samchain/econo-pairs-v1 huggingface dataset:
Perhaps the most important part of this deregulation process was the Second Banking Directive, which became effective in 1993 and which introduced the single banking license, enabling European banks to operate in any EU member state without the need for local authorisation. In fact one of the first European institutions that benefited from this regulation was the Nordic financial institution Nordea, which was established through cross-border mergers in 1997. Today, Nordea has substantial activities in four of the Nordic countries, and also constitutes a significant part of the financial system in all these countries. Measured in terms of lending, Nordea constitutes the largest bank in Finland, the second largest in Denmark, the third largest in Norway and the fourth largest bank in Sweden. The transformation of the banking sector towards a more globalised one has become apparent in the current financial crisis. We have experienced several severe financial crises also before cross-border banking became a notable feature of the financial sector, including the Swedish banking crisis in the early 1990s. But this time around dealing with the crisis became even more challenging because of the banks’ presence in several jurisdictions, creating a need for cooperation between several national authorities. Why do banks become multinational? How can we explain the increase in cross-border banking, in particular in retail banking? The deregulation of previously strictly-regulated markets made crossborder banking possible.

A banking union is necessary for the smooth functioning of a monetary union for the following three reasons: •  It breaks the link between banks and sovereigns by bringing banking supervision and crisis management to the federal level. With the banking union, banks will be considered as euro area institutions over and above their nationality; it will ensure that credit conditions in the euro area will not depend on where you are but on who you are, which is what should be expected of an efficient financial market. •  It allows re-integration of the European banking system. A supra-national supervisor is in fact better placed to assess the risks of cross-border activities and therefore to protect and encourage such activities; it is not subject to national biases that can lead to the temptation of economic introversion. It is therefore more credible and strengthens stability and confidence in the area;  •  Moreover, it restores the full efficacy of monetary policy. If our monetary policy impulses are not transmitted uniformly to all of the area’s countries because of the bank-sovereign link, it undermines the very foundation of Europe’s monetary union; remember that three quarters of the financing of the euro area’s economy consists of bank loans. By breaking this link, a banking union would restore the federal dimension of monetary policy. Today the first pillar of the banking union is being constructed: the Single Supervisory Mechanism.
House prices in Norway have on average risen by 9 per cent annually between 1995 and 2002. House prices have also increased considerably in other countries. A sharp and sustained rise in house prices might contribute to high credit growth even after prices have levelled off. Since only a portion of the housing stock is sold each year, some dwellings will be sold at a higher price than when they were last sold for a long period. This has contributed to sustaining the high level of growth in credit to households in Norway even after the rise in house prices moderated through 2002 and into 2003. It is easiest to sell dwellings in the largest cities and some specific areas are particularly attractive. Residential property is now a fairly liquid and attractive investment. A persistently high rate of increase in house prices may in isolation engender expectations of a further rise and may thus prove to be selfreinforcing for a period. Moreover, there now seems to be a tendency towards investing in property and incurring loans at a more mature age so that younger generations not only inherit dwellings, but debt as well. Both debt and wealth are on the rise for these more mature age groups. Sharp increases in asset prices and debt accumulation may pose a risk to economic stability. With a view to mitigating this risk, it will be appropriate in some situations to apply a somewhat longer-thannormal time horizon than two years to attain the inflation target.

Mohd Razif bin Abd Kadir: Shared services and outsourcing in the Malaysian financial sector Address by Mr Mohd Razif bin Abd Kadir, Deputy Governor of the Central Bank of Malaysia, at the Shared Services and Outsourcing in the Financial Sector – A Joint Forum by Bank Negara Malaysia and the Multimedia Development Corporation, Kuala Lumpur, 13 November 2007. *  *  *  Distinguished guests, ladies and gentlemen, It is with great pleasure that I welcome you to the inaugural forum on shared services and outsourcing (SSO) in the financial sector. This forum is jointly organised by Bank Negara Malaysia and the Multimedia Development Corporation in a cooperative initiative to enhance the significance of SSO in the Malaysian financial sector. The organisation of this event, which focuses specially on the financial services industry and its players, is a timely bringing together of minds to discuss the issues and concerns faced by financial institutions in SSO. The growing significance of the global SSO market suggests to the financial industry players that the outsourcing of operations which would otherwise be performed in-house is certainly an idea worth exploring. According to a recent study by Frost & Sullivan, the global SSO market was estimated to be worth $ billion in 2006 and is forecasted to reach a market size of $ billion by end-2009. Further, the banking, financial services and insurance sectors had the largest SSO spending in 2006 at an estimate of $ billion or almost a third of total SSO spending.
Second, although there is purely national infrastructure in most countries, the main pieces of cross border financial infrastructure are truly global. For example:   CLS operating out of New York processes nearly a million FX transactions in 18 currencies for over 60 members worldwide on a daily basis, with an average daily value of $    4  The SWIFT messaging service based in Belgium services more than 11,000 institutions worldwide, operating in over 200 jurisdictions. In 2015 it processed approximately 6.1bn messages.   Euroclear, based in Belgium, provides services in 51 settlement currencies for more than 2,000 clients in over 90 countries.   5  6  Clearstream, based in Luxembourg, serves 2,500 customers in 110 countries, settling more than 250,000 transactions daily. 7  4  https://www.cls-group.com/Membership/Community/Pages/CLSMembers.aspx https://www.cls-group.com/About/Pages/default.aspx https://www.cls-group.com/MC/Pages/NewsArticle.aspx?nid=187 5 $ 6 https://www.euroclear.com/dam/PDFs/Corporate/Euroclear-Credentials.pdf 7 http://www.clearstream.com/clearstream-en/about-clearstream/who-we-are 4  All speeches are available online at www.bankofengland.co.uk/speeches  4    CME Group in Chicago has customers in more than 150 countries and handles 3 billion contracts worth approximately $ quadrillion annually.   8  Eurex Clearing in Germany has more than 180 clearing members in 17 countries, clearing contracts denominated principally in Euro, and Swiss Franc.   9  LCH SwapClear clears more than 95% of the global cleared OTC interest rate swap market, has over 100 clearing members, over half of which are based outside of the EEA, and clears in 18 currencies.

But this divergence in demand may help to explain why, at least on impact, the pandemic has depressed inflation by a bit less than we and others anticipated when it began. Various things have contributed to gap between real GDP and retail spending Expenditure switching certainly isn’t the only reason for the contrast in Chart 1. I want first to run through a number of other things that have probably contributed to it. One is the weakness of spending – on durables in particular – during the lockdown in the spring. At that time there were many things people were simply unable to buy. For durable stuff, much of that spending is likely to have been delayed rather than cancelled. If you needed a new fridge or a new car in March, you presumably still needed one in June, when the lockdown began to be eased. One would’ve expected most of that catch-up to occur during the summer but some of it may also have leaked into the autumn and early winter. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  Second, part of the drop in GDP reflects an unusually large decline in the measured real output of public services, something that has no consequences for people’s incomes or their ability to spend. To construct these estimates the Office for National Statistics uses detailed information on things like the numbers of pupils in school and operations in hospitals.
Table 1 Domestic scenario (annual change, percent) 2013  2014 (f) Jun.14 Report  Sep.14 Report  2.5-3.5 1.75-2.25  Dec.14 Report  2015 (f) Sep.14 Report  Dec.14 Report  GDP  4.1  1.7  3.0-4.0  2.5-3.5  Domestic demand  3.4  1.7  0.1  -0.7  3.4  3.0  Domestic demand (w/o inventory change)  4.2  2.4  1.0  0.4  3.2  2.6  Gross fixed capital formation  0.4  -0.7  -4.1  -6.2  1.8  1.9  Total consumption  5.4  3.4  2.6  2.4  3.6  2.8  Goods and services exports  4.3  3.2  2.4  1.4  3.8  4.0  Goods and services imports  2.2  -1.1  -3.9  -5.9  4.0  3.7  Current account (% of GDP)  -3.4  -2.5  -1.8  -1.6  -2.2  -1.1  Gross national savings (% of GDP)  20.5  19.9  19.8  19.7  19.7  20.8  December CPI  3.0  4.0  4.1  4.8  2.8  2.8  December CPIEFE  2.1  3.7  3.4  4.3  2.5  2.8  (f) Forecast. Sources: Central Bank of Chile and National Statistics Institute (INE).

The global financial crisis significantly undermined confidence in the financial system, and the discovery of ethical lapses that continue to be reported today has further eroded public trust in financial institutions. There is an urgent need to restore faith in the utility of financial services, firstly through the demonstration of fair and responsible practices and reinforced with the provision of valueadding products and services that are meeting the real needs of consumers and businesses. Financial institutions with their extensive reach and customer relationships are in a unique position to have a more significant role in advancing the financial education agenda. In Malaysia, this has included providing technical support and materials for teachers to improve their knowledge and increase confidence in teaching financial matters in schools. Financial institutions have also adopted more than 10,000 schools across the country under the School Adoption Programme with wide ranging activities in money management for the children. The financial institutions also work closely with the Credit and Debt Management Agency in the implementation of financial education programmes for adults. Today, the focus on financial capability has become a global agenda. This has provided opportunities for policymakers to learn from their peers across countries and leverage on the international network of expertise in addressing common issues and challenges. This Symposium is a great example of realising such opportunities. The possibilities for meaningful cooperation at the regional and global levels are tremendous. This has already included research, technical assistance and guidance for policymakers.
Resilience of emerging market economies to global financial conditions In the 1980s and 1990s EMEs experienced financial crises following a sudden reversal of capital flows. In fact, during this period there were two waves of financial crisis in the EME world. The first wave was associated with currency crises as significantly strengthened US  3  Cecchetti, S, M Mohanty and F Zampolli (2011), “Achieving growth amid fiscal imbalances: the real effects of debt”, in Achieving maximum long-run growth, a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming. 4  Lo, S. and K. Rogoff (2015), Secular stagnation, debt overhang and other rationales for sluggish growth, six years on, BIS Working Papers No 482. 5  Koo, R. (2009), The Holy Grail of Macroeconomics: Lessons from Japan s Great Recession, Revised Edition, John Wiley & Sons. 6  Baker, Bloom and Davis (2013), “Measuring economic policy uncertainty”, Chicago Booth Research Paper, no 13–02, May. 2  BIS central bankers’ speeches  dollar led to massive adjustments in the fixed EME exchange rates. This followed sovereign debt crises in many emerging markets, i.e., Mexico, Brazil and Argentina. The second wave was triggered by sudden stop of capital inflows. The EM banks having intermediated these flows, as a result, caused these severe financial crises in several EMEs such as Mexico and Turkey in 1994, East Asian countries after mid-1997 and Russia in 1998.

2  OECD (2016), Economic Policy Reforms 2016: Going For Growth Interim Report, OECD Publishing, Paris. BIS central bankers’ speeches  1  The weak recovery is also very much related to the problem of demand deficiency – a situation associated with aggregate demand being less than the aggregate supply corresponding to full employment level of output in the economy. And this is probably driven by high indebtedness levels in government and private balance sheets across the world including both advanced and emerging market economies. As a matter of fact, the impaired private balance sheets caused the so-called balance sheet recession of 2008–2009 in AEs as in the USA during the great depression and in Japan during the years following the Japanese financial crisis of 1991. Now, not only the private sectors – financial, non-financial and households – of AEs but also their governments and more importantly EME private sectors suffer from high indebtedness levels. For example, some EME households have debt as large as 75 to 95 percent of GDP. Moreover, EME private balance sheets largely consist of external liabilities as opposed to domestic currency denominated assets, which expose them to increases in the cost of debtservicing foreign currency – denominated external obligations in cases of real exchange rate depreciation. Recent research suggests that agents tend to cut back their spending when their debt reaches certain levels.3,4 Going forward, we are likely to see only a gradual improvement in this stock balances problem as they take longer time to heal than flow balances problems.
Indeed, I find it hard to understand how an earnest rating agency might assess sovereign risk without even referring to that country’s level of public debt and international reserves. As a professor, I can safely assume that the “subject is not treated”, hence the conclusion is unsubstantiated. As concerns these assessments, I must say however that things are not in the least that simple. Of course, we could assert that at present our economy is in a better position than those of other countries in the region rated within the “investment grade” range. But those countries have at least adopted austerity measures at domestic level. How do things stand in our country? After two consecutive years of wage increases in a range from 20 percent to 25 percent per year – i.e. more than twice the labour productivity gains – the wage rises envisaged for 2009 ranged between 50 percent and 60 percent, whereas the agreements with the trade unions, whenever struck, do not provide for hikes lower than 35 percent. Such an approach reveals a dangerous decoupling between aspirations and reality. In the current international context and given the already dangerously high level of external deficit, we must not aim at further increases in domestic consumption above labour productivity gains, since there are no more financing sources for something like that. And unless we understand this state of affairs ourselves, rating agencies are going to warn us.

A high leverage ratio makes the financial system, and in effect the whole economy, more sensitive to fluctuating asset prices. The present downturn in Norway was not triggered by moving asset prices, but rather by the international downturn. Still, the effect of the international downturn on our economy is probably stronger than it would have been with a better regulatory framework. A consensus is emerging internationally that new tools are needed in order to make the financial system more robust with respect to macroeconomic fluctuations. Moreover, the financial system should help dampen rather than amplify or even cause fluctuations. The new tools – macro-prudential policies – are needed regardless of the monetary policy regime in place in any given country. For Norway, as a small EU outsider, it is hard to see any better option than inflation targeting. Indeed, it has been a strength in the current downturn to have a credible inflation targeting regime in place. We have tried to have a long-term perspective on attaining the target. This was especially important when the economy was hit by a supply shock, and we needed to trade off reaching the inflation target and closing the output gap. Inflation was below target until last year. Now, hit by a demand shock and looking ahead, we know that a trade-off is absent – the economy needs stimulus. But in the face of an unusually high degree of uncertainty, and given an unusually large shock, I believe that it is sensible to continue to be patient.
As a result of the normalisation of bank lending in 2021 that I mentioned earlier, and the start of the economic recovery, in the last stretch of 2021 the gap continued to correct, after widening at the onset of the pandemic. This process is expected to continue into the coming quarters, but the gap is still quite large. In this respect it is important to note that, against the backdrop of the crisis caused by the pandemic, the growth in the credit-to-GDP gap is associated with the sharp drop in GDP (the denominator in the credit-to-GDP ratio) in 2020 and with the measures taken to support the flow of credit to the economy (the numerator in the ratio), which drove its strong growth in that year. Accordingly, it does not reflect exuberant credit dynamics. Likewise, credit intensity and the debt service ratio, which are complementary indicators to identify cyclical risk, stand at moderate levels. Looking forward, our projections expect the credit-to-GDP gap to continue to correct in the coming quarters. Yet further acceleration in inflation and increasing downside risks to growth make for greater uncertainty. In particular, we need to ensure in the coming 4  Moreover, in the case of the loan-to-income (LTI) ratio, which measures the relationship between the mortgage principal and the borrower’s income at mortgage origination, the LTI ratios in most new mortgage loans were either low (LTI less than 3 times) or high (LTI over 4.5 times).

Further, Spain and Italy took their fiscal actions in close consultation with finance ministers from other countries in the euro area, demonstrating a healthy ability to work together. While difficult work still lies ahead, countries in the euro area have made meaningful progress toward achieving long-term fiscal sustainability. Looking to the future, the difficult work that remains also presents special risks – both for Europe and the United States. If Europe fails to chart an effective course forward, this could have a number of negative implications here. In particular, there are three areas of potential risk that I would like to highlight for the Subcommittee today. First, if economic conditions in Europe were to weaken significantly, demand for U.S. exports would decrease. This would hurt domestic growth and have a negative impact on U.S. jobs. It is important to recognize that the euro area is the world’s second largest economy after the U.S. and an important trading partner for us. Also, Europe is a significant investor in the U.S. economy, and vice versa. Thus, what happens in Europe has significant implications for our economy. Second, deterioration in the European economy could put pressure on the U.S. banking system. As the recent round of stress tests revealed, U.S. banks are much more robust and resilient than they were a few years ago. They have bolstered their capital significantly, built up their loan loss reserves and have significantly larger liquidity buffers. The direct net exposures of U.S. banks to the so-called “peripheral” European countries are actually quite modest.
And in circumstances when market functioning is unusually strained, as was the case prior to the Fed’s first LSAP program, asset purchases may enhance liquidity through the central bank’s consistent and significant presence in the market. Over the past six years, the FOMC has been flexible in using these tools, adapting as it learned and as individual circumstances changed. In the first two LSAP programs and MEP, for example, the FOMC communicated an expected total size and completion date for each program. However, the third (and current) LSAP program has been outcome-based, with the FOMC announcing only a monthly pace and composition for its purchases and noting that purchases would continue until there is a substantial improvement in the outlook for the labor market in a context of price stability. Other central banks have also used conditional asset purchases effectively. Perhaps the best example is the Outright Monetary Transactions program announced by the European Central Bank (ECB) in September 2012. This program is credited with helping to stabilize euro-area fixed income markets by ruling out certain bad equilibria. This success was achieved without the purchase of a single asset. Another example of conditional asset purchases is the BoJ’s statement of a commitment to continue QEP until inflation registered stably at or above zero. Changes in the Fed’s balance sheet and implications for normalization So where are we now? The current purchase program appears to be nearing its completion.

The Committee also indicated that an overnight reverse repurchase agreement (ON RRP) facility and other supplementary tools will be used, as needed, to help control the level of the federal funds rate. An ON RRP facility will supplement the primary role of IOER in controlling the federal funds rate by providing an alternative safe, overnight asset for money market investors. I will describe the role of the ON RRP facility in more detail in a moment. 11 The Committee expects to gradually return the balance sheet to a more normal size and composition, primarily by ceasing to reinvest repayments of principal. A halt or reduction in reinvestments is expected to occur after the FOMC begins increasing the target range for the federal funds rate. The FOMC does not plan to use asset sales as part of the normalization process, but suggests that limited sales might be warranted in the longer run to reduce or eliminate residual agency MBS holdings. The Federal Reserve will continue to test some of these tools to gather additional information about their efficacy and to enhance their operational readiness prior to liftoff. For the past year, the Desk has been conducting an exercise of ON RRP operations.