samchain/econo-pairs-v1 huggingface dataset:
But starting from this elevated level, the risk that the FPC is concerned about is that with limited housing supply, the demand for housing in the UK continues to push prices up; that lenders are ever more willing to finance high loan-to-income mortgages as house prices rise, and that as a result household indebtedness climbs sharply, making the economy and financial system more vulnerable. This risk is greater at a time of exceptionally low interest rates which may well mask the likely true cost of a mortgage over time. So at its recent meeting the Financial Policy Committee agreed two measures. First, that when lenders are assessing applications for mortgages they test whether the mortgage would be affordable if interest rates were to be 3% higher. And second, that no more than 15% of a lender’s flow of new mortgages should be more than four-and-a-half times the borrower’s income. These measures do not bite now on the market as a whole. Most lenders are already testing whether borrowers could afford mortgages if interest rates were to rise by around 3%. The FPC’s first recommendation is intended to stop that from slipping. And though the proportion of new mortgages worth more than four and a half times the borrower’s income has been increasing sharply, it is currently around 10%, below the 15% limit the FPC has set in its second recommendation. These measures should be thought of as insurance.

Likewise, bringing the safety car in when the danger is passed will also have an impact. These can be difficult judgments to make. They need to be coordinated with the Monetary Policy Committee so that the latter can take them into account in steering demand in the economy as a whole. But the focus of the FPC is financial stability risk: ensuring the system is robust to stress and taking steps to make periods of stress less likely and less severe. That is its comparative advantage. I want to finish by setting out two recent examples of how the Committee approaches this task: first, the stress test of the major UK banks which is currently in train, and second, the action the FPC announced last week on the housing market. In April, the Bank of England launched a stress test of the 8 major UK lenders, as part of an EU wide exercise. Stress testing is one of the tools developed in the aftermath of the financial crisis to test the resilience of the financial system. In essence, a stress test sets out a so called “adverse scenario” in which the economy gets into trouble and financial risks materialize. Together with the banks, we can then look to see how they would cope with a scenario like this. Of course, supervisors in the UK have regularly stress-tested individual banks. But this is the first time that we will test all the major lenders at the same time.
It will also be easier to evaluate monetary policy. The debate has not been slow in coming. Analyses and discussions on monetary policy are now being conducted outside of the Riksbank in a way that would not have been possible if we had not presented our own interest rate path. It is not, as before, primarily the current interest rate decision that is discussed, but more a question of the monetary policy fluctuations throughout the entire forecast period. The fact that the interest rate forecast may later be changed is a different, and quite natural, matter. Withholding information on how we view the future development of the interest rate merely because this view may need to be revised would make us a less open bank. Figure 1. Is the market always right? Repo rate expectations according to implied forward rates Per cent 7.5  7.5  7.0  7.0  6.5  6.5  6.0  6.0  5.5  5.5  5.0  5.0  4.5  4.5  4.0  4.0  3.5  3.5  3.0  3.0  2.5  2.5  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0  0.0 99  00  01  02  03  04  05  06  07  08  09  10  11  12  Source: The Riksbank  4  BIS Review 62/2007

Mario Draghi: Short address on the occasion of the launch of the Europa series € banknote Speech by Mr Mario Draghi, President of the European Central Bank, at the launch of the Europa series € banknote, Bratislava, 2 May 2013. *  *  *  I mentioned this at the end of today’s press conference, but let me say again that I’m very pleased to be here today to see the launch of the new 5 euro, the first banknote of the Europa series. The new banknote will join 15 billion euro notes already in circulation. They are the most visible and tangible symbol of European integration, used from one end of the continent to the other. With the Europa series, we are giving a face to our currency. A portrait of Europa, a figure from Greek mythology, has been incorporated into some of the security features of the new series. After centuries of division, the European Union was awarded the Nobel Peace Prize last year for its contribution to “the advancement of peace and reconciliation, democracy and human rights in Europe”. We all know that Europe is experiencing some challenging times. Governments and citizens are making extraordinary efforts to put their economies on a sounder footing and to build a more stable future for the European Union. In times like these, it’s important to remember what the Union and the euro have achieved and what they mean in the longer term, especially for young people.
To some degree, this is perhaps what has happened to value-at-risk based techniques, which have been massively adopted by the financial industry. Because they use more or less similar parameters and have the same features – for example, they took inadequate account of market liquidity at the time of the 1998 crisis –, such tools tend to give converging signals to those that use them. They thus encourage the herd behaviour that I discussed previously. -  Of course, the fact that some market participants are more sophisticated than the average is a guarantee that standardisation will remain limited, since they will develop techniques that are little used by others. -  However, supervisors are helping to spread the idea that financial institutions should round out their current range of risk management tools to include extensive use of stress testing. This technique offers a better reflection of the varying situations of institutions and of the diverse perceptions that institutions have of exceptional events. The application of stress testing techniques and their results are thus inherently more diversified than those resulting from methods based on the value-at-risk approach. These are only examples of options to help improve the functioning of markets. Indisputable progress has already been made: the generalisation of concepts of appropriate transparency since the Asian crisis and the comprehensive use of stress testing are two significant examples. However, I would like to stress one point.

So when one emerging economy encounters difficulties, all neighbouring countries, or countries that share common characteristics, are treated in the same way – regardless of their actual economic and financial situation. The same applies to businesses operating in the same economic sector. Transparency has substantially increased since the Asian crisis thanks to a solid global consensus – let us continue and reinforce these efforts-  BIS Review 49/2001  5  2.2.2  Take into account the medium and long-term perspective of some market participants:  -  Some investors, such as pension funds and insurance companies, have to invest funds in order to enable their customers to build up wealth over the medium and long term, notably in preparation for retirement. Consequently, this type of investor are supposed to behave differently from traders and short-term investors, who are working on a very different time horizon. But at times it seems that they are all pushed to behave in much the same way, on the basis of an overwhelmingly dominant very short-term horizon. -  To preserve, and even restore, their specific investment approach, these particular investors might be more shielded from excessive short-term pressures. This objective raises considerable difficulties, because it touches on the way in which the performances of medium and long-term funds (including pension funds) and life insurance companies are assessed. 2.2.3  Diversify the risk management tools of financial institutions:  -  As I mentioned earlier, even the best techniques can have adverse effects.
However, the fact that, even before the pandemic, Spanish public finances were characterised by a large structural 30  deficit indicates that, in normal cyclical circumstances, it is necessary to choose between, on one hand, maintaining existing spending programmes at the cost of an increase in the tax burden or, on the other, reducing spending to levels consistent with the level of revenues that the Spanish tax system is capable of raising in its current configuration under neutral cyclical circumstances. The pandemic has meant that this revenue sufficiency principle has become more demanding. To reduce the high level of debt stemming from the health crisis will require, having decided upon the level of spending, a level of taxes over the coming years that produces primary surpluses, i.e. a volume of revenue that exceeds spending. However, this sufficiency principle is not the only consideration when designing tax reforms. The latter should daw on two further principles. First, the configuration of the combination of taxes that make up the tax system must be growth friendly. And the second of these two further principles that should inform the design of the tax system is fairness. Putting this principle into practice, which will depend on what you should decide in your capacity as representatives of the popular will, is by no means a trivial matter. Combining these two principles yields prescriptions for the tax basket.

In March 2010, the Financial Action Task Force (or FATF) issued a report on Money Laundering Vulnerabilities of Free Trade Zones, indicating the rising threats of trade based money laundering. Apart from this report and the periodical typologies reports, the FATF has issued a number of reports relating to specific laundering methods; such as through securities, football and gaming sectors in 2009; vulnerabilities of internet payment system and commercial websites in 2008; and the real estate sector, VAT Carousel Fraud, and the misuse of corporate vehicles, such as trust and company service providers in the previous years. For Malaysia, consistent with the global trend, the financial system continues to be one of the preferred modes of channelling proceeds of crime. In recent years, it is observed that there is a combination of three common methods. The first is the increasing use of repository accounts whereby immediate withdrawals are made once deposits have been received. The other two methods consist of fast movement of money across borders and involvement of third parties in laundering activities. While this is not peculiar to Malaysia, financial institutions are advised to ensure strong controls in place to deter and detect these activities. An example of the modus operandi on the above involves the smuggling of dirty monies into Malaysia by the agents of a criminal ring. The agents will subsequently deposit cash into the accounts of various entities and individuals in the few bank branches operating at the border towns.
Bilateral trade balances that are not in equilibrium are not a problem per se, and are instead much more an expression of the respective parties focusing on their own strengths. A country’s deficit with one trading partner can be financed through its surplus with another. That said, I do not want to paint too rosy a picture of the current trading system. This brings me to the second facet of the concept of ‘fairness’. The accusation that not all countries play by the rules of global trade is not without justification. Chart 3 shows that the number of tariff and non-tariff barriers to trade has increased again of late – with the latter often opaque and thus potentially even more damaging than customs duty. Examples include not taking due account of the principle of reciprocal market access or the protection of intellectual property, or distorting the free exchange of goods and services by way of subsidies. From this perspective, there is a valid point in calling for fairness. After all, international trade is in fact only fair if everyone plays by the rules of the global trading system. I will come back to this point later. No country wins a trade war The import duties recently imposed or increased by the US on certain goods have already prompted the first counteractions from the trading partners concerned. Were the spiral of protectionist measures and retaliation to continue, this could develop into an all-out trade war, which would have drastic consequences for the global economy.

Le SEBC bénéficie de bonnes relations bilatérales avec les autres banques centrales du monde entier. B .- L’UEM renforcera la stabilité monétaire et financière a) Le rôle international de l’euro En ce qui concerne le rôle international de l’euro, je voudrais dire que le SEBC adopte une attitude de neutralité. Le rôle international d’une devise est une question complexe. Une monnaie peut être utilisée par différents groupes d’agents économiques, dans divers desseins, comme monnaie d’ancrage ou comme monnaie de réserve d’une part, et comme monnaie de facturation et de règlement pour le commerce international ainsi que comme monnaie d’expression d’actifs financiers, d’autre part. En tout état de cause, le rôle de l’euro comme monnaie internationale dans ses différentes fonctions mettra du temps à se développer. En ce qui concerne la future part de l’euro dans les réserves publiques de change globales, on peut s’attendre à ce que les banques centrales des pays hors zone euro réexaminent progressivement leur stratégie de gestion des réserves en fonction des opportunités de diversification offertes par la nouvelle monnaie. De plus, l’euro pourrait jouer un rôle accru de monnaie d’ancrage dans d’autres pays européens envisageant de lier le taux de change de leur monnaie à l’euro. En ce qui concerne l’usage privé de l’euro, les agents économiques pourraient utiliser celui-ci pour se prémunir contre des risques en diversifiant la composition de leur portefeuille.
If we knew that “banks in the periphery will not face severe problems” or if we knew that “the recapitalisation needs will be a double digit bn figure” we could spare the effort in conducting this exercise. All these statements are mere speculation. The comprehensive assessment is an extraordinary opportunity to rebuild confidence in the banking sector and promote the long overdue repair of bank balance sheets, which in turn is a precondition for a sustainable economic recovery. One particular point needs to be stressed: credible national backstops must be put in place. If not, the credibility of the whole exercise is put at risk as the outcome will then almost certainly be negatively perceived by market participants. Doing this balance sheet assessment without a backstop in place would be a bit like getting on a boat in rough weather conditions, and not taking a life jacket on board. Any recapitalisation needs uncovered by the exercise should of course first and foremost be covered by the market. National budgets and national resolution funds may intervene as a second line. Finally, a European backstop, the ESM with its existing instruments, meaning a banking sector programme like in the case of Spain, may be available. The second key element of a banking union is the Single Resolution Mechanism, a European equivalent to the Federal Deposit Insurance Corporation. The crisis has shown that simple coordination among Member States has been inadequate to organise the resolution of crossborder banks in an efficient, quick and least-cost manner.

There should be a clear division of labour between supervision and resolution. The fourth and last big open issue is how to finance the backstop for the single resolution fund as long as it is not sufficiently funded via levies from the banking sector. As mentioned before, I think the ESM including any non euro-area member states could provide a credit line to the resolution fund. That would guarantee a clear control over the resolution fund by the participating member states and their parliaments. A functioning banking union is in the best interest of Europe and it is in the best interest of Germany. BIS central bankers’ speeches  7
We also have to be alert to the risk of model drift: that detailed changes initiated by firms, that may each be reasonable in themselves, will have a bias towards reducing rather than increasing capital. Supervisors need to be able to interrogate the overall outcome of accumulated changes, not just the technical merits of individual changes. And it is equally important to remember that insurer resilience depends not just on capital, but also on the accuracy of technical provisions for liabilities, which are themselves inevitably determined by models. At times this has led to time-consuming discussion about the fine details relating to firms’ models: a bit too fox-like, when what is needed is a more hedgehog-like response – a frank dialogue about resilience to big real world risks and shocks. A dialogue that would allow us to respond flexibly to the emergence of new risks and shocks, and to balance modelling with judgment in satisfying ourselves – both regulators and Boards – over capital adequacy. We recognise that modelling is at the heart of the management of insurance liabilities, and of assets too thanks to the interconnectedness of the two sides of the balance sheet. But uncertainty places limits on the reach of quantitative modelling. We should look at a more flexible approach where models sit alongside other 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  inputs to capital requirements.

In my remarks, I will discuss the U.S. economic outlook and the implications for U.S. monetary policy. I will focus primarily on last month’s Federal Open Market Committee (FOMC) “lift-off” decision – the first increase in the federal funds rate target range in nearly 10 years. I’ll explain what motivated my vote to begin to normalize U.S. monetary policy. I’ll also offer a preliminary assessment of how things are going so far – both with respect to how the U.S. bond market reacted to lift-off and how well our new tools are working as we begin to push up short-term interest rates. Both issues are pertinent, as money market rates have spent a very long time close to zero and we have never attempted to tighten monetary policy with such a large balance sheet and high level of excess reserves. To summarize my conclusions: Generally so far, so good on both fronts. Looking ahead, I’ll talk about what comes next. No surprises here – it depends on the data. As noted in the December FOMC statement, we expect that the normalization of monetary policy will be quite gradual. But, there is no commitment here. The flow of the data – broadly defined – will drive our actions as it influences our assessment of the economic outlook and our view of the stance of monetary policy best suited to achieve our dual mandate objectives of maximum sustainable employment and price stability.
I base this on some, few, companies having seen their market power increase in recent years.7 These companies are often known as “superstars” and have high profit margins and have experienced high return on invested capital. They are often multinational corporations that sell products and services all over the world. At the same time, it appears as though smaller companies have fared less well. The difference in productivity between superstars and ordinary companies has also increased.8 When we talk to companies in our Business Survey, they largely confirm this picture. The companies that have long been subjected to international competition on global markets have a greater tendency to regard digitalisation as an opportunity than the consumer-related companies with most of their operations in Sweden. Change is a necessary condition for a prosperous society... Regardless of what stage of technological development we are at, it is clear that technological advances revolutionise lives and entire societies. The internal combustion engine transformed transportation in society. Electricity gave us light,  4 Cowen (2011). 5 Brynjolfsson and McAfee (2011). 6 https://voxeu.org/article/technological-progress-thing-past 7  See, for instance, De Loecker and Eekhout (2017, 2018). 8 OECD (2015). 3 [12]  heat and energy. Digitalisation, and above all the internet, has given us almost direct access to enormous amounts of information. Each new innovation replaces other products or changes their areas of use. Our behaviour changes and we make new demands of companies and decision-makers. In some branches the changes have been particularly marked over the past decade. One example is traditional media.

Along with Pillar 2 add-ons in the UK, which are used to address additional salient risks not captured by the LCR. 34. A fuller discussion of the challenges in interpreting changes in the LCR can be found in Bank of England and PRA Discussion Paper 1/22 ‘The prudential liquidity framework: Supporting liquid asset usability’, March 2022 35. Goodhart, C (2008), ‘Liquidity Risk Management’, Banque de France Financial Stability Review. 36. Bank of England and PRA Discussion Paper 1/22 ‘The prudential liquidity framework: Supporting liquid asset usability’, March 2022  ,