samchain/econo-pairs-v1 huggingface dataset:
A paraphrase can be used to describe the role of states in banking crises – states have had to become owners of last resort. But before the money goes in, make sure that the bank’s managers go out. You simply cannot rely on the same people who jeopardised the bank in the first place. It is also a signal to the markets that things are about to change in the way that the bank is run. Of course, the bank should continue to be run on purely market-based terms, even though the state may become a major, or even the only, shareholder. Another thing you must ensure, before you join the ranks of investors, is that the bank’s assets are conservatively valued. Otherwise, you risk overpaying and instantly transferring taxpayers’ money into the hands of existing shareholders. Diluting the owners’ share of the bank – or, in some cases, even taking over the bank completely – also ensures an equitable upside for the taxpayers over time. And this is important, as capital injection does not mean permanent ownership. The idea, of course, is to exit the bank as soon as this is possible in an economically justifiable manner. A good restructuring plan turns the odds of such an exit in your favour. That is the third lesson. Profit maximisation should be the guiding principle in this restructuring process. Maximising profits, in turn, hinges on banking skills. So make sure the restructured bank is run by the most skilled professional bankers you can find!

I want to emphasize the word limited. Notwithstanding Adam Smith’s own reference to government intervention, the role of government must remain a limited one. If temporary market imperfections or difficult market adjustment periods give rise to the justification for relentlessly expanding the role of government, there will be a point when markets will no longer function effectively and when welfare creation will seize to advance. There is no better breeding ground for irresponsible behaviour than an environment of economic stagnation or worse, welfare decline. BIS Review 38/2005  1  There are times in history when the world economy undergoes fundamental structural change. With the rapid integration into the global economy of China and India, we are experiencing such historic change. Fundamental structural economic change invariably produces economic victims. The temptation for governments to interfere excessively with the free market is therefore particularly acute during periods when dramatic change occurs. Paradoxically, it is precisely then that the forces of the “invisible hand” are most needed to help bring about the welfare that can ultimately help absorb the negative externalities of change. If I am right that we are currently traversing such a period of historic change, it is more important than ever to ensure that government intervention in markets is limited and remains subject to continuous checks. Free markets under the rule of law, Ladies and Gentlemen, provide the optimal path to welfare creation and ultimately responsible behaviour by market participants.
In short, the peripatetic pound has caused, and continues to cause, severe headaches for economic policymakers. But was currency instability really the cause of those headaches in the past, or was it simply the effect of bad policies? Some of both is the answer. Large movements in sterling can create problems for monetary policy, as we have seen very recently. Equally, the absence of a credible monetary framework means that the currency is likely to be volatile. Sterling crises of the past reflected an absence of monetary stability. Inflation has eroded the value of money to the point where the purchasing power of £ in 1950 has been reduced to less than a shilling, or 5p, today. The failure to control inflation led to excessive expansions of the economy, and the subsequent struggle to bring inflation back down resulted in severe recessions. This country experienced the sharpest decline in output of any G7 economy in the early 1980s. And in the early 1990s only Canada had a more severe recession. Eventually, the realisation that inflation did not generate sustainably higher output and employment produced a determination to restore stability to the UK economy. Since our departure from the ERM, in September 1992, successive governments have put in place institutional changes that would deliver stability. First the inflation target and then independence of the Bank of England, with the new Monetary Policy Committee (MPC), have put us firmly on course to achieve monetary stability.

The third motivation for more equity is that some companies who can bridge the virus disruption effectively with more debt could then consider their balance sheets overstretched. During the crisis, debt is the natural – fastest – way to raise finance for most companies. That’s why so much support has been provided to allow it to be raised. But it could leave an overhang. That overhang won’t be one that, at current interest rates, presents an acute problem. The share of companies with interest payments taking up a material fraction of revenues is likely to remain low. But it could create a chronic issue for the economy in the longer term. Greater leverage could damage companies’ ability to refinance and access new capital when dealing with future stresses. Governmentguaranteed loans may need to be refinanced at higher rates in future. Looking ahead to these possibilities, many prudent companies will want to repair their balance sheets, holding back on employment and investment to work the overhang off through time. 10  Source: Office for National Statistics 7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7  With enough companies in that position, what makes sense individually could be harmful collectively; it could drag future growth. So it is essential to give companies every means to repair and restructure balance sheets by issuing equity to repay debt. With these three important motivations, the good news is that equity issuance is already strong.
More broadly, developing practical ways to model realistic interactions among banks and other financial institutions and between the financial and real sectors of the economy would be important advances. Transparency of Process and Results The next element we identified as contributing to the SCAP’s success as a macroprudential exercise was transparency, both of the process and, especially, of the results. The SCAP was groundbreaking because it disclosed firm-specific supervisory estimates in detail, including loss amounts and rates on different types of loans, projections of net revenues, and the amount of capital each firm would have to raise to meet publicly disclosed supervisory targets ratios. These disclosures formed the template for subsequent DFAST and CCAR stress test results. Current stress test disclosures deliver not just insight into individual banks’ ability to withstand stressful economic outcomes, but also provide a broader perspective about the exposure of different segments of bank lending, securities and other activities to adverse economic and financial market developments. These segment-level results, aggregated across banks, are important because they have the potential to serve as public warning signals about over-heating or a build-up of risk that can supplement other cyclical macroprudential analysis. While the transparency of the supervisory stress test results was a groundbreaking element of the SCAP in 2009, subsequent discussion has focused largely on the transparency of the process of generating the results, in particular, information about supervisory stress test models.

Following the launch of the National Financial Inclusion Strategy in 2017, new informal financial service providers have emerged, such as, village banks and savings groups in both the rural and urban areas. As both formal and informal financial service providers are agents of financial inclusion it is important for us, the regulators, to seek effective ways of linking the two types of players with a view to reducing informality as we expand financial inclusion. Distinguished Guests, in recognition of the importance of formal financial inclusion in supporting economic growth, the Bank of Zambia is collaborating with SaveNet, to 1  KEYNOTE SPEECH BY DR DENNY KALYALYA, GOVERNOR, BANK OF ZAMBIA AT THE 2019 WORLD SAVINGS DAY EVENT ON 31ST OCTOBER 2019 AT THE INTERCONTINENTAL HOTEL, LUSAKA  develop channels to link informal savings groups to formal financial services providers. According to SaveNet data, at the end of 2018 there were 15,700 savings groups in Zambia, with cumulative savings amounting to K53.1 million. This points to a good opportunity for the formal financial service providers to mobilise deposits. In this regard, it has been observed that a number of regulated financial service providers and mobile money operators have already started designing products aimed at tapping into this market. It is hoped that this move will expedite the transition of informal groupings into the formal financial sector and enable more people gain access to a wider range of quality and affordable financial services.
How much should tomorrow’s central bank balance sheets do - speech by Andrew Hauser | Bank of England  Bank of England  Page 12  bank balance sheet to provide state-backed transactional money is one of our most longstanding functions. The dog may be old, but it can still perform new tricks! I am very grateful to Joshua Jones and India Rimmer for their assistance in preparing these remarks; and to Andrew Bailey, Sarah Breeden, Shiv Chowla, Rohan Churm, Jon Cunliffe, Rafael Kinston, Jeremy Leake, Amber McAlone, Ali Moussavi, Huw Pill, Dave Ramsden, Francine Robb, Christina Segal-Knowles and Cormac Sullivan for their advice and comments.

Mojmír Hampl: Czechs and Austrians – even closer than they appear Speech by Mr Mojmír Hampl, Vice Governor of the Czech National Bank, at the Wirtschaftskammer Österreich, Vienna, 14 November 2012. *  *  *  Ladies and gentlemen, dear guests, It is a great honour and utmost pleasure for me to speak here today. And believe me, these are not just standard nice opening words. I really mean it. As if there is anywhere I particularly enjoy visiting, it is Vienna and also Austria as a whole. And as the statistics show, the same goes for many Czechs. More than two million of us visit Austria annually, and the number is going up every year, regardless economic circumstances (not the other way around). This is not due solely to the typical and widespread enthusiasm among Czechs for skiing. Many Czechs simply like Austria as a country. It would be hard for me to find a Czech who does not feel good, safe and comfortable here. And it is no accident. So, please forgive me if I do not discuss today macroeconomic trends, the extraordinary synchronisation of economic cycles in our two countries, and factors behind continually rising mutual trade. Much of this will be surely covered in the discussion. There is something else I would like to talk about. I would like to make a personal comment about the closeness of our two countries.
We feel that linked banking provides an opportunity to improve the intermediation role that banks play in an economy. Our Non-Bank Financial Institutions Department will be happy to provide more information on this and other innovative approaches to provision of rural financial services discussed at the said workshop. Update on ZIPSS-RTGS implementation •  •  The Project ZIPSS-RTGS implementation team has successfully undertaken the following activities within the project time frame: •  Development of RTGS policy/position papers;  •  Delivery, installation of BOZ RTGS hardware and software;  •  Conducting of training for BOZ business and IT staff;  •  Conducting of both Business and Technical Functional Tests of BOZ RTGS; and  •  Inspection of Commercial Banks readiness in terms of hardware and SWIFT connectivity. It is important to note that these activities are critical for the successful delivery of the systems within the agreed time and budget. Commercial Banks are therefore urged to ensure that their banks are ready for the next phase which directly affects them. The Implementation Team has put in extra efforts to assist commercial banks to ensure that they are ready within the agreed time frames. Given the importance of the RTGS system, commercial banks must ensure that whatever solution they go for does not compromise reliability, availability, speed and security of the system. On-site examination of commercial bank’s readiness •  The Bank of Zambia on-site examination for commercial banks’ readiness commenced as planned on 22 March 2004.

Update on the microfinance regulations •  The draft microfinance regulations, which are aimed at providing a legal framework for regulation and supervision of microfinance institutions, are currently being reviewed by the BoZ and are scheduled to be submitted to the Minister of Finance and National Planning during the second quarter of 2004. Polymer notes •  As most of you must have heard, through the media, there are public concerns about some features fading on the polymer banknotes of K500 and K1,000. While we have also noticed a number of them, we wish to inform you that fading is a definite and expected feature of these notes as they approach the end of their useful life. However, we also feel that being a new concept, the notes could still be subjected to undue stress testing due to public curiosity. However, we are also not ruling out premature wearing of the notes. We are therefore doing everything possible to ensure that subsequent consignments do not suffer similar setbacks. In the meantime, we wish to make an earnest appeal to all the banks to assist the Bank of Zambia in ensuring that faded notes are quickly taken out of circulation, in the same way as soiled banknotes have been handled in the past. The Bank of Zambia is also going to set up mechanisms for enhancing the process and pace of siphoning faded notes from circulation.
This impact will vary from one institution to another, according to the starting position of each one and their exposure to the sectors and agents most affected by the crisis. In these circumstances, we need to avoid serious damage to the stability of the financial system, as this would make the crisis deeper and longer. Accordingly, we need to step up the surveillance of risks to financial stability and be prepared to respond forcefully, at European level, in the event that any materialise. In addition, banks must address their medium-term challenges decisively, including notably their low profitability, both in Spain and across Europe. At national level, some of the measures already applied need to be extended and regularly recalibrated. Currently, these need to be focused on the most severely affected groups of households and sectors, promoting the necessary structural adjustment, and to be adapted to the rate at which the recovery is taking place. In the corporate sphere, many companies will emerge from this crisis with higher levels of debt, and this may hamper the recovery and be a source of vulnerability. Strategies therefore need to be implemented to promote corporate financial restructuring. One of the main challenges is to avoid funds remaining at companies with no prospect of viability in the post-pandemic scenario. Likewise, the European recovery fund resources should be used to support sustainable restructuring and modernisation of the productive sector.

A large-scale downgrading of this debt, to below investment-grade status, would entail considerable potential losses for the financial system of the European Union (EU) as a whole, a significant part of which would correspond to indirect losses attributable to the forced selling mentioned above. The role of rating agencies in this process is fundamental. When making their assessments, these institutions need to take into account the long-term outlook for the corporation concerned and avoid excessively pro-cyclical behaviour. Indeed, this time round, rating agencies appear to have been more cautious than in the global financial crisis and, to date, phenomena comparable to those seen in the past have not occurred. In any event, the results of this exercise serve to show the systemic importance of this vulnerability and the need to be prepared to provide a sufficient, internationally coordinated response, depending on how the pandemic develops at international level. The impact on general government  A system-wide scenario analysis of large-scale corporate bond downgrades, ESRB Technical Note, 23 July 2020. 10  15  During the current crisis, the activation of automatic fiscal stabilisers associated with lower tax receipts and increased cyclical expenditure (for instance, on unemployment benefit), along with the effect of the discretionary measures adopted by the authorities to mitigate the impact of the crisis, is leading to very significant increases in budget deficits and public debt in all countries. Initially, there were also tensions in European public debt markets, which led to a sharp rise in sovereign spreads.
1  4  See the memorandum dated October 9, 2008: Currency swap agreements and attempts to reinforce the foreign exchange reserves. BIS Review 22/2009  As I have mentioned, the Central Bank of Iceland kept close watch on the liquidity of the Icelandic banks throughout 2008, both by compiling data regularly and by meeting with senior executives in the banks. Among other things, the Central Bank tracked the banks’ liquidity virtually on a daily basis and kept abreast of their refinancing efforts and asset sales. It was common knowledge that one of the banks, Glitnir, had a large foreign loan payment coming up in mid-October. Unlike the other banks, Glitnir had not been active in creating a presence in the retail deposit market abroad, having chosen instead to bolster liquidity by selling assets. In mid-September, the Board of Governors of the Central Bank met with the Glitnir management and reviewed the bank’s liquidity outlook once again. At that time, the prospects for funding the October payment were good, and according to information presented to the Central Bank, Glitnir would be able to cover that payment with an asset sale that was virtually complete. It was then that American investment bank Lehman Brothers collapsed, starting a tremor that would shake financial markets all over the globe. In its Quarterly Review in December 2008, the Bank for International Settlements went so far as to say that, after the failure of Lehman Brothers, the global financial markets “seized up and entered a new and deeper state of crisis.

The muted course of inflation from the end of 2012 stems from the marked deterioration in the economic outlook for the euro area. Overall, despite the expansionary monetary policy, there are no signs of inflation risks over the forecast horizon. BIS central bankers’ speeches  3  4  BIS central bankers’ speeches
Expected losses are then compared to the buffers of profits and capital (perhaps with an adjustment for whether the scenario is likely to be “slow burn” wherein potential future profits might absorb some of the loss, or “fast burn” where pressure falls more immediately on capital) to guide the judgement on the overall impact of the stress scenario on the banking system (and/or on the financial system more broadly). 6 We have utilised this broad approach within the Bank of England to assess the risks to the major UK banks from sources of potential major vulnerability – both individually and in combination. Results have been published in recent Financial Stability Reports (see Chart B). 2  2  Bank of England Financial Stability Report June 2006 and April 2007. The description above applies particularly for the corporate, household and global imbalances stress. See A new approach to assessing risks to financial stability by Andrew Haldane, Simon Hall and Silvia Pezzini, Bank of England Financial Stability Paper No 2 April 2007 for a fuller discussion. 2  BIS Review 81/2007  7 This approach has a number of strengths. First, it draws on a fully consistent macroeconomic scenario and on statistical estimates of the impact of adverse economic conditions on credit and market exposures. Second, building formal “maps” of transmission of economic shocks onto the financial system facilitates greater analytical consistency and provides enhanced clarity on which channels are important. This aids the understanding of risks.

When operational, such distributions should help guide judgements on how overall financial system vulnerability is changing. But the approach should also provide considerable additional information on pressure points within the system and on the channels of transmission and potential contagion. 14 I believe that this broad approach offers an important step forwards in the development of an analytically and empirically robust framework for financial stability work. Of course it is analytically hugely challenging – modelling non-linear tail events with endogenous strategic interactions is always going to be tough! The results will inevitably be subject to major uncertainty. But the approach does start to provide a consistent and coherent framework which should substantially improve the value of top-down stress tests and of risk assessment work. 15 A particular “operational” aim is to use the results to help improve the focus of risk reduction work and crisis management planning, for example through the identification of  BIS Review 81/2007  7  “weak points” in the financial system and through improved assessment of the impact of policy interventions. An important element of risk reduction work is to influence the behaviour of financial firms. “Bottom-up” or firm-level stress-testing practices have developed rapidly in recent years. But one challenge is that, as for the authorities, it is hard for individual firms to gauge the likely “systemic impact” of particular shocks, which takes into account macro and financial system interactions and feedback effects.