samchain/econo-pairs-v1 huggingface dataset:
Even though probabilities of default may be higher for individual SMEs, our research identified persuasive empirical evidence that most banks’ holdings of loans to SMEs benefit from a greater degree of diversification than their holdings of loans to larger corporations do. Diversification helps to reduce both a bank’s exposure to the credit risk posed by SME lending and the commensurate need for capital. Moreover, we’ve taken a closer look at the precautions banks take when lending to smaller businesses, such as asking for guarantees or collateral. These measures help to lower further the potential losses a bank might incur in lending to a small business and can similarly reduce the need for capital. Our findings motivated revisions to the proposals that will prevent an across-the-board increase in capital requirements for SME lending. What’s more, our “quantitative impact studies” have generated solid proof showing that, on average, many banks’ requirements will actually decrease. Three changes to the New Accord are especially relevant. ·  First, in addition to an overall flattening of the risk-weight curve for corporate credits, we have reduced directly the capital charges for loans to smaller businesses. For example, banks on the IRB approach will be permitted to adjust downward the capital requirements on exposures to small businesses with up to € million in annual sales. This adjustment will reduce the capital charges on a loan to an SME by as much as 20% compared to the new requirements for larger companies and may in many cases be lower than the current requirements.

When borrowers pledge eligible collateral or guarantees, and thereby reduce the potential loss on an exposure, banks will be able to hold less capital against that exposure than the 1988 Accord stipulates. This change is especially pertinent to SME lending, since national supervisors will be able to recognise several of the types of collateral and guarantees that SMEs provide. Results of QIS 3 How do we know that these adjustments will help SMEs? To ensure that we’ve got it right, the Basel Committee has conducted a series of “quantitative impact studies” with the active support of many commercial banks. Our most recent study, under the name “QIS 3,” was the most comprehensive, involving an extremely detailed survey of how capital requirements will change for over 350 individual banks in more than 40 countries, including in all EU countries. QIS 3 demonstrates clearly that the new rules will not increase the capital required for banks’ credit exposures to SMEs if we compare the new proposals to the current solvency rules. In fact, our studies show that, on average, banks’ capital charges on loans to SMEs included in the corporate portfolio will remain largely stable for banks using the standardised approach to credit risk and will decline by an average of between 3% and 11% for banks on the IRB approach.
It should vary according to the type of collateral which banks provide, as indeed it does to some extent now. Access to central bank money or asset swaps should, as far as possible, encourage banks to manage liquidity risk prudently. Without the correct pricing structure, the incentives to encourage future risk taking are obvious and potentially large. Valuation margins – or haircuts – are used to protect our balance sheet. By themselves, they aren’t sufficient to create a general pricing structure. The cost imposed by a margin depends primarily on the difference between the costs of secured and unsecured funding, and that will vary across banks and over time. So the key is in the interest rates charged by the central bank. The second challenge is to overcome the ‘stigma’ problem that has plagued the use of central bank facilities throughout the crisis. Commercial banks have feared that, by accessing funding from the central bank, they would acquire a ‘black spot’ in the market. They have been reluctant to come to their central bank unless in good and extensive company. These are challenges that all major central banks are grappling with. They will not be easy to overcome. But with our international colleagues we are aiming to devise a framework that does so.

It was concerns about confidence in the banking system as a whole that explain why the major central banks acted together in December, which in our case meant extending the range of collateral accepted in our regular auctions of 3-month lending. Auctions like this can play a useful role but, as we saw with Bear Stearns, a more continuously available facility may sometimes be needed to avoid an immediate loss of confidence. That is why, in April, when confidence was particularly fragile, we introduced a backstop that is available every day – the Special Liquidity Scheme. As I said in September, in providing such a backstop, we face a balancing act, between avoiding a major shock to the system and encouraging future reliance on the same cheap but risky funding sources. The Special Liquidity Scheme aims to do this by exchanging liquid for illiquid assets that existed only before the end of last year. We intend to learn from the experience of the Scheme to put in place a liquidity facility that works in all seasons – both ‘normal’ and ‘stressed’. It will be part of a set of reforms to our Red Book, to be announced later this year. Any such facility will need to meet two challenges: it will need the right pricing structure and it will need to overcome the ‘stigma’ problem that has affected access to all central banks during the current crisis. BIS Review 75/2008  3  The pricing structure will be key to striking the right balance.
Regulatory response In addition to the actions of the macroprudential authorities, there is no doubt that the public sector response has been, overall, countercyclical and expansionary, helping to cushion the impact of the crisis on the economy. This response has been very different from the one to the financial crisis. The unconventional measures taken by central banks and governments have been particularly noteworthy. But regulators and supervisors have also acted decisively in response to the environment of extreme uncertainty besetting us. Unlike in the case of the global financial crisis, international regulators have tried to act as coordinated as possible. This has been essential in order to foster financial stability and maintain a level playing field in an increasingly interconnected world. A large part of this response has focused on enabling the financial sector to supply the liquidity necessary for the business fabric to be able to survive in the short term. In Europe, a range of measures have been taken, including notably the “quick fix” package of banking rule amendments.

27.11.2020  Opening address of the 19th Conference – Club de Gestión de Riesgos de España Margarita Delgado Deputy Governor  Introduction Many thanks to the Risk Management Club for their kind invitation to open this annual conference. We are now into its nineteenth edition that, inevitably, will focus on the new challenges in the aftermath of COVID-19. The title of this conference refers to the “new world” that will be awaiting us after overcoming the crisis caused by the pandemic. Needless to say, we all wish that this happens as soon as possible. It may seem a little excessive to talk of a “new world” after the pandemic, but I believe to some extent it will be. We should remember that crises are periods of change, in which what is established is called into question. Each crisis is certainly different from previous ones. Or rather it should be different, at least if we supervisors, regulators and banks learn from the past and avoid making the same mistakes. In any event, it seems we have now been hearing the word “crisis” more than ever for over a decade. Until relatively recently, when we referred to “the crisis” we had the global financial crisis in mind. Now, sadly, we must clarify which crisis we are talking about. It could be said that the society we live in may be the result of how we have tackled and resolved each of the crises we have faced.
The continuity of reform momentum – especially that geared to product and  6/7  factor markets and to improving the business environment – is a key element for promoting growth. In Spain, the recovery is providing for significant headway in restoring the main macroeconomic equilibria. But we cannot maintain our growth if we abandon, or step back from, the agenda of reforms aimed at improving our productivity, our competitiveness and the flexibility of our productive system; these are the pillars of economic growth, of lower unemployment and of the re-balancing of public finances that ensures their sustainability and provides for fiscal policy headroom to boost investment and growth. Last but by no means least, the demographic developments our country will foreseeably face in the coming decades, like other EU members, place greater and more pressing demands on the economic policy responses to the foregoing challenges. This is because a progressively older population makes it more difficult to entrench budgetary sustainability and to ensure long-term economic growth. Conclusion As we all know, the economic and political context in which we must face these challenges is not exactly going to be an easy one. The plans for European unity, in their various configurations prior to those we have today, have over the almost 60 years since the project was launched overcome highly diverse difficulties.

Although the economic recovery has provided for an appreciable reduction in this rate, it still stands at around 19%. Foreseeably, several years must go by before unemployment in Spain falls to levels comparable with those of other developed economies. Of note in Spain’s case is the heterogeneity of the unemployment rates in different regions, from levels slightly over 12% 4/7  in Navarre to close to 29% in Andalusia, with Catalonia in the lower part of the table at around 15%. Monetary and financial policy in the face of the crisis The recovery in the developed economies, and in particular in the euro area and of course in Spain, has necessitated far-reaching actions in all economic policy areas. Early efforts by the central banks focused on alleviating the liquidity problems affecting the financial system. But the serious worsening of the situation opened the way for more powerful plans, both in the financial and monetary realms and in terms of fiscal initiatives to boost aggregate demand. Regarding monetary policy, the depth and persistence of the crisis has required an ongoing effort by central banks. Over these years, the monetary authorities have broadened their range of instruments, resorting to non-conventional tools that have enabled monetary stimuli to be deepened and that have been conducive to their pass-through to lower borrowing costs, thereby encouraging household and business consumption and investment decisions.
But, for what it is worth, the Monetary Policy Committee’s view – described in considerable detail in our recent quarterly Inflation Report, which I can make available to you for a remarkably modest fee if you care to get in touch with me afterwards – is that while we will  BIS Review 19/1999  6  not see much growth in the first half of this year – certainly in the internationally-exposed sectors of the economy – overall output growth will pick up on the back of stronger domestic demand as we move towards the Millennium to around trend or above from the second half of next year. We can’t of course altogether rule out an actual downturn in total output over the next few months, though the odds are against that for the economy as a whole. And we are reasonably confident that the slowdown will be relatively mild and short-lived – certainly compared with equivalent periods in the past, for example at the beginning of the 1980’s and 1990’s. The good news is that we expect inflation to remain close to the Government’s 2½% target over the next two years, which should allow the relatively steady growth we have seen in the overall economy since 1992 to resume on a sustainable basis. Within this overall picture, we are still confronted with the difficult problem of imbalance between external and domestic demand and the sectoral and regional stresses that this implies.

Financial markets appeared at that time to take the view that European Monetary Union was being driven increasingly by political determination – even if that meant softening the interpretation of the economic convergence criteria written into the Maastricht Treaty. They concluded that this implied a broad rather than a narrow initial euro membership; and that that, in turn, implied a weak rather than a strong euro. But whatever the reason – and whether it was valid or not – the effect of sterling’s appreciation was to introduce a pronounced imbalance into the UK economy. It dampened net external demand, and had a restraining influence on cost and price inflation, at a time when domestic demand growth remained unsustainably strong, and when we were approaching full capacity. We understood very well that, after a relatively favourable exchange rate environment, following our exit from the ERM, the abrupt appreciation meant that the internationallyexposed sectors of the economy, including large parts of manufacturing industry, were now suddenly confronted with much harsher trading conditions. That, as I say, had a dampening  BIS Review 19/1999  4  effect on the UK economy and on inflation. But we couldn’t just rely on that to cool the economy for us. Clearly at some point the exchange rate would stop appreciating, and this external dampening effect would have worked its way through. In the meantime, we needed to slow the rate of growth of domestic demand sufficiently to avoid overheating in the economy as a whole.
We may very well be setting a new expectation, standard and text-book for bank resolution, and it may not be the standard we want to set going forward. Moral hazard and time inconsistency are always difficult subjects. For financial institutions in the SEANZA region, many regional financial institutions, thus far unaffected directly by the crisis, are also moving into new markets, such as expanding regionally. Indeed, there is some indication of search for yield, as managed funds start to flow overseas to markets which have attractive risk-return prospects, for example due to prospect of faster recovery, or due to some distortion created from implicit risk-guaranty on certain asset classes as a consequence of rescue package. In some countries, certain asset classes such as real estate may be benefiting from ample liquidity, giving rise to concern on asset bubble. 2  BIS Review 146/2009  All these spell potential for increased volatility and demand increased vigilance on management of risks, not only for those arising from country risk and market risk exposures, but also to exposures from counterparty and liquidity risks arising, for example, from hedging positions in OTC markets. Some of these risks, such as country risk, may have hitherto been marginal for regulators in emerging markets, but going forward things may change quickly. Moreover, with credit-play still a very risky and expensive business, with lending subdued by low demand for loans, treasury return could be a potential profit centre, especially with various liquidity support in interbank markets globally.

Reference to excessive monetary growth made central banks relatively immune to daily political and fiscal pressure, even in places where institutional independence had not (yet) been established. Control of the money supply lost some of its attractiveness because its central analytical basis was subject to successive erosion. Money demand functions became increasingly unstable. Given some differences between countries on the one hand and the aggregates employed on the other hand - mainly M0 to M3 - the connection between the intermediate target and the ultimate target became more and more unreliable. That was also the case in Switzerland, even if with a time-lag and to a lesser extent than in other countries, notably English-speaking ones. We recorded shifts in cash  BIS Review 35/2000  2  holdings which we could not even explain satisfactorily ex post, much less have forecast them with any degree of accuracy. The central banks reacted differently to this experience. Some rapidly threw money supply targeting overboard. Others - including the SNB - changed from annual to medium-term targets. The extended room for manoeuvre made it possible to consider various indicators in shaping the policy course. One could use the term pragmatically adapted targeting of the money supply. In actual fact, this step came close to a transformation of the money stock from an intermediate target to a monetary indicator, albeit the most important one. The destabilisation of money demand as previously set out has complex reasons on various levels.
BIS Review 8/2004  7  institutions and households in the treasury bills market has demonstrated upward trends in the last two years. In the coming year, their deficit financing is expected to reach the value of Lek 2.6 billion. Budget deficit financing from the banking system in 2004 is forecasted to be Lek 20 billion or 2.3 percent of the GDP. The law provided the Bank of Albania to finance the budget deficit up to the level of 5 percent of the average budgetary government revenues during these three last years. In absolute value, this limit is estimated to be Lek 7.7 billion. The monetary program for 2004 forecasts that the Bank of Albania financing of the budget deficit will be Lek 7.5 billion. This financing by the Bank of Albania is necessary in covering the budget deficit, considering a small growth of the M2 and Lek deposits. The monetary program forecasts that the increase of Lek deposits during 2004 will be sufficient in covering the other part of Lek 12.5 billion of the deficit financing from the banking system. The following table shows the allocation as to trimesters of the budget deficit financing for the banking system. Table 9. Allocation of the budget deficit financing (Lek billion).

3.1  Money supply and its constituents  Money velocity is forecasted to be relatively stable during 2004. This assumption is based on keeping up the monetary developments trends of 2003 even for 2004. Thus: •  Inflation is expected to be within the target of the Bank of Albania  •  Interests rates are expected to be stable or in downward trend  •  The government demand, which is also the main source of requiring funds, is expected to be at the same level, 2.7 percent of the GDP  •  The growth rate demand for the economy is expected to be almost the same as the 2003 one. Based on these considerations, the M3 circulation velocity - as to trimesters - is presented as follows: Table 3. Money circulation velocity in 2004. (GDP as to trimesters*100 / M3) Dec '02  March  June  42.9  43.9  43.9  September Dec '03 42.9  42.9  March  June  44.1  43.3  September Dec '04 43.2  43.1  Based on this forecast, the money supply is expected to grow by 10.6 percent or by Lek 47.4 billion. 3.1.1  Money supply constituents  The ratio of money outside banks versus the money supply noticed during 2003 is not expected to undergo significant changes during the coming year. However, an upward trend of the foreign currency deposits ratio versus M3 is expected, bringing about a decrease of the Lek deposits weight versus money supply.
Overall, I believe that Europe has the ability to meet the challenges that the western world faces, if it is able to make full use of its own experience and institutions. Changes are nevertheless needed. And this brings me to the questions specific to Economic and Monetary Union. 2  BIS central bankers’ speeches  In this regard, I would like to make two main points: first, the global economy is becoming increasingly “multipolar” and the euro will have to stand its ground alongside at least three – and possibly more – other major international currencies. Second, the euro can only be assured of a major role in a multipolar currency world if the architecture underlying the single European currency is sufficiently strong. The task of achieving this cannot be delegated to financial markets and requires appropriate institutional steps. The euro in a multipolar world When the idea of the single currency was first mooted in the 1980s, the global economy was dominated by three countries: the United States, Germany and Japan. Since then, the global economy has seen major changes. With the ongoing integration of global markets, we have witnessed the rise of emerging market economies. China, in particular, has led to a progressive shift in the centre of economic gravity and is expected to overtake the United States in terms of GDP at market exchange rates sometime from 2025 onwards.

Fiscal deficits in emerging Asia are 2–3% of GDP.   The debt burden is low. Public sector debt ranges from about 25% to 55% of GDP. External debt is about 30% of GDP.   Official foreign reserves are healthy.   The banks are well-capitalised. The 25 largest Asian banks comfortably meet Basel III Tier 1 capital adequacy ratios.   Governance is stronger. Stronger regulatory frameworks and corporate governance reforms following the Asian financial crisis in 1998 have improved the resilience of the financial and corporate sectors.   There is policy flexibility on the fiscal, and to some extent, monetary fronts, in the event global growth slips more than expected. Notwithstanding emerging Asia’s strong fundamentals, there is no room for complacency. The region is not without significant challenges which, if unaddressed, will prevent it from realising its potential and render it more vulnerable to shocks from the advanced economies. Let me highlight three medium-term imperatives for emerging Asia. Increasing domestic demand First, Asia must increase domestic demand. As growth slows in the advanced economies, it is in the region’s interest to reduce reliance on external demand and develop indigenous sources of growth. This will help to strengthen and stabilise Asian economies over the longer term. If an increase in domestic demand in Asia is complemented by fiscal consolidation in the key industralised economies, a longer term rebalancing of global demand could be achieved. 2  BIS central bankers’ speeches  Demographic factors will work to increase domestic demand in Asia.