samchain/econo-pairs-v1 huggingface dataset:
But the supply of bank lending to businesses during the recovery is likely to be more expensive than it was pre-crisis and possibly constrained in quantity. In 2009 we saw one of the consequences, with a record year for sterling corporate bond and equity issuance as investment grade corporates by-passed the banking sector. The loans market is a particularly important part of the system of credit provision. Syndicated loans allow firms to borrow in larger size and for longer periods, and facilitate the lenders in diversifying their risk. Given the highly concentrated origination of business lending in this country, it is useful that the syndicated loans market and the secondary loans market allow a wider group of firms to contribute to lending to UK businesses, including non-bank participation. Over the next few years there are a lot of corporate loans, made during the boom years of credit supply, which fall due for repayment or rollover. That is a particular challenge for subinvestment grade borrowers, including most SMEs. It is clear that the high-yield debt markets are very much more developed in the United States than in Europe and so a greater burden here falls on bank finance. But non-banks may also have a key role to play. The Bank has been engaging with market participants over policies or market developments in the loans market which would support lending by non-bank institutions. Some of that analysis was reflected in a discussion paper on non-bank lending, published by HM Treasury earlier this year.

In particular, the potential amplification of the shock within the financial system through channels such as an endogenous fall in market liquidity as firms simultaneously seek to lower risk exposures; dynamic hedging behaviour (particularly of “unbalanced” options positions) 3 ; and restrictions on lending (a  3  Bank of England Financial Stability Report July 2006 Box 5, Page 33. BIS Review 81/2007  3  “credit crunch” or “financial accelerator” effect), are not yet built in empirically. And the framework does not yet incorporate the potential contagion and spillover effects which would result from severe strain at, or the default of, a major bank or financial institution. 4  BIS Review 81/2007  9 At present, the results from the top-down stress tests consequently tend to be relatively “linear”; that is an “extreme” scenario is a “scaled-up” version of a more “moderate” scenario. As financial instability is by nature inherently non-linear, given the central focus on default, contagion and spillover, this is an important failing. Moreover, the stress-tests typically concentrate on the impact of particular adverse scenarios, which individually have a nearzero probability of occurring in practice. There is generally no attempt to derive a distribution of possible outcomes. 10 Addressing these limitations is an important priority for financial stability authorities, so that “practical” stress-testing meets the “ideal” objectives set out above.
Secondly, in Chile banks cannot hold substantial off-balance-sheet positions, because the General Banking Act expressly indicates what kind of firms the banks may establish, such as mutual fund administrators or securitizing firms. These firms, that the law terms affiliates, must have a single line of business and are banned from investing in other companies. In addition, banks must submit their consolidated financial statements on a monthly basis. Moreover, banks may not take positions in credit derivatives, and face other restrictions regarding the operation of derivative instruments. In particular, to operate with interest rate or foreign exchange rate options, banks must undergo a thorough test by the SBIF, while holding uncovered positions in the balance sheet are costly in terms of capital requirements. But not only regulators and policy-makers learned the lessons from our financial crisis. Enterprises did too. Thus we haven't seen the massive currency speculations where so many firms in the emerging world were involved through the use of exotic derivatives that were not only complex but also very difficult to price. 10  In De Gregorio (2001), I discuss these points in connection with the first intervention period of 2001, and in De Gregorio (2006) I do so in the context of inflation targets and financial stability. 6  BIS Review 150/2008  In the present juncture we still face a severe inflationary challenge.

In view of the direct and indirect effects of these developments, we revised the end-2015 inflation forecast down by 0.6 percentage points compared to the previous reporting period. In food prices, we left the end-2015 inflation forecast unchanged at 9 percent. Our medium-term projections are based on the assumption that tax adjustments and administered prices are consistent with inflation targets and automatic pricing mechanisms. The medium-term fiscal policy stance is based on the Medium Term Program projections covering the 2015–2017 period. Accordingly, we assume that a tight fiscal stance will be implemented and the primary expenditures to the GDP ratio will decrease gradually. 3. Inflation and the monetary policy outlook  Now, I would like to present our inflation and output gap forecasts based on the outlook I have described so far. Our medium-term forecasts are based on a framework that we will adopt a cautious approach to make the improvement in inflation outlook permanent and maintain the tight monetary policy stance by keeping the yield curve flat. Moreover, we assess that the annual loan growth rate will stabilize around the recent reasonable levels, also thanks to the macroprudential measures. Accordingly, we expect inflation to be, with 70 percent probability, between 4.1 percent and 6.9 percent (with a mid-point of 5.5 percent) at end2015 and between 3.2 percent and 6.8 percent (with a mid-point of 5 percent) at end-2016. We project inflation to stabilize around 5 percent in the medium term (Chart 18).
But, we will conduct purchases only to the extent this is necessary and proportionate to fulfil our mandate. In short, the PEPP is a targeted, proportionate and temporary measure in response to the crisis triggered by the COVID-19 pandemic. The legality of the PEPP is ensured for three reasons: First, and as I mentioned earlier, the PEPP falls within the ECB’s mandate in that it pursues monetary policy objectives. As in the Gauweiler case, the measures designed to preserve the monetary policy transmission mechanism may be regarded as seeking to maintain price stability. Let me add that the argument invoking the transmission mechanism cannot be used to ease credit risk premia which are due to the idiosyncratic economic and financial situation of a country. Second, in accordance with the PEPP Decision,“Purchases shall be carried out…to the extent deemed necessary and proportionate”.3 The proportionality assessment of the PEPP must be supported by economic analysis which shows that the measure: (i) is suitable for attaining the monetary policy objective in current and future environments; (ii) does not go beyond what is necessary in order to achieve this objective; and (iii) weighs up the various interests involved to prevent any disadvantages which are manifestly disproportionate to the objectives set.

The recommendation exceptionally has adopted a “one-size-fits-all” approach owing to the current economic uncertainty banks are experiencing, leaving them quite simply unable to forecast their medium-term capital needs accurately. We will review this recommendation in December, and unless we conclude that the banks’ capital projections remain clouded by exceptionally high uncertainty, we should revert to our usual supervisory practice of assessing the planned distribution of dividends on a bank-by-bank basis, taking into account the safety and resilience of the banking system as well as the preservation of its intermediation function at a time of deteriorating asset quality and increased capital consumption. Another new development concerns the leverage ratio. On the basis of the amendments to the Capital Requirements Regulation, ECB Banking Supervision has allowed significant credit institutions to exclude central bank exposures from the calculation of their leverage ratios until July 2021. ECB Banking Supervision has cooperated with and sought the views of the ECB’s central bank function in order to tailor the scope of this temporary exemption so that it covers only those claims on the central bank that are related to the implementation of monetary policy. The measures in relation to dividends and the leverage ratio, as well as the other measures providing temporary capital, liquidity and operational relief to banks, are exceptional measures which are justified as long as the impact of the COVID-19 crisis continues to be felt. We may also decide to discontinue some of these measures, as we did for some of the operational relief measures in July.
Malaysia has developed the comparative advantage in the area of Islamic finance. The comprehensiveness of the Islamic financial system in Malaysia has been mutually reinforcing with the key components of the financial system comprising the Islamic banking, takaful, Islamic money and capital markets now being at an advanced stage of development. In addition, the established legal, regulatory and Shariah frameworks in the Islamic financial infrastructure is also a key competitive advantage for Malaysia , placing it ahead of other financial centres offering Islamic financial services. In terms of Shariah governance, it has enabled the development of Islamic finance to be orderly and compliant with the Islamic injunctions, thereby ensuring that customer confidence be maintained. The conducive Shariah environment has also ensured that Malaysia is sustained as a centre of product innovation, producing cutting-edge products for the increasingly sophisticated customers. In respect of Shariah interpretation and practices, the MIFC will adopt a stance of mutual recognition and accommodate the various juristic reasoning that has been approved by recognised Shariah advisers . Next week, Bank Negara Malaysia will again host the 2nd International Shariah Scholars Dialogue, gathering the Shariah scholars from different regions in our endeavour to continuously bridge and  BIS Review 104/2006  1  foster greater interaction and promote understanding on the issues and challenges faced by the Islamic community on the aspect of Shariah. Malaysia also has a strong and advanced regulatory regime and legal structure in the Islamic financial system.

6  For a more detailed analysis of forward rates and surveys as measures of monetary policy expectations see Alsterlind, J. and Dillen, H, “Monetary policy expectations and forward premia”, Sveriges Riksbank Economic Review 2005:2. 4  BIS central bankers’ speeches  Figure 2 SEK/EUR exchange rate and 5-year interest rate differential in relation to Germany Per cent  Source: Reuters EcoWin. So, what form does the link between the krona exchange rate and the interest rate differential take in the data? Figure 2 shows the value of the krona relative to the euro and the difference between Swedish and German five-year government bond rates since 1995. If we only look at the past few years, the theory seems to apply rather well as the krona has strengthened against the krona at the same time as the difference between Swedish and German long-term rates has grown. On the other hand, the figure shows that there have been several episodes with both increasing and decreasing interest rate differentials in which the krona has not at all reacted in accordance with this simple view. If we now concentrate solely on the most recent period, one may wonder why interest rate differentials appear to capture shifts in relative market expectations, while during the same period of time it was difficult, as previously pointed out, to directly interpret interest rate fluctuations in terms of market expectations?
Jon Nicolaisen: Challenges for the payment system Speech by Mr Jon Nicolaisen, Deputy Governor of Norges Bank (Central Bank of Norway), at the annual conference on payments systems, hosted by Finance Norway, Oslo, 16 November 2017. * * * Please note that the text below may differ slightly from the actual presentation. Introduction The payment system is changing along a number of dimensions. These changes will not only have an impact on the way we make payments, they will most probably also contribute towards promoting and even accelerating the structural changes we have already seen in the financial industry. Today, I will briefly outline some of the most important challenges we are facing. We can perhaps call the sum effect of these challenges a change programme. For this programme to succeed, cooperation is necessary, both within the financial industry itself and between the business community and the authorities. The authorities and the financial industry largely have coinciding interests. We all share the same aim: that Norway will continue to have an efficient, robust and modern payment system. PSD2 and new payment service providers In recent years, the EU has issued a number of regulations which we must adhere to. The revised Payment Services Directive (PSD2) is particularly important. The purpose of PSD2, together with other regulation, is to secure cheap, modern and efficient payment services. PSD2 will enter into force in the EU in two months’ time. A consultation process has been initiated on proposals to implement the directive in Norwegian law.

That is why economists sometimes sound a bit like St Augustine who famously noted in his confessions “Make me chaste and continent, but not yet”. This apparent tension between the medium term and the short term is evident in the banking sector. One lesson of the last 18 months has been that in the medium term banks need to work with lower leverage and higher buffers of capital and liquidity. I have argued elsewhere that we need in future to relate these buffers to the state of the economic and financial cycle so that they expand in good times and are sufficient to cover the inevitable losses in bad times. In a sense the purpose of the recapitalisation in October was to put banks capital up to the level it should have been had such counter cyclical measures been in place. But, at the moment we are in the downswing and we need to allow the banks to use those cushions and reduce their capital ratios from the new and higher starting point. The third point I want to make is about the breadth of the policy response. Long experience has shown that interest rates are the most powerful and effective instrument for managing the economy. As a result other regulatory and fiscal measures have taken a back seat in macroeconomic management in the last 15 years.
On the first count – why is inflation so high – the case for the defence has been advanced by a number of my colleagues in recent months and so hopefully will be familiar to many of you.1 Over the past few years, our economy has been hit by a series of large price level shocks – to oil and other commodity prices, to VAT, and to the sterling exchange rate – which have raised companies’ costs and put upward pressure on prices. Together these factors can more than account for the strength of inflation. 1  See for example the speeches by Bean (2011), King (2011), Miles (2011), and Posen (2011). BIS central bankers’ speeches  1  Indeed, recent analysis in the Bank’s Inflation Report suggests that these factors can account for a rise in the level of consumer prices since the beginning of 2007 of between 8–12%.2 This dwarfs the extent to which inflation has exceeded the 2% inflation target over the same period. Now, if we really were in a Court of Law, I fear the Judge may be looking down on me at this point with a degree of disdain, suggesting that this sounds like a series of excuses. “Inflation is inflation”, he or she may say, “whatever its cause. Your job is to keep inflation close to target”.

In particular, the risks from continuing global price pressures and the effects of the prolonged period of above target inflation meant that the level of demand consistent with achieving the inflation target had probably fallen. Nasty reasons rather than nice ones.15 I should stress that I’m not at all certain that this will turn out to have been the right policy decision. A key lesson I learnt from the financial crisis is that economists know a lot less about the economy and how the economy works than many would like to believe. Policymakers need to approach their task with humility and pragmatism. If growth turns out to be materially weaker than I anticipate or other medium-term pressures on inflation ease unexpectedly, I will reverse my decision. But with growth expected to be around its average historical rate, inflation likely to remain above 4% for the rest of this year and Bank Rate at record low levels, some withdrawal of policy stimulus seems sensible. The juxtaposition of high inflation and loose monetary policy means that there is an onus on the MPC to explain its actions. The case for the defence needs to be made. And we have a good story to tell. We can explain why inflation has been above target for much of the past few years. We think we understand – albeit with the benefit of hindsight – why we have been surprised by the strength of inflation. And we have learnt from those episodes.
Before I go into these issues in more detail, let me say a few words about the basic principles for how we conduct monetary policy today in Sweden. The monetary policy strategy The objective of monetary policy, which has been established by the Riksdag (the Swedish parliament), is to maintain price stability. The Riksbank has specified this objective as limiting inflation measured by the consumer price index (CPI) to 2 per cent, with a tolerance interval of plus/minus 1 percentage point. Monetary policy is also guided by various measures of so-called underlying inflation. The measure most often used is the change of UND1X, which excludes mortgage expenditure and direct effects of changed indirect taxes and subsidies. We normally try to conduct monetary policy in such a way that inflation is expected to be in line with the target within a two-year period. This time horizon can be justified by the fact that monetary policy  1  See Rosenberg, I. “The Riksbank and monetary policy”, speech at Danske Bank, 29 September 2005. See also the box ”Changes in the Riksbank’s forecasting methods”, Inflation Report 2005:1. BIS Review 33/2006  1  actions have a time lag but also by a wish to contribute to holding back fluctuations in real economic activity. However, taking the real economy into consideration must not mean that the goal of price stability is set aside.

The most recent labour market statistics for the United States indicate a continued favourable development, although the monthly statistics for household consumption indicated some slackening of demand. The purchasing managers index for the manufacturing industry in March indicated a small decline for the United States, while the index continued to improve for the euro area. Other indicators for the euro area such as the European Commission’s surveys show a positive development recently. Growth in Asia has been stronger than we had assumed. All in all, my opinion is that international economic activity appears slightly stronger now than we assessed in the February Inflation Report. For Sweden, the assessment in the Inflation Report was that GDP growth would be relatively high in the coming years. Statistics Sweden has since then published national accounts for the fourth quarter  BIS Review 33/2006  5  of 2005. These figures show that GDP growth was somewhat lower than expected, although the outcome for earlier periods was revised at the same time in such a way that the growth for the whole year 2005 remainedl in line with the forecast. Recently, indicators have shown a relatively positive picture of the development of economic activity, for example, the business tendency survey, the retail trade index and statistics for foreign trade. The purchasing managers index for the manufacturing industry has, as has been the case in the euro area, indicated a clear improvement in industrial activity since the middle of last year and this development has also continued recently.
Under this initiative, four member economies of APEC - China, Thailand, Mexico and the Philippines - have volunteered to receive expert advice through visits from panels of experts. The objective of these visits is to assist the economies in question in identifying potential impediments in their markets and in removing these impediments through specific, achievable and monitored action plans tailored to the individual economy. The programmes under this initiative are making good progress, and, in addition to the panel visits, two policy dialogues have been held to promote understanding and experience-sharing. A second cluster of initiatives, under the ASEAN+3 forum, involves a variety of studies known as the Asian Bond Market Initiative (ABMI) on issues such as new securitised debt instruments, issuance of debt by international financial institutions, regional credit guarantees and enhancement facilities, and the establishment of local and regional credit rating and credit enhancement agencies. The third set of initiatives falls under EMEAP - the Executives’ Meeting of East Asia-Pacific Central Banks - and takes the form of bond funds aimed at channelling a small portion of the very large official reserves held by the Asian economies into the region. The first of these funds - Asian Bond Fund I (ABF1) - was launched in June 2003 and is now fully invested in US dollar-denominated bonds issued by sovereign and quasi-sovereign issuers in the EMEAP economies. The EMEAP Central Banks are currently working on ABF2, which will invest in local currency-denominated Asian bonds.

Forward guidance on the path is today less important than commitment on our end objective First, in the current normalization phase, there is much less need and space for detailed forward guidance: we are no longer at the effective lower bound and  Page 5 sur 8 are coming back to our more normal reaction function—all the more so in the current uncertain environment. Accordingly, in our ECB July statement President Christine Lagarde emphasized optionality dependent on economic data, and taking decisions on a meeting-by-meeting basis. More importantly still, we strongly reiterated our commitment to our end objective of bringing inflation back to 2% in the medium-term, i.e. 2024 in our present forecasts. The more open we are about the path, the more committed we must be about the destination of the journey. Don’t get me wrong: market expectations of future policy rates remain a key driver of long-term interest rates, which are what matters most for investment and spending decisions. But forward-guidance—at least in the form of a commitment to an unconditional and/or prolonged path for the policy rate—is today an unadvisable way of steering market expectations. If you go to the hospital, it is certainly unpleasant not knowing how long you will stay there. But you certainly do not want a doctor who decides to keep you 7 days regardless of how your health evolves. Without question, you would rather have a firm commitment that he will cure you of your ailment! II.B.