samchain/econo-pairs-v1 huggingface dataset:
By allowing institutions to finance with the central bank assets they could no longer finance as easily in the market, we have reduced the need for them to take other actions, such as selling other assets into distressed markets, or withdrawing credit lines extended to other financial institutions, that would have amplified pressures in markets. These measures – the Term Auction Facility and swap arrangements – have had some success in mitigating market pressures, in part by providing a form of insurance against future stress. We now have in place a cooperative framework for liquidity provision among the major central banks. And we have considerable flexibility to adjust the dimensions of these liquidity tools. We will keep them in place as long as necessary, and continue to adapt them where we see a compelling case to do so. Encouraging financial repair The Federal Reserve is working closely with other financial supervisors and regulators to facilitate the adjustment underway in markets. This approach has two important elements. The first is to encourage improvements in the quality of valuation methods and disclosure by the major regulated financial institutions and the necessary adjustment in valuations and reserves to reflect the deterioration in expected losses. Better disclosure can reduce some uncertainty about the incidence and magnitude of potential losses across the financial system, although it is important to note that these estimates of losses are a function of the outlook for the economy and will necessarily change as expectations of the future change.

A slowdown in economic activity is not solely caused by interest rates. Other factors that deserve to be mentioned are the contractionary impact of fishing quota cuts, the downturn in the IT sector which is closely linked to global trends, and fluctuations in power-intensive development projects which are unaffected by domestic interest rates. Cutting interest rates now would have a limited immediate effect on the supply side of the economy, while high interest rates act with full force on the demand side where they serve to reduce inflation and domestic demand, which will contribute to improved macroeconomic balance and low inflation. Iceland’s currency options I have outlined various aspects of the Central Bank’s monetary policy. As I mentioned, Iceland has not taken part in European currency cooperation. Various currency framework options that Iceland ought to consider are often named in public discussions. A detailed account of most of them was given in the Central Bank’s 1997 report on the EMU. It is frequently said that Iceland ought to adopt the Euro as its currency, either unilaterally or through associate membership of the EMU. I strongly warn against simplifying the options available to us in this respect. Even if associate membership were being offered, which does not seem likely, it seems fair to assume that any country which was interested in it would need to fulfil the Maastricht Treaty requirements for EMU membership.
A third source of vulnerability is the large degree of connectivity and interdependency of the financial sector. Y2K and the terrorist attacks of September 11, 2001, highlighted this type of vulnerability. One key lesson learnt was that vulnerability extends beyond these systems since they crucially rely on utilities such as electricity and telecommunications or on service providers like S.W.I.F.T. Let me sum up again. There are three major sources of a financial system’s vulnerability: economic concentration, geographic clustering, and connectivity and interdependency. The latter are an obvious characteristic of financial networks. Networks contribute to increased efficiency and facilitate risk management. At the same time they also can act as channels as well as origins of systemic crisis. From vulnerability to resilience Hand in hand with a new awareness of the vulnerability of the financial system, those responsible for its safety and stability in private firms, in financial market infrastructures as well as in the regulatory agencies have recently been taking a new hard look at the financial system’s capacity for resilience. In retrospect the Y2K problem was a first mild but nevertheless rather valuable test. The Y2K test was mild in the sense that everybody had enough time to prepare for it. What helped in Y2K was the clear deadline. All the contingency and communication networks could be set up before the event. Many of us gathered here today knew exactly where we had to be on December 31, 1999, what we had to do and whom we had to call if there were problems.

9  This view is discussed fully in Benito, A, Thompson, J, Waldron, M, and Wood, R (2006), “House prices and consumer spending”, Bank of England Quarterly Bulletin, Summer, pp. 142-154. 10  Some household level evidence for this view is given by Attanasio, O, Blow, L, Hamilton, R, and Leicester, A (2005), “Consumption, house prices and expectation”, Bank of England Working Paper No. 271. 4  BIS Review 7/2008  But even if there is not a strong causal connection between house prices and consumption through a wealth channel, there may nevertheless be a significant collateral channel. When house prices fall, the amount of housing equity and hence collateral at homeowners’ disposal decreases. This will tend to delay spending as lenders are willing to lend less or lend on less favourable terms to those who have little or no housing equity. That channel should have become less important in recent years. This is because most homeowners have substantial equity in their homes which would not be materially affected by relatively modest changes in house prices. 11 This may help to account for a decline in the correlation between real house price growth and consumption since the beginning of the decade (Chart 10). An analogous collateral channel may operate in the corporate sector. Declines in commercial property prices will weaken corporate balance sheets and this could affect corporate spending if lenders raise the cost of borrowing to affected companies. This effect is likely to be particularly pronounced among commercial real estate companies.
Overall, the economy in the euro area stagnated. As in the last monetary policy assessment, we assume that the global economy will continue to recover slowly. This will be driven by globally expansionary monetary policy and strong domestic demand in the emerging economies. In the euro area and the US, developments are likely to be more subdued. Here we assume that the European financial and sovereign debt crisis will gradually ease. However, risks in this respect remain high. In particular, the difficult situation in Greece and Spain has already led to a significant deterioration in the  BIS central bankers’ speeches  1  confidence of households and companies in the euro area. As a result, the economic situation remains vulnerable. These high risks are also affecting the financial markets. Following a temporary recovery at the beginning of the year, the situation on the financial markets at present is again tense. A substantial correction has taken place on the share markets. By contrast, investments perceived to be safe, such as US, German or UK government bonds, recorded all-time low yields and correspondingly high price gains. Real yields on these investments are in negative territory for most maturities, measured in terms of inflation expectations. In addition, interest rates on money markets are at record-low levels worldwide. Swiss economic outlook In Switzerland, real GDP rose faster than expected in the first quarter.

In Europe, in particular, economic activity will be extremely weak on account of the financial and debt crisis. Switzerland will experience a significant economic slowdown over the rest of the year. Only because of the unexpectedly strong winter half-year does the SNB now expect growth of around 1.5% for 2012. The risks for the Swiss economic situation remain exceptionally high. The uncertainty about future developments in the euro area has again risen. If global activity proves disappointing or the turmoil on the financial markets increases, downside risks will again emerge for the economy and price stability in Switzerland. The imbalances in the Swiss residential mortgage and real estate markets increased further last quarter. Consequently, the SNB welcomes the Federal Council decision to make available a countercyclical capital buffer which can counter adverse developments on the domestic credit market. Global economic outlook Let us examine the economic outlook and the inflation prospects in a little more detail. In the first quarter of 2012, the global economy continued to grow at a moderate pace although this varied considerably from one region to another. The emerging economies were still making a major contribution to global growth. By contrast, overall momentum in the advanced economies was subdued, although here, too, differences from one country to another were considerable. Japan experienced strong growth in the first quarter due to a catch-up effect. In the US, momentum was moderate. In the euro area, a number of countries are in deep recession, while in Germany, GDP continued to expand strongly.
Conclusion Retirements always seem far off, until they’re not. LIBOR is no different. What once seemed a distant prospect is now very real. One by one the remaining areas of uncertainty are closing. Now there’s just a year left for all market participants to get three key things done:  -  First, move all your new business off LIBOR as soon as possible next year – and by the end of March for sterling;  11  -  Second, sign the ISDA protocol or make firm alternative plans; and  -  Third, work hard to convert any remaining legacy contracts away from LIBOR. https://www.fsb.org/2020/10/global-transition-roadmap-for-libor/ 5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  To have got to this point is a quite remarkable achievement by everyone involved. Working together, it’s time for one last push before we bid LIBOR farewell for good. Thank you. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6

Moreover, the appendixes to this Annual Report include a study of the prudential consequences of the international accounting standards that will apply in Europe from 2005 onwards. * In sum, French credit institutions in 2002 amply displayed their ability to withstand cyclical contingencies. Improvements can still be made in terms of risk spreading and surveillance. This is one of the factors to which the Commission Bancaire will play close attention as banks prepare and phase in information systems ahead of the introduction of Basel 2 and new accounting standards. In addition to the two studies I have already mentioned, the appendices of the Annual Report include a review of risk management in financial conglomerates. Let me also mention that a summary of the Commission Bancaire’s judicial decisions is being published at the same time as the Annual Report. This first edition will be updated yearly. 4  BIS Review 32/2003
The effects of the high demand for certain commodities from rapidly-growing economies are something that central banks around the world must manage in the future. Another example is the imbalances in the global economy. Access to credit was too high for a long time in many countries and contributed to an unsustainable development. The imbalances that were built up are being corrected, but it is still uncertain how long the adjustment will take. What we see now is a world less stable than we have been seeing in recent years. Sweden is a small open economy and the Riksbank conducts an independent monetary policy. We have an inflation target which we endeavour to attain. An inflation target becomes an even more important anchor for monetary policy in a situation like the present one. If financial imbalances and large fluctuations in commodity prices create global shocks over a long period of time, the inflation target can in itself have a calming effect on our own economy. It therefore feels particularly important to maintain our focus on the inflation target right now. The interest rate decision In connection with the Executive Board’s monetary policy meeting on 3 September, we saw signs that inflation is falling in various parts of the world. But this fall in inflation is from a very high level and as yet no clear decline is visible in the statistics. Swedish inflation is still at its highest level since the mid-1990s. At the same time, growth has been weaker than anticipated.

Measures to ensure the markets function efficiently But the markets have not functioned as efficiently as usual. For instance, interest rates in the interbank market have risen as a result of the increased uncertainty. There has also been a surge in the demand for treasury bills. The Swedish National Debt Office and the Riksbank have maintained a regular dialogue regarding the money and bond markets and the need to counteract the effects of the US financial crisis. Last week the Debt Office decided in consultation with the Riksbank to issue treasury bills at a number of additional auctions to meet the large increase in demand. The funds from the auctions will be invested in what is known as covered mortgage bonds. This improves the way the market functions right now. To ensure that the financial system functions as well as possible, the Riksbank has also implemented some other measures for preventive purposes. On Monday we decided, to put it simply, to increase the access to credit for participants in the RIX payment system. One can say that we are oiling the wheels of the system by making it easier for participants to make their payments to one another during the course of the day. They can now to a greater extent use their own covered bonds, or those issued by an institution with close links, as collateral in the system. A covered bond has collateral in the form of, for instance, a mortgage, which is provided by the credit institution that has issued the bond.
Faced with this unprecedented shock, the banking sector has so far shown notable resilience. Its favourable performance is underpinned by the improvements since the global financial crisis, in terms of balance sheet quality and solvency. The far-reaching international financial reform and, in Spain’s case in particular, the restructuring of the sector have increased banks’ capacity to absorb the unexpected materialisation of risks. Firstly, the restructuring of the Spanish banking sector entailed a significant decline in the number of banks and in their capacity, measured in terms both of branches and of employment and bank balance sheet size.1 As a result, Spanish banks were more efficient and profitable than the European average, although the level of profitability was low in historical terms, as was also the case with European banks. As regards balance sheet quality, the NPL ratio had fallen by 9 pp since peaking in 2013, to 4.8% in 2020 Q1, though this was still higher than in 2007. Further, in that same period, the weight of forborne exposures relative to assets had fallen by 9 pp. Also, the weight of lending to construction and real estate development, which came to account for 27% of total lending to the non-financial private sector, stood pre-pandemic at around 10%. Finally, mortgage lending standards have been much stricter and, in the case of loans to firms, these have been tied far more to firms’ efficiency.

In Spain, recent experience has shown how inefficient the existing insolvency proceedings for credit institutions are in terms both of timelines and recovery in value. It would, therefore, be desirable for progress to be made in determining an administrative mechanism for winding up credit institutions that maximises the preservation of value and reduces both the timelines and the costs of the existing insolvency proceedings. The need to address the long-term challenges If the current crisis has done anything it has been to underline the importance of having a healthy banking sector with sufficient buffers to absorb unexpected risks. In this connection, going forward we must ensure that the banking sector remains resilient to any new risks that might emerge. Completing Basel III and expanding the macroprudential toolkit available to the Banco de España are two particularly important avenues of work. To more accurately measure the risks assumed by banks and thus reinforce the credibility of their capital ratios, particular focus was placed on the calculation of risk-weighted assets (RWAs) in the second phase of the Basel reforms, approved at the end of 2017. Standardising the treatment of RWAs across institutions was considered necessary. The output floor is a key part of the reform to achieve this goal. The floor limits the benefits banks can derive from using internal models to calculate minimum capital requirements vis-a-vis the standardised approach, which does not require the use of models and is much less sensitive to new information.
Financial stability Developments in real economic variables are mirrored in credit markets. In recent years, household income has shown solid growth, and household confidence has been high. However, corporate earnings have been low, and until recently enterprises have primarily focused on enhancing efficiency. Credit developments are giving ambiguous signals to our interest-rate setting. Growth in household borrowing is high, but enterprises have reduced debt. The change in the breakdown of credit may have been amplified by banks’ increased eagerness to extend credit to households after a period of losses on loans to the business sector. Some reports from our regional network indicate that are some liquidity constraints for the business sector in some areas. According to reports from Northern Norway, banks seem to have become more cautious in extending loans to the business sector. Banks are requiring higher levels of capital and earning capacity. Total credit is expanding broadly in line with normal growth in nominal GDP. Developments in credit to enterprises shadow developments in their investments. Low credit growth indicates that corporate investment in the mainland economy has still not picked up even though there seem to be signs that the decline is levelling out somewhat. Norwegian households generally finance their mortgages at an interest rate that follows the short-term money market rate. Floating interest rates tend to vary widely over time. The interest rate level is very low at present, and long-term investments cannot rely on this interest rate spanning the life of a housing loan.

That is why the ONS publishes preliminary estimates of key data a few weeks after the month or quarter to which they refer, derived from sub-sets of their overall samples. As time passes, more information is processed and estimates are revised, making them progressively more accurate. But the fact remains that the data that give the timeliest read on economic activity are also the ones that are measured least accurately. So there is always a risk that the official data will give a misleading view of the current economic situation. Reading the economy is difficult And indeed there have been times when economic policy has been led astray by misleading data. For example, in the second half of the 1980s economic policy was founded on the view - indicated by the official data at the time - that the pace of recovery from recession had been relatively modest, and there was considerable spare capacity in the economy. But a sequence of data revisions proved that view to be wrong. Nigel Lawson, who was Chancellor at the time, recalled that revisions to the trade figures in 1988 made it clear to him that “demand in the economy was pressing against the limits of capacity to a much greater degree than I had previously realised”. The GDP figures were also heavily revised. For example, growth in 1986 was initially estimated at 2.4% (in early 1987) - close to economists’ view of trend growth. Three years later in 1990 - this had been revised up to 3.6%.
Since Norges Bank will be providing the Ministry of Finance with concrete advice regarding a countercyclical capital buffer, I would like to devote some time to stating the reasons why such a buffer is necessary, and why, more generally, regulation of the banking sector is necessary. Then I shall touch upon the interaction with monetary policy and will also add some brief comments about some of the challenges facing monetary policy in the wake of the financial crisis. Why capital regulation? A well functioning financial market is essential for virtually all other economic activity in a market economy. Banks are a key component of the financial system. Banks channel money from savers to investors. Banks determine who should be given credit and closely monitor borrowers and their projects. This is a task that would be difficult for small savers to undertake. Resilient banks and prudent banking are important for a solid and stable economy. If banks end up with insufficient equity capital following substantial losses in bad times, they will have to tighten lending. This may serve to amplify the downturn, as is currently the case in a number of European countries. Compared with other enterprises, banks have limited equity capital. It is often more costly for banks to fund lending with equity capital than with deposits and borrowing from the market. As deposits are readily available to depositors and many deposits are covered by a deposit guarantee, depositors accept a relatively low interest rate.

It is well known that such systems can exhibit the following features: non linearity and discontinuities (a good example being liquidity freezes); path dependency; sensitivity to initial conditions. All this accounts for truly unpredictable behaviour. It creates uncertainty in the Knigthian sense: even with full knowledge of the "fundamentals" it may be impossible to associate a probability distribution to future states of nature. However, complexity creates the possibility of extreme events. It does not make them happen necessarily. Other factors may also contribute: one of them is human behaviour. 2. Financial systems are "human" systems. Their dynamic is shaped by the way human beings react to changes in their environment. Those reactions can help and amplify initial shocks to a point that a real "catastrophe" may occur. Herd behaviour has long been known as an essential feature of financial markets. More subtly, individual reactions, by themselves rational, can, by the virtue of their mutual interaction, produce strong amplification effects. This has been luminously shown by Danielsson and Shin in their seminal article on "endogenous risk", based on the now famous parable of the Millennium Bridge. Extreme events and modern finance With slight exaggeration, a case can be made that modern finance has been built, in practice, if not in theory, on implicit tolerance and widespread ignorance of extreme events. BIS Review 151/2008  1  The use of models Models are extensively used to assess risks and price assets. Nearly all models are based on the prevalence of "normal" (Gaussian) distribution as the basic tool.