samchain/econo-pairs-v1 huggingface dataset:
Per cent 25  December 2003  20  25 20  Household debt  15  15  10  10  5  5  0  0  -5  House prices  January 2004  -5 -10  -10 1983  1987  1991  1995  1999  2003  Sources: Norwegian Association of Real Estate Agents, Statistics Norway and Norges Bank  Home-owners who have seen the value of their dwellings rise have the possibility of taking up new mortgage-secured loans. They free up a portion of their home equity value to finance consumption and other investments. It is easiest to sell dwellings in the largest cities and some specific areas are particularly attractive. Residential property is now a fairly liquid and attractive investment. Price developments in the housing market are characterised by the fact that there is little change in the housing stock from one year to the next. As a result, higher demand for housing will in the first round translate into higher prices. Housing prices fluctuate more than prices for goods and services, where supply can be rapidly adapted. A persistently high rate of increase in house prices can in isolation engender expectations of a further rise and can thus prove to be self-reinforcing for a period. BIS Review 11/2004  17  Chart 26. Short-term interest rates in Norway Actual and market expectations.

Minouche Shafik: Making markets fair and effective Speech by Ms Minouche Shafik, Deputy Governor for Markets and Banking of the Bank of England, at the London School of Economics, London, 27 October 2014. *  *  *  Accompanying figures can be found at the end of the speech. Making markets fair and effective It is a real pleasure to be giving my first speech as Deputy Governor of the Bank of England at the London School of Economics (LSE). It resonates on so many fronts. The LSE has produced many members of the Monetary Policy Committee, Deputy Governors and indeed Governors of the Bank of England as well as vast numbers of its staff over the years. I was taught macroeconomics at the LSE by Charlie Bean, one of my predecessors at the Bank as well as by my host this evening, Nick Stern, when I did the MSc in economics. And the topic of my speech tonight resonates with the origins of the LSE as an institution that always sought to bring the best of academic thinking to the pressing problems of the day. As you will no doubt realise by the frequency of misconduct stories in the papers, Fixed Income, Currency and Commodity (or FICC) markets are certainly dealing with pressing problems.
From this mixed bag, only one clear explanation emerges: that there is no clear explanation. To a first approximation, we remain unsure quite what caused the Flash Crash or whether it could recur. 1 That conclusion sits uneasily on the shoulders. Asset markets rely on accurate pricing of risk. And financial regulation relies on an accurate reading of markets. Whether trading assets or regulating exchanges, ignorance is rarely bliss. It is this uncertainty, rather than the Flash Crash itself, which makes this an issue of potential systemic importance. In many respects, this uncertainty should come as no surprise. Driven by a potent cocktail of technology and regulation, trading in financial markets has evolved dramatically during the course of this century. Platforms for trading equities have proliferated and fragmented. And the speed limit for trading has gone through the roof. Technologists now believe the sky is the limit. This rapidly-changing topology of trading raises some big questions for risk management. There are good reasons, theoretically and empirically, to believe that while this evolution in trading may have brought benefits such as a reduction in transaction costs, it may also have increased abnormalities in the distribution of risk and return in the financial system. Such abnormalities hallmarked the Flash Crash. This paper considers some of the evidence on these abnormalities and their impact on systemic risk. Regulation has thin-sliced trading. And technology has thin-sliced time. Among traders, as among stocks on 6 May, there is a race to zero.

Page 2/6  Berne, 12 December 2019 Thomas Jordan  News conference  The external value of the Swiss franc has remained stable since the monetary policy assessment in September. There has also been scarcely any change in the trade-weighted exchange rate over 2019 as a whole, although it initially declined before appreciating again in the summer. The Swiss franc thus remains highly valued, and the situation on the foreign exchange market is still fragile. Short-term interest rates are close to the SNB policy rate. The long-term Swiss franc rates reached new lows in the summer, and have recovered only slightly since. This pattern reflects global interest rate movements. The yield on 10-year Swiss Confederation bonds currently stands at –0.5%, compared with –0.2% at the beginning of the year. The long-term interest rates in the euro area and the US have declined even more strongly. All in all, the low interest rate environment around the world has become more entrenched over the course of 2019. Finally, inflation expectations have declined slightly in Switzerland by comparison with the start of the year. However, they remain within the range of 0% to 2% that the SNB equates with price stability. Five years of negative interest  Ladies and gentlemen, the SNB introduced the negative interest rate five years ago. Hardly anyone thought then that it would still be in place at the end of 2019. I would therefore like to take this opportunity to set out for you why we are convinced that negative interest remains necessary today.
Villy Bergström: Should the Riksbank be concerned about asset prices? Speech by Mr Villy Bergström, Deputy Governor of the Sveriges Riksbank, at a Breakfast Meeting arranged by Round Table in Sundsvall, on 11 April 2000. *  *  *  The Swedish economy is growing more quickly than for a very long time. In 1999, GDP increased by 3.8% and during the coming three years, growth is expected to average almost 3.5%. At the same time, the prerequisites for a long-term favourable development appear better than for many decades. Almost all economic indicators are pointing in the right direction. Despite a very strong upswing, the long-term inflation expectations remain stable and close to the target for monetary policy. Central government finances are in surplus for the second year running and despite a planned tax reduction of over SEK10 billion this year, the surplus in the central government budget is expected to total at least 2% of GDP. From having had the next poorest budget balance in the entire EU in the early 1990s, the budget balance in our public finances is now among the strongest in the whole union. Since the mid-1990s, central government debt has decreased from 80 to 70% of GDP. Our country’s financial balance, ie the current account, has at the same time shown a surplus for a number of years and the foreign debt has fallen from 40 to 20% of GDP during this period.

The Consultative Paper calls on supervisors to ensure that each bank has sound internal processes in place to assess the adequacy of its capital based on a thorough evaluation of its risks and capital structure, thus moving the Accord beyond a ratio-driven minimum capital standard to a comprehensive approach for assessing capital adequacy. In general, supervisors have expected and continue to expect banks to hold more than the regulatory minimum amount of capital. In proposing this supervisory review of capital, the Basel Committee intends to foster a more active dialogue between banks and their supervisors with respect to the actual level of capital banks choose to hold. I want to stress, however, that this proposed approach to assessing capital adequacy in no way intends to replace the judgment and expertise of bank management. Nor is this approach meant to shift ultimate responsibility for the adequacy of bank capital to the supervisors. On the contrary, I believe that managers are the ones with the most complete understanding of the risks that their institutions face and it is they who must have the primary responsibility for overseeing these risks. The task for supervisors in this framework is to evaluate how well banks are assessing their own capital needs relative to their risks, including whether banks are appropriately addressing the relationship between different types of risks. To this end, the Basel Committee is currently developing guidance to help supervisors evaluate internal capital assessments conducted by banks.
This residual risk can be eliminated by euro adoption, and fasttrack entry into euro area thus seems to be an optimal exit strategy from the current regime. In the case of countries with floating exchange rates, on the other hand, the direct exchange rate risk may be  2  BIS Review 8/2004  much smaller. The debate may therefore pay more attention to preconditions that should be met before entry to minimise the risks of excessive credit booms with undesirable consequences. Let me conclude by saying that central bankers in acceding economies should focus on two issues in the period ahead. We should aim to meet the nominal convergence criteria in a sustainable manner and we should also provide good guidance in the area of financial stability. And we certainly need much more discussion to find ways in which central banks, fiscal authorities and financial system regulators can foster financial stability in the monetary union. The balance of risks will depend very much on the particular legal and regulatory framework of each economy and the quality of corporate governance in financial institutions. The risks could become serious only if the inflow of external funds were to be intermediated by a weak domestic financial sector. Further improvements in the legal and regulatory framework are thus very important. We must also strengthen our capacities in macroprudential analysis, as early identification can help prevent financial vulnerabilities from building up further.

News conference  Berne, 14 December 2017 Fritz Zurbrügg  Introductory remarks by Fritz Zurbrügg  In my remarks today, I would like to address some of the developments currently taking place in the field of financial stability. I shall look at the big banks first before turning to the domestically focused banks. I will conclude with a few words on the new banknote series. Big banks  As Thomas Jordan has already noted, the international economic environment has continued to improve since the last news conference in June. Conditions on the financial markets have remained stable. Premia for bank credit default swaps, for instance, have barely changed since June. Premia have thus settled at lower levels again following the turbulence in 2016. Against this positive backdrop, both of Switzerland’s big banks remain on track to meet the requirements of the ‘too big to fail’ regulations with respect to resilience. This first pillar of the regulations covers requirements pertaining to the going-concern loss-absorbing capacity of systemically important banks. Both Credit Suisse and UBS already comply fully with the final 1, risk-weighted requirements. However, further improvement is needed with respect to the leverage ratio. Both of the big banks have also made progress on the second pillar of the regulations, ‘resolution’, which covers the orderly restructuring and wind-down of a bank that can no longer function as a going concern and is thus deemed to have become a gone concern.
However, we know the difficulties banks face and, most importantly, the difficulties their clients face in dealing with anti-money laundering legislation. Therefore, we are preparing a special 4/5  BIS central bankers' speeches  ‘Know Your Customer’ platform. We also need legislation here. We will not be able to do this without legislation. In our opinion, it is this platform that will allow everyone to reduce the costs of implementing anti-money laundering legislation. We hope it will get established. Also, we are developing the Faster Payments System and its functionality in order to level out the working conditions in the payment market. We can see that it is in demand both by banks’ customers and banks themselves. It levels the playing field in terms of competition. I will not go on with the list. I mentioned this to illustrate our approach. We will not turn a blind eye to problems and risks, but where we can, we will try to help banks reduce costs, which we believe is important. I will not have time to discuss questions now. We will have the opportunity to discuss things further and more in detail at our traditional annual forum, the International Financial Congress. It will take place in a month. I think we should return to the questions that Mr. Aksakov raised. And when taking the reporting into account, I agree, we should take another look. We are constantly reviewing these reports.

We can see that banks did not restrict lending, as was the case, for example, during the crisis of 2014–2015, but, on the contrary, significantly increased it and, moreover, restructured a large volume of their clients’ loans. That is to say, they supported borrowers in an acutely difficult period when they needed financial resources. This made it possible to avoid more serious consequences both for banks, whose credit losses were not as serious as many expected, and for the economy as a whole. It seems to me that this shows that building such long-term relationships with clients is very important, and banks had the opportunity to do so because the financial stability they had established in previous years made it possible to carry out a policy of not demanding that their clients immediately repay loans and continuing to issue loans. Therefore, it seems to me that this is a positive result of an overall very difficult last year. The corporate portfolio has shown serious growth, by almost 10%, and continues to grow. In the first four months of this year, growth was 3.5%, taking January to the end of April into account. That is, this trend continues to be seen this year as well. At the same time, it is important that not only large companies are being granted loans, but small- and medium-sized businesses too: the portfolio of small- and medium-sized businesses grew by 20% last year, which is a record level since 2014.
A comparison with European countries that fared poorly as a result of the financial crisis shows that Iceland’s exports have not grown more than those of euro area countries or those with fixed exchange rates. Actually, excluding seasonal effects, some of the fixed-rate countries have experienced greater export growth (Chart 2). 5. Actually, if exchange rate volatility is excessive and exporters are heavily leveraged in foreign currency, a large currency depreciation could conceivably have a negative impact on exports. Even though the depreciation has a positive effect on an exporter’s cash flow, the balance sheet effects could make the company technically insolvent. This complicates access to credit, which may be a prerequisite for the expansion of exports in a small economy with specialised export production. According to the above, my preliminary diagnosis is that the erosion of the value of the króna since its launch as an independent currency in 1920 can be traced to an inadequate monetary framework (particularly in the early years), general lack of discipline in economic policy-making, and the interaction of those problems with problems of running the world’s smallest independently floating currency. In order to maximise the chance of recovery, all of these underlying weaknesses must be treated simultaneously, including the instability of the  BIS central bankers’ speeches  3  currency, as some of the prescribed medications for long-term reduction of exchange rate volatility are difficult to administer unless exchange rate volatility is reduced first.

Although the Central Bank has announced its intention to intervene in the foreign exchange market more actively than it has in the past in preparation for lean times, such intervention should not be expected to have a profound or lasting impact on the exchange rate.5 Other ways to reduce harmful exchange rate fluctuations should therefore be considered. Negotiations are currently underway concerning Iceland’s possible accession to the European Union and the Economic and Monetary Union (EMU), upon fulfilment of the Maastricht criteria. If there is no advantage to a floating exchange rate – or even less than no advantage – then there is clearly no benefit in delaying membership of the European Exchange Rate Mechanism (ERM II), which precedes full membership, provided that EU membership is approved in a national referendum and by member states. How quickly Iceland fulfils the Maastricht criteria is primarily in the hands of the authorities and the social partners. In my view, the timing of membership will be determined primarily by how quickly the general government debt ratio can be lowered towards the Maastricht criteria. According to the formal requirements, general government debt must be less than 60% of GDP or fall quickly enough towards that target. Belgium, Italy, and Greece were admitted to the EMU with general government debt in excess of 100% of GDP – a decision now rued by many. Iceland will probably be subjected to more stringent requirements, for which I am tempted to be grateful.
Household and business confidence continued to strengthen, reinforcing the economic momentum. In the event, the unemployment rate fell far faster than we had expected, falling below 7% in February 2014. But even as the recovery strengthened and survey indicators of output growth reached levels previously associated with sharp policy tightenings (Chart 1), market expectations about the future path of policy remained subdued (Chart 2). Participants understood the conditionality of guidance, as they and the MPC learned that there was still considerable spare capacity in the economy. Chart 2: Forward market interest rates rose only modestly as unemployment fell quickly towards 7% August 2013 guidance issued  Data published showing Percent unemployment fell to 6.9% 4.0  February 2014 guidance issued  3.5 3.0  Counterfactual path for Bank Rate based on historic correlation with survey indicators of output growth  2.5 2.0 1.5  UK 1 year instantenous forward OIS rates  1.0 0.5 0.0  Jan. 12  Jul. 12  Jan. 13  Jul. 13  Jan. 14  Jul. 14  Sources: Bloomberg Finance L.P., IHS Markit, ONS and Bank calculations. The MPC’s second use of guidance responded to another structural development: the sharp fall in the equilibrium real interest rate, or r*. 6  In February 2014, the Committee explained why it expected the equilibrium rate of interest to be much lower than in the past, and then outlined the possible consequences for policy. 7  The Committee signalled that the policy path was likely to be different from the past.

Of course, the execution of our exit strategy will still present us with a tricky judgement call. We do not want to nip a recovery in the bud prematurely. Equally we will not want to let the inflation genie out of the bottle. But that is the sort of balancing act that monetary policy makers regularly face, even if the scale of the downturn and the size of the policy stimulus that has to be withdrawn are so much larger now. A previous guest at this Feast, Winston Churchill, declared that he “would rather see finance less proud and industry more content”, shortly before he took the fateful decision to return  BIS Review 62/2009  3  the pound to the gold standard at an overvalued rate. Finance has certainly been humbled by the events of the past couple of years and the post-crisis financial world is bound to look very different from the pre-crisis one. But let us also hope that it is a world in which industry is more content. It remains only for me to thank you again for a marvellous meal and to propose a toast. To the Manufacturing Industries of Hallamshire. 4  BIS Review 62/2009
Although the gradual move out of cash has made paper-based instruments such as money orders, postal orders, bank drafts etc., popular for several decades, their market sizes have continued to decline, largely due to inherited inefficiencies and cumbersome processes in effecting and settling payments. Some of these retail payment instruments and systems have now been replaced by electronic payment instruments and cards, and the tendency is to move towards electronic credit and debit transfers. According to the statistical reports of the Bank for International Settlements, some interesting movements in the use of retail payments in selected countries can be seen. In volume terms, France, Germany, Italy and the UK have reduced cheque use from a range of 3-38 percent of total non-cash payments, respectively, in 2000 to a range of 1-26 percent in 2006, while there are no cheques at all in the Netherlands. In Brazil too, cheques have decreased from 57 to 25 percent or less in the same period. Credit and debit transfers and cards, on the other hand, have risen significantly in these countries. This picture is different to that of India, where cheque use has reduced at a slow pace from 84% in 2004 to 73% in 2007 and in Sri Lanka from 75% to 65% in the same period, indicating the dominance of cheques. I believe the situation is the same for other countries in the SAARC region.

Prospects and outlook, therefore, for Asian region trade, and consequently retail payments, are good. 3  Transforming challenges to new opportunities  3.1 Challenges and complexities: Retail payments development is very challenging due to numerous complexities and is much more difficult to modernize than large value  2  BIS Review 61/2008  payments. In order to complete even a small payment, it is necessary to have appropriate and acceptable payment instruments, an institutional set up, an enabling legal environment, infrastructure, processing procedures and money/fund transfer mechanisms. There are enough opportunities to change this situation, if all stakeholders are committed to introducing innovations, with appropriate safeguards. We need to look at some of the practical ways of starting this transformation. 3.2 Discourage cash and paper-based instruments: Progress in the use of electronic payments has been slow in our region due to numerous reasons. Cash is the most popular mode of face-to-face payments for retail transactions. Cash does not require the user to go to specific places, use computers or special equipment to originate or settle a transaction. Moreover, the payment is final. Given the user preference and convenience, cash and cheques still dominate as payment instruments in many countries. Businesses also prefer cheques because of inherited cash management processes, legacy of accounting systems or reluctance by their governments to transact in electronic payment instruments. If there are cheque clearing delays or frequent cheque returns, small businesses have no choice but to borrow for short periods, perhaps at exorbitant interest rates, from informal sources.