samchain/econo-pairs-v1 huggingface dataset:
As I will explain in the first part of my remarks, the three pillars of Basel II introduce a coherent system of checks and balances - or perhaps reality checks - into the supervision of capital. Basel II will likewise contribute to the resilience of the banking system on a macro level. In the second part of my remarks, I will discuss some of the factors that suggest that Basel II will more broadly become an effective tool of public policy. Of course, for Basel II to be effective at the micro and macro levels, we will need to undertake considerable work in the months ahead to prepare for its consistent implementation. In the third and final part of my presentation today, I’d like to share an update on what supervisors are doing currently to prepare for the implementation of the new capital framework. I’ll include as well some thoughts on additional things that banks can do to promote a smoother transition to the new framework. 2. Will Basel II promote sound risk management within individual banks? To begin, I would like to discuss why I believe that Basel II will promote reasonable and realistic decision-making on a microeconomic level with regard to each bank’s capital needs. This effect is critical now that qualifying banks choosing an advanced approach to credit or operational risk will be allowed to apply some of their own assessments of risk in the calculations of their minimum capital requirements.

Alongside expenditure, it is important to identify and resolve any inefficiencies in the use of the public funds earmarked for education. The AIReF is already doing this in various autonomous regions. Recent reforms in this area (laws governing education, vocational training and the university system) should also be assessed. The third factor limiting productivity is the regulatory environment, which affects activity and the efficient allocation of resources among firms. The evidence points to a significant accumulation of capital in low-productivity firms between 1995 and 2007 in Spain.14 This allocation has barely become any more efficient in the most recent period.15 To a certain extent, this situation has come about because firms’ access to financing seemingly depends less on their productivity and more on the collateral available to them.16 In this respect, in spite of significant improvements in financing in recent years, Spanish firms – in comparison with firms in the euro area – continue to be heavily reliant on bank loans and have relatively limited access to venture capital. This funding structure, which is closely linked to the collateral available, restricts not only firms’ growth possibilities and their capacity to respond to potential shocks, but also negatively affects their ability to carry out innovation projects, which, by their very nature, have a relatively high risk profile. Improvements in this area will also require initiatives at European level, such as completion of the capital markets union, for example.
This labour has to be recruited from the exposed sector, or through the natural increase in the labour force finding its way to the sheltered sector. Over time, the size of the internationally exposed sector will be affected by the portion of the petroleum revenues that is absorbed into the Norwegian economy. The size of the internationally exposed sector is independent of monetary policy. An appreciation of the krone may, nevertheless, affect the speed at which changes occur in the business and industry. To maintain balance in the Norwegian economy, the phasing in of petroleum revenues must be countered by a monetary policy stance that is tighter than it would otherwise have been. This may be accomplished by keeping interest rates higher than they would otherwise have been, or by an appreciation of the krone, or both. A clear monetary policy target is a necessary complement to the fiscal guideline with a view to ensuring reasonable macroeconomic stability. Monetary policy is oriented towards low and stable inflation. The inflation target is set at 2½ per cent. BIS Review 66/2002  1  If evidence suggests that inflation will be higher than 2½ per cent with unchanged interest rates, the interest rate will be increased. If it appears that inflation will be lower than 2½ per cent with unchanged interest rates, the interest rate will be reduced. Inflation in Norway is determined by both domestic and international inflationary impulses. Domestic inflationary impulses are influenced by the state of the Norwegian economy.

The balance between innovation and resilience that has characterized the U.S. financial system in recent years has played an important role in the improved performance of the U.S. economy. We all have a strong interest in preserving this balance. Thank you. BIS Review 28/2006  3
A broad-based analysis of the data, taking the appropriate medium-term perspective and allowing for these considerations, confirms the underlying strength of money growth. In particular, the pace, maturity and sectoral composition of borrowing from banks suggest that, at the level of the euro area as a whole, the availability of bank credit has, as yet, not been significantly affected by the ongoing financial tensions. This notwithstanding, growth in loans now shows signs of moderation, as previously anticipated, with corporate demand for credit slowing. At the same time, the growth of loans to households continues to follow the downward trend observed over the past few years, as a result of higher short-term interest rates and housing market weakness in several parts of the euro area. To sum up, a cross-check of the outcome of the economic analysis with that of the monetary analysis clearly confirms the assessment of upside risks to price stability over the medium term. The information that has become available since the last meeting of the Governing Council has confirmed that annual inflation rates are likely to remain well above levels consistent with price stability for a protracted period of time. The growth of broad money and credit aggregates is now showing some signs of moderation, but the still strong underlying pace of monetary expansion points to continued risks to price stability over the medium term. The latest economic data also confirm the weakening of real GDP growth in mid-2008.

This reflects partly an expected technical reaction to the strong growth seen in the first quarter as well as dampening effects from global and domestic factors, including direct and indirect effects from high commodity prices. Against this background, it remains imperative to avoid broad-based second-round effects in wage and price-setting. In full accordance with our mandate, we emphasise that maintaining price stability in the medium term is our primary objective and that we are resolute in our determination to keep medium and long-term inflation expectations firmly anchored in line with price stability, thereby preserving purchasing power in the medium term and supporting sustainable growth and employment in the euro area. On the basis of our assessment, the current monetary policy stance will contribute to achieving our objective. We will continue to monitor very closely all developments over the period ahead. Regarding fiscal policy, budget plans for 2009 should fully reflect existing policy commitments. This implies that euro area countries with relatively large fiscal deficits need to specify much more ambitious and concrete consolidation measures, especially on the expenditure side. Countries that have already achieved their medium-term budgetary objectives need to ensure that they maintain sound structural fiscal positions. At the current juncture, the steady pursuit of stability-oriented fiscal policies would help to contain inflationary pressures and provide the required budgetary room for manoeuvre to allow automatic stabilisers to contribute to smoothing the business cycle.
Net imbalances do matter, and macroprudential policy will not solve the deep problems of the international monetary system; nor will the temporary capital controls employed by some EMEs on “macroprudential” grounds. That question is still with us because those imbalances are, broadly, still with us. And if the surplus countries do not adjust, that poses tough challenges for the rest of us. 24  See “Monetary policy and financial stability – some further challenges”, Ingves (2010). 25  Bank of England and Financial Services Authority staff. December 2011. “Instruments of macroprudential policy”  BIS central bankers’ speeches  9  Lessons for the policy framework Where does that leave us? Summing up my analysis, it is that we must use financial asset prices, in particular spreads, alongside quantities as indicators of risk taking and risk appetite. It is through credit flows – domestically and across borders – that risk is built. But it is in balance sheets that those risks are housed and come home to roost. In terms of the policy framework, this leads me to suggest the following lessons: –  We must not rely entirely on central banks “mopping up” after financial crises. Not only does it strain our capabilities ex post, it is counterproductive ex ante. If central banks are perceived as writing deep-out-of-the-money put options, then the market, believing it is protected by those tail-risk puts, will itself take more risks than otherwise. We need overall macro regimes that aim to make chronic imbalances and over-indebtedness less likely and less threatening.

Recent studies by the ECB and the European Commission have clearly shown that a lengthy period of processing the old national and the new SEPA instruments in parallel will be costly for both banks and their customers. Therefore, this period of dual processing should be kept as short as possible. Responding to the global financial market correction Financial integration is proceeding not only within Europe, but also at the global level. Financial globalisation enables the international community to share significant benefits in terms of enhanced financial efficiency and economic growth, but it also makes the safeguarding of financial stability a more interdependent endeavour. Effectively coordinated international action aimed at addressing financial system vulnerabilities has therefore become very important, as highlighted during the ongoing financial market correction. Against this background, the major collective effort undertaken by both the public and the private sector to cope with the financial market turbulences has been encouraging. Hard work has been done in terms of restoring the orderly functioning of financial markets in the short term and identifying proper measures to strengthen the resilience of the financial system in the longer term in order to avoid the recurrence of similar events in the future. The report of the Financial Stability Forum (FSF) on “Enhancing Market and Institutional Resilience” 3 has been fully endorsed by the international community and provides the main reference point for the necessary improvements.
If people are reluctant to pay taxes but demand social security and good roads, it is the shadow of the past. In brief, if people do not understand why elections are held and what is the state’s role, it is the shadow of the past. But, of course, in ten years a lot has been achieved. We have built up democratic institutions. Market economy functions. Private ownership has a solid foundation. Banks provide credit to people for new housing developments. But our current success should not be taken for granted. And we should also bear in mind that much needs to be done yet. The public has to understand the role and possibilities of the state and the government in the market economy. Everybody should feel responsible for their own welfare as well as their family’s and the state’s well-being. Our new generation should be able to cope with the complicated processes of the modern society much better than we did. In our efforts to achieve this goal it is impossible to underestimate the support provided by our partners. The Estonian society and politicians need partners with whom to exchange experience and from whom still to learn the fundamentals of the functioning civil society. At that, I would like to thank Konrad Adenauer Foundation for the work it has done and is doing in Estonia and elsewhere for the promotion of political co-operation, preservation and support of free democracies throughout the world, development and consolidation of the social market economy and respective values.

That Was The Week That Was was a popular TV programme which ran for two series in 1962 and 1963. That was the time when inflation was just starting to rise and although it averaged well below 5 per cent throughout the 1960s it picked up sharply in the early 1970s and didn’t fall back to below the MPC’s current 2% target until 1998 (Chart 10). Sources: ONS and Bank calculations. See The path to 2 per cent − speech by Silvana Tenreyro | Bank of England. See Shocks, uncertainty, and the monetary policy response- speech by Dave Ramsden I Bank of England 16 17  Bank of England  Page 16  2022 has been a very challenging year for the UK economy. Millions of households and businesses are experiencing great hardship as a result of the cost of living crisis. As a member of the MPC I am acutely conscious that our actions are adding to the difficulties caused by the current situation. The past history of the UK economy demonstrates the damage to households and businesses that would result if high inflation persisted. Unlike these earlier periods of high inflation, exacerbated by ineffective policy and policy frameworks, we now have a monetary policy framework which empowers us to take action. However challenging the short term consequences might be for the UK economy, the MPC must take the necessary steps in terms of monetary policy to return inflation to achieve the 2% target sustainably in the medium term.
BIS Review 18/2003  5

The standstill provides an essential breathing space during which accountants appointed by the company can report on its financial problems and prospects for survival, and the company can try to reorganize its business and management. Assuming that the company looks as if it is salvageable, the banks will normally be prepared to continue the standstill to allow proposals to be presented by the company’s financial advisers to restructure its debt, by for example extending its term, reducing the interest rate or even the principal amount and swapping debt for equity. If the shareholders are able and willing, it may also be possible for fresh capital or assets to be injected into the company to fill a hole in the balance sheet and to improve its income earning capacity. During the period of the standstill and while the restructuring plans are being formulated, it will be the responsibility of the lead bank appointed at the first all banks meeting to enforce the standstill, to negotiate with the company and its financial advisers and to share information with the other lending banks. The lead bank will be assisted in this process by a steering committee, normally consisting of about 4-6 banks. It is important to note that while the steering committee may recommend a restructuring plan to the bank group as a whole, it cannot commit them to it. This means that a workout can only go ahead if there is unanimous agreement among all the banks involved.
If the credit risks disappear from the banks, where do they go? Today I intend to speak a little bit about the risks involved in credit derivatives, which so far mainly concern the international market. Here in Sweden the use of credit derivatives is still limited, although increasing. Then I intend to mention the opportunities I see in Sweden. But let me first run through how credit derivatives are used and how the market has developed in recent years. 1  How do credit derivatives work? A credit derivative is a financial contract between two parties. It insures the buyer of the contract against the credit suffering a credit event during a predetermined period. The credit event quite simply defines what the insurance covers, in roughly the same way as the conditions in a normal home insurance. I shall return to this shortly. Take, for instance, a company like TeliaSonera. Then imagine a bank that has loaned money to this company. This may involve a lot of money as TeliaSonera is a large company. Although Telia’s ability to pay is good when the loan is taken, the bank is exposed to the risk that it may deteriorate in the long term. If the bank considers the credit risk to be too high, it may choose to "sell" part of it to another investor. Then the bank can use the credit derivatives market. For the bank, which in this case is the seller of credit risk, the credit derivative functions roughly like a normal insurance.

In particular, BELab has been created with the aim of providing the research community with greater access to high-quality microdata, in a controlled environment that ensures data confidentiality, through on-site or remote means depending on the sensitivity of the data. The microdata available at BELab include the Survey of Household Finances, the Survey of  1  Financial Competences, the balance sheet data of non-financial corporations and microdata on loans to legal persons. I would strongly encourage all of you to have a look at these data, because I honestly believe that allowing independent researchers to access high-quality data is a necessary step to enhance our knowledge of the Spanish economy. And this annual conference specifically should be seen as another step in furthering our commitment to research as an indispensable tool for improving economic policymaking, in this case with the focus on understanding and monitoring developments in the Spanish economy as a basis for promoting well founded economic policy decisions. We wish to strengthen our interaction with the research community in this field as a way of better discharging our legal responsibility to provide advice to the Spanish governments on economic policy matters. And related to this responsibility, the annual report of the Bank, that it´s regularly presented to Parliament, offers an analysis of recent developments in the Spanish economy within the global setting, as well as how it is likely to perform in the future and the challenges it faces.
In many parts of the world banking laws were passed for the first time and the central bank often became the bank supervisor. In this process the distinction between the micro- and macro- perspectives became blurred. What has changed in the past ten to fifteen years is that central banks have started to give much more explicit emphasis than in the past on their macro prudential responsibilities and have distinguished it more clearly from the micro-supervision perspective. This renewed emphasis has several different sources. One of them was undoubtedly the financial crises that hit Asia in 1997. This experience showed that even if the individual banks in a financial system appear to be sound, the system itself can still be overwhelmed by financial shocks. For example, the system can be exposed to a common risk that isn’t obvious from looking at each bank individually. In the Asian crisis countries the exposures of banks to foreign exchange risks didn’t show up on bank balance sheets. The risks were instead in the balance sheets of their major borrowers, who had borrowed heavily in foreign currencies even though they had domestic currency cash-flows. And this also points to another feature of macro prudential concern – it cannot stop at the traditional boundary of the banking system, but must look at the risks in the nonbank financial sector and at the structure of household and corporate balance sheets. There are also two other factors worth mentioning.

The household debt burden (household debt as a percentage of disposable income) has increased to a historically high level and is expected to rise further. However, the household interest burden (interest expenses after tax as a percentage of disposable income plus interest expenses) is still low as a result of the low interest rate level. The interest burden is expected to increase to fairly high levels in pace with a normalisation of the interest rate. Still, on the whole, households’ financial position is strong. The rise in the policy rate so far has not been fully reflected in banks’ lending rates. Intensified competition, especially for mortgages, has dampened increases. Banks’ interest margin has declined during the last decade. Falling interest margins have, however, partly been compensated by high lending growth, and banks have so far succeeded in maintaining good results. Pre-tax profits as a percentage of total assets have been solid. Norwegian banks are solid. Due to high growth in lending, capital adequacy ratios for banks as a whole declined slightly in 2005. Nevertheless, capital adequacy ratios are still high. Under Basel II, capital requirements for credit risk are to be calculated using either the standardised approach or more risk-sensitive internal ratings based (IRB) approaches. The five largest Norwegian banks have applied to Kredittilsynet to use the Foundation Internal Ratings Based (FIBR) approach for credit risk. Under Basel II, the required level of capital for banks in Norway will be reduced. The main reason is that mortgages constitute a substantial part of banks’ total assets.