samchain/econo-pairs-v1 huggingface dataset:
Although the fall in GDP was greater in Sweden than in many other countries, the recovery has gone more quickly and we are now on much more stable ground than most others. There are several reasons for this. But I believe that one important explanation is the insights we gained from the deep recession at the beginning of the 1990s. We then realised the importance of building stable frameworks for both monetary policy and fiscal policy to create proper conditions for long-term stability. When economic agents make decisions they have been able to rely on inflation being reasonably stable and on public finances not being weakened to an extent that requires severe tightening. The latter in particular is now a problem in many countries. When things get difficult, as in the recent crisis, the fundamental faith in the economic policy framework has meant that we could stimulate the economy strongly without anyone questioning the credibility of the inflation target or the sustainability of Sweden’s public finances. Our bank system has also managed better than those in many other countries. To some extent this is probably due to lessons learned from our own earlier bank crisis. For example, the banks have avoided so-called structural products with elements of high-risk US mortgages, which were one of the causes of the crisis in the first place.

The Riksbank’s assessment and decision in September At our most recent monetary policy meeting in September we could note that the situation in the world economy had continued to improve, although the strength of the recovery was still uncertain. The public finance problems in certain eurozone countries were still causing some concern and there was uncertainty over the consequences that stricter fiscal policy might have for growth in these countries. But compared with the situation in the spring and early summer, the unease on the financial markets had toned down, partly as a result of the stress testing of the banks by the EU during the summer. Growth prospects in the eurozone were in principle thought to be the same as at our meeting in June. However, we could note that the risk of slower growth in the United States had increased and we revised down the forecasts for US growth this year and next year. Nevertheless, we envisaged, as before, that the international economic climate would gradually improve. BIS Review 134/2010  1  We could also note at the meeting that the recovery in the Swedish economy had been more rapid than expected, and our assessment was that the Swedish economy would grow more quickly than, for instance, those in the eurozone and the United States. One reason for this, as I have just discussed, is that unlike many other countries, we do not need to tighten policy to correct large budget deficits and debt ratios.
See  BIS Review 108/2009  decentralised and specialised. The focus was on customer needs supported by some of the first-ever market research on their tastes. In the end, it was Sloan and General Motors whose strategy was emulated around the world. In meeting the future needs of the real economy, perhaps there is a case for more “Sloans” and fewer “Fords” in banking. Perhaps there is a case for a strategic focus on the “local” as much as the “global”, for more micro-finance and less macro-finance. Perhaps it is time for relationship-banking to make a comeback. •  Strategy – diversity versus diversification  Customers require a basket of banking services. The provision of some of these services is important for the wider economy; they are a quasi-public good. For example, the provision of monetary services – basic banking – has a strong public good element. That is why depositor protection, in the form of deposit insurance, is stipulated by the state in many countries. Lending to households and companies can also be thought to contain a public good element. Other functions performed by banks may provide more limited social benefits, though their private benefit may be significant – for example, proprietary trading in complex instruments. If scale economies in banking are weak, banking services could probably be equally well provided by either a financial supermarket or a set of specialist banks. These different structures might not, however, be equivalent from a risk perspective.

Mr Gjedrem focuses on the issue of financial stability: experiences and challenges  Speech given by Mr Svein Gjedrem, Governor of the Central Bank of Norway, at the annual meeting of the Norwegian Savings Banks Association, held in Sandefjord on 21 October 1999. (Shortened version) 1. Introduction  Every day around NOK150–200 billion change hands through the banks’ accounts in Norges Bank. In the course of a week, payments corresponding to our gross national product for an entire year have passed through Norges Bank’s settlement system. These payments involve all types of transaction, from a 10 kroner ice cream purchase to securities transactions where a single transaction may involve billions of kroner. The banks play a pivotal role in the payment system. Deposits are now the predominant means of payment. Payment settlement is the banks’ most important function besides channelling funds from savers to borrowers. In other countries, securities markets are of growing importance. They are taking over an increasing share of banks’ credit intermediation. This may also occur in Norway. Securities are also increasingly serving as collateral in payment settlement. These three elements - payment and settlement systems, banks and other financial institutions, and securities markets - make up the financial system. Every day we experience how dependent a developed economy is on the smooth functioning of this system, i.e. on financial stability. The volume of foreign payments is substantial and on the rise. Banks and securities markets are becoming ever more closely integrated.
Moreover, the mark-to-market completed by mark to model of a wide range of assets and liabilities has also contributed to this widespread focus on immediate financial performances. This focus on short-term performance can translate into additional volatility in the price discovery process: indeed, the shorter the investment horizon of market participants, the larger the impact on prices of any new information. Mimetic behaviour is by no means a new phenomenon on financial markets. However, technological developments on markets may have gradually reinforced this type of behaviour. The spread of benchmarking, which allows fund managers and clients to measure performance against that of other funds, together with the growing competition within the sector, appears to have favoured such “herd behaviour”. Some operators have come to the conclusion that it is better to be wrong along with everybody else, rather than take the risk of being right alone. A striking example of rational mimetic behaviour is the influence that hedge funds enjoyed, a few years ago, as "opinion leaders" and trend makers. The second set of factors relates to new market techniques or financial engineering devices. Here are a few examples of some of these mechanisms: •  The inclusion of contingent or trigger clauses in loan and bond contracts. These clauses provide creditors with a form of insurance since the level of interest rate paid by debtors increases when specific trigger events occurs (typically the downgrading of the debtor by rating agencies). These clauses were designed to help borrowers access financing at lower rates.

Cases of financial turmoil in emerging countries, which are usually due primarily to inappropriate domestic policies, show that there is room for improving the timely identification and correction of vulnerabilities by International Financial Institutions. In particular, a key point is to improve the analysis of debt sustainability in order to have a more forward-looking assessment of possible cases of insolvency. We can only praise the ongoing work by the IMF on this matter. Unfortunately, enhancing warning signals will probably not be sufficient to protect us against financial crisis. 2.2. Designing effective procedures for handling international financial crisis represents another challenge  First, there is a need for clarifying the financing policy of the IMF, as acknowledged by the G 7 and the recent IMFC communique. Greater discipline in the provision of official finance is key to ensure a more timely involvement of the private sector in crisis resolution (PSI), and to provide strong incentives for debtors and creditors to start debt negotiations timely and appropriately. By doing so, the international community will benefit from the so-called « catalytic approach », that was at the core of crisis management in the 1980s and proved quite successful, and that was recently restated by the international community. A precondition for an orderly crisis management relies upon more predictable decision-making process regarding the use of Fund’s resources. In that regard, the presumption of clear access limits to Fund financing is key.
A few years ago, the television show 60 Minutes covered an undercover operation that captured on video fifteen out of sixteen Manhattan lawyers offering advice on how an African official could secretly move funds into the country. 14 The investigator posed as an adviser to an African minister of mining who managed to accumulate millions of dollars for personal use— expensive real estate, a jet, and a yacht. In the end, no firms actually took on the client. These were just preliminary meetings. And they were a set-up. No actual crimes were committed. Still, only one lawyer out of sixteen told the undercover investigator to get lost. What an eyeopener. As a lawyer and a central banker—and as a New Yorker— I found this report deeply troubling. Where Do We Go From Here? So that’s where I see us today. Where do we go from here? Let me share some ideas, which are not mutually exclusive. Build Good Habits For starters, let’s be honest about “looking the other way.” Many financial institutions have, at times, turned a blind eye to evidence of money laundering, sanctions evasion, corruption, kleptocracy, and plain theft. Over time, some institutions become weak links in our system when they take on riskier clients, perhaps in order to chase profit, without developing the ability to manage those relationships in a responsible way. Often these relationships start small: one lowvalue, ethically suspect transaction.

Monetary policy must therefore be elaborated taking into consideration a view of inflation over a one or two year period. Therefore, the Riksbank makes inflation forecasts for this time period at regular intervals. Monetary policy is therefore controlled by an intermediate goal, namely the inflation forecasts. It would be unreasonable to try to immediately bring back inflation to two per cent if inflation was higher. It would require a dramatic reduction of capacity utilisation and a deterioration of the situation on the labour market. 5  BIS Review 59/1999  The Riksbank therefore weighs in the situation on the labour market and the real activity in its assessments. In the short run, there is a trade-off between stability of the inflation rate and stability in the real economy. An unremitting stabilisation of the rate of inflation very narrowly around two per cent would at times lead to real economic instability. Precisely for this reason, the target horizon is set at between one and two years, during which time the Riksbank endeavours to gradually meet the inflation target, by steering inflation towards two per cent, guided by the inflation forecasts, which have been made for this period. In the long run, however, there is no trade-off between inflation and employment. A low, stable inflation provides the prerequisites for fast growth and high employment, according to experiences from earlier periods, such as the first two decades after the war. We are now seeing a development that seems to confirm this hypothesis.
But we also must keep in mind the implications for the functioning of the global financial system in the near and medium term. This requires consideration of prospects for restoring normal market functioning and access, and the creation of appropriate incentives. •  When difficulties arise, the challenge remains, as always, to encourage and work with countries that are ready and able to implement strong corrective actions and to find financial solutions best suited to both the specific case and the broader functioning of the global financial system. A flexible, case-by-case, managed-market approach, represents the best bet - - and the only realistic option - - for achieving those goals as we face a challenging future. Thank you. BIS Review 61/2002  7

I think we have helped to contribute to the considerable progress made on a number of fronts, including making the financial system more resilient and robust and helping make monetary policy more effective, even at the zero lower bound. But there is much more work to do. In particular, I think we have just scratched the surface in understanding how developments in one area, such as capital and liquidity requirements for large, complex financial institutions, affect other areas, such as effective monetary policy implementation. We still don’t have well developed macro-models that incorporate a realistic financial sector. We don’t understand fully how large-scale asset purchase programs work to ease financial market conditions – is it the effect of the purchases on the portfolios of private investors, or alternatively is the major channel one of signaling? There are many other riddles that remain to be solved. How does one design an effective reference rate that is informative, verifiable and not vulnerable to manipulation? If you manage to come up with one, how do you migrate the trillions of dollars of existing contracts to the new standard? The U.S. unemployment rate has declined more sharply than one might expect given the economy’s growth rate over the past few years. Is this permanent or will it reverse if the economy continues to grow and the pressure on labor market resources increases in the coming years? How does one end “too big to fail” for large global firms operating across different jurisdictions? The list goes on and on.
In the end, clarity about the regulatory perimeter is both desirable and unavoidable – a task given to the Financial Policy Committee as part of the Bank of England’s new responsibilities. And the attraction of the more radical solutions is that they offer the hope of avoiding the seemingly inevitable drift to ever more complex and costly regulation. The broad answer to the problem is likely to be remarkably simple. Banks should be financed much more heavily by equity rather than short-term debt. Much, much more equity; much, much less short-term debt. Risky investments cannot be financed in any other way. What we cannot countenance is a continuation of the system in which bank executives trade and take risks on their own account, and yet those who finance them are protected from loss by the implicit taxpayer guarantees. The difficulty is in finding the right practical way to achieve that. Some of the solutions that economists have proposed have been dismissed by some as impractical and pie in the sky. But I am reminded of Keynes’ dictum that “practical men who believe themselves to be quite exempt from any intellectual influence are usually the slaves of some defunct economist” (Keynes, 1936). Of all the many ways of organising banking, the worst is the one we have today. I have suggested a number of ways in which the system could be reformed. But making the right choice will take much careful thought and a good deal of time.

This leads to the limiting case of proposals such as Professor Kotlikoff’s idea to introduce what he calls “limited purpose banking” (Kotlikoff, 2010). That would ensure that each pool of investments made by a bank is turned into a mutual fund with no maturity mismatch. There is no possibility of alchemy. It is an idea worthy of further study. Another avenue of reform is some form of functional separation. The Volcker Rule is one example. Another, more fundamental, example would be to divorce the payment system from risky lending activity – that is to prevent fractional reserve banking (for example, as proposed by Fisher, 1936, Friedman, 1960, Tobin, 1987 and more recently by Kay, 2009). In essence these proposals recognise that if banks undertake risky activities then it is highly dangerous to allow such “gambling” to take place on the same balance sheet as is used to support the payments system, and other crucial parts of the financial infrastructure. And eliminating fractional reserve banking explicitly recognises that the pretence that risk-free deposits can be supported by risky assets is alchemy. If there is a need for genuinely safe  8  BIS Review 140/2010  deposits the only way they can be provided, while ensuring costs and benefits are fully aligned, is to insist such deposits do not coexist with risky assets. The advantage of these types of more fundamental proposals is that no tax or capital requirement needs to be calibrated. And if successfully enforced then they certainly would be robust measures.
So far this year, the market capitalisation of the Oslo Stock Exchange has declined by more than 15 per cent, or more than NOK 300 billion. When the interbank market seized up, many central banks injected extra liquidity. In periods, Norges Bank has also provided additional loans to banks. This has reduced swings in interbank rates. Norwegian banks borrow dollars short in the European market for their interbank trading. Banks also borrow in foreign markets to finance lending in NOK. The banks raise foreign currency loans, which are exchanged into NOK. The premia on such loans are passed on to customers that borrow in NOK. This is why the increase in US and European premia has quickly fed through to Norwegian interest rates even though Norwegian banks are profitable, retain confidence and have limited loss exposures. In recent years, debt accumulation among Norwegian businesses and households has increased markedly. At the same time, Norwegian banks’ foreign short-term liabilities have tended upwards. The banks hedge against the exchange and interest rate risk associated with these loans. But the turbulence in the latter half of last year showed that banks cannot as readily hedge against liquidity risk. Norges Bank supplies NOK to the Norwegian banking system. In that respect, we can be generous when the markets are seized by fear and uncertainty. But when banks borrow in foreign currency, they are more on their own. Crises and turbulence are built into the workings of the market.

This time, the banks, instead of asking for financial statements, obtained alternative data from various data providers through CDI. For instance, from integrated online shopping platforms, banks learnt the amount of chilled chicken Chu Kee supplied to different supermarkets, and their value. 11. With the data, the banks understood Chu Kee’s latest operating conditions better and made credit decisions speedily. Needless to say, before the data was used and shared, prior consent from Chu Kee was obtained. In the end, Mr Chu secured a substantial loan at a competitive interest rate, and was very pleased with the hassle-free experience. 12. Now, what if I tell you that the above is based on a true story?2 Yes, during the technical exploration stage, CDI has already, in real life, helped SMEs in Hong Kong take more control of their own digital footprint, and use their own data to improve their access to financial services. Importers of chilled food and sneakers, and manufacturers of phone accessories have already enjoyed the benefits of CDI firsthand. As more and more banks and data providers join CDI, we expect that an increasing number of SMEs will benefit from the platform. 13. For CDI to reach its full potential and successfully connect the digital islands, your active participation is crucial. CDI is definitely a team sport, and we all have a role to play as members of Team Hong Kong. 14. The HKMA, as a regulator, will facilitate a conducive environment, and we are doing that by building the infrastructure and offering guidance.
Such weaknesses arose from the rapid growth in credit, the high exposure to the real estate development sector and the increase in capacity, which grew so as to adapt to what were unsustainable rates of expansion. The global crisis broke at a time when the adjustment of the imbalances had just begun, and it contributed to exacerbating their significance. The measures adopted in the Spanish banking sector have been specifically aimed at countering the weaknesses incubated during the expansionary phase. Undoubtedly, the key challenge has been the restructuring of savings banks, undertaken with the support of the Fund for the Orderly Restructuring of the Banking Sector (FROB). The 45 pre-existing savings banks have since seen their number reduced by two-thirds, in a consolidation process that has affected 95% of the sector’s total assets. This has enabled excess capacity in both networks and central services to be cut; it corrects the excessive fragmentation of the sector, which hitherto comprised a large number of institutions whose small size curtailed future prospects; and it allows advantage to be taken of the resources and management capacity of those savings banks which, on the basis of their greater soundness, have led the various integration processes. Other far-reaching measures have been brought to bear in this restructuring process. For instance, there is the reform of the savings bank regulatory framework, which is allowing for their conversion into institutions more subject to market discipline and better prepared to meet the requirements of the new international regulatory framework.

It has been a pleasure and a privilege for me to cooperate with him as a member of the ECB Governing Council over the past five years, during times of great complexity for monetary policy and financial stability in the euro area. In this period I have seen at first hand Jean-Claude’s personal and professional qualities. He has shown he has the right blend of firmness and pragmatism required to take difficult decisions at the worst junctures of the crisis. And he also possesses the leadership and communication skills needed to convey a long-term vision of the European project and the central role that the ECB plays here. During Jean-Claude Trichet’s presidency, the ECB Governing Council has displayed the resolve needed to deploy all the instruments available to the common monetary policy and to take timely decisions that help ensure the goal of price stability in the medium term is achieved. Since the creation of the ECB, average inflation has stood just below 2% and inflation expectations have held stable. The extraordinary scale of the financial crisis has put to the test the responsiveness of the Eurosystem in general, and of Jean-Claude Trichet in particular. Since the start of the crisis a series of bold and well-directed decisions have been adopted. And these have contributed notably to restoring the monetary policy transmission mechanism, which had been seriously damaged, and to preventing an unprecedented collapse of the financial system with incalculable consequences.