samchain/econo-pairs-v1 huggingface dataset:
Armed with this, we can consistently build resilience into the financial system well ahead of when that resilience is needed. The second theme is how we are keeping pace with a changing financial system. New research is enabling us to simulate the effect of economic downturns on the growing non-bank financial system. It has highlighted possible weak spots that need monitoring and some that need new standards of resilience. Keeping up with the economy  Disciplined macroprudential policy builds resilience to economic shocks into the financial system well before it’s needed. You don’t make cities near fault lines resilient to earthquakes by waiting until there are tremors that signal a quake may be imminent. That would be not just ineffective; it would be counterproductive, See Piet Clement, ‘The term “macroprudential”: origins and evolution’, BIS Quarterly Review, March 2010. Andrew D Crockett, ‘Marrying the micro- and macro-prudential dimensions of financial stability’, remarks before the Eleventh Conference of Banking Supervisors, Basel, September 2000. 1 2  2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  leaving the city with buildings under re-construction and surrounded by scaffolding and cranes just as an earthquake hit. The right approach, for building resilience to earthquakes into structures, and for building resilience to economic shocks into financial systems, is to focus not on tremors, but on the underlying vulnerability. By underlying vulnerability I mean how serious a quake – real or economic – could be if one occurred at any point.

student loans)  Percentages of households  NMG Survey  3.00  160  2.50  140 120  2.00  100 80  1.50  60  1.00  40  0.50  20 0 1994  97  00  03  06  09  12  15  18  Sources: Bank of England, ONS and Bank calculations. 0.00  91 93 95 97 99 01 03 05 07 09 11 13 15 17 Sources: British Household Panel Survey/Understanding Society (BHPS/US), NMG Consulting survey and Bank calculations. There has been a substantial reduction in corporate debt since the crisis as commercial real estate companies have repaired their balance sheets after over-extending them before the crisis (Chart 9). Banks  7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  and investors have had strong appetite for corporate lending but corporate debt has only just outpaced the growth of the economy (Chart 10).
It may also be difficult for an individual central bank to raise the inflation target alone as long as an international debate is underway on whether or not a higher target would be advantageous. 13 There may be reason to wait for a reasonable degree of consensus among central banks and in the research community. If the conclusion were reached that raising the inflation target would be justifiable, this would probably also increase the possibility that several central banks would simultaneously decide to do so. This would probably further increase confidence for such a measure. Greater acceptance of falling short of the target? If monetary policy should now turn out to be less effective in the period ahead than it has been historically, one consequence could be that the central banks would be forced to accept below-target inflation for longer periods of time. This would make it important to try to create acceptance for this among households, companies and market participants, so that these do not start to believe that the central bank has abandoned the inflation target. Expectations among economic agents would thus play a completely central part in this. The problem can be illustrated, in a stylised manner, with the use of Figures 3–5. To maintain the credibility of an inflation target, inflation cannot be allowed to deviate from the target indefinitely. Economic agents can tolerate a deviation in the short term, but, the more time that passes, the closer to target inflation has to be to maintain confidence.

This also applies to the temporarily restricted autonomy and flexibility when a central bank must act resolutely in certain situations to maintain confidence in the inflation target. So far, it is my assessment that this is something transitory. Different theories behind the weak recovery from the financial crisis One notable theory for the reasons behind the low interest rates and the sluggish recovery from the financial crisis is the hypothesis of secular stagnation advanced by Summers (2013). The concept here is that a chronic surplus of saving has arisen in the world for various reasons, and that this has pushed the interest rate down. The problem, however, is that not even the current low level of interest rates creates a balance between supply and demand. The result of this is the risk that many countries will become stuck in a situation with too low aggregate demand, resource utilisation below normal and inflation that tends to be much too low. Rogoff (2015) instead argues that growth is being restrained by the world being in an adjustment phase of an unusually large debt cycle, a “debt supercycle”. Even if the level of interest rates is unusually low, this needs not mean that countries are stuck in a situation of chronic demand deficit. Demand and growth will start to pick up when the debt situation again normalises. Unlike a case of secular stagnation, which can be regarded as a structural phenomenon, the problems are thus assumed to be of a basically cyclical, albeit long-term, nature.
On behalf of the Supervisory Board I would like to thank Lilja Steinþórsdóttir for our pleasant work together. In her place, the Supervisory Board appointed Stefán Svavarsson Chief Auditor. Financial institutions compete fiercely for talented employees, which is not surprising given the pace at which the Icelandic banks’ activities have expanded. It is vital for the Central Bank to have as capable employees as possible in its service. It must take prevailing conditions into account to ensure that this is the case. On the Supervisory Board in 2006, Ólafur G. Einarsson resigned from the post of Chairman which he held since 1998. Helgi S. Guðmundsson was elected Chairman in his place. On behalf of the Supervisory Board I would like to thank Ólafur G. Einarsson for his particularly successful leadership during his years as chairman. The Supervisory Board held 22 meetings during the year. I would like to thank the members of the Supervisory Board for their pleasant cooperation and fine work. I also thank the Board of Governors and employees of the Bank for their very good work during the year and fruitful collaboration with the Supervisory Board. 2  BIS Review 34/2007

Unlike earlier episodes of high oil prices, which were driven largely by temporary supply constraints, the recent increase in the demand for oil has been reflected in higher prices for future delivery as well as higher spot prices. Similar rises are apparent in the market for gas. The signpost marked higher energy prices points us towards ways of using less energy, to alternative energy sources and to new sources of oil production such as the Canadian tar sands. BIS Review 9/2006  1  The first two signposts point us in the right direction. But the path has not been easy to follow. We have seen movements - in both directions - in inflation, consumer spending and output growth. Interest rates too have moved both up and down in order to maintain overall stability of the economy by keeping consumer price inflation close to the 2% target. The reasons for those changes have been explained in the minutes of the Monetary Policy Committee meetings and in our Inflation Report. Tonight, I want to look a little further ahead, to the challenges for monetary policy posed by a third signpost - the recent fall in long-term interest rates. The development of an integrated world capital market means that these now depend on savings and investment decisions elsewhere in the world as well as here at home. Investors seem to be willing to lend to governments at much lower interest rates than for many a year.
At the same time, monetary policy can be used to smooth fluctuations in activity around the growth trend. But I should emphasise that this presupposes that the central bank is committed to price stability and that its policy is perceived as credible. With low inflation, moreover, the economy will function more efficiently. It is important, I believe, to realise that price stability’s status as the monetary policy objective does not imply a lower priority for growth and employment as economic policy’s overall objectives. Rather than being an impediment, low inflation creates good conditions for growth. In order for this to be combined with low unemployment, the labour market must also function properly. Monetary policy with an explicit inflation target Since the move to a flexible exchange rate in the autumn of 1992, monetary policy in Sweden has been conducted with an explicit inflation target. The Swedish target for the rate of inflation, which is appraised in an annual perspective and expressed in terms of the consumer price index, is 2 per cent. The target is surrounded by a band of ±1 percentage point, which serves among other things as a buffer for temporary effects on inflation. I should like to mention some factors which illustrate how the Riksbank works on the construction of monetary policy with an inflation target. As monetary policy is characterised by long and variable lags, the policy needs to be forward-looking and based on an inflation forecast.

Factors that generate changes in ongoing rate of inflation must be distinguished from temporary effects on inflation due to once-and-for-all shifts in the price level. It is mainly variations in the output gap and in expected inflation which have an impact on the ongoing rate of inflation. Monetary policy accordingly focuses on these factors. Temporary effects on inflation may come, for example, from changes in indirect taxes and subsidies or from shifts in terms of trade. Monetary policy measures as such may likewise have temporary effects on inflation via changes in house mortgage costs, which are included in the measurement of consumer prices. This was the case in 1996, when the average rate of inflation fell below the lower band limit of 1 per cent mainly as a temporary consequence of the Riksbank’s reduction of its instrumental rate. Clearly, monetary policy should not respond to temporary effects on inflation from upward or downward movements in the instrumental rate; to do so would be to make interest rate policy procyclical and thereby destabilising. The monetary policy reaction to other temporary effects depends essentially on how these affect inflation expectations. If a temporary increase in the rate of inflation is taken, for example, to indicate a more lasting upward shift, so that people adjust their inflation expectations, monetary policy would have to respond in order to prevent the ongoing rate of inflation from increasing. If expectations are unaffected, on the other hand, temporary effects may be of secondary importance for monetary policy.
So the scale of response in the overall flow of credit to businesses depends in part on a wider confidence effect shifting the demand curve. We may finally be seeing that restoration of business confidence in which case the flow of credit to businesses should pick up. Beneath that aggregate narrative, there are some revealing stories in the details. The data we publish each quarter reveal material differences in net lending volumes across participants in the Scheme. The main lenders are in quite different places (Chart 7). For example, 30 out of 41 participating groups have had positive net lending since the launch of the scheme, despite the slight contraction in the aggregate numbers. Together, these groups lent a net £ to the UK real economy, while the eleven groups that contracted their net lending did so by a combined £ That in part reflects a desire by several major UK lenders to reduce the scale of their so-called “non-core” loan portfolios following the financial crisis, or a need to comply with State Aid conditions. So these banks may not see material increases in their total lending, even if they use the FLS to the full to support their core activities. There are other factors at play. For example, nearly half of bank and building society lending to businesses is to the commercial property sector and a good part of the rest will be secured on property. Pre-crisis, banks lent too much money, too cheaply, to too many borrowers, especially in this sector.

And the Bank’s Agents have heard reports of some smaller businesses preferring to seek out non-bank alternatives for finance, including peerto-peer lending, insurance companies and investment funds to diversify their funding sources. So when assessing trends in credit supply, it is important to consider flows of lending from all sources, not just the banks. The extension to the FLS to include lending related to non-bank credit providers (including finance leasing corporations and factoring companies) recognises the importance of some of these forms of lending to SMEs. Finally, there are a number of small “challenger” banks who are successfully using the FLS to help expand and take market share from the more traditional lenders. You sometimes see the phrase “the banks are not lending to SMEs”. That is simply not true when you look into the details. The data on SME lending is not fully comprehensive nor of the best quality. But the data we do have suggest that since the launch of the Scheme, gross lending to SMEs has been around £ although repayments have been slightly higher, so the overall picture of slightly negative net lending is the difference between two much larger numbers. Within that aggregate picture there are many individual banks which have expanded their net lending to SMEs whilst others have contracted. That is partly why I have been advising business contacts to “shop around” for credit if they can.
Deficient payment and securities settlement systems might potentially trigger a crisis in the system. An operational or technical system failure can delay transaction settlement so severely - or even prevent it for such a long period - that widespread credit or liquidity problems among financial institutions result. In particularly serious cases, the financial institutions concerned, and perhaps even the financial markets, are no longer able to perform their role in the economy or can do so to only a limited extent. Yet on the other hand, payment and securities settlement systems also play a major part in preventing the transfer of payment or delivery problems from one participant to the others. Such difficulties might also trigger a chain reaction which could jeopardise the entire system. This makes the architecture of payment and securities settlement systems all the more important, because it determines their capacity to limit the transfer of weaknesses. Secure and efficient financial market infrastructures are especially important to the Swiss economy, which has a large financial sector and generates significant payment flows. Their significance is illustrated by the relevant figures: every day, sums amounting to around 180 billion Swiss francs pass between financial institutions via Swiss Interbank Clearing System (SIC), Switzerland’s most important payment system. With a system of this scale it is easy to imagine that problems with the clearing or settlement of transactions might jeopardise the stability of the financial system as a whole.

BIS Review 58/2003  1  The oversight of payment and securities settlement systems in practice In future, the National Bank will be taking a risk-oriented approach, i.e. we will deploy our resources in those specific areas in which the risks are particularly high. The National Bank Law stipulates a three-tier oversight process. The first tier is an obligation on the part of operators of payment and securities settlement systems to provide statistical information. The National Bank will use the data it collects to gain an overview of the breadth and importance of the systems and instruments for the clearing and settlement of payments and securities trades that are available in Switzerland. The second tier is a more wide-ranging disclosure obligation that is imposed upon the operators of securities settlement systems and those payment systems which process payments in excess of 25 billion Swiss francs a year. With payment systems of this size and larger, the National Bank will look in greater detail into the extent to which they might jeopardise the stability of the financial system. Finally, the National Bank Law provides for powers on the part of the National Bank to impose minimum requirements on systemically important financial market infrastructures as a third tier of oversight. Detailed implementation provisions for oversight will be laid down in an ordinance to be issued by the National Bank. In early November 2003, the National Bank submitted a consultation draft of this ordinance to interested parties. The draft itself can be found on our website.
The ECB has only one instrument at its disposal – short-term official interest rates - and can therefore only aim at one objective. This has been defined by the Governing Council as “a year-on-year increase in the Harmonised Index of Consumer Prices (HICP) for the euro area of below 2%”. The objective of price stability “is to be maintained over the medium term”, emphasising that monetary policy needs to be forward-looking. But this definition also stresses the fact that the focus of the ECB is on price developments “in the euro area”. In reaching its decisions on monetary policy, the Governing Council is concerned with economic conditions in the euro area as a whole, rather than specific regional or national developments. It is sometimes said that while the single monetary policy may be “right” for the euro area as a whole, it is “wrong” for many individual countries within the area. I disagree with this view. First, it overlooks the fact that within a single currency area adjustment can occur via prices and wages. Second, it infers a very narrow perspective on the costs and benefits of a single monetary policy, in isolation from the broader arguments. These broader considerations can be assessed in my view, as being very clearly positive in the medium to long term for growth as well as employment. Nevertheless, an analysis of the causes of and policy responses to the differences across countries is useful.

There are, of course, still plenty of rules-based aspects to the new capital framework: it's difficult otherwise to understand what the many hundreds of pages of the Basel II document are needed for. However, the point I want to stress is that the advanced approaches, and especially IRB, introduce a new element into banking supervision. For want of a better term, I'll call this process-regulation. Whereas the old Accord focused on rules, the IRB approaches focus instead on the processes by which risks are managed. Rather than prescribing detailed rules for assessing capital adequacy, supervisors will in future need to assess the adequacy of the internal processes used by firms to manage their risks. This is reflected, for example, in the approach that we propose to take to the validation of IRB systems: we will not be prescribing specific numerical standards that we expect internal risk measurement systems to achieve. Rather, we will discuss with each individual IRB bank how its system performs in relation to the bank's own internal objectives and appetite for risk. IRB will require us to engage in a dialogue with AIs to understand how they go about developing and approving their IRB models. As a result, the future for banking supervision is likely to take the form of an active discussion with our counterparts in the risk management and credit control functions. It will be less a matter of us setting hard and fast rules, and more a matter of us holding a dialogue with risk managers.
If this is confirmed, as I think probable, the overall picture is of an economy expanding around or a little above its potential rate of growth. The combination of lower rates of productivity and labour force growth mean that potential is growing at around 1.5% about a percentage point below its pre-crisis rate. 9  Trying to make very precise forecasts of the output gap is a fool’s errand but the balance of evidence is there appears to be little slack left in the labour market and little spare capacity in firms. Unemployment is at 4.2% – pretty much the MPC’s revised estimate of the natural rate. Underemployment is low. 10  Non-price measures – for example, surveys of recruitment difficulties and measures of churn in the  labour market – have been signalling increasing labour market tightness for a number of years. 11  Whole economy regular pay growth reached 2.5% in December and has stayed above that level through the first few months of 2018 though there has been a slight slowing in the latest – April – data (from 2.9% in March to 2.8% in April). The higher frequency measure of pay growth, 3 month on 3 month growth, has been above 2.5% for 11 months between last May and March this year – the longest run of such consistent wage growth since the crisis (Chart 7).

It has also generated export growth that has help support the economy. More recently, there are signs that Brexit uncertainty is holding back investment. These impacts are incorporated into the MPC’s assessment of policy and forecast of the economy. But it is much harder, and in my view it would be mistaken, to set policy in anticipation of any particular Brexit outcome. There is a very wide range of possible outcomes and paths to those outcomes. And it is not at all clear how the evolution of demand, supply and the exchange rate would respond in different circumstances – which could mean very different implications for monetary policy. Over time, Brexit is likely to affect the supply side of the economy which has evolved and specialised over the last 45 years in the context of our EU membership. If the Brexit outcome generates the types of uncertainty about the economic model that I have been discussing, that will need to be factored into the policy approach. But for the present, my view is that the best course for the MPC on Brexit is to react to the economy as we 18  now see it conditioning our forecasts on neutral assumptions about Brexit outcomes. At the same time, we  should stand ready to respond, quickly and vigorously to any sharp impacts on supply, demand and the exchange rate that might emerge – as the Committee did immediately following the referendum.