samchain/econo-pairs-v1 huggingface dataset:
This means having an effective regime against: •  market misconduct and misdemeanours; and  •  illicit finance, namely money laundering and terrorism financing. MAS is stepping up enforcement action against misconduct such as insider trading, false trading and front running by individuals and traders in the securities market. •  We have sought criminal actions or higher civil penalties to send the right deterrent message. •  In April last year, MAS imposed a civil penalty of close to $ million for insider trading – the highest quantum in a single case so far. BIS central bankers’ speeches  5  When it comes to anti-money laundering and countering the financing of terrorism (AML/CFT), the rules are strict and in line with international standards. Financial institutions must: •  know their customers;  •  assess the risks and perform additional due diligence where the risks are higher;  •  monitor transactions on an ongoing basis and report any suspicious activities. Supervision of financial institutions is rigorous. •  In recent years, MAS has stepped up its onsite supervision of AML/CFT controls – increasing the number of inspections by six-fold. •  This is resource-intensive business: each AML/CFT inspection of a bank takes about 4–8 weeks and involves 4–6 supervisors. We have now set up a dedicated AML Department.

We will: •  make more robust risk assessments of financial institutions’ business activities, client profiles, geographical connections, transaction volumes, and quality of controls;  •  intensify supervision of financial institutions that pose higher risks;  •  conduct thematic inspections of activities that pose higher risk across financial institutions; and  •  step up engagement with financial institutions to promote deeper understanding of emerging risks and typologies as well as best practices to mitigate these risks. But MAS cannot inspect every bank every year. Nor can we go through all transactions. And we certainly do not set out to detect fraud – which would take months of intense scrutiny. Responsibility for AML/CFT rests with the board and senior management of financial institutions. They must: •  put in place robust monitoring mechanisms to detect suspicious activities;  •  promote strong risk awareness and constant vigilance among all staff; and  •  empower their compliance and risk management people. My advice to senior managers in our financial institutions is this: keep your risk and compliance people close to you. •  They are often seen as hindering opportunity and profits. •  But when things go wrong, you wish you had heeded them. •  When they say ‘I think something’s not right here’, listen to them. Ultimately, trust and conduct boil down to culture more than any externally imposed rules. By culture, I mean the shared values, attitudes and norms that guide behaviour. Financial institutions must get the culture right.
If our monetary policy impulses are not transmitted uniformly to all of the area’s countries because of the bank-sovereign link, it undermines the very foundation of Europe’s monetary union; remember that three quarters of the financing of the euro area’s economy consists of bank loans. By breaking this link, a banking union would restore the federal dimension of monetary policy. Today the first pillar of the banking union is being constructed: the Single Supervisory Mechanism. We are currently working on legal issues, on identifying systemically important banks within the euro area, on the supervisory model, on the future data reporting and, of course, on the asset quality review that will be undertaken before we take on the responsibility of supervision. The governance structure we have adopted will guarantee that, while the Governing Council will keep the decision power, there will be no conflict of interest between monetary policy and banking supervision. On the contrary, more consistent supervision across the euro area should allow for the early detection of potential risks and imbalances and, ultimately, improve the transmission of monetary policy. This is a fundamental first step and its rapid implementation will be a major success for the euro area. But, alone, it cannot achieve the objectives of a banking union. That is why we must rapidly construct its two other pillars: a supranational bank resolution authority and a unified deposit insurance system.

Overall, the June 2013 Eurosystem staff macroeconomic projections for the euro area foresee annual real GDP declining by 0.6% in 2013 and increasing by 1.1% in 2014 thanks to three main drivers: export growth, accommodative monetary policy and low inflation. BIS central bankers’ speeches  1  2. How can we boost growth further in the euro area? A strong fiscal stimulus obviously appears unfeasible, given the necessity to rebalance public finances. I want to stress two things here: •  The euro area has very rapidly and efficiently set to work to cure its fiscal weaknesses and can today boast some of the best results among the major developed economic regions: its public deficit has been reduced from 6.3% of GDP in 2009 to approximately 3% today; by the end of 2013, the euro area should show a positive primary balance;  •  While the commitment to progressively achieve sustainable levels of public debt and deficit has to be achieved; the measures need to be designed in such a way as to limit the negative side-effects on growth. For instance, efforts need to be focused on non-productive spending. In fact, there is only one way to durably raise the growth potential of our economies, and that is by structural reforms that enhance competitiveness. It is clear that the euro area is well equipped to confront the challenges of the 21st century. With 370 million consumers and high purchasing power, it remains the biggest market in the world.
But now that the economy has undergone a period of deep crisis and it is difficult to assess what structural changes the crisis may lead to, the process becomes even more complex. One illustration of this is how one should assess future developments in the labour market. So far employment has not fallen as much as might be justified given the historical relationship between unemployment and GDP, and the large fall in GDP. This has come as a surprise to us and to other forecasters. But what conclusions should one draw with regard to the effects in the slightly longer term when the economy recovers? Employment and the number of hours worked are now beginning to increase. Normally, one might have expected a greater adjustment in the number of hours worked than we have seen in this economic downturn. The fact that the  6  For further information on resource utilisation, see Jonsson, M., Nilsson, C. and Palmqvist, S., 2008, “Should monetary policy stabilise resource utilisation?” Economic Commentary, www.riksbank.se or Öberg, S. “Monetary policy and the elusive resource utilisation”, speech published on 25 May 2009, www.riksbank.se. 4  BIS Review 58/2010  adjustment has not corresponded to the fall in production means that productivity has been very weak. But as we observe in our most recent Monetary Policy Update, which was published last week, we expect productivity to improve in the future, which also means that the number of hours worked and the number of employed will grow slowly.

3  The relationship estimated is: Change in unemploymentt = a + b0*(GDP growth)t + b1*(GDP growth)t-1 + b2*(GDP growth)t-2+ q*(Change in unemployment)t-1. εt . 4  IMF World Economic Outlook, April 2010. 2  BIS Review 58/2010  Studies have shown that unemployment may suffer long-lasting effects from a deep recession. This is partly because a person who has been unemployed for a long time loses part of his or her human capital and therefore becomes less attractive in the labour market, and partly because some people, after job-seeking for a long time, quite simply give up and leave the labour force. What is usually referred to as structural or “natural” unemployment may thus increase during periods of high and protracted unemployment. Labour market policy can counteract these effects to some extent, by for instance, offering further education and retraining to the unemployed. The situation today is in contrast to what we saw during the crisis in the 1990s. Then, GDP fell for three years and the fall in employment was greater than the fall in GDP. That crisis was domestically-generated and it was generally known that tough times lay ahead, as public finances were to be consolidated. This time, the crisis has come from outside and there has been scope for forceful fiscal policy and monetary policy measures. It is always difficult to make forecasts. Moreover, I believe it is more difficult than normal in the current situation.
The age dependency ratio, that is the ratio between people of pensionable age and people of working age, is expected to increase in Sweden from the current level of 30 per cent to 45 per cent by 2050. For Europe as a whole, however, the age dependency ratio is expected to increase from 25 per cent to 52 per cent. At the same time, of all the countries in the OECD only Norway, which is an oil exporter and Switzerland have larger current account surpluses as a percentage of GDP than Sweden. 17 The crisis of the 1990s perhaps meant that the Swedish public accepted the demand for a consolidation of public finances in a different way than in other countries. In many cases, these countries are being forced to conduct similar budget consolidation processes now  16  This is a somewhat controversial claim, however, as future generations can be expected to have higher real incomes due to the growth of productivity in the economy. 17  The National Institute of Economic Research “Sparsamma hushåll har skapat ett stort överskott i den svenska bytesbalansen” (“Thrifty households have created a large surplus in Sweden’s current account”). Article, 2011. 8  BIS central bankers’ speeches  instead. If so, this suggests that the differences in saving compared to other countries will decline in the long term, and thus also the Swedish current account surplus.

The current account on the other hand, which constitutes a flow that adds to or subtracts from these stocks, is less important. 22 Changes in the valuation of the assets and liabilities are affected to a great extent by changes in the exchange rate. 23 There are, however, considerable shortcomings in the statistics in this area. The values of some types of asset are definitely underestimated, as there is a lack of statistics on the Swedish households’ direct investments abroad. The net position can also be measured in different ways depending on whether direct investments are accounted at market value or at book or nominal value. However, both methods give a net position that is much lower than that given by the accumulated current account surplus (see Figure 8). 21  The nominal external position was –22 per cent of GDP in 2010, while the market-value net position was +4 per cent of GDP according to statistics from Statistics Sweden. 22  This is also found by Lane (2006) in an analysis of the Swedish exchange rate. 23  For a more detailed analysis of the external position see Blomberg and Falk, 2006.
A similar effect has operated for households: borrowers with floating rate mortgages in particular have seen their monthly repayments fall sharply. More generally, by reducing the returns on saving, the fall in interest rates has encouraged households and businesses to spend. The MPC’s programme of asset purchases has further stimulated demand by injecting additional money directly into the economy. The Bank’s purchases of government bonds encourage investors to diversify into alternative assets, such as corporate bonds and equities. The Bank is also operating directly in commercial paper and corporate bond markets to improve the functioning of those markets. Both actions have helped to boost the prices of corporate assets, reducing yields and lowering the cost to companies of raising funds in capital markets. This in turn should help to stimulate increased spending. The dramatic easing in monetary policy occurred alongside a range of Government policies. Most importantly, the Government’s actions to provide both capital and liquidity were  1  2  See Eichengreen and O’Rourke (2009). Romer (2009) makes a similar point. BIS Review 159/2009  instrumental in stabilising the banking system. The temporary reduction in VAT and the car scrappage scheme have boosted household spending and provided short-term support to retailers and the car industry. And the Government’s Business Payment Support Service has reportedly enabled almost a quarter of a million small and medium-sized firms to delay tax payments.

This is not a widespread issue: the average NPL ratio is 5.4% in the European Union as of September 2016, and in many countries, including France and Germany, it is below 4%. But it is a challenge which seriously affects specific banks in certain countries, mainly Italy and Portugal. So this challenge is manageable, but it needs to be actually managed: the quicker the better. Recent initiatives by Italian authorities are a step in the right direction, with the active involvement of European supervisory authorities. Third factor: the digital transformation. It is true that digitalisation is disrupting traditional customer relationship models. But it also creates opportunities: for instance, more diverse and accessible financial services, more complete customer satisfaction, greater valorisation of data. Yet, in order to succeed in the digital transition, financial companies need first to place innovation at the heart of their strategic management; and second to examine ways of transforming their business models, mainly in Retail. Obviously these are difficult choices that need to be made by the companies themselves. The strategic way forward is not up to regulators, and will not be uniform. That said, let me share some thoughts with you. On the income side, the response could be twofold: diversifying the range of services – both proprietary and via partnerships – that are offered to customers; and adjusting existing pricing policies, with fewer flat-rate prices and more pricing by use.
There is a great deal of slack in the economy. Around three-quarters of a million jobs (net) have been lost. And most surveys have firms working well within capacity (Chart 8). The MPC believes that that will tend to bear down on wages and consumer price inflation over the next few years, warranting our substantial monetary stimulus. But the recession will obviously impair the economy’s productive potential. Investment plans have been shelved and some discouraged people are likely to leave the workforce. Those effects are likely to accumulate over time. But there are important temporary factors too. Typically when monetary policymakers talk about the potential supply of the economy, we have in mind the slow-moving accretion in productive capacity determined by growth in underlying productivity, the workforce and firms’ net investment in the capital stock. Right now, that mindset would not quite capture what is going on. There are a number of reasons for thinking that the “effective supply” capacity of the economy has been depleted temporarily due to the shock to credit supply and confidence (Chart 9). How much, and how temporary, are major uncertainties. In the months immediately after the Lehman crisis, the cutbacks in lending and in trade credit insurance were so severe that some firms were probably unable to maintain production at previous levels. Working capital is, after all, an intermediate input. 2 Those constraints have probably reduced over the months.

In setting a course for nominal demand, we are usually trying to stabilise inflation in line with our target over a horizon of 2–3 years. Of course we care about longer horizons. As a number of us have argued over the years, 13 that is nicely captured by approximating our objective with a so-called quadratic loss function that gives weight to deviations of inflation from target and deviations of the level of output from its sustainable course. In that set up, the policymaker cares about future volatility (or uncertainty) about the inflation rate and the “output gap”. Sizeable imbalances create precisely that uncertainty, threaten precisely such volatility. All very useful as an abstract framework for thinking about policy. The trouble is that there is not a policymaker anywhere who has much of a clue about how to operationalise it in actual interest rate decisions. This matters because not all imbalances are associated with credit booms that pose a threat to financial stability. The development of a set of macroprudential tools would not be sufficient to insulate our economies from imbalances. But I do believe that it is necessary.
More specifically, I am referring to the fact that EU accession benefits were not evenly distributed across the economy, as reflected for instance by rising regional divergence. Bucharest, alongside other important cities, as well as areas either in the proximity of the Western border or in which industrial clusters appeared, did much better than other areas, particularly those in the North-East, which are lagging behind. The North-East of the country could constitute an attractive investment destination. As there are other regions where the gap between demand and supply of skilled labour is becoming more evident, firms have often encountered difficulties in overcoming the challenges posed by poor transport infrastructure – the one that makes us sigh. Because of the lack of investments, administrative units do not have an economic core and people have little choice but to move to a larger city or to another country. This is perhaps the most important challenge Romania is facing right now and I see only one way of overcoming this: continuing to increase our competitiveness and productivity in such a way as to preserve macroeconomic balances and reduce inequality. No country can obtain sustainable economic growth by boosting consumption and undermining contractual discipline, but by implementing structural reforms leading to productivity gains. As Paul Krugman said “productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker”.

Here we can see that while sovereign debts have increased considerably in the United States and the euro area in recent years, Sweden’s sovereign debt has decreased more or less continuously over the last 15 years. 4  BIS central bankers’ speeches  This indicates that the economic-policy framework in Sweden has worked well. The framework reflects the lessons we have learned from our own problems in the past, not least during the 1970 and 1980s, and we should build on this. The framework largely addresses three areas: fiscal policy, wage formation and monetary policy. The first area, fiscal policy, had to be changed following the crisis of the 1990s as the problems with Sweden’s public finances became acute. At the same time as austerity packages were implemented, great importance was attached to not ending up in the same situation again. The introduction of surplus targets, expenditure ceilings and the stipulation that municipalities should have balanced budgets also contributed to increased stability in public finances. A number of important reforms were also implemented that significantly improved the budget process. Figure 14 clearly shows the positive effects of all this on the budget. The second area is wage formation, which has also improved considerably since the mid1990s. The Industrial Agreement and the setting up of the National Mediation Office are two important factors behind this improvement. Nominal wage increases have been significantly lower over the last 15 years than in the 1980s.
Research from the New York Fed estimates that, within the first three months following the CCF announcement, credit spreads retraced about 90 percent toward pre-pandemic levels, with two-thirds of the improvement occurring on facility announcement dates (i.e., before purchases even began), and that half of the improvement in bid-ask spreads since the peak in March occurred on the initial announcement date itself.14 This provides strong evidence that the market found credible the design the CCFs, as well as the Federal Reserve’s commitment to following through. Improvements in secondary market conditions pass through to corporate borrowing costs in two ways: directly through borrowing rates that are benchmarked to secondary market yields of similar bonds, and indirectly by increasing the willingness of dealers to underwrite bond issuance. And this is precisely what we’ve observed. Since the CCF announcement, firms have raised about $ trillion in the corporate bond market from investors, or about double last year’s pace. Companies have raised new funds and refinanced maturing debt, helping them to maintain their operations and payrolls and build liquidity buffers against continued uncertainty. Importantly, the dramatic improvements in credit conditions have come despite an extremely small CCF footprint that has decreased over time. On account of healthy primary markets, the PMCCF has yet to be tapped. And since mid-May, when we began SMCCF purchases, the pace of our buying has fallen steadily in response to improvements in market functioning.

Together, these efforts allow us to expand the reach of our operations while making tangible progress on our commitments to diversity and inclusion, including to minority-, women-, and veteran-owned firms. Let me now turn to transparency and accountability. In the spirit of these principles, we have reported to the public in near real-time our market activity, including the details of every SMCCF transaction. Our holdings are publicly reported on a weekly basis through the Fed’s H.4.1 release. Every month the Fed publishes the full holdings in a detailed Congressional report. We also provide the attributes of the Broad Market Index, including detailed issuer-level weights. Aside from portfolio activity, we have also disclosed the CCF’s legal agreements. On the New York Fed’s website, you can find all documentation with the Department of Treasury that governs the operation of the facilities, as well as all contracts with external vendors. On the latter, we remain committed to disclosing all fees to service providers as they are paid. Impact on Credit Conditions As you all know, corporate credit conditions have recovered substantially from the worst strains of March.