samchain/econo-pairs-v1 huggingface dataset:
GDP growth in Sweden slackens from the annual rates of 3 to 4 per cent in recent years to around 2.5 per cent in the coming years. The GDP figure for Q4 last year suggests that a fall-off has already begun. Some observers talk of a soft landing. Most things point to a downward adjustment of demand to the long-term trend rather than a regular downturn with the risk of a recession. In this situation it is a help that, after a number of years with good growth and price stability, the Swedish economy is soundly balanced and that the public finances are also in a comparatively good state. Combating inflation effectively and consolidating the government budget have increased the freedom of action in economic policy and made an economic slowdown relatively less difficult to handle. The adjustment we now foresee will occur through a variety of channels. Slacker international activity implies a slowing of exports. The decreased order inflow and less pronounced capacity restrictions tend in turn to dampen investment. With falling share prices and less optimism among households, the growth of private consumption becomes more subdued. Moreover, stock adjustments this year imply a temporary lowering of demand. In the labour market, the number of new job vacancies is already levelling off, which shows that the growth of employment will be slower in the coming years.

If world economic activity had remained strong, it would have been reasonable to count on the Riksbank continuing to raise the repo rate. BIS Review 26/2001  1  A look at the threats we perceived in December as being liable to push inflation up above our forecast, shows that they have become less troublesome. At the same time, the clouds that were gathering over the U.S. economy have thickened and darkened. To date this year the Federal Reserve has cut its interest rate a total of 1.5 percentage points. The first cut, announced in January in between the regular monetary policy meetings, surprised the market by its magnitude as well as its timing. Another cut came at the end of January and a third last week, on 20 March. There has been a spate of negative news about the global economy in general and certain companies in particular and international stock markets have remained turbulent. US economy difficult to assess The focus at present is on the U.S. economy. Its future path is highly important for economic developments in Sweden. In order to arrive at a clear picture of the situation, we need to judge the effects of alternative outcomes. During the 1990s the United States experienced its longest economic upswing ever without any serious signs of accelerating price and wage increases. A more efficient economy, with strong competition and functional product and labour markets, accompanied by advances in computer and telecom technology, are said to have contributed to a higher rate of potential growth.
Against this background, the Banco de España has a tradition – one that I think it is comprehensively successful – of conferring high importance in its supervisory work to monitoring the rigour of financial information and of the models used to calculate riskweighted assets. Naturally, it is our wish that these elements, which crucially affect the supervisor’s capacity to properly measure banks’ solvency situation, should be part of the common model adopted by the SSM and applied uniformly to all banks. A third significant challenge concerns achieving a fruitful framework of interaction between the SSM and the Single Resolution Mechanism. The regulations have set in place a complex structure in Europe, which includes the creation of a resolution agency (the Single Resolution Board) separated institutionally from the supervisor. This agency has been granted wideranging powers both in respect of the definition of resolvability requirements – which include the determination of a minimum volume of instruments capable of absorbing losses – and of  4  BIS central bankers’ speeches  the activation of resolution procedures for non-viable banks, as well as the selection of the most suitable tools to implement them. Resolution actions have direct consequences for financial stability, which is a public good that the SSM seeks to protect, and they turn on the more vulnerable banks, which are precisely those that require greater attention from the prudential supervisor.

Naturally, to achieve this homogeneity, bank crisis-prevention and management mechanisms are needed along with risk-mutualisation arrangements that minimise the link between national economic and fiscal conditions and the ability to preserve the value of bank liabilities in each jurisdiction. These requirements include a single supervisory mechanism as a prevention tool, a single resolution mechanism that pursues the homogenous treatment of banks with viability problems and has a common fund to make this economically feasible, and an integrated deposit guarantee scheme that ensures identical coverage throughout the monetary area for eligible deposit-holders. We can already claim that the project to set up a Banking Union that includes the abovementioned ingredients is close to becoming a tangible reality. Just a few weeks back we celebrated the first anniversary of the start-up of the first of the three pillars of the Banking Union project, the Single Supervisory Mechanism (SSM); the Single Resolution Mechanism, the second pillar of the Banking Union, is now under way and will be fully operational from 1 January 2016. Admittedly, certain relevant aspects have still to be set in train. First, the single resolution fund must be strengthened to ensure that it is strong enough to withstand future banking crises, without destabilising the public finances of the countries concerned. Further, we must step up efforts to move forward on the third pillar of the Banking Union, the establishment of a common deposit guarantee scheme, based on the proposal released by the European Commission last week.
Having worked on both sides of this argument, I am more than aware of the anxieties - and indeed disagreements - which have arisen during the long debate that has got us to where we are. But the direction seems clear even though storm clouds may appear from time to time. But what I would like to do today is to look beyond today's situation a little, and to share with you a few reflections both on the Basel process itself, and, looking forward, on some related issues. Importance of all three pillars in the new Accord Firstly a couple of observations on the Accord itself. One is to remind ourselves that the Accord has three pillars - not just one. Pillar one has had most of the attention hitherto. The challenge of producing greater risk sensitivity has been considerable. Technical experts from all areas of the business, model builders, and others, have been involved. This has generated a tendency to seek greater and greater granularity and has resulted, perhaps inevitably, in considerable complexity. Striking a balance between risk sensitivity and detail has not been easy. But faced with the detail of pillar one, the challenge going forward is not to lose sight of the other two pillars, and the role they can play in mitigating complexity. Pillar two Pillar two, it should be remembered, was designed to alleviate the need for excessive detail. Supervisory oversight was felt to be a better way to address the many complexities than detailed rules.

At the moment, although the European and US government bond markets are of comparable size, the non-government bond market in Europe is ‘only’ a third to half the size of that in the US; and much of that is bank issued debt. I would expect the euro corporate bond market to develop significantly in the medium term. And with it, I would expect to see other product markets develop, as they have elsewhere (in the UK, but especially in the US) – for instance markets for asset backed securities and commercial paper. As part of this I think we will see a trend to greater issuance at the lower credit end of the market (or ‘high yield’, as it is politely named). In the euro area around 70% or corporate bond issuance is by issuers  3  BIS Review 43/1999  rated Aa2 and above. In the US, it is around 30%. I would expect that gap to close a bit, and I think there are already signs of life in the European high yield market. While I am on the subject of European bond markets, I would like to make just a few remarks about the proposed EU withholding tax. The stated objectives of the scheme – reducing tax evasion and reducing structural unemployment – are clearly desirable ones. But in thinking about any kind of withholding tax a judgement has to be made about the trade off between the efficiency of tax collection and the efficiency of capital markets.
Its members, individually and collectively, are publicly accountable for the way in which that responsibility is exercised. The supply-side agenda, under successive governments has inevitably been more diverse. It has included a strong commitment to free markets and competition as the motive forces for productive efficiency, and as the essential means of allocating financial and real resources. It includes an equally strong parallel commitment - both regionally within the European Union but also more broadly - to international free trade in goods and services and to the global free flow of capital. The supply-side agenda has included an extensive program of “privatisation”, bringing market disciplines to bear on commercial activities previously undertaken within the public sector, but often involving new forms of regulation in areas of activity that might otherwise be dominated by natural monopolies. It has included extensive deregulation - for example in relation to financial services, including banks and building societies, though this has been accompanied by improvements in the financial infrastructure and by enhanced prudential supervision. It has included measures of labour market deregulation and Trade Union reform. And it has included increased emphasis on education and training; measures to encourage business enterprise - especially among smaller businesses; and reforms to the welfare system to improve incentives to work. The list could go on.

In this regard, we are naturally supporting efforts by the French Treasury and insurers to improve the prudential treatment of long-term equity investments already during the 2018 review. On a topical note, I would add that it is crucial for supervisors to apply all prudential requirements with equal rigour. The string of failures by insurers doing business on the French market under the FPS, particularly in construction insurance, is a reminder of the importance of this. The ACPR is obviously working hard to deal with this crisis, which is affecting tens of thousands of French policyholders. But the requisite convergence of supervisory practices also needs to become a reality very soon. I know that Gabriel Bernardino and EIOPA are making this a priority. Finally, let me be clear: it is unreasonable to apply the new IFRS17 accounting framework right now, given the current state of the discussions. Aside from the complexities of creating a European governance framework for these standards, there is also an obvious issue of timing, and fortunately, the IASB appears to be reopening discussions on this. Implementing IFRS17, which will be costly and complex, will follow on from implementation of Solvency 2, a process that has kept insurers very busy. Beyond the question of timetabling, there are major substantive issues. We want an agreement on identifying groups of loss-making contracts. As it stands, the draft is unworkable. We also want to see completion of the discussions on the treatment of reinsurance contracts held.
In fact, there is relatively little empirical analysis regarding the role of Islamic banks in financial stability. Nevertheless, a working paper of the International Monetary Fund was published at the beginning of 2008. 5 The findings of this paper are to be viewed as preliminary. Nevertheless, it has the advantage of being, as far as I know, the first and, up to now, only cross-country empirical analysis of Islamic banks’ impact on financial stability. Even if the situation may in principle differ from country to country and even from bank to bank, the paper finds that: -  (i) small Islamic banks tend to be financially stronger than small commercial banks,  -  (ii) large commercial banks tend to be financially stronger than large Islamic banks,  -  (iii) small Islamic banks tend to be financially stronger than large Islamic banks. 5  “Islamic Banks and Financial Stability: An Empirical Analysis” Prepared by Martin Čihák and Heiko Hesse (January 2008). The analysis is based on evidence covering 77 Islamic and 397 comparable commercial banks in 18 banking systems with a substantial presence of Islamic banking, over the 1993-2004 period. BIS Review 118/2009  3  One of the plausible explanations given by the paper is that it is significantly more complex for Islamic banks to adjust their credit risk monitoring system as they become bigger. Given their limitations in standardisation in credit risk management, monitoring the various profitloss-arrangements rapidly becomes much more complex as the scale of the banking operation grows.

This evolutionary approach requires two things: first, a stable framework which provides certainty for the industry so that the accord is not a moving target; second, enough structured flexibility to be able to adapt to relevant changes in best practices. Schedule With the release of the three papers on unexpected losses, securitisation, and the recognition of operational risk capital across home and host jurisdictions, the Committee has come a long way toward resolving many of the most complicated issues raised in consultations. These revisions to the framework will, moreover, help to ensure that the New Accord is more sensitive to the actual degree of risk that banks face and even more supportive of future improvements in the measurement and management of risk. The Committee’s working groups are refining these and other technical matters in the New Accord and will report their solutions to the Committee by May 2004. That will allow the Committee to meet its goal of resolving outstanding issues by the middle of this year and agreeing on the text of the Accord that will provide a solid basis for national rule-making processes and for the industry’s preparations to continue. Concluding thoughts Over the next two days, you will have an opportunity to discuss and share ideas on the latest risk management practices in the areas of market, credit, operational, and insurance risk. A great deal of what you will discuss has direct relevance to developing and implementing advanced risk management techniques.
This has been accomplished without any evidence of market disruption or volatile price movements; it has been, as former Chair Janet Yellen once said, like “watching paint dry.” 12 The charts in Figure 4 also show the projected progression of the portfolio for the rest of the year. Runoff from the balance sheet increases over the projection horizon, as the caps attain their terminal value later this year. As had been expected at the start of the program, principal repayments from our agency MBS portfolio are projected to eventually start coming in below the level of the caps. Based on current projections, principal payments on the Federal Reserve’s holdings of agency MBS would likely be lower than the monthly cap on redemptions that will be in effect beginning in the fall of this year. Consistent with the Policy Normalization Principles and Plans, when this occurs in a given month, no reinvestment occurs, and the portfolio size declines by the amount of principal repayment. It is important to remember that mortgage principal repayments are uncertain; are sensitive to various factors, particularly long-term interest rates; and could conceivably rise above the level of the cap in the future, particularly if interest rates were to decline. If this were to occur, those amounts above the cap would be reinvested. The cap-based program to normalize the balance sheet was designed at the start to operate exactly in this way: it is the mechanism by which the decline in the balance sheet is kept to a gradual and predictable pace.

“Confidence in the Implementation of U.S. Monetary Policy Normalization” Remarks by Simon M. Potter Executive Vice President Federal Reserve Bank of New York at the 23rd EMEAP (Executives’ Meeting of East Asia-Pacific Central Banks) Governors’ Meeting Manila, Philippines August 4, 2018  Thank you for the invitation to participate in today’s discussion about globalization and its effect on monetary policy in emerging market economies. 1 U.S. financial markets, and the U.S. monetary policy stance, can significantly influence global financial conditions and capital flows. 2 In no small part, this reflects the extensive use of the dollar in international trade and in financial transactions conducted outside the United States. The pricing and availability of financing for business activity around the world—even activity that does not directly relate to an American borrower, lender, producer, or consumer—often are influenced by conditions in U.S.-dollar money markets. And, understandably, the evolution and stability of dollar funding markets are a focus of attention for many economic policymakers around the world, especially here in the East Asia-Pacific region. As always, the views I will express today are mine alone and do not necessarily reflect those of the New York Fed or the Federal Reserve System. My remarks today will focus on the implementation of monetary policy normalization in the United States and its contribution toward maintaining stability in U.S.-dollar money markets. I will start by reviewing progress on the Federal Open Market Committee (FOMC)’s program to normalize the stance of monetary policy.
The annual number of M&A deals increased threefold during the 1990s and the total value of deals increased almost tenfold in the 13 countries as a whole. Moreover, the trend accelerated during the period, with a noticeable increase in activity in the last three years of the decade. As we proceed into the first years of the 21st Century, there is little sign of this trend abating. The result has been the creation of a significant number of large and complex banking groups with a global reach. The host of today's conference is a living example of this. We also, of course, have our own homegrown example in the shape of HSBC. Motivations for consolidation The motivations behind all this activity are not hard to discern. Banks, like other companies, are in business primarily to generate value for their shareholders. M&A, it is commonly held, offers an effective means of achieving this through creating synergies that can increase revenue and reduce cost. In particular, larger banks may be able to achieve revenue gains by filling gaps in their product range and offering customers the opportunity of "one-stop shopping". Increased size and market share may give a bank more credibility in the eyes of larger customers, thus providing the opportunity for bigger and more value-added transactions. Size can also open the door into overseas markets.

The only way to  2  BIS Review 18/2003  fix the exchange rate while still retaining an independent currency is to return to the old regime and introduce currency controls, but who would want to return to such an arrangement? Exchange rate volatility is best prevented with economic policies which promote economic stability, but this does not only depend on the Central Bank. It is essential to take a long-term perspective. However, it should be noted that since September last year the Central Bank has been regularly purchasing currency in the foreign exchange market in order to boost its external reserve. The Bank’s purchases of currency have amounted to more than 13 b.kr. since that time, and have undoubtedly weighed somewhat against the appreciation of the króna in the short run, although the long-term effect is negligible, if any at all. The Central Bank’s main monetary instrument is the interest rate on its repo agreements with credit institutions. In response to anticipated overheating of the economy the Central Bank began to raise its interest rates as early as 1997 and raised them rapidly in 1999 and 2000. In the beginning of 2001 the policy rate was up to 11.4%. Since then the Central Bank has lowered its policy rate 13 times and it now stands at 5.3%. Admittedly this is a higher level than among neighbouring countries such as the euro region, which have to tackle the problems of persistent economic weakness and high unemployment.
Such efforts would therefore need to be implemented within the agenda of the overall financial sector development programme in the individual countries. It is within this context that Malaysia has chosen to adopt a flexible timeframe, underpinned by four key implementation principles: •  First, for capacity building measures to be implemented;  •  Second, within these capacity building efforts, the emphasis on the enhancement of the risk management framework for all banking institutions;  •  Third, to emphasise on strong business justification instead of regulatory mandate in the adoption of the more advanced approaches; and  •  Finally, to enhance the supervisory methodology to assess the internal models and the advanced risk management systems. The rigorousness of the analytical process under Basel II will certainly be demanding for banking institutions. It is equally demanding from the supervisory perspective to develop an appropriate response and assessment framework on these processes. Instead of over focus on validating the detailed quantitative and statistical procedures, supervisory attention would need to ensure that the analytical processes are undertaken to support decision making, and not merely to meet regulatory  expectations. Supervisors also need to undergo early training to identify the relevant issues when undertaking the supervisory assessment. This underscores, the importance of efforts to accelerate supervisory capacity building efforts, particularly in the development of specialised supervisory skills to conduct model validation.

If an institution engages in types of business that we regard as being at the higher end of the risk scale, such as share margin financing or lending for property development, this will also attract our attention. Other things that will attract our attention include major changes in the operating environment, including new technology; areas or activities which are experiencing rapid growth; the introduction of new lines of business, products or activities; and domestic and foreign acquisitions. In each case we would want to be assured that any necessary enhancements to the control environment have been made so as to reduce the chance of adverse and unforeseen effects on the institution. Different risk areas require different approaches, but essentially our approach is to start by reviewing the written policies and procedures setting down the controls over a particular area, and then to look at how the controls work in practice. This may involve a combination of reviews of documentation, discussions with staff, and some testing of transactions. The end-result will be a judgement as to whether we believe the controls are effective or need improvement. If improvement is needed we will discuss our recommendations with the management and agree an action plan and time-scale for the remedial action. This may sound to you quite similar in some respects to the work of an institution’s internal audit department and external auditors.