The surveys are also useful in forming an assessment of the prospects for capital spending, as this is an area where statistical models are particularly poor – and I should know, having spent some of my formative years at the Treasury unsuccessfully trying to build econometric models to predict investment! Both the CBI and BCC surveys collect information on investment intentions, and it is also something we ask our Agents to take a view on, based on their contact interviews (see Chart 4). We look closely at this information when assessing the outlook for business investment. Other forward-looking questions can also prove valuable. For instance, at the current juncture, with CPI inflation well above our 2% target, we need to judge how much further it will rise and for how long that might persist. Past experience gives us some guide as to the speed at which higher commodity prices pass down the supply chain and the extent to which those movements are amplified or attenuated by movements in other costs and prices. But the questions on pricing intentions contained in the business surveys represent a valuable additional source of information on near-term inflation pressures. A third use of surveys is in helping the MPC diagnose the causes of recent developments. Here, the quarterly Industrial Trends survey stands out as particularly useful because it has a rich set of questions that explore companies concerns. For example, it has questions about the factors limiting investment, exports, and output.
Yves Mersch: Euro clearing - the open race Keynote speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the Frankfurt Finance Summit, Frankfurt am Main, 29 May 2018. * * * During the 2008 financial crisis, counterparty risks became infamous. Obviously, every finance textbook deals with the risk that, when you enter into a financial contract, the other party may not fulfil their part of the agreement and may even default on their obligation. But the failure of Lehman Brothers and the large losses suffered by AIG in over-the-counter derivatives markets revealed that there were counterparty risks throughout the entire financial system. This was due to the domino effect of counterparty defaults in leveraged products. As a response, G20 leaders agreed at the 2009 summit in Pittsburgh to move all standardised derivatives contracts to clearing through central counterparties (or CCPs). CCPs address the weaknesses exposed during the crisis by insulating counterparties from each other’s default risk. They specialise in managing counterparty credit risk, and by doing so they reduce the risk of defaults spreading across the financial system. But CCPs can only make the financial system safer if they are safe themselves. In the European Union, they are subject to a comprehensive regulatory framework. The European Market Infrastructure Regulation (or EMIR) ensures that they hold robust resources to deal with financial distress.