samchain/econo-pairs-v1 huggingface dataset:
60% of leveraged loans are now covenant-light and most deals have substantial “add backs” of EBITDA.20 These are developments analogous to the “No Doc / No Income” heyday of US subprime. To add to the sense of déjà vu, growth in leveraged loans has been increasingly driven by securitisation. Chart 8: New leveraged loans to US companies have become riskier  Average  Median  Riskiest 25%  Total debt to EBITDA 7  6  5  4 Post-crisis avg  2017  2018  Source: LCD, an offering of S&P Global Market Intelligence. Notes: The chart includes leveraged loans issued to US corporate borrowers. Total debt to EBITDA is measured postissuance and is not adjusted for EBITDA add-backs, which have increased in size and prevalence in recent years. There are some important differences between leveraged lending today and subprime a decade ago. Nonbanks are playing much smaller roles in origination, and ‘skin-in-the-game’ rules had, until recently, aligned  19 In the US, gross corporate debt as a share of annual earnings was 266% in Q3 2018, compared to 262% at the end of 2007. On the same measure UK corporate debt to earnings was 312% in Q3 2018 compared to 336% at the end of the 2007, but excluding the leverage of UK companies in the CRE sector it is above pre-crisis levels (301% in Q3 2018 vs 278% at end-2007). See the Bank of England’s November 2018 Financial Stability Report for more details.

BIS central bankers’ speeches  1  Chart 2  Four years after the financial crisis engulfed the world, a European version has now emerged. Both market participants and the authorities failed in their assessments after the introduction of a single currency. Prior to the introduction of the Economic and Monetary Union, there were wide differences between interest rates facing different European countries, which primarily reflected different inflation expectations across countries. But through the 1990s, long-term interest rates drifted down to German levels. Over the next 10 years, sovereign interest rates were fairly similar – and very low – for all euro area countries despite wide differences in debt levels, budget deficits and growth rates. Market participants did not take into account differences in sovereign creditworthiness. Sovereign debt was treated as virtually risk-free, both in the markets and by the authorities. The period contrasts with the recent two to three years during which interest rates on sovereign debt have widened sharply. For many countries, interest rates have reached very high levels. In retrospect, we see that market participants failed in their risk assessment through the ten years following the introduction of the euro. Economic policy also failed. EU rules relating to budget deficits and public debt were disregarded early on when Germany and France exceeded the limits they had so eagerly advocated when the European Monetary Union was established. Other countries followed their example. Low interest rates made it easy to finance deficits by issuing new debt.
These large pay gap differences between different ethnic minority cohorts beg the question of whether it is useful to think about a single “ethnicity pay gap”. 18  All speeches are available online at www.bankofengland.co.uk/speeches  18  Chart 15: Granular ethnicity pay gaps Ethnicity groups Mixed/Multiple ethnic groups  Indian  Pakistani  Bangladeshi  Chinese  Any other asian background  Black/African/Caribbean/Black British  Other ethnic group ‐40  ‐30  ‐20  ‐10  0  10  20  30  Ethnicity pay gap, per cent 2018  Sample average  Source: ONS Labour Force Survey and Bank of England calculations. Note: A positive ethnicity pay gap in this chart indicates that ethnic minorities earn less than their white counterparts, whereas a negative ethnicity pay gap indicates that ethnic minorities earn more than their white counterparts. Whether an ethnic minority individual is born in the UK or not also plays an important role in their pay. Chart 16 shows that ethnic minorities born in the UK (apart from those from Bangladeshi and Pakistani backgrounds) earn more than UK-born white people. Educational attainment is part of the explanation here. Although ethnic minorities born in the UK are a small part of our sample (2%), they are almost twice as likely to have a degree relative to white UK-born workers (40% versus 21%). In stark contrast, most ethnic minorities born outside the UK earn considerably less than white people born outside the UK.

This means the median observation for the white group occurs a lot earlier than for the ethnic minority group. As a result, when we run a pooled Oaxaca-Blinder decomposition, more weight is placed on later observations, where the ethnic minority population is larger leading to a negative ethnicity pay gap. This is at odds with time-series results which take into account the relative shares of the two groups in each year. To ensure that the results are comparable with the gender pay gap, we aggregated the results from the time series regressions using the share of the two groups in each year as weights. 24  All speeches are available online at www.bankofengland.co.uk/speeches  24  ethnic minority workers tend to be employed in regions where wages are higher (40% of ethnic minorities work in London) and tend to have higher qualifications than their white counterparts. Once these compositional effects are accounted for, the unexplained (“pay bias”) ethnicity pay gap is as large as for females. It averages just under 10 percentage points over the sample. This demonstrates one of the perils of interpreting raw, unconditional, pay gap data too literally. Replicating this analysis for people born in the UK reduces by half the size of the pay bias. Conversely, for people born outside the UK from ethnic minority backgrounds we estimate a significantly larger pay bias, at around 12 percentage points.
Financial stability Developments in real economic variables are mirrored in credit markets. In recent years, household income has shown solid growth, and household confidence has been high. However, corporate earnings have been low, and until recently enterprises have primarily focused on enhancing efficiency. Credit developments are giving ambiguous signals to our interest-rate setting. Growth in household borrowing is high, but enterprises have reduced debt. The change in the breakdown of credit may have been amplified by banks’ increased eagerness to extend credit to households after a period of losses on loans to the business sector. Some reports from our regional network indicate that are some liquidity constraints for the business sector in some areas. According to reports from Northern Norway, banks seem to have become more cautious in extending loans to the business sector. Banks are requiring higher levels of capital and earning capacity. Total credit is expanding broadly in line with normal growth in nominal GDP. Developments in credit to enterprises shadow developments in their investments. Low credit growth indicates that corporate investment in the mainland economy has still not picked up even though there seem to be signs that the decline is levelling out somewhat. Norwegian households generally finance their mortgages at an interest rate that follows the short-term money market rate. Floating interest rates tend to vary widely over time. The interest rate level is very low at present, and long-term investments cannot rely on this interest rate spanning the life of a housing loan.

Moreover, there now seems to be a tendency towards investing in property and taking up 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 time horizon than the usual two years to attain the inflation target. At present, however, debt accumulation is high only in the household sector. There is little borrowing activity in the enterprise sector. House prices are rising, but prices for office space are stable. Output and employment are at trend level. Unemployment is on a par with the average for the 1990s, wage growth is consistent with the inflation target, credit growth is close to long-term nominal GDP growth, relative labour costs and prices are approximately at the same level as the average for the past 30 years and the interest rate differential is close to zero. But inflation is low, as a result of the lagged effects of the strong krone, low import prices and high productivity growth. The analyses in the inflation report indicate that inflation will remain low this year, picking up thereafter. The krone depreciation since January 2003 is expected to push up prices for imported consumer goods.
Fintech startups leverage on banks for regulatory compliance and access to customer base, while banks allow them to ‘plug-into’ their business as a swift means of acquiring technology; c. This collaborative model is made possible by the application of new technologies such as distributed ledger and open API across a wide range of financial services; d. Consumers and businesses will have access to highly competitive and efficient financial 3/5  BIS central bankers' speeches  services, driven by both scale and adoption of technological innovations; and e. In this scenario, greater financial education and literacy is important to ensure that the benefits of technology and innovation in the financial sector are fully realised. The third scenario is “New Kids on the Block” a. In this scenario, both technology adoption by incumbent banks and fragmentation among finance providers are relatively low; b. Consumers continue to accord a premium to regulated institutions and the existing idea of financial services being offered by a bank; c. Factors such as security, privacy and reliability remain at the forefront of the value proposition of traditional banks.

Owing to a high employment rate, the number of employed persons as a share of the working-age population is now close to the level prevailing before the sharp fall in oil prices in 2014. In 2018, employment rose in most sectors of the Norwegian economy, including oil-related industries. More people entered the labour market, but unemployment nonetheless edged down. There are signs of growing pressures in the economy. A rising number of Regional Network contacts report little spare capacity. A number of employers report difficulties in finding skilled and experienced labour. In the wake of the oil price decline, wage growth has been moderate. The improvement in the labour market has contributed to a pick-up in wage growth in recent years. At the same time, inflation has been high. As a result, real wage growth has been low, with little improvement in household purchasing power. Chart: Consumer prices 2/3  BIS central bankers' speeches  Consumer price inflation edged up through 2018, primarily reflecting a sharp increase in electricity prices. Underlying inflation also moved up, partly owing to the pick-up in wage growth and higher imported inflation. Annual consumer price inflation (CPI) was 2.7 percent in 2018. Persistently high debt growth has added to the vulnerability of the household sector. High house price inflation has fuelled debt growth. In 2018, house price inflation was low, and debt growth eased somewhat. Debt nevertheless grew faster than household disposable income.
A recent Banco de España’s research paper documents that this programme also had a positive side effect on the access of SMEs to funding given that banks reallocated the credit previously granted to bond issuers to smaller firms that do not have access to financial markets.7 Among the more permanent factors that could have contributed to the recent trend of financial disintermediation is the introduction of the new global banking regulation as a reaction to the financial crisis. The new regulation aims to improve primarily the resilience of banks to shocks and will have a positive impact on overall financial stability. However, as it has been documented in some papers, these regulatory measures might also reduce somewhat the ability of banks to compete in the intermediation of some financial flows8. But going forward, it is still under debate at the global level to what extent elements of the new regulatory framework should be also applicable to some non bank financing channels, as long as they might share with banking activities similar underlying risks to financial stability, such as maturity transformation and high leverage. If finally applicable, this might imply a more level playing field between banking and non bank intermediation. Another permanent factor that is contributing to the development of capital markets in the EU is the launch of new markets such as the alternative stock and fixed-income markets aimed at attracting medium-sized companies, although the size of these markets is still relatively small.

Apart from the aforementioned implications in terms of the low diversification of firms’ financing sources, this situation has also implications for the ability of households and firms to hedge against country-specific sources of risk to smooth income, consumption or investment growth. The evidence for United States shows that cross-ownership of assets all over the country, and especially equity securities, has played a key role in smoothing state-specific shocks6. By contrast, this mechanism is less powerful in Europe since the cross-border ownership of assets is still limited. The project of the Capital Markets Union (CMU) aims at the developing and integration of capital markets in Europe. In my view, the CMU project is an important step forward to reach the goal of correcting some structural deficiencies of the EU capital markets in terms of their relative underdevelopment and fragmentation. CMU Action Plan was launched in 2015 by the European Commission by setting out a list of over 30 actions and related measures to establish the building blocks of an integrated capital market in the European Union by 2019. So far the implementation of these measures has been slow. In any event, in recent years the role of European capital markets as a source of funding for firms has increased. For example, the ratio of financing through fixed-income securities to total debt financing has grown from 8% in 2007 to 12 % in 2017. A similar trend has also been observed in other advanced economies including the United States.
That spiral defined the pre-crisis arms race in financial returns. It generated an equilibrium of synchronously high returns and pay, as banks unilaterally militarised as defence against their competitors. But as in military arms races, the resulting outcome was a sub-optimally risky one. High equity returns came through risky leverage. And high pay, especially in equity-based forms, further encouraged risk-taking.17 The resulting high-leverage equilibrium sowed the seeds of the financial crisis. With hindsight, it was easy to spot this market failure, the co-ordination problem. Banks and the financial system as a whole would have been better off had there been a benign, enlightened regulatory planner, able to co-ordinate banks on a lower return equilibrium. Unfortunately, there was not. ************ Over the past decade, trading in financial markets has undergone a technological revolution.18 The frontier of this revolution is defined by speed. A decade ago, trade execution times were measured in seconds. A few years ago, they were measured in milliseconds. Today, they are measured in microseconds. Tomorrow, it will be nano-seconds or pico-seconds. For technologists, this is a “race to zero” – the promised land of zero  12  Haldane (2011a). 13  Haldane (2011a). 14  Gabaix and Landier (2008). 15  Aikman, Haldane and Nelson (2010) provide a formal, multiple equilibrium model of this phenomenon. 16  McLean and Nocera (2010). 17  Cheng et al (2010), Fahlenbrach and Stulz (2009). 18  See, for example, Foresight (2011).

Ruin is the destination to which all men rush, each pursuing his own best interest in a society that believes in the freedom of the  1  Byatt et al (2001). 2  Science News (1983). 3  Frank (2011). 4  Ridley (1993). BIS central bankers’ speeches  1  commons”.5 Therein lies the tragedy, the market failure. This situation is made more, not less, tragic by unbridled competition. The tragedy of the commons is one example of an age-old problem of military arms races. The incentives of individual players, and outcomes for society, are much the same as in commons tragedies. Individual country incentives are to increase military might, to leapfrog opponents to improve national security. But this game of leapfrog is a Red Queen Race. The quest for national safety results in a steady rise in military spending and a steady fall in both societal and national security. The common good is jeopardised. These arms-race dynamics, and commons tragedies, have a history in economics too. It is not just plumage that is conspicuous. As Thorstein Veblen set out at the end of the 19th century, so too is consumption.6 Some goods serve as a signal of social standing: they are positional. Not everyone can have the apartment which is closest to the sea. As in other arms races, the equilibrium is a sub-optimal one – a competitive shopping war in which everyone conspicuously over-spends. And so it is with economic behaviour more generally.
05.05.2022  Opening remarks 112th Meeting of Central Bank Governors of CEMLA Pablo Hernández de Cos Governor  Ladies and gentlemen, good afternoon: It gives me great pleasure to welcome you here today in Seville at the opening of the 112th Meeting of Central Bank Governors of CEMLA. Having been obliged to hold this event virtually in the past two years it is particularly gratifying to be able to meet in person, although we cannot consider the pandemic to be fully over just yet. It is a great honour for the Banco de España to organise this meeting jointly with CEMLA. I should like to take this opportunity to thank Governor Villar, Chair of the Governing Board of CEMLA, and Dr Ramos Francia, Director General of CEMLA, for their invitation to hold this event in Seville. This is the second time, after the 2003 edition, that the meeting will take place here in Seville, which, as the former president of Columbia César Gaviria recalled, Octavio Paz described as the most American of Europe’s cities. At a time when international cooperation is more important than ever, CEMLA stands as a magnificent example of a multilateral institution that fosters such cooperation.

Set up in 1952 under the auspices of the Banco de México and with the support of six other founding central banks (the central banks of Chile, Colombia, Cuba, Ecuador, Guatemala and Honduras), CEMLA has for seven decades promoted debate over, and a better understanding of, important monetary and financial matters for the region’s monetary authorities, and helped share best practices in the different areas of central banking among all of its associate members. CEMLA currently has 31 associate members and 20 collaborating members, and has established itself as the foremost institution in Latin American central banking. The Banco de España has worked closely with CEMLA since joining as a collaborating member in 1965. After participating in CEMLA’s governing bodies in an observer capacity for two decades, last year the Banco de España became an associate member, thus reinforcing its commitment to the organisation. Allow me to share with you now, in these opening remarks, a few brief thoughts on the need to reinforce multilateral cooperation in the current geopolitical context to which I have just referred. Russia’s attack on Ukraine is taking an appalling toll in terms of lives, destruction and displaced persons. Of course, it is also having an economic impact, one that is putting our responsiveness to the test. The war broke out at an already delicate juncture for the world economy, with the various regions emerging from the pandemic at different speeds and amid much uncertainty, inflationary tensions and global production chain disruptions.
In 2005, 4 commercial banks launched the E-switch facility to allow their customers to share their ATMs and other payment delivery channels, like point of sale terminals. These services were unheard of before the reforms and were supported by the international community. •  Commercial banks have also embarked on other initiatives including expansion programmes based on the community banking concept. This is consistent with the rural banking concept and is intended to provide financial services to those sectors of the community that are not currently serviced by the banking sector. BIS Review 72/2006  1  Your Excellency, to meet the challenges which come with an expanded banking sector and in our desire to continue modernising the overall financial sector, it has been imperative to strengthen the prudential and supervisory mandate of the Bank of Zambia. In this regard, the key initiatives that have been endorsed, with an ultimate goal of promoting safe, sound and efficient operations have included: •  The enactment and amendment of the Banking and Financial Services Acts in 1994 and 2000, respectively.

A first source is the “too big to fail” (TBTF) problem – that the Swiss banking sector has several banks with balance sheets that are large in relation to GDP. A second key source of risk resides in the substantial imbalances that have been building up in Swiss real estate and mortgage markets and the high exposure of domestically focused banks to these markets. Let me mention here that other possible system-wide sources of risk discussed on the global level, in particular those in the “shadow banking” sector, are considered less of an issue in Switzerland. One reason is that shadow banking assets in Switzerland carry low to moderate bank-like systemic risks. Another reason lies in the fact that bond funds and other investment funds, which make up 60% of shadow banking assets in Switzerland, are supervised by FINMA. 8 Switzerland has made considerable progress in addressing its two main sources of risk to financial stability. With respect to the risks stemming from the real estate and mortgage markets, a countercyclical capital buffer (CCB) has been introduced. The CCB was activated on a sectoral level in early 2013 and increased in 2014, as a complement to further administrative and self-regulatory measures aimed at increasing the resilience of the banking system and preventing excessive credit growth. Experience with this policy mix has so far been encouraging, and has flowed into the preliminary assessment indicating that these measures have contributed to a recent dampening of corresponding market dynamics.