samchain/econo-pairs-v1 huggingface dataset:
Let me note, in passing, that those problems unfortunately were not specific to the Euro area. Public debt jumped by around 30% of GDP in UK and in US. Structural deficits in those countries stand at similar or higher levels than those in most parts of the Euro area. Overall, the crisis has put into light major deficiencies in the implementation of fiscal discipline and, more generally, in the economic governance of the Euro area. It is indeed demanding to operate a single currency with multiple fiscal and structural national policies. Given the insufficient of market discipline, the founders of the Euro had seen the problem and put in place the Growth and Stability Pact. The principles were sound. The framework was adequate. The implementation has been extremely weak. Bluntly speaking, peer pressure failed to ensure consistent and rigorous respect of the principles which had been agreed upon. It was, and remains necessary to make a “quantum leap” in economic governance. What did we do ? The governments are now trying to address those deficiencies. Significant progress has been made over the past year. At the national level, all Member States have embarked upon credible public finance consolidation plans that are already bearing fruit. At the EU level, a new framework has been agreed upon. The first pillar is a strengthening of the SGP with a much stronger preventive arm. Surveillance over budgetary policies has been reinforced with a more effective prevention/correction of excessive deficits.

In addition to having an impact on profitability through higher legal costs, this situation has been accompanied by a reputational deterioration which, if not reversed, may lead to a loss of business in the medium term. This is particularly significant in a setting such as the present one with the emergence of new competitors described above. Consequently, it is essential for the sector to recover customers’ trust as soon as possible, this being a key asset in the financial business. Also, Spanish banks have to complete their adaptation to the new international regulatory and supervisory framework. As indicated, although their capital ratios are above the minimum requirements in the area of solvency, the Spanish banking system still remains below other European countries in the case of the highest quality ratio (CET1). Strengthening capital would not only lead to greater resilience to adverse shocks but it would also bring down issuance costs.5 In addition, higher solvency would help facilitate compliance with MREL requirements (Minimum Requirement for own Funds and Eligible Liabilities) that Spanish banks will have to gradually meet over the coming years. It will be a considerable challenge for smaller banks to comply with these requirements since they do not usually obtain funding by regularly tapping the capital markets. Lastly, another significant challenge is that associated with climate change and the transition towards a more sustainable economy which, although it affects all economic agents, has a particular impact on the financial sector.
The credit institutions need only comply with the minimum reserve requirement on average within the reserve period. This contributes to the stabilisation of money market developments. A key element for the functioning of the operational framework has been the TARGET payment system. This payment system interlinks the 15 national real-time gross settlement systems and the ECB’s payment system, by providing a uniform platform for the processing of crossborder payments in real time. It has allowed a single interbank market interest rate across the euro area to prevail. Overall, the operational framework of the Eurosystem has proved efficient in providing liquidity to the banking system. This does not mean that this framework is rigid. On the contrary, it must adapt to the situation and evolution of the money market in the euro area. In this regard, the Eurosystem switched from a fixed to a variable rate tender for its refinancing operations on 8 June 2000. Let me make clear that this technical decision does not in any way modify the stance of the Eurosystem’s monetary policy, nor does it preclude renewed use of fixed rate tenders in the future. The sole aim of this  BIS Review 58/2000  2  changeover is to address the severe overbidding problem which developed in the context of the fixed rate tender procedure. Monetary and economic developments in the euro area Turning from theory to practice, I shall now consider current monetary and economic developments in the euro area.

Developments in the 1970s and 1980s showed that a higher rise in costs in Norway relative to other countries leads to a slacker labour market. This will also be the case this time. 5) Pressures on the exchange rate of commodity-based economies There is a correlation between price inflation and the exchange rate. As mentioned, the exchange rate has a significant influence on prices and costs through its effect on import prices. Furthermore, a precondition for maintaining a stable exchange rate against European countries is that inflation in Norway is over time on a par with the inflation rate prevailing in these countries. The high rise in costs in 1998 was probably the main factor that weakened confidence in the krone. International conditions also played a significant part. In 1998, the world economy was hit by the financial crisis in Asia, Russia and Brazil, falling commodity prices and widespread unrest in international financial markets. The Asian crisis proved to be more serious and prolonged than envisaged, and the contagion effects were more severe than most observers had anticipated. Weaker global demand contributed to a sharp fall in commodity prices, which in turn had a severe impact on commodity-based economies such as Norway, Canada, New Zealand and Australia. For all these countries, the terms of trade worsened and exchange rates depreciated. The Asian crisis also made investors more cautious, with an outflow of investment from countries perceived as risky.
This is how the behavior of credit, interest rates, liquidity, fiscal and monetary policy, and exports have acted countercyclically, which combines with the recent improvement in the terms of trade. As a result, this has been the crisis with the shortest period of contraction and, therefore, with the most immediate recovery. The outlook for Chile also compares favorably with that of many of its peers (Figure 13). Page 7 of 19  However, it is important to recognize the characteristics, biases, and limitations of the recovery so far. While the initial Covid-19 shock affected the economy across the board, in the recovery there has been a high degree of heterogeneity between the sectors most affected by social distancing norms and those that were able to cope with the confinements or recover when they were eased. On the demand side, there is a large gap between private consumption, driven by transfers and massive withdrawals of pension savings, and investment, more influenced by the financial situation of companies and uncertainty. In this context, the recovery is being accompanied by local price pressures, latent risks insolvencies and a precarious recovery in employment. In other words, this is a still very unbalanced recovery, with frictions, mismatches, bottlenecks, and important risks, all of which may jeopardizes not only the speed of the recovery, but also our ability to resume growth at a close to trend rate over a longer term.

However, this recovery process has been slower than we expected a few months ago. In particular, because mobility has not increased as quickly as we had hoped and the social distancing, both compulsory and voluntary, has had more long-lasting effects on some areas of the economy, such as construction and services. The withdrawal of pension savings has triggered temporary increases in consumption, especially of imported goods, which have had a positive impact on sectors such as retail but have also put pressure on the prices of the most demanded products. In fact, inflation data for September and October showed significant upward surprises, mostly concentrated in the categories of durable consumer products, such as home equipment and electronics. The significant depletion, and in some cases exhaustion, of inventories of these products has contributed to this result. Investment, beyond the reactivation of public and private projects, is being affected by the restrictions on mobility that have taken a toll on construction, the financial situation of companies, and the persistent uncertainty, so it is lagging further behind than consumption. The labor market, meanwhile, has shown some recovery, with an increase in employment compared to mid-year, but mostly concentrated in non-salaried jobs. Very recently we learned of the Metropolitan Region’s rollback to Phase 2 of the “Step-by-step” plan, which could take some of the impulse off activity at the margin. However, it could also help to avoid more drastic measures in the future by articulating a more orderly transition towards a vaccine.
As the President of the Bank Council pointed out just now, our annual disposable profit averages about CHF 1 billion. As this year's negative result shows, it is subject to sharp fluctuations. The fact that we are now distributing more than this amount is because we are gradually releasing the provision for future profit distributions. This provision amounted to CHF 13.4 billion in 2001, but had dropped to CHF 6.9 billion by the close of our 2004 accounts. This development does not come as a complete surprise. A progressive fall in the provision had been predicted, though the speed of the decline – a result of the current low interest rates – had not been expected. Our profit distribution may already have to be reduced in 2007, when the agreement we concluded in 2002 with the Federal Department of Finance on the distribution of profits is revised. Our profit distributions will gradually decrease towards the CHF 1 billion level. Ladies and gentlemen, dear shareholders, dear guests, 2004 was a relatively favourable year for the Swiss economy. A few clouds have recently appeared on the horizon. The recovery has unfortunately weakened, so a fall in unemployment is not imminent. We will continue to pursue a monetary policy aimed at maintaining the level of economic activity, though we will keep a careful watch on the general level of prices.

Roughly half of these investments were concentrated in the European continent. Over the years, and given Switzerland's trade surplus, our companies have thus developed an extremely dense international network of production facilities. In addition to the 4 million jobs within the domestic economy, Swiss companies employ a further 1.8 or so million people abroad. Of these, 1 million work in European countries. These figures show that Switzerland has by no means resigned itself to low growth, but has seized the opportunities created by the opening-up of borders and markets. These days, a lot of people worry about competition from low-wage countries and the resulting relocations. However, they overlook the fact that our country is a major beneficiary from the more pronounced international division of labour brought about by globalisation. The relocation of certain production stages is inevitable. It allows our companies to stay competitive in the face of high Swiss labour costs. In some respects, the jobs created abroad secure those at home with more added value. "One out of every two francs is earned abroad" is the phrase that comes to mind when the performance of our exporters is being discussed. This also means, however, that one out of every two francs is still earned in Switzerland. Put another way, the domestic economy plays a crucial role in our country's economic development both on a demand and production level. In 2004, domestic turnover grew more slowly than sales abroad. The growth figure of 1.8%, however, was still higher than in the previous year.
This is all the more important in the context of the “originate and distribute” model given that the effectiveness of the risk transfer instruments on the basis of which the latter has developed requires sufficient liquidity both on the part of agents and markets. It is, incidentally, worth noting that the Committee of European Banking Supervisors (CEBS) and the Basel Committee are working on a revision of the current regulations regarding liquidity. Moreover, concerning risks incurred by some activities such as asset management, it appears necessary to gain a better insight into the transmission channels of these risks between activities carried out for banks’ own account and for third parties as well as the liquidity requirements generated by the latter. More generally, the methods used to assess and capture some risks such as reputational risk and strategic risk, notably in the context of Pillar 2, need to be developed. I would like to stress the very important role that Pillar 2 must play in improving banks’ management practices i) regarding new risks not covered by Pillar 1 and ii) in areas that supervisors deem, specifically, liable to become new sources of vulnerability. In practice, for some activities, there are still no universally accepted standards for risk management. This does not mean, however, that banks’ risk management  BIS Review 11/2008  5  processes in these activities are always sufficiently stringent, but rather that there is a wide range of instruments available for this purpose, each with its advantages and disadvantages.

The latest study by the FSI on the application of Basel II, published in September 2006 and conducted among 115 countries, shows that 82 Non-Basel Committee Member Countries intend to implement the new framework, in most cases as of 2008 or 2009, and in some cases at a later date. Fully aware of the practical aspects of implementing a more modern, complete and risk-sensitive prudential framework, the Basel Committee published, in July 2004, i.e. directly in the wake of the New Capital Accord, a document entitled “Implementation of Basel II: practical considerations”. Recognising that the adoption and application of Basel II may not be a short-term priority for a certain number of supervisory authorities of non-G10 Countries, the Committee encouraged the latter to develop their own approaches and implementation timetables. Given that the necessary legislative and regulatory changes and human resource requirements have to be identified, the application of Basel II will necessarily be a gradual process throughout the world. This is especially the case since technical decisions often have to be taken on the exact choice regarding the scope of application of Basel II or the possibility of a staggered implementation of the three pillars. In this respect, I welcome the choice made by Algeria to adopt and implement Basel II in the near future. This choice should not be seen by banks as a regulatory constraint but rather as a great opportunity to converge towards best international practices.
However, that debate is for another day: the risk margin and its calculation are part of the law and our job is to implement it. More specifically, the directive is clear that the Solvency Capital Requirement (SCR) and the risk margin are separate concepts: put simply, firms have to survive a 1-in200 stress, using the capital held to meet their SCR, and then have the risk margin available to provide for the costs incurred in an orderly transfer of liabilities. It is obvious that in this respect Solvency II is more demanding than the ICAS regime, even if other elements of the regime are not. A related source of tension is our use of the Quantitative Indicator (QI) framework as part of our assessment of internal model applications. This framework describes a set of judgements, based on evidence and analysis that provide an assessment of the most common risks faced by UK insurers, such as longevity risk for life insurers, and how they relate to each other. Many of the areas covered by the framework involve a significant degree of judgement, and accordingly we are flexible in how we use the framework and consider it just one input into our consideration of whether firms’ models meet the tests and standards for approval under Solvency II. The way we use the QI framework has also been, and continues to be, informed by evidence and practices presented to us by firms.

Unlike the 1980s, the build up of debt in recent years has been in an environment of low inflation and low interest rates. The interest ratio, that is, interest expenditure as a share of disposable incomes, is much lower now than it was then. Although the level of households' debt ratios is not necessarily worrying, it is nevertheless the case that a borrowing level rising by more than 10 per cent a year is not sustainable in the long term. In the long term it needs to come down and be more in line with nominal disposable incomes. The Riksbank is assuming that household borrowing will continue to increase, but at a slower rate than before. The fact that interest rates have been raised contributes to this, as does the fact that economic activity is entering a calmer phase. The interest ratio has recently begun to rise but is still at an historically low level. The expected  BIS Review 60/2008  1  slowdown in household borrowing will mean that the interest ratio also increases at a slower rate in future (see figure 3). The chances are good that household borrowing and house prices will have a soft landing. Although borrowing is still increasing at a rapid rate, there has nevertheless been some slackening and this is expected to continue. House prices fell slightly in the first quarter of this year compared with the final quarter of last year. However, on an annual basis the increase was just over seven per cent.
6  BIS Review 36/2005  Graph 5: Risk Premium and Real Interest Rates  1000  35  900  30  800  25  700 600  20  500 15  400 300  10  200  Risk Premium (JPMorgan) Real Interest (Calculated w ith inflation expectations)  100  5  Mar-05  Jan-05  Nov-04  Sep-04  Jul-04  May-04  Mar-04  Jan-04  Nov-03  Sep-03  Jul-03  May-03  Mar-03  Jan-03  Nov-02  Sep-02  Jul-02  May-02  Mar-02  0 Jan-02  0  Source: CBRT, JP Morgan. Graph 6: CBRT Interest Rates and Secondary Market Nominal Interest Rates 90 ISE T-Bill and Bond Market Interest Ratescompound  80  CBT Overnight Interest Rates  70  (%)  60 50 40 30  3/2/05  1/2/05  11/2/04  9/2/04  7/2/04  5/2/04  3/2/04  1/2/04  11/2/03  9/2/03  7/2/03  5/2/03  3/2/03  1/2/03  11/2/02  9/2/02  7/2/02  5/2/02  3/2/02  10  1/2/02  20  Source: CBRT, ISE. At this point, within the scope of the changing dynamics of inflation, I would like to talk about the passthrough effect of the exchange rates on inflation, which is quite significant not only in terms of the determinants of inflation, but also the current exchange rate regime.

Besides, there is a persistent and visible recovery in inflation dynamics, and thus the inflation inertia has, to a great extent, been. When we consider where we are after four years of fighting inflation following the crisis, we see that CPI inflation, which was 73.2 percent by January 2002, remained below the end year targets for three consecutive years, declining to single digit figures; annual CPI is realized as 7.94 percent in March 2005. The total decline in inflation during this period was more than 65 percent. This favorable development was apparent in the expectations as well. While the reliability difference, which is the difference between target inflation and inflation expectations, was 13.3 point at the beginning of 2002, it dropped to 0.4 points at the beginning of 2005. As of today, according to the results of the survey of expectations of the Central Bank of the Republic of Turkey, the year-end inflation expectation dropped to 7.5 percent. This figure is below the official target of 8 percent. As well as being a concrete indication of the fact that the inflation inertia has been broken to a great extent, this improvement in inflation expectations is clear evidence of the increased confidence in monetary policy. Moreover, this situation shows that the inflation target will be a nominal anchor for economic units in their future decisions.
In the current liquid conditions, therefore, the large banks have been able to cut their standard savings rate. They are therefore seen by some analysts as the winners from deregulation since they now have another lever to adjust their net interest margin. The unanswered question is whether they will be able to get away without a significant erosion of deposits in savings and current accounts. A certain amount of switching of accounts has gone on. But there is not enough evidence at this stage to conclude whether deregulation has resulted in any significant redistribution of deposits among banks. So we cannot tell how interest elastic the demand for savings accounts may prove to be, particularly in today's somewhat artificial conditions of high liquidity. However, what can be said is that deregulation does offer the smaller banks an enhanced ability to compete for savings accounts and for those customers which the large banks may be less eager to retain. While the smaller banks may have to pay a higher rate for their savings deposits, they will still benefit if they can substitute such funds for even higher cost, and less stable, time deposits. Consumers will also benefit from deregulation through greater choice of savings products and, for those with larger balances at least, from higher interest rates. However, we have to face the fact that not all depositors will be better off in the deregulated world.

David Carse: The changing landscape of banking in Hong Kong Speech by Mr David Carse, Deputy Chief Executive of the Hong Kong Monetary Authority, to the Hong Kong Investment Funds Association, Furama Hotel, Hong Kong, 15 August 2001. *  *  *  Ladies and Gentlemen, Thank you for inviting me to speak to you at the Association's luncheon. My topic today is the changing landscape of banking in Hong Kong. I shall illustrate this by reference to two of the key recent events that are changing that landscape and are going to go on doing so in the years ahead. I am referring to the deregulation of interest rates, the final phase of which took place on 3 July of this year, and the introduction of the Mandatory Provident Fund scheme. I will try to describe the implications of these for the banking industry and for the regulators. I will also try to place them in the context of the broader trends and developments that are taking place in the banking industry. Current industry trends You are probably already familiar with some of these trends and developments. The most obvious one is the increasing intensity of competition. This is a global phenomenon, whose full effects have only recently hit Hong Kong. It has shown here up in the sharp decline in lending margins, particularly on residential mortgages.