samchain/econo-pairs-v1 huggingface dataset:
Within this context it is relevant to note that while in general accession countries have made significant progress towards achieving macroeconomic stability, this progress has been far from uniform and challenges remain in this respect too. The paper to be given by Dr Lipschitz and the presentations on EU country experiences should provide some interesting perspectives on these issues. The relevance of transparency and good governance also applies at the corporate level, not least because financial difficulties in large corporations could undermine the well-being of individual financial institutions and markets. This is especially the case in small jurisdictions. Now it is a fact that corporations will always know a lot more about their financial position than any outside entity charged with monitoring them, and financial intermediaries are no exception in this regard. This is particularly true at a time when the complexity of financial products and the intensity of cross-market risks are stretching the capacity of central bankers and supervisors to remain fully in control. Several recent episodes in the financial world indeed confirm that the innate human predisposition to maximise selfinterest can induce behaviour that is not in harmony with the public interest. The implications of this are two-fold. While rules and regulations continue to play an important role in preventing systemic shocks, they will increasingly have to incorporate incentives and credible deterrents to discourage excessive risk-taking and moral hazard.

Philipp M Hildebrand: Economic outlook and monetary policy Speech by Mr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, Apéritif Marché monétaire, Geneva, 17 November 2005. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  The Swiss economy has benefited from a favourable international environment. Activity has remained strong in the US, whereas it has improved in Japan and, more recently, in Europe. In Switzerland also, the latest indicators point towards stronger growth. Exports remain the engine of the recovery but private consumption has also picked up. However, consumer confidence remains fragile in the context of only modestly improving labour market conditions. The SNB expects the economic recovery to continue. A sudden adjustment of the US current account imbalance or a further increase of energy prices are predominant risks. From a monetary point of view, the current situation is characterised by different counteracting forces. On the one hand, the economic outlook is positive. On the other hand, some risks put this favourable picture into perspective. Furthermore, the increase of energy prices might endanger medium term price stability at a time when monetary conditions remain expansive. Last but not least, globalisation continues to hold down the prices of many goods. In this complex environment, it is important that central banks succeed in preserving their most important monetary asset, namely well anchored inflation expectations.
Thus far, much of the money we have pushed out into the economy has been stored away rather than expended to the desired degree. For example, we have seen a huge buildup in the reserves of the depository institutions of the United States. Less than a fifth of commercial credit in the highly developed U.S. capital markets is extended through depository institutions. Yet depository institutions alone have accumulated a total of $ trillion in excess reserves – money that is sitting on the sidelines rather than being loaned out into the economy. That’s up from a norm of around $ billion before the crisis. The Fed’s large-scale asset purchases dramatically and more broadly impacted credit markets. The U.S. credit markets are awash in liquidity. BIS central bankers’ speeches  1  As of March 14, our par holdings of fixed-rate MBS exceeded 30 percent of the outstanding stock of those securities. Through these purchases, we have driven down mortgage rates and helped rekindle the U.S. housing market. We now own just shy of 24 percent of the stock of Treasury coupon securities. Having concentrated our purchases of Treasuries further out on the yield curve, and done so in size, we have driven nominal interest rates across the credit spectrum to lows not seen in over a half century.

We will feel the stones of the economy with the bottoms of our feet as central bankers and proceed accordingly. Draghi’s Old Man At a recent meeting I attended in Frankfurt, Mario Draghi of the European Central Bank told of a man who needed a heart transplant. The doctor leveled with him that he had several choices, including the heart of a 75-year-old central banker. “I’ll take that one,” the man answered immediately. “Why?” the doctor asked. “Well,” said the man, “because it’s never been used.” As was made clear in Chair Yellen’s speech in Chicago earlier this week, central bankers have hearts, and the Fed is working to harness monetary policy to relieve the plight of the cyclically unemployed. But we also need to be vigilant in making clear that we are obligated to maintain price stability and that allowing inflation to take grip is a cardinal sin for a central bank, for it is the cruelest of afflictions for all of society. Joachim Fels of Morgan Stanley noted that Draghi’s little joke serves as a reminder not that my colleagues and I at the Federal Reserve belong to a heartless tribe but that “central banking is about making rational, cool-headed and unemotional decisions often under difficult circumstances” 7. We must conduct monetary policy in a cool-headed and unemotional manner in order to achieve both of the mandates Congress has given us – preserving price stability and achieving full employment – while avoiding financial market turbulence.
the real interest rate consistent with inflation stability and output at its natural level) is now at historically low, possibly negative, levels. Some possible explanatory factors are of a transitory nature (such as the still-ongoing deleveraging processes), while others are more structural ( i.e. low productivity growth and demographic factors). We have to deepen our analysis further in order to have a full grasp of this “new normal” reality. Implications for monetary policy:  New conventional? The question that arises is whether the “new normal” should lead to a “new conventional” for monetary policy. Indeed, inflation and real interest rates are likely to persist at a low level in the future, and therefore nominal interest rates will also be lower and hence closer to their effective lower bound, limiting their effectiveness as a monetary policy instrument, which will possibly lead to balance sheet management as a permanent policy. There are still no conclusive debates about balance sheet management, including on its marginal effectiveness, the optimal size of the balance sheet and the repercussions it could involve in terms of financial stability. Again, in this area, we need further analysis. 4/6   Once the conditions for it are met, the exit strategy from the accommodative policies will require gradualism and predictability. As the recovery gathers speed, and as long as this translates into a sustained adjustment in inflation towards its objective, the need for monetary policy support will tend to diminish.

The mandates of central banks are changing, as they are strengthening their macro-prudential powers and embracing more explicitly the objective of financial stability. Some major central banks have for the first time assumed the direct supervision of credit institutions. Thus, this period of changes is going to be a landmark in the history of central banking. The current overhaul of banking regulations globally is also fundamental by nature. The scale of reforms in the regulatory framework for the banking industry, after the collapse of Lehman Brothers and the outbreak of the euro area sovereign debt crisis, could be compared only with the major reforms undertaken in the aftermath of the Great Depression in the 1930s. The sheer magnitude of this changeover, however, does not guarantee the elimination, once and for all, of the regulatory gaps and loopholes for the risk taking activities of banks. Moreover, while the wide-ranging changes in banking regulation certainly improve banks’ capital, liquidity, operations and governance, they are sometimes feared to have a discouraging effect on banks’ lending and other services in the public interest. What caused the recent wave of banking reforms, what issues regulators still need to consider, and how are banks expected to respond on a global or national level?
One clear example is that we are not a no firm failure regulator. Orderly failure which does not disrupt our statutory objectives is part of supporting a functioning market economy. We have learned the hard way that financial stability is essential for supporting growth and employment. We have seen the effects of damaging financial stability, and the consequences in terms of lost output and the need to use public money to counteract the inability of the tools of the day to deal with the threat of the collapse of the system. We have also seen the long-lasting effects of that loss of financial stability. I remember that in the early stages of the financial crisis, most forecasts suggested a recovery would take hold in a year or so, on the assumption that the policy tools available at the time would be effective. That did not happen. A crucial lesson from that experience was the importance of policy coordination, which is why it is so much at the heart of the new role of the Bank of England. The remits of the MPC and  BIS central bankers’ speeches  1  FPC require the committees to explain how they have regard to the policies of each other. In the last year, we have seen that coordination at work. Almost a year ago, the Bank and Treasury introduced the Funding for Lending Scheme. The Bank also introduced an extended collateralised term repo facility.

This quadrant [slide 4] shows four categories of possible shocks linked to the transition. They can have a positive versus negative impact on supply, and a positive versus negative impact on demand respectively. They are not mutually exclusive, and may combine or succeed one another. Their stand-alone probability is hard to assess at this stage, but there are reasons to believe that the upper-left one (the negative supply shock) is slightly more probable than the  Page 5 sur 8 others. However, given the large range of shocks, their sources and macroeconomic effects – which could include a positive scenario of large green private capex v – [slide 5], we must continue our modelling, in line with our first commitment in relation to the ECB’s climate agenda: we committed in July 2022 to “assess the macroeconomic impact of climate change and mitigation policies on inflation and the real economy”. vi  But being uncertain about the combined macroeconomic effects does not mean being passive or inert on action now. What we can already derive from these scenarios is a set of four firm convictions and prescriptions. 1. A shock that is global and certain >>> an orderly transition - First, climate transition entails structural changes to the global economy that are both universal and certain, with an overall and possibly negative supply shock that will generate frictions and costs in terms of the necessary reallocation of production factors.
It is unclear to me why the Federal Reserve would want to apply more stimulus at a time when market conditions were improving. This suggests that some variability in the trajectory of the Fed’s balance should be expected and might even be desirable. And, in fact, this is what we have seen in practice. Third, I am not worried at all that the Federal Reserve’s balance sheet expansion will generate an inflation problem. It should be emphasized that the Federal Reserve has the ability to manage down the size of its balance sheet over time once financial conditions and the economy improve. Many of the liquidity facilities will shrink automatically as financial conditions normalize. With the exception of TAF loans, all of the other Fed liquidity facilities charge rates that are higher than what one would expect during more normal financial circumstances. And, if we want the TAF loans to shrink, we can either shrink the amounts on offer or raise the interest rate we charge, or both. The other assets such as Treasury securities and agency MBS can be sold or the impact on reserves be offset by repurchase operations that drain reserves from the banking system. More importantly, the Federal Reserve now has the tools to allow the conduct of monetary policy to be separated from the size of the balance sheet and the amount of excess reserves in the banking system. In September 2008, the Federal Reserve gained the authority to pay interest on excess reserves.

As the financial condition of some of the major securities dealers worsened, the clearing banks became more  2  BIS Review 48/2009  reluctant to return the cash that the triparty repo investors had invested the prior evening. The clearing banks were worried that if a dealer were to fail, they could be stuck with a large obligation. The nervousness of the clearing banks, in turn, spilled back to the investors. If there is some chance that I might not get my cash back and instead be stuck with the collateral, do I really want to make the loan in the first place? The Primary Dealer Credit Facility essentially broke this dynamic by putting the Federal Reserve in the position of lender of last resort in the triparty repo system. With the Federal Reserve willing to lend against collateral, the clearing banks no longer have significant intraday risk exposure. The triparty repo investors have been reassured that they would be paid back. As a consequence, they were willing to keep investing. The TAF and the dollar facilities offered by foreign central banks provided the same antidote to rollover risk in the interbank funding markets. Banks that were reluctant to lend to one another because of rollover risk became willing to reengage because they knew that the Federal Reserve and foreign central banks would lend against high-quality collateral. By eliminating rollover risk, the CPFF also helped to restore market function in the commercial paper market.
In addition, Malaysia established the International Centre for Leadership in Finance (ICLIF) in 2003 to also provide leadership development and management training for the Islamic financial institutions. Closely linked to having the talent is the need to have strong and well established Islamic financial institutions. This presents another challenge for the Islamic financial industry as there are currently not many large Islamic financial institutions. Many of the players are not large enough globally to finance large development projects, particularly in Muslim countries and are not strong enough to underwrite the needs of the Islamic financial community on a large scale. Currently, some of the project financing in Muslim nations are undertaken by large conventional banks because of the under capitalisation of the Islamic financial institutions. We therefore need to have strong and highly capitalised Islamic financial institutions that are able to offer the comprehensive and complete range of Islamic financial products and services. Besides having large Islamic financial players with the required pool of expertise, the integration of the Islamic financial system with the international financial system needs to be supported by the development of a full Islamic financial system at the national level, thereby increasing the potential to effectively participate in a more liberalised and globalised environment. Towards this end, Malaysia together with other OIC countries, are collaborating with the IDB and IFSB to formulate a ten-year master plan for the future global development of the Islamic financial services industry.

Stefan Ingves: Strengthening bank capital – Basel III and beyond Keynote address by Mr Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision, at the Ninth High Level Meeting for the Middle East & North Africa Region, jointly organised by the Basel Committee on Banking Supervision, the Financial Stability Institute and the Arab Monetary Fund (AMF), Abu Dhabi, United Arab Emirates, 18 November 2013. *  *  *  As prepared for delivery Good morning everyone, and thank you for the opportunity to speak about what – among the myriad of recent regulatory initiatives – has probably been the most important: strengthening bank capital. Strengthening bank capital is not simply about asking banks to hold more capital. Rather, it is a broader objective that involves ensuring the functioning of the entire capital regime. The Basel Committee’s approach has therefore been to work extensively on the consistent implementation of the regulatory capital framework. The ultimate goal is to implement Basel III so that it strengthens the quantity, quality, consistency and reliability of bank capital ratios around the world. Quantity and quality of capital As you know, a set of requirements designed to raise the quantity and quality of bank capital lies at the heart of the Basel III reforms. Not only were minimum capital requirements raised, but the increases in capital requirements were focused on where they were needed most: in going-concern loss-absorbing capital, or Common Equity Tier 1.
(Indeed, the mere chance that this may occur may be diminishing the degree of accommodation in place today.) The economic thresholds I am proposing put a higher and more predictable standard on the removal of accommodation. Conclusion I would like to conclude by noting that I have undoubtedly generated some discomfort in the room tonight by saying that even with the large degree of accommodation already in place, monetary policy can and should take additional steps to facilitate a more robust economic expansion. Central bankers naturally worry about such statements. We think back to the 1970s, when our failure to appreciate the changing structure of the economy led to over-stimulative policy and eventually to stagflation. It’s in our DNA to have these concerns; and they remind us of the need to continually do our best to calibrate important markers such as the natural rate of unemployment, keep close tabs on inflation expectations and have our eyes open for early warning signs of financial instability. But I believe a greater risk today is that we buy too quickly into thinking that the equilibrium rate of unemployment has jumped 2 or 3 percentage points or that long-run inflation expectations have become so fragile that they are on the verge of spiking well above 2 percent. I just don’t see the evidence out there supporting this view. But if we do buy into it, then we’ll end up following overly restrictive policies that could unnecessarily risk condemning the U.S. economy to a lost decade – or even more.

In August 2011, we added a particular type of forward guidance to our policy, first saying we would likely keep rates low until mid-2013 and then, in January, indicating that sub-par economic performance would likely warrant exceptionally low rates until at least late 2014. Working to complement these efforts and to improve FOMC communications more generally, we also added two major communications initiatives: A statement of our monetary goals and long-run strategies, and publication of FOMC participants’ projections for the federal funds rate. 1  Krugman (1998). 2  See, for example, Bernanke, Reinhart and Sack (2004) and Eggertsson and Woodford (2003). BIS central bankers’ speeches  1  I have strongly supported each of these developments, believing that they improved transparency and also provided welcome further monetary accommodation for the U.S. economy. However, as I have been talking about in public for some time, I think there are additional tools we could use to deliver more effective policy accommodation. In particular, I would like to see our forward guidance take a different form – one that explicitly ties liftoff in the funds rate to observable economic outcomes (You can think of this as a Ulysses-type forward guidance: We tie ourselves to the mast to avoid the siren calls of premature tightening.)
The rise in labor productivity is usually seen as the main factor behind the spectacular performance of the US economy, characterized by high growth and low inflation. Will productivity now also start rising in Switzerland and Europe? Where will it rise more? In Switzerland, where the labor market is more flexible and structural reforms are more advanced, or in Europe, where the large common market and the single currency are expected to break up old structures? We have good reasons to believe that there is a potential for non-inflationary economic growth in Switzerland. Investment has been strong in 1998 and in the first part of 1999, deregulation and competition have made spectacular progress, large-scale adjustments have taken place in various economic sectors and more flexibility is now accepted in the labor market. Some adjustments in the interest rate have been made in order to restore a more neutral monetary stance. In one word, the degree of competitiveness of our economy is stronger today than it was 5 or 10 years ago, production capacities have not been fully exhausted and monetary conditions have been adjusted. Switzerland will thus benefit from the recovery in Europe without major risk of inflationary pressures. Indeed, the assessment of the future stability in the exchange rate between the Swiss franc and the euro depends crucially on what will happen in Switzerland and in the surrounding countries. If the convergence in fundamentals goes on, the exchange rate should remain relatively stable; otherwise some adjustment will be needed.

At that time, the euro will probably also be easily accepted for payments in Swiss border regions and tourist areas. As final advantage, the single currency greatly enhances market transparency and stimulates competition. On the one hand, Swiss importers can now directly compare euro denominated offers from different countries. On the other hand, exporters can less easily differentiate prices according to the market destination of their products. In the long run, transparency will promote efficiency for EU-members and non-members. The almost daily news about mergers and acquisitions in Europe is an expression of the ongoing fight for a favorable position on the unified European market. 2. Extraordinary stability of the Swiss franc/euro exchange rate in the past ...  After these remarks on the general consequences of the euro for Switzerland, let us now turn to the more specific, but nonetheless central, question of the exchange rate between the Swiss franc and the 1  BIS Review 17/2000  euro. As already mentioned, the exchange rate between the Swiss franc and the euro is of crucial importance to the Swiss economy. So far, the relation between the two currencies has been remarkably stable. Since the introduction of the single currency, the Swiss franc/euro exchange rate has fluctuated in an extremely narrow band of only 2%. Thus, exchange rate volatility has until now been even lower than the 8% volatility observable between the Swiss franc and the Deutsche mark during the three years preceding the monetary unification.