samchain/econo-pairs-v1 huggingface dataset:
By the way, let me remind you that the Spanish public debt to GDP ratio at the end of 2010 stood at 60%, well below those of other euro area countries. Allow me to conclude by addressing some of the doubts raised by investors, which it is our duty to try and resolve. The first message I wish to convey is my absolute confidence in the Spanish banking system’s solvency. The measures we have taken in the past for their restructuring are beginning to bear fruit (creation of banks, market orientation, downsizing, etc.) and the recently adopted measures, specified yesterday, along with the pressure we are exerting on our banks to increase their solvency, should raise confidence in our banks and dispel doubts about their present and future situation. It should be stressed that our asset valuation system is very demanding, both in terms of the classification of problem assets and of provisioning and write-downs. Savings banks, with exposure to the construction and real estate developers sector of € billion, have € billion of doubtful loans, in which the borrower is not paying interest or repaying the  BIS central bankers’ speeches  3  principal. As Banco de España requirements stand, banks have, in addition to the foregoing amount, to record as problematic the assets foreclosed in payment of debts. Even more, standard loans under special surveillance owing to weaknesses observed in them are also considered as problematic.

Expectations about house prices, which had started to lose momentum in 2006, changed and prices began to fall, in a much more unfavourable macroeconomic setting and with financial institutions much more cautious about extending credit given the rise in bad debts and provisions, and the tightening of funding conditions. In view of these problems, the Government and the Bank of Spain began to take decisive measures to tackle this “classic” crisis based on credit to the real estate market and to the abrupt change in cycle, as well as to the changes in the markets. Firstly, to address the uncertainty on funding markets, a programme was set up that would allow banks to issue debt with the backing of the State and the ECB started to inject liquidity allowing full allotment. Secondly, the Fund for the Orderly Restructuring of the Banking Sector (FROB) was created in 2009. With the FROB we anticipated the need to equip  BIS central bankers’ speeches  1  ourselves with an instrument to carry out a far-reaching restructuring of the savings bank sector. The scale of the savings bank restructuring process has been huge. Of the 45 previously existing savings banks, only 17 remain. The aims of the process were very clear. First, to take advantage of the concentration processes to restructure assets and correct the excessive fragmentation of this sector. Second, to reduce the excess capacity in the savings bank sector.
My purpose today is to explain how this recession differs from the others I have lived through, why that calls for a wider range of responses than normal, and the difference between the policy objectives in the medium term and the short term. The boom before the bust? What is striking about the run-up to this recession is that we did not see the booms in output, employment and wages that led to past recessions. Past recessions, in good measure, reflected deliberate decisions by policymakers to rein in spending and damp the inflationary pressures that had been building up. The rise in interest rates then led to a correction in the spending behaviour of households and companies as optimism about future income growth in the boom turned to uncertainty and gloom in the bust. Chart 1 highlights what was happening to domestic output in the two years before the last three recessions. The Barber Boom was a case in point, when output rose by 10% over the  BIS Review 5/2009  1  year to 1973 Q1, and then fell by 3% over the following year. You can see a similar pattern before the recessions of the early 80s and early 90s. But in 2006 and early 2007 growth was close to its average over the past 30 years. That is not the whole story of course. When we look at asset markets, a different story emerges.

So as members of the Monetary Policy Committee we see it as more important than ever to make visits such as this so that we can talk to businesses face to face about the conditions they are experiencing on the ground. And every month our Agents in the regions, including the North West, give us a comprehensive report based on a large number of meetings with contacts in all sectors of the economy. 2009 is certain to be a difficult year for the UK and the global economy more generally. In the United Kingdom, we expect the sharpest fall in output for decades while on some measures, retail prices are likely to fall for the first time in almost half a century. We are not alone in our difficulties. Most of our major trading partners are also entering recession. A decade or more of remarkable macroeconomic stability; the Great Stability as economists called it, has come to a shuddering halt. These exceptional developments have led already to exceptional policy measures. Here in the United Kingdom, the government has set in train a fiscal expansion and has stepped in to support the banking system and lending. And earlier this month, we reduced official interest rates to an historic low of 1.5%. Similar measures have been taken overseas.
And notwithstanding my rather jaundiced remarks above about forgotten lessons, some of the risks involved in commercial property are now better understood. This could simply mean that this cycle will repeat history but in a less pronounced way than last time. Perhaps I should at this point recognise the VAT changes announced in the last budget. These have caused a strong reaction from the property industry. They have caused a halt to a number of major deals. I do not know how the matter will be resolved and will not speculate whether the impact will be lasting. More of that no doubt in coming weeks. But are there any other new influences which could bring about a different - and better - outcome than the last cycle? There are at least four other important factors which arguably did not exist in 1989. They may all make the market less volatile in the years ahead. Let me be a bit visionary. 18 The first of these is a low inflationary environment. The political constituency for low inflation is now almost certainly stronger than at any time in living memory. There is a real prospect that a low inflation environment can be sustained into the future. This is a profound change and should help to smooth the path of future economic cycles. This environment is likely to mean slower growth in nominal rents and also less volatile capital values. The emphasis will continue to change from capital gain to running yield.

The pool of such property increases every time that a major user of space moves into new offices and releases its former premises. While some of the better quality secondary property can be refurbished at an economic price and relet, much of this stock may never again be relet for its present use and may not lend itself readily to conversion for alternative uses. This will continue to exert a dampening influence on the market, and imaginative solutions will be needed. The Future 14 So, the market may be improving but it is still not easy. How is the market likely to develop over the next eight years? What will I be saying if you invite me back in the year 2005? 15 As we all know, the property market has, historically, moved in cycles. Some, notably RICS, have done work to develop our understanding of these cycles. The economic cycle itself is clearly one of the driving factors, though it is clear too that property is subject to its own fluctuations and its own step changes. Contributing factors include the strength of tenant demand, the activities of developers and the willingness of lenders to finance investment and development. 16 My story in the future could be similar - perhaps depressingly similar - to my review of the recent past. Many of the ‘ingredients’ that contributed to the last cycle are certainly present now.
It was a time when there was an absence of speculators. It was only in 1997-98 when the ringgit and other regional currencies came under speculative attack. The volume of foreign exchange transactions had become massive, far exceeding volume of trade and the normal financial flows. This resulted in exchange rate volatility during the Asian crisis that occurred wave after wave. Regional currencies continued to plummet during this period. After more than a year of this turmoil and uncertainty in the foreign exchange market, Malaysia implemented selective capital controls and de-internationalised the ringgit. This was instrumental in restoring stability in the market. It acted very much like a circuit breaker. Offshore trading of the ringgit, the major source for financing the speculative attacks, was effectively eliminated. Within a year, all the controls that were imposed were removed. More than 10 years later, the ringgit, however, still remains non-internationalised. An important precondition for the internationalisation is the development of a robust foreign exchange market in our financial system. Financial stability The events surrounding the current financial crisis has brought into sharp focus the role of central banks in financial stability. As these events continue to unfold with great uncertainty on the financial markets and broader economy, allow me to reflect on Bank Negara Malaysia's own role in financial stability. In addition to its functions as the lender of last resort, Bank Negara Malaysia has also had the responsibility for the regulation of banking institutions.

Finally, the Central Bank could not have been successful in achieving our objectives and policies if we did not have the support in our country – from the Government, the financial and business communities, and the people of the country – for their confidence and trust in us during these 50 years. The Bank, going forward, through our policy actions and in discharging our responsibilities, will continue to uphold this trust that has been placed upon us. 6  BIS Review 12/2009
The savings ratio increased in the United States at the same time as domestic demand increased more rapidly in China as a result of a fiscal policy stimulation package. The substantial fall in oil prices also played a role. The question is, however, whether the underlying causes of the imbalances have been corrected. The IMF believes that the imbalances will remain in place in the period ahead (see Figure 2). The oil price has also increased considerably during the last six months, which also indicates that the imbalances will remain. This is because this boosts net exports in oil-exporting countries, which tend to have current account surpluses, but increases costs for oil importers, who tend to have current account deficits. The G20 has pointed to the global imbalances as being an important factor for development in the global economy. One aspect that has been discussed is whether to adjust the nominal exchange rates in order to reduce the imbalances. If China, for example, maintains a fixed exchange rate against the dollar, this will make it possible to adjust the real exchange rate if China has a higher rate of inflation than the United States. However, this entails either a high rate of inflation in China, which the Chinese authorities are not likely to want, or to deflation in the United States, which the US authorities definitely do not want.

It appeared probable that the dollar would depreciate as it was difficult to believe that the United States would be able to maintain its deficit indefinitely, 2 and the real exchange rate normally weakens when a current account deficit needs to be corrected. And the dollar’s status as a reserve currency throughout the world made the entire global economy sensitive to rapid changes in the dollar rate. Although a dollar crisis did not occur, the analysis was reasonable. Substantial and persistent current account surpluses or deficits may be a sign of an underlying weakness or imbalance in the economy. Even though global imbalances have subsequently declined, this is due more to cyclical factors than to structural factors. They have also increased again recently in pace with the recovery of the global economy. The International Monetary Fund (IMF) continues to monitor the development of global imbalances and says that an adjustment of these imbalances is necessary if the recovery is to rest on stable foundations. 3 The association of developed countries and emerging economies that goes under the name G20 has therefore decided to perform thorough analyses when surpluses or deficits become substantial, in order to determine whether the country concerned should take measures. In the risk survey conducted by the Riksbank in May this year, in which participants on the Swedish fixed-income and foreign-exchange markets were asked to assess the risks to the Swedish financial system, global imbalances were seen as the greatest risk.
While the stress testing element was only part of the CCAR review, it was an important input into evaluating banks’ capital planning. The assessment was conducted between November 2010 and March 2011. Once again the largest 19 U.S. domiciled bank holding companies were asked to participate, using a baseline scenario, their own stress scenario, and a supervisor-provided stress scenario (a set of macroeconomic assumptions consistent with an economic downturn). A critical benchmark was whether banks could meet a 5 percent Tier 1 common capital ratio under stress conditions over the next two years, assuming they paid dividends or carried out the stock buybacks as they proposed. Additional capital measures were examined, including the ability to satisfy over time the new Basel III capital ratios and changes in capital required by the Dodd-Frank legislation. Bank holding companies were required to provide information on their capital adequacy processes and capital distribution policies, and supervisors assessed them. Conducting the analysis for all of these institutions simultaneously gave supervisors a good benchmark as to how the financial institutions were performing relative to a stress scenario. In addition to providing a method for evaluating capital assessments, the stress test that was one component of the broader CCAR provided an opportunity to determine how financial institutions had refined their ability to conduct stress tests and incorporated lessons learned from the SCAP. In that vein, these types of capital assessments are likely to be an important tool in understanding the capital planning process in the future.

Bank regulation and bank supervision – not to mention management practices within financial institutions – all need to continue to evolve to ensure that during periods of economic or financial distress, organizations remain well capitalized so their role in credit intermediation is not disrupted. I hope the analysis and observations I have shared today can assist with a process of learning, evolving, and improving that will prevent future disruptions. Thank you. 6  BIS central bankers’ speeches  BIS central bankers’ speeches  7  8  BIS central bankers’ speeches
The rule is robust to variations in government revenues and provides a stable framework for economic developments. The fiscal rule has been adhered to, which in itself makes a considerable contribution to stability. Monetary policy has been assigned a clear responsibility for stabilising the economy. Inflationary pressures are addressed using a different approach than earlier. Monetary policy keeps inflation under control. This may translate into high interest rates and in periods a strong krone. The alternative could have been higher inflation, with a continued contest for economic resources and persistently high wage growth. This would have resulted in a continued deterioration in business sector competitiveness year after year as a result of higher price and cost inflation in Norway than abroad. The experience of the 1970s and 1980s shows that inflation and wage growth do not have a stable anchor under these conditions. Inflation and wage growth would have continued to move up until monetary policy was tightened. Unleashing inflation is not a viable alternative. Why is unemployment rising? High labour costs, a strong krone and global stagnation are leaving a mark on Norway’s internationally exposed sector. Many enterprises will not be able to sustain activity given current market conditions and cost levels. Labour costs are also squeezing margins in some private service industries. More enterprises are competing on international markets. Moreover, even if allocations are growing, public entities have limited capacity for increasing employment because wage expenses have risen so sharply. Chart 11.

So we may feel that at a certain point we need to do something more, or we do not. But we can expect the effect to be relatively limited. Second, I think the framework we have set, results in something very different from what we had before. Having decided that we refinance at fixed rates for unlimited quantities, and with a large corridor between the deposit facility and lending rate means, the lending rate has become the ceiling and the deposit facility rate is the floor and markets tend to move the money market rates in between, with overnight rates at a very low level and the three month rate at a level which can be below the refinancing rate. As a consequence, the rates effectively paid by borrowers are much closer to the situation in the US or the UK than most people would imagine. FT: What does that mean in practice? That the main policy rate need not go any lower, or can’t go any lower? CN: I didn’t say that. FT: Or that the deposit facility rate can’t go any lower? CN: I didn’t say that either. But it is clear that the room for manoeuvre on the deposit facility is limited. What I mean is that if we keep the present framework, we cannot move much. That’s obvious. If we want to move more, we have to change the framework, which could cause inconvenience.
The Commission has set up a working group with EU authorities and industry to address the issues involved and to facilitate the transfer of derivatives contracts denominated in euro or other EU currencies to EU CCPs. From a supervisory perspective, UK CCPs have been recognised as third-country CCPs by the European Securities and Markets Authority (ESMA).3 And two UK CCPs have been recognised as being systemically important for the EU (Tier 2 CCPs). In line with the provisions of the European Market Infrastructure Regulation, this means that they are subject to ESMA’s supervision. This set-up helps to ensure that Tier 2 CCPs comply with EU regulatory standards. During this 18-month period of equivalence, ESMA will assess whether this set-up is sufficient to address risks to EU financial stability emanating from these two systemically important UK CCPs. As part of its responsibility for issuing the euro, the Eurosystem – which comprises the ECB and national central banks of the euro area – will develop its own stance on the matter and will contribute to ESMA’s assessment. At the end of this process, ESMA may recommend that the Commission deny the UK CCPs recognition to provide certain clearing services or activities in the EU if they pose excessive risks to financial stability. If this recommendation were to affect eurodenominated clearing services, the Eurosystem’s agreement would also be required.

20.Let me be clear that this is not technology at any cost. We must fully understand the pros and cons of what these changes will mean to banks’ AML systems and controls. At the same time we cannot outsource this responsibility to technology firms. Some of you will know from our work with a Regtech firm specialising in testing screening systems that we expect banks to understand why a machine makes the recommendations it does. 21.Going forward, if we are going to address the challenges, we need to be ambitious. The HKMA plans to move in the coming months from a one-to-one type engagement in our Chatroom, to a many-to-many type engagement where banks, stored value facility (SVF) operators, technology specialists and the regulator come together to tackle AML pain points. This will initially target one or two challenges, but will aim to build momentum and turn the successes into mainstream AML solutions that contribute to effectiveness and efficiency. 22.But that perhaps is still not enough. New technology comes at the right time not only for the regulatees, but also for regulators. With the advice from technology experts, we will embark upon a study to enhance the timely retrieval and transmission of AML/CFT related information and data from banks and SVF operators in a digitalised and efficient way, as opposed to the old-fashioned way of regulatory returns and surveys.
We can see how trust-based relations between banks and their clients have helped the economy and people during the pandemic. Winding up, I would like to say that the financial sector has generally performed well during the pandemic. Large-scale restructuring, lending expansion, better financial inclusion, and financial institutions’ stability are very important achievements. This proves that we will be capable of addressing any future challenges as well. I hope that, cooperatively, we will be able to find solutions to any challenges that might arise for the financial system in the course of the pandemic and post-pandemic recovery. The financial industry will be developing so as to support households’ welfare and the growth of the national economy. Thank you for attention. 6/7  BIS central bankers' speeches  7/7  BIS central bankers' speeches

Some factors have also been procyclical so that problems in the financial sector have had a negative impact on the real economy and vice versa. In good times, there is almost always a tendency to expand the provision of credit and to dismiss the risks this entails. However, when the downturn comes, the same players tend to run for the exit at the same time, which serves only to make the overall situation worse. Some of the characteristics of the financial regulations, for example the capital adequacy requirements and certain accounting regulations, have reinforced these tendencies towards herd behaviour among the financial players. We have been aware of these problems for a long time, but there have been no effective mechanisms for counteracting them. Nor have the supervisory arrangements adequately reflect the increased internationalisation of the financial sector. In recent decades, the financial markets have become increasingly interlinked and large, complex financial institutions now conduct extensive operations in several countries. At the same time, supervision has mainly been conducted on the basis of national mandates and focused on companies within individual, national jurisdictions. Supervision has thus lacked the oversight required. In the wake of the crisis, a number of initiatives have therefore been taken that aim to create a clearer link between the supervision that focuses on institutions and the more system-oriented supervision of stability, and to sharpen the tools we use to promote stability in general. So what needs to be done?