samchain/econo-pairs-v1 huggingface dataset:
Some would say that part of the answer would be to cap particularly retail interest rates charged by banks. Do you see that as part of the answer? This is a long-running debate here. Even though the ECB rate is quite low, when you look across Europe, the mortgage lending rates in Ireland are higher. The ECB has provided a legal opinion on the draft law, and it highlights, in line with the Central Bank of Ireland analysis, that a policy that caps the interest rate runs the risk of having an unintended effect, which is that it will deter entry. The Irish banking system is quite concentrated. Many people would like to see more banks enter to compete and, through competition, lower the rates. If you have a legal approach, where there is a legal regulation capping the interest rate, then the incentive for foreign lenders to come in is less. We have this long-running debate about the contribution of the quite high default risk in Ireland being built into those higher rates. I understand the intent: trying to make housing more affordable is a big issue. But personally, and in terms of the official advice of the ECB, we think capping interest rates is not the advisable way to go. You don’t even see a role for it, say, if you were to consider the housing situation to be an emergency scenario; that it would be a temporary measure given to the central bank? Well, again let me come back to the basics here.

When I was at the Central Bank of Ireland, and where I am now, we would still have the same concern, which is: where do you strike a balance between recognising that this is an important source of revenue versus whether it is guaranteed to be here into the future. For any incoming government, having a prudent approach to managing that would be important. You’re nine months into the job: what do you think the advantages are for Ireland of having the former Governor of the central bank here in such a key role at the ECB? What’s very interesting about the ECB is that our only focus is on the overall performance of the euro area. The euro area is a very important trade partner for Ireland. What is good for the wider euro area would typically be good for Ireland. What I can say more generally is that the ECB has staff from everywhere in the EU. It’s very interesting to have that diversity. We talked earlier on about savers versus debtors. That’s important because that differs across the euro area. Some countries have big manufacturing sectors. Other countries are more focused on tourism or technology. It differs so much that having staff — and, if you like, the Executive Board membership — that reflects the diversity of the euro area makes for a very interesting workplace and I think makes for better-quality policymaking. One of the things we’ve been very worried about here for quite some time is Brexit.
In essence what is needed is to settle the question of ‘who pays’ unambiguously and in advance. We need to pre-position a specific type of creditor who can absorb loss if the bank fails. Clearly, getting a creditor to accept this in advance has a cost; there will be a premium for carrying such an explicit risk. That cost is, however, simply the counterpart of the hidden subsidy being given to banks by the implicit taxpayer guarantee that applies if they cannot be resolved in an orderly way. We now have international agreement on the minimum amount and nature of this type of loss absorbing instrument – which goes under the unlovely name of ‘TLAC’ – that the largest, globally systemic banks should issue.11 And in the EU, under the Banking Recovery and Resolution Directive (BRRD), resolution authorities will need to set in advance, for each firm, the overall amount and nature of the resources that can absorb loss both when the firm is a going concern and when it can no longer operate – this goes under the equally unlovely name of MREL. (v) International co-operation The final plank is international cooperation. The hardest challenge in ending too big to fail is dealing with the failure of systemically important banks that operate in a number of jurisdictions. The crisis proved beyond doubt that we did not have the international machinery to handle this.

And a large number could fail simultaneously if they take on correlated risks, as was the case in the US Savings and Loans crisis in the 1980s. Something else might be lost: banking relies on information. Large, multinational banks can use their existing customer knowledge to offer a customer services across the globe and across different business lines. This allows information to flow freely across borders and products and supports international trade and investment. I think it is possible to have a world in which large banks can fail in an orderly way – without the contagion and damage to the economy that in the past has forced the taxpayer to come in and absorb losses. But there is no single, silver bullet to achieve that; rather it requires the application of a comprehensive set of policy and powers. It requires a major change in the regulatory landscape and the transition will be difficult. Progress on resolution The good news is that there has been very substantial progress towards this new world. In the UK certainly we are now in a much stronger position in terms of dealing with bank failures  5  See Morgan and Stiroh (2005). 6  The FDIC had injected a total of $ as subordinated debt and equity into Continental Illinois (around $ in 2009 money). This compares to at least $ (contingent) capital injections into RBS (using 2009 exchange rates). 7  See Independent Commission on Banking (2011).
My idea, which I have already mentioned, is basically this: Each economic policy framework is designed to function well in a given economic reality. When the reality changes, the framework may also need to be adapted, reformed or supplemented. However, it is also important to be able to identify the changes and understand their implications. The frameworks should aim to be robust for events that cannot be predicted. They should also be symmetrical – be able to handle shocks that lead to both higher and lower outcomes than expected. For example, the current system was created to deal with a high government debt, high inflation and high nominal wage increases. An updated framework should have scope for dealing with risks on both the upside and the downside. The frameworks that we have built up are worth defending, but we must not be too complacent and believe that there is no potential for improvement. We know that the world is different today than it was thirty years ago and that we have built up vulnerabilities in the Swedish economy. Difficult task but better conditions The Riksbank, like many other central banks, faces a challenge that we have not met for decades; inflation has risen to levels that we have not seen since the early 1990s. As I have mentioned, this was initially about a number of global supply shocks that pushed up commodity prices, in particular. But, it has gradually become increasingly clear that the price increases have begun to spread widely in the economy.

When equity prices increase rapidly, the equity allocation will exceed the strategic weight of 60 per cent. Rebalancing rules are then applied to bring the equity allocation back to 60 per cent. These rules are more important than many perhaps believe. Many investors waited for a long time, probably too long, to rebalance their portfolios during and after the crisis, when equity allocations fell sharply. It should also be considered whether the rules should be designed to provide for a greater degree of automaticity, less judgement and probably also greater transparency. It is important to take into account the Fund’s particular features, that is to say a long-term, large investor without short-term liquidity needs, when evaluating which investment strategy is most appropriate. In the spring 2010 Report to the Storting on the Fund, the Ministry of Finance suggested that the level of less liquid assets should be increased: “Further development (of the strategy) will seek to diversify the risk further and increase the weight of investments that benefit from the Fund’s size, long-term perspective and ability to hold less liquid assets.” Today the Fund’s assets are divided into two classes: equities and bonds. Going forward, a division into three asset classes may better enable the Fund to achieve its long-term objectives. The first asset class is equities. This class features the highest risk exposure and the highest expected return. It accounts for 60 per cent of the Fund, which reflects the risk willingness of the Fund’s owner.
2  Personal Financial Assets are defined as financial assets that are held by households, rather than companies or other institutions  3  The growth in AUM may be overstated by increased coverage of the source data over the period. 2  BIS central bankers’ speeches  From an end-investor perspective, both of these trends are understandable. Yet they also potentially carry risk implications, both for end-investors and for the financial system as a whole. For example, the shift towards illiquid assets heightens market risk for investors. And the move into passive and tracking strategies increases the potential for investor herding and correlated market movements (Bolognesi and Zuccher (2008)). Both potentially have implications for financial markets dynamics and systemic risk. Turning to the liabilities side of the balance sheet, here again some important trends are at play. Among the most important is the progressively greater share of investment risk being put back to end-investors, with commensurately less being borne by intermediaries and companies. One clear example is found in the pensions industry, with the structural shift away from Defined Benefit (DB) and towards Defined Contribution (DC) pensions. Here in the UK, the proportion of DB schemes offered to new members has fallen from 31% to 14% since 2008. Contributions to DC funds have been roughly twice as large as those to DB funds since the early part of the century.

Andrew G Haldane: The age of asset management? Speech by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the London Business School, London, 4 April 2014. *  *  *  I would like to thank Sarah Breeden, Antonia Brown, Edd Denbee, Ronnie Driver, Ronan Hodge, Tamara Li, Pippa Lowe, Varun Paul, Jonathan Rand, Martin Taylor, Lewis Webber and Jack Worlidge for their help and comments. It is a great pleasure to be speaking at this London Business School conference on asset management. Given the topic and my area of responsibility, I thought I would discuss the links between asset management and financial stability. This issue is not new. But it has become topical recently as the asset management industry has grown and changed shape. Partly in response, regulators globally have begun to explore the risks to the financial system that might be posed by non-banks of various stripes, including asset managers. I want to discuss those risks and their potential policy implications. I want also, however, to discuss some of the opportunities asset management offers. The industry is a key bridge between end-savers and end-borrowers, between the financial and real parts of the economy. As the banking system continues to de-risk, strengthening that bridge could well strengthen both the financial system and wider economy. The evolution in asset management Let me start with some facts on the evolution of the industry. Asset management is, of course, an agency activity.
While dealing with short-term issues, we need to pay attention to long-term challenges that could restrain our competitiveness, productivity, and growth potential. The rising trend of disruptive technology will also come into play as it brings both opportunities and 3  threats. To tackle these long-term challenges, structural reforms are underway to upgrade and unlock our economic potential in the long term. The government has made structural reform a national agenda and has launched several important initiatives. One of our main focuses is to upgrade connectivity infrastructure within Thailand and within the region, including roadways, railways, waterways, power lines, air networks, and digital networks. This strategy will establish Thailand as a center for regional transportation and logistics, connecting the Indian Ocean with the Pacific Ocean, as well as connecting Thailand with South China and neighboring CLMV countries. Beyond building physical infrastructure, the government is pushing forward to restructure the Thai economy towards a high-value and innovation-driven economy under the ‘Thailand 4.0’ theme. This policy focuses on promoting targeted industries, including the ‘new S-curve’ industries. As many of you are well aware, the Board of Investment (BOI) revised the criteria for investment promotion privileges to be based on the value added content of the project rather than on its location as in the past. Thailand’s economic model will be geared towards sophisticated high-valued manufacturing, innovative manufacturing, and modern services. This can be done by focusing on promoting technology, creativity, research and innovation, especially with respect to IT-based services.

In the latter part, I will share with you my thoughts on the way the Thai economy is moving forward as well as opportunities for Japanese businesses. Let me start with the first part, by reviewing what we went through last year. I believe you all agree with me that 2016 was full of unexpected events and turns. On the domestic front, we faced with a severe drought early in the year followed by a historic flood in the South around the end of the year, and of course the passing of His Majesty the late King Bhumibol, which caused all Thai people the greatest sorrow. Also, the government’s crackdown of illegal tour operators led to temporary yet significant effects on the tourism industry which had been a major growth driver of the economy in the past few years. On the external front, we saw the Bank of Japan’s adopting a negative interest rate policy in January of last year, an unease  1  over the fate of European financial institutions, the Brexit vote, and the unexpected outcome of the U.S. presidential election. Yet the Thai economy was able to weather these storms, one after another, and ended up with a 3.2 percent growth with all stability intact. The resilience reflected the underlying strength of the economy which owed partly to preemptive policies to create shock absorbers for the economy such as ample international reserves and ample banks’ capital base and loan loss provision.
First of all, this is because, in Spain, energy, and electricity in particular, account for a larger share of the consumption basket. While Spanish households devote 11.7% of their budget to energy, the euro area average is 10.9%. Regulatory and pricesetting mechanisms are another factor responsible for the notable unevenness across euro area countries in the pass-through to retail prices of the higher wholesale electricity price. For instance, in Spain around 40% of households opt for a dynamic pricing system, characterised by the high frequency of price revision, which explains the higher volatility of the electricity component of inflation and, thus, the faster and stronger pass-through. 8  The rising inflation is also having an uneven impact on households and firms. In particular, in recent months, lower-income households have experienced higher inflation because staple goods, whose prices have shown a greater relative increase in recent times, account for a larger share of these households’ spending. Consumer price inflation dynamics have gradually spread across the board since the summer of 2021. Thus, underlying inflation has risen rapidly, exceeding 4% in mid-2021 in the United States and 2% since end-2021 in the euro area. The underlying inflation rate has continued to increase and in April reached a level of 3.5% in the euro area (the highest in the history of the monetary union) and 3.4% in Spain (the highest since 2003). Additionally, according to the preliminary estimates available, underlying inflation in the euro area climbed to 3.8% in May.

6 And, such an approach would require binding agreements amongst home and host resolution authorities. Vague assurances would not do the trick, as domestic authorities could change their minds when it really mattered. Host and home authorities would need “skin in the game” to underpin co-operation. And co-operation in distressed circumstances could helpfully flow back to how supervisors work together in peacetime. An obstacle to such an approach might be that in some countries, legislation mandates preferential treatment of creditors and depositors of local entities of cross-border banks. But that might be weighed by legislatures against the current reality that when the fiscal authority finds itself injecting equity to save a bank and preserve stability, it protects worldwide creditors not just its home creditors. To be clear, I am not advocating any particular approach here. I just want the authorities to articulate the issues clearly, so that our leaders can make a choice and think through the consequences of that choice. I’m not sure that it has really been put to them up to now. And, of course, whatever is done, within Europe we would need to find an EU version that sat between national and global regimes. Summary My purpose today is not to advocate solutions. It is to identify the big issues and to float some possible avenues for discussion in the EU and internationally. The big question is clear enough. Can we resolve distressed LCFIs in an orderly way without injecting public money?
The currency board arrangements are not just another monetary policy regime. They are a “frame of mind”, a way to view and tackle the economic, political and social processes. Some Western analysts and researchers fail to understand this. But I am sure the contributions by my colleagues from the BNB will clearly illustrate during this conference that the currency board is something more than just a monetary policy regime. Following a dramatic banking and financial crisis in 1996–1997, the economy was stabilised by the introduction of the currency board arrangements, in combination with the strong fiscal  BIS central bankers’ speeches  1  discipline, the liberalisation and privatisation of the Bulgarian economy, and the use of a broad range of macroprudential instruments. The current global crisis is not the first one successfully weathered by the Bulgarian economy. In only two decades we have endured the Asian crisis, the Russian Crisis, the “dotcom bubble” burst, the U.S. subprime crisis and the failure of Lehman Brothers, before the euro area financial and sovereign debt crisis came in. But the recent crisis has served as perhaps the biggest “litmus test” for the optimality of our monetary policy regime. We believe that a small open economy, which is not rich in certain commodities or natural resources, cannot succeed in pursuing the so-called independent monetary policy. All these issues will be elaborated today by deputy governor Hristov who will share our experience with you during the afternoon session of this conference.

It is also about looking forward and staying the course for the medium- to long-term. As institutional investors pivot towards alternative assets, Asian private equity, Asian real estate, and Asian infrastructure can provide credible stores of value in the institutional portfolio. And Singapore’s financial centre – with more than 120 global and regional banks, a diverse ecosystem of over 650 asset managers, and extensive connectivity with the rest of Asia – offers an excellent platform to tap into these opportunities. Thank you, and have a good evening. 1 The IMF forecasts refer to the ASEAN-5 economies of Indonesia, Malaysia, Thailand, Vietnam and the  Philippines. 6/6  BIS central bankers' speeches
International comparisons as well as surveys and similar studies that have been carried out by external analysts in the media, for example, confirm that the Bank’s monetary policy communication has worked fairly well. However, this doesn’t mean – and I want to stress this – that there are no examples of episodes when our communication in my opinion could have been better. My conclusion is that the Bank’s policy in the past ten years has worked well. Nonetheless there is of course every reason to reflect on whether the analysis that we carry out and the framework that we follow in our monetary policy work could be improved. That is the aim of the rest of my speech. Some thoughts on how to develop the Riksbank’s monetary policy work Methodological aspects Let me begin by addressing an issue that is of a rather technical or methodological nature, but that, as we also shall see, has a number of further consequences: the choice of repo rate on which the inflation forecast is based. Since 1996 the Riksbank’s Inflation Reports have presented overall assessments of the economy and inflation that have served as a guide for policy. From the fourth Report in 1997 these have included numerical, relatively detailed forecasts. The published forecasts have consistently been based on the assumption of an unchanged repo rate, above all because forecasts arrived at in that way make it easy to motivate changes in policy.

Nevertheless, even if a serious lending boom during euro area accession seems unlikely, policymakers should remain vigilant and prudent banking sector supervision should be the right answer to protect oneself against the risk of such developments. BIS Review 67/2007  3  Second, higher domestic demand can fuel inflation pressure and increase imports, thus leading to a higher current account deficit. As for the latter, it seems that while outside a monetary union deep current account deficits worry investors and can, in extreme situations, lead to currency crises, for countries that have already joined the common currency such developments do not matter much. An example of the three Baltic States (Estonia, Latvia and Lithuania), whose currency board arrangements are close equivalents of a monetary union, shows that enormous current account deficits (9-16% of GDP in 2006) have no apparent negative consequences for the economy, as yet. The case is, however, different with inflation pressure. In theory, the margin for local demand-driven price increases in small member states of monetary unions is very narrow. This is guaranteed by the so called law of one price – the expectation that the same product should have the same price in various countries of a monetary union. In practice, however, there are several obstacles for this law to hold perfectly – some goods cannot be traded, most goods do not have perfect substitutes, there are transportation costs and tax differentials – so local demand pressures can play a role in driving prices in monetary union member states.