samchain/econo-pairs-v1 huggingface dataset:
By forcing all of the banks that participated in the SCAP to have sufficient capital to help them withstand a stress environment, this process improved confidence and increased the willingness of banks to engage with each other. It also made it easier for the banks to be able to tap the capital markets. The SCAP exercise made a bad state of the world less likely, helping to create a virtuous circle rather than a vicious one. The SCAP exercise was developed and conducted in response to the crisis and a specific need. Now, we need to figure out how to conduct these types of exercises on a systematic basis. Such exercises may even need to be hardwired into the supervisory oversight of the financial system. Transparency In some critical segments of our financial markets, both before and during the crisis, limited or ineffective disclosure undermined market discipline and this contributed to the accumulation of risk. In the years leading up to the crisis, the lack of transparency contributed to increased risk and leverage in off-balance sheet vehicles, structured credit products and in over-the-counter securities such as asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs) and their associated derivatives. Once the crisis was underway, the opacity of many of these vehicles, structures and securities contributed to the concerns about counterparty credit risk. This uncertainty exacerbated the erosion in market liquidity conditions and further intensified the crisis.

For example, multi-year guaranteed bonus payments would raise a red flag for us as not likely being consistent with the evolving consensus on sound compensation practices. Thank you for your kind attention. I would be happy to take a few questions. 8  BIS Review 125/2009
This means that the Riksbank must make assessments of how the krona will develop in relation to other currencies during the forecast period, and assess what effect the development of the krona will have on demand for Swedish goods, as well as the impact the krona will have on consumer prices. None of these assessments is simple. Allow me first to point out the mechanisms that are important with regard to a direct impact on inflation via import prices. If the krona weakens and prices on the goods we import are determined in the exporter’s home country currency, the weaker krona will have a direct impact on import prices. For the weaker krona to have a full impact on prices of imported goods in the consumer channel, all domestic intermediaries must pass the price increases on to the end consumer. During the years with a floating exchange rate we have been able to note that the weakening of the krona has not had the impact on consumer prices that we had expected. One explanation could be that internationalisation and increased competition have first and foremost meant that the exporting companies endeavour to adapt their prices to developments on the markets where they sell, in order to retain their market share. It is reasonable to imagine that large corporations with sales and production spread around the world can act in this way without facing large fluctuations in profits.

A prolonged surplus on the current account will sooner or later strengthen the nominal exchange rate so that a balance is achieved. However, this can evidently take longer than expected. BIS Review 79/2001  3  Although the long-term value of the krona is determined by flows of goods and other items in the current account, its price is governed in the short term by supply and demand on the foreign exchange market, and here other factors can prevail. Developments on the financial markets have led to rapid and substantial portfolio transfers when, for instance, Swedish investors have bought shares abroad or foreign investors have sold Swedish shares. Changed expectations of earnings on various shares and changes in the willingness to take risks appear to have increasingly governed the developments on the foreign exchange markets in a way that is not captured by traditional exchange rate models. Portfolio transfers as a result of deregulation or changes in investment regulations may also have had significance. In the long term, however, it is difficult to believe that anything other than the development of the fundamental economy shall determine how the exchange rate develops. Regardless of which model we apply to explain the krona rate, it will show that the krona is undervalued and has been so for a long time. Despite the difficulties connected with forecasting exchange rates, we have to make assumptions regarding the development of the krona in our assessments of inflation.
In October we had revised down our growth forecasts for Sweden and abroad considerably and in December we revised the forecasts down by as much again; the economic slowdown had hit with even greater force than we had earlier expected. The weaker krona together with the fall in energy and food prices appeared to some extent to be able to counteract the severe slowdown in the economy. According to our forecast in December, Swedish GDP will decline by 0.5 per cent in 2009, but recover during 2010, when growth increases to approximately 2 per cent. We also revised down the inflation forecast substantially, primarily because of falling energy prices and declining interest expenditure for households. According to our assessment, CPI inflation will on average be just over 1 per cent in 2009. However, inflation will then rise towards the target level at the end of 2010, as economic activity improves and the effects of falling energy prices and interest expenditure no longer affect the inflation figures. The assessment in December was that resource utilisation would be lower than normal over the coming years, while inflation would undershoot the target for a while. Given this, we Executive Board members were agreed that a substantial and long-lasting cut in the repo rate was needed to avoid an unnecessarily long period of inflation undershooting the target and of weak real economic development. Nor were there any advantages to adjusting the repo rate in gradual stages.

This feeling that we’ve built a strong fortress able to withstand any onslaught may create a mood of complacency and detract attention from the dangers that could be growing within the walls of financial institutions. This problem is aggravated by the fact that the hard numbers studied by regulators and supervisors should look great when the economy’s doing well. Profits are high and loan losses low when the economy is humming along. But, strong numbers in a strong economy don’t give you the full picture. They can’t always tell you whether people are cutting corners, taking excessive risks, or violating rules and regulations. Even worse, they can distract you from digging into the truth and unearthing unethical business practices and misconduct that may hide below the surface. The well-known challenge with culture is that, in contrast with things like capital and liquidity, culture feels “softer” and, therefore, more difficult to measure. And often in finance there’s a tendency to disregard what can’t be quantified. But just because it’s hard to measure doesn’t mean we should ignore it or downplay its importance. As we heard throughout today’s conference, culture shapes every conversation, every decision, and every action; it is at the root of whether an organization performs in a manner consistent with its mission, or not. How to Achieve a Better Banking Culture This brings me back to the issue of culture as a long-term investment that can’t be “fixed” overnight.
In other words it’s a matter of supply not demand. Chart 6 gives a stylised description. In a competitive market the demand curve facing an individual firm (and those in a relatively small country) is essentially flat. Domestic events don’t have much effect on the global price. When the currency falls, pushing up prices and profits of outward-facing firms, the response of export volumes depends on the slope of the supply curve: to what extent do firms in the tradable sector have the capacity to raise output and, where that is insufficient, the willingness to invest in more? Chart 6: For a small open economy tradable demand is highly elastic  Chart 7: Depreciations push up the sterling price of goods exports as well as those of imports  Source: ONS and Thomson Reuters Datastream. * excluding oil and erratics. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  Now commodities may be an extreme case. They’re essentially homogenous – one country’s output is much like another’s. But even in non-commodity goods markets you find a similar pattern. The UK is relatively small, accounting for only 3% of international goods trade (even including oil). Many UK firms are to a significant extent “price takers” in international markets. And you can see from Chart 7 the close correlation between the sterling price of the UK’s (non-oil) goods exports and the exchange rate. The reaction is a bit less than one-for-one but in general no less marked than that of import prices.

First, if the market has misjudged the risks – if the UK emerges from this as open an economy as it is today, or more so – one imagines the exchange rate will re-appreciate, all else equal. I’ll come back to the significance of this point later on. Second, the weaker exchange rate is acting on an economy whose trading relationships are for the time being quite unchanged. As yet Brexit has done nothing directly to affect the UK’s openness because Brexit hasn’t happened. The MPC is always keen to caution against treating a change in asset prices as some independent, “exogenous” event, without considering its underlying cause. This case is a bit special, however: in this instance the cause has yet to occur. We’ve had the reaction in asset prices well ahead of the event. In that sense it’s more independent than usual. And what’s striking about this is that economists usually view independent depreciations in the exchange rate as expansionary rather than contractionary. Yes, they dent real household incomes and therefore consumer spending. But the usual view is that this negative effect is compensated, indeed outweighed, by positive effects on other areas of spending, net exports and investment. With the additional tailwind of a strengthening world economy you might expect most forecasters to have predicted faster economic growth following sterling’s decline. Yet the opposite is true: after 2% through 2016 (in the year to Q4), the consensus forecast is that UK GDP growth will slow to 1.2% through this year.
•  Five of the top 10 primary growth markets will be in the Asia-Pacific; this includes China, India, and Indonesia. There are three structural factors driving demand for insurance in Emerging Asia. First, Asia is getting richer. Projections by the IMF show that Emerging Asia will remain the fastest growing region in the world over the next decade. As incomes rise in Asia, governments, corporates, and individuals will increasingly seek insurance to protect their growing economic assets. •  Burgeoning urbanisation, infrastructure development, and cross-border trade will drive demand for commercial and specialty insurance. •  A growing middle class and rising affluence will underpin a steady increase in life and health insurance penetration rates. Second, Asia is getting older. Asia is facing declining fertility rates, increasing life expectancy, and a rapidly ageing population. •  The United Nations projects that, by 2030, Asia’s old age dependency ratio will be 16%, up from today’s 11%. •  Against this demographic backdrop, public retirement and pension systems in Asia remain inadequate. The retirement gap between savings and retirement needs can be as high as 13 years. •  This will spur greater demand for private health insurance, annuity and other retirement security products. Third, Asia is becoming more aware of catastrophic risk. •  Over the last 30 years, Asia has borne the brunt of natural catastrophe losses, accounting for almost half of the world’s estimated economic losses from natural disasters. Yet less than 5% of the losses were insured, compared to 40% in advanced economies.

•  London controls more than 60 billion pounds in premiums, which makes the London market twice the size of Bermuda, three times that of Switzerland, and more than 10 times bigger than Singapore. With its wealth of insurance and specialist risk capacity, London insurance is well positioned to ride the growth in Asian demand. But insurers will benefit from closer proximity to markets, information, and talents. Global insurers and brokers are responding to a growing preference for local placements by setting up local offices in high growth markets to understand their clients better and to be more responsive to their needs. This is where Singapore and London can play complementary roles. London with its unparalleled insurance expertise and experience, and Singapore, with its market proximity and client knowledge can collaborate on providing insurance and risk management solutions that are, relevant, appropriate and responsive to Asian needs. Conclusion The fascinating origins of Lloyds, over 300 years ago – in a coffee house where seafarers gathered to swap intelligence on their trade – illustrates the enduring power of information, networking and the centrality of markets. As with Lloyd’s coffee house, the essence of financial centres lies in connecting markets and people to provide innovative solutions to further economic prosperity. The rising demand for financial services in Asia offers tremendous opportunities for London and Singapore to strengthen our connections for sustainable insurance growth. Thank you. BIS central bankers’ speeches  5
7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7  Chart 5 Interest rate expectations track actual interest rates9  Given the long and painful recovery from the financial crisis and the fall in house prices, expectations of future income and of future house prices were depressed. Consumer confidence hit an all-time low after the GFC and remained subdued until 2014. Expectations of future interest rates may also have been low; however to the extent that the low risk free rate in the period was associated with a recession, this may not have had an upward effect on price. One would expect these factors to have waned following the economic expansion beginning in 2013, though real pay growth did not start to recover until some years later. Brexit uncertainty following the referendum result in 2016 is likely to have had a further general dampening effect on expectations. Moreover, as well as changing the expectation of future economic prospects, the financial crisis and the recession and unemployment may well have increased household risk aversion. Psychological scarring following crises can cause perceptions of risk to become overstated, and lead households to prioritise balance sheet repair in response10. Miles and Monro, “UK house prices and three decades of decline in the risk-free real interest rate”, forthcoming 10 For a more detailed discussion, see Haldane, A.

Adoption of the initiative would represent a tectonic shift in our monetary and economic system, which has developed over a period of many years. Furthermore, the uncertainty in the transition phase would be enormous. The initiative is aimed at ensuring financial stability. This is a noble goal and one which the SNB shares. But there are far better ways of achieving this than sovereign money. The initiative’s goal of fully nationalising money creation is flawed and would hurt the Swiss economy as a whole. The idea of ‘debt-free’ payments is dangerous: The initiative would encumber the SNB with added responsibilities, which would inevitably expose it to a higher level of political influence. There is a high risk that this could lead to excessive inflation. The legal and institutional framework in which the SNB has hitherto operated has stood the test of time. It ensures a fair balance of independence and democratic control. Today the SNB is protected from political influence and this enables it to pursue an effective monetary policy in the interests of the country as a whole. Given all these considerations, sovereign money is an unnecessary and dangerous experiment, which would inflict great damage on our country. Thank you for your attention. Page 8/8
Let me explain why the subject is a very timely and relevant topic. War and peace: Rising government debts in developed countries since 1980s 5. During World War II, naturally most governments borrowed huge amounts of debts to finance the warfare. As a result, the public debts shot up and the ratio of public debt to GDP rose to very high levels. In the industrial nations (e.g. US, UK, France, Germany and Japan), the average government debt increased to a peak level of over 200% of GDP in 1946. Huge government borrowings had crowded out the private sector and in any case most industries not related to military supplies production did not have the opportunity to expand their business anyway. After the War, industrial nations began to pay down their public debts as they embarked on the journeys of reconstruction. BIS central bankers’ speeches  1  6. After two decades of hard work and economic growth, the ratios of government debt to GDP of the industrial nations came down to below 30% in the 1970s while private sector debts grew steadily to around 85% of GDP. The total debt, public and private combined, was amounting to 110% of GDP at that time. 7. A brief word about debt. When one borrows money, whether to fund investments or to finance consumption, it could bring about many beneficial effects. For example, student loans could assist many young people without the necessary means to take up education or training that would benefit their whole lives.

Ultimately, the common theme in all our efforts is to further the aims of the European Union. These are to promote peace, its values and the well-being of its peoples. As the recent events in Ukraine demonstrate, these aims remain as attractive and compelling as ever. Thank you for your attention. BIS central bankers’ speeches  5
06.07.2021  The Spanish banking sector: over one year of fallout from the pandemic 16 IESE Banking – Banking: helping to boost the economy Pablo Hernández de Cos Governor  Good morning, I should like to thank the IESE Business School for the invitation to this event, which gives me the opportunity to discuss the main developments in the banking sector since the onset of the pandemic. The proper identification of risk developments in the sector is crucial, both to inform the authorities’ and banks’ response in this new economic recovery phase and to draw lessons with a view to tackling the medium and long-term challenges. A good point of departure for this analysis might be to identify why it has been oft-repeated during this crisis that, thus far, the banking sector “has been part of the solution, not part of the problem”. Besides the fact that this crisis has been entirely exogenous in origin and bears no relation to the sector itself, there are two aspects that, in my view, have been crucial. First, the international financial reform implemented over the past decade has given rise to a healthier, more capitalised banking sector that is more resilient to different shocks. In Spain, this reform also came in tandem with a programme of very profound restructuring in the sector.

In any event, since the global financial crisis, the sector’s ROE has remained systematically below the cost of capital, offering yet another sign of structural profitability challenges in the sector. Lastly, this crisis is also prompting an increase in risks that were already manifest before the crisis, such as competition from technology firms, the reliance on third-party IT services and, of course, cyber risks. What economic policy response is needed to address these risks? First, the improved economic outlook, underpinned by the encouraging progress of the health situation, has reduced the likelihood of the severest scenarios in terms of economic growth and financial stability. Nevertheless, the recovery remains highly dependent on the monetary and fiscal support measures. Monetary policy must continue to guarantee favourable financial conditions for all economic agents and, for now, the fiscal measures need to remain focused on the sectors and population groups hit hardest by the crisis. In parallel, the structural adjustments stemming from the pandemic must be smoothed, and efforts should concentrate on tackling our economy's structural challenges, many of which pre-date this crisis. The timely design of a fiscal consolidation programme, to be gradually  10  In 2008, there was one branch per 1,000 inhabitants in Spain, compared with 0.61 in France, 0.58 in Italy and 0.48 in Germany. By contrast, in 2020, the number of branches in Spain had fallen to 0.47, below the 0.48 in France, but still far from the 0.39 in Italy and 0.29 in Germany.
Exiting before the underlying strength of key financial institutions is sufficiently well established runs the risk of leaving some of them vulnerable to adverse disturbances, possibly even triggering renewed financial system stresses. Late exits, on the other hand, can entail the risk of distorting competition, creating moral hazard risks that come with downside protection – including the possibility of excessive risk-taking – as well as exacerbating risks for public finances. To cushion the risks that lie ahead, banks will need to be especially mindful in ensuring that they have adequate capital and liquidity buffers in place. If the circumstances require it, some banks may need to raise new and high-quality capital. In addition, some banks, especially those which have received state support, may need fundamental restructuring in order to  BIS Review 168/2009  7  confirm their long-term viability when such support is no longer available. This could involve the shrinking of balance sheets through the shedding of unviable businesses with a view to enhancing their profit-generating capacities. At the same time, banks should take full advantage of the recent recovery in their profitability to strengthen their capital positions, so that the necessary restructuring of businesses and the enhancement of shock-absorbing capacities do not impinge materially on the provision of credit to the economy. Thank you very much for your attention. I am now at your disposal for questions.

This is part of the broader issue that I noted at the outset about the ability of non-bank finance to insure against severe but plausible liquidity stress. It is an issue that the FSB should take forward as part of its work programme on enhancing liquidity resilience in the NBFI sector. Prompt and transparent margining and, where possible, central clearing are essential to the resilience of the financial system. In times of stress, margin requirements will increase – as I said earlier that is a feature of the system, not a bug. But at the same time we need to do everything possible to ensure that the impact is not unnecessarily pro-cyclical, that market participants have the tools to prepare and manage that impact and that they do so. The March 2020 ‘dash for cash’ has given us a valuable lesson, we should not waste it. 1 Ben Bernanke has pointed out that panics can be a major cause of credit crunches. Reforms that avoid such  panic reduce the likelihood that financial stress transmits to real economy stress. 2 FSB (2017) Report on effectiveness of derivatives reforms. 6/6  BIS central bankers' speeches