samchain/econo-pairs-v1 huggingface dataset:
15  Additionally, some segments in the non-bank financial sector exhibit high levels of vulnerability, similar in fact to those witnessed before the crisis. The search for yield may have also fostered an increase in leverage among relatively risky firms. For example, in recent years there has been a dramatic increase at the global level in the volume of lowerrated investment-grade corporate bonds and in the issuance of leverage loans, many of which are distributed in the form of CLOs. Macroprudential policies are well-equipped to deal with some of these risks. Indeed, the evidence suggests that these policies have been effective in curving financial stability risks. However, most of the existing tools in this area apply only to banks. In a world in which the share of non-banks is increasing, we need to develop new macroprudential tools that can be used to prevent the build-up of systemic risks outside the perimeter of the banking sector. Conclusions  Let me conclude. We seem to be in a new economic context characterised by older and declining populations, radical technological innovations (but not necessarily much higher productivity growth), high debt and low interest rates. All this entails substantial challenges both for macroeconomic policies and for the financial sector. Central banks will need to redefine not only their strategy but also the toolbox to be used when the constraints on their interest rate policy become binding.

Specifically, the central scenario of the UN assumes that, in net terms, around 25 million people will come to Europe over the 2020-2050 period. Therefore, a back-of-the-envelope calculation shows that holding the working age population constant would require at least three times the net migration flow assumed in the baseline scenario. Put another way, if Europe were to offset the projected decrease in the working-age population by receiving more migrants, it would need a net influx of around 2.6 million people each year over the next 3 decades, roughly twice the net migration flow Europe has received in the recent past. We cannot overstate the challenges these magnitudes pose from an economic, social and political perspective. 3  It is worth stressing that population ageing has become a global phenomenon. A closer look at the cross-country evolution of the old-age dependency ratio, that is, the ratio of the over65s to the working-age population, is illustrative of this trend. While in 1950 no country in the world featured an old-age dependency ratio above 20%, nowadays 59 countries surpass this level, including all but one European country. In 2050, according to the UN Population Projections, the group of countries with an old-age dependency ratio above 20% will double to 118, comprising most nations in Europe, North America and Asia.
The second option is to have a mechanism or process to facilitate the orderly liquidation of a defaulted dealer’s collateral. One could imagine a mechanism that was funded by tri-party repo market participants and potentially backstopped by the central bank. This would have the advantage of dealing with the entire tri-party repo market and not artificially favoring one type of collateral over another. It would also push against the underpricing of liquidity and credit risk during good times by forcing market participants to pay for the costs of a liquidation facility up front. 11  OMO eligible is collateral that the Fed can purchase or repo in its open market operations. 12  In addition, because the Federal Reserve is authorized to intervene in the Treasury, agency debt, and agency MBS markets, it could act to stabilize these markets during times of stress. This would make it easier to liquidate such collateral without unduly depressing prices. 6  BIS central bankers’ speeches  Because no single market participant has a strong incentive to develop such a mechanism, however, sustained regulatory pressure may be required to reach such a solution. From the perspective of the tri-party repo borrowers and investors, the status quo undoubtedly is viewed as superior because neither group is forced to fully bear the externalities associated with their actions. Instead they anticipate that emergency liquidity would be made available in the event of a future systemic crisis.

The other path would be to expand the range of financial intermediation activity that is directly backstopped by the central bank’s lender of last resort function. This expanded range  16  Although the largest stand-alone securities firms adopted bank holding company status during the crisis, their non-depository institution arms do not have access to the discount window backstop because Section 23A of the Federal Reserve Act restricts the ability of the holding company to transfer assets from the non-depository institution to the commercial bank affiliate that has access to the discount window. 17  See Daniel K. Tarullo. 2012. “Industry Structure and Systemic Risk Regulation”. December 4. http://www.federalreserve.gov/newsevents/speech/tarullo20121204a.htm. In this speech, he explores three policy proposals: (1) breaking up large financial institutions by reinstating Glass-Steagall restrictions or by imposing other prohibitions on affiliations of commercial banks with certain business lines; (2) placing a cap on the nondeposit liabilities of financial institutions; and (3) requiring financial institutions above a specified size to hold minimum amounts of long-term debt available for conversion to equity to avoid or facilitate an orderly resolution of a troubled firm  8  BIS central bankers’ speeches  could be defined either in terms of access by the types of firms that are systemically important in market-based finance, or by types of activity or assets. It is worth pausing here to review in a little more detail the two key functions performed by a lender of last resort.
The efforts seem to have already paid off – the year 2013 marked a turnaround in Romania’s economic development: economic growth of 3.5% driven mostly by robust export and industrial output on the supply side; a small current account deficit; historically low inflation; while the fiscal deficit was kept well below 3%. And I have every reason to believe that Romania will see further growth in the years to come. And that, unlike in the pre-crisis period, this time sustainability will be the name of the game, as hopefully we all have learned our lessons from our previous mistakes. As they say, no one really learns but from his own mistakes…  BIS central bankers’ speeches  1  Talking about sustainable economic growth, one needs to put things into perspective in order to ascertain whether the economy is on the right track. This means that short-term policies must be harmonised with the long-term vision and goals. Euro adoption could serve as such a long-term goal. And Romania has chosen to use it as an anchor. Let me say a few words about this subject. In the post-crisis period, all non-euro area EU countries in Central and Eastern Europe with floating exchange rate regimes (Czech Republic, Hungary, Poland and Romania), as well as Bulgaria, shifted to a wait-and-see approach as regards euro adoption, even though, in some of them, Maastricht criteria were already fulfilled or within reach.

First and foremost, the project itself is still work in progress and it is always advisable to partake from the inside in the construction of a mechanism that we will eventually have to join anyway. Secondly, with the Banking Union in place, the domestic financial system will be affected regardless of whether Romania is a member or not, so it is better to have a say in the decision-making process that generates such effects, since the latter will impact us one way or another. Besides, Banking Union membership is expected to benefit participating countries through the removal of an incentive for deleveraging on the part of foreign banks, more effective supervision by improving access to information and eliminating the possibilities of jurisdictional arbitrage, as well as the creation of a more competitive market by reducing distortions and entry barriers. Given the share of foreign capital in Romania’s banking system, it makes even more sense to support the project. In light of the above, Romania aspires to be part of all three pillars of the Banking Union. It is our view that adhering to this European project will strengthen financial stability, further increase confidence in the national banking sector (through the harmonisation of supervisory practices and deposit guarantee schemes), as well as foster sustainable lending and economic growth (by reducing the fragmentation of the European financial markets). I shall stop here, thanking you for your attention. I wish you a fruitful outcome of the conference, and hope you enjoy your stay in Bucharest!
Considering the fiduciary responsibility of the Boards towards their stakeholders, and in the interest of wider financial system stability, the Central Bank issued directions on corporate governance in December 2007, requiring the banks to streamline their governance practices commencing from 2008. 3.2 The implementation of the Basel II framework from January 2008 is another enhancement to the regulatory structure, which requires the financial industry to have a better risk management framework. Most of the leading banks have set up independent risk management and compliance divisions to monitor bank-wide risks. These institutions should now focus in moving forward to implement advanced approaches under Basel II framework by setting up data warehouses and sophisticated IT systems in order to have better risk management and compliance. Similarly, the adoption of International Accounting Standards such as IAS 32 & 39 and IFRS 7, which deal with disclosures, presentation, recognition and measurement of financial instruments, also highlight the need for an integrated risk management, disclosures and compliance. There is, however, reluctance by banks to build robust IT infrastructure and advanced IT frameworks due to the high cost of investment and the time it would take to reap the benefits. It is important that banks and financial institutions change this mindset to pave the way for a GRC management and also to avoid operational losses due to product failures and frauds. Risks arising in these areas could spread beyond the financial institution concerned and have the potential to affect the entire industry. 4.

We will need a flexible economy that allows to redirect resources rapidly and efficiently from those sectors that are losing appeal to those that are gaining it; a financial system able to weigh the risks and help new ventures thrive; and we must double our efforts to improve our productivity, and so on. The good news is, as I just mentioned, we have an appropriate macroeconomic policy framework to confront changes in the external environment and an economy that, having made significant adjustments, is now free of significant imbalances. This is why I believe that, never forgetting that we are a small and very open economy and therefore ever exposed to external shocks, we can look into the future with confidence. Thank you. 6  BIS central bankers’ speeches
Rating system design  The first area concerns the design of a risk rating system, which is, of course, central to ensuring the effectiveness of the IRB approach. The Basel Committee believes that banks’ internal rating systems should accurately and consistently differentiate between degrees of risk. The minimum IRB standards in this area build on the strongest risk management practices observed in the industry. To illustrate the point, many organizations either already have, or are in the process of developing a ratings system that captures both the risk of borrower default, as well as transaction-specific factors that shed light on the amount of loss that would arise if default occurs. In other words, these banks’ systems are now oriented to capturing the several essential components in estimating credit risk under the IRB approach. Credit risk rating systems are clearly improving in various dimensions, including how finely they seek to distinguish differing degrees of borrower risk. To do so, banks typically look to expand the number of ratings categories into which they slot their exposures. However, just establishing more rating categories is not enough. The challenge is for banks to define clearly and objectively the criteria for these ratings categories in order to provide more meaningful assessments of both individual credit exposures and, ultimately, their overall risk profile. The clarity and transparency of the ratings criteria will be critical to ensuring that ratings are assigned in a disciplined and reliable manner. b.

In order to become a smart consumer he must try to understand the nature of different kinds of banking products and to avoid those products that go beyond his risk appetite or personal financial capability. This relates to the “smart” part. On the “responsible” part, it is important that when a person takes out a loan from his bank, whether to shop or buy a flat, he should fully assess his repayment capability in relation to his income and expenses. There is not much point in blaming the bank in granting you easy and cheap credit when you have overstretched yourself in exuberant spending or in taking excessive risks in properties or stocks. In the context of buying investment products from a bank, the customer must realise that he is bound by his signature on the agreement, and that he cannot imply obligations which are contrary to the express terms of an agreement. Put it simply, a customer may not succeed in civil litigation for investment losses on the ground that he did not fully understand the terms of the investment contracts. Recent court cases in Hong Kong have clearly demonstrated that the existence of mis-selling by the bank would be a relevant factor in determining the culpability of the bank, but the customer must not harbour the expectation that mis-selling, regardless of its nature and severity, would necessarily lead to full compensation for investment losses.
On the demand side, the below-potential growth of the Albanian economy continued to keep spare capacities in output factors – labour and capital – materialising in downward pressures on wages, output costs and inflation. Economic agents’ expectations remain anchored around the Bank of Albania’s target, owing to its reliable monetary policy, as well. Anchored  BIS central bankers’ speeches  1  expectations in the economy have reduced the so-called second-round effects, in other words, transmission of temporary shocks from higher primary commodity prices in global markets and output costs and higher consumer prices at home. They have provided higher flexibility for the Bank of Albania to pursue its stimulating monetary policy. Overall, these tendencies are expected to continue in the period ahead. Reduction of inflationary pressures in 2011 and expectations for low inflation rates during 2012, motivated further easing of the monetary policy in the fourth quarter of 2011. The Bank of Albania cut the key interest rate twice, namely in September and November, down to the historic low 4.75%. The Bank of Albania holds that the monetary stimulus increase will provide suitable financial conditions for compliance with its medium-term inflation target. Furthermore, eased monetary conditions serve to boost domestic demand, which remains fragile in the presence of higher uncertainties in the economy. In addition, it factorizes prudent fiscal policy for 2012 and expected curbing of public spending contribution to economic growth.

Ardian Fullani: Recent economic and monetary developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the press conference on the Monetary Policy Decision of the Bank of Albania Supervisory Council, Tirana, 25 January 2012. *  *  *  Today, on 25 January 2012, the Supervisory Council of the Bank of Albania reviewed and approved the quarterly Monetary Policy Report. Based on the analysis of Albania’s latest economic and monetary developments and following discussions on their performance outlook, the Supervisory Council of the Bank of Albania decided to cut the key interest rate by 0.25 percentage points. Following this decision, the rate for One Week Repurchase Agreement fell to 4.50%. The key rate is reduced under the conditions of contained inflationary pressures over the monetary policy horizon as well as expectations for a more prudent fiscal policy in the period ahead. The Supervisory Council deemed that this decision provides the appropriate monetary conditions to meet the inflation target over the medium run. Moreover, this movement increases the monetary stimulus and encourages the economic activity in Albania. (Let me now proceed with an overview of economic developments and main issues discussed at today’s meeting.) *** The Albanian economy faced challenges in 2011 as regards economic growth and maintaining of macroeconomic balances. Additional attention to public finance stability in euro-area countries is reflected in added risk premiums in international financial markets and reduced willingness to invest in emerging economies.
Most commentary about the catalyst for these moves has focused on the shift in expectations with respect to U.S. monetary policy – and, in particular, to uncertainty about the timing and implications of Fed tapering. This focus seems generally right to me, although other factors also played a role. From one perspective, the unconventional nature of recent U.S. monetary policy adds little that is fundamentally new to the challenges that face EMEs. These policies simply represent a way of easing that was necessitated by hitting the zero lower bound on the federal funds rate. Central bankers have managed differences across countries in cyclical positions and policy stances many times in the past. This time should not be fundamentally different. But, from another perspective, we have less experience operating with unconventional monetary policy, and this creates more potential uncertainties. These uncertainties put a premium on keen listening skills on our part and clear communication among central bankers as well as between central bankers and market participants. In my view, an important fact is that our large scale asset purchase programs affect the size of term risk premia globally. This new set of monetary policies affects financial asset prices in a different way compared to changes in short-term interest rates, and we should be humble regarding what we claim to understand about this distinction. Looking ahead, it seems likely that markets will remain focused on vulnerabilities that they might have ignored prior to the taper tantrum in 2013.

While raising interest rates is often portrayed as a difficult task for central bankers, in fact, given the events since the onset of the financial crisis, it would be a development to be truly excited about. Raising interest rates would signal that the U.S. economy is finally getting healthier, and that the Fed is getting closer to achieving its dual mandate objectives of maximum employment and price stability. That would be very good news, even if it were to cause a bump or two in financial markets. Global implications of U.S. monetary policy normalization Let me now turn to the implication of U.S. policy normalization for foreign economies. Like other central banks, our monetary policy mandate has a domestic focus. Our monetary policy actions, though, often have global implications that feed back into the U.S. economy and financial markets, and we need to always keep this in mind. For most of us, the market volatility that we saw in the spring and summer of 2013 during the so-called “taper tantrum” still remains fresh in our minds. EME financial markets were hit the hardest, with declines in equity prices, a widening in sovereign debt spreads and a sharp increase in foreign exchange rate volatility. In the U.S., we saw a spike in Treasury yields, with the 10-year rate rising by more than 100 basis points from early May before peaking in early September.
I thank you. 2  BIS Review 15/2009

The reinvestment horizon is linked to the forward guidance on policy rates: we now say that we will “continue reinvesting, in full, the principal payments from maturing securities purchased under the asset purchase programme for an extended period of time past the date when we start raising the key ECB interest rates […]”. This means that any recalibration of the date-based leg of forward guidance by construction extends the period over which investors expect the ECB to continue reinvesting in full; this prolongs the favourable liquidity conditions and reinforces the downward effect of our rate forward guidance on long-term rates by suppressing term premia (see Chart 5). 7 / 19  BIS central bankers' speeches  8 / 19  BIS central bankers' speeches  If warranted by our policy assessment, net purchases under the APP could be restarted in the future.8 In the event of any resumption of net purchases, associated revisions to the framework of forward guidance would have to be considered in order to make sure that the different instruments continue to be tightly linked and that their synergies are maximised. TLTROs The Governing Council recently decided to start a third series of TLTROs (TLTRO III) to help preserve favourable bank lending conditions and support the smooth transmission of monetary policy. The generous borrowing conditions offered to banks should not only provide a backstop to the banking system but also lower aggregate funding costs, which contributes to the overall accommodative monetary policy stance.