samchain/econo-pairs-v1 huggingface dataset:
The most narrow definition of capital,4 tangible common equity, is a measure of capital widely used by investors (and increasingly so during the crisis) because it focuses on the “core” capital readily available to cushion the bank against losses. The tangible capital measure – specifically the ratio of tangible common equity to tangible assets – was a bit above 2 percent for Wachovia and about 3 percent for WaMu,5 providing only a small cushion against the losses accumulating from their subprime exposures. The regulatory capital ratios use broader definitions of capital, relative to risk-weighted assets. To be considered adequately capitalized, a bank needs to have at least 4 percent Tier 1 risk-based capital to risk-weighted assets, and at least 8 percent total risk-based capital to risk-weighted assets. To be well capitalized a bank needs to have at least 6 percent Tier 1 risk-based capital to risk-weighted assets and at least 10 percent total riskbased capital to risk-weighted assets.6 Figure 1 shows that under these definitions both banks were well capitalized in their final quarter – despite the fact that more narrow definitions of capital indicated only a very small capital buffer. Figure 2 plots the capital ratios for the period leading up to the “run” on Wachovia. The broader definitions of capital – Tier 1 and total risk-based capital – were actually rising in the period when holders of Wachovia’s liabilities were becoming concerned, and thus the broader definitions of capital were not particularly informative.

As a result of large exposure to subprime mortgages, partially as a result of an acquisition of a large California thrift, investors became concerned about the solvency of Wachovia. A loss of confidence in Wachovia led depositors, funders, and investors – those on the liability side of the bank’s balance sheet – to withdraw, pressuring the institution to sell itself. After a short bidding war between Wells Fargo and Citigroup, Wells Fargo prevailed and acquired Wachovia at the end of 2008. Washington Mutual or “WaMu” was the largest savings and loan holding company in the United States, with assets over $ billion. WaMu had grown rapidly, with a large exposure to residential real estate and a large concentration of both variable rate and subprime mortgages. Large depositors became concerned about the solvency of WaMu in September 2008 and began rapidly withdrawing funds. The institution failed later that month (on September 25) and was acquired by JP Morgan Chase. 3  Given time constraints, my remarks do not delve into the role of stress tests in macroprudential supervision. In my view, stress tests benefit macroprudential supervision in that (a) they embed an explicit link to macroeconomic scenarios and (b) they focus on the ability of the financial system as a whole to provide intermediation services to the real economy rather than just on the solvency of individual institutions. 2  BIS central bankers’ speeches  Figure 1 provides the capital ratios reported in the last financial filing for both Wachovia and Washington Mutual.
In normal times, the ECB calculates each week the expected liquidity needs of the banking sector and publishes an estimate of the “benchmark” amount of liquidity needed. This benchmark is calculated under the assumption that banks prefer to fulfil their reserve requirements smoothly by holding, in aggregate terms, the same level of current account holdings with the central bank on each day of the reserve maintenance period. The ECB then provides an amount of liquidity close to the “benchmark” in its weekly liquidity operations (the so-called “main refinancing operations”). This pattern of liquidity provision has functioned well in the past, when it has succeeded in delivering short-term money market rates close to the target rate corresponding to the announced monetary policy stance. However, since 9 August when the tensions in financial markets first spilled over to the short-term euro money market, an increase in precautionary demand for liquidity and a change in the temporal pattern of liquidity demand within the reserve maintenance periods have altered the behaviour of banks, temporarily rendering the assumptions underlying the “benchmark” computations less realistic. As a result, while maintaining entirely unchanged the structure of its operational framework (a testimony to the flexibility and resilience of this framework), the ECB has somewhat departed from the regular patterns of liquidity provision that it normally follows in order to  2  BIS Review 143/2007  steer the very short-term money market rates.

José Manuel González-Páramo: The role of information and communication in central bank policy – the experience of the recent financial turmoil Keynote address by Mr José Manuel González-Páramo, Member of the Executive Board of the European Central Bank, at the SUERF Conference on “Tracking Financial Behavior: Where do Macro and Micro Meet?”, Milan, 3 December 2007. *  *  *  Ladies and Gentlemen, 1 I am very pleased to be able to speak at this prestigious SUERF conference today. As a policy-maker at an institution with responsibilities in both the areas of statistics and market operations, I am particularly pleased to see that much high-quality work is being done to improve and deepen our understanding of financial activity. The recent turmoil in financial markets has reminded us of the importance of timely access to accurate and comprehensive information on financial events as well as of the need to ensure that financial development and innovation are accompanied by advances in financial statistics. Let me take the liberty to narrow my intervention from the rather general issues suggested by the programme to the more specific subject of the role of information and communication in the recent financial turmoil, particularly for the implementation of monetary policy.
That's not a massive rebound, but it is a positive picture - even allowing for downside risks. So we are, in fact, seeing - in terms of Turandot's first riddle - the renewal of the US economy. And of course it is  BIS Review 64/2002  1  immensely important for the global economy that we should, because the prospects in some of the other major industrial economies, notably Japan and Germany, are rather more uncertain. Surprisingly in the light of all this, Turandot's own answer to her first riddle was not "the US economy." Her answer was HOPE. I suppose I would settle for modest EXPECTATION. Her second riddle was "What flickers like a flame when man dreams of conquest?" And again, as I sat there, the answer seemed obvious - it had to be business and financial confidence - or perhaps the global equity market. Given the macro-economic prospect in the US - which is expected to contribute to a recovery to neartrend growth in the world economy as a whole in the course of the next year or two - the recent pessimism of business leaders and the renewed nervousness of global equity markets over the summer seemed somewhat puzzling. Fear seemed to have taken over from man's dream of conquest! There was a real puzzle before the equity markets started to decline.

Clearly in principle the colder the external frost, the higher we need the internal temperature: the danger is that we overload the domestic boiler, with households becoming reluctant to take on more debt, or pay higher house prices, so that consumer spending growth moderates regardless of the outside temperature. Earlier this year in fact things seemed to be moving in the right direction: global demand appeared to be picking up quite well, and there appeared to be a reasonable prospect that consumption growth would moderate largely of its own accord. There was at that time a question of whether that moderation might need to be encouraged by higher interest rates. With the downward revision - over the summer - to the expected pace of global demand growth, the emphasis of our policy debate has shifted. The questions now are how far we need to try to sustain domestic demand growth by lowering interest rates, in order to maintain overall stability; and how far we can sensibly do so without excessive risk of overloading the domestic boiler. The best outcome for us of course would be if the external frost would continue to melt, with the global economy maintaining its gradual recovery and the euro continuing to strengthen in foreign exchange markets. And that is in fact in my view the most probable outcome. But until things become clearer we are very much on the spot. And perhaps, I thought, 'on the spot' was not a bad answer to the opera's third riddle.
In the coming months we will publish a manual with the macroeconomic projection models used by the CBC in formulating monetary policy. With this, the analysis carried out by the Board can be better understood and the sensitivity of the projections to certain key variables can be measured. Also, we will improve our communication about the future trajectory of the monetary policy rate in the Monetary Policy Report, in order to provide a clearer orientation to the market on how monetary policy can materialize in the baseline scenario of the Report. On the other hand, we will strengthen the risk analysis, articulating with more clarity alternative scenarios and their implications for monetary policy. In this way, we hope that the CBC will be at the forefront of the central banks in terms of transparency and quality of its orientation to economic agents and the overall population. Two, in the next few months we also plan to take two essential steps in terms of financial stability. The first one implies broadening the analysis of risks facing financial stability, in order to input sources and areas of risks not yet considered in the Financial Stability Report analysis, including operational risks, particularly computer safety. The second step will be associated with the approval of the new General Banking Act and involves announcing in the 12  course of 2019 the variables and parameters with which the countercyclical capital reserve requirement will be applied, which will become the most important instrument of macroprudential policy in Chile.

Paulo Sergio Cavalheiro: Regulation of capital and financial stability Speech by Mr Paulo Sergio Cavalheiro, Deputy Governor for Supervision of the Central Bank of Brazil, at the International Seminar “The New Basel Capital Accord: Challenges and Opportunities for the Americas”, held jointly by “Centro de Estudios Monetarios Latinoamericanos - CEMLA”, “Association of Supervisors of Banks of the Americas - ASBA” and “Federación Latinoamericana de Bancos FELABAN”, in Mexico City, Mexico, 12-13 July 2004. *  *  *  The final version of the Capital Accord, also known as Basel II, has just been released. The document maintains the basic framework initially proposed, that is, three pillars, the first one dealing with the calculations of the capital requirements per se, comprising market, credit and operational risks (this last being the real novelty), the second describing the supervisory review process and the third detailing the market discipline to be achieved via disclosure. In Brazil, capital requirements were introduced by Resolution 2099, in August 94, which specified 8% of risk weighted assets as the minimum capital required. Following Resolution 2099, in October 94, Circular 2500 modified some values for minimum capital and net worth required for the establishment of banks, in accordance with the location and size of institution. The supervisory authority raised the minimum capital required to 10% of risk-weighted assets in June 97. In November 97, Circular 2784 again raised this value, this time to 11%, which is still the minimum ratio.
In addition, the UK Commissioner for Public Appointments, who is responsible for reviewing the appointments of senior officials of more than 300 public agencies, approves the other appointments on the central bank’s Court of Directors. 7  According to Issues in the Governance of Central Banks, a study published by the Bank for International Settlements (BIS) in 2009, the power to appoint the Governor of most central banks lies with the Head of State or the Prime Minister (60% of the 47 institutions surveyed), while in 23% it lies with the Government or the Minister for the Economy and in just 11% with Parliament. In turn, according to the OECD (2016), “Being an independent regulator”, in most cases (more than 60%) it is the executive that nominates and appoints the members of senior management of regulators in the countries analysed. 7  I believe it would also be desirable to unify to some extent procedures for appointment of the senior officials of the various independent agencies existing in Spain. These procedures are currently highly disparate. The possible introduction of improvements in the appointment of institutions’ senior officials could also be accompanied by a reflection on their terms of office. Terms that extend beyond the electoral cycle are crucial to reinforcing the independence of individuals and, ultimately, of the institutions themselves.

It has also been entrusted with other basic functions, such as conducting foreign-exchange operations consistent with the exchange rate policy established, holding and managing the official foreign-exchange reserves of the Member States, and promoting the smooth operation of payment systems. Since 2014, under Article 127(6) of the TFEU and Council Regulation (EU) No 1024/2013 (the “SSM regulation”), the ECB is responsible for specific tasks relating to the prudential supervision of banks located in the participating Member States. The ECB performs these functions within the framework of a Single Supervisory Mechanism made up of the ECB and the national competent authorities, as explained in Part 2 of this Annex. Finally, the ECB has the exclusive right to authorise the issue of banknotes in the euro area, to compile and produce statistics in collaboration with the NCBs in the performance of their functions, and to issue reports on consultations on legislative initiatives of the EU or of the national authorities concerning its sphere of competence. The organisation of the Eurosystem is based on the principle of decentralisation. Decision-making is centralised, while the implementation of decisions is decentralised. In practice, the NCBs perform almost all operational tasks of the Eurosystem: they conduct the monetary policy operations and, as agents of the ECB, manage its foreign reserve holdings, provide payment and securities settlement facilities and ensure the manufacture, issue and post-issue handling of euro banknotes. They also collect statistics for the ECB, collaborate with the ECB on translation and the production of publications and contribute to economic analysis and research.
The reform sets out the criteria for the implementation of the excessive deficit procedure and allows for more leeway in the time-frame for correcting excessive deficits. It does not, however, diminish the binding nature or the efficiency of the Pact. Let me conclude by mentioning how much we have achieved in Europe over the last fifty years. The EU has reached a diversified but, broadly speaking, very ambitious level of integration: it is complex because the degree of integration is largely dependent on which areas are at stake, it is ambitious since, in some areas precisely, the system is completely integrated and relies on one single policy. The euro, in that regard, is both the symbol of our achievements and our best hope for the future of European integration. Thank You. 2  BIS Review 3/2007

These considerations largely explain the easing of monetary policy in the US and in Europe since last autumn. The fact that we reduced interest rates by different amounts, and that they remain at different levels, is explained by differing assessments of the prospective impact on the pressure of overall demand, taking account of our own particular starting points. But the general nature of the response was driven by essentially similar considerations. Managing this global imbalance will be a considerable challenge for policymakers over the next few years; and helping to finance it – including helping to finance re-emerging markets – will be a considerable challenge for international bond markets. The fact that you are all here – and in evidently good form – after the past remarkable year suggests that you have strong nerves. You may well need them again in the period ahead. But think of it this way. By the time we meet again for this great Congress next year, Y2K will be behind you – and if you have survived that, you can survive anything! I wish you all possible success. *  *  *  BIS Review 17/1999
Yet others see MAS as having struck the right balance, that “the crypto winter is proving MAS’ policies to be right”. What does MAS really want? Well, we know what we want but I think we need to do a better job of explaining it. Before I get to that, it is important to be clear what we are talking about. Public and media attention has tended to focus on cryptocurrencies. But cryptocurrencies are just one part of the entire digital asset ecosystem. To understand the issues more sharply and what the benefits and risks are, we need to be clear what the different components of this ecosystem are. I can understand why there is confusion about cryptocurrencies, blockchains, and digital assets. The inherent complexity of this ecosystem has made it difficult even for MAS to get its messages across. So, today, we will try to do a better job of explaining the ecosystem and its different components – and what MAS is actively promoting; what MAS is discouraging; and what are the risks MAS is seeking to manage. My apologies if the next couple of minutes sound like a tutorial but it is important that we are clear about the concepts we are dealing with. A good place to start is with digital assets. A digital asset is anything of value whose ownership is represented in a digital or computerised form.

As Chairman Bernanke noted in the press conference following the June 2013 FOMC meeting: “While participants continue to think that in the long run the Federal Reserve’s portfolio should consist predominantly of Treasury securities, a strong majority now expects that the Committee will not sell agency mortgagebacked securities during the process of normalizing monetary policy.” The balance sheet would shrink post-lift-off as Treasury securities matured and mortgages were prepaid, but outright agency MBS sales are no longer contemplated during the process of monetary policy normalization. Also, I think that the language in the June 2011 exit principles with respect to reinvestment needs to be revisited. The exit principles state: “To begin the process of policy normalization, the Committee will likely first cease reinvesting some or all payments of principal on the securities holdings in the SOMA.” There are two considerations that suggest to me that ending the reinvestments prior to lift-off may not be the best strategy. First, such a decision might complicate our communications regarding the process of normalization. Ending reinvestments as an initial step risks inadvertently bringing forward any tightening of financial conditions as this might foreshadow the impending lift-off date for rates in a manner inconsistent with the Committee’s intention. Second, when conditions permit, it would be desirable to get off the zero lower bound in order to regain some monetary policy flexibility. This goal would argue for lift-off occurring first followed by the end of reinvestment, rather than vice versa.
Built-in stabilisers did exist, for instance in the form of unemployment support, but the benefits were low in order to strengthen the incentive to search for new employment. This did work – when the upturn came in February 1922 the number of persons on relief work or the dole was over 100,000; by the end of 1923 the figure had dropped to 6,000 – but the flexibility did, of course, exact a price in the form of social hardship. Stabilisation policy’s emergence In contrast to the lack of an active economic policy in the period around 1920, decision-makers in the 1930s had high ambitions, underpinned by a nascent stabilisation policy theory. The course of economic events in connection with the crisis of 1930–33 partly resembled what had happened in Sweden a decade earlier. An international boom with unduly high hopes of future profits had led to markedly inflated asset prices. The party ended in a financial crash and Wall Street’s collapse in October 1929. A number of banks had to close their doors. On top of all this, the US Federal Reserve imposed credit restrictions. In Sweden, the depression was not as deep as the one in the early 1920s, though unemployment did rise to much the same level, about 25 per cent. The major difference was that the economy was successfully piloted past a steep price fall. Sweden left the gold standard in September 1931.

Jacqueline Loh: Strengthening Asia's bond markets Keynote address by Ms Jacqueline Loh, Deputy Managing Director of the Monetary Authority of Singapore, at the Asia Securities Industry & Financial Markets Association's Annual Conference, Singapore, 17 November 2016. * * * Andrew Ng – Chairman, ASIFMA Mark Austen – CEO, ASIFMA Greg Medcraft – Chairman, Australian Securities and Investments Commission, and my fellow keynote speaker Fellow regulators and central bankers Distinguished guests Ladies and gentlemen 1  It is my pleasure to join you this afternoon at the 10th ASIFMA Annual Conference. 2 When I last spoke here two years ago, the global economy was confronted by what the IMF described as “legacies, clouds and uncertainties”, and was forecast to grow at just 3.3%1. Two years on, in 2016, the IMF has lowered its forecast for the current year further to 3.1%, reflecting a more subdued outlook for advanced economies, before recovering to 3.4% in 20172. This is below the immediate pre-GFC average of 4.2% over 1998–2007, though more aligned with its long-term average of 3.1% over 1980–1998. 3 The medium-term growth story for Asia is bright. The IMF’s outlook for the next five years is for emerging and developing Asia to grow by a robust 6.3%, well above the forecast for the US (1.9%), Europe (1.5%) and Japan (0.5%), and will underpin the higher investment returns in this part of the world. 4 Asia’s bond markets have softened in recent years but has much potential alongside its relatively strong economic growth outlook.