samchain/econo-pairs-v1 huggingface dataset:
Higher interest rates can also reduce the probability of a banking sector crisis through the same leaning channel (𝜙𝑖 < 0), but do not increase resilience directly. The banking sector only provides a proportion (𝑏) of credit to the economy, the remaining (1 − 𝑏) share is provided by the market based finance sector (𝐵1𝑀 ). While higher interest rates have the same effect in reducing credit and the crisis probability in both sectors, increasing the CCyB leads to a leakage of credit from the banking sector to the market based sector, so the marginal effect of a higher CCyB on marketbased finance is to increase its growth rate (𝜙𝑠𝑀 > 0). This increases the probability of a crisis originating in the market based finance sector (𝛾1𝑀 ). In addition, there is no resilience benefit from a higher CCyB working to reduce the probability of crises originating in the market-based finance sector. The overall probability of a financial crisis is equal to the sum of the probabilities in each sector, weighted by their market-share. Both sectors are subject to shocks (𝜉1𝐵 , 𝜉1𝑀 ). A single policymaker sets both instruments, the CCyB and the interest rate, to minimise the joint loss function given below under discretion.

William C Dudley: The evolving structure of the US treasury market Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at The Evolving Structure of the U.S. Treasury Market: Second Annual Conference, Federal Reserve Bank of New York, New York City, 24 October 2016. * * * On behalf of the New York Fed and our co-sponsors, it is my pleasure to welcome you to this second annual conference on the evolving structure of the U.S. Treasury market. We have the opportunity today to continue the dialogue around the changing nature of the Treasury market, a discussion that grew more urgent following the events of October 15, 2014.1 We have made significant progress since last year’s conference in improving our collective understanding of the Treasury market, and I believe it is important to continue official and private sector collaboration on this topic. Indeed, there is much left to do to ensure the continued integrity and effectiveness of this market, and I look forward to the further progress we will make today. As always, what I have to say today reflects my own views and not necessarily those of the Federal Open Market Committee or the Federal Reserve System.2 Over the past year, the Joint Member Agencies 3 have engaged with market participants and other members of the public to gain more information on the changing structure of the Treasury market.
In the years ahead, the multilateral trade system is at risk of being undermined, which may leave us with a more fragmented system. This may adversely affect small countries in particular. In that situation, it would be injudicious for Norway to compromise its current agreements with Europe. Climate change requires structural adjustments The world needs more cooperation, not less. We are facing a climate crisis that can only be addressed by engaging in a common global effort. Last year’s report from the UN climate panel was alarming. If work to reduce greenhouse gas emissions is not intensified, global warming could spin out of control. A warmer planet will have serious consequences. Major changes in production methods and consumption patterns are needed in order to mitigate global warming. Measures taken must lead to concrete reductions in global emissions and should be cost-efficient. Emissions pricing is essential to reducing greenhouse gas emissions. The polluter must pay. The consequences of not having applied this principle at a global level are now coming into evidence. To quote one of last year’s Nobel laureates in economics, William D. Nordhaus: “The result is too much burning of fossil fuels, too much climate change, and too many harms to humans, wildlife, ecosystems, and more.”2 It is a demanding task to put into place adequate measures. The gains from lower emissions are shared by all - also by those who do not contribute. This creates a free-rider problem both at the global and national level.

The global upturn, higher oil prices and low interest rates have contributed to pushing up growth. After falling sharply for several years, investment on the Norwegian shelf and oil service exports expanded last year. A number of signs indicate that capacity utilisation has continued to rise in recent months. The number of employed persons as share of the working-age population has increased, and unemployment has drifted down further. There is also an increase in the number of enterprises reporting capacity constraints. Chart: Inflation has risen Consumer price inflation has increased over the past year, partly reflecting higher wage growth. Tighter labour market conditions suggest that wage growth will increase further. The risk outlook is dominated in particular by the global developments mentioned. Over the past 5/6  BIS central bankers' speeches  year, rising protectionism and political uncertainty have weighted on global growth. The UK’s relations with the EU have yet to be clarified. If trade tensions deepen, growth among trading partners may be lower than projected. At the same time, the krone may remain weak, if global uncertainty persist. The target for monetary policy is annual consumer price inflation of close to 2 percent over time. Inflation targeting shall be forward-looking and flexible, so that it can contribute to high and stable output and employment and to countering the build-up of financial imbalances. At its meeting in March, the Executive Board noted that the monetary stance in Norway is accommodative. Underlying inflation is a little higher than the inflation target.
The Committee has responded effectively and promptly to public concerns about banks' business practices by providing appropriate guidance on interpretation of the Code or even amending relevant provisions of the Code. The question of the industry associations' involvement in resolving customer disputes, whether or not these are related to the Code, is more controversial. Although the HKAB Ordinance does provide the Association with certain powers in relation to conduct regulation, the principal concern is whether such an industry-run scheme would have the necessary credibility, since banks would effectively be policing themselves. The rapid growth in number of complaints is a cause of concern but not a cause for alarm. The current framework of self-regulation by the industry has worked reasonably well in the past and there is no reason why it cannot continue to do so with a bit of help from banks themselves. We should monitor the situation carefully before rushing into other costly options. Meanwhile, the banks must help by tackling the problem at source: through being careful to avoid giving grounds for complaint and through dealing with any complaints that do arise fairly and promptly. All of this does not rule out a role for the HKMA. How best can we participate?

I think the consensus at present, as reflected in the recent discussion at the LegCo Financial Affairs Panel, is that neither the current volume and nature of complaints nor the deficiencies in existing arrangements would justify the creation of such elaborate machinery. The second option would be to give the HKMA a clear mandate to arbitrate and resolve consumer complaints and the powers to impose sanctions. This option could go some way towards addressing the current gap between the expectation of bank customers and what the HKMA can do for them under its existing powers. However, I think there is a consensus that this is not the right time for the  BIS Review 39/2002  3  HKMA to be given such a role. It would require a considerable increase in resources and some form of cost recovery from the banking industry, and it would also require addressing concerns about conflict of interest between different branches of the organisation - a problem that is not insoluble, but which would nevertheless require some careful thought. This, at least for the time being, does not seem to be the preferred option. The weight of opinion seems, then, to fall on the third option, which is to rely mainly on the industry itself to ensure that complaints are properly handled. There are three things which banks can do in helping to promote self-regulation: •  First, AIs should strictly follow the Code of Banking Practice, which is issued by their own industry associations.
It would run the big risk of encouraging banks to reduce their loan books – in other words, it would affect the interaction of our two objectives, or incentivise the banks to reduce/”optimise” their risk weights. We are, instead, defining the growth of capital in terms of the increase in the nominal stock of Core Tier One, or equity, capital. This makes it easier to find a transition path that allows more capital and more new lending to co-exist. But, this begs three big questions: by how much do we want to see the nominal capital bases of banks grow in short order; why do we want this to happen; and what form do we want the capital to take? The first two of these questions, how much and why, are best taken together. Here, in my view, we face uncertainty that we have to find a way to resolve adequately. What we have done so far is to ask the major banks to try to maintain the projected growth of nominal Core Tier One capital over the next 18 months, according to the projections for this growth that they provided to us earlier this year. This is, their Basel III transition path. In order to go beyond that path, we have to ask why we want to do so? In my view, there could be at least four reasons why new lending by banks might be restrained by lack of capital as represented by low price to book ratios.

With its long history and impressive membership, ACI has developed very much into an icon of professionalism in finance, contributing to "market development through education, market practices, technical advice and networking events for the financial practitioners of the world". The Association therefore has a very important role to play and faces in the coming years much greater challenge than before in promoting and upholding professional and ethical standards in finance. One interesting, perhaps even perplexing, aspect of the current financial turmoil is that emerging markets, particularly those in Asia, have only been lightly affected, so far. One reason is that financial innovation, in the form of credit risk transfer through securitisation by the "originate and distribute" model, has not caught on in Asia to the same extent as in the United States. Indeed, economies in different stages of financial sector development face different issues, notwithstanding the clear trend of globalisation in finance. Correspondingly, in promoting and upholding professionalism in finance, there may be a need for different emphases and approaches, having regard to the different development stages that individual regions and economies are undergoing. But it is also important that these different emphases and approaches should be developed within the framework of global standards. I therefore wholeheartedly support regional outreach initiatives of international standard setting bodies such as the ACI. Asia, of course, is region of rising importance in the global context, particularly in terms of finance.
Another example, which has recently led to new legislation in the United States, is the role of analysts in investment banking. An analyst has the task of providing investors with advice, but if the bank is more interested in gaining business for its corporate finance activities than safeguarding the investor’s interests, the analyst’s assessment may be influenced by this. Here there should traditionally be a “Chinese wall”, but this has in some cases been fairly low and probably eroded considerably over time. Before I go on to more bank-specific issues, I would like to say a few words about conflicts of interest in general, and how these can be handled - to the extent that they should be handled. I shall then move on to more specific conflicts of interest between different types of banking operations, particularly given the developments in the United States. Finally, I shall draw some conclusions concerning Sweden. The fact that different people have different interests is quite natural. A buyer and a seller usually have different interests in a business transaction. A difference of interest is actually one of the most important driving forces in a market economy. A difference of interest only becomes a conflict of interest when one person or organisation has to take into account several different interests and can promote one at the cost of another. Conflicts of interest are thus based on an agency relationship. BIS Review 47/2004  1  These conflicts exist in almost all businesses.

We should stress here that, of the larger euro area countries, France has the highest proportion of market-based financing, at 40%. Non-bank financing in France totals EUR 1.748 trillion, and the leading asset manager in Europe is a French firm, Amundi. France also has an internationally recognised regulator, in the form of the AMF, while Paris is home to the European Securities and Markets Authority, ESMA. After Brexit, I also have every reason to believe that a significant share of the market activities of the largest global banks will be based in Paris. First of all, I want to put an end to the non-debate over whether market-based financeis better than bank-based finance and vice versa, and the misconception that the US system should be 1/3  BIS central bankers' speeches  replicated in Europe: working towards a balanced development of non-bank finance simply means giving companies the option of diversifying their debt financing. Fun damentally, the real debate lies elsewhere: it is about switching from debt to equity.This is crucial in advanced economies, where growth is dependent on innovation. Equity financing is better suited to the uncertainty and often long-term returns associated with innovative projects. The euro area is seriously lagging behind in this respect: equity only accounts for 74% of GDP, compared with 125% in the United States. Moreover, it only makes up half of the total external financing of euro area corporations (equity + debt), compared with three quarters in the United States.
The resulting anxiety led to the waning of trade on a number of financial markets. As the banks have become increasingly dependent on the financial markets for their funding, many banks now found it difficult to refinance their operations. In other words, they found it difficult to borrow in order to cover their lending. When the US investment bank Lehman Brothers was forced to apply for bankruptcy protection in September last year, this had major repercussions in many parts of the world. The global financial crisis escalated and the Swedish banks were also affected to an increasing extent. When the conditions on the global financial markets deteriorated, there was a general increase in credit risk premiums. For those borrowers – banks or countries – that were deemed to entail the highest risks, the premiums increased more than for others. A process to reduce exposures and debt/equity ratios began among banks and other financial institutions around the world. The rapid decline in the supply of credit reinforced the downturn in global economic activity. This in turn accelerated the substantial fall in asset values and the increase in the bank's credit losses. A vicious circle arose in the global economy in which the financial turmoil aggravated the weakening of the real economy and vice versa. The events in the financial sector reflect fundamental failures in the risk management of the financial players. Securitisation partly removed the banks' incentive to monitor credit risks. 4  BIS Review 41/2009  The credit rating institutions largely took over this role.

Without stability in the financial system it becomes more difficult to conduct monetary policy, and price stability is part of an effective payment system. Practically and organisationally, however, these are two separate fields of work. You could say that we normally use two different toolboxes to perform these two tasks. First, we have a monetary policy toolbox, parts of which I have already described. The monetary policy measures, for example the setting of the repo rate, have a clear objective: to influence economic activity with the aim of maintaining price stability. This in turn is an important component of our efforts to achieve stable development in the real economy. Second, we have a box of tools for promoting stability in the financial system. Financial stability is a basic prerequisite for a safe and efficient payment system. The Riksbank normally uses tools other than the repo rate to promote financial stability. Our analyses of the risks in the financial system that we produce and publish every six months in our "Financial Stability Report" represent the primary tool in this toolbox. If nothing else, this and other feedback that we provide to the banks makes them more aware of potential vulnerabilities and, in the best case, gets them to take preventive measures. This is usually referred to as "moral suasion". But this toolbox also contains more concrete tools. These include the possibility to quickly add liquidity to the banking system.
The Guidelines are in turn based on the London Approach that was formulated by the Bank of England when the UK market was going through similar strains at the beginning of the 1990s. The underlying principles of the Guidelines are as follows: *  When it becomes public knowledge that a debtor company may be experiencing financial problems and the borrower has approached its banks, banks’ initial attitude should be one of support. They should not withdraw facilities or hastily put the company into receivership, or issue writs demanding repayment. *  Further decisions should only be based on information that is reliable and shared fully with all the creditor banks (after obtaining the debtor’s permission). *  The decision to offer the company financial assistance - or not - should be a collective one by creditor banks. It will be seen that the process begins when the debtor takes the initiative to approach the banks and to call what is known as an “all banks” meeting. This is the first psychological barrier to be crossed, since companies are often reluctant to own up to their difficulties. The meeting with the banks offers the company the opportunity to explain the nature of its problems and to ask the banks to agree to a standstill on repayments of principal and possibly also of interest.

This is why the HKMA has in the last few years been embarking on a programme to help equip and empower the INEDs. Our intention is to help INEDs to work with the executive directors and senior management to achieve a more optimal outcome and not work against them. So it is important that the bank management joins the HKMA in embracing the empowerment of INEDs because we all share the common interests and goals. 7. Under this INED empowerment programme, we have rolled out a number of initiatives. Some of you have attended the High Level Seminar co-organised by the HKMA and China Banking Regulatory Commission (CBRC), which was designed to give INEDs a unique opportunity to understand the macro perspectives of China’s development strategy and how Hong Kong should position itself in the years to come. The first one was held in Beijing in October 2015 and the second one was held in Xian in June last year. On both occasions, 1/2  BIS central bankers' speeches  the former Chairman of CBRC personally attended to speak to the INEDs, which is a clear indication of the support given by Beijing on this programme. On a regular basis, we have also organised thematic seminars in Hong Kong, all of which were well attended by INEDs. In December last year, we issued guidance to banks on the HKMA’s requirements to enhance the roles of INEDs, including their remuneration and the way the boards should conduct their meetings.
We are currently working on legal issues, on identifying systemically important banks within the euro area, on the supervisory model, on the future data reporting and, of course, on the asset quality review that will be undertaken before we take on the responsibility of supervision. The governance structure we have adopted will guarantee that, while the Governing Council will keep the decision power, there will be no conflict of interest between monetary policy and banking supervision. On the contrary, more consistent  BIS central bankers’ speeches  3  supervision across the euro area should allow for the early detection of potential risks and imbalances and, ultimately, improve the transmission of monetary policy. This is a fundamental first step and its rapid implementation will be a major success for the euro area. But, alone, it cannot achieve the objectives of a banking union. That is why we must rapidly construct its two other pillars: a supranational bank resolution authority and a unified deposit insurance scheme. In this respect, the recent progress made by the Eurogroup both on the future ESM direct recapitalisation instrument and on a common position on the Bank recovery and resolution directive is very positive and reaffirms the determination of European leaders to finalise these decisive steps towards a genuine banking union as soon as possible.

Paris has the potential, the expertise and the infrastructures to do so. To introduce your two-days Forum on “Growth and Investment Opportunities in Europe”, I wish to first give you an overview of the current economic and financial situation in the euro area and then discuss the major changes currently underway that are considerably strengthening our monetary union. 1. Overview of the current economic and financial situation in the euro area  Before I start this overview, I would like to quote a famous sentence by Jean Monnet, one of the founding fathers of Europe: “what matters is neither to be optimistic nor pessimistic, what matters is to be determined”. In other words, what the euro area needs is neither euro-bashing nor celebration, but awareness and action. As you all know, overall growth in the euro area has been very weak for a few years. The most recent figure is a 0.3% contraction in GDP in the first quarter of 2013, following a decline of 0.6% in the fourth quarter of 2012. Output has thus declined for six consecutive quarters, with labour market conditions remaining very weak. The euro area economies were badly affected by the crisis (first financial, then economic, then sovereign debt), and the fiscal adjustment that became necessary to overcome it has had a negative impact on growth as well. ECB projections see a gradual recovery taking shape later this year.