samchain/econo-pairs-v1 huggingface dataset:
As a consequence, the firm’s liquidity pool dropped by 83 percent in a two-day span.1 These liquidity dynamics were driven by two main factors. The first factor was the underlying stress on dealer balance sheets as the prices on complex collateralized debt obligations (CDOs), private label residential mortgage-backed securities (RMBS), and commercial real estate-related assets fell sharply and uncertainty about underlying asset values rose sharply. The uncertainty stemmed, in part, from the lack of transparency about what prices these assets could be sold for, which, in turn stemmed from the difficulty of valuing these extremely complex and heterogeneous securities. The stress on underlying asset prices and the uncertainty about the valuations of pools of illiquid assets caused investors to become concerned about the solvency of some of the weaker dealers.2 These concerns contributed to liquidity pressures, which, in turn, led to forced asset sales by dealers and others. These sales both further depressed asset prices and increased asset price volatility. The second factor contributing to the liquidity crisis was the dependence of dealers on shortterm funding to finance illiquid assets. This short-term funding came mainly from two sources, the tri-party repo system and customer balances in prime brokerage accounts. By relying on these sources of funding, dealers were much more vulnerable to runs than was generally appreciated. Consider first tri-party repo, a market in which money market funds, securities lending operations, and other institutions finance assets mainly on an overnight basis.

However, the decision-making system in the United States is constructed in a way that makes it difficult to take the necessary type of decision. Moreover, my impression is that the problems with the public finance deficit are underestimated in the United States to the extent that they believe growth will resolve much of the problems. On the other hand, they have now decided on certain budget-strengthening measures and the United States usually succeeds in managing difficult problems in the end. The sovereign debt problems in the euro area are actually smaller than the US problems. The deficit in public finances in the euro area is calculated by the IMF to correspond to around 4 per cent of GDP this year. All in all, there is thus less need of budget strengthening measures in the euro area than in the United States and the tightening effects need not be so great. But the deficit is unevenly distributed and some countries have very large deficits and/or national debts. The problem is that even in Europe it appears to be difficult to reach decisions on credible long-term programmes for consolidating public finances. Instead, many countries have been forced by the markets to decide on further budget strengthening during the summer to increase confidence. However, even if the sovereign debt problems in the United States and the euro area are essentially the same, the market turbulence may lead to the situation deteriorating.
The banking system’s capital stock is adequate to boost lending; we do not foresee any growth in outstanding liabilities and, at the same time, profits are sufficient to enable capital buildup. The question is, what procedure will banks use to assess borrowers’ risks and how will demand for capital rise. The current volume of lending is indeed growing, albeit at a very moderate pace: around 5-7% for this year. Turning now to capital outflow. As we see it, capital outflow is expected to remain steady – in the range of $ billion a year over a three-year horizon. Rossiiskaya Gazeta’s QUESTION:  7 / 14  BIS central bankers' speeches  Mrs Nabiullina, the Bank of Russia has recently closed submission of debt load calculation and use proposals. What feedback did you receive from the market? What is the timeline for the rollout of this instrument? And my second question, if I may. You met the People Bank of China’s governor, discussing yuan-denominated OFZ. Did you reach an agreement on investment quotas for our securities? Thank you. ELVIRA NABIULLINA: As regards the rollout of the debt load indicator, we believe this is absolutely the right approach, and we intend to move forward in this direction. We are still receiving feedback. We will need time to process and consolidate this feedback. No final conclusions are possible at this point, our approach being though that this indicator should be enacted; the timeline and details to be discussed. As for my meeting with the governor of China’s central bank.

Having said that, we do not rule out that a decision may be made at one of our intermediate meetings. Let us have a closer look at the factors behind today’s decision. First, inflation has slowed down considerably. It stood at 5.4% in late 2016 and fell to 4.3% as of 20 March. It is very close to the 4% target. Inflation reduction is driven by a number of factors. Price growth is primarily checked by slack consumer demand. Some indicators suggest that it started to slowly recover in early 2017. However, overall households retain the propensity to save, of which deposits are indicative. Incentives to save are supported by positive real interest rates. Lowering inflation expectations also slow down consumer price growth, though they are still high. Expectation indicators sometimes wobble up and down and we speak about their volatility. Having said that, the most important development is that a downward trend has entrenched. The ruble appreciation triggered inflation to reduce faster than forecast. It has affected all goods and individual services in recent months, especially food prices. Prices for some products, such as fruit and vegetables, even dropped, because they quickly respond to a changing environment. That said, it also means that the situation may abruptly reverse for such goods. Exchange rate movements also decelerated growth in non-food goods and service prices. Another factor is heavy crops last year and in 2015. They have left stocks of farm produce which drag down prices for some food products.
Preparing a plan for reducing euroisation in our economy is a joint commitment by a number of authorities and the Bank of Albania is in the process of identifying measures that may be taken in this regard. Amid a complex and challenging economic and financial environment, the coordination of the monetary, micro and macro-prudential policies assumes primary importance in promoting monetary and financial stability. In 2016, the Bank of Albania has worked with the same intensity in all three aspects, aiming at an optimum calibration for them. Following, is an overview of our work for maintaining and promoting financial stability. 3. Promoting financial stability and sound lending In accordance with its mandate and institutional responsibilities, the Bank of Albania is jointly responsible for safeguarding financial stability in Albania. It communicates its assessment on the financial stability regularly, and coordinates its policies with other institutions, through the Financial Stability Advisory Group (FSAG). With regard to financial stability, during 2016, we continued to work for drafting a comprehensive framework of the macro-prudential policy and constructing macro-prudential instruments. This framework is based on recommendations of the European Systemic Risk Board and standards of the Financial Stability Board. Moreover, in accordance with its institutional mandate and responsibilities, the Bank of Albania is tasked with safeguarding the stability of the banking system and addressing potential risks that may jeopardise it.

Output and demand are posting moderate annual growth rates, but still with some improvement over the second half of last year. This is good news. However, marginal data show some loss of strength which, combined with low confidence indicators for firms and households, leads us to estimate that the recovery foreseen for the second half of this year will proceed at a slower pace. Accordingly, we have adjusted our growth forecast for this year downward, by one fourth of a point. Inflation has moderated but is still high and thus it is our main worry. In our baseline scenario, we have it around 4 percent for some months to later descend toward our 3 percent target. About the risks facing financial stability, the Report shows no big changes either. Corporate borrowing continued to rise in the past few quarters. Although there are obvious factors behind this trend, such as increased external borrowing-a logical development given the good credit conditions-and the depreciation of the peso, we must not relent in our efforts to closely monitor these tendencies. Anyway, figures also show that the households’ and firms’ financial burden has not increased, largely because interest rates are low, in line with our clearly expansionary monetary policy. The external scenario has also behaved as we outlined in March. The recovery of developed economies looks more balanced across countries, boosting confidence in consolidated growth of the developed world. Emerging markets continue to show some further weakening, especially in our region.
A new agenda for change So while the architecture may remain fundamentally the same, the plumbing of the financial system has undoubtedly been improved. This is unromantic work, but when crisis hits in the middle of the night, and unpleasant odours emerge from the system, it is the plumber you call, not the architect. However, it is reasonable to ask whether these changes are sufficient to reduce the incidence of financial crises in the future and to enhance our ability to manage such crises as will, inevitably, occur. I do not propose today to try to cover all the issues that might be raised by that general question. I certainly do not plan to talk about fiscal and monetary policies, which are no longer my area of expertise. I will also leave to one side the important developments of bankruptcy and insolvency procedures. The IMF’s Sovereign Debt Restructuring Mechanism (SDRM) proposal seems to have been shelved for the time being but, judging from recent successful bond issues by Mexico and Brazil, some solid progress is clearly being made on collective action clauses which should allow for more timely and orderly restructuring of sovereign debt in case of problems. However, all of these subjects are, as we say, above my pay grade. I will concentrate instead on the regulatory dimension. I do not propose a very radical agenda. Regulators are not normally revolutionaries.

So far the international regulatory community has not been successful in getting a grip on the extent of the possible systemic problem. It is a gap which needs to be filled quickly. Similarly, I am not sure we know enough about the hedge fund market. I chaired a working group on highly-leveraged institutions for the Financial Stability Forum, which reported a couple of years ago. Our conclusion then was that there needed to be better risk management by hedge fund counterparties, better risk management by highly-leveraged institutions themselves, enhanced public disclosure by those institutions, and some other related changes. I am not one of those who believes that hedge funds are inherently dangerous beasts in the financial jungle. Indeed in many cases hedge funds have been useful in being prepared to take positions, sometimes counter-cyclical positions, which have helped stabilise markets. But the sector has grown dramatically, and as the Long-Term Capital Management problem showed, if leverage is uncontrolled, even one fund alone can be a destabilising factor. So while I do not believe that the case for direct regulation of hedge funds is made out, I do think we need more transparency, particularly about the extent of their leverage, and the recommendations to that effect in my earlier report have not been effectively implemented as yet. It is encouraging that under its new Chairman the SEC are holding a series of roundtables on the subject in New York.
This may be related to greater uncertainty as to developments in the German economy. Forward interest rates 10 years ahead. US, Germany and Norway Per cent 7.5  7.5  7.0  7.0  Norway 6.5  6.5  6.0  6.0  US 5.5  5.5  Germany  5.0 4.5 01/01/01 01/05/01  5.0 4.5  01/09/01  01/01/02 01/05/02  01/09/02  01/01/03  Source: Norges Bank SG Gausdal 31.01.03  The mandate for monetary policy with an inflation target provides a sound basis for assessing Norges Bank's interest rate setting. According to the regulation, the direct effects on consumer prices resulting from changes in interest rates, taxes, excise duties and extraordinary temporary disturbances shall in general not be taken into account. This means that monetary policy must be oriented towards bringing underlying inflation, adjusted for the deviations mentioned above, close to 2½ per cent. An adjusted index such as this will be most relevant when assessing the orientation of monetary policy in retrospect. The most common indicator of underlying inflation – the consumer price index adjusted for tax changes and excluding energy products (CPI-ATE) – has shown a year-on-year increase of between 1.8 per cent and 2.7 per cent since the inflation target was introduced. In December, the last observation to date, the year-on-year rise was 1.8 per cent.

Per cent of trend GDP 6  6  5  5  4  4  Norway1)  3 2  3  OECD countries  2  1  1  0  0  -1  -1  Euro area  -2  -2  -3  -3  -4  -4  -5 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002  -5  1) Mainland Norway Sources: OECD and Norges Bank SG Gausdal 31.01.03  In spite of last year’s high wage growth, the interest rate was only raised by 0.5 percentage point last summer. Later in the year, the interest rate was reduced, primarily as a result of weak external economic developments that led to a reduction in interest rates abroad, thereby widening the interest rate differential. The global downturn and the strengthening of the krone have had a dampening impact on the Norwegian economy. When cyclical developments in Norway and abroad again converge, interest rates in Norway will be closer to the level abroad. This may also bring the krone back to a more normal level. Today’s particularly strong krone must also be seen in connection with the stock market decline, high oil prices and fears of war in Iraq. The very low level of interest rates among trading partners reflects an environment of sluggish growth, high unemployment and a risk of a prolonged downturn with deflation. This is a situation that we must strive to avoid.
But has the development of the derivative markets and the often sophisticated derivative instruments really led to better risk management? I believe it has. Derivatives redistribute risks to other risk-takers. These risk-takers may, of course, be better-equipped or more poorly-equipped to manage risks than a bank. If the risk is realised, it may lead to large losses in other parts of the financial sector, for instance, the insurance companies. However, if the risks are really diversified to a large number of agents, this should on the whole be positive from a macroeconomic perspective. One could say that we will all bear a small part of the gain or loss on our future pensions, but we hopefully avoid financial and macroeconomic costs from banking crises of the type we experienced in Sweden at the beginning of the 1990s. Given the significance of risk management for society and for financial stability, it is natural that the Riksbank should carefully follow developments in this field. During the era of regulations, we were the authority with the task of monitoring that the banks observed credit policy restrictions in their operations, but we now have a completely different direction. We closely follow - and sometimes even try to influence - how risks are managed in the financial sector. Risk management should be governed primarily by the needs of the customers, markets and intermediaries. It is only necessary for authorities to intervene with regulation and other means of control where there is a risk of market failure, i.e.

There were also inadequacies with regard to credit granting. Large loans were made to new customers, new sectors and new geographical areas. This type of lending strategy is not wrong in itself, but it requires that the credit-granter has done his homework and is aware of the possible risks. In some parts of the banking world, they talk about credit-granting according to the church tower principle, i.e. that loans should be primarily made to customers living and active close by. How this principle was applied in connection with investments in Atlanta or Brussels is not easy to see. In addition, the banks contributed to their customers building up a comprehensive credit exposure in foreign currencies, regardless of whether or not they had matching income in their loan currency. As the krona exchange rate was high, some borrowers chose to take out loans in foreign currencies that had a lower nominal interest rate. The risks with this strategy became evident after the krona’s rapid fall of almost 25 per cent in six months, calculated from when the krona was allowed to float in November 1992. When the banks’ borrowers found that their debt amounts had increased by up to 25 per cent, calculated in kronor, many of them were unable to meet their obligations and the banks’ loan losses increased further. These actions by the banks are actually quite remarkable.
Put differently, for money market interest rates to stay close to the SNB’s negative interest rate on sight deposits, the supply of liquidity must exceed the demand for liquidity by a sufficient amount. In a system of bank-specific exemption thresholds, this means that the supply of liquidity by the cash-providing banks – that is, by the banks whose sight deposits exceed their exemption thresholds and which are therefore willing to provide liquidity – must exceed the demand for liquidity on the part of the cash-taking banks – that is, banks which have an unused portion of their exemption threshold and are therefore willing to accept additional sight deposits on their balance sheet. Provided this condition holds, it is possible to reduce the burden on the banking system through exemptions, without jeopardising the monetary policy objective of the negative interest rate on sight deposits. If we take another look at the time series trajectory of money market interest rates depicted in Chart 3, we notice that this condition must have been met in practice, as market interest rates have indeed been close to the negative interest rate on sight deposits ever since that rate was first introduced in 2015. Page 8/13  The exemption thresholds have significantly reduced the burden on the banking system as a whole. When the SNB initially introduced its negative interest rate on sight deposits at the beginning of 2015, around two-thirds of total sight deposits were exempt from negative interest.

At the beginning of 2015, the average interest rate charged on all sight deposits held by the banking system was thus −0.25%, and not −0.75%, as would have been the case in a system without exemptions. We are aware that the exemption threshold affects banks differently, depending on their balance sheet structure.3 The exemption threshold need not be static and should reflect monetary policy needs. Since the introduction of negative interest on banks’ sight deposits, the exemption thresholds have been adjusted twice. The first adjustment went into effect on 1 November 2019. Our decision was guided by two goals. First, in order to take account of developments in banks’ balance sheets over time, we needed to switch from a static to a dynamic model in calculating banks’ exemption thresholds. 4 Second, we raised the exemption threshold to bring the interest burden placed on the banking system back to the minimum needed for the implementation of monetary policy. 5 The adjustment led to a roughly 40% increase in the aggregate exemption thresholds. This increase was appropriate, as the total amount of sight deposits held by banks had expanded significantly due to our interventions in the foreign exchange market in the almost five years since the introduction of negative interest on banks’ sight deposits. Starting in November 2019, that is, after the first adjustment, around two-thirds of total sight deposits were once again exempt from negative interest – a similar proportion as had prevailed at the beginning of 2015.
At the same time, there has been a need to fundamentally rethink conceptual frameworks and approaches to financial regulation. The rapid digitalization of trade and finance has transformed the nature of financial services, the types entities offering them, and the location from which they are being offered. Borders and dividing lines are being eroded, creating potentially large gaps in regulatory perimeters. Meanwhile the  2/4  BIS - Central bankers' speeches  rise of data-intensive platforms with strong network effects have raised issues concerning privacy and competition. How best to foster innovative solutions while safeguarding stability, ensuring fair competition and market contestability, and providing adequate consumer protection? What is the appropriate balance and combination between entity-based and activity-based regulation? How does this relate to the application of micro-versus macro-prudential regulation? Moreover, we also need to consider how best to gear regulation to facilitate the green transition that is so critical. Our conceptual framework for financial oversight has to shift as we grapple with these complex regulatory challenges. The climate challenge The third and final fault line is climate change and central banks' role in combating it. Of all the three challenges, this is arguably the most daunting one. It is new to us. There is no precedence to follow. And the outcome is not under our direct influence, testing the limits of our tools. Yet we cannot ignore it. Given the potential consequences, combatting climate change is simply too urgent and too important.

Mr Nyberg comments on how EMU may affect the Swedish housing loan market and its financing  Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at Föreningssparbanken in Warsaw on 14 October 1999. *  *  *  Thank you for giving me the opportunity to come here and give some points of view on how EMU may affect the Swedish housing loan market and its financing. This is undeniably an issue which we have every reason to take an interest in whether we take part in the monetary union or not. One of the ideas with EMU is to create a more efficient market for goods and services where competition is increasing and consumers obtain better products at lower prices. In the housing loan market, this should mean that borrowers expect a greater range of products, more suppliers and lower interest rates. How should the Swedish housing loan institutions handle this challenge? Competition for customers As we know, the national housing loan markets in Europe look rather different, which is illustrated by the following diagram (figure 1). In countries such as Germany, Denmark, Sweden, the Netherlands and the United Kingdom, the total outstanding stock of loans with mortgages in property totalled over 50% of GDP. In other countries, including Greece and Italy, the equivalent figure is under 10%. The differences depend on factors such as the systems of rules, tax legislation and market structure which vary from country to country.