samchain/econo-pairs-v1 huggingface dataset:
This is not a criticism of statistical agencies: the UK’s Office for National Statistics (ONS), down the road in Newport, do a fantastic job of tracking our economy, to say nothing of the help they have provided with this speech. It is simply that, in a dynamic economy, it is impossible to track everything with statistical precision. 1 Faced with those uncertainties, it is often useful to try to form pictures using disaggregated subsets of the jigsaw pieces – much as we do when completing a large jigsaw puzzle. As with a jigsaw, this can help in understanding the bigger picture. Second, standard measures of economic activity, such as GDP, are not perfect metrics of societal well-being. This problem has long been recognised, including by the original architects  1  2  For example, see the recent review of the UK’s statistical system (Bean (2016)). BIS central bankers’ speeches  of GDP. 2 It is one reason why statistical agencies in a number of countries, including the UK, have recently begun publishing a broader range of measures of well-being, social as well as economic, subjective as well as objective. These provide a different window on how economies and societies are performing over time and across sectors. Third, even though monetary policy cannot discriminate between regions, sectors or individuals, that does not mean its impact is exactly the same across each of these groupings. It is not. The effects of interest rates, whether higher or lower, affect savers and borrowers very differently.

Where TLAC is issued in a group brings me to the final key dimension of TLAC – distribution. One of the big innovations of TLAC is to go beyond previous capital accords to address the distribution of loss absorbency within groups. This was always going to be necessary for resolution which operates at legal entity, not group level. And it is essential to engender trust and time consistency between authorities cross-border. As it is set out in the principles covering the Term Sheet, host authorities must have confidence that there is sufficient loss absorbing and recapitalisation capacity available to subsidiaries in their jurisdictions with legal certainty at the point of entry into resolution. Internal TLAC – prepositioned loss absorbency down-streamed from the resolution entity to material subgroups, equivalent to 75–90% of the subgroup’s needs – is designed to achieve this, without pushing up overall TLAC requirements for the group as a whole. It also provides a mechanism in an SPE strategy through which by converting the internal TLAC via contractual terms, the key operating subsidiaries can be kept outside resolution and the losses can be transmitted to the top of the group for the resolution to take place in one legal entity, be that a holding company or a parent bank, in one jurisdiction. Again this addresses the concerns that some have expressed about making resolution work cross-border in different legal regimes. So if those are the trees, what is the wood?
According to the report, it could in the long term lead to a change becoming necessary in the traditional role of the intermediaries. For example, they may choose to concentrate on the segments they consider most profitable. •  A further important effect is that price formation can be improved when all trading is centralised to one platform. This could make it easier for market players to find a balanced price. New information will have a rapid impact on prices with the aid of the new technology. This can in turn lead to a reduction in interest-rate differentials or spreads between purchase prices and selling prices. At the same time, the report points out the risks ensuing from electronic trading systems. One evident risk, which may seem trivial in a way, but in reality may have great significance, concerns the technology itself. It quite simply has to work, and do so even in situations where there is unrest on the market. Knowledge of the traditional methods of trading, such as telephone trading, will of course also decline over time. This means it will probably become increasingly difficult to trade using alternative methods in the event of system disturbances. Allow me therefore to emphasise the importance of the systems being reliable and of having functional emergency routines. Electronic trading systems will not necessarily lead to all of the benefits I recently mentioned.

Although the electronic platform being launched today will not be able to meet all of these, I still hope that it will prove to be the starting point for something new and contribute to an eagerly-awaited renaissance for Swedish fixed income trading. Good luck! BIS Review 37/2001  3
And through the process of stress-testing the balance sheets of financial institutions, the FPC and PRA are now laying out transparently the risk standard they are requiring from firms and from the financial system as a whole and which is the subject of external scrutiny. But this has not fully allayed occasional criticisms of the Bank’s regulatory policy choices. At various times, the Bank has been warned against pursuing the stability of the graveyard or the tendencies of the Taliban. A somewhat better defined financial stability anchor, set by Parliament and reflecting society’s desires, could over time damp these criticisms. In the 1950s and 1960s, central banks and academics strove to define an appropriate anchor for monetary policy. That brought success, with inflation targets and attitudes now wellanchored. This gives grounds for optimism that financial stability can follow the same path though, as monetary policy found, the journey is likely to be long and arduous. Myopia biases The Bank’s monetary, macro-prudential and micro-prudential policy regimes all exhibit instrument independence. Decisions are made by Committees of technocrats, operating at arms-length from the political process. The case for delegation of policy responsibility is founded on myopia biases within society at large or among its elected representatives. In a monetary policy context, myopia tends to manifest itself as a desire to bring forward tomorrow’s income to today, typically by setting monetary policy too loose. As one former US president is rumoured to have put it, “I want tight money – and lots of it”.

It has been argued that targeting a 2% inflation rate results in this zero bound constraint binding too frequently, inhibiting the effectiveness of monetary policy. 47 A higher target would loosen that constraint. This academic debate may run for some time. On the financial stability side, the position is less straightforward. There is no single, easily observable or quantifiable target for systemic risk against which to hold the FPC and PRA to  45  Bernanke and Mishkin (1997) first coined this term in the context of inflation–targeting. 46  Shiller (1997). 47  Ball (2014). BIS central bankers’ speeches  7  account. And the public at large often do not have well-defined or strong attitudes towards financial stability – except, perhaps, when things go wrong. Since 2012, the Bank has been surveying the general public on how they believe the Bank has performed in protecting the financial system. Some reassurance can perhaps be taken from the fact that this has moved from a net dissatisfaction score of 13 in 2012 to a net satisfaction score of 40 today. 48 Nonetheless, by itself this approach falls well short of having a clear objective against which the FPC and PRA can periodically be assessed. The FPC has begun publishing a set of financial stability indicators against which it assesses systemic risk and is held to account.
The quantitative definition of price stability has been clarified after five years of experience The definition adopted by the ECB’s Governing Council in October 1998 was confirmed and clarified in May 2003 following an in-depth review of its strategic framework by the Eurosystem. In the wake of this assessment exercise, the Governing Council specified that price stability was defined as an annual increase in the HICP close to, but below, 2% over the medium term. Several remarks should complement this definition: - by specifying that inflation should be close to 2%, the Governing Council intended first of all to confirm the symmetrical nature of its strategy by ruling out situations of deflation. This clarification also makes it possible to take account of any possible measurement bias in the price index, as well as inflation differentials within the euro area; - the quantitative definition of monetary stability brings the Eurosystem’s strategic framework close to that of central banks that rely on inflation targeting, especially if a broad definition of the latter is accepted, such as that expressed by the term “flexible inflation targeting”. The big difference is in the use made of forecasts derived from econometric models, which play a predominant role in “pure” inflation targeting strategies, whereas they are only one component in the decision-making process of the Governing Council of the Eurosystem; - especially in the early days, we were confronted with substantial criticism regarding our definition of price stability, considered by many observers as too ambitious.

Against the backdrop of fear and uncertainty, banks have tightened their lending and consumers have become more cautious in their spending. This will act as a drag on the euroarea economy going forward. A key constraint for both the US and euro-area, as well as many other advanced economies, is the limited policy space available to authorities. In these countries, monetary policy and fiscal stimulus have been pushed to their limits. Limited capacity to respond to new shocks thus represents a real risk for these economies, and for the global economy, that we must be weary of. In this setting, and given the deep-seated nature of the problems being faced, meaningful remedies rest just as much on political factors as on economic ones. How governments respond and how their electorates receive these responses will be an important source of uncertainty. In contrast, the rising economies in Asia offer a more positive outlook. Despite the slowdown in exports of many Asian countries, reflecting the softer global economic backdrop, domestic demand remains robust. More fundamentally, the continued rise of China and the formation of the ASEAN Economic Community (AEC) will generate enormous economic opportunities for the region. As will be discussed later, the key challenge for Thailand will be how to optimally position ourselves to reap the full benefits of this trend. This brings me to the internal challenges.
While the relatively high level of these countries’ foreign liabilities makes an excessive depreciation undesirable, considering the threat this would pose to financial stability, in other economies the authorities welcome the depreciation given its favourable impact on external competitiveness. In 2009, the latter countries have been facing capital inflows generating appreciation pressures and many of them have chosen to intervene in order to counter these pressures. In this respect, it is worth mentioning the massive interventions of the Swiss National Bank and the devaluation of the Singapore dollar in the spring of 2009, the frequent interventions of the Bank of Israel and the joint interventions of the central banks in Thailand, South Korea, Singapore and the Philippines. BIS Review 5/2010  13  As for Romania’s economy, some adjustments would have been very painful for want of external financial support. For instance, if the risk of a financing gap had materialised at the highest level expected for 2009, then the depreciation pressures on the leu would most likely have generated a currency crisis with a negative impact on inflation and, implicitly, on leudenominated financial assets of households. Other adjustments, such as the cut in public spending, wage cuts included, given that government expenditures had reached unsustainable levels during the massive capital inflow cycle, would have borne the hallmark of lesser credibility. In such an environment, the arrangement concluded with the IMF and the EU brought about two major advantages to Romania’s economy: coverage of the external financing deficit and credibility.

loans to households foreign-currency-denominated loans lei-denominated loans 26.8  40 35 30  19.6  22.7  20.7  20  16.6  15.4  12.7  13.3 11.3  15  5  35.9  18.6 19.5  25  10  39.3  11.8 10.2  4.8  6.3  7.4  9.4  11.4  14.1  17.3 16.4  2006  2007  19.7  16.6  0 2004  2005  2008  Source: National Bank of Romania, National Institute of Statistics  Government credit hovered around relatively low levels during the period under review (Chart 5). 8  BIS Review 5/2010  Chart 5 Government credit percent of GDP  4.0 3.4  3.5 3.0 2.3  2.5 2.0 1.5  1.2  1.1  1.0  2004  2005  2006  1.0 0.5 0.0 2007  2008  Source: National Bank of Romania, National Institute of Statistics  Banks came to rely heavily on external financing, while the mismatch between foreign currency-denominated assets and forex liabilities of both companies and households widened. In 2004, the difference between forex-denominated deposits and loans in the corporate sector stood at around lei –5 billion, increasing sevenfold by March 2009, i.e. lei –34 billion. As for households, the differences stood at lei +5 billion and lei –28 billion respectively (Chart 6).
In brief, these involve raising the international requirements regarding the capital and liquidity the banks must hold. For instance, a larger share of the capital must be real equity capital. Another example is that the EU has established a special body, the European Systemic Risk Board, which is to identify risks in the financial system and to provide warnings and recommendations to the countries and authorities concerned. Public finances an acute but difficult problem The two other challenges are rather more difficult. The problems with public finances entail a difficult balancing act for the countries concerned. On the one hand, it is desirable that the  2  This and the third challenge are taken up by, for instance, Olivier Blanchard in the foreword to the IMF’s World Economic Outlook, October 2010. BIS Review 149/2010  3  savings do not increase too much too soon thereby withdrawing public sector demand while private sector demand is still weak. This could lead to a negative spiral, with falling demand and production, where public finances are weakened rather than strengthened. On the other hand, the deficits and the government debt must not continue to grow to the extent that doubts arise regarding the ability to repay the debt at all. Such a situation would hardly be preferable. A further complication is that this time there are many large countries who need to save at the same time. The effects on the global economy could then be substantial, particularly if the balancing act is not successful.

Moreover, the financial sector in Sweden has some distinguishing characteristics which make stability and clear game rules particularly important. From an international perspective, the Swedish banks’ collected balance sheet totals are large in relation to our GDP, market funding comprises a larger share than in most other countries, and funding from abroad is relatively extensive and largely short-term. Our own Swedish regulatory framework also needs to be renewed. For one thing, we need to look into the division of responsibility and the powers of authority of the different government agencies. For instance, the Riksbank is responsible for the stability of the financial system in Sweden, but has no really effective tools to carry out this task. Finansinspektionen (the Swedish Financial Supervisory Authority), on the other hand, has tools that could be used to influence the banks’ behaviour. But it does not have the task of counteracting macroeconomic developments than entail risks for financial stability. Another important issue that needs to be addressed in a new regulatory framework is how the state should manage banks in distress. 3  See, for instance, Ben S. Bernanke, “Fiscal Sustainability and Fiscal Rules”, speech given at the Annual Meeting of the Rhode Island Public Expenditure Council, Providence, Rhode Island, 4 October 2010. BIS Review 149/2010  5  In February we presented a report to the Riksdag proposing that the regulatory framework in Sweden should be reviewed. We mentioned these two areas as examples of important objects for analysis.
The board needs to harness the work of the auditors as an independent check on the information received from management. I believe that this emphasis on the role of the board and senior management in developing and implementing an effective risk control environment will, with the help of independent audit and other control functions, result in better-managed banks. Culture The second “C” is culture. I believe that the increased responsibilities of the board of directors and senior management under Basel II will foster a culture of improved risk management. This notion underlies the second pillar of the new framework, which takes as its starting point that the board and senior management have an obligation to understand the bank’s risk profile and ensure that the bank holds sufficient capital against its risks. Supervisors, in turn, are responsible for reviewing the bank’s assessment to evaluate and determine whether that assessment seems reasonable. The key, in my view, is that risk awareness starts at the top of the organisation. The board and senior management cannot abdicate their responsibility to understand and manage the risks arising from the bank’s activities. I believe that this focus on sound risk management at the very top will help to set the tone throughout the bank that effective risk management is everyone’s job. Of course, this may also represent a cultural shift for supervisors. Basel II places a firm emphasis on taking a risk-based approach to supervision.

This does not mean that we can rest; banks are not immune from any of the factors that I have just described. Indeed, if we were to look closely at bank failures large and small over the years, I believe we would find that poor corporate governance lay at the heart of many of these failures. Why should we have higher expectations for the governance of banks than we have for other firms? Fundamentally, because banks must act in a way that promotes “confidence” to the public and the markets in general and, more specifically, to their primary stakeholders. Banks play a crucial role in the flow of capital within an economy and are charged with a special public trust to safeguard customers’ wealth. A stable and healthy banking system is critical to the long-term growth of an economy. Banking supervisors have long recognised the importance of good governance; supervision can not function properly if sound corporate governance is not in place. Experience underscores the need to have appropriate levels of accountability as well as sufficient checks and balances. For banking supervisors, although the range of topics that corporate governance may encompass is quite wide, the focus is mainly on those elements that relate to the manner in which the business and affairs of an organization are governed by its board and managers.
Would it be acceptable to use tax-payers money to refund foreign depositors at a larger scale? This might pose problems both for the home and host country. The wide divergence of national systems clearly needs attention. Potential solutions might include increased co-operation and harmonisation regarding fees and entry and exit rules. Crisis management. National central banks have national mandates in extending emergency liquidity assistance. In a future integrated European financial market, the mandate of the lender of last resort will not be as clear-cut. How should this function be organised when the largest banks might be systemically important in several EU member countries? There will also be banks that are very important in one country while being completely insignificant in a European context. Another issue is whose interest a national supervisor will protect in a crisis involving a cross-border banking group strictly its own national interest (the case now) or the interest of all member countries where the group might have operations? Conclusions These issues, or challenges, are essentially political. They are about how to share the risks and costs of financial integration. And as long as these challenges are left unaddressed they constitute political barriers to integration. We all say we want financial integration but as usual, nothing comes for free. Financial integration brings some difficult issues for authorities and politicians. Public authorities will have to rethink their roles and priorities.

Fiscal policy has had a significant impact as a countercyclical tool. Since 2013, the increase in oil revenue spending has roughly matched the fall in oil investment. Chart: Investment Low interest rates and high public demand have resulted in robust growth in the public sector and the construction industry. With high house price inflation, housing investment has increased substantially. Investment in 2/4  BIS central bankers' speeches  housing is now higher than investment in oil activity. Chart: Growth in mainland GDP The economy is now turning the corner. Contacts in Norges Bank’s regional network have reported gradually rising growth. The upturn seems to be broadly based across industries and regions. There are clear signs that unemployment is falling both in oil-dependent regions and in the rest of the country. At the same time, employment growth has been modest, and some of the decline in unemployment is the result of labour market withdrawal. Looking ahead, there are prospects that employment will increase as growth in the mainland economy picks up, partly driven by mainland corporate investment, which seems to be picking up. Oil investment is also expected to show a moderate upswing as from next year. Export growth is also likely to pick up, supported by growth among Norway’s trading partners. At the same time, there is reason to expect less fiscal stimulus ahead. The Government has adjusted the fiscal rule for oil revenue spending.