samchain/econo-pairs-v1 huggingface dataset:
Radical action was necessary to ensure the survival of the banking system. And on the morning of 8 October that action was taken when the Prime Minister and Chancellor unveiled a UK plan for recapitalising the banking system on which the Bank, FSA and Treasury had been working for a while. Why was radical action necessary? When the financial turmoil began in August 2007, markets for a number of financial instruments, including mortgage-backed securities, dried up. Most observers expected this closure to be short-lived, and the predominant view was that the crisis was one of (a lack of) liquidity. But, as time passed and markets did not reopen, it became clear that the problem was deeper seated, and concerned the solvency of the banking system and the sustainability of its funding model. Attempts to deal with the problem by injections of liquidity from central banks led to temporary alleviations of the symptoms, but, after an initial improvement, conditions would deteriorate again. The scale of central bank liquidity support during the crisis has been unprecedented, and all central banks have increased the scale of their lending in broadly similar ways. The UK taxpayer now has a larger claim on the assets of banks (in the form of collateral held by the Bank of England) than the total equity value of UK banks. Massive injections of central bank  BIS Review 128/2008  1  liquidity have played a vital role in staving off an imminent collapse of the banking system.

I should add that the International Association of Insurance Supervisors (IAIS), a fellow association of supervisors in the insurance area, is now discussing a supervisory framework that would apply to all insurance regulatory systems globally. Evolution in risk management and the reform of financial supervision should complement and reinforce each other, and the progress in each area will be influenced by the work underway globally to revise accounting guidelines. The Geneva Association has taken a great interest in this topic, so I will conclude my remarks with some brief thoughts from my perspective on the convergence of accounting standards, advances in risk management, and supervision. II. Trends across financial services sector  Allow me to begin with an overview of recent trends in risk management. Last year, a body representing major financial supervisory agencies conducted a study of 31 banks, securities firms, and insurance companies in 12 jurisdictions. This body - called the “Joint Forum” - consists of expert supervisors from member agencies of the Basel Committee, the International Organisation of  BIS Review 32/2004  1  Securities Commissioners (IOSCO), and the IAIS. The Joint Forum seeks to identify best practices and develop guidance for activities across the financial services sector. In its report, which was published in August 2003, the Joint Forum identified two important and recent trends among large, complex firms engaged in banking, securities, or insurance, or in some mix of these activities. a.
Yves Mersch: The European banking union – first steps on a long march Speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the Finanzplatztag, Frankfurt am Main, 27 February 2013. *  *  *  Dear Mr Padberg, Ladies and Gentlemen, I am well aware that many of you are concerned that the European Central Bank’s assumption of the supervisory role might overburden monetary policy. However, if well designed, set-up and managed, the banking union will eventually ease the burden on monetary policy. This will not happen by itself, though. Numerous stumbling blocks need to be cleared in the preparatory phase. But let me start without further ado. The success of monetary policy rests on integrated financial markets that operate efficiently and smoothly. They are: 1.  the basis for the equal transmission of monetary policy across member states in a monetary union;  2.  a key channel for the proper transmission of the monetary policy stance to the real economy – and hence for the ability of monetary policy to deliver price stability. However, the crisis has brought the flip side of financial integration to the fore, namely interconnectedness and increased risks to financial stability. Indeed, an integrated financial and economic system is more prone to contagion from large adverse shocks. Financial turbulence can more easily spread across markets and regions. This is particularly true if no institutional safeguards – such as euro area-wide crisis management arrangements – are in place.

Various actors in the economy may be relieved from pressures to take up their own responsibilities, thereby lowering the incentives to correct imbalances, unwind past excesses and redress the course of unsustainable economic and financial policies. BIS central bankers’ speeches  3  Second – and more fundamentally – non-standard monetary policy cannot solve the underlying structural economic and financial problems. The banking union – restoring financial stability and reintegrating financial markets The banking union aims at building an integrated financial framework to safeguard financial stability. To this end, it is absolutely imperative to have both an EU framework for single supervision, the SSM, as well as an integrated resolution framework, the SRM. Stability comes from having two pillars. The Single Supervisory Mechanism One particular institutional shortcoming of Economic and Monetary Union (EMU) derives from the inconsistency between a single monetary policy and national supervisory competences. A step up of supervisory powers to the supranational level was therefore needed to reverse financial fragmentation, with a view to breaking the link between sovereigns and banks, restoring the principle of self-responsibility and avoid objectionable transfers. By centralising supervision, the SSM should ensure uniform practices across Europe and overcome the home-host cross-border supervisory discussions and the associated national bias. The establishment of a single supervisor marks a new epoch in the EU financial framework, which may be comparable to the creation of monetary union at the end of the last century.
While net lending to companies remains subdued, that partly reflects lenders running down their commercial property loans; new lending to businesses has picked up significantly over the past year. In sum, there are reasonable grounds to expect that the handover from households to businesses will be realised. As far as the prospects for productivity go, the picture is murkier. A feature of this downturn has been the unusual weakness of productivity growth. To give you an idea of the scale of the puzzle, output per person-hour worked is just over 15% below where it would have been if it had simply continued growing at its pre-crisis average rate (Chart 4). Part, but only a small part, of this shortfall can be traced to the low rate of business investment and special factors such as the decline in North Sea oil production. A possible explanation is the presence of overhead labour and the desire to hang on to skilled labour that might be difficult to replace when demand picked up; the low rate of pay growth will certainly have encouraged this. Some businesses also tell us that they have had to devote more effort to winning business while demand is depressed. Finally, the need to repair balance sheets may have led banks both to forbear on delinquent loans to some weaker businesses while simultaneously inhibiting the extension of new credit to riskier, but potentially more productive, enterprises. Now several of these explanations imply that a recovery in demand could be met largely with the existing workforce.

Compared with the 1990s recession, and despite a far greater collapse in demand, fewer businesses have failed and fewer people have lost their jobs and their homes. Now, at last, there are clear signs that the economy is on the mend. It is still early days and the MPC will be doing its utmost to ensure that recovery is not nipped in the bud. But when the time does come for us to start raising Bank Rate, we should celebrate that as a welcome sign that the economy is finally well on the road back to normality. Thank you! 4  BIS central bankers’ speeches  UK Economic Prospects North East Chamber of Commerce Presidents Club Talk Rockcliffe Hall Hotel Charlie Bean, Deputy Governor Monetary Policy 10 March 2014  Chart 1: Household saving ratio  (a) Recessions are defined as at least two consecutive quarters of falling output (at constant market prices) estimated using the latest data. The recessions are assumed to have ended once output began to rise. (b) Percentage of household post-tax income.
The synchronization and shortening of cycles will probably also increase the volatility of international interest rates. Economies with liquidity constraints and limited access to international financial markets will suffer the most. The policy prescription here is to strengthen fundamentals and open and deepen the integration of both product and capital markets with the rest of the world. The effect of synchronization and shortening of the cycle on international interest rates will probably also be an increase in the volatility of those rates. Coverage against interest rate volatility is an additional argument in favor of integrating the emerging country economies with that of the world. 4. Monetary policy  Another by-product of the new information technology is the blurring of the traditional definitions of money. It is now clearly possibly for the non-banking private sector to create money substitutes on demand. This development will tend to render inefficient the regulation of limited definitions of money as a tool to influence economic activity and prices. If this is so, interest rates will reign unchallenged as a monetary policy tool, while inflation targeting will be in the forefront as a nominal anchor for the economy. By the way, under these conditions it will become extremely difficult to differentiate between financial and non-financial firms. Until a greater synchronization of the cycle becomes evident, the need for an independent monetary policy will necessarily lead to floating exchange rates.

11  All speeches are available online at www.bankofengland.co.uk/news/speeches  11  And the challenges are very different in different jurisdictions, not least because of differences in the structure and effectiveness of monetary policy transmission mechanisms.25 But, taken together with other changes in the economy – such as changes in the labour market which appear to have led to some flattening of the wage Phillips curve and changes in the pass-through of labour costs to consumer prices – the probability is that demand management will need to use more tools to stimulate demand in downturns and work harder to prevent macro-economic tail events. There is a lively debate over the extent to which aggressive use of monetary policy tools to stimulate demand creates financial stability risks by inflating asset prices and encouraging risk taking and the build-up of debt. My own view is that this can be overdone. There are, as I have said, deep-seated underlying structural drivers of low for long. We have not seen an explosion of real economy debt in advanced economies in recent years even with very low rates (Chart 2). Debt-to-GDP has not risen in advanced economies, although there has been a rotation from private sector to public sector debt. Prices of real assets like housing have been growing at a moderate pace in most advanced economies.
This calls for us to review our strategy and to consider how our monetary policy can best deliver on our mandate. Indeed, a question that is common to the entire community of central banks today is how to best define the medium-term objective of monetary policy, so as to ensure that expectations are firmly anchored. This could be particularly beneficial in conditions – like today’s – in which the policy space to buffer the economy from adverse developments is more limited than it was prior to the crisis. And, we are all trying to gain a better understanding of how the longer-term trends I mentioned might affect variables we monitor regularly and seek, to some extent, to control. This being said, it is premature to venture here into debates about the precise scope, direction and timeline of our review, as the matter has not yet been discussed thoroughly by the Governing Council. What I can confirm, however, is that the strategy review will be guided by two principles: thorough analysis and an open mind. This will require time for reflection and for wide consultation. The Parliament, and this Committee in particular, have traditionally offered a unique forum for dialogue, which has been enriched by the expert reports prepared ahead of the hearings.4 The ECB greatly benefitted from these debates 16 years ago when it undertook its last strategy review. This time around, we will be seeking a dialogue which is even more intense and productive than in the past.

Christine Lagarde: Hearing of the Committee on Economic and Monetary Affairs of the European Parliament Introductory statement by Ms Christine Lagarde, President of the European Central Bank, at the ECON committee of the European Parliament, Brussels, 2 December 2019. * * * Madam Chair, Honourable members of the Economic and Monetary Affairs Committee, Ladies and gentlemen, I am very happy to be back before this Committee for my first regular hearing as ECB President. I want to express my personal and sincere gratitude to this house for the support I received during the appointment process. And I look forward to a constructive and positive relationship between our two institutions going forward. The connection between the ECB and the European Parliament is especially valuable today as a means to reinforce trust in European institutions. In the euro area, support for the single currency has grown steadily in recent years, rising from a low of 62% in 2013 during the crisis to an all-time high of 76% today. Trust in the ECB has grown in that time as well – but its recovery after the crisis has been less dynamic.1 My predecessors at the ECB were alert to this and already acted to address the challenge. The ECB’s accountability practices have evolved2, as has its communication strategy.
In view of the limited size of the domestic capital market compared to other countries, foreign currency purchases seemed the most appropriate course of action for Switzerland. This allowed for the absorption of extreme exchange rate developments, which could have triggered a deflationary dynamic. In absorbing the upward pressure on the Swiss franc, the SNB may have taken on a higher balance sheet risk, however, in doing so, it countered the risk of a deflationary trend. Although the Swiss franc has appreciated sharply since the beginning of the year, the deflation threat has declined as the economic recovery has strengthened. The appreciation of the Swiss franc has impaired the competitive position of Swiss exporters. However, the negative impact on export demand has been reduced by robust economic growth in the economies importing Switzerland’s goods and services. Chart of conditional inflation forecast  I would now like to comment on the new, conditional inflation forecast in more detail. The (dashed) red curve on the chart represents the new, conditional inflation forecast. It shows the future path of inflation, assuming that the three-month Libor remains constant at 0.25% over the entire forecast horizon, and it covers the period from the fourth quarter of 2010 to the third quarter of 2013. For purposes of comparison, the (dash-dotted) green curve shows the inflation forecast published in September, which was also based on the assumption of a three-month Libor of 0.25%. The new conditional forecast shows that inflation remains low for 2011 and 2012.

In view of the expansionary monetary conditions, lending business remained brisk. According to the SNB survey on bank lending, banks maintained their lending standards for companies and households in the third quarter of 2010. Several banks reported that household demand for mortgages increased again. This is reflected in the continued high growth rate of mortgage volume. Moreover, real estate prices continue to rise. The situation on the mortgage and real estate markets still requires the full attention of the SNB. 2  BIS Review 173/2010  Impact of foreign exchange market interventions on the SNB balance sheet  Since the beginning of the financial crisis, the SNB balance sheet has lengthened considerably and its composition has changed, in particular due to the SNB’s foreign exchange market interventions. Since the beginning of 2010, the balance sheet total has increased from CHF 207 billion to some CHF 280 billion. Moreover, the significant appreciation in the Swiss franc has resulted in considerable exchange rate losses on the SNB’s foreign currency investments. My colleague, Thomas Jordan, will take a closer look at the risks for the SNB associated with the lengthening of the balance sheet. After the beginning of the financial crisis, the SNB lowered money market interest rates to virtually zero. Despite these decisive reductions in interest rates, the Swiss economy faced the threat of deflation from March 2009 onwards. This required the SNB, as part of its mandate, to undertake a further monetary policy easing.
The number of hours worked rose during the years following the crisis at the beginning of the 1990s. But developments were strongly affected by the upturn in the economy, which enabled unemployed persons to gradually return to the labour market and obtain work. The positive growth in employment was supported by an increase in the number of persons of working age at the same time as sick leave was at a relatively low level. In recent years, this trend has been broken, partly due to an increase in sick leave. The picture of productivity in recent years has been somewhat brighter. For the economy as a whole it has stood at 2 per cent per year, or just above this figure. This is a marked improvement on the 1980s, when the increase remained at around 1 per cent per year, and even more so compared with the 1970s, when the productivity trend was negative. Factors such as the change in fiscal and monetary policy regimes and stiffer competition have probably played a role in this development. Despite the fact that the strong growth in productivity during the 1990s partly reflects both rapid growth in the private sector relative to the public sector and the large expansion in the ICT sector, there is reason for relative optimism regarding the future. Our economy has become more open, with greater competition and price pressure in many sectors. The problem is primarily the labour supply. Here, developments seem to have turned in a negative direction.

The implication of this is that the Riksbank could then be forced to raise interest rates and tighten monetary policy at a lower rate of growth compared with the last ten years. The problems of a weaker labour supply are particularly serious in Sweden, even if an ageing population is something shared by many other countries. This is because an unusually large part of the expenditure ensuing from an ageing population in terms of medical treatment, care of the elderly and pensions comes from the public sector budgets. In turn, this means that an unfavourable population development will in our case have direct and tangible effects on the public finances. The only realistic means of counteracting these effects is for more people to work and pay taxes and for fewer to utilise the transfer payment system. Finally, we should have learnt from the crisis more than ten years ago that it is important to prevent problems. To deal with difficulties and challenges in good time - before they grow out of control. Failing to take action does not make the problems disappear. On the contrary, they risk becoming much worse in a few years time, when the population development has taken a significantly negative turn. Then it might be necessary to make larger and more painful changes under less orderly conditions. Thank you! BIS Review 44/2003  5
But exit strategies from this support need to be developed and consistently implemented to contain moral hazard, to forestall a rise in long-term real interest rates and crowding out effects, and to insure sustainability of public finances. If this challenge is not met, the current crisis is bound to be exacerbated by a sovereign debt crisis. •  In the area of regulation a broad set of measures is under way and considerable progress has been made. But as signs of stabilisation in the financial system and the  BIS Review 102/2009  3  economy are emerging, reform appetite is waning and there is a risk of missing the opportunity of a paradigm shift in the financial system. •  Especially as the crisis intensified, central banks took immediate and unprecedented action by lowering rates to historically low levels and providing ample liquidity. •  Keeping interest rates too low for too long may well lay the basis for new imbalances and instability. Central banks need to prepare for credible strategies to phase out their support and stand ready to prepare financial markets when they come to unwind their credit support measures. •  In academic circles the financial crisis has revived the debate whether central banks, in the conduct of monetary policy, should pay more attention to financial variables, and specifically, whether inflation targeting strategies do not focus too narrowly on economic developments alone. Relative to this the ECB’s monetary policy strategy has proved to be robust.

Thus, the impact of the pandemic on domestic demand was less pronounced. Despite relatively successful public health measures, the large share of tourism services in Iceland’s GDP made the economy quite vulnerable to the economic consequences of global restrictions on travel and tourism services. In 2019 tourism and tourism-related services amounted to about 8% of Iceland’s GDP, a proportion second only to that of Portugal and Spain in the OECD. Reflecting the weight of tourism in exports, Iceland’s exports contracted by 31%, more than in any other OECD country, and service exports shrank by 54% in the wake of restrictive measures taken by all major trading partners. Other tourism-dependent countries such as Greece, Spain and Portugal also suffered severe export shocks. The weight of tourism and the effects of COVID on exports  In 2020, economic activity in Iceland contracted by 7.2%, compared to 4.9% on average in main trading partner countries. The difference may appear smaller than expected given the size of the shock to exports. As a small open economy, Iceland imports a large share of consumer durables, investment goods and tourism services. Therefore, a considerably larger share of shocks to aggregate demand tends to be absorbed by the external sector than in larger, more self-contained advanced economies.