samchain/econo-pairs-v1 huggingface dataset:
It also has the ability to make Recommendations within the Bank, to HMT and to any other person, with a view to achieving its statutory objectives. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  The post-crisis reforms embody the lesson of that: keep up… …with the risks the system faces. And with the shape of the system as it shifts. To keep the system capable of serving in the bad times as well as the good. Today – declaring my obvious conflict of interest – I want to look back to consider how, over five years, we’ve got the system to a place where it can serve the economy in bad times as well as good. And then I want to look ahead, to the macro trends of Brexit, borrowing and the unbundling of banking and the challenges they present to keeping up. Looking back, we have largely corrected the fault lines that underlay the crisis. In particular, the banking system has been strengthened. Not everyone agreed it should be strengthened so much. But it was obvious that it needed to happen. The economic costs of major banks getting into distress are vast. So they must be able to withstand – and keep lending through – even very severe and rare economic events. That’s why we stress test them to economic scenarios more severe than the financial crisis. It’s why the largest banks must fund themselves with 10 times more capital than they did before the crisis.

Jaime Caruana: Coordinating regulation and supervision of banks - Basel II and beyond Remarks by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the Global Operational Risk Forum of the Risk Management Association, Paris, 24 October 2003. *  *  *  I would like to thank the organizers for inviting me to this forum on operational risk. As the new Chairman of the Basel Committee on Banking Supervision, it is a pleasure for me to join you, the members of the Risk Management Association, in a discussion about the latest trends in capital and risk management. Overview Many of you have travelled great distances to join us here. Perhaps part of the attraction was the chance to enjoy the charms of autumn in Paris. But the main reason is that you believe risk management matters. Indeed, from their first meetings in Philadelphia almost 90 years ago, the members of the Risk Management Association have long helped to promote sound risk management, offering training, educational resources, and forums such as today’s event to financial professionals. Moreover, for more than 80 years the RMA has emphasised the analysis of quantitative data in helping to evaluate risk through its collection and annual publication of financial data and benchmarks. Through your efforts, and the efforts of associations similar to the RMA, you are helping to advance the state of the art in the management of credit, market, and operational risk and to encourage responsible banking practices.
Instead, it is argued, monetary policy should be aimed at attempting to counteract financial imbalances to a greater degree, possibly even exclusively. In relation to this debate, Sweden finds itself in a rather unique position. We have discussed these issues for longer than most other countries, we have experience of a policy that was aimed, to a certain extent, at counteracting financial imbalances, inflation fell earlier in Sweden than in many other areas, and we have also – after a long period of highly expansionary monetary policy – managed to bring it back on target. In other words, we have a number of experiences to share. Here, I have given an account of what I consider have been the most important experiences: that it is important not to lose sight of inflation and inflation expectations, that it may take significant interest rate rises to halt the accumulation of financial imbalances and that it may take a long period of highly expansionary policies to bring inflation up – but that it is possible to bring it up. In conclusion, to avoid misunderstandings, I would like to emphasise that my comments today do not, in any way, mean that I consider that central banks should not have any role or responsibility for financial stability. That issue deals with much more than whether or not it is appropriate to address financial imbalances with monetary policy and the policy rate.

And the Basel Committee is developing the capital framework to ensure implicit offers of contingent support by banks, for example to their SIVs, will be properly capitalised. Interconnections created by derivatives are being reduced and made transparent. Requirements are being imposed, and incentives created, for banks to centrally clear derivative trades, helping to replace the complex web of bilateral deals with a central model. Trade reporting and margining requirements are being strengthened. More broadly, overall disclosure has been enhanced on the key risks arising from business models, sources of funding, market risk measures and loan forbearance policies.5 Through such initiatives, complexity and obscurity are being replaced by simplicity and transparency. A fairer financial system That goes some way towards increasing the effectiveness of market discipline. But that discipline will never be felt fully if markets believe that creditors and shareholders will be bailed out in a crisis because banks are too big to fail. Expectation of bail out was validated comprehensively last time. The US authorities sought to make Lehman Brothers a test case of moral hazard. Instead, this exception proved the rule. AIG was rescued within twenty four hours. As Barney Frank observed, the free market lasted for a day. This “heads-I-win-tails-you-lose” environment for the world’s largest banks struck right at the heart of the sense of fairness in our societies. It simply had to be fixed. Tackling the rampant moral hazard at the core of the system has not been easy but, at the Brisbane Summit, G20 Leaders marked a watershed in our efforts.
An additional concern is that many of the transactions suffering from this risk may have been entered into for portfolio management reasons (such as the pension fund example) or regulatory capital relief and other “window dressing” purposes rather than genuinely to protect against default. Net exposure numbers quoted on earnings calls, or stress losses reported to regulators, can all be made to look more palatable if the insurance is apparently in place, while the true risks in the event of default may not have changed much. These issues raise general questions for market structure with tradeoffs that are far from trivial. Is it beneficial for, say, banks to lay off sovereign risk with other banks and other leveraged financial institutions such as hedge funds, or does the ensuing web of contingent exposures across leveraged institutions increase the systemic risks? It seems that many of these arrangements increase diversification in the case of small and medium size stress scenarios, but may actually exacerbate the systemic implications in the case of very large shocks7. These arrangements also highlight the delicacy of the appropriate regulatory structure. In many instances, subject to sufficient diversification, these tail risks might be better borne by so-called “real money” investors, i.e. insurance companies, pension funds and traditional long-only bond and equity funds, as these investor categories operate with little or no leverage.

Just as the application of information technology revolutionised the business of banking and risk management in the second half of the twentieth century, I expect that the increasing quantification of risk will drive tremendous advances in the first half of the twenty-first century. But, as prudent risk professionals and bank supervisors, you and I know that quantifying risk involves making assumptions. And no model, and no software package, no matter how sophisticated, can ever replace the skills of a trained, experienced, and conscientious risk manager. Banking, finance, and insurance are, at least in part, an art, not a science. We can and should supplement and enhance our judgement with the best technical tools available. Yet - against the backdrop of unpredictable markets and times it would be folly to derive business strategies purely from the projections of a mathematical model. And that is why the work of an organisation like GARP matters so much. GARP creates a forum for its 30,000 members to share ideas on new ways to approach risk or to share suggestions on ways to improve current practices. Furthermore, GARP and similar professional organisations encourage all of us to improve our own skills constantly and to probe and understand emerging issues in the market. So it is a particular pleasure for me to share some thoughts on the Basel Committee’s progress to develop regulatory capital standards that reflect the best practices in risk management today - and that recognise the importance of exercising prudence and sound judgement when taking on risk in banking.
The first is that central banks use their balance sheets not, like commercial banks, to generate economic returns for their shareholders, but to deliver the policy goals of monetary and financial stability. That may sound innocent enough: dull even. But that would be misleading – because  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  maintaining stability means central banks must be prepared to act like financial firefighters – rushing into burning buildings (taking on certain types of financial risk) when everyone else is rushing out. That dynamic is clearest when central banks act as lenders of last resort: stepping in to provide temporary liquidity (to individual firms, or the market as a whole) when private liquidity providers take fright. They are uniquely able to do this because their ability to create fiat money means they face no liquidity risk in their own currencies of issue. Of course, central bankers go to great lengths to limit the other forms of risk they take on in such circumstances: lending only to institutions assessed as solvent and viable; taking high-quality collateral, with conservative haircuts; charging suitably penal interest rates; and typically lending only for limited periods. But they can still find themselves lending, sometimes in large size, when everyone else prefers not to, in order to limit the financial instability that would be caused by wider contagion. That inversion of the normal definition of risk tolerance – illustrated schematically in Chart 1 – is strike one against the risk professional’s standard operating manual.

11 / 12  BIS central bankers' speeches  I would like to make a final comment on the effects of our APP portfolio on bond yields. While, overall, our APP portfolio will continue to exert downward pressure on euro area long-term interest rates, other factors such as economic fundamentals and the creditworthiness of issuers, as assessed by market participants, remain key determinants of the levels of bond yields and spreads. Conclusion The winding-down of net asset purchases is not tantamount to a withdrawal of monetary policy accommodation. The ongoing rotation from net asset purchases towards enhanced forward guidance on key ECB interest rates has preserved the ample degree of monetary policy accommodation that is necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term. Prudence, patience and persistence will continue to inform our policy decisions. The sizeable stock of acquired assets and the associated reinvestments, as well as the strong anchor for policy rate expectations provided by our enhanced forward guidance, will continue to deliver the monetary policy stimulus necessary for inflation convergence. In any event, all our policy instruments can be adjusted to ensure that inflation moves towards our aim in a sustained manner. 1 This speech builds on my remarks at the UBS Conference, London, 13 November 2018. 12 / 12  BIS central bankers' speeches
This has reduced business cost pressures and thus overall inflation. Third, the tighter monetary policy stance has nudged the level of output closer to its potential, thus preventing the economy from overheating. The positive output gap is projected to narrow from nearly 4% of potential GDP in 2010 to around 1% this year. MAS’ policy stance has begun to yield results. Both CPI-All Items inflation and MAS Core Inflation have eased from their recent peaks. •  CPI-All Items inflation has fallen from 5.5% in Q3 2011 to 4.0% in Q1 2013. •  At 1.6% in the first quarter of this year, MAS Core Inflation is running at nearly half the pace seen a year ago. BIS central bankers’ speeches  5  But there is no room for complacency. The pace at which business costs are passed through to consumer prices could pick up in the latter half of this year. MAS will remain vigilant in ensuring that the recent gains in controlling inflation are sustained. Macroprudential policies: augmenting monetary policy to promote economic and financial stability Let me move on now to macroprudential policy. This is the new buzzword in central banking circles. It has not been much referred to in Singapore, but we have been applying macroprudential policies for some time now. I will describe now the workings of macroprudential policies in Singapore, explaining why they are necessary in our context, and how they have been applied.

Ravi Menon: Securing price stability as Singapore restructures Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Asian Bureau of Financial and Economics Research (ABFER) Opening Gala Dinner, Singapore, 21 May 2013. *  *  *  Professor Bernard Yeung, Dean, NUS Business School, whose tireless efforts have brought to fruition the Asian Bureau of Financial and Economics Research, distinguished guests, ladies and gentlemen, good evening. Interesting times again Monetary policy has become interesting again. The Great Moderation, beginning in the mid-1980s and spanning two decades, marked the triumph of monetary policy over the scourge of inflation. The formula worked brilliantly – independent central banks, with clear mandates to pursue price stability, and doing so with consistency and credibility, ushered in an era of macroeconomic and financial stability supporting steady economic growth and rising prosperity. Then came 2008/2009 – unleashing a financial crisis of unmatched scale and impact, and a global recession deeper than any seen since the Great Depression. We are still living in the shadows of these two shocks, with the global economy stuck in a hesitant and uneven recovery and financial market stresses resurfacing from time to time. Monetary policy in the advanced economies has entered unchartered waters, in a valiant effort to support economic growth, which was being weighed down by deleveraging. In the emerging economies, central banks and governments have had to be equally nimble in their policy responses, as they grapple with the spillover effects of these unconventional monetary policies.
In 1997 and 1998 the economy shifted from an upturn with high growth rates to an expansion with lower growth but low unemployment, labour shortages in many sectors and strong growth in labour costs. The period of strong expansion has ebbed away in the course of the past year. Winter 2002 marked the turnaround in the Norwegian economy. Growth in the mainland economy is now lower. Unemployment is approaching the average for the 1990s. Industrial leaders are pessimistic. Companies report a decline in production, employment and orders for both the export and domestic markets. Many companies have relocated or have plans to relocate all or some of their production operations abroad. In particular, enterprises producing capital goods are experiencing problems. The number of bankruptcies has increased sharply. The number of bankruptcy petitions is the highest in nine years. If we disregard personal bankruptcies, there has been an increase of 32 per cent from the first quarter of 2002 to the first quarter of 2003 - 200 more than a year ago. The largest increase in the first quarter is in retail trade and the property management and commercial services sector, while manufacturing and the construction sector accounted for the largest increase in the previous quarter. The number of bankruptcies increased in all counties compared with 2002, with the sharpest increase in Hordaland, Buskerud and Oslo (161, 111 and 18 per cent respectively from 2001 to 2002). Oslo accounted for most bankruptcy petitions, with 249 in the first quarter.

The interest rate influences inflation indirectly via domestic demand for goods and services and via its effect on the exchange rate. When interest rates rise, it becomes more profitable for households to save, and consumption will therefore be postponed. Similarly, borrowing becomes more expensive, and investment will decline as a result. Lower demand then curbs the rise in prices and wages. Higher interest rates make it more attractive to invest in NOK and borrow in foreign currency. Therefore, higher interest rates normally lead to an appreciation of the krone. This makes imported goods cheaper. In addition, a stronger krone reduces activity, profitability and the ability to pay in the internationally exposed sector. Major economies such as the US, Germany and France are struggling with stagnation and fears of recession. Sluggish developments have led many countries to set very low interest rates in an attempt to stimulate growth. The business cycles in Norway and other countries have been desynchronised. While the turnaround abroad took place two years ago, the Norwegian economy continued to show a high level of activity. Towards the end of the upturn, the economy was facing labour shortages, higher wage growth and a sharp increase in household consumption and debt. Interest rates had to be kept at a high level in  BIS Review 23/2003  1  Norway. This led to a widening of the interest rate differential against other countries. The main explanation for the wide interest rate differential is that interest rates abroad are at a historically low level.
Switzerland is an exception In Switzerland, despite the difficult economic environment, there is currently no tension between monetary and fiscal policy. There are two reasons for this. First, public finances are very healthy. Second, monetary policy has always been focused on stability. The healthy state of public finances is mainly due to fiscal rules at cantonal level and the debt brake at federal level (cf. chart 7). The debt brake was introduced in 2003 to halt the growth in Swiss public debt that had taken place in the 1990s. 11 The core element of the debt  8  Cf. Alesina and Summers (1993) and Klomp and de Haan (2010). 9  Cf. Jordan (2011, 2012a). 10  Cf. Bernholz (2003). 11  Sovereign debt grew from CHF 39 billion in 1990 to over CHF 120 billion in 2002, peaking at CHF 130.3 billion in 2005. In 2011, it stood at CHF 110.5 billion. Cf. FDF (2012). BIS central bankers’ speeches  5  brake is a simple expenditure rule: Expenditure must not exceed receipts over the course of one economic cycle. The advantage of this is that no specific debt level needs to be defined or aimed for. I would like to point out that, rather than limiting fiscal policy’s room for manoeuvre, the debt brake increases it. It combats excessive debt, leaving fiscal policy in a better position from which to act, should it need to.

I didn’t expect to say “those were the days” about 2007. It was natural that the first response to the financial crisis in terms of reforms was focused on the bedrock prudential issues of capital and liquidity in banks. This has been supplemented by the drive both internationally and domestically to solve the too big to fail problem through a combination of resolution measures at the centre of which is agreement on total loss absorbing capacity for those banks which require such a bulwark to ensure orderly resolution in the event of failure. This is crucial to break the dependence of failing banks on injections of public money and likewise to break the impact of solvency problems in banks on the public finances. This is an international as well as domestic agenda of reforms aimed at fixing the fault lines that caused the financial crisis, building a more resilient and open global financial system, and deepening and building trust across jurisdictions. I have said before, but I think it justifies repeating, that we are unwavering supporters of an open global financial system which finances the investment and trade necessary to support strong, sustainable and balanced growth. As we see and seek to deal with new risks to the world economy and to global financial stability it is always important to remember that free trade and free capital flows are the foundation of a successful world economy with all the benefits that brings for the welfare of people.
The income settlements in 1974/75 and 1986 in particular, but also the settlements in 1998 and 2000, contributed to higher cost inflation and weaker demand for labour. We have seen that income formation is affected by labour market conditions and profit trends in the business sector. This is also true of wage and income developments among managers, salaried employees and the liberal professions. The structural changes that now seem to have occurred in income determination for these groups has probably also been important for the outcome of the ordinary wage settlements. Through the last part of the 1990s, factor income rose as a share of labour costs. Over time, a balance will probably be reached between labour costs and the portion of income that goes to servicing capital. To some extent the process will be self-regulating. High profits tend to lead to stronger growth in wages. Lower earnings prompt companies to cut costs. This may take the form of increased work effort, or possibly workforce reductions, in order to increase productivity. Companies may also reduce growth in business fixed investment. Since 1997, price inflation has been higher in Norway than among our trading partners. The most important reason for higher price inflation in Norway is that we have had a tight labour market for many years. This has also led to high growth in wages and labour costs.

It is our job to ensure that companies and households can make transactions and calculations using a currency with stable purchasing power. During the time Estonia has been a member of the European Union, the well-being of the people of Estonia has improved. EU membership has meant our economic environment has been more stable and deserving of confidence. In the past ten years, economic growth in Estonia has surpassed average economic growth rates in the European Union, so that Estonian GDP in purchasing power terms has advanced from 55% of the EU average in 2003 to 71% in 2012. The incomes of residents of Estonia have also increased, with real wages up more than 40% in the past decade. EU membership has brought both opportunities and risks. It is the job of those setting national policy to make sure that risks are minimised and that we are best able to profit from opportunities and I am sure that the analysis provided here today by my colleagues will help in guiding the decisions behind that policy. The presentations we will hear today have been prepared thanks largely to the initiative of the European Commission Representation in Estonia to celebrate the tenth anniversary of Estonia’s accession to NATO and the European Union. In summary we can say that in ten years we have made Estonia and the space where Estonian people operate much larger. BIS central bankers’ speeches  1