samchain/econo-pairs-v1 huggingface dataset:
4 In the year 2002 the costs to society for managing cash were SEK 6.6 billion or 0.3 per cent of Sweden’s GDP. 5 This includes an estimated cost for the time the general public spends on fetching cash and managing it. Almost half of the costs to society arose within the banks and Svensk Kassaservice. Almost an equally great percentage arose in the retail trade, among transport companies and among the general public together, with costs distributed fairly evenly between the three groups. The Riksbank’s and the cash depots’ shares of the total costs to society were modest. The same study estimated the number of payments with cash made in one year at SEK 1.4 billion. This means that each cash payment made in 2002 led to a cost to society of on average SEK 4.6. The costs to society for cash payments in 2002 were estimated at SEK 1.9 billion, which corresponded to almost 0.1 percentage of GDP. That year, 589 million card payments were made. 6 This means that each card payment cost society an average of SEK 3.0. An average card payment is thus around 35 per cent cheaper than a cash payment. Around 2.3 billion transactions were made by card or cash 2002. We estimated that more than 70 per cent of these were paid in cash. There thus appear to be evident cost savings to be made through a reduction in the use of cash.

At first glance it would appear that card payments – which are 35 per cent cheaper for society to produce – should replace cash completely. But it is not quite so simple. There are major differences in how cards and cash are produced. Card payments require an extensive infrastructure of terminals, computers and lines of communication and have substantial fixed costs. But the cost of a card payment is always the same, regardless of whether one uses the card to pay for a purchase amounting to SEK 50 or SEK 50,000. For payments made in cash the variable costs are substantial. Cash payments require considerable physical management such as transport, counting, storage of banknotes, etc. The larger the transaction amount, the more expensive the actual cash payment will be, as it involves a larger share of this management. For payments of small amounts the cost of cash is therefore lower than the cost of a card payment. This means that from society’s point of view, cash may be preferable for making small payments. To obtain an idea of what the size of a transaction may mean, we estimated the costs to society of a cash payment and a card payment respectively as functions of the transaction amount. In this way we could also calculate when it was profitable to pay in cash. The results show that – at lease in 2002 – it was most cost-efficient to pay in cash for purchases amounting up to almost SEK 70. 7 Above this, card payments were always preferable.
Banks and microfinance institutions are now obliged to disclose to borrowers the total loan cost to rule out situations where borrowers end up paying more than agreed under seemingly clear terms. 2/5  BIS central bankers' speeches  Running ahead, we think that there is a need for more stringent legislation in that area, considering that banks have adjusted and some of their ‘offerings’ circumvent the requirement of disclosing the total loan cost, that is the amount they are required to make clear to the borrower. Against the background of economic recovery, disbursements of unsecured loans have accelerated. As I have said, this is driven by high inflation expectations (when people expect higher inflation, they try to buy goods on credit) and fairly attractive interest rates. Banks like this situation, without doubt. They are looking for ways to circumvent our restrictions. For example, we have seen a rise in the share of consumer loans (I mean consumer loans, not mortgage loans) with more than five years’ maturity (from the pre-pandemic 11% to 21% in the second quarter of this year). On the one hand, by extending loan maturity, banks reduce monthly payments, making a loan seemingly more affordable to borrowers. Yet, the total amount of debt per borrower is increasing. This is normal for a mortgage that is issued for a long period (and with much lower rates), but those long periods for unsecured loans are unreasonable and are set to entail problems. We already see a deterioration in consumer lending standards.

In fact, a  BIS Review 88/2006  3  study by the ECB shows that the closer a country comes to an excessive deficit, the more likely it is that the forecast the government presents officially will later turn out to be wrong. There is a strong bias towards unrealistic optimism once a country’s deficit approaches 3% of GDP. The same result was indicated in a study by Lars Jonung and Martin Larch. What challenges does the future hold? Let me say something in this respect about the new member states. It is all too apparent that the collapse of Germany’s leading role in fiscal discipline has also set a bad example for some of the larger new member states. This despite the fact that Germany now appears to be in the process of correcting its deficit. Given that public finances did deteriorate so much in Poland, Hungary and the Czech Republic during the first years of this century it is fortunate both for themselves and for the euro area that these countries have postponed joining ERM II and the attempt to rapidly adopt the euro. They have made clear that their government finances must be in order before the process of joining the euro area begins. Had they tried and locked their currencies within ERM II they may well have stayed in that position for a long time, becoming in the meantime targets for speculation – as their poor public finances would have lent little credibility to their overall economic policy.
Nor does it apply to the contributory role of the ECB with regard to financial stability under Article 127(5) of the Treaty, as the ECB is not the policymaker in this field. I will conclude my remarks at this point, and I am happy to turn the floor over to the workshop presenters and participants to further elaborate on these themes. [1]This correlation does not imply that independence is causal  for low inflation. In particular, societies with a high degree of inflation-aversion may find it more natural to grant their central bank a high degree of institutional independence. On this, Posen, A., “Why central bank independence does not cause low inflation: there is no institutional fix for politics”, in O’Brien, R. (1994) (ed), Finance and the International Economy: in memory of Robert Marjolin, Oxford University Press. Moreover, it should be borne in mind that the short historical sample reflects the fact that the notion of independent monetary policy is of limited interest in periods of fixed exchange rates regimes (as was the case during the gold standard or under the Bretton Woods regime). [2]Beyer, A., Gaspar, V., Gerberding, C., and Issing, O. (2013), “Opting Out of the Great Inflation: German Monetary Policy after the Break Down of Bretton Woods”, in Bordo, M. D., and Orphanides, A. (eds), The Great Inflation: The Rebirth of Modern Central Banking, University of Chicago Press. [3]Balls, E., Howat, J., and Stansbury, A.

Institutions deemed as having higher risk are subject to more frequent onsite inspections. Let me cite some outcomes from our inspections. Institutions that have failed to meet our requirements have been warned or reprimanded in writing. A few have been required to appoint external consultants to conduct a thorough review of their AML/CFT frameworks; others have been asked to increase the resources devoted to this function. In a couple of cases, where the frameworks and procedures were adequate but ineffective management oversight resulted in inadequate implementation, we have asked the senior management to be replaced. In all cases, MAS informs the institution’s parent supervisor of our findings and concerns. Our supervisory approach aims to be preventive in nature. This means that sanctions can be taken against financial institutions for weak AML/CFT controls, even if no predicate offence has occurred. Having reviewed our regulations and our supervisory and enforcement actions, the FATF assessors concluded, “Singapore’s AML/CFT sanctions regime is effective, proportionate, and dissuasive”. In a nutshell, while a lot has been done, our institutions can always do better. MAS is reviewing whether we need to increase our supervisory intensity and is considering if we should make public, sanctions against persistently or egregiously errant institutions. Strengthened cross-border co-operation The third prong of our efforts is international co-operation.
Examples of how the option value to waiting can lead to significant increases in required rates of return are given in Dixit and Pindyck (1994). BIS Review 68/2002  9  Chart 6 Consumption and deflation in Japan, 1985-2002  Note: Inflation is measured using the consumer price index excluding foodstuffs. The overnight interest rate is the nominal overnight uncollateralised call rate. Source: Thomson Financial Datastream. (iii)  Aversion to long-term contracts and excessive resources devoted to hedging inflation risks. As we have seen, high inflation goes hand in hand with greater uncertainty about future inflation. Inflation is, therefore, associated with a positive risk premium to compensate investors for that uncertainty. The longer the time horizon, the greater the risk premium is likely to be. That discourages long-term contracts and interest rates in such contracts will often depend upon future spot interest rates. Floating-rate mortgages are a good example. With a floating-rate mortgage the borrower is exposed to the risk of sharp fluctuations in the proportion of income that is devoted to debt service, as many households in Britain still remember from the late 1980s when interest rates doubled to 15%. Fixed-rate mortgages eliminate that risk, but at the cost of introducing a new risk: the real value of the outstanding debt may change relative to the value of the house. John Campbell and João Cocco (2002) have suggested that a superior contract would be a fixed-rate mortgage where the principal was index-linked. That would reduce both income and capital risk.

[9] There are currently eight globally important banks in the euro area (in France, Germany, Italy, the Netherlands and Spain) holding additional buffers of between 1% and 2%, and 108 other systemically important institutions with buffers of up to 2%. Systemic risk buffers have been activated in five countries, with a range of between 0.5% and 3%, and the countercyclical capital buffers have been announced in seven countries (Belgium, France, Germany, Ireland, Lithuania, Luxembourg and Slovakia) with rates between 0.25% and 2%. For more information, see “Macroprudential measures in countries subject to ECB Banking Supervision and notified to the ECB” on the ECB website. [10] For a discussion of recent CCyB decisions, see Babić, D. and Fahr, S. (2019) “Shelter from the storm: recent countercyclical capital buffer (CCyB) decisions”, Macroprudential Bulletin No. 7, ECB. [11] See, for example, “  Refining the Stress Capital Buffer”, speech by the Vice-Chair for Supervision, Randal K. Quarles, at the Program on International Financial Systems Conference, Frankfurt, Germany, 5 September 2019. European Central Bank Directorate General Communications Sonnemannstrasse 20, 60314 Frankfurt am Main, Germany Tel. : +49 69 1344 7455, E-mail: media@ecb.europa.eu Website: www.ecb.europa.eu Reproduction is permitted provided that the source is acknowledged. Media contacts  Copyright 2019, European Central Bank
Stefan Ingves: The need for a strengthened insolvency and resolution framework for banks – a central banker’s perspective Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the International Bar Association’s 14th Annual Global Insolvency and Restructuring Conference, Stockholm, 19 May 2008. *  *  *  As a central banker, the tasks assigned to me are to maintain price stability and to promote a sound and efficient payment system. In short, I deal with economics and finance. So what does this have to do with your business, insolvency law? What is a central banker doing opening this conference on insolvency and restructuring? Actually, there are more links between the fields than you might think. As I said, one of my tasks is to oversee the payment system. Without a functioning payment system, no modern economy is able to function for very long. But what we call the payment system is really not much more than a system where money is transferred electronically from one bank account to another, in a longer or shorter chain of intermediaries with the central bank as a hub. If there is a problem in one of those intermediaries, there is a problem in the payment system. And if the problem is not technical but financial in nature, this may lead you right into the area of insolvency law and bank restructuring regimes. But in fact, there is also a link of a more general nature.

The close and complex financial links between the banks also mean that a failure can have a knock on effect on the other banks in the system. Particularly problematic in this respect will be the failure of a bank which has a key position in the payment system. That is, a bank which many other banks use as their intermediary when making payments to one another. The mere rumour that such a bank is having problems can thus paralyse the payment system. A further complication is that banks are vulnerable in a special way. If confidence is shaken, deposits and other financing can usually be withdrawn at short notice. The assets can not be disposed of that easily. A bank may be forced to sell its assets at fire sale prices to meet a run; if the worst comes to the worst the bank may become insolvent. Banks are therefore very sensitive to a shift in confidence. A bank failure can thus affect the smooth functioning of the financial system. The more widespread the problem and the larger the risk of the crisis spreading through the system, the greater is the threat to financial stability – and in the end to the real economy. Clearly, the failure of a bank where a lot of people, companies and other banks have their accounts, and which is an important provider of credit and risk management tools, will normally be more problematic than the failure of a small bank.
Christian Noyer: The euro area sovereign debt crisis Speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the Bank of France / Toulouse School of Economics Conference “The euro area sovereign debt crisis”, Paris, 19 December 2011. *  *  *  Ladies and Gentlemen, It is a great pleasure for me to give the introductory address to this stimulating conference that the Banque de France is very pleased to organize jointly with Toulouse School of Economics. Obviously, finding a more topical subject would be difficult, now that euro area’s sovereign debt markets are caught in the vortex of the financial turmoil that has been plaguing the world economy for the last four years. This topic is also the one we have chosen for our next Financial Stability Review, to be released next March, with a significant number of contributions stemming from today’s presentations. The current crisis is indeed extremely challenging. Many complex factors are currently interacting, making policy decision-making particularly difficult. In such a context, academics have a critical role to play to help us clarify the tradeoffs and available options, so that we are better able to make the right choices in real time.

Three years ago, the Federal Reserve’s decision to curtail the quantitative easing policy, quite unexpected for the market, became such a ‘black swan’. Two years ago, both the market and experts witnessed quite an unprecedented fall in oil prices. Last year saw a rather high market volatility caused by the reassessment of risks related to the situation in China. This year is not yet over but a ‘black swan’ has already flown out. I mean Brexit, which has also turned out to be quite unexpected for the market. We should try to foresee risks. However, it is not always possible. That is why it is important to ensure resilience of the system facing various risks, even unexpected ones, and have tools to stabilise the financial markets and the economy as a whole. As far as Brexit is concerned, in our estimates, its explicit impact on the Russian economy and financial system will be rather limited. We have already seen that Russian markets withstood the surge of volatility in global markets caused by the outcome of the referendum in the United Kingdom. Long-term implications will depend upon specific arrangements between the UK and EU and their influence on the global economy and financial markets. Brexit, however, can be seen in a wider context, i.e., as a manifest of public appeal for changes related not only to politics, but also largely to the economy, since the low growth rates of the world economy lead to a loss of confidence and dissatisfaction among people in many countries.
There are therefore compelling arguments in favor of a generally positive assessment of the consequences of innovation. Does experience provide support for these arguments, or are these changes too new for us to know? The recent changes in credit markets have been dramatic. We have seen rapid growth of structured credit products, credit default swaps and new types of collateralized debt and loan obligations. Although these instruments are very new, they are the natural extension of earlier innovations in credit markets. Over a long period we have seen innovations ranging from the syndication of bank loans and the direct provision of credit through the capital markets, to the spread of asset-backed securities and products that separate different parts of the payments stream and different dimensions of the risk in a credit obligation into different instruments. These changes have contributed to a substantial reduction in the share of total credit held by banks. They have produced a greater separation or distance between the entity that first arranges a loan and those who end up holding the risk, and more intermediaries in that chain. And they have contributed to a dramatic increase in the number and diversity of creditors to any individual borrower, and a greater capacity to actively trade credit risk. BIS Review 29/2007  1  We are now well into the third decade of experience with the consequences of these earlier innovations, and this history offers some useful lessons for evaluating the probable impact of the latest changes in credit markets.

These challenges exist for all participants in these markets: for the institutions that underwrite, structure and distribute these risks; for those who trade or hold them; and for third parties, like the rating agencies. These challenges of complexity are significant as well because they can exacerbate the problem of dealing with classic principal-agent problems. You can see this in the subprime mortgage market where, for example, a person may be rewarded for generating new mortgages on the basis of volume, without being directly exposed to the consequences of default; but these problems exist wherever incentives diverge and contracting is imperfect. Financial institutions typically maintain a range of different checks and balances to deal with the risk of misaligned incentives: for example, between a trader and the principal whose resources are at risk, or between the mortgage broker or underwriter and the firm that ultimately ends up holding the risk. But these checks and balances depend in part on the capacity of risk managers to observe and understand the underlying economic risk in these instruments. Where that is harder because of this combination of complexity, imbedded leverage, and short loss history, then market discipline will be weaker. A third issue relates to the dynamics of failure and the infrastructure that supports these markets. The dramatic growth in the volume of over-the-counter derivatives and the growth in the number and size of leveraged funds inevitably complicate the resolution of the failure of a large financial institution that is active in these markets.
The answer is that many activities cannot do without forecasts as a basis for their planning. The spring budget bill that was presented recently is, for example, based on a macroeconomic forecast of the levels of central government income and expenditure in the years ahead and the potential scope for reforms that will therefore be available. Forecasts of different kinds also play a practical role for the planning of companies, even though they may not call their underlying assessments forecasts. Financial investors, who are better able than others to forecast macroeconomic developments, have an advantage in the search for yield as financial prices such as interest rates, exchange rates and share prices are strongly affected by business cycle developments. A final but important example concerns households who, when planning to  BIS central bankers’ speeches  1  buy a home, largely base their decision on what they believe about the development of interest rates in the future. Although forecasts are seldom entirely correct, I would still say that they are often correct enough to provide a reasonable basis for planning. It is mainly in connection with turning points in economic activity and with different types of crisis that forecasts prove to be wrong. On the other hand, we should be aware that forecasts are predictions of what will happen in the future and are therefore shrouded in uncertainty. We must always be prepared to change our course of action if events move in a different direction.

I will also discuss what concrete steps can be taken, and are being taken, to further financial integration in the region. Expanded intra-regional flows of funds do potentially expose financial institutions to new types of risks. Hence I will argue that regulators need to be vigilant as the integration process proceeds. Here in Hong Kong, we are actively working to implement the latest supervisory standards. This should ensure that our banking system will be ready to take on the new challenges associated with greater financial linkages in the region. 3. But let me start at the beginning, namely, the definition of financial integration and what benefits it is likely to bring. 4. The fundamental characteristic of financial integration is that net savers in an economy can have access to any investment vehicle regardless of the geographical location of either the saver or the issuer of the investment product. Similarly, entrepreneurs seeking funds to finance capital expenditure plans can, in a financially integrated area, have access to sources of credit irrespective of geographic location. 5. Put differently, financial integration permits the efficient transfer of funds between economic units that save in excess of their investment plans to economic units for which the opposite is true. As a result, net savers will receive the highest return on their funds, and the investors will obtain credit on the lowest available terms.