samchain/econo-pairs-v1 huggingface dataset:
In July 20227 the ECB decided to include climate change considerations in the corporate bond purchases in its monetary policy portfolios, tilting these holdings towards issuers with better climate performance. Moreover, it decided to include these climate considerations in the assets it accepts as collateral in its provision of liquidity to credit institutions. Requirements on the disclosure of information on private sector assets have also been set in place as an additional criterion for accepting collateral assets. 7  See the ECB press release of 21 July 2022: “ECB takes further steps to incorporate climate change into its monetary policy Operations”. https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.pr220704~4f48a72462.en.html  Own portfolios Second, I would like to highlight that central banks are working to incorporate sustainability principles into their own portfolio management. A significant number of NGFS members8 are either planning or have already begun to consider the adoption of sustainable and responsible investment practices in the management of the portfolios in which they are directly involved, such as, for instance, their own portfolios. A growing number of central banks are implementing green bond investment strategies, often with specific purchasing targets.

The positive market sentiment on the European markets has defied both negative reports from the real economy and various political crises, even those in major member states such as Italy. The lower interest rates have improved the growth outlook in the euro area and opened up a time window for structural reform. A certain degree of calming also occurred for the Swiss franc exchange rate. Demand declined for investments which were seen as safe havens, such as the Swiss franc, with the result that foreign currency purchases to defend the minimum exchange rate have not been necessary for over a year. However, investors remain cautious, as can be seen in chart 1. First, the exchange rate did not perceptibly move away from the CHF 1.20 level until January 2013, in other words, after many months of declining risk premia. Second, the Swiss franc has not weakened fundamentally against the euro during the course of this year, although risk premia have declined further. Nevertheless, many market participants expect a renewed depreciation in the Swiss franc in view of the progress in the euro area. The value of the Swiss franc is still high at present. As can be seen in chart 2, the trade-weighted, inflationadjusted exchange rate for the Swiss franc, for instance, is currently about 10% above its long-term average. The minimum exchange rate continues to prevent an undesired tightening of monetary conditions should the upward pressure on the Swiss franc intensify once again in view of the current uncertainty.
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, appear to have increased such mimetic 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 wrong alone. -  The spread of certain fund management techniques, in particular index management, which has proven very popular on equity markets, may have contributed to amplifying movements in financial asset prices. This technique endeavours to match as accurately as possible developments in stock market benchmark indices. It therefore mechanistically leads managers to accentuate current price trends by buying stocks that are on the rise and selling those that are falling. -  The impact of risk management techniques on market dynamics is particularly enlightening with regard to the question of asset price overshooting. Of course, central banks and financial institutions should continue to encourage the use of these instruments. But, in times of financial turmoil, the growing use of sophisticated risk management techniques by financial intermediaries has had the paradoxical effect of amplifying the initial shock and the spill-over effect. Regardless of the intrinsic qualities of these risk management tools, their growing use may have produced pernicious effects.

The two largest banks, which account for half of the domestic banking sector, had prospective capital needs of close to EUR 8 billion – or 44% of GDP. This is what the independent due diligence exercise revealed in February 2013. If the sovereign had shouldered these massive recapitalisation needs, debt would have risen to 145% of GDP. This would have critically endangered public debt sustainability. At the same time, traditional ways of burden sharing by the private sector bank creditors were limited, given little junior debt outstanding in banks. All this made the situation in Cyprus highly challenging and exceptional. One needs to bear in mind the starting conditions when assessing the design of the EU/IMF programme, to which I will now turn. Key elements of the EU/IMF programme  Three key objectives guided the negotiations of the MoU: first, to reduce the risks posed by the financial sector; second, to preserve debt sustainability; and third, to restore the conditions for sustainable and balanced growth. Combining these three objectives has proved to be a challenge, to say the least. Not only did the programme have to strike the right balance between short-term financial stability concerns and long-term debt sustainability considerations. It also had to be framed within a political context which requires unanimous decisions in the Eurogroup and ESM decision making bodies. Due to these exceptional economic and political circumstances, programme negotiations dragged on for too long, and the situation of the banking sector became critical. This forced the ECB to act.
Meanwhile, productivity growth has continued to be higher than expected and we believe that it may rise even further in the near future. Inflation has also been a little lower than anticipated. We are expecting a low underlying inflationary pressure in the short term, but this will probably increase as economic activity picks up. However, import prices are very important to our assessment of future inflation. These have had a significantly subduing effect in recent times, but an upward turn appears probable over the coming year. All in all, our assessment is that inflation will begin to rise later this spring and gradually approach our target level two years ahead. However, we do not believe that this upturn will be particularly dramatic. Let me emphasise that the changes that have occurred since our December meeting are not particularly great. They mainly entail some signs that domestic cost pressure could be lower than anticipated. As early as December we made some adjustments to our estimates in this respect, but the signs were fairly new then and a majority of the Executive Board preferred to await further information that would make the picture clearer. Given this, the assessment was that inflation would be slightly lower throughout the forecast period than was assumed in December; a conclusion that was not particularly sensitive to the choice of  BIS Review 9/2004  5  inflation measure. The Executive Board of the Riksbank therefore decided to cut the repo rate by 0.25 percentage points.

Some analysts have pointed to the possibility that the recent productivity increase could be at least partly due to IT capital now making an efficiency impact on production even outside the sectors producing IT capital, where it has enabled rationalisation of labour and a reduction of the investment requirement. This theory thus explains the combination of rapid productivity growth, weak employment growth and a slow increase in investment, which has recently characterised both the US and Swedish economies. So what - apart from the actual developments in productivity, employment and investment - indicates that this is the explanation? One piece of the puzzle that supports this theory is that the improvements in productivity can scarcely be explained merely by business cycle effects. This becomes clear if we study productivity growth in the corresponding phase of the business cycle during earlier periods (Figure 5). The measure of economic activity we have chosen is, however, more or less arbitrary and does not entirely correspond to the assessment of resource utilisation in the Riksbank's Inflation Report. Nevertheless, this does not appear to affect the general conclusion that productivity growth is unusually rapid at present, bearing in mind economic activity and could thus be a sign of a sustained change. BIS Review 9/2004  7  5.
As a result, to achieve the FOMC’s desired level of the federal funds rate, the Open Market Desk at the New York Fed (Desk) estimated the amount of reserves to add or subtract that would intersect supply and demand at the target interest rate directed by the FOMC.5 All else equal, if the Desk wanted interest rates to go up, it slightly reduced the amount of reserves; if it wanted rates to go down, it slightly increased the amount.6 So long as the Desk was able to effectively forecast the appropriate amount of reserves to add or subtract, temporary open market operations provided it with an efficient means to add or subtract them, and therefore allowed for good control over the federal funds rate.7 These operations were conducted as repos or reverse repos secured by Treasury securities or other high-quality collateral.8 Back then, a typical day on the Desk focused on forecasting the demand for reserves created by reserve requirements and other sources, and projecting autonomous factors affecting reserves.9, 10 With very small amounts of excess reserves in the system, there was a straightforward relationship between rates in a range of money markets. Thus, the Desk was able to target a rate in one part of the unsecured market by conducting small secured operations as needed with primary dealers. Since the financial crisis, the environment has changed in two important ways.

Eddie Yue: New and important frontiers of financial development reached in 2017 Welcome remarks by Mr Eddie Yue, Deputy Chief Executive of the Hong Kong Monetary Authority, at the Hong Kong-London Financial Services Forum 2017, Hong Kong, 18 December 2017. * * *  Opening Richard, distinguished guests, ladies and gentlemen, good afternoon. I would like to welcome you all to the Hong Kong-London Financial Services Forum 2017, especially our guests travelling from London. This is already the seventh Forum since the first Hong Kong-London RMB Forum convened back in 2012. The Forum has proved to be an effective platform for the private sectors in the two places to collaborate and promote the use of RMB in the international markets as well as to grasp the associated business opportunities. Last year, London and Hong Kong decided to broaden the scope of the Forum to cover not only RMB business but also other new and important frontiers of financial development including infrastructure financing, the Belt and Road (B&R) Initiative, green finance, as well as Fintech. Looking back, it was a good move. As 2017 is drawing to a close, I think most of you would agree that B&R and fintech are the two hottest buzzwords in the financial services sector this year. RMB Internationalisation But that is not saying offshore RMB business has been all quiet in the past year. On the contrary, 2017 witnesses important milestones in Mainland China’s capital account liberalisation.
This is the bad news. The good news, however, is that, first, many of the principles underlying pre-crisis monetary policy frameworks are still perfectly valid, so that, in a sense, we do not have to “reinvent the wheel”. Second, the adoption of macro-prudential policies aimed at taking care of the buildup of disequilibria in asset markets, or within specific segments of such markets, offers the possibility of effectively tackling the problems which led us to the current predicament. Thank you for your attention. References Altunbas, Y., Gambacorta, L., and Marqués-Ibáñez, D. (2010), “Does Monetary Policy Affect Bank Risk-Taking?”, ECB Working Paper n. 1166, March 2010. 8  BIS central bankers’ speeches  Borio, C., and White, W. (2003), “Wither Monetary and Financial Stability? The Implications of Evolving Policy Regimes”, presented at: Monetary Policy and Uncertainty: Adapting to a Changing Economy, a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 28 – 30, 2003. Claudio Borio and Haibin Zhu (2008), “Capital Regulation, Risk-Taking, and Monetary Policy: A Missing Link in the Transmission Mechanism?”, BIS Working Paper n. 2588, December 2008. Ciccarelli, M., Maddaloni, A., and Peydró, J.-L. (2009), “Trusting the Bankers: Another Look at the Credit Channel of Monetary Policy”, ECB, mimeo. Dubecq, S., Mojon, B., and Ragot, X. (2010), “Fuzzy Capital Requirements, Risk Shifting and the Risk Taking Channel of Monetary Policy”, Banque de France, mimeo. Friedman, M. (1968), “The Role of Monetary Policy”, American Economic Review, 58(1), 1–17.

For example, we have seen difficulties from banks in arranging promotion of risk culture and cascading the “tone from the top” to different levels of staff, simply because of the lack of F2F interactions. This has tremendously reduced the opportunities for staff to build rapport and foster a common culture, which is an important element in the culture promotion efforts. 5. Secondly, the pandemic disruptions have effectively put bank culture under stress test. Against the new mode of banking operation with significantly reduced F2F interactions, both amongst banking staff and between banks and their customers, there are signs of increasing hurdles in maintaining a sound bank culture. 6. On one hand, there are challenges in ensuring robust controls in a non-F2F environment. 1/4  BIS central bankers' speeches  Reduced physical oversights of staff activities by supervisors could greatly reduce the effectiveness of conventional control mechanisms and practices that worked well in the past, and thereby increased the risk of poor customer outcomes. 7. At the same time, the pandemic is driving changes in customer behavior. Customers have tried to avoid visiting bank branches in person as much as they can. If we look deeper at the statistics, the customer behavior of investment activities registered a significant change in the past two years. The proportion of online investment transactions out of all channels of retail banks has increased from 37% in the first half of 2019 to over 50% in the first half of this year.
This means that the central bank must get people to believe that it will knowingly and deliberately strive to exceed the inflation target. How can a central bank that normally strives to create low inflation expectations and meet the inflation target promise, with any credibility, that it will exceed the inflation target in the future? 6 When we discuss and evaluate various policy alternatives for monetary policy in a liquidity trap, we should thus start from the most important criteria for assessing their effectiveness – how effective alternatives will be in affecting inflation expectations. The solution: affect inflation expectations A credible inflation target An established and credible inflation target above zero and a transparent monetary policy will help to ensure that inflation expectations do not fall too low and to reduce the risk of expectations of deflation arising. The Riksbank has a major advantage in this respect in that we already have a well-established inflation target. By publishing well-founded forecasts for  4  The appendix to this speech shows, in a simple so-called new-Keynesian model, how the output gap depends on expectations regarding the repo rate path, the spreads, the future price level and the path for the natural interest rate; see equations (6) and (7). 5  See Bernanke, Ben (2009), “The crisis and the policy response”, speech at the Stamp Lecture, London School of Economics, January 13, 2009, www.federalreserve.gov. 6  As Paul Krugman put it in his insightful Brookings essay – how will the central bank "credibly promise to be irresponsible”.

But the figures collected by the HKMA for the local banks’ Hong Kong offices show that, in aggregate, their pre-tax operating profits rose by about 15% in 1999. This compares with the decline of 33% that we saw in 1998. This improvement has been supported by renewed growth in net interest income. Moreover, the aggregate bad debt charge of the local banks showed little change in 1999, having increased by 335% in the previous year. It is true that some banks were obliged to increase their provisions against Mainland related companies during the course of the year. But the general trend in the latter part of 1999 was that the growth in new problem loans began to slow down as the economy improved. This is supported by the figures for problem loans in the final quarter of 1999 which we published recently. These show that the ratio of loans classified as “substandard”, “doubtful” or “loss” to total loans fell to 9.8% at the end of December, compared with the 1999 peak of 10.3% at the end of September. At the risk of tempting fate it does seem that the worst of the bad debt problems for Hong Kong banks is over. Certainly all the local banks are expecting a significant reduction in the bad debt charge in 2000, which will give a boost to profitability. Can we say therefore that life for the local banks is getting back to where it was prior to the crisis? The answer unfortunately has to be “no”.
This requires designing policies to support the development of markets’ size and scope, removing barriers between EU capital markets, expanding sources of funding for companies, and broadening the role of the non-bank financial sector. Ultimately, a well-developed CMU will increase private risk-sharing, promote financial stability and boost economic growth. Starting in 2015, the European Commission launched a series of initiatives to stimulate the development and integration of EU capital markets. On market development, the Commission adopted a set of harmonised rules on securitisation and published its fintech action plan in 2018. Initiatives on market integration included the review of the European Supervisory Agencies and the covered bond legislative package. The former aimed to make our system of financial supervision more efficient and effective and also gave the European Banking Authority a coordinating role in the areas of anti-money laundering and terrorist financing. The latter should foster the development of covered bonds by creating a harmonised EU framework, providing a source of long-term financing for banks and supporting the real economy across the EU. Despite the efforts of policymakers and market participants, retail investors are far from having embraced investing in capital markets. While the full impact on the real economy may take time to materialise, it is concerning that the initial ambitions of the plan launched by the European 3/5  BIS central bankers' speeches  Commission towards the development of a CMU were significantly lowered to enable colegislators to reach an agreement.

A robust and stable financial system, that we have managed to ensure so far, is a necessary, but not sufficient condition for achieving sustainable growth. Financial system efficiency needs to be upgraded, so that it serves to lift economic efficiency, not least by harnessing the hitherto untapped strength of the grass-root economies, where the emerging organic social-economic network has increasingly highlighted the potential contribution to growth and welfare improvement. For the banking system, the strategy to harness this potential is set out in the Financial Sector Master Plan Phase 2, which is a continuation from Phase 1. BIS Review 20/2010  1  Ladies and gentlemen, The challenges I have raised, together, pose a tall order. So in today’s talk, let me set out our strategy and policy priority in three parts. First, the SWOT analysis of the banking system and the challenges we face; Second, the key strategies in the Financial Sector Master Plan Phase 2; and Third, the key measures in risk-based supervision to ensure stability. First, the strength of our banking system is evident in its continuous solid performance. During the toughest times, our banks remained strong and resilient against the backdrop of economic slowdown. Loan decelerated, partly due to contraction in corporate portfolio and deceleration in household portfolio, as a result of more cautious business undertaking and household spending, and partly due to tightened loan underwriting standard. The good news is the figures are already starting to pick up again.
Indeed, while the risks of investing in different types of banks do not differ substantially under low volatility conditions, such as the one that prevailed until recently, the risks from investing in large euro area banks increase considerably when market volatility goes up. Overall, however, forward-looking market indicators provide a positive assessment of the outlook for the euro area banking sector, although the uncertainty surrounding this assessment has increased since the publication of the December 2005 Review. The chart on the right on slide 11 depicts the broadly based contraction of a standard measure of credit risk – the expected default frequency –  4  BIS Review 50/2006  across banks with different levels of risk. Notable in this regard is the substantial improvement in this indicator for the most risky banks. 5.3  Other euro area financial institutions – insurance companies and hedge funds  Allow me now to turn to non-bank financial institutions, focusing on insurance companies and hedge funds, two sectors that have been at the centre of attention during the past year. Despite significant losses incurred by the reinsurance sector following the damage caused by natural catastrophes, the financial performance of the euro area insurance sector as a whole improved in 2005, owing to stronger investment income, improving underwriting income and rising equity prices. Market-based indicators suggest that the outlook for the sector remains favourable in the immediate future. However, there are a number of risks facing the industry in the period ahead.

And despite the good starting point, there are some quiet signals of the need to be alert in the UK. The level of debt relative to corporate profits has started slowly rising again. The evolution of corporate debt levels will bear close scrutiny in this market environment. 4. Is the banking system exposed to an adjustment of asset prices? The answer here is given by our stress test last year: Britain’s major banks are resilient to an economic and market stress more severe than the global financial crisis. The 2017 stress test subjected the banks to simultaneous UK and global recessions, a deep market shock and stressed estimates of conduct redress fines. The test included a sharp adjustment in corporate credit markets and commercial property markets. Sterling investment grade corporate bond yields were assumed to snap up almost 800bps as long-term gilt yields rose by over 500bps and credit spreads blew out. Commercial property prices were assumed to fall by 40%. 10  These are typically syndicated loans to large companies which have either high levels of indebtedness, a non-investment grade credit rating, or are owned by a private equity sponsor. For more information, see pages 30-31 of the November Financial Stability Report. 11 As a percentage of institutional leveraged loan issuance. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  More than 5% of UK and global business loans would have been impaired over the first two years of the test period.