samchain/econo-pairs-v1 huggingface dataset:
However, in some sense the Basel proposals will have failed in their purpose unless the pricing of bank credit better reflects the riskiness of borrowers. By removing perverse incentives for banks, we also wish to establish better incentives for borrowers. Greater risk sensitivity does, however, carry with it a possible danger, and that is the introduction of potential 'procyclicality' into the capital framework. I have touched on this concern more than once in the past, and make no apology for doing so again. To counteract this danger, regulators should not allow banks' internal ratings to reflect the optimistic prospects of borrowers during an economic upswing: rather, ratings need to be genuinely forward-looking, and to factor in borrowers' likely performance during economic stress. Long runs of performance records will be invaluable in establishing how robust borrowers are to different economic circumstances. In this way, economic downturns when they come should not prove too much of a shock to the ratings scales. Of course, I do not wish to sound complacent regarding the avoidance of 'procyclicality'. Capital is after all meant to be a cushion against volatility, also referred to as 'unexpected' loss, but measuring the unexpected is something of an oxymoron. Some of our researchers at the Bank of England recently reviewed the usefulness of various predictive models of banking problems, but unfortunately our conclusion at the moment is that banking crises are each unique in its own way.

Indirectly, in the same way that the change in banks' behaviour in response to the original Basel Accord had a profound effect in shaping developments in securities markets in the last decade. Directly to the extent that EU investment firms, under the Capital Adequacy Directive, are subject to the same capital requirements as banks. One of the principal goals of the new Basel framework is, of course, greater risk sensitivity. The lack of sensitivity of the existing Accord has been one of the drivers of increased capital market activity: both through disintermediation, as companies have accessed the capital markets for funding directly instead of relatively more expensive bank loans, and through securitisation, as banks themselves have sought to continue originating credit but not incur the capital costs of holding it on their balance sheet. The new Basel proposals to the extent they succeed in aligning capital more closely with the underlying risk, will we hope significantly reduce incentives for pure regulatory arbitrage. While the original Accord created an incentive to securitise or, by other means, move exposures off balance sheet, it is too simplistic to assume that adoption of the new proposals will result in a swing back to more traditional bank lending. The wider use of internal ratings, coupled with greater transparency regarding their compilation and some assurance of quality control by the regulators, may in fact contribute to further 'commoditisation' of bank loans. It is conceivable that this development could reduce the cost of due diligence on loan portfolios by rating agencies and buyers.
And an ambitious reform of overall economic governance has been launched, strengthening the mechanisms to align national economic policies with the aims of the Union as a whole and designing a plan to move towards a deeper and sounder union in four stages: banking union, economic union, fiscal union and, finally, political union. Highly significant progress has already been made in the first of these four areas. In November next year the new Single Supervisory Mechanism will begin to operate within the ECB, and it should be complemented by a single bank resolution system and, later, a Single Resolution Authority and a Common Resolution Fund although, as is known, these latter steps pose complex legal and political problems that might delay their effective start-up. National governments, too, have reacted within their remit. On one hand, to contain the worsening of public finances, one of the main imbalances underlying the European strand of the crisis. And on the other, to make markets more flexible and to promote investment, growth and employment. Since late last year the quantitative and, above all, the qualitative indicators have improved markedly. In the second quarter this year, there was a year-on-year increase of 0.3% in euro area GDP. This positive figure has put an end to six consecutive quarters of contraction. The rise in output has been across the board, spanning both domestic and external demand.

In principle, by relating new information to our most recent forecast, market players are in a good position to form a picture of policy’s direction and we can see that when we compare their forecasts of the repo rate with our own. However, one should be aware that there is a risk that an unduly simple rule or decision-making model will oblige the central bank itself to disregard other relevant information. Monetary policy is not mechanics. For this reason we have elaborated our view in various respects. We have underscored that there are also grounds for considering the periods before as well as beyond the 1–2 year horizon on which we focus. Strictly speaking, it is a matter of optimising over all future time, including both inflation and output. For a long time now we have also declared that there are transitory factors we should disregard; more recently we noted that there can be grounds for weighing a prompt return to inflation’s targeted rate against the risk of avoidable fluctuations in output. Finally, we have said that departures from our simple rule may be warranted by problems with financial stability. What is important, however, is our ambition to provide a clear explanation and motivation for such departures. Given our ambitions in this field we would risk severe criticism if we were to do so without good arguments. I should also say that if our application of the rule would continuously be modified and altered, much of its communicative and educational value would be lost.
Europe is lagging far behind in this area: such financing only represents 68% of GDP in the euro area compared with 128% in the United States in the fourth quarter of 2016. Creating the Financing Union would magnify the impact of national reforms: whereas they foster firms’ willingness to invest, the Financing Union would foster firm s ’ ability to invest, and they would together foster microeconomic dynamics and competitiveness. 5/8  BIS central bankers' speeches  The efforts so far are going in the right direction, but work should now be accelerated. The building blocks already exist: the Juncker investment plan; the Capital Markets Union (CMU), which supports the diversification of private financing; and the Banking Union, which tackles the fragmentation issue. These initiatives have to be brought together into the FUII in order to go beyond administrative or bureaucratic borders, create synergies, and therefore give new impetus to this agenda. Think for instance of a real European venture capital. To be more concrete, progress towards a Financing Union for Investment and Innovation requires fleshing out proposals in four key areas: First, completing the Banking Union. This means, as a priority, finalising the Banking Union’s second pillar, namely the single resolution. Within a strong Banking Union framework, banks in the euro area will thus be able to engage in cross-border consolidations on a sound and safe basis and therefore contribute to further reducing financial fragmentation. This also includes harmonising insolvency regimes for businesses.

Mr Chairman, I am informed that one of the notable projects being undertaken collaboratively is on ICT Governance implementation within the central banks using the Control Objectives for Information and related Technologies (COBIT) framework. BIS Review 42/2008  1  Ladies and Gentlemen, you will be delighted to learn that just last week a number of board members from central banks in Africa and across the world converged here in Livingstone to discuss the subject “Trends in Central Bank Governance”. Indeed good corporate governance is generally acknowledged as important in economic management and therefore, the role that ICT Governance plays, in this regard, can not be over emphasized. I am also informed that this conference will discuss some of the solutions available for implementing Business Continuity Planning (BCP) and the progress so far made in this regard. Indeed business continuity planning and management for ICT resources is critical to the operations of our Central Banks. The level of investment and dependence on ICT services is significant and few organizations could operate for long today without these resources. I therefore urge you to critically review this area that is equally important to the implementation of good corporate governance. Mr Chairman, allow me also to talk about financial inclusion or access to finance for all. Ladies and Gentlemen, as you are aware most of our rural areas are mostly unbanked due to infrastructural obstacles.
This dollar strength has created competitive challenges for U.S. exporters, especially in manufacturing, and has caused the trade sector to be a drag on U.S. economic activity. Looking forward, despite the fact that U.S. economic growth has been disappointing, we have actually made considerable progress toward our monetary policy objectives. The United States is quite close to its employment and inflation objectives. On employment, there still seems to be a bit of slack in the U.S. labor market. But, that margin has shrunk greatly over the past few years. Payroll gains have been at least as robust as anticipated. On inflation, we are still somewhat below our 2 percent objective. But, even here, I think there has been progress. Despite the strengthening of the dollar and the decline in energy prices, core PCE inflation has been quite stable over the past year – currently running at around 1.6 percent. That is not a tremendous difference from our 2 percent objective. So why has the United States done a bit better compared to Europe and Japan in terms of achieving our monetary policy objectives. I think there are a number of contributing factors. First, U.S. household balance sheet repair occurred relatively quickly. This is in part because the housing foreclosure process wiped out many mortgage debts. Part was accomplished by a long period of very slow household debt growth. And part was accomplished by the sharp fall in interest rates that helped cut debt servicing costs.

Villy Bergström: Should the Riksbank be concerned about asset prices? Speech by Mr Villy Bergström, Deputy Governor of the Sveriges Riksbank, at a Breakfast Meeting arranged by Round Table in Sundsvall, on 11 April 2000. *  *  *  The Swedish economy is growing more quickly than for a very long time. In 1999, GDP increased by 3.8% and during the coming three years, growth is expected to average almost 3.5%. At the same time, the prerequisites for a long-term favourable development appear better than for many decades. Almost all economic indicators are pointing in the right direction. Despite a very strong upswing, the long-term inflation expectations remain stable and close to the target for monetary policy. Central government finances are in surplus for the second year running and despite a planned tax reduction of over SEK10 billion this year, the surplus in the central government budget is expected to total at least 2% of GDP. From having had the next poorest budget balance in the entire EU in the early 1990s, the budget balance in our public finances is now among the strongest in the whole union. Since the mid-1990s, central government debt has decreased from 80 to 70% of GDP. Our country’s financial balance, ie the current account, has at the same time shown a surplus for a number of years and the foreign debt has fallen from 40 to 20% of GDP during this period.
The third reason is the favorable conditions provided by our financial system to our exporters to increase their production, which is backed by the regulations of the Central Bank. Accordingly, as of May, investment and export loans account for about 28% of total commercial loans, the highest level of the last 20 years. TRY-denominated export and investment loans have grown rapidly since the beginning of 2022. Between December 2021 and May 2022, TRY commercial loans increased by TRY 618 billion, of which TRY 154 billion stemmed from the rise in export and investment loans. Likewise, the share of export and investment loans in total TRY commercial loans was constant around 10.1% before 2022, but reached 13.9% as of May 2022 thanks to new regulations. Through the rediscount credit facility we offer as the Central Bank, exporting firms have been provided with financing of USD 106 billion over the last five years. The costs of the rediscount credits extended are well below the market rates, helping firms keep their financing expenses at reasonable levels. Thanks to favorable interest rate conditions offered to rediscount credit beneficiary firms by the Central Bank, a cost advantage of up to USD 250 million per year has been provided since 2017. Compared to the first half of the previous year, the number of firms that used rediscount credits in the first six months of 2022 rose to 4,476 from 2,199, and the loan utilization amount went up to USD 11.1 billion from USD 9.3 billion.

Another potent factor is indeed the movement towards disintermediation, which should further amplify the role of CCPs. This disintermediation trend is fostered by public initiatives, such as the Capital Markets Union promoted by the European Commission in the EU. This movement is also related to market initiatives, notably in our financial centre here in Paris, to promote market financing as a complement for bank credit: for instance, the ESNI (Euro Secured Note Issuer) allows for the securitisation of high quality credit claims to improve SME financing. We also see a growing appetite of market participants for central clearing to further secure their transactions. Repos are increasingly cleared in CCPs in the EU, and this has stood as a key factor in the resilience of the European repo market over the latest years. However, with greater systemic importance come greater responsibilities. Greater responsibilities lie first with the industry. The clearing industry must have a coherent and resilient organization. We must not yield to the temptation to maximize netting effects. We all agree that the primary objective of central clearing is to reduce systemic risk. CCPS cannot be considered primarily as vehicles for improving operational and capital efficiency. They should be as well financial stability enhancers. The proposed merger of the London Stock Exchange Group and Deutsche Börse might be a relevant illustration of the risk of a trade-off between these two objectives. So we will closely look at it from a financial stability perspective, as I already said.
If the analyses show that there is a need for introduction of a digital denar, hopefully, during some of the next celebrations of the day of monetary independence we will talk about the digital denar as an official means of payment in the country. Dear guests, The great Goran Stefanovski, whose words inspired me to open my address tonight, also reminded us that stories are the core of our lives and that they are not something that is planned, but something that is created and won every day – just like the freedom. Therefore, the National Bank will continue to write and add to the monetary chapter of our story, working professionally and responsibly for the benefit of the citizens, guided by the European central banking principles. Congratulations on the anniversary and the celebration of the stable denar which is something that belongs to all of us, the citizens, the present and future generations! 4/4  BIS - Central bankers' speeches

In 2015 the ESRB issued a recommendation which provides guidance for a systematic assessment of the cross-border effects of macroprudential policy, and a coordinated policy response in terms of voluntary reciprocity for macroprudential policy measures when needed. The recommendation provides the basis for implementing voluntary reciprocity in the EU and sets guidelines for the analysis, notifications and requests to be carried out. The reciprocity framework is still relatively new but it is a very important part of a macroprudential approach for the reasons just mentioned. I think the ESRB’s follow-up assessment of the recommendation in this area will provide important insights on how we might develop this framework further in the future. The EU needs a strong ESRB as we move ahead So what about the future role of the ESRB? The financial crisis brought with it new rules of the game for financial markets from a systemic risk perspective. We have a new regulatory landscape and framework for financial supervision, and the ESRB is a pillar in that framework. Not only is the ESRB central in identifying and warning against risks to the EU financial system, and recommending measures to mitigate such risk if needed. It has played a key role by providing a benchmark when the new macroprudential policy frameworks were implemented across the EU. The ESRB continues to be vital in developing that framework further, and with that I mean for both banks and for non-bank financial institutions.
We nevertheless have reasons to cheer: in 2021 around EUR 100 billion were invested in the European technology ecosystem, almost three times the previous record of 2020, with around 100 new unicornsi. Furthermore, although technologies have not yet shown their full potential in terms of productivity, we may be at a turning point with the latest advances in artificial intelligence, biotechnologies or telework-related reorganisations - after a lag which corresponds to the process of appropriating these technologies by the economic fabric (investment, training, etc.). Page 7 sur 9 These disruptions are also reflected in the monetary, financial and payments spheres – which we scrutinise as central banks and supervisors –, where digitalisation is bringing about a triple revolution – and it is far from over: (i)  First, the arrival of new players: new actors born from the tech world – Fintechs and Bigtechs – are challenging historical players with radically new approaches to financial services and at present much less regulation;  (ii)  Second, the emergence of new assets: crypto-assets from the blockchain universe in the form of tokens: they will never according to me be credible as “crypto-currencies”, but could be used as settlement means – think of stablecoins for instance;  (iii) Lastly, the emergence of decentralised market infrastructures: new technologies tend to reduce the use of proven centralised settlement systems. These revolutions offer the potential for increased market efficiency while reducing costs and time.

There is, however, still progress to be made; our monetary and economic union needs to be completed. Our European economic institutions are like a trimaran. Our vessel already has a robust central hull in the form of the ECB and the Eurosystem, with its credible single monetary policy. This boat must be completed with two floaters. On one side, we need a public float with a standing common fiscal capacity to better cope with macroeconomic shocks. This need not mean increasing permanently our yearly budget; rather we should construct a fiscal facility that could be activated in moments of crisis or recession. In this respect, the EUR 750 billion Next Generation EU programme – agreed in 2020 and now actively implemented – has been a major step forward. On the other side, we need a private float to foster a better capital allocation, which is just as important. The  Page 5 sur 9 Banking Union and Capital Markets Union, though somewhat “boring” and technical, should be absolute political priorities to enhance the free circulation of capital across the EU and build what I suggest to rebrand a “Financing Union for Investment and Innovation”. In the U.S., private capital flows are a major financial shock absorber between states. We can achieve the same in Europe, and make better use of the world’s largest pool of savings, including by fostering venture capital which is still underdeveloped.
4  All speeches are available online at www.bankofengland.co.uk/speeches  4  Chart 5: The distribution of capital flows to emerging market economies Unconditional distribution  Probability density 0.10  Negative shock  0.08 0.06 0.04  A  B  0.02 0.00 -8  -6  -4  -2  0  2  4  6  8  10  12  14  16  18  Capital flows as a % of GDP  Sources: IMF and Bank of England staff calculations. Notes: This chart shows the unconditional distribution of capital flows to EMEs over 2006-2018, and an estimated distribution conditional on a one standard deviation negative shock to pull factors. The diamonds highlight the fifth percentile, which is our preferred measure of Capital Flows-at-Risk. We estimate several quantiles of the distribution through quantile regression and then fit a skewed-t distribution; hence, the distribution can both shift and change shape in response to shocks - see annex for further details. The grey line in Chart 5 shows the unconditional distribution of capital flows, and the purple line shows how the distribution shifts in response to a negative shock. “Capital Flows-at-Risk” are defined as capital outflows in a severe, low-probability event (that with 5% probability or less). The left tail ‘fattens’ if bad outcomes become more likely and/or the “5% probability event” becomes more severe – shown by the shift from A (Capital Flows-at-Risk of 1.2% of GDP) to B (Capital Flows-at-Risk of 4.2% of GDP).

by Martin Feldstein, Chicago: University of Chicago Press. 7 Rose (2007), A stable international monetary system emerges: Inflation targeting is Bretton Woods, reversed, Journal of International Money and Finance, Elsevier, vol. 26(5), pages 663-681, September. 8 See Chapter 3 of the October 2018 IMF World Economic Outlook. 9 Cesa-Bianchi et al (2015), Global Liquidity, House Prices, and the Macroeconomy: Evidence from Advanced and Emerging Economies, Journal of Money, Credit and Banking, show that for AEs flexible exchange rates dampen the impact of push shocks, whereas for EMs they can amplify the impact of push shocks via a collateral valuation effect 10 See Chapter 2, IMF April 2016 World Economic Outlook. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6    An effective macroprudential policy toolkit to curtail the damaging extremes of domestic financial cycles. Macroprudential policy can guard against rapid credit growth, which is amongst the best early warning indicators of an impending downturn. 11 And higher domestic bank capital ratios reduce the sensitivity of capital inflows to changes in global volatility.12    And deep domestic capital markets to reduce the reliance on foreign investors and the need to issue in foreign currency, which dampens capital flow volatility (Chart 6).