samchain/econo-pairs-v1 huggingface dataset:
In one direction lies the Japanese experience, and in the other direction that of emerging East Asia. The authorities can either choose between swiftly auditing and repairing the banking sector, which will help to restore credit flows, or they can allow forbearance, which will harm the long-term prospects for our economy. I do not mean to downplay the significant restructuring and recapitalisation that has already taken place in Europe. Since the onset of the global financial crisis, euro area banks have raised around € billion of fresh capital and a further € billion has been injected by governments, equivalent in total to more than 5% of euro area GDP. Today, the median Core Tier 1 capital ratio of the largest euro area banks stands close to 12%. But there is some way to go. To ensure that we take the right road, I see three responses as key. The first is to carry out a comprehensive clean-up of the banking system so that the price mechanism is no longer obscured by uncertainty about asset valuation and bank funding models, and banks can free up balance sheet capacity to extend new loans. The ECB will take up its supervisory responsibilities in about a year from now, and as part of this we will conduct a comprehensive assessment of 128 significant credit institutions covering 85% of euro area bank assets.

Open trade policies in the crisis helped Asian economies to benefit from the upswing in global trade and growth towards the turn of the millennium (see Chart 4), which in turn supported the post-crisis recovery. However, while there may be lessons to learn, what are the important differences between emerging Asia of the 1990s and the euro area today? Emerging Asian economies had greater policy leeway than euro area countries in dealing with their crises, in that they had flexible exchange rate regimes. Some might argue that this makes it hard to say which part of the Asian experience is relevant for Europe. But I would have a different interpretation: a lack of nominal exchange rate flexibility does not preclude real exchange rate adjustment. Sharing a currency entails a fundamental trade-off. It brings considerable microeconomic benefits but it creates responsibilities for participating countries. They should run prudent policies to make asymmetric shocks less frequent, ensure that relative prices can adjust if such a shock nevertheless occurs, and be prepared to insure each other against extreme outcomes when the former mechanisms are not enough. The conditions were unfortunately not met in the euro area. National policies were run on the misguided assumption that countries, companies and households could borrow forever.
With that, expanding SMEs, for example, could gain easier access to risk capital and incur lower financing costs, in the same way that a more evolved and integrated market for corporate bonds has led to a lower cost of capital for large companies. Consumers, too, would benefit from lower borrowing costs and access to a broader range of financial services. Moreover, both companies and households would have better opportunities to diversify risk. Better use of scale economies should also mean less expensive and more secure ways to pay for goods and services. So, with all these potential efficiency gains, it is clear that further integration of the markets for financial services is vitally important, if we are to succeed with the Lisbon agenda and improve growth in Europe. And this is also the prime reason for the Financial Services Action Plan, which was launched a few years ago. However, at the same time as the financial system is important for growth in the real economy, it is also inherently unstable. In particular, banks could be prone to bank runs due to the liquidity imbalance between their assets and their liabilities. This inherent instability is an important reason for the existence of financial regulation, supervision and macro-prudential oversight of financial firms in the first place. The costs to society from a bank failure could be enormous due to potential contagion to other financial companies, thus posing a threat to the financial system as a whole.

A basic challenge for the authorities dealing with cross-border banks is how to find an acceptable formula for sharing the burden and the costs of a crisis. Goodhart and Schoenmaker have in their paper suggested a number of keys that could be explored to create such a formula, for example the relative size of GDP, the ECB capital ratio, and the relative amount of bank assets in the country. As pointed out by Goodhart and Schoenmaker, the first question to be asked is whether one would want a general solution where all countries contribute according to some fixed key, or more specific burden sharing arrangements, where only the directly involved countries participate according to a more flexible key, presumably taking into account the geographic spread of the bank’s business. To achieve the latter, it would be necessary to find some commonly agreed criteria for assessing a bank’s systemic relevance to the financial system of a country. Merely using market shares as a criterion will probably not be adequate as other aspects, such as the bank’s relevance to the payment system, clearing and settlement, involvement in inter-bank securities markets and so on would also be important in this respect. At the same time, in a constantly changing banking landscape, it would be difficult to find criteria that are so clear-cut that assessments will not be “up for negotiation” in a sharp crisis scenario.
Between 2012 and 2022, the share of households’ bank debt with an interest rate fixation period of up to one year fell from 35% to 25%, while for non-financial firms the proportion of bank debt either maturing within a while a year or with an interest rate fixation period of up to one year declined from 70% to 59%.18 A second factor could be related to a slower pass-through of market rates to retail deposit rates than in previous episodes, which could weaken the standard intertemporal channel through which rising interest rates discourage savers from spending.19 This slower pass-through could come from the fact that, during the period with negative rates, the 18  These results, however, mask a significant degree of heterogeneity across countries: the share of household debt with interest rates that reset within a year stands at 63% in Spain and 59% in Italy, but just 6% in France and Germany. In the case of firms, the share of bank debt either maturing or with interest rates that reset within a year stands at 93% in Italy, 70% in Spain, 48% in France and 41% in Germany. 19  It should be noted, however, that a slower pass-through to deposit rates may also have dampening effects on household spending, by slowing down the increase in savers’ financial income. 7  remuneration of retail deposits was above market interest rates, as banks were unwilling to reduce it below zero.

10.04.2023  Latest monetary policy developments in the euro area The Brookings Institution The Hutchins Center on Fiscal and Monetary Policy Washington, DC. Pablo Hernández de Cos Governor  Good morning, it is a pleasure to visit the Hutchins Center on Fiscal and Monetary Policy and share with you my reflections on euro area monetary policy at a still very challenging time for central banks globally. I will start by briefly describing the decisions that we adopted at our European Central Bank (ECB) Governing Council meeting in March. Then, I will lay out a number of factors that will determine our future decisions and will require close monitoring going forward. Our March meeting took place in the context of the financial tensions related to the banking sector in the US and in Switzerland. These tensions increased investor risk aversion and financial market volatility and led to a global drop in bank share prices. While the European banking sector is resilient, with strong capital and liquidity positions, the main message from our meeting was that we are closely monitoring these financial tensions and we stand ready to respond as and when necessary to maintain price and financial stability in the euro area.
This is because the tendency to invest more in international markets – as reflected in the surge in crossborder portfolio flows – has been accompanied by the tendency of households to shift part of their savings towards riskier domestic assets, as the sharp rise in countries’ domestic market capitalisation reveals. What can we say about the future? We should expect that home bias will continue to decline, most likely at a slow pace, because investors need to perceive that diversifying their global portfolio more and more on a global scale will reduce risk; for that they need to become more familiar with the international environment. 7  See for example French and Poterba (1991), Coval and Moskowitz (1999) and Huberman (2001). 8  See Solnik (1974). 9  De Santis and Gérard (2006) provide the methodology here adopted to compute home bias measures. 4  BIS Review 43/2006  Impact of EMU on portfolio reallocation and financial integration Did EMU play a role in the reallocation of capital worldwide and on financial integration? To answer this question, we need to remind us what a monetary union implies. The elimination of the exchange rate risk is the first obvious implication, which is also a feature of other fixed exchange rate regimes. But the fundamental difference is that – when EMU was established – Member States committed to irrevocable conversion rates of their currencies.

The third discussion forum I would like to mention is the reference group for the payment system called together by the Riksbank and consisting of representatives from VPC AB, Bankgirocentralen, Stockholm Stock Exchange, the major banks and the Swedish Bankers’ Association. Part of the work in these working groups has entailed charting the flows and the infrastructure of the payment system. The charting process began as an internal project at the Riksbank, with a general review of the payment system’s basic conditions, agents and services. This has since functioned as a basis for discussion and as reference material for other working groups to make a more in-depth survey of some representative payment services. One example is the flow chart of the Swedish Social Insurance Administration's pension payments that I have spoken of today. Other payments that have been charted are credit transfers and payments for securities. The general conclusion reached by most participants in these discussions is that each organisation has a responsibility for supplying its services in accordance with the agreements it has with its customers. This responsibility includes solving crises internally and cooperating with those the organisation is dependent on to be able to supply their services. The discussions have also increased awareness that everyone in the chain must have a reasonable level of business continuity and crisis recovery planning and that cooperation may be necessary to safeguard common interests. It has not yet been decided how these discussions will continue.
13 CFRF members include banks, insurers, asset managers, and other organisations with a strong interest. The working groups include industry groups to ensure a wide range of views is reflected. https://www.bankofengland.co.uk/climate-change/climate-financial-risk-forum. 5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  5. Embed assessment of climate risks into financial stability analysis: where the FSB is taking forward work, drawing on the advances made by its members as well as the NGFS. 14 Return: helping firms and investors identify the opportunities in the transition to net zero. The transition to net zero will affect every sector of our economies, and all companies that are transitioning to net zero should be encouraged. In parallel, with people increasingly demanding climate action, asset owners and managers will need to disclose whether their clients’ money is being invested in line with their values—a point Richard Curtis will make much more eloquently and forcefully later this morning. Thus far, the approaches to doing so have been inadequate. ESG metrics—while worthy—are dominated by the S and the G. Carbon footprints are not forward-looking. And the impact of shareholder engagement is hard to measure. Moreover, a whole economy transition isn’t about funding only deep green activities or blacklisting dark brown ones. We need fifty shades of green to catalyse and support all companies towards net zero and be able to assess collectively whether we’re “Paris aligned”.

The Road to Glasgow Speech given by Mark Carney Governor of the Bank of England, Finance Adviser to the Prime Minister for COP26  Guildhall 27 February 2020  I would like to thank Jennifer Nemeth for her assistance in drafting these remarks and Jennifer Bell, Sarah Breeden, Alice Carr, Iren Levina, Sini Matikainen and Harriet O’Brien for their input. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  Introduction Sir David Attenborough’s prophetic introduction has exposed the scale of the challenges and hinted at the enormous opportunities before us. And the Secretary of State has just described the prospect of a lasting COP 26 legacy and the opportunity for finance to be the force for good we know it can be. Now is the time to answer these calls to action. Private finance will have a critical role to play in a successful transition to a net zero carbon economy. With the UK COP26 Presidency, in partnership with Italy, the world is watching. Today is all about action. The actions the private financial sector can take to support a whole economy transition. The actions that regulators, governments and countries will take to catalyse your efforts. The actions that our fellow citizens are demanding, and that future generations deserve. And you have already begun. Private finance is now increasingly focused on the opportunities and risks in the transition.
For example, the labour participation rate is still low at 58% compared with an EU average of 70%; and the Maltese will have worked seven fewer days this year than the Dutch, who work longest, and three days fewer than the EU average, despite the abolition of the practice of compensation for a holiday that falls on the weekend. Since independence, moreover, successive governments have bequeathed a legacy of welfare schemes and free public services that have not only distorted incentives and encouraged waste and abuse, but are also largely unsustainable. It is no wonder, therefore, that the Government absorbs almost half of the GDP, the tenth highest percentage in the EU. The concept of value for money, moreover, does not always prevail in public sector procurement 1 . Let me mention just two examples of resource misallocation. The first is the absence of fees for government-supplied health care. One can, for example, obtain expensive medicines or have a heart by-pass operation for free, regardless of one’s capacity to pay. Not surprisingly, the budgetary allocation for medicines and surgical materials alone is forecast to increase by 13% next year to Lm21.5 million. The sustainability of the public health system is imperiled by the very manner in which it is financed. Sooner or later, the ability to provide free services to those who truly deserve them will itself come under threat.

What the typical student expects from higher education in terms of quality will increase once he or she is contributing to its financing, and higher expectations are known to be one of the drivers of an improvement in standards. Anyone who perceives something sinister in these proposals might look up a recent study by economist Andre Sapir. Using a fairly well-established typology, Sapir grouped the EU15 into four main social models, the Continentals, Nordics, Mediterraneans and the Anglo-Saxons, and then estimated the efficiency and equity of each. He shows that there does not need to be a trade-off between efficiency and equity. Just as importantly, however, he underlines that efficiency is always necessary for sustainability 3 . How do other countries approach this challenge? The experience of Singapore, which is twice as well off as Malta on a per capita GDP basis, is instructive. There, undergraduate education is heavily subsidized by the government, but the remaining cost is borne by the student. The student’s annual contribution ranges from the equivalent of Lm1,300 for an engineering degree to Lm3,800 for a medical degree. There are, however, means for the student to finance this co-payment through borrowing from the Central Provident Fund. This is a social security savings plan funded by contributions from employers and employees, and which go into three accounts. Let me mention two of them. One is the Ordinary Account, which can be drawn upon to pay for the family’s educational expenses, or to buy a house.
4  BIS Review 68/2002  Table 3 Real GDP growth in the UK Mean  St. dev  1956-1959  2.42  1.22  1960-1969  3.15  0.92  1970-1979  2.12  1.42  1980-1992  1.86  0.84  1993-2002  2.76  0.36  1956-2002  2.42  0.98  Note: Mean GDP growth is the total increase in real quarterly GDP over the period indicated, expressed as a four-quarter growth rate. Standard deviation is calculated on quarterly growth rates (not annualised) over the period indicated. Data up to 2002 Q2. Source: Bank of England calculations based on ONS data. It is, of course, difficult to identify the effect of changes in the monetary policy regime on the path of total output. One approach is to consider long runs of data which make it easier to identify structural breaks in the behaviour of output. Luca Benati of the Bank of England has been investigating the statistical properties of inflation over long periods for a number of countries. He finds that changes in the behaviour of inflation appear broadly to coincide with changes in the monetary policy regime. Some tentative evidence that this general conclusion applies to the UK can be found in the behaviour of ten-year forward interest rates on UK government bonds. At this horizon, high and variable interest rates are signs of high expected inflation and a large inflation risk premium.

The objective is to equip market participants with better information, let them take responsibility for making their own decisions and to judge the quality of the corporate governance of companies. But a disclosure-based approach can only work well if it is backed up by a robust enforcement regime. This is key to maintaining the confidence of market participants in the disclosure-based regime. In recent years, our regulatory authorities have acted decisively in the face of breaches by market participants, such as in the cases of ACCS, Citiraya and China Aviation Oil. Equally important for a disclosure-based regime is the raising of the bar on corporate governance standards themselves. Singapore’s approach here is a flexible one, recognising the need to cater to a range of companies of different sizes and resources. It comprises a balance of mandatory rules, captured in our legislation and listing rules, and best practice recommendations in the form of the Code of Corporate Governance. Listed companies are required to either adopt the best practice recommendations or to disclose instances where they have not done so and provide explanations for these – in other words companies must “comply or explain”. We will keep both our legislation and best practice codes up to date through regular refinement, so that they stay relevant to a changing environment. We will also keep close watch on developments internationally, to see if they might be relevant to the Singapore environment.
If you look it up in the Report you will see that according to our estimate only a very small amount of excess supply – ¼% of GDP – remained in the economy. But we couldn’t be certain of this. Even in the most benign interpretation the economy had gone through a temporary soft patch. The majority of indicators were pointing in one direction. And it felt like there was at least a risk that, perhaps reflecting the unusual position of the UK, something more material was going on – perhaps one of the risks I highlighted earlier was crystallising. That was why I, along with the majority of the Committee, decided to vote again to leave Bank Rate unchanged. How do I see the economy evolving from here? It is still early days. We are still only two thirds of the way through Q2, less far through the Q2 data cycle, and only a month has passed since our last MPC meeting. Even so, the data we have had so far suggests our interpretation of the slowdown in Q1 as temporary looks to be being borne out. Consumer confidence and consumer credit both picked up in the latest data, as did retail sales and several business surveys. That included the latest services PMI output balance, representing 80% of the economy. So far at least our May judgement looks on track. Looking ahead, my central expectation for the economy is in line with the MPC’s best collective judgement as expressed in our inflation report forecasts.

What’s going on? Speech given by Dave Ramsden, Deputy Governor for Markets and Banking, Bank of England  Barclays Inflation Conference, London 7 June 2018  I am grateful to William Abel, Harvey Daniell, Bianca Ginelli Nardi, Raf Kinston, Simon Kirby, Elliot Luciani-Kane, Rebecca Maule, Sanjay Odedra, Tom Smith, Pawel Smietanka and Brad Speigner for their assistance in preparing this speech, and Clare Macallan, Michael Saunders and other Bank staff for their helpful comments and suggestions. 1  All speeches are available online at www.bankofengland.co.uk/speeches  An unusual position UK GDP growth has slowed following the Brexit referendum, and it slowed even more in the first quarter of this year. In the MPC’s May Inflation Report we are forecasting that it will remain subdued over the forecast period. If our forecast materialises, annual growth will have been between 1¼ and 2% for five consecutive years from 2016 to 2020. To give some context, annual average GDP growth has been in this range in only eight of the 50 years before that period, and three of those were since the financial crisis. It’s been said before but it bears repeating: the UK economy is in an unusual position. Over the past few years, meanwhile, unemployment has fallen from a high of 8.5% to a forty year low of just 4.2%. Employment has similarly picked up to record highs.