samchain/econo-pairs-v1 huggingface dataset:
But at the same time, this may be a strength compared with the regulations, simply because it is difficult to “circumvent” an interest rate increase. BIS Review 164/2010  7  Another reason why monetary policy may in some cases be needed as a complement is that there will probably be quite considerable resistance to using regulation to prevent a creditdriven bubble. Banks and other financial market participants may perceive regulation to be a larger intervention than an interest rate increase, and consider it to be aimed only at them. In addition, things often look very good just as a bubble is inflating, so resistance would probably be particularly strong when measures are needed the most. The political and psychological pressure on those pulling on the regulation lever could thus be substantial. Important with a good allocation of responsibility I thereby come to an issue that is just as important as how regulations should be designed; namely, who should pull on the regulation lever and when. Lessons can be learned from monetary policy when it comes to responsibility and mandate. If an authority has a sufficient degree of independence it can more easily withstand external pressure. And if it also has clear and specific objectives, it has greater opportunity to do a good job, while at the same time it is easier for society to evaluate it.

I have already mentioned that there were deficiencies in the regulations and supervision, but these perhaps mainly contributed to the failure to slow down a process that had already begun and was driven by other forces. One factor that some people consider played a role in this is the expansionary monetary policy with very low interest rates conducted by the US central bank, the Federal Reserve, and others during the years before the crisis. 2 Although monetary policy was hardly the main reason for the crisis, it may have contributed to problems building up. A risk-taking channel… Recently, there has been increasing interest in a special channel through which monetary policy may have influenced events – what is known as the “risk-taking channel”. The idea that there is a special risk-taking channel that should be regarded as an independent, previously-ignored part of the transmission mechanism is fairly new. 3 The idea is that low policy rates can in various ways get the banks to take greater risks. When the central bank holds the policy rate low because the outlook for inflation and the economy appears to motivate this, the policy may actually have the undesired and unforeseen effect that risks increase in the banks and in the financial system as a whole. In the long run, this can cause problems. This was what I meant earlier when I said that monetary policy may in some circumstances have unexpected effects.
While the adjustment to interest rates can be larger – up to 75 basis points - if alternative assumptions are made about cost of crises and the sensitivity of crisis risk to monetary policy, the calibrations required to deliver these outcomes are extreme. Svensson (2017) argues that the costs of using interest rates to lean against financial crisis risk are likely to be greater still if one takes into account that doing so will make the economy weaker at the point a crisis strikes and hence might actually worsen its severity. 24  We would like to thank Karam Shergill and Rhiannon Sowerbutts for collecting these data. 34  All speeches are available online at www.bankofengland.co.uk/speeches  34  Aikman et al (2016) analyse empirically the joint non-linear dynamics of credit, financial conditions and monetary policy in the United States. They find that the transmission mechanism of monetary policy to long-term yields is blunted in high credit states. This suggests that attempts to lean against the wind with monetary policy when credit is already elevated may be futile. Filardo and Rungcharoenkitkul (2016), by contrast, find benefits from using monetary policy to ‘lean’ when the evolution of financial imbalances is extremely persistent. But the general consensus is against deploying monetary policy, at least in an activist way, for financial stability purposes given its limited efficacy and potential real-economy costs. One recent paper that addresses issues of CCyB strategy is Aikman, Giese, Kapadia and McLeay (forthcoming).

As regards housing loans, fixed rate loans - which fortunately represent almost 98% of outstanding loans -  Page 3 of 9 are an essential protection for borrowers, and therefore ultimately for the banks as they limit their default risks. And more generally, rest assured that we will never take any prudential decision that could increase the risk of overindebtedness or of non-repayment of housing loans. The average solvency ratio of the six main French banking groups reached 14.9% at end-2022, still a high level, well above regulatory requirementsi. I welcome the publication yesterday of the report by the Observatoire du financement des entreprises ii, which notes that for this very reason, their access to financing has remained favourable despite the crises. French insurance groups also show high solvency ratios, around 250%, thanks to their dynamic activity and financial results. Page 4 of 9  II. ... and of our regulation and supervision model There are two other reasons why the US banking crises did not affect the euro area this time - although we must remain vigilant: our regulation and supervision. As regards regulation, Basel III in its entirety applies to all European banks, but only to 13 banks in the United States.
This suggests banking has undergone, at least arithmetically, a “productivity miracle” over the past few decades. Section 4 explores in greater detail some of the quantitative drivers of high aggregate returns to banking, while Section 5 explores some of banks’ business activities. Risk illusion, rather than a productivity miracle, appears to have driven high returns to finance. The recent history of banking appears to be as much mirage as miracle. Section 6 concludes with some policy implications. 2. Measuring financial sector output  (a)  Historical trends in GVA  The standard way of measuring the contribution of a sector to output in the economy is GVA. This is defined as the value of gross output that a sector or industry produces less the value of intermediate consumption (that is, goods and services used in the process of production). GVA only measures the sector’s direct contribution to the economy. The indirect contribution of finance – for example, on productivity growth through the provision of funds for start-up businesses and new investment projects – may also be important. But looking at historical trends in value added is a useful starting point. Chart 1 plots an index of real GVA of the financial intermediation sector in the UK from the middle of the 19th century, alongside an index of whole-economy output. Both series are in constant prices and indexed to 1975=100.

Many of the key planks of that debate are covered in other chapters in this volume. Some of these reform measures are extensions or elaborations of existing regulatory initiatives – for example, higher buffers of higher quality capital and liquidity. Others propose a reorientation of existing regulatory apparatus – for example, through counter-cyclical adjustments in prudential policy (Bank of England (2009b), Large (2010)). Others still suggest a root-and-branch restructuring of finance – for example, by limiting the size and/or scope of banking (Kay (2009), Kotlikoff (2010)). In evaluating these reform proposals, it is clearly important that the on-going benefits of finance are properly weighed alongside the costs of crisis. Doing so requires an understanding and measurement of the contribution made by the financial sector to economic well-being. This is important both for making sense of the past (during which time the role of finance has grown) and for shaping the future (during which it is possible the role of finance may shrink). While simple in principle, this measurement exercise is far from straightforward in practice. Recent experience makes clear the extent of the problem. In September 2008, the collapse of Lehman Brothers precipitated a chain reaction in financial markets. This brought the financial system, and many of the world’s largest institutions, close to the point of collapse. During the fourth quarter of 2008, equity prices of the major global banks fell by around 50% on average, a loss of market value of around $ billion.
But I don’t think they appreciated, or could reasonably have foreseen, the extent to which it would become absolutely endemic. People around the world now will already have groups working on how to arb Basel III. This is part of freedom; it’s part of capitalism. But it means that the official community needs to be rather more nimble and savvy; knowledgeable about and alert to the byways as well as the highways of our capital markets. That doesn’t mean regulating everything that moves, but it does mean having a capability to adapt our regimes when truly stability-threatening activities move beyond the existing regulatory perimeter. This needs very careful thought. Macroprudential And that brings me to my last heading, which is macroprudential. This means many things. I want to suggest that, most important, it means taking a system-wide perspective to micro regulation; the view that my Bank of England predecessors of 20–25 years ago would have taken. Today there are three elements to it. One, as I just implied, is equipping ourselves with the ability to move the perimeter of microprudential regulation to keep up with the effects of regulatory arbitrage and innovation. The plans that the UK government have in this area would enable the planned new Financial Policy Committee of the Bank of England to make recommendations to government to change the perimeter of financial regulation. The second dimension of a macroprudential regime is maintaining a resilient infrastructure, in the widest possible sense, for our capital markets and banking system to be resilient.

That is a truly terrible choice and so the key thing is to find a new set of measures that can be deployed to give us a tolerable course. That set of measures is what constitutes a resolution regime. It is not about making things perfect. It is about coping. We can all learn from the US’s special resolution regimes in this respect, including the extensions in scope to bankholding companies and non-bank financial firms affected by the Dodd-Frank Act. But there are things being debated in Europe and in the international community that may even supplement the toolbox that exists already in the United States. One of them is the potential ability for the resolution authority to haircut creditors and partially convert debt into equity in what is otherwise a firm with a viable underlying franchise and so potentially a going concern. This would be an adaptation of Chapter 11 regime in the US rather than the standard special resolution toolkit for banks. This set of issues is, at its very core, a cross-border endeavour. We will not get far on this front without much more intimate and trusting co-operation between home country supervisors and resolution authorities and host country authorities. We should not exaggerate the extent to which this has worked well in the past. Supervisors even admit that behind closed doors.
It is now clear that the financial sector had not been fully able to manage the risks and that supervision of the financial sector needed to be improved. A more moot point is whether central bank monetary policy contributed to the build-up of financial imbalances.2 Had central banks been so focused on stabilising inflation that they ignored the financial imbalances that were building up? Had the Great Moderation given rise to overconfidence in the ability of monetary policy to steer the economy? I believe that both these questions will become increasingly important in the period ahead. I also believe that they need require further analysis, although one lesson to be learned in any event is that financial stability cannot be taken for granted. We can also establish that the recovery after the crisis has been slower than many expected. Output per capita in Sweden and in several other countries is only between 1 and 5 per cent higher than before the break-out of the financial crisis (see Figure 1(a)). Another example is labour productivity. In Sweden, for example, labour productivity is around 5 per cent higher than in 2007, which is a slow rate of increase in a historical perspective (see Figure 1(b)). Once a financial crisis has broken out, it can hence take a very long time for the economy to recover. 2 See also Billi and Vredin (2014) and Rajan (2005). 4 [23]  Figure 1.

At first sight it might appear that banks and other financial institutions, as service companies, have less responsibility for environmental protection than other companies, notably those whose industrial processes have a direct impact on the environment. However, this would be to ignore the central role in the economy that banks have as financial intermediaries. While they may not be polluters themselves, they will probably have a banking relationship with some companies that are polluters or could be in the future. This creates a number of risks for the banks, and raises the question of how these risks should be identified, measured, monitored and controlled. This is primarily a matter for banks’ management to deal with, and I hope that today’s conference will help them to do so. But it is also an issue for banking regulators, particularly with the increased focus on risk-based supervision. In the case of the HKMA, this is a process whereby we try to assess the extent to which banks are exposed to various types of risk and the quality of the systems used for managing these risks. For this purpose, we have identified eight different types of risk: credit, market, interest rate, liquidity, operational, legal, reputation and strategic. Environmental risk straddles a number of these risks. In particular, it is a subset of credit, legal and reputation risk: •  Credit risk can arise indirectly where banks are lending to customers whose businesses are adversely affected by the costs of cleaning up pollution or by changes in environmental regulations.
In the case of services, European Commission studies suggest that full implementation of the Services Directive would deliver significant productivity gains and growth potential. Efficiency gains may also be achieved through the creation of a single energy market. Regarding the free movement of persons, we should be aware of the risk of the spread of an uncoordinated response that may ultimately fragment the Schengen area. The introduction of reforms and deepening of the single market are clearly crucial to achieve the structural convergence needed to improve the functioning of the euro area and make further progress towards a more robust monetary union. Our aim is to achieve sustainable activity and a recovery in employment, while maintaining the essential bases of the welfare state which is naturally one of the pillars of the construction of Europe. Clearly the result of the referendum held on 23 June in the United Kingdom is a major setback along that road, with consequences for the medium and long term that are still difficult to gauge but which, in any event, obliges all of us, economic agents, citizens and governments to reflect on the future of the European Union and its governance. In light of the uncertainties unfolding in this new scenario, it is now more important than ever to achieve sufficient and sustainable economic growth that will boost income and employment. The message reiterated by the ECB over the last two years at least is that monetary policy cannot be the only economic policy instrument.

At the same time, the role of the financial services sector in the recent global economic meltdown has also raised questions on the issue of the quality of the leadership and workforce and for the need to place greater focus on developing ethical and responsible leaders who will be able to lead a sustainable industry over the medium and longer term. The economic costs of a failure to arrest talent shortages are strategically significant and include low productivity, the slow pace of innovation and lost opportunities. Building a strong talent pipeline has therefore become an economic imperative as human capital rivals financial capital as the critical economic engine of the future. This requires new and innovative ways of thinking about talent development, programs, processes and competencies. The human capital challenge has therefore to be approached with a different set of solutions. Giving recognition to its importance, in the United States, the accounting rules were adjusted to allow organisations to treat a wider range of talent development costs in the same manner as long-term investments in equipment, manufacturing plants and other facilities. Financial institutions today are also forming stronger relationships with business schools to increase the relevance of their curriculum. The World Economic Forum, through its recent work on skills and talent mobility, has fostered a concerted, multi-stakeholder, cooperation and dialogue among policy-makers, relevant international institutions, governments and businesses to develop interdisciplinary solutions to address the talent shortage.
François Villeroy de Galhau: France and Europe - economic developments, reforms and attractiveness Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Paris Europlace International Financial Forum, New York City, 18 April 2018. * * * Accompanying slides of this speech. Ladies and gentlemen, Let me welcome this traditional gathering – Paris Europlace in New York – with a less traditional timing: one year after the French elections. And indeed much happened in these 12 months. In my remarks today, I would like to elaborate on what I call “the French momentum” and more generally the “euro area momentum”. We have a unique opportunity to implement crucial reforms both in France and in Europe that we must definitely seize. So I would like to share with you some thoughts on (i) our cyclical favourable environment (ii) hence, our structural acceleration, and (iii) Paris’ attractiveness, including in the post-Brexit world we must prepare. *** 1.Our cyclical opportunity and the present expansion phase  [Slide 2] The euro area economy is experiencing a strong and broad-based expansion: we have now seen 19 consecutive quarters of positive growth. In 2017, real GDP growth peaked at 2.5% and short-term economic indicators all point to a continued economic upswing. According to the latest ECB projections, real GDP is expected to expand at 2.4% in 2018, above potential. The breadth of this steady economic growth is noteworthy: dispersion across countries and sectors is at its lowest level for two decades.

Combining more reforms in France and more fiscal stimulus in Germany, as will happen, is welcome but not sufficient: we need a stronger Economic Union in the euro area to avoid overburdening monetary policy by the next recession. And second, that the United States and the G20 are clear-sighted enough to address their economic challenges through multilateral answers, and not unilateral ones: here too, France is a reliable partner. 4/4  BIS central bankers' speeches
This second risk is one that I would consider small if it were clear that the economy was on typical upswing of the sort of cycle we used to think normal. But I do not see many of the signs that are usual in a normal upswing. Typical features of the early stage of strong cyclical upswing would be rapid growth in lending and in the money supply, signs of emerging shortages in capacity across several sectors, wage pressures moving up, and indicators of household and business confidence moving steadily higher. Neither the aggregate statistics on the state of the economy, nor surveys, nor the discussions that I have had with businesses across the UK, are consistent with this. Consider what has happened to wages in the UK – which for many firms are the most significant element of costs and are an indicator of underlying, domestically generated inflation pressures. Over the whole period from the mid 1990s to the onset of the financial crises UK-wide aggregate wage settlements fluctuated in a narrow band around 3.5%. Those settlements were consistent with inflation outcomes that stayed very close to the target set for the Bank of England. Whole-economy annual wage settlements have now fallen to around 1.5% – well below both the current rate of inflation and below the inflation rate thought likely over the next year (see Chart 16). So these are not normal times, which is why there is a risk that monetary policy is normalised too quickly.

Gent Sejko: Bank of Albania’s engagement in financial education Address by Mr Gent Sejko, Governor of the Bank of Albania, at the opening ceremony of the Money Week 12-18 March 2018, Tirana, 12 March 2018. * * * Dear Mr Pedrazzi, Dear students, teachers and friends of the Global Week, Like in previous years, I have the pleasure to welcome you today to our central building, and thank you for your participation in the Money Week 2018. This is a special year as it marks a decade of Bank of Albania’s engagement in financial education, which meaningfully started with a Memorandum of Cooperation signed with the Ministry of Education. Over these years, financial education and financial inclusion have increasingly held a significant place in our work, in designing and implementing numerous educational projects. They are dedicated to different age groups, and consist of a variety of initiatives ranging from training and brochures to the high school elective module “Personal Finance in Your Hands”, the educational package for the elementary schools and the Albanian Money app. Moreover, the Museum of the Bank of Albania, our utmost effort in this regard, offers/provides a multifunctional space, where visitors may not only learn more about the monetary history in Albania and the central bank, but also deepen their financial literacy and expand their financial awareness. As a result of all these valuable experiences, we have been able to participate with dignity in the Money Week, which, in 2018, is celebrated in more than 135 countries.