samchain/econo-pairs-v1 huggingface dataset:
Now, it may be that these shifts are well within firms’ management capabilities, and they should be well captured by our capital framework. But we should be watching them like a hawk. Second, UK mortgage risk-weights for large firms using internal models have been declining significantly over the last decade – from an average of 15.1% in 2009 to 9.7% in 2018. In other words, the capital requirement which results from that part of our regime (“Pillar 1”) has dropped by one third (see Chart 5). It is also notable that the average modelled mortgage risk-weight in the UK is lower than in many other jurisdictions (see Chart 6). This trend has essentially been driven by two things: a cyclical fall in modelled Probability of Default because realised defaults have been low; and a fall in modelled Loss Given Default due to rising house prices. Both of these factors are real, and our teams make strenuous efforts to ensure that firms are modelling them in a suitably prudent way. Still, I think we should approach this trend with a very sceptical eye and need to consider whether there is a case to impose more floors in firms’ models – particularly given the current stretch in some measures of house price valuation. As to the level of risk-weights, a vital mitigant against cyclical modelling of mortgage credit risk is of course our stress-testing regime, which requires firms to carry today the amount of capital they would need to keep lending through a severe housing bust.

But I think that, rather than an expense, we should consider enhanced systems or governance as long-term investments. Despite the difficulties, we are seeing adjustments to bank business models, partly as a result of the pandemic but also in response to a trend that had been under way for some time. Headway is being made in digitalisation and process optimisation, which may impact internal control functions. We are also seeing greater resort to outsourcing, and nimbler and more flexible ways of working are being implemented. All these trends involve changes that redress problems and improve efficiency. But, regrettably, they also pose additional risks. It thus seems that neither banks nor supervisors can lower their guard as regards risk. In fact, I believe future work is guaranteed for those of us who make a living from risk measurement and management. Financial education I will conclude referring to an area which I believe is not given sufficient attention, despite it being crucial for ensuring a responsible financial culture that will contribute to the future economic viability of banks, companies and individuals. Clearly, end-financial consumers, especially individuals, are the weakest part of the customerbank relationship. That makes it important for banks to take the utmost care when they advise customers to take up their services. 5/6  BIS central bankers' speeches  But we must acknowledge that a shortfall in financial knowledge among citizens is the starting point here. And this may have prompted mistaken decision-making.
Central Bank’s FX Interventions and FX Auctions (Million US dollar)  Year  FX Buying Auctions FX Selling Auctions  FX Buying  FX Selling  Total Net FX  Interventions  Interventions  Purchases  2003  5652  -  4229  -  9881  2004  4104  -  1283  9  5378  2005  7442  -  14565  -  22007  2006  4296  1  5441  2105  6632  2007  9906  -  -  -  9906  2008  7584  100  -  -  7484  2009  4314  900  -  -  3414  2010*  3376  -  -  -  3376  *As of 15 April 2010. Source: CBRT. Esteemed Guests, 50. In sum, the developments since the last quarter of 2008 demonstrated that inflation targeting is a flexible strategy that enables a timely response to economic shocks. Recent experiences have clearly confirmed that the Central Bank, when necessary, can focus on sudden slumps in growth and employment driven by external factors provided that this does not conflict with its objective of price stability. In the upcoming periods, we will continue to focus on establishing price stability permanently, acting in the light of our past experience and with the awareness of our increased credibility.

The volumes of goods and services traded and amount of currency handled by individual traders may seem small. However, they are collectively significant and have implications for the conduct of monetary policy. For instance, the World Bank estimates small-scale border trade in Southern Africa to be around $ billion. Other studies have estimated that small-scale cross-border trading accounts for about 42% of GDP in Sub-Saharan Africa. Ladies and gentlemen, it is for this reason that this roundtable symposium has been convened with the following objectives: 1. To stimulate broader interest in the topic of small scale cross border trade;  2. To initiate an inquiry into the design of a World Bank project aimed at fostering small scale trade and innovative cross-border payment services in Southern Africa; and  3. To look at the opportunities for providing cross-border money transmission services that benefit both small-scale trade and remittance transfers. It is anticipated that this roundtable symposium shall come up with a refined design of the World Bank project to be launched later in 2011 focusing on five countries in Southern Africa, namely: Angola, Malawi, Mozambique, South Africa, and Zambia. A draft copy of the project design has been circulated to you all. The project will aim at enhancing trade through lower transaction costs for trade payments and improved access to financial services for smallscale traders. The goal is to increase small value trade payments through formal channels and transition payments away from cash by improving competition and innovation in the market for trade related payment services.
In particular, in the UK, after the go vernment anno unced large tax cuts and no curb in go vernment expenditure in September, the Bank o f England was fo rced to intervene quickly in respo nse to rising government bo nd yields which threatened the so lvency o f British pensio n funds. The Bank o f England made it clear that it was acting to ensure financial stability, rather than changing its mo netary po licy stance, and ended its interventio n in Octo ber. 7  There are, however, some arguments that point towards attenuated effects of QT compared to QE. First, markets are already pricing in QT to some extent. This is important because much of the impact of asset purchase programmes stems from the advance information provided to financial markets about their overall scale and design. Since markets are forward-looking, the whole expected future path of asset holdings plays a role in determining market yields at any given point in time. That is what is typically known as “stock” or “announcement” effects. In contrast, beyond potential “stock effects”, several studies that have sought to measure the “flow effects” of asset purchases – the changes in yields directly related to the amount purchased or held at a given point in time – tend to conclude that these effects are relatively smaller. 13 For this reason, we might expect that yields already reflect, at least to certain extent, current expectations on the implementation of balance sheet reductions.

16.11.2022  The ECB’s monetary policy normalisation: a roadmap Conference of the Asociación de Mercados Financieros Pablo Hernández de Cos Go bernado r  Ladies and gentlemen, good afternoon: It is a pleasure for me to take part in this conference organised by the Asociación de Mercados Financieros. I have already had the honour of speaking here on several occasions in recent years, and I am delighted to be back. Regrettably, the current economic and geopolitical setting continues to be one of unprecedented uncertainty. We now face a slowdown in global growth, but crucially, we also face much higher and more persistent inflation. In the light of today’s uncertain circumstances, the ECB has recently decided to stop providing forward guidance about the future path of its policy rates and will instead make its actions over the near term entirely “data dependent” following a “meeting-by-meeting” approach. However, eliminating forward guidance as a policy tool does not mean that we central banks wish to give up or reduce communicating on our actions. On the contrary, in the present state of uncertainty, it is particularly important that we provide the public with insight into the analysis and rationale underlying our past and future monetary policy decisions. Therefore, today I will explain the ECB’s monetary policy normalisation process. I will begin by discussing the monetary policy decisions adopted at our latest meeting, in October.
The Bank was left with egg on its face, but neither the City nor the economy were scrambled. That was probably as much by good luck as design. At the time, the macro-monetary and financial stability arms of the Bank rarely crossed or co-ordinated. The monetary policy side dealt with the economy, at a macro level. The financial stability side dealt with financial firms, at a micro level. One had a bird’s eye view, 11 12  Bailey (2020). See King and Plosser (1985), and Leeper (1991). 9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  the other a worm’s eye view. But the bird and the worm rarely socialised. The Bank’s macro-economic brain was largely detached from its micro-supervisory hands. You needed only to visit the Bank’s restaurant building in the early 1990s to spot this difference. On the ground floor was both a wine bar and a pub. If you visited the pub on a Friday you would spot the economists, probably in knitwear. If you visited the wine bar you would see the bank supervisors, probably in tweed. Beer and wine do not mix and nor did the beer and wine-drinkers. It was probably just as well there were no systemic crises at the time requiring these two tribes to co-ordinate their analysis and actions. The bank failures of the 1980s and 1990s contributed to the decision to strip the Bank of responsibility for supervising financial firms, soon after monetary policy independence. The two decisions were linked.

I do not conclude from this that forward guidance has no role. I do, however, think this role, its audience and its content needs to be rethought fairly fundamentally. This could build on the experience of what was, in my view, the one example so far of successful forward guidance in the UK. 41 42  Woodford (2012). Morris and Shin (2002). 22  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  22  In 2014, the MPC used three little words, “limited and gradual”, to describe the future trajectory of interest rates. This language was neither precise nor time-specific, but did offer a clear and simple description of the broad direction and destination of interest rates. It offered next to no guidance to those pricing short sterling assets - that was not its purpose. But it did help households when planning taking out a mortgage and businesses when contemplating taking out a loan. We know that from surveys the Bank conducted at the time. The MPC’s message got through to around 75% of companies and around a fifth of households. In other words, the words were both fairly widely understood and helped most those that mattered most to decision-making in the economy. This guidance did not dis-incentivise anyone from personal budgeting, though it did provide some basis for that budgeting. My takeaway for forward guidance from this experience echoes my takeaway for the Bank’s approach to communications generally. Where possible, keep it short and simple.
But in my view, the motivation is not, and should not be, to seek some kind of public revenge. The simplest way to understand all these initiatives is that their main collective purpose is to avoid public money being needed in future to bail out the financial sector. Even though some bail outs have ultimately led to profits being made, the sense of injustice around this use of public money makes it extremely unpopular. Solving the “too big to fail” problem remains key. Meanwhile a debate has been growing as a result of the slow recovery. Is regulation itself directly responsible for restraining credit and hence limiting economic growth? I have recently argued that this should not be so.2 Safe and sound credit institutions are a necessary part of generating sustainable economic growth. If banks hold more capital than they did pre-crisis and are less levered, then they will be in a more secure position to provide credit to support the real economy. Switzerland has made a practical demonstration of the proposition that making banks hold more capital can actually lead to those banks having higher equity prices and lower funding costs. We have recently witnessed an example where capital raising by a Swiss bank was followed by its equity price rising (and its CDS premium fell) on both a relative and absolute basis. Just as in the debate about output and inflation, there is no clear cut, stable, trade-off between making banks hold a prudent amount of capital and growth in the medium term.

Then demand shifts from one to the other (to DL and DH  5  Samuelson and Swamy (1974). 11  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  11  respectively). When everything can move in response, capital as well as labour – we’re on the straight line – aggregate output is unchanged. But when we’re on the curved line, and averaging across the two sectors, total attainable output is lower. At least until capital is able to react, and move from the low-demand to the high-demand sector, resources are misallocated. The counterpart for costs is shown in Chart 8c. With diminishing returns marginal costs increase along with output – the curved line gets steeper as you move to the right. So the rise in costs for a high-demand sector is bigger than the drop for a low demand sector. At least in the short run, therefore, big shifts in demand can raise costs across the economy as a whole, even for a given aggregate. Chart 8b: Potential output could be affected by  Chart 8c: Dispersion in demand can raise short-  large and rapid rise in the dispersion of demand  run average costs  I shouldn’t exaggerate these effects. They don’t negate the point that shortfalls in aggregate demand tend to drag on costs and inflation. In reality, in fact, the shift could itself create such a shortfall.
In contrast the asset management regulators had no real concept of consolidated or group supervision and looked primarily at each legal entity in a group by itself. A small building society would be visited by staff from the Building Societies Commissioner every six months, while the insurance regulators’ norm for a company with far greater assets than 42  that small building society would be one visit every three years . Through a series of public papers, the FSA therefore embarked on defining a common approach towards all of the institutions it supervised. It defined its interactions with firms into 5 broad activities: authorisation; baseline monitoring; thematic work; specific risk mitigation; and work once a risk has escalated or crystallised. 40  Building Societies Commission (BSC);Friendly Societies Commission (FSC); Insurance Directorate (ID) of HM Treasury; Investment Management Regulatory Organisation (IMRO); Personal Investment Authority (PIA); Registry of Friendly Societies (RFS); Securities and Futures Authority (SFA); Securities and Investments Board (SIB); Supervision and Surveillance Division (S&S) of the Bank of England 41 FSA website: http://www.fsa.gov.uk/about/what/approach 42 Foot, Michael. ‘The FSA: The first six years’, Journal of Financial Regulation and Compliance, Vol. 12 Issue. 3, (2004), pp. 201-205 14  All speeches are available online at www.bankofengland.co.uk/speeches  14  The extent of the FSA’s interaction with firms was defined by its assessment of two factors: a firm’s probability of failure and its likely impact upon failure.

This might imply that the case for an equally rapid reversal of the policy easing as disinflationary risks abate is understated. However, expectations of such a rapid reversal may themselves undermine some of the stimulative effect of the easing: expectations of a steady-handed approach to policy decisions may help stabilise the economy close to the lower bound (or even avoid its incidence altogether, as in Pill (2010)). 26 Within the framework discussed in earlier sections of this speech, it may be seen as consistent with the MINIMAX characterisation of robust monetary policy that I outlined. 27 See King (1999), p. 7. 20  All speeches are available online at www.bankofengland.co.uk/news/speeches  20
In this regard, supporting the development of a vibrant small and medium enterprises (SMEs) sector will be of particular importance. SMEs play a vital role in the economic growth of developing countries, typically accounting for over 90% of business establishments and about half or more of output and export shares. Their entrepreneurship, flexibility and responsiveness to change are essential driving force of economic development. The employment opportunities they create improve the livelihood of thousands of millions of poor people. In many developing countries, and in fact in developed economies as well, SMEs account for as much as 70% of the labor force. Despite the important role of SMEs in the economy, their growth is often constrained by the lack of capital, among other impediments such as regulatory red tape. Their small size, lack of credit ratings and the generally underdeveloped capital markets in the region deny SMEs access to bond and equity financing. Banks are also reluctant to lend to SMEs or charge them a high interest rate, since SMEs usually do not have strong credit history and cannot provide substantial collateral. Making available SME financing at reasonable cost is therefore crucial to the growth of this important sector. Providing policy loans directly to SMEs helps, but the assistance is limited relative to the enormous financing needs and there are always concerns about economic distortions and the efficient use of public resources.

What I would like to do here is to share with you our views on the following three issues that have profound impact on the way in which the banking industry, including that in Hong Kong, should structure itself:    Universal Banking vs. Segregated Banking    Universal Banking vs. Narrow Banking    Branch vs. Subsidiary Operations. Universal banking vs. segregated banking 2. First let me talk about “universal banking”, which may mean different things to different people. By “universal banking” I refer to a business model in which banks are allowed to provide a wide range of banking and other financial services to their customers, whether they are mass retail, high net-worth, SMEs or large corporates. In this connection, it may be appropriate to regard a universal bank as a one-stop financial supermarket. 3. Hong Kong has a long tradition of this type of universal banking. Notwithstanding the experiences of the recent Global Financial Crisis and the ongoing debate and scepticism in some jurisdictions, we continue to see merit in the model of universal banking. Why? Let me explain. 4. First of all, universal banking in the form of a one-stop financial supermarket provides what the customers need to meet their rising demand for investments in a wide range of financial and wealth management products. These customers can enjoy the convenience of a one-stop service, ranging from simple products such as equities, unit trusts, insurance, gold etc. to the more complex derivative or structured products that meet their investment needs.
I should also stress that no formal decisions have yet been taken in this respect. As you probably know, the Committee will meet next month for the first time since the comment period closed. I can assure you that we will continue to do our utmost to ensure that you - the industry - can take advantage of the benefits of the new Accord at the earliest possible opportunity. Thank you for your attention. BIS Review 42/2003  5

As I conclude, Ladies and Gentlemen, I would be remiss if I did not acknowledge the support of other institutions during the preparation of this workshop. To this effect, I wish to thank Standard Chartered Bank, PriceWaterhouseCoopers, KPMG, Deloitte and Touché, Grant Thornton, the Zambia Centre for Accountancy Studies and ZICAB Tuition Centre, for having agreed to provide resource persons for this workshop. With these few remarks, it is now my honour and privilege to declare this workshop officially open. I thank you. 2  BIS Review 13/2005
5 The evidence from the Bank of England’s Agents and recent employment surveys is that the labour market in the UK has stabilised and that labour demand in the private sector may have already started to pick up. Companies also seem to have adjusted quickly to a lower level of demand and activity in the recession, and the most recent surveys do not point to an unusually large margin of spare capacity remaining within firms. For example, the latest CBI survey shows 62% of manufacturers reporting some spare capacity – which is virtually in line with the average for the decade before the financial crisis. 6 The evidence on wages and prices is also consistent with the view that spare capacity is not exerting as much downward pressure on inflation as the MPC expected last summer. In the manufacturing sector, underlying wage growth is back up to the 4–5% level already, though is more subdued in the services sector. And after quite widespread pay freezes last year, the latest pay settlements data from Income Data Services show that the most popular range for pay settlements is currently 2–3%, which is where four out of ten pay settlements are now being struck. If the recovery continues and headline inflation remains relatively high, there may be a further upward drift in pay growth in the private sector, offsetting some of the downward pressure on wage growth from the public sector.

As I have argued in earlier speeches, the globalised economy we now inhabit may have many potential sources of instability, including the potential upside pressure on energy and commodity prices as well as volatility in financial markets. 7 In addition, we have learned through this recession that inflation has not performed in the way conventional economic models and our earlier forecasts suggested. As spare capacity has not exerted much downward pressure on inflation so far, there must be a high degree of uncertainty about its future impact. In the highly integrated world economy we now inhabit, the margin of spare capacity in the UK economy may have less impact on our inflation prospects than global inflationary pressures – which have been less benign in recent years. And the exchange rate can play a key role in the transmission of these global price pressures to the UK economy, which may help to explain the above-target inflation the UK has experienced in the last three years. For a legendary rock band like Led Zeppelin, the song should indeed remain the same. When the band reformed at the end of 2007 at the O2 Arena, everyone wanted to hear “Stairway to Heaven”, “Dazed and Confused”, “Whole Lotta Love” and their other classics. But in monetary policy, we need to adapt our tune to the changing performance of the economy, and to absorb what we learn about the economy in new and unprecedented circumstances, such as the recent financial crisis.