidity would be resilient in times of stress. Automated markets may have driven down costs, but are possibly less resilient. Dealer-intermediated markets, on the other hand, may have become more costly, but possibly more resilient. In a forthcoming speech, my colleague Minouche Shafik will discuss the changes in market structure that we have seen since the financial crisis and what they mean for market functioning.
2.1  Main public spending measures  The Draft Budget includes an increase in public-sector employee compensation of 2.25% in 2019, plus an additional 0.25% if GDP growth in 2018 is equal to or higher than 2.5%, and other additional funds for specific targets and bodies. The hiring policy of the past two years remains in place, with replacement rates being increased in some sectors and additional measures being taken on working hours and temporary contracts. As regards social benefits, the Draft Budget includes a rise of 1.6% in State pensions and growth of 3% in minimum and non-contributory pensions in 2019, and an increase of 4 pp in the regulatory base of widows’ pensions. Other spending measures are the reinstatement of unemployment benefits for persons over 52 years old, more funds for dependent persons and the extension of paternity leave to eight weeks. The Draft Budget exhaustively details the other spending measures and priorities, which I shall not repeat here for the sake of brevity. In all, in 2019 State expenditure will, in accordance with this Draft Budget and in budgetary accounting terms, grow by 6.7% with respect to the budget outturn projection provided for 2018 (see Chart 8).

From the Bank’s perspective, we believe that the way forward to propel the Islamic finance industry to the next level of growth ─ if I may, a ‘game changer’ ─ should give equal weight to both economic value creation and upholding ethical values. That is why we have embarked on VBI, which is a holistic approach for our industry players to deliver the intended outcomes of Shariah that generate positive and sustainable impact to the economy, community and environment. While VBI shares similarities with concepts such as Ethical Finance, ESG (Environmental, Social and Corporate Governance) and SRI, the distinguishing factor is the central position of Shariah in determining Islamic finance’s underlying values, moral compass and priorities. There are four underpinning thrusts of VBI ─ entrepreneurial mindset; community empowerment; good self-governance; and best conduct. Through the embodiment of these principles in the business strategies of Islamic banks, there would be greater appreciation on the need to create a positive impact on stakeholders, as called for by Shariah and Islam itself. The adoption of VBI is expected to further strengthen the element of self-discipline within Islamic banks. A common moral outlook for the ultimate good leads to greater accountability and integrity, resulting in strong consideration on the impact of any decisions made. Islamic banks would be driven to continuously improve their offerings and treatments toward customers and employees, which include fair and transparent disclosure.
Lars E O Svensson: Why a lower repo rate path? Speech by Prof Lars E O Svensson, Deputy Governor of the Sveriges Riksbank, at Umeå University, Umeå, 24 February 2010. *  *  *  The opinions expressed herein are my own and are not necessarily shared by other members of the Riksbank’s Executive Board or staff. I would like to thank Hans Dillén, Karolina Ekholm, Per Jansson, Pernilla Meyersson, Staffan Viotti and Svante Öberg for their valuable comments. Hanna Armelius has contributed to this speech. In this speech, I would like to explain why I entered a reservation the most recent monetary policy meeting and justify why I preferred a lower repo rate. I will also explain why I consider that mean squared gaps should be used, to a greater extent, as a measure of the extent to which monetary policy has succeeded in stabilising inflation around the inflation target and resource utilisation around a normal level. Such measures entail a new step towards a more transparent and systematic monetary policy. The Sveriges Riksbank Act and the preparatory work for it specify that monetary policy should be directed towards stabilising inflation around the inflation target and resource utilisation around a normal level. The lower repo rate path I advocated at the most recent monetary policy meeting would provide a better outcome for both inflation and resource utilisation, with both higher resource utilisation and CPIF inflation closer to the target.

(2009b), “Flexible inflation targeting: Lessons from the financial crisis”, speech held in Amsterdam, 21 September 2009, www.riksbank.se. Svensson, Lars E.O. (2010a), “Policy expectations and policy evaluations: the role of transparency and communication”, Economic Review 1/2010, 44–80. Svensson, Lars E.O. (2010b), “Inflation targeting after the financial crisis”, speech held in Mumbai, 15 February 2010, www.riksbank.se. Sveriges Riksbank (2009), Monetary Policy Report, October 2009, www.riksbank.se. Sveriges Riksbank (2010a), Minutes of the Executive Board’s Monetary Policy Meeting, 10 February 2010, www.riksbank.se. Sveriges Riksbank (2010), Monetary Policy Report, February 2010, www.riksbank.se. 12  BIS Review 22/2010
Under the influence of changes in banking practices, customers may be able to have access to a wider range of financial products and services. Furthermore, efficiency gains will allow products to be offered at lower prices. In the euro area, electronic finance thus compounds the effects of the creation of the single currency, adding impetus to progress towards integrated financial markets at an area-wide level. Monetary policy needs to take account of these developments. In particular, it is important to monitor the resulting modifications to the financial structure of the economy so as to be able to track changes in investor behaviour, not least in order to assess the transmission channels of monetary policy. Moreover, in this context the possibility of excessive risk taking in the banking sector should not be neglected. Faced with eroding margins in "old businesses", banks may develop their activities in heretofore unexplored fields, by geographical expansion or by product development. In such circumstances, some banks may misjudge the risks inherent in the new activities, as a result of a lack of information, knowledge or skill. In such a situation, the prudential supervision of banks can help by assessing whether the capital buffers of banks remain sufficient for the banking sector as a whole. In financial markets, the issues are broadly similar. It is widely recognised that financial markets have been significantly transformed by the emergence of on-line brokers and electronic trading systems over recent years. In general, these developments have the potential to improve the functioning of financial markets.

Keynes, both on microfilm, makes the library an excellent repository for undertaking any study of economic history. Let me conclude with a few words about today’s III Seminar of Economic History that we are opening now. As you can see in the programme, we have about thirty participants from a dozen universities, central banks and research centres. Economists from the Banco de España are participating as authors and also as discussants of a number of papers on historical episodes that are relevant to our understanding of the world of today. Many thanks to all the participants, authors and discussants. We are really honoured this year to have with us one of the leading expert in the history of central banking, Professor Charles Goodhart, for many years at the Bank of England and now at the London School of Economics. Thank you very much, Professor Goodhart, for joining us today. Now, without further ado, I give the floor to Pablo Martin Aceña, for his introductory remarks. 4/4
This is particularly clear for industrial countries, whose financial markets are more sophisticated, but it is also affecting emerging markets, as a logical consequence of their rapid integration into global financial markets. I will focus on these issues in the first part of my speech, in particular on whether the recent behaviour of financial markets is exacerbating the volatility and cyclicality of the real economy. Insofar as this is the case, the next question we regulators should ask ourselves is whether this might be a result of the increasing weight of the financial sector in the economy or spontaneous financial market developments, such as new risk management techniques by market participants and/or a by-product of prudential regulations which might unintendedly amplify financial cycles. This debate has gained momentum recently in the context of the discussions for a new Basel Capital Accord. One of the issues identified in the discussions was precisely to what extent there are factors in the old or new regulations favouring excessive pro-cyclicality. But we should not overemphasise this point. It is true that a certain degree of cyclicality in risk management techniques and regulations is not only unavoidable but also sensible. We regulators ask banks to be more risk-sensitive and risk-sensitive usually means pro-cyclical behaviour. The second part of my address will deal with the forward-looking provisioning system recently adopted in Spain.

In the published accounts it will be deducted from the book value of the credit items that produce it. It is not considered a reserve to be integrated in the regulatory own funds. The annual accounts shall report the various solvency provisions (or value adjustments), and their method of computation. The statistical provision is not a tax-deductible expense although banks can use an asset account of anticipated taxes (i.e. the impact on the profit and loss is neutral but still negative in terms of cash flows). Finally, given the considerable internationalisation of our banking system in recent years, it is important to keep in mind that the statistical provision is required on an individual level of all the members of a consolidated banking group. It is not possible to counter a positive statistical provision requirement in one bank with a negative one in another bank of the same group. This individual bank approach reinforces the statistical provision requirement and squares well with the fact that expected losses arise at an individual bank portfolio level. By now, you are probably wondering about the real impact of the statistical provision in the Spanish banking system. As far as the profit and loss account is concerned, the statistical provision for depository institutions represents around 12% of 2001 total operating margin. At the end of 2000 the statistical fund reached 15% of its maximum amount (remember there is a cap of three times the latent risk) and at the end of 2001 it stands at 27%.
4  BIS Review 157/2008  Chart 1: Risk premia in the money market CHF 3M Libor - 3M TOIS swap EUR 3M Euribor - 3M Eonia swap basis points 400  USD 3M Libor - 3M OIS swap GBP 3M Libor - 3M Sonia swap  350 300 250 200 150 100 50 0  J  A  S  O  N  D J 08 F  M  A  M  J  J  A  S  O  N  D  Source: SNB Markets Analysis Platform, Bloomberg  Chart 2: Comparison of share price performance 2000 1987 1973 1929 Dow Jones I ndustrial Average, Peak=100 120  Present  100 80 60 40 20 0  trading days before/ after peak -500 -400 -300 -200 -100 0 100 200 300 400 500 600 700 800 900 1000  Source: SNB Markets Analysis Platform, Bloomberg  BIS Review 157/2008  5  Chart 3: Target range, three-month Libor and repo rates SNB 1W repo  CHF 3M Libor  % 3.5 3 2.5 2 1.5 1 0.5 0  J  A  S  O  N  D J 08 F  M  A  M  J  J  A  S  O  N  D  Source: SNB Markets Analysis Platform, Bloomberg  6  BIS Review 157/2008

Prospective buyers must be mindful of their ability to cope with the potential risk that may arise from possible changes in the property cycle as well as mortgage interest rates. 7. The HKMA will continue to monitor the property market closely, and will introduce appropriate counter-cyclical measures to safeguard the stability of the banking system. 1/1  BIS central bankers' speeches
Further steps to digitise financial services in the EU The further development of digitisation will continue to be among the main priorities, and the following measures are expected to be taken in order to accelerate these processes and reach their full potential at European level: 4.1. Eliminate the fragmentation of the digital single market by: - Legislative changes aimed at creating opportunities for interoperable use of digital identity throughout the European Union. This will allow easy ‘onboarding’ of new customers entirely online, in full compliance with the requirements for combatting money laundering and terrorist financing; - Facilitating cross-border provision of financial services, including by introduction of a harmonised regime for new activities such as crowdfunding, credit intermediation, and cryptocurrency services; 4.2. Adaptation of EU legislation to facilitate digital innovation: - Regulation of activities with cryptocurrencies and financial instruments based on tokens by introducing a comprehensive regulatory framework by 2024, allowing the implementation in the financial service sector of distributed ledger technology (DLT) and cryptocurrencies, taking into account the related risks;  3  - Promoting cooperation and use of cloud computing infrastructure, including through the development of a legislative framework for the supervision of information and communication technology (ICT) providers for the financial sector; - Promoting the use of artificial intelligence tools in the financial services sector; - Adherence to the principle of technology neutrality of legislation, combined with the issuance of interpretative guidelines on how existing legislation on financial services should be applied to new technologies in order to reduce legal uncertainty. - 4.3.

to NFC chips in mobile phones and to the kernels for contactless payments in POS terminals, thus facilitating contactless payments with cards issued within national card schemes in the EU Member States; - Encouraging the use of electronic identity and solutions based on trust services, improvement of electronic identification and trust services with a view to meeting the requirements for strong customer authentication and other regulatory requirements; - Improved acceptance of digital payments by both the public and private sector, including by legislative amendments in 2022, if needed; - Standardisation of additional functionalities by establishing special SEPA schemes aimed at greater convenience in initiating instant payments, such as the services ‘request-topay’, payment by mobile phone number (proxy look-up), electronic invoice and electronic receipt, etc.
12 Having said this, it may be worth adding that monetary policy and a policy for financial stability usually go hand in hand, more or less automatically. Moreover, problems with financial stability only arise under certain limited periods. On the other hand, one may claim that the crisis and its effects show that we actually should worry about it slightly more often than we have done. If we are successful in formulating and using regulations and supervision, the central bank can receive assistance with both of the monetary policy problems I mentioned earlier. The central bank can hold the policy rate low when the economic outlook calls for this, without being afraid of risks building up through a monetary policy risk-taking channel. And if regulation and supervision can be used to prevent credit-driven bubbles arising, the central bank need not fear a balance sheet recession where monetary policy has little effect. Regulation with monetary policy motives With regard to coordinating the interest rate lever and the regulation level, I would like to return to a question I raised when I talked about balance sheet recessions. As I noted then, a fall on the property market could lead to a weak performance in the economy if households become uncertain about the future and feel they must consolidate their balance sheets. I also noted that this does not mean that the banks will experience problems that could threaten financial stability.

Indeed, those were among the reasons a number of countries, including the US and Canada, had a leverage ratio regime ahead of the crisis.4 The Basel III leverage ratio, set at a minimum level of 3% Tier 1, is due to be implemented internationally by 2018. A second new element of the Basel III package was to augment solvency with liquidity-based standards. Banks’ liquidity has long been a pre-occupation of the Basel Committee (Goodhart (2011)). But it took wholesale liquidity runs on the world’s largest banks during the crisis to provide the impetus for internationally-agreed liquidity standards. Under Basel III, these take the form of a liquidity coverage ratio (LCR), designed to ensure banks have sufficient high-quality liquid assets to meet their 30-day liquidity needs; and a net stable funding ratio (NSFR), designed to ensure banks’ funding profiles are sustainable. The LCR has been implemented in full in most countries; the NFSR is due for implementation by 2018.5  During the crisis, a crucial missing ingredient from the financial regulatory architecture was found to be the ability to wind up financial institutions in an orderly fashion – that is, while minimising disruption to financial markets and the economy and without exposing tax-payers to risk (FSB (2014)). A number of measures have been taken or are in progress to fill this gap, including the introduction of more effective national resolution regimes for financial firms and greater cross-border co-operation and co-ordination when dealing with international banks in situations of stress (FSB (2017c)).
It is worth noting that the current elevated inflation rate of 4.5% can be largely accounted for by the effects of energy and import prices and VAT: energy prices and VAT are probably each contributing around one percentage point to current inflation, and non-energy import prices around double that. The twelve-month inflation rate is likely to remain elevated through the remainder of this year, and indeed may rise further in the second half of the year, as utility prices are likely to rise sharply to reflect higher oil and wholesale gas prices. But inflation should fall back as we go into 2012 and factors such as the rise in VAT drop out of the calculation. But the pace and extent to which inflation will drop back will depend on a number of factors. First, there may be further significant movements in commodity prices and in import prices more generally. Second, there may be some resistance to the past erosion in living standards, resulting in a period of faster pay growth. Third, although pay growth has been subdued, the low rate of growth of productivity has nevertheless resulted in a squeeze in profit margins and there may be some attempt to restore these as the economy strengthens. Finally, if the period of elevated inflation leads business and households to expect higher inflation in the future, then it may also lead them to set higher pay and prices.

And associated with such a re-balancing, one would expect to see some shift in the structure of production away from sectors focussed on serving domestic needs towards those producing internationally tradable goods and services. The re-balancing should be facilitated by the depreciation of sterling – down around a quarter since the middle of 2007 – but is still at an early stage. Household spending stagnated over 2010 and remains around 4% below its pre-recession level (Chart 2). The sluggishness of consumer spending should hardly be a surprise. Real post-tax labour incomes have been squeezed by a mix of low pay growth and elevated inflation on the back of higher VAT, energy and import prices. In addition, heightened uncertainty probably led some households to increase their savings or pare back their debts. The most recent survey of retailers by the British Retail Consortium suggested that the fine Easter weather and the royal nuptials may have brought a welcome fillip to the High Street, but with the squeeze on real pay likely to continue through this year, it seems likely that consumer spending will remain subdued through this year at least. Public spending will also  1  Though not all: recent employment data, for instance, have been surprisingly robust. BIS central bankers’ speeches  1  provide little impetus to overall activity, given the necessary fiscal consolidation that is now under way. That, of course, is a particular issue here in Northern Ireland. So, the prospect for overall growth depends heavily on business spending and external demand.