samchain/econo-pairs-v1 huggingface dataset:
Christian Noyer: Some thoughts on the financial crisis Speech by Mr Christian Noyer, Governor of the Bank of France, at Paris-Europlace, Tokyo, 18 November 2008. *  *  *  Ladies and Gentlemen, It is a great pleasure for me to be here and share some thoughts on the financial crisis. It is too early to draw all the lessons from recent events in financial markets. It is however vital to start reflecting on the experience of the last few months. Even more in periods of tension than in normal times, action and reflection should reinforce one another. It is at the very moment of managing the current crisis that we lay the foundations for the future financial system. Having said that, I propose to reflect with you on four topics: •  The nature of the financial crisis  •  The policies implemented to address it  •  The macroeconomic outlook  •  The outlook for financial regulation  The nature of the crisis The crisis first emerged as a liquidity crisis. The first symptoms appeared at the beginning of August 2007 when serious disruptions surfaced on the inter-bank market. More than a year later, tensions on money markets are still with us. Recent weeks have witnessed abnormal levels of spreads, a shortening of maturities, and the contraction, or even closure, of some market segments. Through spill-over, these tensions are also affecting non-financial corporations and, more broadly the financing of the economy.

Banks’ balance sheets became overstretched. Off-balance sheet vehicles without any equity proliferated. Monoline insurers  BIS Review 143/2008  1  guaranteed volumes of structured products way beyond what their equity position could bear. As you know, leverage works both ways. It amplifies gains as well as losses. Amplified gains took the form of the US property boom. Amplified losses are with us now. The whole deleveraging process still underway has meant, since its start, that financial institutions unable to raise capital had to suffer very considerable depreciations on some products, which in some instance wiped out their net worth, bringing them to failure. Against this background, what about French banks? Of course, they are not immune to the crisis. Direct or indirect exposures to toxic assets implied that they too had to record writedowns; sometimes substantial ones. The liquidity shortage is also hurting and the prolonged market disruptions have raised their refinancing costs. That said, our banks are sound and robust. Indeed bearing in mind the following. First, French banks exhibit high solvency ratios. Indeed well above minimum prudential requirements and above ratios of many competitors. Second, overall, they remain profitable. It is so not least because they benefit from regular sources of income. They are universal banks; and as such much less susceptible to funding market conditions. Sound and revolving sources of profits are a vital asset at the current juncture. Fourth, French banks can “manoeuvre” and play an active role in the ongoing restructuring of the international financial sector.
This means that the members of the banking union should establish and implement a harmonized framework for banking regulation and supervision. Second, there should be a single supra-national supervisory authority in charge across the union (the main supervisory tasks will be transferred from the national to the European level). Third, there should be a single bank resolution mechanism to address potential banking crises. Fourth and finally, there should be a single deposit guarantee scheme in order to harmonise and centralise deposit insurance. IV.3. Assessing the project  Obviously, each pillar has its own pros and cons. Let me mention the most important ones. As concerns the single rulebook, the financial crisis highlighted the danger of divergent national rules. The current context justifies the adoption of a common legal framework for banking regulation. The European Banking Authority would play the central role in elaborating the rulebook. The result will be (i) less regulatory arbitrage; (ii) a reinforcement of the competitive neutrality principle: same business, same risk, same rules; and (iii) a higher level of transparency, contributing to a robust and uniform regulatory framework in the Single Market. On the other hand, there are some risks: (i) implementing the same rulebook across over 8,000 banks in 17 or more countries may not prove flexible enough; (ii) the tougher regulations currently in place at national level might be undermined in those non-euro area Member States which decide not to join the banking union. Local subsidiaries may choose to bypass the more prohibitive banking legislation by turning into branches.

The banks in Bulgaria have an important year ahead, which we expect to be overall successful for the sector. Banks’ operations continue to take place in an environment of rather optimistic attitudes of enterprises and households amidst a relatively high growth of the Bulgarian economy. At the same time, the external environment holds risks and insecurity that, due to the openness and international integration of our economy, could potentially affect the economic 1/2  BIS central bankers' speeches  situation in Bulgaria. Some adverse scenarios could exacerbate aspects of the risk profile of the banking sector. Therefore, it is essential that in their behaviour banks continue to take into account the main risks, including profitability risks and asset quality risks. 2/2  BIS central bankers' speeches
Developments beyond the forecast horizon The uncertainty in the forecasts increases the further ahead they look, but despite this it can be interesting to look beyond the two-year forecast horizon in the main scenario. Economic developments during the past decade have been characterised by considerable free resources following the crisis at the end of the 1990s. That is not the case today, and will be even less the case in two years’ time, if the economic upturn continues as expected. This changes the focus of economic policy. A decisive factor for economic growth will be the development of production capacity, as I have mentioned earlier. It is production capacity that governs the development in demand that is compatible with price stability. Here there are some worrying tendencies, which I have touched upon earlier. The labour supply in Sweden risks developing less favourably beyond the forecast horizon as a result of demographical changes. Shorter working hours would have the same effect. On the other hand, measures may be taken to increase the supply of labour and thereby affect developments in the opposite direction. This effect could be obtained by, for instance, lower absence due to sickness. It is clear that the way the labour market functions will play a decisive role for economic growth both in the coming two years and beyond the forecast horizon. An important issue for Sweden in the near future is whether we shall take part in the third stage of EMU.

This helps to ensure that the central bank is consistent over time. Monetary policy in recent years Has monetary policy been successful? Has it contributed to satisfying the preconditions for a stable krone exchange rate? Before I attempt to answer these questions, I will briefly review the actual conduct of monetary policy and the decision-making basis. The period between December 1992, when the fixed exchange rate regime was formally abandoned, and 1996 was characterised by balanced growth and a stable krone exchange rate. However, in 1996 the economy began to show signs of overheating. Coupled with an increase in oil prices, this contributed to appreciation pressures on the krone. Interest rates were kept at a low level to counter  BIS Review 7/2001  5  appreciation pressures, and fiscal policy was not sufficiently tight to curb pressures in the economy. Developments since the beginning of 1997 show that the exchange rate is no longer suitable as a short-term operational objective of monetary policy. Norges Bank cannot fine-tune the exchange rate. As mentioned, Norges Bank therefore places emphasis on satisfying the fundamental preconditions for stability in the krone exchange rate over time in its conduct of monetary policy. Instability increased further in 1998. In addition to domestic problems of overheating, which translated into strong cost inflation, 1998 was marked by financial crises in Asia, Russia and Brazil, falling commodity prices and general unrest in international financial markets.
Capital, in effect, helps protect firms against “runs,” both traditional “runs” where short-term funding and liquidity are at issue, and more gradual, but just as damaging “runs” on franchise value, where customers turn elsewhere for services because they question the long-term viability of a firm. Consolidation has resulted in larger and more diverse financial institutions at the core of the U.S. financial system. Deregulation has enabled firms to better optimize the scale, geographic spread, and scope of operations. The result has been the creation of some extremely large and diverse financial institutions with high earnings capacity. In 2003, 18 U.S. bank holding companies and six securities firms each earned more than $ billion, with the five largest bank holding companies earning a combined total of nearly $ billion, over 40 percent of the banking industry total. Along with capital, these earnings provide a substantial cushion to absorb losses, significantly moderating the consequences of an adverse event. The wider scope of activities and greater domestic and international geographic diversification of these firms also provide a more stable revenue base. Advances in risk management have also enabled firms to hedge risks more effectively and, in the aggregate, to disperse risk more efficiently across firms in the financial system. Given advances in data collection and risk modeling, banks and other financial firms are able to do better risk-based pricing. Firms now have the capacity to view credit and other key risks from a portfolio perspective rather than in isolation, leading to more efficient risk sharing and better capital allocation.

Measured against the OECD’s top three performers, the euro area is lagging far behind in both product and labour market efficiency, with no euro area country in the top three and with the largest euro area countries often underperforming the euro area average[17]. 2  BIS central bankers’ speeches  In recent years we have seen a number of important reforms, particularly in those countries that carried out economic adjustment programmes. The main focus has been on reforms in the labour market. The nominal and real labour market rigidities that we have traditionally lived with in Europe have resulted in what is being called the “European unemployment disease”: persistently high unemployment rates and a limited ability to adjust to economic shocks. You get a very telling picture if you plot the unemployment rate in the euro area and in the US over several decades – say, from the 1970s. Every time there is a downturn in economic activity, the unemployment rate goes up in both regions. However, whereas the US quickly readjusts when the economy picks up, the euro area takes much longer to do so and once the unemployment rate actually starts falling it almost never seems to return to that previous low. The end result is that euro area unemployment has risen steadily for 40 years. [18] That said, there is solid theoretical and empirical evidence showing that greater flexibility results in much lower equilibrium unemployment rates[19].
Notes: Chart shows the sensitivity of different capital flows to a negative "push" shock. Coefficients are standardised by each component’s share of total flows e.g. the red MBF bar shows how total Capital Flows-at-Risk would respond to a one standard deviation tightening in global financial conditions if all capital flows were accounted for by MBF. Estimates are based on the FSB’s measure of ‘collective investment vehicles with features that make them susceptible to runs’, see FSB Global Monitoring Report on Non-Bank Financial Intermediation 2018. 18 The initial version of the speech mistakenly referred to Real Estate Investment Trusts here, instead of open-ended funds. 17  14  All speeches are available online at www.bankofengland.co.uk/speeches  14  The third aspect of the pipes is the global financial safety net (GFSN). Developments in this regard have arguably further increased Capital Flows-at-Risk. The GFSN has become more fragmented over the past two decades and its core – IMF resources – has shrunk relative to the size of the global financial system (Chart 14). As a result, individual countries have chosen to self-insure at high cost to both themselves and the rest of the world. While the IMF’s nominal resources have more than tripled over the past decade, they still only represent around 1% of global gross external liabilities and have been on a downward trend from 2.5% in 1980. Other multilateral arrangements, such as Regional Financing Arrangements (RFAs) and swap lines, are only partial substitutes.

The last point that I want to make is that I disagree with those economists who speak of the difficulty of anticipating the East Asian crisis, since these countries had assembled all the ingredients of a perfect crisis recipe: •  An appreciated exchange rate;  •  A high and worsening ratio of short-term debt to usable foreign reserves;  •  Untransparent off-balance-sheet items in the banking sector;  •  A widening current account deficit;  •  Steep growth of domestic credits;  •  And a continuous decline, during recent years, in emerging markets’ borrowing spreads without matching improvement in their economic fundamentals. If someone should combine all these elements, it is conceivable that they might succeed in creating a crisis. But the world’s financial centers turned away from the existence of this perfect crisis recipe and turned toward the Turkish economy, for which, ignoring the developments in East Asia, they predicted a crisis during the last couple of years. The Turkish economy does not satisfy the perfect crisis recipe described above. Of course we have high inflation, a high nominal budget deficit, and high short-term domestic debt, but on the other hand Turkey’s exchange rate policy, current account situation, the nature of its short-term external debt, and other fundamentals do not indicate an alarming situation. The East Asian crisis should have greatly improved the ability of economists to predict an episode. I would be glad to see some evidence of this improvement. BIS Review 50/1998
Evidence from the Bank’s Decision Maker Panel survey indicates that drag took 3-4% off business investment last year. That effect persists, though it has not intensified. As the Committee has repeatedly stressed, how the economy evolves will depend on how these expectations change as Brexit progresses. On the one hand, increased caution could drag on demand. On the other, if there is progress towards the new, deep and special partnership the government is seeking, a boom in investment and potentially consumption could be unlocked, boosting output. From a monetary policy perspective, the Bank is ready for Brexit. The MPC is well-prepared for whichever path the economy takes. We have the tools we need. We will be prudent not passive. We will respond to 20  All speeches are available online at www.bankofengland.co.uk/speeches  20  any change in the outlook in these exceptional circumstances to bring inflation sustainably back to target while supporting jobs and activity, consistent with our remit. Our guidance means that those who follow us will be better able to anticipate our actions. It will make those actions more powerful. And it will help households and businesses consume, save, hire and invest with confidence as the UK determines its path forward. Thank you. 21  All speeches are available online at www.bankofengland.co.uk/speeches  21  Appendix Frequently, the economy experiences shocks that drive inflation and output in the same direction. These shocks to aggregate demand can include variations in government consumption, households’ desire to consume, or business’ desire to invest.

However, financial services value-added in 2017 and 2018 has since been revised upwards by the Department of Statistics. The 3-year average growth rate over 2016–2018 is now 5.0%, while the 4-year average growth rate during 2016–2019 is 4.8%, based on the revised numbers. 1. [7] Science, Technology, Engineering, or Mathematics. 1. [8] SingSaver, (July 2020) Analysis of 1,000 responses from Singaporeans and permanent residents aged 18 and above, to understand how COVID-19 will change financial habits and affect personal finance challenges over the next 6 to 12 months. 15 / 15  BIS central bankers' speeches
The euro area as a whole must aim for stronger and more lasting growth. Monetary policy naturally plays a vital role: it ensures the price stability required for growth; this is my first point. However, on its own, it can never be enough. To accelerate growth, the other economic policy levers must be brought into play; I shall come back to this later. Lastly, I will share some thoughts on the new international environment that heightens the urgency of taking action in Europe. ** 1. Our monetary policy is an asset for the euro area. I am perfectly aware that the ECB’s monetary policy is the subject of lively debate in Germany. I would first like to explain the reasons for this policy and what the situation is today. a) Why have we been pursuing this monetary policy? Our European Central Bank, it should be remembered, was constructed on solid foundations shaped according to the model of the Bundesbank and its successes. And I sincerely believe that our present monetary policy is very much in accordance with the German values that I fully share: independence, respect of the Treaties, price stability and a long-term approach. Contrary to what some critics suggest, our monetary policy is not some sort of Latin fantasy. It is decided collectively by the Council of Governors and we take the mission entrusted to us – ensuring price stability – very seriously. This means ensuring that inflation is neither too high nor too low.

Philipp Hildebrand: Principles for sound compensation practices Summary of a speech by Mr Philipp Hildebrand, Vice-Chairman of the Governing Board of the Swiss National Bank, at the Economic Outlook 2009 (Unternehmer NW-Schweiz), Basel, 23 April 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Most financial institutions viewed compensation systems as being largely unrelated to risk management and risk governance prior to the crisis. Short-term profits were rewarded with generous bonuses with little regard to the longer-term risks taken on behalf of the firm to generate those profits. With hindsight, it should therefore be no surprise that these bonuses fueled the excessive risk-taking that has ultimately undermined the global financial system. It is important for the future stability of our financial system that compensation systems be viewed as an integral part of the risk management system in financial firms, and designed and governed with this in mind. The Financial Stability Board (previously the Financial Stability Forum) has drafted a set of sound compensation principles for large financial institutions with exactly this goal in mind. The Principles were endorsed by the G20 leaders at the London summit earlier this month and aim to be widely implemented by the 2009 remuneration round. BIS Review 50/2009  1
José De Gregorio: Chile’s latest Monetary Policy Report Presentation by Mr José De Gregorio, Governor of the Central Bank of Chile, of the Monetary Policy Report before the Honorable Senate of the Republic, Santiago de Chile, 7 September 2011. *  *  *  The Monetary Policy Report of September 2011 can be found at http://www.bcentral.cl. Introduction Mr. President of the Senate, Senator Guido Girardi, Senators: I am grateful for your invitation to the Board of the Central Bank of Chile to present our Monetary Policy Report. As in September of every year, this presentation coincides with the Central Bank Board’s yearly account to the Senate, where we share with you our vision regarding recent macroeconomic and financial developments in Chile, as well as their prospects and implications on monetary policy conduct. At the time of presenting this Report, we are about to complete three years since the outbreak of one of the worst economic and financial crises in modern history, known as the Great Recession. The string of events that followed the collapse of Lehman Brothers drove the world to an unprecedented confidence crisis, with a drop in global output that has no comparison with any other episode over the last eighty years. Chile was able to mitigate the adverse effects of the crisis, and succeeded in quickly recovering its levels of output and employment, in sharp contrast with what happened in developed economies (figure 1).

Also, it is foreseen that the weakening of the developed world will have an impact on emerging economies which, in any case, will continue to outperform their developed counterparts. This projected world growth forecast is lower than consensus, which at the closing of this Report probably does not reflect the full effect of current financial turmoil. Nonetheless, incoming reports by investment banks do carry significant downward corrections for these developed economies, in line with the assumptions that make up our baseline scenario. As I said, concerns about an overheating of the emerging world and its consequences on inflation have subsided. Adjustments already made to the monetary policies of several economies, the weakening of the global economy, and the recent drop in commodity prices are behind this assessment. So, several countries have already suspended their cycles of policy rate increases and, in general, market expectations have adjusted to expect a flattened rate. In the developed economies, it is most likely that monetary policy will hold on to – or possibly even intensify – its current degree of expansiveness for some time. The Federal Reserve has just announced its intention to keep the fed funds rate at a minimum at least through mid-2013 (figure 11). All these facts combined will result in that the external impulse that the Chilean economy will be receiving over the coming quarters will be milder than previously estimated. On one hand, the worsened global performance will have a negative impact on our trading partners’ economies.