samchain/econo-pairs-v1 huggingface dataset:
The problem became rather apparent thanks to the GFC, which witnessed cases in which bank managers took excessive risks or otherwise breached the trust of their customers in the pursuit of profit and bonuses. In some infamous cases, such as AIGFP and Merrill Lynch, sizable bonuses, funded by taxpayers’ money, were still paid to managers even though their actions had arguably contributed to the failure of the firms. This “heads I win, tails you lose” regime in modern banking is clearly a recipe for disaster and can do very little to help enhance the trust and reputation of bankers. 8. Another material change in banking from the “good old days” is the problem of what I call “short-termism” amongst some bank shareholders (“impatient capital” focused only on bolstering their own short-term returns). It has also become increasingly common for senior bank managers, especially at the top levels, to be hired on contract basis. While this might be justifiable from the point of view of hiring the best talent available in the market, it could have the unfortunate side effect of cultivating short-termism amongst senior bankers if they only work for a contract or two and therefore must deliver tangible and quantifiable financial results within a short period of time, such as a target RoE. In essence, like football managers, they survive on their reputation for delivering fast results during the current league season. The problem has been exacerbated by two more factors.

At the HKMA, we have just introduced an initiative called “Balanced and Responsive Supervision”. It involves a mechanism to regularly review with banks possible execution issues arising from the supervisory processes, as well as to collect ideas for streamlining supervisory practices and requirements. Through better and ongoing communication with the industry, we should be able to achieve a more optimal and sustainable supervisory outcome in the longer run. 14. I would also argue that banking supervision is not the only, and should not become the most important, means in protecting the interests of bank customers. It is my strong belief that regulation and supervision are most effective in prescribing what constitutes unacceptable behaviours or outcomes, e.g. minimum standards for capital and liquidity ratios, prohibition of unacceptable market behaviours such as insider dealing and rigging of interest rate or FX benchmarks, no mis-selling of financial products, etc. However, supervision is much less effective or appropriate in setting good corporate culture, values and ethical standards of a financial firm. No amount of external supervision or policing can instill and sustain the right culture and ethics of a bank. Culture and ethical standards must be from top-down, owned by the Board and filter down to the senior management and then to all levels of the firm. A bank and its staff must internalise good culture and values in such a way that they behave properly not because they are afraid of being caught and punished by the supervisors but because they think it is unethical to do otherwise. 15.
As a comparison, the same rate stands at 75% in the USA. The necessary reforms aim, in particular, at eliminating unemployment and poverty traps. For instance, in France, some useful steps have been taken: for example, a series of cuts to employer social security contributions has been implemented in order to reduce labour costs. We must also continue to step up efforts in training and education. The third way of raising potential output growth is to promote ways to boost gains in labour productivity: The rapid transformation of information systems is likely to accentuate the structural transformation of the economy. Although the euphoria of entering a new economic era has faded somewhat, remarkable potential for economic change remains. This may help to boost labour productivity significantly and on an ongoing basis. That strategy should be pursued whilst increasing the overall competitiveness of our economy If I refer to what we observed in the past, the French strategy of competitiveness, which was based on limiting increases in the unit costs of production, gave us a very important advantage. And this competitive advantage for the French economy was transformed into growth, into job creation and into solid external accounts. Thus, in the present situation, it is vital to continue in this direction and to maintain a multi-partisan consensus on this competitive disinflation process. Competitiveness is also linked to European harmonisation in other fields, for example in the service industries.

Table 2  Domestic scenario 2022  GDP Domestic demand Domestic demand (w/o inventory change) Gross fixed capital formation Total consumption Private consumption Goods and services exports Goods and services imports Current account (% of GDP) Gross national savings (% of GDP) Nominal GFCF (% of GDP)  2.4 2.3 3.0 2.8 3.1 2.9 1.4 0.9 -9.0 16.4 24.8  2023 (f) 2024 (f) 2025 (f) Mar.23 MP Dec.22 MP Mar.23 MP Dec.22 MP Mar.23 MP Report Report Report Report Report (annual change, percent) -1.75 / -0.75 -0.5/0.5 2.0-3.0 1.0-2.0 2.0-3.0 -5.3 -4.0 1.7 1.1 2.1 -4.6 -3.0 1.9 0.7 1.9 -5.0 -2.9 -0.2 -0.7 2.3 -4.5 -3.0 2.5 1.1 1.8 -5.9 -3.8 2.5 0.9 1.9 6.0 4.5 3.2 3.7 2.2 -5.4 -6.5 0.9 2.5 0.5 -4.9 -4.0 -4.1 -4.1 -4.0 20.2 18.7 19.8 18.9 19.2 24.3 23.3 23.8 23.2 23.2  (f) Forecast. Source: Central Bank of Chile. 19  Figure 13  Real consumer credit flows  (millions of UFs, moving quarterly average)  40  Rolling credit cards Credit card in installments Loans in installments Overdrafts  Households' financial burden (*)  (percent of monthly income, moving annual average)  20 19  30 18 20  17  10  16  0  15 14 15 16 17 18 19 20 21 22 23  19  20  21  22  (*) Median debtor's financial burden. Monthly income includes labor component (salaried formal) and pension fund withdrawals prorated over six months as from receipt of payment.
Do you think that the measures adopted last week by the Eurogroup are enough to deal with the severity of the problem, or should the finance ministers have gone further? With coronabonds, for example, or similar solutions. The agreement made was a commitment that goes in the right direction. It’s important to remember that. To reach a compromise, everyone has to give way a little and to believe in it. The agreement is a sign of political commitment. As for other possible measures, such as coronabonds, the ECB has always been in favour of the existence of a fiscal instrument at European level that can complement monetary policy. It is just that this is a political decision. We are in favour of it, we think it would be a good thing for the euro area, but we will see what happens. The European Council meets on 23 April. We consider it to be a useful instrument, but it is not up to the ECB. It’s for the European governments to decide. 1/3  BIS central bankers' speeches  And what do you expect will happen? Do you think that it’s possible to reach a political agreement to take this step towards coronabonds or is it just a dream? I couldn’t possibly say what will happen. All I can say is that the current situation is difficult and that the commitment made by the Eurogroup was positive, but let’s see. The possibility of a recovery fund being set up is a good idea.

Luis de Guindos: Interview in Expresso Interview with Mr Luis de Guindos, Vice-President of the European Central Bank, and Expresso, conducted by Mr João Silvestre on 15 April 2020. * * *  Is this the greatest crisis in living memory? According to the International Monetary Fund (IMF), this will be the worst downturn since the Great Depression. There is a great deal of uncertainty and, given this degree of uncertainty, we need to define and analyse several scenarios. The IMF’s baseline scenario is very similar to other public and private sector forecasts. It’s important to bear in mind that the impact on the economy, which will be huge, is concentrated in the second quarter of the year – as well as in March – and that the impact will be severe, but temporary. This temporary aspect is important. The calculations point to a contraction in the second quarter by as much as 20% compared with the previous quarter. And it will also have an impact on public finances and the financial markets. Despite the uncertainty you have mentioned, is a rapid recovery possible in 2021? The key factor is the duration of the lockdown – the longer it lasts, the greater the impact. We hope that the containment measures will start to be eased over the coming months, reducing the negative impact on the economy, and that we will see a return to positive growth rates in the second half of the year.
Headline inflation – which was negative as recently as December 2020 – has risen by 9.4 percentage points from its trough during the pandemic to its peak last month. Core inflation has risen by 4.1 percentage points. In the recent past, elastic global supply has meant that shocks to production or energy have dissipated eventually. Following the Iraqi invasion of Kuwait in the 1990s, for example, oil prices fell below their pre-war level after around five months. And following the Japanese earthquake and nuclear disaster in 2011, production is estimated to have returned to normal after only seven months for Japanese firms. [4]  But the shocks triggered by the pandemic and the war have also created what I have previously called a “new global map” of economic relationships. [5] The economic turning points on this new global map imply that supply constraints are likely to last longer than in the past. And this means, in turn, that it is taking longer for the inflationary effects of those shocks to fade out. Two issues are worth considering here. First, geopolitics have shaken up European energy markets. The cut in gas supplies owing to the Russian invasion has become a major structural change which will have ramifications for several years. For example, following the two oil shocks of the 1970s – the OPEC embargo and the Iranian revolution – the effect on oil prices was still persistent after three years.

Boehm, C.E., Flaaen, A. and Pandalai-Nayar, N. (2019), “Input Linkages and the Transmission of Shocks: Firm-Level Evidence from the 2011 Tōhoku Earthquake”, The Review of Economics and Statistics, Vol. 101, No 1, MIT Press, March, pp. 60-75. 5. Lagarde, C. (2022), “A new global map: European resilience in a changing world”, keynote speech at the Peterson Institute for International Economics, Washington, D.C., 22 April. 6. Hamilton, J.D. (2011), “Historical Oil Shocks”, NBER Working Paper Series, No 16790, National Bureau of Economic Research, February. 7. Bachmann, R. et al. (2022), “How it can be done”, ECONtribute Policy Brief, No 34. 8. Kuik, F., Morris, R. and Sun, Y. (2022), “The impact of climate change on activity and prices – insights from a survey of leading firms”, Economic Bulletin, Issue 4, ECB. 9. McKinsey (2021), “How COVID-19 is reshaping supply chains”, 23 November. 10. During US recessions from the 1950s to the 1980s, inventory investment accounted for 1.4 percentage points of the average 2% peak-to-trough decline in real GDP. See Piger, J.M. (2005), “Is the Business Cycle Still an Inventory Cycle?”, Economic Synopses, No 2, Federal Reserve Bank of St. Louis. 11. Lagarde, C. (2022), “Monetary policy normalisation in the euro area”, The ECB Blog, 23 May. 12. The Governing Council has (i) decided to flexibly reinvest maturing securities under the pandemic emergency purchase programme, and (ii) launched a new transmission protection instrument. 13. These are the median figures across recessions. 14.
While it would be ideal to have much broader coverage at this time (as at today, around one-third of global banking assets are officially subject to the Basel III requirements), the delays should not be interpreted as any lack of commitment by global regulators to implement the agreed reforms. At recent international gatherings, all members have been asked to reaffirm their commitment to implementing the agreed reforms as soon as possible. And they have given that commitment (subject, of course, to the vagaries of domestic rule-making processes that each must follow). Nevertheless, let me be clear: the question being discussed is when the reforms will be implemented, not if. Any setback to implementation is undesirable, since Basel III is a key platform on which to rebuild a stronger global banking system. But the delays are not critical at this point, for two reasons. First, the Basel III capital rules contain a lengthy phase-in period, meaning that in 2013 the new requirements should not be particularly burdensome for banks (eg none of the new deductions from capital are applied this year). Second, many regulators who have been unable to implement the new standards by the beginning of this year are still measuring and monitoring their banks’ capacity to meet the new requirements. And, of course, markets are applying similar pressure. In other words, the “force” of the new capital regime is much broader than just those countries that have implemented their domestic regulations.

Unlike other countries, where credits extended to the private sector reduced in certain periods after the crisis, in Macedonia credit flows were constantly growing and currently credits are 1.5 times higher than before the crisis. The average credit growth from 2008 to 2014 was almost 6% which is well above the average for the region of about 1.8%, and certainly above the average for the Euro-zone, where lending decreases. Credit growth accelerated particularly in 2014, and in November this year it was close to 10% on an annual basis. The fact that the banking system is in excellent condition, with a capitalization rate of over 16%, with high liquidity and low reliance on external funding sources, explains the current room for lending. We expect the solid credit support to continue in the medium term, supporting growth. What are our expectations for the economic growth in the period ahead? Although foreign demand suffers downward adjustments, our estimates for the growth of the domestic economy in the next period point to solid performances. Considering the solid economic growth that is already certain to take place in 2014, and the assessments for further support of the growth through foreign and public investment, our estimates point to an economic  2  BIS central bankers’ speeches  growth of 4.1% in 2015 and its acceleration to 4.5% in 2016.
I should add that the International Association of Insurance Supervisors (IAIS), a fellow association of supervisors in the insurance area, is now discussing a supervisory framework that would apply to all insurance regulatory systems globally. Evolution in risk management and the reform of financial supervision should complement and reinforce each other, and the progress in each area will be influenced by the work underway globally to revise accounting guidelines. The Geneva Association has taken a great interest in this topic, so I will conclude my remarks with some brief thoughts from my perspective on the convergence of accounting standards, advances in risk management, and supervision. II. Trends across financial services sector  Allow me to begin with an overview of recent trends in risk management. Last year, a body representing major financial supervisory agencies conducted a study of 31 banks, securities firms, and insurance companies in 12 jurisdictions. This body - called the “Joint Forum” - consists of expert supervisors from member agencies of the Basel Committee, the International Organisation of  BIS Review 34/2004  1  Securities Commissioners (IOSCO), and the IAIS. The Joint Forum seeks to identify best practices and develop guidance for activities across the financial services sector. In its report, which was published in August 2003, the Joint Forum identified two important and recent trends among large, complex firms engaged in banking, securities, or insurance, or in some mix of these activities. A. Integration of the risk management function.

Their reactions provide economic incentives for banks to strengthen their management of risk and hold at least adequate levels of capital against their risks. One might say that Basel II seeks an “efficient frontier” of policy objectives through the three pillars. Each pillar provides something that the other two cannot. Each is essential to achieving our overall objective of financial stability. I realise that this analogy of the three pillars as a portfolio of policy options is an oversimplification. But it helps us to visualise why we think that the most “efficient frontier” involves a mixture of minimum rules, tempered by supervisory discretion, and supplemented by market-based incentives. IV. Consistency of accounting standards and a three-pillar system  Of course, our three-pillar supervisory system is highly dependent on a firm’s internal measures of risk exposures. “Basel II,” for example, looks at a bank’s own measures of risk in Pillar 1. Supervisors then engage bank managers in a dialogue on their interpretations of those measures - and the steps managers take in response - in Pillar 2. Finally, Pillar 3 is intended to give the market greater insight into those measures of risk exposures and what the bank may do to control them. Because the three pillars are so dependent on the internal measures, neither supervisors nor bankers can ignore the mechanics that define how financial data are recorded and reported. Those mechanics, as you know, are governed by national accounting standards, which is the last topic I would like to address.
Further, in the last few years Spanish institutions have shown notable skill in managing operating costs, becoming some of the most efficient players in the world. In the current circumstances, progress along these lines is even more necessary. Third, and very importantly, some of the international markets on which Spanish institutions have raised financing in recent years have narrowed substantially. In this respect, the lack of discrimination seen in the last few months is surprising, as the markets have similarly penalised products whose features, in terms of level of complexity and risk, are substantially different. This is the case, for example, of Spanish securitisations which, on account of their simplicity, the high quality of the securitised collateral and the low level of bad debts recorded, bear no relation to the more complex structured products used by banks in other countries. A particularly striking case is mortgage covered bonds, whose credit quality is very high and easily measurable. This quality resides in their legal characteristics, since they are backed by the whole of the issuer's mortgage portfolio and their minimum level of overcollateralisation is 25%. However, financial market participants have not taken these arguments into consideration. In fact, banks have to keep explaining to the market the differences in their issues. An effective way of doing so is to start issuing medium-term securities again. And, as mentioned above, congratulations are in order because this is the path successfully taken by some banks in recent months.

Domestic economic activity in much of Asia will inevitably be subdued, with knock-on effects elsewhere, and major imbalances are likely to emerge in international trading patterns. It is too soon to have any very clear view about the likely scale or duration of these economic effects. The IMF, in its Interim World Economic Outlook, based on information available to early December, has tentatively estimated that world gdp growth this year - at 3½% - might be around 1% lower than it had expected in the autumn. They expected much of the impact to fall on the Asian economies themselves - with forecast growth in the newly industrialised Asian economies falling by 2½%, whereas growth in the G7 countries was expected to be only about ¼% lower at 2¼%, with a substantially larger impact on Japan. My impression is that, notwithstanding these revisions, most analysts would still see the risks as being quite heavily on the downside. There have been suggestions that the dampening of activity, particularly in this country and in the US, as a result of these developments is welcome insofar as it will help to prevent the re-emergence of inflationary pressures. And that is true - up to a point, my Lord Copper. It is clearly not desirable that the necessary moderation of demand should be narrowly concentrated on those sectors that are exposed to international competition. And while some of the industrial countries can certainly tolerate significant external deficits for a time, persistent, large deficits would not be sustainable indefinitely.
What are the investments that run the risk of being stranded assets in a net-zero world? What are the investment opportunities as the world transitions to a low-carbon economy? There have been significant policy moves on the sustainability front that will attract keen investor interest in the years to come. In US, the introduction of the Inflation Reduction Act will direct nearly $ billion in federal funding to incentivise low-carbon investments – in areas such as clean energy generation and storage, electric vehicle manufacturing, and carbon capture. In Europe, the REPowerEU Plan will mobilise up to € billion of investment in areas such as renewable energy, storage and energy efficiency, to achieve the 2030 target of a renewables share of 45% in energy production. There are also significant opportunities for sustainable investing in Asia. According to McKinsey’s estimates, net zero by 2050 would require about $ trillion of investment per year. Out of which, around one-third or $ trillion would be in the Asia Pacific. Southeast Asia has high potential for climate action. Estimates from Bain shows that five sectors - renewable energy, electric vehicles, forest conservation, built environment and sustainable farming - account for 60% of Southeast Asia’s carbon abatement potential [7] . For example, renewables such as solar and wind will reach an annual $ billion opportunity by 2030, while electric mobility will be an annual $ billion opportunity by the same period. To meet these needs, we need to catalyse blended financing.

In current, unstable circumstances, what role should the central bank play? Monetary policy should certainly stick to its mandate and ensure price stability in the medium run. In Europe, with financial conditions tighter as a result of the explosion in sovereign spreads, increased uncertainty and loss of confidence, – as shown by the fall in most indicators – there are now more downside risks to price stability. It was therefore appropriate to lower our policy rates by 25bp, a decision reached unanimously by the Governing Council. Second, we need to ensure that the banking system has access to liquidity –what is sometimes called the role of lender of last resort of the central bank. In this respect, the  BIS central bankers’ speeches  3  Eurosystem has confirmed its policy of providing unlimited liquidity – at fixed rates – to the banking system until at least until the end of Q2 2012. Collateral policy has been adjusted to avoid the shocks and liquidity squeezes borne out of rating changes. Dollar funding, based on the existing swap with the Federal Reserve, has also been made easier. Finally, in a period of intense market disruption, it is essential to ensure that the monetary policy transmission mechanism actually works. This may involve temporary and exceptional interventions on those market segments where dysfunctions are most apparent. This is the purpose of the Securities Markets Program (SMP), initiated in May 2010 by the Eurosystem.