samchain/econo-pairs-v1 huggingface dataset:
Ardian Fullani: Concerns of the prospective ERM II members Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the conference “The Mission of Contemporary Central Bank” organized by the National Bank of Poland, Warsaw, 15 December 2006. *  *  *  Your Honor Mr. Balcerowicz, Honorable Governors, Dear Colleagues, Ladies and Gentlemen, I would like to take this opportunity to thank Mr. Balcerowicz and the National Bank of Poland for the invitation. It is an honor for me to take part in this discussion and to share my thoughts concerning the challenges facing prospective ERM II members. The central theme of this conference – the mission of the contemporary central bank with the focus on euro adoption – is of crucial importance for countries aspiring to become members of the big EU family in the not-too-distant future. Drawing from the experience of current and prospective members, accession to this family is a complex and challenging process. As a test of the nominal convergence of a country, the ERM II mechanism has attracted a lot of academic interest and criticism. Conceptually speaking, the ERM II directly precedes the full integration in the EMU. (I)  ERM II as a step towards EMU  To put the ERM II in a proper context, we need to be clear on the fact that it is an early necessary step before Euro adoption. Therefore, entry into ERMII is conditional on the economic and political readiness for entering the EMU.

Too many Malaysian households have been thrust into vulnerable financial positions that might have been mitigated, due to high debt levels, low buffers and poor financial habits that left them sorely unprepared to cope with unexpected shocks during the pandemic. When confronted with having to deal with their financial difficulties, many struggled to take appropriate steps to gain control of their situation and make good choices. As a result, individuals have had to resort to drawing down on retirement funds, or incurring higher debt just to get by. And there are still too many who continue to fall prey to desperate financial scams and fraud. Indeed, the need to double down on financial education has never been clearer. We need to build stronger resilience among all Malaysian households. We need to equip and empower Malaysians with the right knowledge and skills to confidently make responsible financial decisions at key stages of their lives. We need to promote healthy attitudes towards financial management. And in Kofi Annan’s words, we need to build a bridge to hope for every Malaysian who has been affected by the pandemic crisis – not just to tide over the immediate challenges that they face, but to provide for their future financial security. With this in view, this Community of Practice aims to help FEN members and the broader financial education community develop effective responses to meet the challenge of delivering lasting and impactful financial education to society. The Community of Practice agenda today focuses on two key areas.
Since summer 2005, the key policy rate has gradually been raised again to a more normal level in order to prevent inflation from becoming too high. As mentioned, external interest rates are again moving down and the interest rate differential against other countries has widened recently. This may lead to a stronger krone, but there are also opposing forces in the foreign exchange market. In the long run, the krone exchange rate is determined by changes in the terms of trade and permanent differences between domestic and external inflation and productivity. But the krone exchange rate also shows monthly and yearly fluctuations. The krone was strong towards the end of the previous cyclical expansion, but depreciated when interest rates declined in 2003. Thereafter, the krone appreciated again as growth in the Norwegian economy recovered. Over the past two years, the krone has appreciated by close to 5 per cent. Inflation has nevertheless picked up and is now fairly close to 2½ per cent. 3  3  Norges Bank uses different measures of underlying inflation. In January, the twelve-month rise in the CPI-ATE was 1.9 per cent, a weighted median showed a rise of 2.4 per cent and a trimmed mean 2.9 per cent. The twelve-month rise in the CPI was 3.7 per cent following a sharp increase in energy prices. 4  BIS Review 18/2008  The sizeable basic balance deficit may result in a renewed depreciation of the krone.

Overall, given the acceptance of countercyclical approaches to macroprudential policy, I am sure that the panel discussion tomorrow on the Spanish countercyclical provisions experience will offer not just an interesting study in history, but also some lessons for the future. Without further ado, I am pleased to open this first Conference on Financial Stability giving the floor now to Rafael Repullo, director of CEMFI, who will chair the first session. Thank you for your attention. 5/5
Structures must be in place to prevent weaknesses in the financial system, such as payment or delivery difficulties on the part of a system participant, spreading in an uncontrolled fashion to other participants. In this context, the focus is, for example, on requirements relating to the payment instruments used, the irrevocability of transactions that have already been settled (finality), and on instruments and procedures to limit credit and liquidity risks. 2  BIS Review 58/2003  Collaboration with other authorities The National Bank is not the only institution which actively endeavours to secure the stability of the financial system. There is also contact with other authorities. One of these points of contact arises from the fact that, for example, the operator of SECOM (SIS Sega Intersettle AG) holds a bank licence and is therefore subject to supervision by the FBC. The FBC will still be the regulatory body responsible for the institution itself, while the National Bank will handle the oversight of the system operated by this institution. A parallel situation exists in the case of x-clear, which is operated by SIS x-clear AG - also regulated, as a bank, by the FBC. The FBC and the National Bank coordinate their activities and avoid overlaps. A further point of contact with other authorities exists in the case of financial market infrastructures that are of systemic importance to Switzerland but are operated abroad and thus cannot be overseen directly by the National Bank.

Our use of early warning indicators is precisely because we have learned the hard way with banks that excessive reliance on modelled capital requirements lends itself to cutting capital levels too low. In banking supervision we are playing catch-up by working to raise capital levels from ones that were too low. We can avoid that outcome for insurance by acting now to introduce sensible backstops. Turning finally to the broader global environment, the financial crisis has led to a great deal of debate around whether insurers contribute to systemic risk in the financial system. The IAIS has been considering whether there are insurers which can be classed as Globally Systemically Important. In doing so, it has developed a methodology to identify insurers whose distress or disorderly failure, because of their size, interconnectedness, and the nature of their activities would cause significant disruption to the global financial system and economic activity. This work is at an advanced stage and we should hear shortly from the Financial Stability Board on a list of global systemically important insurers. The implications for being labelled as a GSII will then need to be considered. The PRA recognises that insurers are not systemic in the same way as banks. However, we strongly believe that failure of some insurers could have the potential to pose risks to the stability of the financial system or to directly disrupt economic activity through the availability of risk transfer.
That's why I have said after each monetary policy meeting at which we have left interest rates unchanged that reducing the country's debt is another key condition for lowering inflation. Orderly finances are the road towards a good rating, towards credibility of the country as a whole and towards a strong koruna. Third policy for a strong koruna – long-term growth policy Monetary and fiscal policies endeavour to dampen fluctuations in the business cycle. In the last three years, they have been focused mainly on finding short-term solutions to the Covid and energy crises. However, we must not forget the third variable in the equation, which I would call long-term growth policy. The long-term growth of an economy depends on its production capacity, or on supply, that is, on people and their hard work and on the capital and technology in the economy. I want people to save so that capital is accumulated for investment. I want wage growth to be in line with growth in labour productivity.7 This will increase supply, the country's potential, and the economy will grow in a non-inflationary way. Above all, if there is less debt, the quantity of money in the economy won't grow too much. This is an important condition for reducing inflation. Ultimately, such an economy should attract foreign direct investment and its exports should thrive. The result will be a strong koruna. 1 Zeman, M. (2016). Speech at the Festival exportu 2016 conference, Czechinno,  Prague. 2 See https://www.cnb.cz/cs/verejnost/servis-pro-media/autorske-clanky-rozhovory-s-  predstaviteli-cnb/Covid-a-socialismus-nebezpecny-saci-reflex-naroda/ and https://www.

Joseph S Tracy: Testimony on Housing Finance Reform – essential elements of a government guarantee for mortgage-backed securities Testimony by Mr Joseph S Tracy, Executive Vice President of the Federal Reserve Bank of New York, before the U.S. Senate Committee on Banking, Housing and Urban Affairs, Washington DC, 31 October 2013. *  *  *  Chairman Johnson, Ranking Member Crapo and members of the Committee, thank you for the opportunity to appear before you today. My name is Joe Tracy. I work at the Federal Reserve Bank of New York. Today I will be discussing research1 in the area of government support for housing finance that colleagues and I at the New York Fed have conducted. It is important for me to emphasize that my remarks today, and the conclusions of the research that I will share with you, represent my own views and are not official views of the New York Fed or any other element of the Federal Reserve System. I commend the Committee for focusing on the elements necessary to constitute a robust housing finance system in the United States. By “robust” I mean that such a system must provide for the uninterrupted flow of credit to housing markets even in periods of market stress. In the wake of the financial crisis, significant progress is underway to improve the resiliency of financial markets. Nevertheless, we must plan ahead for the risk of future market stresses.
Both of these examples result in an increased in measured deposits at banks, but neither presages more nominal spending. 9  G Ryle “The Concept of Mind” London (1949) Hutchinson. Ryle was criticising as incoherent a dualist view of mind and body in which the mind is instrumental in determining action but is wholly distinct from the physical realm. BIS Review 73/2007  5  We need to start as the Governor has said by trying to distinguish supply shocks from demand shocks. 10 Where growth in money is driven by the wish of consumers or companies to increase their holdings of money for a given level of spending, there need be no effect on nominal GDP or inflation. As I have discussed there is clear evidence of changes in demand of that sort in the financial sector. But that is not the whole story. So have there been increases in supply of money and if so how will they feed through into the economy? What does a supply shock look like? It is easiest to visualise in a closed economy in which the money supply is mainly notes issued by the monetary authorities. One can imagine then a direct increase in supply – a helicopter drop of extra notes. In that world people would really find themselves with extra cash in their pockets and would be expected to go out and spend some or all of it.

Second the growing importance of bonuses in the financial sector can make it harder to interpret statistics on earnings. City bonuses are generally paid at the start of the year. As Chart 10 shows this leads to big peaks and troughs. At times when changes in earnings growth are of great interest, as they have been in recent months, it is difficult to identify the underlying path. The difficulty is partly a technical issue of how to smooth out the monthly variations. Do we spread the bonuses backwards over the last 12 months on the grounds that they are deferred pay conditional on profits in that period (with the consequence that you don’t know the true earnings figure for any month until over a year later)? Do you spread them forward because they will tend to be spent over the coming year? Or do you do a bit of both? To that uncertainty we can add the fact that there several different measures of earnings growth including two – the AWE and AEI – which are telling a somewhat different tale. 7 There is also a more conceptual challenge. Are bonuses to be treated as part of the cost of labour or are they a form of profit sharing? The economic implications may be quite different. In practice they are probably a bit of both; bonuses are much higher when profits are good, but they are unlikely to disappear entirely in tough times (witness the concept of the “guaranteed bonus”).
This process should lead to a more efficient allocation of finance within the global economy, but it will also call for the ability to adjust to structural changes in order for stable financial systems to be maintained. Today, I should like to outline the likely future development of the financial sector and of the financial markets in the euro area as envisaged by the European Central Bank (ECB). To this end, I shall first briefly discuss the impact of the introduction of the euro on domestic money markets. I shall then turn my attention to likely developments in the financial markets and in the banking system, before concluding with some remarks on how these likely developments might affect the stability and efficiency of the financial system in the euro area. Impact of the introduction of the euro on money markets Until the end of 1998 the various money markets of the euro area still displayed a certain number of distinctive features. However, following the changeover to the euro they were integrated swiftly and smoothly at the beginning of January 1999. A highly competitive single money market has already emerged in the euro area, as banks were well prepared for the changeover to the euro and the TARGET system has provided an efficient means of making cross-border payments. In particular, transaction volumes in money markets rapidly reached high levels while typical bid/ask spreads decreased almost immediately to very low levels. This indicates the depth and high degree of liquidity that the euro money market has already achieved.

A feature of the current stage of the development of the euro money market, which is particularly worthy of note, is that differences in overnight interest rate spreads mainly reflect differences in the credit standing of banks rather than that of the country in which the transaction takes place. 1  BIS Review 63/1999  These structural developments are, of course, positive. For the Eurosystem (i.e. the ECB and the national central banks of the 11 countries participating in the euro area) the existence of a deep and liquid money market enhances the efficiency of monetary policy operations. In this respect, I should like to draw your attention to the “market friendliness” of the framework applied by the Eurosystem to the conduct of monetary policy operations. By this I mean that the framework is based on tenders in which markets decide who receives the liquidity. The standing facilities are open and recourse to the marginal lending facility is not subject to scrutiny. In addition, the list of eligible collateral is extensive. Prospects for the development of financial markets in the euro area Looking now at the financial markets from a broader perspective, it is important to remember that the financial markets of the euro area began the process of integration before the start of Stage Three of Economic and Monetary Union. An indication of the pace of integration before January 1999 is provided in particular by the evolution of spreads between yields on the bonds issued by the various central governments of the euro area.
It is possible to go one step further and argue that higher bank capital ratios could potentially lower banks’ cost of capital. The size of the premium demanded by holders of equity is a long-standing puzzle in finance – the equity premium puzzle. 29 Robert Barro has suggested this puzzle can be explained by fears of extreme tail events. 30 And what historically has been the single biggest cause of those tail events? Banking crises. Boosting banks’ capital would lessen the incidence of crises. If this lowered the equity premium, as Barro suggests, the cost of capital in the economy could actually fall. The costs of prohibition Turning to the other side of the equation, what does existing evidence tell us about the costs to banks of restrictions, whether on the scale or scope of their activities? In Weitzman’s framework, how significant are the private costs of restrictions? Fortunately, there is a reasonably rich empirical literature on economies of scale and scope in banking. 26  Kay (op.cit.). 27  Kotlikoff (2010). 28  Modigliani and Miller (1958). See also Miles (2009). 29  Mehra and Prescott (1985). 30  Barro (2006). 10  BIS Review 40/2010  (a)  Economies of scale  On economies of scale, the literature tends either to look at the cross-sectional efficiency of banks of different sizes, or the time-series efficiency of banks either side of a merger. As it turns out, both roads reach the same destination.

As an example, in the FX market, concerns were raised about the integrity of FX rate benchmarks, particularly around incentives for potential market malpractice linked to the structure of trading around the benchmark fixings, such as the WM/Reuters 4pm London fix. The WM/Reuters fix is one of the long-standing and dominant benchmarks used in the market. It was structured in a way that created an incentive for dealers to “trade ahead” of clients at the fix and also an opportunity for them to influence exchange rates. The FSB’s FX benchmark working group produced recommendations that called for a change in methodology around the structure of the fix and changes in firms’ trading behavior at the fix. Guidance suggested that firms establish and enforce internal guidelines and procedures for collecting and executing fixing orders, such as separate processes for handling such orders. In addition, the group recommended that transactions conducted at to-be-determined levels be priced in a manner consistent with the risk borne in accepting such transactions through such methods as applying a bid-offer spread or a direct fee. The Global Preamble, published by the FXC in coordination with other FX committees, supported and reinforced the FSB’s FX benchmark recommendations. 15, 16 Since the release of the recommendations, a number of changes have been made. For example, there is a new structure for certain FX benchmark rates, including the WM/Reuters fix. Many dealers have changed how they provide FX benchmark execution, with a growing emphasis on the use of algorithmic execution and a more transparent pricing structure.
Technological changes, increased demands for stable supplies and intensified international competition have made enterprises in many industries  ever more vulnerable to even short operational disruptions. The employers’ ability and willingness to take on open labour conflicts have therefore diminished. On the other hand, corporate boards and management are responsible for decisions on expansions, closures, rationalisation, location and workforce increases. Unions have little direct influence on these matters. If company costs increase, either productivity must be improved, production closed or relocated to another country. This is the companies’ arena. Their decisions concerning operations, investment and location are in turn determined by the required rate of return that owners set to keep their capital in the company. Under these operating parameters, developments in labour costs essentially reflect employees’ and their organisations’ assessment of the trade-off between real wage growth and employment. These organisations cannot assume that others can safeguard their members’ jobs when they determine how high pay increases should be. The pay increases for white-collar workers in the business and financial sector and academics in the public sector have been particularly high. For a long period, this mirrored the high wage growth for liberal professions, consultancy firms, law firms and the IT industry. However, wage growth for whitecollar workers and academics appears to be holding up even with weaker labour market conditions for these groups. In many places in our country, public sector wages are higher than the level that can be sustained by local businesses in a less favourable economic environment.

Market participants weigh the interest rate differential between Norway and other countries against the likelihood of a depreciation of the krone in the future. Cyclical divergence can cause the krone to overshoot its future level in the short term. However, in the long term, the krone cannot remain this strong. This would require a substantial improvement in our capacity to generate income. What are the factors behind the wide interest rate differential? With the krone exchange rate prevailing at end-January, competitiveness had weakened by a little less than 25 per cent since 1996. The krone had appreciated by almost 10 per cent. Chart 8. Relative labour costs 120  120  31 January 2003 110  110  Local currency  100  100  90  90  Common currency 80  80 1990  1992  1994  1996  1998  2000  2002  Sources: TRCIS/IMF, Ministry of Finance and Norges Bank  In the same period, wages in Norwegian manufacturing increased by close to 15 per cent more than wages among trading partners. In the years around the millennium, the depreciation of the krone veiled the underlying deterioration in competitiveness. In May 2000, the krone hit its lowest level in six 1 years . The krone has since appreciated, and the effect of high wage growth has gradually come into evidence in company accounts. In the ten years that have passed since the banking and currency crisis in 1992, the economy featured a long period of balanced growth.