samchain/econo-pairs-v1 huggingface dataset:
This provides a telling example of the perverse incentives that the Draghi Report had highlighted a decade earlier. Booking practices and pricing were distorted by lax overall regulatory capital requirements, a zero-weighting on 364-day committed lines to shadow banks, accounting regimes that recognised unearned profits on highly illiquid securities, and an implicit state subsidy to housing finance from public agencies that were themselves over-levered and profit-maximising. Policy responses and lessons Looking back, armed with these conjectures, what could or should have been done as our economy and others accumulated debt? A few years ago, a couple of us discussed this in the margins of a regular gathering of economists in London.21 One thought was that Western governments should have “gone on the biggest infrastructure splurge since Victorian times”, spending the inflows on investment rather than consumption. I can’t help wondering whether all the investment would have been well judged. Another thought was that the UK and others should have tightened fiscal policy, in order to raise national saving and so improve our external position. That would have added to global saving, possibly pushing the world real rate lower, asset prices higher, and so possibly further fuelling private sector borrowing. But were we trying to answer the right question that evening?

I think that Basel II recognizes the importance of a combination of micro and macro factors for achieving greater financial stability. Furthermore, I would say that Basel II incorporates some of the key basic principles that are also built in modern approaches to monetary policy: a flexible and forward-looking approach, anticipatory rather than reactive behaviour to risk, and the need to take into account market views. Looking into the future, we must direct our resources to ensure that banking supervision in the 21st century is more dynamic, more preventive, more flexible, more inclusive, and more transparent. We should continue adapting and learning. I believe the ultimate objective of financial stability increasingly requires co-operation and properly aligned incentives on the part of the industry, markets, and supervisors. Thank you. BIS Review 34/2005  7
This is based on the framework established by the Stability and Growth Pact: the budgets of the member states must be balanced or show a surplus during at least several consecutive years and in no year must the deficit rise above 3% of the GDP. Besides budgetary policy, most other economic policy sectors (e.g. labour market policy, structural policies, etc.) are coordinated between the members states and institutions. •  The economies of the European Union member states are closely intertwined. Of the external trade of the EU, some 65% is with other member states, and only a third with the rest of the world. The more the economies of the member states depend on each other, the greater the gain arising from the single currency. Then it will also be unlikely that economic  BIS Review 26/2004  5  growth in some member states might be significantly slower, which could potentially threaten the stability of EMU. What does such a framework mean for the future of the European Union? Above all, economic success of the European Union - hence also of Estonia - depends on whether the economy in Europe manages to be sufficiently flexible and competitive so as to utilise the opportunities offered by the single currency and attract more investments than before. •  Economic flexibility is the trump card Estonia as a small country holds in the European Union.

If the aim of the upper secondary school is to send students on to higher educational establishments, the percentages of those admitted to universities should be publicised on a permanent basis. This requires the state to take action. •  Developing an INTEGRAL framework for supporting innovative activities - including measures related to labour quality and promoting innovation as well as venture capital funds helping to implement good ideas in manufacturing - similarly requires contemplation and support by the state. I say again that our approach should be integral and not dispersed between different competing projects and agencies. Now, on the threshold of the European Union, it is the most appropriate and necessary time for that. Several plans and projects in that direction that can serve as a foundation are about to be completed. Also Finland's SITRA has offered us help. Ideally, I would like to see regional cooperation between the Baltic Rim countries in that area similarly to the work that has been successfully launched in the financial sector. And perhaps we might find an opportunity to rely also on pan-European structures. •  Let me remind you that Knowledge-based Estonia, the research and development strategy for 2001-2006, was approved by Riigikogu as early as in 2001. How much of it has been implemented by today? One thing is sure: more could have been done - and perhaps in a more coordinated manner. Time does not wait.
It was the uncertainty over the value of the assets that led to many institutions facing problems when their assets declined in value at the same time as they suffered funding problems. Some institutions were then forced to sell of some of their assets which further pushed down the value of the assets and led to new funding problems. There was a belief that the extensive trade in financial instruments meant that the risks were spread and that the system thus became more stable. In actual fact, the risks appear to have finally landed in the bank sector. The financial system was thus in practice more vulnerable than most people – including the financial supervisory authorities – believed. 3 Expansionary monetary policy in the United States The expansionary monetary policy in the United States during the period 2002–2004 has also been held up as a possible contributory factor to the overheating in the US housing market and the ensuing financial turbulence. 4 Some analysts feel that very low, short-term interest rates contributed to the overheating. However, it should be emphasised that inflation in the United States was low during this period and there were fears that the US economy would experience what is known as a liquidity trap, which could have had very serious consequences for developments in the real economy. Here it was the experiences from Japan during the 1990s and 2000s that caused alarm.

The interest on their deposits (in an account overnight or weekly via Riksbank Certificates) must follow the policy rate for monetary policy to function.30 When we raise the policy rate, our financing costs increase, while the return on our assets remains unchanged. These two ways of describing the effects on earnings lead to the same result over time, but the losses are recognised at different times. The Riksbank's accounting  29 I described the change in the balance sheet and the interest rate risk in Flodén (2016). 30 For example, if we chose not to pay interest on bank deposits, the short market rate would be close to zero. That would mean that the policy rate would be zero, and monetary policy would be much more expansionary than is currently necessary. 16 [30]  principles are based mainly on market valuation, which means that the entire effect on on the results will be reported in this year's financial statements, although these are losses that are actually expected to occur gradually as long as the Riksbank owns the bonds.31 Figure 11. The balance sheet then and now SEK billion  Note. Simplified picture of the Riksbank's balance sheet at the end of 2007 and at the end of 2021 respectively. Revaluation accounts and risk provisions are included in the item "equity". The light blue field refers to 'other', and mainly consists of claims and liabilities on the International Monetary Fund. Source: The Riksbank.
The FCI is an average of two alternative FCIs, one in which the weights are derived from the impulse response of HICP inflation to a shock in each of the four financial variables from an estimated value at risk (VAR) model, and the other where the weights are derived from the elasticities drawn from a set of projection models used in the (broad) macroeconomic projection exercise. The latest observations are for 14 May 2020. Chart 9 External financing conditions of euro area NFCs (percentages per annum)  Sources: Refinitiv, Merrill Lynch and ECB calculations. Notes: Monthly data. The blue dots refer to the nowcasts for April 2020 (left dot) and May 2020 (right dot) for the overall cost of financing, assuming that bank lending rates remain unchanged at their March 2020 levels. The latest observations are for May 2020 for the costs of equity and debt, and March 2020 for the costs of lending. Chart 10 Financial and non-financial equity prices  https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200519~e5203d3520.en.html  7/14  5/19/2020  Pandemic central banking: the monetary stance, market stabilisation and liquidity  (1 January 2019 = 100)  Sources: Bloomberg, Datastream, Refinitiv and ECB calculations. Notes: Daily data. The indices used are the Datastream indices for non-financial and financial corporations. The latest observations are for 14 May 2020. Chart 11 Euro area corporate bond spreads (basis points)  Sources: iBoxx, Bank of America Merrill Lynch and ECB calculations. Notes: Daily data. The latest observations are for 14 May 2020.

And that lies four square within the Bank of England’s mission to promote the good of the people of the United Kingdom, Muslim and non-Muslim alike. Global growth in Islamic Finance Islamic finance is a global success story, with assets of $ trillion in 2019 (Table 1). That’s 11% higher than a year earlier, and fully a third bigger than in 2015. Table 1: Size and composition of Islamic Finance Services Industry $ 2019)  *  *Gulf Co-operation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates). Source: Islamic Financial Services Industry Stability Report 20202  Three quarters of those Islamic finance assets are held by banks – and are large enough to play a  1  For a summary of these principles, see eg https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2017/islamic-banksand-central-banking.pdf?la=en&hash=15D94BD65C2EFA6962989D10E21543B7B7013C1C. 2 https://www.ifsb.org/download.php?id=5724&lang=English&pg=/index.php. 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  systemic role in thirteen countries.3 There’s also a nascent Islamic insurance industry (takaful) – and a much larger capital market, anchored around the growing stock of sukuk4 issued by companies and governments (Chart 1), and over 1,500 Shari’ah compliant investment funds. Chart 1: Global sukuk issuance and stock outstanding  Source: Islamic Financial Services Industry Stability Report 20202  The role of the UK and the Bank of England in supporting Islamic Finance So far, so impressive.
But how can this potentially damaging link between the mortgage and real estate markets, the banking system and financial stability be explained? First, it is important to remember that these markets represent a major concentration of risks, especially for banks and households. Thus, mortgage claims in Switzerland are the biggest asset item on banks’ balance sheets. They account for roughly 30% of total assets in the banking system – and if one considers only the domestically focused banks that operate predominantly in the Swiss credit market, this percentage rises to 70%. Moreover, residential property is the most important asset overall of households in Switzerland, and mortgage loans are their largest liability. Around 45% of household wealth is invested in real estate, and mortgage loans account for a full 95% of household debt.5 These figures highlight a further important aspect: The real estate market is largely debt financed. Roughly 95% of mortgage loans are granted by banks. There are thus close links between the mortgage and real estate markets and the banking sector. A final important fact is that real estate markets have historically been subject to prolonged and pronounced cycles. Such cycles can last for years or even decades. During the long upswing phases, risks tend to be underestimated, thereby leading to excessive risk-taking by households, companies, investors and banks. A downswing, by contrast, can generate the mutually reinforcing effects of falling prices and loan defaults. This can lead to severe upheavals in the banking system and entail high economic costs.

In this context, the SNB regularly reassesses the need for a reactivation of the CCyB. Closing remarks Ladies and gentlemen, I now come to my concluding remarks. Are we heading for a big real estate crash? Is there a bubble that will burst soon? If you were expecting me to answer these questions today, I’m afraid I have to disappoint you. To predict the future would require a crystal ball. By their very nature, crises cannot be predicted. 12  Behncke (2020), for example, shows that LTV risks did in fact decrease due to the banks’ self-regulation rules in 2012 and the activation of the CCyB in 2013. Cf. Behncke S., Effects of macroprudential policies on bank lending and credit risks, SNB Working Papers, 6/2020. 13 Cf. Schelling. T and P. Towbin, Negative interest rates, deposit funding and bank lending, SNB Working Paper, 5/2020. Page 11/12  The key question, from our point of view, is: Are there substantial vulnerabilities on the mortgage and real estate markets? We can answer this question with a ‘yes’. According to our assessment, markets today are more vulnerable to corrections in the form of declining prices and increasing numbers of mortgage loan defaults. Thanks to substantial capital buffers, however, most banks should currently be capable of absorbing the associated losses. The capital buffers are therefore essential to financial stability – and will remain so in future.
Ooi Sang Kuang: Managing risks in mortgage financing Welcoming address by Mr Ooi Sang Kuang, Deputy Governor of the Central Bank of Malaysia, for the talk on “Managing Risks in Mortgage Financing”, Kuala Lumpur, 13 January 2010. * * * It is my great pleasure to welcome all of you today to this dialogue on “Managing Risks in Mortgage Financing”. This event is jointly organised by Bank Negara Malaysia and Cagamas Berhad to review and exchange perspectives on developments in the area of mortgage financing. At least two factors make this a highly topical subject at this particular time. Firstly, the dramatic events of the global financial crisis have shed the spotlight directly on the mortgage market, prompting many questions to be raised about current practices in mortgage financing. These questions have challenged traditional assumptions that mortgage lending is generally a safe and low-risk activity, and drawn attention to the blind spots that we need to be concerned about. Secondly, the current accommodative stance of monetary policy coupled with the increasing intensity of competition in the mortgage market calls for greater vigilance by banks in monitoring risks in the mortgage portfolio. Expectations of faster and stronger recovery prospects for Asia, and that Asia will begin the process of unwinding of accommodative policies ahead of the rest of the world, could also lead to strong capital inflows and asset price increases. These combined conditions require banks to carefully monitor any changes in the direction of risks emanating from the housing market.

It’s not sprinting as fast as you can for 100 meters until the finish line. If you told me today to run a full marathon tomorrow, I could not make it. But, if you gave me time to prepare and get fit, I would be in the run. Monetary policy Let me now devote the last few minutes of my talk to update you about our monetary policy. Throughout the last couple of years, the Monetary Policy Committee has maintained an accommodative policy stance to support the economy. Mindful of downside risks to growth, the Committee carefully adjusted the degree of policy accommodation to ensure sufficient support to domestic demand and to shore up confidence. Since May 2013, the policy rate was cut three times, as lower risks to domestic financial stability and subdued inflation opened room for monetary easing. Nonetheless, since the interest rate has been low for a prolonged period, we continue to be vigilant in monitoring any risks to financial stability. (Slide 6) Ladies and Gentlemen This year marks the 15th anniversary of Bank of Thailand’s adopting of the “flexible inflation targeting’ monetary policy framework. Thus far, this framework has served us well and resulted in a satisfactory record of price stability, which is a remarkable improvement from previous decades. (Slide 7) The headline inflation rates were on average 2.6% since 2000 under inflation-targeting, while they were more than 4% prior to that (15 years during 1985–1999).
On balance, I believe we have been making progress toward our goals, recognizing that a few issues still cloud the outlook. Most noteworthy is the fact that inflation continues to run well below our 2 percent objective. With respect to the economic growth outlook, the softness in third-quarter real GDP – which according to its initial estimate rose at only a 1.5 percent annualized pace – and the weakness of the manufacturing sector have raised concerns that the U.S. economy may be losing some forward momentum. Sharp reductions in oil and gas drilling activity and a loss of international competitiveness associated with the dollar’s appreciation over the past year have restrained factory output. Judging from historical experience, the impact of the dollar’s recent strength has the potential to be protracted, so that the trade sector probably will continue to be a drag on growth in 2016. Thus, the manufacturing sector is likely to continue to lag behind the rest of economy. But these negatives need to be set against the many positive aspects of the economic outlook. In particular, domestic demand continues to grow at a solid pace as increases in consumer spending, housing and business fixed investment all contributed to the third quarter’s 2.9 percent annualized gain in real domestic final sales. A large decline in the pace of inventory accumulation was the main reason why real GDP growth faltered in the third quarter.

First, the decline in these forward inflation compensation measures has been highly correlated with the fall in oil prices – a pattern that is hard to explain. Second, a careful analysis of the factors behind the decline in inflation compensation suggests that changes in liquidity risk premia and what investors are willing to pay for inflation protection account for most of the decline, rather than the decline reflecting a change in inflation expectations. Still, we need to continue to monitor inflation compensation closely, while recognizing that sorting out the allocation of the decline in inflation compensation across the three factors – liquidity risk premia, the price for inflation protection and inflation expectations – is admittedly difficult. And also, the conclusions reached in such models are sensitive to these models’ assumptions and structures. Regardless of how much signal one takes from these recent data, a decline in inflation expectations below levels consistent with our 2 percent inflation objective would be problematic because inflation expectations are an important influence on actual inflation. Businesses, for example, make decisions about the size of annual wage increases based, in part, on their expectations of future inflation. And, households base their spending decisions, in part, on how fast they expect their incomes to rise, and inflation expectations play a role in that process. Lower inflation expectations also raise the level of real interest rates, all else equal, which can undercut the power of monetary policy to support economic activity. This is particularly relevant at the zero lower bound for interest rates.
The taxonomy will also pave the way for plans that will be announced soon to mandate the adoption of climate related financial disclosures by financial institutions. In addition, we are supporting efforts by the Government to strengthen the capacity of development finance institutions to enable them to play a more significant role in crowding in sustainable finance from the private sector, supporting the capacity building needs of businesses in transition, and scaling up innovative financing mechanisms. In light of the current challenges faced by businesses and individuals, we see a greater need and significant prospects for new forms of blended finance to support the recovery process and meet transition challenges. To this end, the Bank is engaging with the financial industry, including DFIs, and other key stakeholders on strategies to combine commercial lending with alternative funding sources such as philanthropic funds and social finance instruments. This includes upscaling existing pilot programmes. Such blended finance solutions will be important to reduce debt levels and future risks to growth and financial stability. During this period, the Bank has also established concessionary financing facilities dedicated to help SMEs automate and digitalise their operations. This will enable them to take advantage of new technologies to enhance income streams and build greater resilience. Thirdly, we believe collaborative partnerships will play a larger and more critical role in shaping financial policy going forward.

The potential for online payment solutions is great enough to offer scope both for secure card payments and for e-payments based on online banking. The ECB strongly supports the emergence of SEPA-wide online e-payment solutions, such as those that already exist at the national level, for example in Germany, Austria and the Netherlands. In my view, European wide implementation of such innovative ideas is very much needed. Both increased security for “card-not-present” transactions and the introduction, throughout Europe, of e-payments based on online banking will provide more payment options for users. And such developments will also address a problem that greatly concerns central banks: safety. I firmly believe that for “online shopping” the payments industry needs to deliver a solution that permits customers to pay for their purchases in a safe way. This brings me directly to the last of my proposed New Year’s resolutions: New Year’s resolution number five: let’s not forget about security The security of retail payments is key to ensuring that consumers and businesses place their trust and confidence in SEPA. The risk-based approach applied by individual banks may not be sufficient to achieve the level of security that is required at the aggregate industry level. The reason for this is that commercial risk tolerance may differ from social risk tolerance. In the seventh SEPA progress report we dedicated a chapter to the topic of security. By sending a number of ambitious messages we have ensured that the necessary attention will be paid to this topic.