samchain/econo-pairs-v1 huggingface dataset:
The deepest red, for example, means the indicator is beyond the 90th percentile of its historic distribution. Chart 4 Selected indicators of underlying vulnerabilities  Series and sources: 12-month mortgage credit growth (Bank of England); share of households with mortgage LTIs above 4.5 (UK Finance); corporate debt growth (annual) – Bank staff measure (Bank of England, Association of British Insurers, Cass Commercial Real Estate Lending Survey, Datastream from Refinitiv, Deals Business Intelligence from Refinitiv, Deloitte, LCD, an offering of S&P Global Market Intelligence, London Stock Exchange, ONS, Preqin and Bank calculations); UK current account balance (% GDP) (ONS and Bank calculations). Notes: Each data series included in the heatmap has been rescaled into a percentile by using a kernel density estimate of its cumulative distribution function using all available data back to 1987. The Bank staff estimate for corporate debt adjusts the official ONS measure by adding sources of market-based finance not captured by the ONS and by removing other sources of market-based finance that have been misallocated to corporate debt. The net effect of these adjustments is predominantly to decrease the level of debt pre-crisis. Stocks of PNFC debt at 2018 Q3 split: 43% bank loans, 39% corporate bonds, with residual being money market instruments and other forms of non-bank finance. The temperature overall doesn’t look elevated. The only warm colour on this heat map stems from the UK’s continued reliance on the kindness of strangers – its persistent current account deficit, running currently at 4.4% of annual GDP (Chart 3).

In the UK at least, macroprudential policy has become an operational reality. Now, with the help of research and the latest techniques, we’re looking to the future. That work will help us stay disciplined and agile in keeping up with changes in the economy. It’s guiding us to what needs to be monitored closely in the non-bank system and where new standards of resilience might be needed to keep up as the financial system changes shape. Keep up we must. It’s no use waiting for the tremors. When the economic ground shakes, whenever that may be, we will all want the financial system to be resilient. 20  All speeches are available online at www.bankofengland.co.uk/news/speeches  20
This issue matters considering that, compared to our September 2019 estimates, the damaged caused by the social crisis and the Covid-19 crisis combined will add up to a loss of almost 10% of GDP by 2022 (Figure 14). This is complemented with the fact that these two crises combined have caused dismay among the economic agents, whose equity position has worsened as they have used up their slack and reserves. Thus, from September 2019 and through this year to date, companies increased their indebtedness by 16 points of GDP; the capitalization of the stock market fell by nearly 25 points of GDP; the government has used its sovereign wealth funds and issued new debt to raise it in net terms by almost 8 points of GDP, and households will have reduced their pension savings by about 10 points of GDP when the second withdrawal of funds is completed. All of this makes these agents more vulnerable to future stressful scenarios. The impact of these factors is already apparent in our economy. Our currency, for example, recovered only partially the parity and stability of before the social outbreak, reducing some of its capacity to cushion our capital market from external shocks. The long-term rates, which used to be more stable than those of comparable countries, are now more volatile, bringing home the changes in external financial conditions (Figure 15).

Second, the perception that the central bank will always “pick up the pieces” might give incentives to excessive risk-taking and high leverage. Even in good times that perception could discourage sound fiscal policies and prudent financial behaviour. In the design of non-standard measures and in its communication, the ECB has taken great care not to give such adverse incentives to either banks or governments. The following elements, among others, serve as proof:   The non-standard measures are temporary in nature. Some of them will expire automatically, if not renewed. On top of that, we have all the necessary instruments to reverse the current situation of abundant liquidity provision.   The mandate of the ECB as stipulated by the Treaty has an unambiguous focus on price stability. In combination with the ECB’s monetary policy strategy it provides a clear guidepost and has proved effective in anchoring inflation expectations over time.   The monetary policy strategy gives a prominent role to the monetary analysis which captures money and credit developments and ensures a symmetric reaction to financial forces.   The design of the tool called Outright Monetary Transactions creates the right incentives for governments to improve their performance with respect to fiscal prudence and structural reforms. I will expand a bit further on this fourth point. OMTs will only be activated in cases where the benefiting country has signed up to strict and effective conditionality attached to an appropriate European Financial Stability Facility/European Stability Mechanism (EFSF/ESM) programme.
In that case, we could witness a more drastic adjustment that would drive the economy into a deeper and more protracted slump that would be difficult for economy policy to manage. This is a risk scenario that the Riksbank’s Executive Board has devoted some attention to in recent years. It is also a risk that individual households have reason to take into account when they are about to take on new loans. So these mechanisms are something that we have to take into account when we make our monetary policy decisions. The current economic situation International economic activity still firm International economic growth was high last year. In the latest Inflation Report in October, we noted that the slowdown in international economic activity earlier this year appeared to have been temporary. The oil price had turned out considerably higher than we previously expected, however, prompting us to sharply revise up our oil price forecast. This was expected to contribute to an increase  1  See Financial Stability Report 2005:1. 2  Inflation Report 2005:3, page 43. 3/6  in international price pressures and to a slight moderation of growth. These effects were forecast to be relatively limited, however. The picture of relatively firm economic growth abroad in the coming years was thus broadly unchanged. Consequently, Swedish export markets also were estimated to grow at a firm pace in the next few years. In the US, the hurricanes and oil price increases in recent months have contributed to dampening the economy somewhat.

The net banking system result for 2006 stood at a profit of ALL 7.45 billion, about 12.9 percent more than in 2005. Revenues from the principal activity (net income from interest) resulted to 31.2 percent more than in the previous year, reflecting the banking system orientation to activities of higher return and a rise in the overall volume of assets. At end of 2006, the net income from interests was 92.6 percent of the gross banking system incomes, compared to 84 percent at end of 2005. This indicator has recorded constant growth, particularly over three last years, reflecting the overall net income sustainability for the banking system. During 2006, the banking system assets grew by All 127.7 billion, or about ALL 57.6 billion more than the growth of assets noted in 2005. The main contribution to the growth of banking system assets was given by large banks, though their share in the market is downward. The estimates show that the lending activity concentration level is lower than that of assets and deposits concentration. The significant growth of lending has been associated with increased share of nonperforming loans portfolio, by about ALL 3.1 billion compared to end of 2005. The loans portfolio quality indicator, expressed as a ratio of nonperforming loans to total loans portfolio in gross terms, is estimated at 3.1 percent as at year-end, against 2.3 percent as at year-end 2005. The banking system capability of covering loss loans with capital has been downward, but still at good levels.
This is true both at a domestic and an international level. A first step is for the relevant national authorities to have clear, well established, processes for decision making and for communicating externally, and to ensure that these processes are well understood by all parties. In the UK, HMT, the Bank and the FSA have a published Memorandum of Understanding (MOU), established in 1997, which sets out a high-level framework for co-operation in the field of financial stability. Although there is no such agreement at an international level at an equivalent level of detail, a ‘Memorandum of Understanding on co-operation between banking regulators, central banks, and finance ministries of the European Union in Financial Crisis Situations’ was signed earlier this year. It is fair to say, however, that this represents only a first step. Finally, if the authorities decide to take measures to mitigate the systemic impact of a crisis—for example through emergency liquidity injection of one sort or another—it is vital that the central bank, supervisor and ministry of finance act, and are seen to act, in a decisive and joined up way. In the UK, the MOU provides for strategic management of a crisis at meetings of a ‘Standing Committee’, the members of which are senior representatives of HMT (who chair the meetings), the Bank, and the FSA. BIS Review 79/2005  5  liquidity became fragile, then, all else being equal, firms would be more vulnerable to liquidity problems.

Zeti Akhtar Aziz: Three trends and their post-crisis implications Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Inaugural Official Monetary and Financial Institutions Forum (OMFIF) Global Lecture, Frankfurt, 1 March 2010. *  *  *  It is my great pleasure to be here in Frankfurt to participate in this inaugural OMFIF meeting, and to speak at this evening’s inaugural lecture at the Goethe University. These are significant times for policymakers and the financial industry. As we come out of the worst international financial crisis in decades, there still remain some unresolved issues that need to be addressed. The recovery has prompted focus on exit strategies and on the search for more permanent solutions that will put the financial system on a more solid foundation. These issues are however being considered during a period of exceptional conditions. Of concern, is that this might significantly influence the direction of the reform agenda with its medium and long term implications which could be counter to solutions that would lead us to a path of stability and sustainable growth. My remarks this evening will focus on three trends that are gaining significance in the global economy and the international financial system and their implications as we progress forward in this post crisis era.
It is also evident that the reputations of the credit rating agencies have become tarnished, but how much of this can be remedied through regulation is not so clear. In addition, the trading, clearing and settlement of certain derivatives has been carried out in such a way that insight has been poor and counterparty risks have been substantial. There is thus reason for the authorities to press for the development of the underlying infrastructure of, for instance, OTC-traded derivatives. Many ideas regarding what needs to be done to reduce the risk of future crises will probably be put forward over the coming six months. Let us hope that the wise and well-reasoned proposals will be the ones that are implemented. Crisis management I would also like to touch briefly on some crisis management issues. Good preparedness and good preparations are the be-all and end-all of crisis management. Both in Sweden and other EU countries, and in particular in the United States, it has been necessary on this occasion to improvise measures to a great extent in the management of the financial crisis. This is of course not exactly desirable. Experiences of earlier crises point to improvised measures often coming too late and costing more than ought to have been necessary. It is as yet too early to say what the outcome of the measures taken now will be, but there are nevertheless some bright spots.

This broad membership makes the TMA the authoritative industry association and focal point for treasury matters in Hong Kong. I am also glad that there are four committees established to focus on the four key areas that I have spoken about. We at the HKMA consider the TMA an important new element of our financial infrastructure. We are confident that the TMA will play a pivotal role in the maintenance of the status of Hong Kong as an international financial centre. May I congratulate you all on today's inauguration a nd wish you all the very best for the future. 2  BIS Review 4/2006
Our country was in the midst of solid economic growth and was experiencing a strong inflow of foreign workers. In the first three quarters, year-onyear growth amounted to 2.4%, buttressed by all components of global demand except construction. At the end of summer, however, the situation turned completely. The faltering international credit markets and the mounting uncertainty caused global trade to plummet and prompted a decline in growth in our export markets; indeed, most of our trading partners actually went into recession. In the fourth quarter of 2008, Switzerland’s GDP receded to 1.2% and unemployment, which had reached a low-water mark of 2.5%, started to climb again. In our quarterly assessment of last December, we predicted a 0.5-1% drop in GDP for 2009. In March this year, based on the latest data available, we revised the forecast downwards to a 2.5-3% decline. The SNB’s reaction In autumn 2008, as I said, we experienced an abrupt downturn of the economic cycle and, owing to plunging commodity prices, a spectacular change in the inflation outlook. Whereas inflation had been at 3.1% in July, price stability was entirely re-established from November onwards. This reversal forced the SNB to take rapid and decisive measures to ease its monetary policy. In a series of five steps between October 2008 and March 2009, we lowered the target range for the three-month Swiss franc Libor and brought down the market rate from 3% to 0.25%.

In others, the fiscal position is strong enough to stabilize the debt dynamics, but provides little buffer against adverse shocks, and very little room for fiscal policy to help cushion the effects of such a shock. 2  BIS Review 37/2004  •  Important challenges remain in the financial area as well. In many countries, large public sector debt burdens have left banking systems highly exposed to the sovereign, constraining authorities’ room for maneuver. There are also problems in banks’ corporate and consumer loan books, and a number of banking systems also have a large share of foreign currency denominated liabilities, in some cases held by non-residents. •  The durability of recent improvements in external positions, which reflect weak domestic demand in many countries, is also open to question. As domestic demand strengthens, external balances could move into deficit again, which in some cases will reintroduce a greater external risk. •  And in many cases, the financial exposure of the IMF and the multilateral development banks is already high. These balance sheet challenges took a long time to develop, and they will take a long time to reverse. They are the legacy of years of past fiscal decisions, magnified by the impact of crises on growth, the exchange rate, and the financial sector. They leave an exacting set of policy challenges.
As you can see, the SNB is keen to deepen its understanding of the potential implications of climate risks for its work, and it is actively engaged at the international level to achieve this goal. Beyond its prerogatives with respect to monetary policy and financial stability, the SNB integrates its thinking on environmental sustainability into its operational activities. Environmental management at the SNB For many years now, the SNB has been fully meeting its sustainable development responsibilities in its day-to-day operations. Since 1996, the SNB has applied a systematic environmental management concept aimed at reducing its energy consumption. We publish annual reports detailing the environmental impact of our operational activities and the progress being made on this front. 9 Our strategy for reducing CO2 emissions is based on four pillars: first, avoid; second, reduce; third, replace existing solutions with cleaner energy sources; and, finally, offset. For the past eight years, the SNB’s operational activities have been carbon neutral. In other words, it offsets all unavoidable CO2 emissions by investing in a range of climate protection initiatives around the world, including wind farms, geothermal projects and photovoltaic plants. But the SNB’s commitment does not end there: we have also done pioneering work in introducing the first environmental impact assessment for banknotes. This work allows the SNB to assesses the environmental impact of a banknote over its entire life cycle, and it has inspired other central banks to do likewise.

On the other hand, the SNB employs ESG criteria in the management of its equity portfolio via a selective exclusion policy. Since 2013, it has refrained from acquiring shares in companies whose products or production methods seriously violate ethical principles – notably, firms that produce internationally condemned weapons, seriously violate fundamental human rights or systematically cause severe environmental damage. Such exclusions, which also apply to our corporate bond portfolio, enable the SNB to align its asset management with the fundamental values and norms of our country. How does the SNB go about identifying the companies to be excluded? It follows a clear and structured process, in which it draws on the knowledge of external experts. With respect to the environment and human rights, we regularly evaluate our investments in a two-step process. First, an expert consultancy collects all publicly available information and then draws up a warning list containing high-risk companies (i.e. companies that most likely meet our exclusion criteria). In a second step, another specialist firm evaluates these allegations in detail and prepares a full report for each high-risk company, accompanied by a recommendation. The final decision on whether or not to exclude a company is taken by the SNB. In addition, the SNB exercises its voting rights for a portion of the shares in its portfolio. It focuses on aspects relating to good governance. Good governance contributes to the positive development of a company, which ultimately improves the return on our investments.
Collateral: is not a constraint for my business (disagree). However, a sizeable share of firms, one third, judged that they had invested too little. And two thirds of these – 20% of the entire sample – reported a variety of external financial constraints as an obstacle to investment. These firms were less likely to receive the full amount of finance they had applied for and more often experienced other external financing constraints. They were more often unable to borrow at the maturity required or faced collateral constraints. And again, these constraints were higher for the smaller firms that judged they had invested too little. 30% of the smaller firms in the sample said they faced external financing constraints on investment. Moreover 16% of small firms did not even apply for external finance for fear of rejection. One in five firms, out of a large representative sample, facing external financing constraints on investment sounds high – as does nearly one out of three of the smaller firms. It chimes perhaps with the still negative overall perception of financing conditions on the part of small firms. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  It is, however, hard to know whether or not these constraints were warranted. One would certainly expect the rejection rate of loan applications to be above zero. Not all investment projects are robust. It could represent prudent credit rationing by lenders. We do not have a sufficient time series to help gauge what a ‘normal’ rejection rate looks like.

Some caveats are required here. In the survey responses there was an under-representation of younger firms. This makes the results less informative about the investment behaviour and financing needs of younger companies, particularly of start-ups. Moreover, as this is the first time such a survey has been carried out, we cannot evaluate the results through time to see whether and how firms' approach to investment has changed over the years. And of course the survey reflects the subjective judgments of the firms that responded. These need to be evaluated against the harder, aggregate data on investment. That said, the survey sheds light on a number of interesting aspects of firms’ behaviour and on the availability of finance for investment, which may go some way to explain the weakness of investment since the crisis. I want today to concentrate on two of these. First, the reasons why around a third of the companies surveyed believed they had underinvested over the past five years. And second, whether the rates of return firms require to invest suggest that there is now a greater risk premium that may be leading to lower investment more generally. The ‘Underinvestors’  One of main motivations for the survey was to shed light on whether the cost or availability of finance was acting as a constraint on investment. Corporate borrowing in general crashed following the financial crisis. This was clearly due to constraints on the supply of finance as well as a marked reduction in demand.