samchain/econo-pairs-v1 huggingface dataset:
I would essentially highlight three issues: •  First, that the exercise should be rigorous and demanding in terms of its scope. Contributing to this is the breadth and depth of the portfolios to be analysed in the asset quality review, the involvement of independent consultants and auditors, the consideration for the stress test of a very harsh macroeconomic scenario, and the setting of capital thresholds appreciably higher than the regulatory minimum set: 8% in the baseline scenario and 5.5% in the adverse scenario. •  Second, that the exercise should be robust from the legal standpoint and reasonable from the economic perspective. Specifically, the exercise should observe current prudential and accounting regulations. In this connection, it uses the definitions of regulatory capital in force at present, in keeping with the European Directive and Regulation on capital requirements. Moreover, the macroeconomic scenarios being designed for the stress test should include shocks to economic variables that are mutually compatible and consistent with past experience and economic logic. That is to say, as publicly announced by the ECB, the adverse macroeconomic scenario ultimately adopted should be severe but plausible. •  Third, we should expect the analysis to be balanced. Namely, it should seek to reflect and analyse the impact of all factors of vulnerability of European banks in terms of their objective relevance, irrespective of how technically difficult their treatment is.

As indicated on several occasions, the overall aim of the comprehensive assessment of banks is two-pronged: on one hand, the exercise seeks to offer a high degree of transparency concerning the situation of banks whose supervision will be conducted by the single supervisory mechanism as from November; on the other, it intends to promote the recapitalisation of those viable institutions that show insufficient levels of solvency. Both  2  BIS central bankers’ speeches  avenues will help reinforce the credibility of European banks ahead of the transfer of the supervisory function to the new authority. I should emphasise that it would be mistaken to quantify the value of the stress test in terms of the capital requirements it brings to light; and even more mistaken to measure its success on the basis of the proximity of the final result to the relatively sizeable estimates in the analyses published so far which, often, have been lacking in information and rigour. Experience shows that, beyond the size of the capital shortfall identified, these analyses are only credible if they manage to provide rigorous and consistent information on banks’ real situation and their ability to withstand adverse scenarios. Accordingly, the strategy to pursue can be none other than to ensure the methodological soundness and consistency of the exercise, and to provide the market with sufficiently accurate information on the results obtained and the process followed. In this respect, what should reasonably be expected from the comprehensive assessment under way?
But the extent to which continuing constraints on the supply of bank credit are likely to impede the recovery is less clear. On the one hand, banks still face significant challenges, especially in terms of the ease and cost at which they can refinance maturing funding. This is undoubtedly affecting the ability of some small firms to borrow at affordable rates. On the other hand, many companies started this recovery with increased levels of savings and so are in a position to finance increased investment if and when they wish to. And we have seen “creditless” recoveries in the past. For example, the corporate sector in aggregate repaid bank lending in each of the first three years of the 1990s recovery. I’m hopeful – but by no means certain – that strains within the banking system will exert increasingly less drag on the economy going forward. But what of the tailwinds that are pushing against these factors and ensuring that the burgeoning recovery continues? The most significant factor is the highly accommodative stance of monetary policy. As you know, Bank Rate remains at 0.5% and the stock of asset purchases – quantitative easing –  1  This is an annual survey conducted for the Bank by NMG Financial Services Consulting. This year’s survey was conducted between 24 and 30 September 2010 and covered almost 2000 households. Some results from this year’s survey featured in the November 2010 Inflation Report (pages 22–23).

In addition, collateral security must, as stipulated by the attendant regulations, be assessed as a market value calculated in a manner that is prudent and sustainable over time, i.e. it is possible that the experience of potential losses in adverse situations over the last twenty years may not be consistent with the characteristics of the current situation. This has to be taken into account by institutions in calculating the capital consumed by real-estate loans under the advanced Basel II approaches. But this need for prudent assessment is not limited to credit institutions: appraisal companies play a key role in Spain’s financial system and hence it is essential for them to operate under the clear prudential guidelines laid down in their specific regulations. The sustainability of results, their recurrence, the diversity of income sources and the ongoing search for efficiency are needed to strengthen the line of defence represented by the high profitability of Spain’s institutions. In this respect, we must not overlook the behaviour of the liabilities side of bank balance sheets. The financing of this high volume of assets has been made possible by their access to efficient financial markets after Spain joined the euro area. This enabled them to supplement their traditional deposit-based financing, which despite its strong momentum is insufficient to finance lending activities.
It also enables the regulator to focus supervisory attention on the areas and institutions that pose the greatest risk to financial system stability. BIS Review 159/2008  1  Thus, the supervisory authorities are in a position to identify systemic risk factors and devise intervention measures aimed at forestalling systemic failures. The added advantage of this approach is that it brings about optimal utilisation of supervisory resources. Ladies and Gentlemen, I am happy to inform you that following our initial efforts dating back to 1999 to introduce risk based supervision, the Bank of Zambia has this year fully adopted RBS. As a result it is expected that there will be enhanced supervision of banks and other financial institutions. Let me also state that the BoZ is committed to implementing the Basel II Capital Accord but stands ready to review this stance in the face of the ongoing global financial crisis. As you know Basel II is intended to make banks operate at capital levels which are commensurate with their risk profiles. To this end, the BoZ just issued risk management guidelines. Distinguished Workshop Participants As I conclude, I wish to urge the workshop participants to participate actively in the deliberations and use this opportunity to tap knowledge and skills from the vast experience of the resource persons. This workshop provides us with a unique opportunity to share our respective country experiences and challenges.

It is my hope that we will develop the supervisory systems in the region to a level where they will be able to interact effectively. This uniformity in the supervisory systems will prepare us to respond better to regional and global financial challenges. With these few remarks, Ladies and Gentlemen, it is now my honour and privilege to declare this important regional workshop on Effective Banking Supervision: A Risk Based Approach officially open. I thank you!!! 2  BIS Review 159/2008
Here there is a possibility that climate effects have played a role. Political uncertainty in, for instance, Venezuela and Nigeria has had an effect on the oil price, to mention a couple of examples. Food prices have also been pushed up as a result of alternative areas of use competing for the supply. Agricultural products are being used increasingly in the production of ethanol and other biofuels – and this development is also driven by the higher oil price. Weak dollar, low interest rates and greater interest in commodities as an investment Another factor that has certainly also been significant in the price rise is that the dollar has weakened. Commodities are usually priced in dollars and when the dollar depreciates commodities exporters want compensation. As demand has been strong, they have largely been able to do so, which has pushed up prices. It is also possible that the low real interest rates have contributed to the rise in commodity prices. Commodities then appear to be a more interesting investment than interest-bearing assets. When the interest rate falls, it is also cheaper to keep stocks of commodities. However, it is doubtful whether the stocks have really increased recently. The links that may exist between interest rates and commodity prices imply that there may be a link between monetary policy and pricing in the commodities markets, in addition to the influence via demand in the economy.

Given the monetary policy system we currently have in Sweden, it involves trying to find a path for the policy rate that ensures inflation is reasonably close to the target while the real economy is in balance. This is how one should reason regardless of what shocks affect the economy. In this sense an upswing in commodity prices is nothing special. …but their practical implementation is difficult However, the practical implementation of the principles is far from simple. This is partly because it is no simple task to capture in the forecast all of the effects that rising commodity prices might have on the economy. It is also because monetary policy works with a lag. Rapid price impulses cannot be immediately counteracted. A further complication is that the effects on inflation and the real economy move in different directions. Inflation rises while the real economy, for instance, production and employment, slows down. It is not self-evident how these effects should be weighed against one another, but this is something that must be achieved in monetary policy. The commodity price rises in recent years have caused inflation to rise in many countries. At the same time, growth in production and employment is slowing down. The slowdown is partly due to weaker international economic activity in the wake of the financial market turmoil and the downswing in the United States. But it is probably also partly due to the upturn in commodity prices.
This more balanced policy mix is an opportunity to engage in new ways of thinking and to strengthen the recovery via stronger economic coordination in Europe. The room for manoeuvre in economic policy is highly heterogeneous across European countries, and each country should use its capacity to improve the overall situation [Slide 6]. European countries have done quite a lot on their own, but now we can and must do more to coordinate demandside policies and structural reforms at the European level. To do so, I would like to make two proposals. 4/ Strengthen Investment First, we need to improve investment financing [Slide 7]. Our efforts should be put towards financing growth and innovation and towards finding the right mix between debt and equity financing solutions, while still preserving financial stability and consumer protection. In the EU, the European Commission has launched several initiatives to serve these objectives, particularly the Investment Plan and the Capital Markets Union. 2  BIS central bankers’ speeches  Second, we need to focus on removing obstacles to investment, providing visibility and technical assistance to investment projects and making smarter use of new and existing financial resources. The European Fund for Strategic Investments (EFSI) drives the Investment Plan for Europe. It supports strategic investments in key areas such as infrastructure, education, research, innovation, as well as risk finance for small businesses. Through the use of limited public guarantees, it aims to foster private investments totalling EUR 315 billion in three years.

Since the beginning of 2013, Spain has experienced a decrease in its unemployment rate of some 6 percentage points and Spanish growth is nowadays one of the main drivers of the European recovery. Contrary to preconceptions, France has also demonstrated in the past its capacity to meet the challenge of economic and social reform. In the 1990s, to prepare for the introduction of the euro, France pursued a competitive disinflation policy that proved highly effective. Remember that in the late 1990s, France experienced the highest GDP growth and the weakest inflation rate among European countries, along with a significant fall in its unemployment rate. Today, French reforms are heading in the right direction, [Slide 5] in particular the tax credit for competitiveness and investment (CICE) and the Responsibility and Solidarity Pact (RSP) that enhance the competitive strength of the French economy. A policy of administrative simplification, the so-called ‘simplification shock’, and a new law to sustain economic growth and entrepreneurship (‘loi Macron’), are also being conducted in order to rebuild business confidence. However, we are not there yet and a number of reforms need to be complemented. In particular, in the labour market: hopefully renewed progress will be made with the draft law under discussion in Parliament. Finally, in the euro area, fiscal policy is now more balanced since significant adjustment has already been achieved. Structural efforts and a growth recovery have led to a reduction in deficits and to a stabilisation in the ratio of debt to GDP.
8 After each monetary policy meeting a press release is published, containing the reasons for the decision made. A press conference is also organised. We have recently decided to make some changes to the Inflation Report. For one thing, it will change its name to ”Monetary Policy Report” with effect from the report published in February, and it will now contain a clear link between the forecasts and the monetary policy decision. The discussion at the monetary policy meetings will be reported around two weeks later in the separate minutes of the meeting. The minutes contain the arguments put forward and show whether any reservations were made against the interest rate decision. In my opinion, we could even go one step further in this field and name the members in the minutes, not merely any reservations against the interest rate decision they might have made. But this is a question that we Executive Board members would have to decide together. We Executive Board members hold around thirty speeches every year, where we can describe our views of economic developments. The Governor of the Riksbank appears before the Riksdag (Swedish parliament) Committee on Finance twice a year for a discussion of the monetary policy conducted. The Riksbank has also been evaluated by external assessors, who were commissioned by the Committee on Finance. As recently as December last year an evaluation of Swedish monetary policy during the period 1995-2005 was published. The evaluation was made by professors Francesco Giavazzi and Frederic Mishkin.

Monetary policy based on an inflation target was a relatively new phenomenon at that time. There was also great uncertainty about how this would work in Sweden. For those of us who were around during the crisis years, it is particularly pleasing to see how well the Swedish economy has developed over the past ten years, compared with the previous two decades. Naturally, one cannot ascribe all success to the changeover in stabilization policy – the general economic developments have also been favourable. However, there is no doubt that the new regime with an inflation target for monetary policy has given a steadiness and stability to economic policy that was previously lacking. A stable fiscal policy has also been very important. A lot has happened to the monetary policy framework since the inflation target was introduced. This includes much of the learning process I mentioned in my introduction. As deputy governor during the years 1994 to 1998, I was involved in setting the course, so to speak, and when the work on building up competence and analysis tools for the bank’s main tasks - monetary policy and financial stability began. Other important tasks included improving communication and increasing transparency, both internally and externally. It was necessary to win confidence in monetary policy as quickly as possible and this required openness and clarity. Since I returned to the Bank at the beginning of last year, I have been able to note that the Riksbank’s work procedures have continued to develop and modify.
In my view, there are similarities that yield useful policy lessons for the euro area. But there are also differences that need to be kept in mind. What can we learn from the Asian crisis? What are the parallels between the Asian crisis in 1997–1998 and the euro area crisis? The economies of emerging Asia were characterised by buoyant growth and a brisk expansion of credit (see Chart 1). This rise in debt was facilitated by considerable inflows of foreign capital, which financed significant external deficits (see Chart 2). This led to growing financial imbalances, and in particular to currency and maturity mismatches on the balance sheets of local banks. In addition, the economic boom prevailing at that time was accompanied by a loss of competitiveness of the region’s export sector. Investors typically under-priced potential risks as they had overly optimistic expectations of the medium-term growth prospects. They did not identify systemic vulnerabilities such as the risk of sudden stops in capital flows or of twin crises of the banking system and the balance of payments, which eventually materialised.1 Except for currency mismatches, similar developments were evident in the euro area before 2009 – if not at the regional level, at least in those countries that later ran into financial difficulties. It was widely believed that sudden stops in capital flows, not to mention twin  1  See Calvo, G. (1998). “Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops”, Journal of Applied Economics 1(1), pp.

The story is a clear example of how artificial intelligence can produce bad outcomes for all concerned. It also offers a case study for exploring the root causes that lead to bad outcomes - and so in turn offers insights for boards on how to govern the introduction of artificial intelligence. The art of managing technology is an increasingly important strategic issue facing boards, financial services companies included. And since it is a mantra amongst banking regulators that governance failings are the root cause of almost all prudential failures, this is also a topic of increased concern to prudential regulators. In my comments, I will provide a quick overview of the scale of introduction of artificial intelligence in UK financial services; then make three observations about it, and suggest three principles for governance derived from them. Artificial Intelligence Technological innovation is inevitable and welcome. As the Governor noted during this year’s UK Fintech Week,1 we are shifting towards a new economy, which is powered by big data, advanced analytics, smartphone technology and more distributed peer-to-peer connections. This new economy will go hand in hand with fundamental changes to the structure and nature of the financial system supporting it. Indeed some of the largest international investment banks are now declaring that they are technology companies with banking licences. Some of the most important recent developments in technology are associated with the introduction of automation – by which I mean the replacement of humans by machines for conducting repetitive tasks.
Globally, efforts towards building climate resilience have intensified, with global supply chains joining the movement. The race towards Net Zero by 2050 has also seen multi-national corporations (MNCs) restructure their supply chains to be more sustainable, putting non-compliance suppliers at risk of being sidelined. As a trading nation, Malaysia stands to lose USD65.3 billion4 worth of annual export revenue if we do not embrace the transition towards a low carbon and climate resilient economy by 2025. Trade partners have started to impose expectations on sustainability as preconditions to transact. For example, Malaysia’s major trade partners (e.g. China, EU, South Korea and Japan) commitments to Net Zero by mid-century and the recently EU’s proposed Carbon Border Adjustment Mechanism will increase the cost of business to export into these markets. It is clear that sustainability is no longer a nice to have but an imperative business consideration critical for long-term survival. It is encouraging to see that the financial sector is stepping up on this front including via the offering of sustainable finance solutions and assistance to companies in their transition journey. Islamic financial institutions have and continue to lead through Value-based intermediation (VBI) practices. VBI stems from the underpinning values of Maqasid Shariah that propagates attainment of benefits and prevention of harm that is consistent with the principles of sustainability.

This entails focusing our sights on the path ahead, towards re-building a global financial architecture that will facilitate and secure our economic prospects. With the considerable benefit of hindsight, we now know that finance, if not anchored to the aim of creating sustainable value in the real economy, will become inherently unstable and destabilising to the ultimate goals of greater shared prosperity. There is thus a compelling need for finance to have a greater role in shaping responsible behaviour that underpins a stable and well-functioning economy, and advances the goals of a progressive society and sustainable environment. This is the underlying objective of responsible finance. Of significance, aligning business practices towards responsible finance entails a paradigm shift away from the conventional thinking of finance - the most important distinction being the need to recognise and appreciate that responsible finance delivers value by focusing on its ultimate outcomes, rather than its immediate returns. Responsible finance at its core strives to serve wider objectives that is consistent with, but goes beyond, the predominant objective of enhancing shareholder value. In delivering long term sustainable value, allocative efficiency is achieved in a manner that promotes stability and prosperity in the broader economy and sustainability of the environment. Above all, responsible finance aims to optimise its positive impact on society, economic wellbeing and development. Over the recent decade, the heightened advocacy for ethical and socially responsible investments has also seen the proliferation of financial instruments that cater for both financial and societal objectives.