samchain/econo-pairs-v1 huggingface dataset:
The most important indicator in this assessment is the credit gap, which is a measure of how much credit growth deviates from its long-term trend. The reason for the credit gap having gained a key role in the assessment is that it has proven to be the indicator that warns of an impending crisis best and sufficiently early. A pure mechanical application of the credit gap can provide a certain guide to when the capital requirement would have been activated (see figure 1).6 Figure 1. Time periods when countercyclical capital buffers should have been activated based on historical measures of the credit gap (per cent). 3  2,5  2  1,5  1  0,5  0 81  83  85  87  89  91  93  95  97  99  01  03  05  07  09  11  Countercyclical buffer Households Non-financial corporations  Note: The calculations are based on a mechanical application of the credit gap approach. We can see that the requirement would have been activated on two occasions. The first time would have been a few years before the banking crisis of the 1990s, and the second time around 2005, that is just before the global financial crisis. We can also see which lending makes the credit gap grow by applying the approach separately to different sectors. The driver of activation of the capital requirements in the 2000s is mainly the household sector.

Lending and the building up buffers among both lenders and borrowers then stabilises over time. I would like to emphasise that this is a highly simplified description of financial stability, which to a certain extent disregards the structural aspects of systemic risk such as resilience and risks in financial infrastructure on the one hand, and such factors that trigger financial crises on the other. However, even the simplified picture gives important insights. The new tools being developed and the old tools which can be used for a new purpose are crucial to the success of macroprudential policy. Allow me therefore to discuss macroprudential policy tools and how they are intended to function. Macroprudential policy tools and how they fit in with monetary policy Typical macroprudential policy tools are capital and liquidity requirements chiefly focused on banks and the supply of credit. However, it’s also about measures to limit demand, such as the mortgage cap, or the regulation of exposures and haircuts with the purpose of limiting the contagion risk in the financial infrastructure. The various tools can be divided into static and time-varying tools. Using my simple lending rate formula, I will illustrate how, in different ways, these tools affect lending rates and credit terms. That is, after all, partly their purpose. However, this also has consequences for monetary policy.
Only if investors outside the euro area are confident that their purchasing power will be preserved over time, will they engage in euro-denominated financial activities. Therefore the commitment of the ECB to pursue price stability in the medium term remains a key factor behind market confidence in the euro as a stable currency. Besides price stability, the current and expected growth performance of the euro area economy is an additional factor behind the attractiveness of the euro. Sustained non-inflationary growth in the euro area economy would have beneficial effects on market expectations and foster the international use of the euro. As regards the private use of the euro, recent trends show that it has mainly been used as a financing currency. With regard to international debt securities, the euro is more widely used than the former national currencies of the euro area countries. The issuance of euro-denominated assets by residents outside the euro area accounted in 1999 for almost 30% of total issues denominated in a currency different from that of the borrowers’ respective geographical residences. By comparison, the combined share of all former national currencies of the euro area countries and the ECU amounted to only 18% of total gross international issuance in 1998. The growing use of the euro was mainly mirrored in a decline in the share of US dollar-denominated issues from 58% to 48% between 1998 and 1999. These trends are even more striking if one focuses on the bonds and notes segment of the market.

Voting rights are an area where hard work and many hours of persuasion will be needed if countries are to be convinced to see the bigger picture and relinquish some degree of direct control over the IMF in return for the creation of a more effective institution. Hard work, perseverance and dogged determination have been characteristics of this year’s Australian presidency of the G20 under Peter Costello, Ian MacFarlane and Glenn Stevens. Their efforts have been crucial to the progress that has been made towards quota reform over the past year. It is important that the Australian legacy be carried forward if the process of quota reform is to be completed. (e)  Are there overlaps with other institutions? Unnecessary duplication is a waste of both time and money. I have already spoken about the respective comparative advantages of the IMF and OECD. There has also been some discussion about the roles of the IMF and the G7 in respect of exchange rate issues. Over the past three years – especially since the Boca Raton G7 summit of February 2004 – the inability of the G7 to deal with the major spillover effects in the world economy has become more and more evident. Adding new members, even if they were willing to join, is not the answer. More productive would be to use the IMF as flexible forum to bring the relevant group of countries together to handle issues as and when they arise. 5.
A more recent example is the people fleeing from the war in Syria, and we are now seeing a similar development in connection with the war in Ukraine. Depending on the circumstances, war may also give rise to a period of sharply increased geopolitical uncertainty. This may mean that countries that are not directly involved in the war choose to arm themselves and thus increase public spending. However, greater uncertainty about the future may also mean that the private sector chooses to postpone investment and increases its precautionary saving. There are thus counteracting effects on aggregate demand and thereby on inflation. All in all, there are thus a number of different ways in which war can lead to inflation rising, both in individual countries and in the world economy as a whole. Four periods of high inflation since 1900 This is something that is quite clear when studying a longer time series for inflation. Figure 1 shows inflation in Sweden from 1900 onwards. Figure 1.

The August 2020 Financial Stability Report (FSR) showed that the cumulative loss of UK economic output associated with the outbreak of Covid-19 would need to be around twice as big as the Monetary Policy Committee’s central projection. 21  12  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  12  The post-crisis capital framework has proved resilient so far and we need to wait out the Covid stress before we can complete our evaluation. In the meantime, it is imperative that Basel jurisdictions implement the last part of the post-crisis reforms – what in the UK we call Basel 3.1 and elsewhere is sometimes referred to as ‘endgame Basel 3’. These reforms have nothing to do with the design of regulatory buffers and the overall Basel 3 capital resource framework built in the aftermath of the Global Financial Crisis, which was in large part all about the numerator of the capital ratio. By contrast, Basel 3.1 is about how to ensure risk weights, especially internally-modelled risk weights, are measured robustly – it’s about the robustness of measuring the denominator of the capital ratio. We should be getting on to implementing these measures consistent with the agreements we made when sitting around the Basel table. At the same time, we should not ignore the evidence that points towards issues with the original Basel 3 vision on buffer usability.
Hence, there is much to be gained in terms of greater resilience and efficiency of the financial system through the design of regulatory and supervisory frameworks aimed at combating the factors that underlie a poor assessment of risks at their root. In this sense, a sound prudential framework should provide financial institutions with the right incentives to properly assess and monitor the risks of their investment and lending policies, incorporating them accordingly into their pricing decisions. Increased awareness of risks, and how these evolve along the business cycle, favours earlier reactions to changing conditions and smoother adjustments in the flow of credit, thus reducing the likelihood of episodes of abrupt liquidity and credit contraction. The New Capital Accord, known as Basel II, is an example of a prudential framework that makes the foregoing principles I have outlined its centrepiece, since it seeks to strengthen the stability of the international banking system by promoting the implementation of more robust and comprehensive risk management practices. It does so mainly by establishing a more precise and sensitive system to link banks’ real risks and the minimum regulatory capital requirements, and by imposing higher levels of transparency in banks’ financial reporting, hence fostering closer scrutiny by market participants. A more risk-sensitive capital framework tends to make banks more watchful of the actual risks of lending policies focused on short-run targets, such as market share or portfolio size, which presumably are important ingredients in periods of credit booms sustaining speculative activities.

This makes sense, particularly in view of the special liquidity requirements I have already mentioned. In addition, we also place funds in small cap companies. In terms of market capitalisation these holdings only account for a small portion of our equity portfolio, but in numbers they make up about three-quarters of all the securities we hold. This, too, shows the breadth of our equity universe. When selecting our equities, we use a benchmark. This is a combination of various commonly used indices, assembled by us. As soon as we have determined the benchmark, equity investment becomes a largely automatic process. Why does the SNB not make targeted investments in individual companies or sectors where an above-average return can be expected? In other words, why do we not engage in stock picking? Warren Buffett is quoted as having said, wide diversification is only required when investors do not understand what they are doing. I can assure you that our investment specialists have an excellent understanding of what they are doing. However, we choose to have recourse to a broad equity universe for the following four reasons. First, we achieve a greater diversification effect within the equity segment by investing as widely as possible, across both regions and sectors. Second, it should not be our objective to enforce strategic or, indeed, political interests by means of our investments in individual companies. This could limit our monetary policy room for manoeuvre and would also make our position vulnerable.
This is an important point of departure, but we have now presumably learned that imbalances and risk arise when large countries do not sufficiently take into account that their own choices also influence those of others. The International Monetary Fund (IMF) must be given a more important role. The Fund must enhance its surveillance activities and its advice must be acted upon to a greater extent. However, this probably requires changes in the IMF’s governance structure. Countries that are now gaining in economic strength are seeking greater influence. The IMF must also improve its reputation in these countries. Government wealth and saving International capital markets have been a boon to Norway. We drew on borrowing opportunities abroad when the petroleum industry was being built up. We did the same in order to expand welfare schemes and to finance the countercyclical policy of the mid-1970s and the early 1990s. National oil and gas resources are now converted into equities and bonds abroad. Other small industrial countries are also making active use of global capital markets. Our neighbouring country Sweden has recorded large balance-of-payments surpluses. 8  18  G20: group comprising 19 countries and the EU. Member countries are among the world’s largest economies and include members of the G7. BIS Review 16/2009  Switzerland has a high level of saving and a recurring surplus. Australia, on the other hand, has been able to record a deficit since 1975. This year we are celebrating the works of the Nobel Prize-winning author Knut Hamsun.

  Total merchandise export earnings rose by 71.2 percent to $ million in 2010 from $ million recorded in 2009, following increases in both metal and non-traditional export earnings.   Metal export earnings rose by 81.6 percent to $ million in 2010 from $ million in 2009, of which copper export earnings were US $ million and cobalt export earnings were US $ million. This was explained by the rise in copper and cobalt production following increased capacity utilisation at various mines and higher global market prices.   Exports of non-traditional products registered a growth of 34.3 percent to $ million in 2010 from $ million the previous year. This was driven by higher exports of copper wire, cane sugar, burley tobacco, cotton lint, electrical cables, gemstones, maize and maize seed, and wheat and meslin.   Total merchandise imports grew by 40.3 to $ million in 2010 from US $ million in 2009. Exchange rate   Following strong macroeconomic fundamentals and increased supply in foreign exchange, the Kwacha performed favourably against all the major traded currencies in 2010, except for the South African Rand. The Kwacha appreciated by 4.7 percent against US dollar to trade at $ from $ in 2009.   Similarly, the Kwacha appreciated by 6.0 percent against the British Pound and by 8.0 percent against the Euro to trade at £ and € respectively. 2  BIS central bankers’ speeches  However, the Kwacha registered a depreciation of 8.8 percent against the South African Rand.
Use of CRA ratings in regulatory regimes We will also need to revise the extent to which we as a regulatory community use rating agency ratings. The official sector can’t express concern – at times indignation – about the performance of rating agencies, valid concerns, and then at the same time continue to build rating agencies ratings umbilically into our regulatory regimes. Over the past few months, I have been chairing a working group of the FSB developing proposals on that, which will go to Ministers and Governors shortly. I think Ministers in Europe are attentive to it as well. Changes in this area will take time and will not be easy, but they are being planned. The underlying purpose of securities markets regulation Going beyond that, the final thing I would say in this area is that the conceptual framework for securities regulation, especially in the USA, has over the past 30 years or more  1  For more information, see the report of the Securities Review Committee (1988), “The Operation and Regulation of the Hong Kong Securities Industry”. BIS Review 145/2010  3  essentially made a distinction between public markets and private markets, public issuance and private issuance. That is basically because it has taken an investor protection approach to securities regulation. The investor protection objective remains valid of course.

Too Big to Fail: resolution regimes This wasn’t a crisis that revolved in every single degree around institutions that were Too Big Too Fail but, my goodness, they were at the heart of it. And it is intolerable for our societies, it is intolerable for capitalism, that we should continue to have institutions that are too big to fail. The Financial Stability Board will, therefore, be recommending to the G20 a package on this. It will include greater loss absorbency for the largest and most complex firms whose distress would inevitably spillover into the global system – probably in a way that can, in degree, be implemented in different ways in different countries and contexts, subject to a meaningful process of peer review to avoid free riding. But absolutely central to this is resolution regimes. Too many countries do not even have the most elementary resolution regime for their national commercial banking institutions. Perhaps partly for that reason, many people, when they talk about resolution, slip after about 15 seconds into talking about enhanced supervision and early intervention. To be clear, resolution is about when everything else has failed. It is about when early intervention and higher capital requirements, better risk management and more resilient capital markets let us down, and we are in “the last chance saloon”. The distressed institution is no longer viable, and officials are presenting our political leaders with a ghastly choice between chaos from straight liquidation and, alternatively, taxpayer support to prevent the system imploding.
Lower middle-income countries are those with per capita gross national incomes (GNIs) of between US $ and US $ per year; while upper middle-income countries are those with GNIs between US $ and US $ This status reflects the continued economic growth that has been registered in the recent years.   Zambia’s reclassification as a middle income country would enhance investor confidence and further boost the investment climate thereby creating jobs and wealth for the people. In terms of financing, it should be noted that with the new arrangement, the government would be able to access more non concessional financing which remain key for infrastructure development necessary for economic development. This is in contrast with the previous status whereby Zambia could only access limited concessional financing which attracted very low interest rates and payable after a long time.   Despite the positive reclassification, it should be noted that the disparity between the poor and the rich would always be there and do exist even in developed countries. The challenge for the Government is to implement policies that will redistribute wealth so that inequality is reduced.   Nevertheless, with reclassification, it shows that the Government has been working very hard to accelerate economic growth, which is a necessary for economic development.   On average, people have been pulled out from poverty as per capita income has risen from US $ in 2000 to over US $ in 2010.

  Performance of the mining sector increased following higher output arising from increased capacity utilisation at various mines and investments into operations at various mines. Metal mining was the main driver of this growth, with copper and cobalt output growing by 17.4% and 49.4% to 819,159.19 mt and 8,781 mt, respectively.   Construction output was driven by increased public and commercial infrastructure projects around the country, as well as continued high demand for housing. This was supported by expansion in domestic production of cement. Inflation   Consistent with the favourable performance in economic growth, the country has succeeded in lowering inflation. Inflation has declined from 17.2 percent in 2003, 9.9 percent in 2009 and stood at 7.9 percent at end-2010. Inflation continued to be moderate, and stood at 9.0 percent as at June 2011.   The decrease in inflation over the years can be attributed to prudent monetary policy and a relatively stable exchange rate. The increase in food supply, arising from the favourable crop harvest, has also been a key factor in moderating inflationary pressures in light of high and increasing prices of petroleum products due to high international oil prices. BIS central bankers’ speeches  1  Interest rates   Interest rates have generally been on a declining trend in line with the fall in inflation and yield rates on Government securities. This trend was broken as a result of the financial crisis in 2008.
For instance, in the Fortis case, I doubt that Dutch and Belgian ministries would have broken up the bank along national borders, in an instant probably destroying vast economic value. The Icelandic case could also have turned out differently, had there been better cooperation with British and Dutch authorities. With frequent interaction with its foreign counterparts, the inertia of the Icelandic supervisory authority would have been unlikely. I could continue providing examples, but the point is that, in most cases, the outcome would have been very different – and far better. For whatever reasons authorities and ministries have not cooperated across borders, there is no excuse anymore. We need better coordination. And setting up a Cross-Border Stability Group is an important step in the right direction. But, despite all its virtues, cooperation does not always work. Legal barriers, political motives and cultural clashes may all inhibit willingness to cooperate. I therefore believe the new European supervisory structure – currently being considered by the Council and the Parliament – is an important step in the right direction. Among other things, this new structure will include formal European Supervisory Authorities. These authorities will be equipped with a number of tools to use when cooperation fails: they will be able to mediate when supervisory authorities do not agree on supervision and remedies; they will be able to take action when national supervisory authorities neglect community law, and so on.

But it also extends to tending to the so-called culture of the institution – for example, ensuring that good ideas rise to the top no matter where they originate, and that people feel comfortable to challenge the conventional wisdom. These challenges are energizing, and that’s why being president of the New York Fed is the greatest job in the world. And I am confident that, because of the talent and dedication of our staff, the New York Fed will succeed in surmounting the challenges it faces now and will face over the next 100 years. And to drive home the point of our staff’s dedication, I would like to highlight the efforts of one person, Rosemary Lazenby, who has made this exhibit possible. Rosemary is the longest tenured employee at the Bank – 55 years – she is our resident historian and curator and she has delayed her retirement in order to develop this centennial exhibit. Her efforts are just another example of what really glistens at 33 Liberty Street (and I am not referring to the gold in our vault). Thank you Rosemary, and thank you all for coming out this this evening to enjoy the centennial exhibit. BIS central bankers’ speeches  3