samchain/econo-pairs-v1 huggingface dataset:
The Icelandic banking sector experienced a dramatic expansion in just a few years, funded by cheap foreign financing, which allowed it to boost its assets from 100 to almost 900 percent of GDP between 2004 and end-2007. This expansion made the Icelandic banking system one of the largest in the world in relation to GDP. As global conditions deteriorated in early 2008, banks’ CDS spreads rose to unprecedented levels. In response, banks slowed lending growth, enhanced liquidity buffers, reduced costs, and started a process of downsizing non-core operations and laying off staff. But their ability to deleverage was limited by the global risk aversion. A recent FSAP update and Article IV Consultation conducted in June 2008 pointed to several risks that were mounting throughout 2008: (i) liquidity and funding risks, associated with the banks’ reliance on market funding and their large funding needs over the short run; (ii) credit and market risks, resulting from foreign currency, equity exposures, and high indebtedness of domestic borrowers, as well as collateralized lending, connected lending, and large exposures; (iii) operational risks, associated with the banks’ rapid expansion in recent years; and (iv) quality of capital risks, related to complex ownership structures. In this light, the Staff Report concluded that “if risks were to materialize in full, Iceland could face severe financial strains.” Despite the authorities’ attempts to prepare for contingencies earlier in the year, the crisis brought down the three main banks within a week.

As the US is the primary supplier of liquid and safe assets, it attracts inflows of capital, a process which accentuates global imbalances. Excess demand for those assets pushes their prices up, which triggers financial bubbles. Financial development in surplus countries would go a long way to solve that problem by reducing the asset shortage, thus the probability of future bubbles. BIS Review 85/2009  1  •  Third, there is no denying that weaknesses and failures in financial markets played a major role in the build up to the crisis. Over the last decade, financial innovation has been organized to "transform" illiquid and risky instruments into (apparently) safe and liquid assets. That unsustainable process has abruptly come to an end with the burst of the credit bubble. During that period, rating agencies, accounting rules, unregulated and off balance sheet entities as well as very poor risk management all contributed, willingly or unwillingly, to fragilize our financial systems. Those weaknesses are at the origin of the crisis. Had they been addressed in due time, most of the problems we are now dealing with could have been avoided. Creating a new regulatory regime and strengthening our supervisory arrangements are at the forefront of efforts conducted at the national and, for the EU, at the European level. Those efforts are closely coordinated worldwide through the G20 process and the newly created Financial Stability Board.
This means, in particular, that for some parts of the economy even being too late will feel as though it is too soon. What is certain is that the current expansionary monetary policy cannot be maintained indefinitely without incurring inflation risks. Therefore, households and firms should prepare themselves for a return, sometime in the future, to a world of higher interest rates, with exchange rates being guided by market forces. This is the normal state of affairs, and all concerned should shake off bad habits learned in extraordinary times and remember that they are ultimately responsible for the long-run viability of their decisions and operations. 2. Safer financial system: regulation  It is here that we have most to learn from recent events, and here that we must adapt. There is a lot that could be said. However, I will be modest and confine myself to putting forward three simple ideas that are becoming part of the general consensus, as outlined in the G20 and FSB agendas. Firstly, it should not be a game of us (the central banks, the regulators, the government) versus them (the banks or their managers, the financial sector). What is at stake is the design of an economic system that is efficient, compatible with the rules of a market economy and favourable to value creation. One essential lesson of the financial crisis is that the system was not properly designed.

This is not only exemplary, it is an important lesson we can learn from the crisis for use in the future, and it holds true not only for households but for companies and public entities as well. There are many ways to express this message, but allow me to refer to French classical literature and recall for you Jean de la Fontaine’s celebrated fable about the cricket and the ant: “La cigale et la fourmi”. In the fable, the cricket who had not accumulated surpluses during the plenteous summer days preceding the crisis, found herself “fort dépourvue quand la bise fut venue”, that is, she “found when the winter winds blew free, her cupboard bare as bare could be”. The fact that, in this situation, the ant of the fable was not eager to lend to the singing cricket lends further realism to the analogy. II. Current environment and short-term prospects  What now? We are not yet ashore and the relatively positive assessment of the previous paragraph does not reflect a definitive evaluation. First, private consumption could be less robust should conditions on the labour market improve less than currently anticipated or even deteriorate again. Here the main worry is the ability of the Swiss economy to quickly reabsorb the 60,000 individuals working on a short-time basis. Recently, developments have been encouraging. In turn, the situation of the labour market depends on the continued recovery of the 60% share of the economy that is geared to international markets.
As in other countries, the outlook for the Spanish economy remains uncertain, although this has abated somewhat recently in light of the brighter figures for the world economy. It is likely that the recovery in the Spanish economy will lag that in the euro area to some extent. This is due above all to the marked weakness of investment, not only in the case of housing, but also in that of business investment, given the very low levels of capacity utilisation. While public investment will continue to account for a high proportion of GDP in 2010, this figure will be lower than in 2009. The outlook for private consumption is more uncertain. The main determinants of consumption will not be favourable, given the foreseeable behaviour of employment and the difficulty of reversing the high unemployment rate. Yet as the decline in households’ consumption has been much more drastic than that of their incomes, the saving rate is climbing to very high and indeed unprecedented levels. Hence, if the factors of uncertainty were to abate, consumption might contribute more significantly to the recovery. Given these constraints, the main support factor of activity in 2010 has to be the external sector. This will be assisted by the earlier recovery of our main trading partners and the relatively favourable course that Spanish exports are following.

And the threat posed by climate change means we need to give serious consideration to the resilience of our physical and digital infrastructure. The New York Fed has the appearance of an historic institution, but behind the stone façade 1/2  BIS central bankers' speeches  we’re grappling with these issues in the same way that you are. In our economic research, our supervision of financial institutions, the payments systems we operate, in short – in all that we do. Talent, technology, and innovation challenge us every day. They create incredible opportunity, but they also test us by exposing new vulnerabilities. I know that over the next couple of days there will be lots of valuable insights shared by experts about how to handle the challenges posed by big data, cryptocurrency, and climate change. But first, to kick off the conference, it’s my pleasure to introduce John Dugan, Chair of Citigroup. Citigroup has operations in over 150 countries, with about 200 million customer accounts worldwide.2 As head of a global employer with complex, international operations, John is no stranger to the changing nature of risk. John became Chair of Citigroup at the start of this year. Prior to that he was chair of the Financial Institutions Group at the law firm Covington & Burling LLP, where he spent much of his career. He has also held a number of public sector roles, including Comptroller of the Currency during a critical time for our financial system and economy, from 2005–2010.
These generally did not foresee the periods of strong house price increase in the first half of the 2000s. This suggests that there could have been some offsetting error, and in terms of the underlying assumptions used by the MPC one candidate is a frequent overprediction of  6  Bank of England (2000). 7  Harrison et al (2005). 8  Hills et al (2005) sets this issue out fully. BIS Review 27/2010  3  growth in earnings. It would not be right to suggest that this had automatically led to a systematic overestimate of inflationary pressure, since, as explained above, the published projections are also based on overall MPC judgements. But it is notable that despite frequently-expressed concerns by the MPC about periods of higher inflation leading to higher wage inflation, the relationship between earnings growth and RPI has become weaker over time. Chart 2 does not suggest a consistent relationship. Indeed, since 1995 the correlation between RPI (lagged by one quarter) and average earnings has been just 0.3, compared with 0.8 over the 1977–95 period. These comments on the past, however, clearly do not exhaust the range of potential uncertainties about the size and interpretation of the output gap. These include mismeasurement in the data, incorrect calibration of the relationship between demand and supply, and changes in the implications for inflation of any particular estimate of excess capacity. How might these difficulties affect the outlook at the present time?

But it would be disappointing if that debate degenerates into recrimination and antagonism. That would be to obscure the remarkable consensus that now exists - throughout the European Union and indeed more widely, and across a broad spectrum of political opinion within the countries of Europe, including this country, on the broad approach to macro-economic management. This unforced consensus extends to monetary policy directed to price stability, and it extends to budgetary policy directed to medium and longer-term fiscal sustainability. There is growing recognition, too, across the continent, of the importance of structural policy directed to supply-side flexibility. This strengthening consensus is fundamentally important - more fundamentally important, in terms of the economics of it at least, than whether these common objectives are pursued inside or outside the framework of monetary union. Pulling these thoughts together, it would be a mistake in my view for monetary union to go ahead without reasonable confidence of genuine, sustainable, convergence between its members; and it would be a mistake for any individual country to seek to join, or to be permitted to join, unless it had achieved genuine, sustainable, convergence. If there are serious doubts - generally or in any particular case - it would be in no-one’s interest to proceed. But it would be just as big a mistake, if monetary union does not go ahead, or for countries on the outside, if individual governments saw that as an opportunity to seek to take short-term advantage of the apparent macro-economic freedom that that gave.
This “credit expansion externality” implies a market failure and may justify public intervention. As experience has shown that it is precisely the bursting of property bubbles that has played such a decisive role in several financial crises, there exists reason to believe that such credit expansion externality may be particularly great on the property market. According to one view, a central bank should try to counteract the increase of property prices and credit volumes by keeping the policy rate higher than would otherwise be necessary during the upturn. Central banks should lean against the wind, as this is usually described. The idea is that the increase in property prices and credit volumes will thus be smaller, but also that the decline, in return, will be significantly less dramatic (Figure 8). If the development of property prices and credit volumes becomes more balanced, it is also assumed that the real economy and inflation will be more stable. While growth will undoubtedly be somewhat lower in the upturn, it will, on the other hand, make it possible to avoid the deep recession that may be the consequence of a fall in property prices. BIS Review 68/2010  13  Figure 8 Leaning against the wind Property prices and lending Without ” leaning” With ” leaning”  time  One complication arising in this context is that it is not entirely easy to incorporate the risks that may be associated with the rapid increase of property prices and credit volumes into the normal work of forecasting and analysis.

John C Williams: Banking culture - the path ahead Remarks by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the conference "Building Cultural Capital in the Financial Services Industry: Emerging Practices, Risks and Opportunities", Federal Reserve Bank of New York, New York City, 4 June 2019. * * * As prepared for delivery Good morning, everyone. I’d like to begin by welcoming you to the Federal Reserve Bank of New York and to the fifth conference on culture in financial services that we’ve hosted. Before I launch into my remarks, it’s time I remind everyone that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee or others in the Federal Reserve System. When I took on the role as President of the New York Fed last year it so happened that my first day coincided with this conference. In my remarks that day, I emphasized that culture is a longterm project, a constantly evolving one, which is never done. The trouble with long-term projects with no distinct finish line is that they can lack a sense of urgency. The pressure to make real progress is often missing, especially when there are so many other priorities competing for our time. Headlines in the financial news illustrate the lack of progress. In the year since our last conference, stories of money laundering and fraud have been an all-too-frequent feature.
2 Additional information about SUERF is available on its website, www.suerf.org/. 3 The amortization of premiums on portfolio securities holdings results in downward pressure on the size of the 13 / 15  BIS central bankers' speeches  Federal Reserve’s balance sheet over time, even absent a reduction in reinvestments associated with increasing redemption caps. Specifically, the balance sheet includes securities holdings at face value and records unamortized premiums (discounts) as a separate asset (negative asset). As the premium (discount) security amortizes to its par value—with an associated offsetting reduction (increase) in remittances to the U.S. Treasury—the size of the balance sheet declines (increases). 4 The maturity structure of the balance sheet was only loosely incorporated into the purchase plan. Purchases of  Treasury securities were targeted at maturity sectors; within each sector, specific issues were selected for purchase using a relative-value approach based on a spline fitted to market prices. Sack, Implementing the Federal Reserve’s Asset Purchase Program, February 9, 2011. Treasury securities acquired through reinvestment are allocated in proportion to issuance. Agency MBS purchases are distributed across instruments roughly in proportion to anticipated gross issuance of those securities at the time. Potter, The Implementation of Current Asset Purchases, March 27, 2013.

Investors in schemes involving crypto tokens may also be exposed to a heightened risk of fraud. These schemes are often conducted online by operators whose authenticity and credibility are difficult to verify. Managing crypto risks The challenge for central banks and regulators is this: how can we harness the potentially transformative benefits of blockchain technology and crypto tokens while containing some of their risks? MAS has to-date chosen not to regulate crypto tokens directly. But we are: 3/6  BIS central bankers' speeches  focusing on the activities associated with crypto tokens, evaluating the different kinds of risks these activities pose, and considering the appropriate regulatory responses, all the while, seeking to ensure that we do not stifle innovation. The key risks MAS is monitoring in the crypto world are in the areas of financial stability, money laundering, investor protection, and market functioning. Financial stability MAS and other regulators are studying the nexus between the crypto world and the financial system to assess how risks to financial stability may be transmitted: market risk from the direct exposure of financial institutions to crypto tokens; credit risk through unsecured lending to crypto token businesses; and leverage when borrowers pledge crypto tokens as collateral to borrow and buy more crypto tokens. MAS assesses that the nature and scale of crypto token activities in Singapore do not currently pose a significant risk to financial stability. But this situation could change, and so we are closely watching this space.
We are also working to improve the Fund’s website, which will include a continuous update of the Fund’s value. Conclusion Transparency is important. Transparency contributes to strengthening confidence, and confidence is crucial for an effective monetary policy – in normal times, but perhaps particularly in times of crisis. According to Lars Weisæth and Ragnar Kjeserud, two authorities in the field of crisis psychiatry, to be successful in managing a crisis, the responsible authorities must be perceived as competent and at the same time have a reputation for openness and honesty. 55 I started this lecture by describing how the Bank of England managed the crisis during the 1780 Gordon riots. A military defence was necessary to safeguard society’s values. The event gave rise to the expression “as safe as the Bank of England” and later “as safe as the bank”. We have experienced a deep financial crisis. We are now hopeful that it is coming to an end. The reputation of private banks has not been left untarnished. Banks’ own behaviour was one of the causes of the crisis. The very depth of the banking crisis is attributable to a collapse of trust among banks. They no longer considered their fellow banks as “safe”. Financial markets stopped functioning. The expression “as safe as the bank” became somewhat hollowed. We have seen that the most unexpected places, such as small coastal towns and the northern region of Norway, have been hard-hit by the financial crisis. The crisis has also left its mark on our language.

The cure in such cases is to achieve primary surpluses in the future, and this can be done in two ways: cutting fixed expenditures or raising taxes. We know, even from our own experience in the 1990s, that this process is painful. On the other hand, there is real danger of conflict between the objectives and directions of the fiscal and monetary policies. Tightened monetary conditions and loosened fiscal conditions have contrary macroeconomic effects, at least on demand. To this we could add the significantly delayed structural reforms which could have supported the resolution of supply-related problems, but have not yet been brought into the focus of the budgeting debate. The combination of these two factors would seriously hinder the endeavours to limit and keep inflation down; and what is more, it would create conditions for return to the macroeconomic imbalances of the recent past. Such a development, inter alia, would have a strongly deleterious effect on the businesses and banks in Bulgaria. Therefore, in terms of greater predictability of the macroeconomic environment dynamics, now one of the major economic policy tasks is to try to synchronise as much as possible the monetary and fiscal conditions in Bulgaria. In the language of  2/5  BIS - Central bankers' speeches  budgeting, this means accomplishing fiscal consolidation that can be measured by a concrete number: a budget deficit not higher than 3% of GDP.
Both the US constitution and the EU Treaty were entered into voluntarily and resulted in the closer union of the participating states. Both serve to lay down the level at which powers are to be exercised and decisions taken. BIS Review 61/2001  1  We must understand that the EU's underlying framework, like that of the US, is a product of its times. When the US constitution was drafted, the involvement of the state in economic matters was extremely limited. In fact it was not until over a century later that the US finally had a fully-fledged central bank, after earlier attempts to establish a national bank had ended in the Fed's predecessors being dissolved. By contrast, the process of European integration began at a time when the power of the state in managing and intervening in the economy was high and many thought that this power should indeed be used to a large extent. Let me point out that since the establishment of the European Community, economic integration has served not only as an end in itself, but also as a means of achieving wider objectives, including greater political integration. Progress towards establishing the so-called "four freedoms", namely the free movement of goods, services, capital and labour, required, from the start, the creation of an institutional system with state-like attributes such as a legislative, an executive capacity and judiciary functions. As economic integration has progressed, this institutional system has developed and adapted.

Thus, while the euro area shows a unique institutional setting – in contrast to monetary policy, fiscal policy is far from being single – national governments have agreed to common rules which ensure that the euro area remains an efficient and stability-oriented single economic area. 4  BIS Review 61/2001  Conclusion Let me conclude by saying that the single currency and the establishment of a new European institution responsible for monetary policy in the euro area complemented the process of economic integration that started half a century ago in Europe. This process and the institutional build-up, together with clear and coherent policy goals and an efficient allocation of the respective responsibilities, are transforming the euro area into an increasingly unified economic entity which, in many respects, resembles the US. Although most of the required structural reforms still have to be implemented, it cannot be denied that substantial progress has been made. The introduction of the euro has been and will continue to be a powerful catalyst, contributing to greater competition in the economic and the political sphere, thereby further enhancing the welfare of the citizens in the euro area. Ladies and gentlemen, political leaders throughout Europe have recognised the need for structural changes in both taxation and expenditure policies and regarding the deregulation of product and labour markets.