samchain/econo-pairs-v1 huggingface dataset:
And within the banking system, to strengthen even further the core – the globally and domestically systemic banks which provide the key connections in the financial system and with financial markets. We have, as I have noted, further to travel through the economic stresses of the COVID crisis. The extent of the economic damage remains very uncertain. But as far as the initial phase is concerned, the banking system has by and large been able to absorb a very sharp financial market shock and the large prospective losses. In the UK, the desktop stress test carried out by the Financial Policy Committee on the basis of the scenario for the economy in the MPC’s May Monetary policy Report3, indicates the banks could face up to £ of credit losses over the next two years. There is of course great uncertainty about the future evolution of the pandemic, of the health policy measures necessary to contain it and of the consequent economic impact. The stress test scenario is only one possible economic path through the crisis; more adverse paths are possible. But even after the very significant losses indicated by the stress test, considerable resilience remains in the core banking system to deal with more adverse outcomes: the impact of the stress test would exhaust a little less than half of the loss absorbing capital buffers in the system. Liquidity failure, as we learned 10 years ago, can damage the banking system faster than credit impairments.

But as with CCP margin, it is important that we remember the reasons for the regulatory reforms in this area. As I have noted, one of the key differences between this crisis and the financial crisis has been the ability of the core banks to absorb a very severe financial market shock. We should not put that at risk by weakening the regulation of banks. If we want to increase the overall resilience of the system we cannot simply lower resilience in one area in order to strengthen it in another. Rather we need to look at other ways to reduce surges in the demand for liquidity and improve the supply of liquidity under stress. See BIS (2017) ‘Repo market functioning’ https://www.bis.org/publ/cgfs59.htm and BIS (209) ‘September stress in dollar repo markets: passing or structural?’ https://www.bis.org/publ/qtrpdf/r_qt1912v.htm 14  13  All speeches are available online at www.bankofengland.co.uk/news/speeches  13  Conclusion  The issues outlined above are neither an exhaustive nor a definitive list. There are other lessons about the financial system under stress that we will inevitably learn as this crisis progresses. Not all of these will be in the financial market and non-bank sectors. We will, as I have said inevitably learn more about the performance under stress of the banking capital regime and the usability of banks’ capital buffers. But the list, I think illustrates two important points.
The quantitative effects in the scenario are estimated using the Riksbank’s macro model for the Swedish economy, but such estimates entail a degree of uncertainty and other empirical approaches could lead to different results. A common result in the research literature is that if we take into account the fact that there is uncertainty about the impact of monetary policy then we should act more gradually over time. However, it may then take longer for inflation to approach the target and for resource utilisation to normalise than if we do not take such uncertainty into account.3 This line of reasoning may therefore mean that a higher repo-rate path is better balanced than the example’s lower path, despite the fact that it will take longer for inflation to reach the target. Put another way, if we are not absolutely certain about the outcome of monetary policy it is better to proceed gradually. Moreover, the repo rate is already low at present at the same time as we are seeing more and more signs that economic activity is picking up and at the same time as there are risks associated with household indebtedness. I would like to begin by discussing why household indebtedness has affected my stance on monetary policy. Risks and rewards must be weighed against each other Asset managers think in terms of risks and rewards.

Luis M Linde: Overview of Spain’s economy in 2012 – reflection and outlook Testimony by Mr Luis M Linde, Governor of the Bank of Spain, before the Parliamentary Committee on Economic Affairs and Competitiveness, Madrid, 20 June 2013. *  *  *  Ladies and gentlemen, I appear before this Committee on the occasion of the presentation of the Banco de España Annual Report for 2012, one of the most difficult years for the Spanish economy of the last decades. I shall begin with a review of the general economic situation, and then focus on the progress achieved in restoring the major balances of our economy, developments in credit and in household and corporate debt, the headway in balance sheet clean-up and restructuring of our banking system, financial regulation reforms and progress in the European Banking Union project. I shall conclude with a reflection on the outlook for our economy. Situation of and outlook for the Spanish economy Throughout 2012 the Spanish economy held on the contractionary course that first became discernible in late 2011. GDP fell by 1.4% during the year, far above the 0.5% decline recorded in the euro area as a whole. This double-dip recession, the second dip of which is less acute in terms of the decline in output but more persistent than its 2008–2009 forerunner, has had particularly serious consequences for employment, which shrank for the fifth year running in 2012.
Andrew Bailey: A resilient financial system Speech by Mr Andrew Bailey, Governor of the Bank of England, at the TheCityUK Annual Dinner, London, 10 February 2022. * * * It’s a pleasure to be here this evening, and let’s take the fact that we are able to be here as a positive sign of things to come. Adrian, it’s timely to recall that, early on in the Covid era, you and I started to talk about the importance of ensuring that the financial system was able to support the economy through the pandemic, and about the need to mobilise to ensure that long term capital would be available for businesses as we came out of the pandemic and beyond. Those discussions formed an important input to the work of the Productive Finance Working Group, work which continues and for which I want to thank John Glen for his leading role and commitment and Nikhil Rathi too. That work is not done, but it has more momentum and substance as a consequence of our early engagement. I am going to say a few words on the subject of resilience, what it means in finance and how important it is. In March 2020, nearly two years ago, we had our initial very difficult time with some financial markets, the so-called “dash for cash” where weaknesses in the system of market based finance amplified the initial covid shock.

But I don’t think that one can realistically argue that we should consciously put the economy as a whole at risk of excess demand pressure and accelerating inflation in order to try to bring about a weakening of sterling against the euro. Yet that in substance is what the witnesses for the prosecution would be asking us to do. Now, even if you accept my case that macroeconomic stability, in the terms in which I’ve described it, is the right objective, there is nevertheless a more technical - but still serious - charge to answer. Some of those who agree in principle nevertheless argue that we are simply exaggerating the macroeconomic risks. The charge in this case is that we don’t in fact need interest rates at their present level, certainly not at any higher level, to maintain macroeconomic stability. That would be a technical judgement on which even the best informed experts might legitimately disagree: in fact as you may have noticed even the members of the Monetary Policy Committee themselves disagree, more often than not, at the margin. Now is not the moment for me to launch into that technical debate - just a day before our monthly policymaking meeting. In fact, strictly speaking according to our MPC “purdah” rules I ought not to be here at all. But you can find a detailed description of the technical debate, in the minutes of our policy meetings and in the Quarterly Inflation Report, either in our printed publications or on the Bank’s website.
Allow me to express in my address also full recognition to Prime Minister Mart Laar who has been the leader of the Estonian government during several critical periods. Mart Laar was the head of the Estonian government during one of the most difficult periods - from the autumn of 1992 to November 1994. This was the turbulent period of initial reforms not only in the economy but the entire society, immediately after the monetary reform and adoption of the constitution. But, with your kind consent, I shall hereby focus on economic issues. These were the times when Estonia’s foreign reserves, in the current denomination, could have been expressed in hundreds millions of euros, the average monthly wage was slightly above one thousand kroons and, by the end of 1992, three big banks had collapsed. These were the years just after the monetary reform when the question “for how long this kroon is going to last” was often asked in Estonia, but even more frequently abroad. The central bank has always stressed the essential backing provided to the stability of the kroon’s exchange rate and the financial system by the economic reforms at large and a stable, predictable budget in particular. We have repeatedly stressed that the foundation for our relative economic success was laid in 1992 and 1993. Our banks would not be so strong to date without solid customers - private enterprises, individuals.

It is obvious that no country, not even Estonia, when planning its economic policies should assume, for example, a 8-8% current account deficit spanning several years. Even if the latter is in the initial years financed through foreign direct investments, the adaptation of the economy is inevitable. The slower the economic growth is during the adaptation period, the more painful it is for the society. The goal of the economic policy should be the prevention of the internal demand-driven boom immediately prior and after the EU accession which will be followed by a significantly slower growth phase. Pre-accession economic programme and macroeconomic risks All these important issues are, to a certain extent, reflected in Estonia’s pre-accession economic programme which was recently approved by the government of the republic. I stress that the projections which form the basis of the national pre-accession programme and the premise that in Estonian economy the real total output is going to increase at the rate of about 6% per year are attainable only if the current economic policy continues. Keeping of the macrobalance is of critical importance for sustaining the economic growth and credibility of the monetary policy. The kroon’s fixed exchange rate and the forthcoming entry into the euro zone are by no means “free lunches”.
On the one hand, global trade may continue to grow more rapidly than expected, thereby supporting euro area exports. Moreover, strong business confidence could provide more support to domestic economic activity in the euro area than is currently expected. On the other hand, downside risks relate to the tensions in some segments of the financial markets and their potential spillover to the euro area real economy. Further downside risks relate to renewed increases in oil and other commodity prices, protectionist pressures and the possibility of a disorderly correction of global imbalances. With regard to price developments, euro area annual HICP inflation was 2.4% in January 2011, according to Eurostat’s flash estimate, after 2.2% in December. This further increase was broadly anticipated and largely reflects higher energy prices. Looking ahead to the next  BIS central bankers’ speeches  1  few months, inflation rates could temporarily increase further and are likely to stay slightly above 2% for most of 2011, before moderating again around the turn of the year. Overall, we continue to see evidence of short-term upward pressure on overall inflation, mainly owing to energy and commodity prices. Such pressure is also discernible in the earlier stages of the production process. These developments have not so far affected our assessment that price developments will remain in line with price stability over the policy-relevant horizon. At the same time, very close monitoring is warranted.

At the same time, the yield curve has steepened somewhat further, implying that the attractiveness of short-term instruments included in M3 continues to decline compared with more highly remunerated longer-term instruments outside M3. On the counterpart side, the annual growth rate of bank loans to the private sector continued to conceal differences in the magnitude of growth across sectors. The growth of loans to non-financial corporations stood at –0.2% in December, after –0.1% in the previous month, while the growth of loans to households strengthened to 3.0% in December, after 2.8% in November. Taking into account the effect of derecognition of loans from bank balance sheets and looking through short-term volatility, the latest data confirm a continued gradual strengthening in the annual growth of lending to the non-financial private sector. At the same time, the latest data point to the overall size of bank balance sheets having contracted again after expanding for most of 2010, mainly on account of a reduction in lending between banks. It is important that banks continue to expand the provision of credit to the private sector, in an environment of increasing demand. To address this challenge, where necessary, it is essential for banks to retain earnings, to turn to the market to strengthen further their capital bases or to take full advantage of government support measures for recapitalisation. To sum up, the current key ECB interest rates still remain appropriate. We therefore decided to leave them unchanged.
And the global population scarcely budged, held in check by unchanged food supplies, as th  7  predicted by Thomas Malthus in the late 18 century. Not for nothing was this called the Malthusian era. Another example of this secular stagnation, a favourite of mine, is provided by plotting heights from excavated skeletons records. These are a diagnostic on levels of health and nutrition. Male skeleton heights were essentially unchanged, at 160-170cm, for at least 2,000 years prior to 1750. Humans grew neither physiologically nor financially. And neither, then, did the societies in which they lived. That makes the contrast with developments in the last quarter of the millennium all the more striking. From around 1750, GDP per head suddenly took off and has kept on rising ever since, growing by around 1.5% per year. The magic of compound interest means these growth rates have transformed people’s living standards. The time it takes for living standards to double has shrunk to less than 50 years. The impact on people’s well-being, financial and psychological, has been transformational. It has meant each generation has been around 50% better off than its predecessor. After 1750, generational progress suddenly became visible, children to parents to grandparents. Growth in living standards became a social norm, in a way never previously true in human history. Life’s travellator turned into an escalator. And not just for GDP. Broader metrics of well-being tell a similar tale.

Indeed, one of the key benefits of globalisation over the past several decades is that the freer flow of goods and services, people and capital, ideas and information, has served as a vehicle for the transmission and diffusion of new technologies across borders. Other things equal, this should have accelerated catch-up between countries operating at and inside the technological frontier. 65  Other things, however, have not been equal. Penetration rates of new technologies, once adopted, tell a different tale. They suggest that, over time, there has been a divergence between frontier and non-frontier countries. In other words, the intensity with which new technologies have been used has expanded more rapidly in frontier (especially Western) economies than in non-frontier (non-Western) ones. This will have retarded catch-up between the two blocs. It is a less encouraging story about the diffusion of innovation. With the intensive and extensive margins of diffusion pushing in opposite directions, which has won out? It seems to have been the forces of divergence: slower rates of penetration of new technologies have more than counter-balanced faster rates of adoption across countries. This has shown up in levels of productivity between frontier and non-frontier which, since around 1980, have if anything diverged. Chart 7 illustrates that. It compares levels of productivity across 44 countries since 1950 relative to the frontier country (the US). Convergence prior to 1980 has given way to divergence subsequently.
They show the observed intraday frequency of certain fluctuations in yield on US or Japanese government bonds for the period since 2001. Fluctuations of the magnitude described here are extremely rare events. Such episodes prompted fears that market distortions of this kind could recur at any time. What do these changes in market liquidity mean for the SNB? At the operational portfolio management level, we are affected by the deterioration in corporate bond liquidity. The greatest difficulty stems from the fact that trading is increasingly focused on a comparatively small section of the corporate bonds outstanding. This has meant that large purchases or sales are more difficult, and more expensive, than before the financial crisis. This, in turn, has necessitated some adjustments in the way corporate bond portfolios are managed. The SNB is now more active in the primary sales market than before, and has also expanded its counterparty base. In addition, depending on the liquidity situation, transactions are having to be split into smaller tranches. Overall, therefore, the management of corporate bond portfolios has become more complex and more demanding. By contrast, the markets for highly rated government bonds continue to be very liquid. Shortterm price fluctuations do not place any limitations on the management of the government bonds in our portfolio. As I have already mentioned, we have a very long investment horizon. We hold our investments for at least one full economic cycle and we are not obliged to sell, even in periods of stress.

The possibility to create new access channels provides opportunities for nimble firms that are not banks to act as middle men and provide interfaces that facilitate the initiation of the underlying, more old-fashion payment. Remember that payment initiation services and third-party providers have been at the centre of the discussions on the new Payment Service Directive. These firms don’t compete outright with the banks and in some cases they may even directly cooperate with them. In other cases, the non-bank may compete directly with the banks. It may even have built its own infrastructure or account structure through which it processes payments. This is most likely in cases where the non-bank already has a kind of network that it can adapt and utilize for payments. Telecom operators and Internet service providers are examples of such firms. A concrete example of such a case is M-Pesa, the mobile payment service launched by SafariCom in Kenya. Initially intended for person-to-person payments, it quickly became a success and a platform for a number of financial services. Non-banks can also act as suppliers of services to the banks, e.g. payment switches routing the payment information or the outsourcing of back-end services such as the operation of large IT-platforms, etc. These are all essential inputs for payment intermediation. Because non-banks can enter the payment process in so many places, we have longer and more complex payment processes with more actors involved. Banks, at least for some type of payment services, have less direct contact with the end-users.
In the case of private consumption, there is also a reduction in durable goods consumption due to the peso depreciation and slower growth in real wages associated to the upward revision to the inflation forecast. As for investment, there is the downward correction of the survey from the Capital Goods Corporation on investment plans for 2015. Thus, measured in real terms, gross fixed capital formation should be 23.7 percent of GDP this year. In this projection, gross national savings rises to 21.5 percent of GDP in 2015, reflecting an increase in private saving in the past few quarters. This greater national saving has driven a further reduction in the current account. Accordingly, we estimate that this year it will be near 0 percent of GDP (table 1). On the external front, this projection assumes that our trading partners will grow more in the two-year period 2015–2016 than in previous years. The terms of trade should improve, helped by the drop in oil prices, whose impact will partly outdo the downward adjustment of the copper price. The baseline scenario assumes that copper will trade at an average of 280 dollar cents per pound in 2015–2016. In the same period, Brent oil should average 62 dollars per barrel and WTI oil, 55 dollars per barrel (table 2). Another element contributing to domestic output and demand resuming greater growth is that monetary policy continues to add significant boost to the economy, helping to keep mediumand long-term interest rates at or near record lows (figure 8).

And this takes considerably more time than addressing or doing away immediately with problems by injecting public funds. Yet this requirement to promote private solutions does not fully explain the enormous workload that has fallen on the supervisor over recent years. Insofar as it was decided at first to retain without major changes the singular legal arrangements for savings banks, and particularly their governance, this made it necessary to pursue most complex negotiations with the parties involved, namely trade unions, managers, regional governments, etc., each with very different interests from those that prevail in any mercantile company, where market discipline leads owners to worry about minimising losses and increasing shareholder value, and not about maintaining power, or the total amount devoted to early retirements, or about where headquarters should be established. In merger operations, processes such as determining shares of interest are reasonably easy to agree upon, since it suffices to make a proper valuation and to assign to each party what corresponds to it. But those who have followed the news in recent years will have witnessed the long drawn-out discussions, on a flimsy economic basis, that have been necessary to determine the power apportioned to each player in savings bank integrations. Before their transformation into banks, observance of the legal structure of savings banks meant that their restructuring could only move forward very gradually, step by step and with great prudence.