samchain/econo-pairs-v1 huggingface dataset:
[5] That is why the PRA sets out clear expectations for firms wanting to branch into the UK. [6] It is why we build trusted relationships with supervisors in other jurisdictions, supported by a growing number of Memorandums of Understanding. [7] It is why the Bank provides support for the Government’s work pursuing free trade agreements with financial services chapters, and bespoke mutual recognition agreements, that facilitate safe access to overseas markets for UK firms. [8] And it is why we recognise that prudential regulation mustn’t create barriers that stop global talent working in UK firms whilst at the same time failing to advance our primary objective. For that reason we are reforming remuneration rules, starting with a consultation on removing the bonus cap. [9] As well as openness, we are acting to strengthen the UK as a global financial centre by providing a predictable and stable regulatory environment. This makes it easier for all firms – domestic and international – to do business here. We’ve improved the way we communicate. The Bank and PRA now work with six other regulators to produce a regulatory grid setting out our plans in one place. [10] And we are developing a new UK rulebook that will be easier to navigate than the labyrinth of regulations – many of them EU rules – we are replacing. [11] I should reassure you that stable and predictable regulation doesn’t mean static regulation. Innovation is one of the UK’s strengths.

We will tailor rules to UK circumstances when that is appropriate and when we can do so in ways that maintain trust. We are working hard to deliver this plan. That is why I am able to use this occasion to announce the publication of two consultation papers proposing tailored liquidity, disclosure, reporting and remuneration rules for small banks and building societies. These proposals show how we can use our rule making powers in ways that are good for competitiveness and growth. We are also today publishing analysis of the impacts of previously announced proposals. This analysis is about how our proposals will narrow the gap between capital requirements faced by large and small mortgage lenders. This analysis will feed into policy development work to simplify capital requirements for smaller banks and building societies. I’ll conclude by launching a conference we will hold in September to deepen our understanding of the links between prudential regulation, international competitiveness, and growth. At that  Page 3  conference we will share ideas about how we can provide information (including appropriate quantitative metrics) that Parliament can use to judge our performance. How finance supports competitiveness and growth Competitiveness is a complicated economic concept which doesn’t have a uniformly accepted, text-book definition. [1] The impact of finance on economic prosperity is well understood, but there is little research that can help us understand the contribution of prudential regulation to growth through the channel of international competitiveness. [2] So I and my colleagues have been thinking hard about these concepts.
In the case of banks, for example, it is important for correspondent and custodial customers to develop comfort that the bank will be able to function normally in the new century. Banks and other firms need to develop strategies for conveying appropriate information efficiently to these constituents. In response to a flood of Year 2000 questionnaires from their customers, some banks in New York are beginning to hold forums to convey information and build confidence that they are addressing the problem. Another practice we are seeing is organizations declining to fill out questionnaires regarding their Year 2000 readiness unless the firm asking the questions discloses the same information. It is clear to me that this sort of market discipline is going to become a powerful force in the coming months for firms that are perceived to be lagging and failing to disclose. A solid program of self-disclosure is the best available approach to ensuring that all parties are willing to share information. Of course, supervisors and regulators may also need to develop mandatory disclosure programs or to interpret existing disclosure requirements to cover Year 2000-related issues. In the United States, the Securities and Exchange Commission has progressively strengthened its efforts to require meaningful disclosure by all types of firms. Clearly, supervisors considering increased transparency need to act rapidly to ensure that any new requirements will become effective in time to be useful to market participants. An important challenge in considering either voluntary or mandatory disclosure is the question of what information should be disclosed.

More recently, on the Basle Supervisors’ Committee, I have been learning about the Year 2000 issues that confront bank supervisors around the globe. Scope Simply put, I do not think it would be possible to overstate the importance of the Year 2000 problem as an issue for the financial markets. Naturally, the tendency in these turbulent times is to focus on day-to-day concerns, and to leave future problems to be dealt with later. This tendency must be resisted strongly if we are to succeed in addressing the Year 2000 problem. I say this because the Year 2000 problem is an issue for every country, firm, organization, government agency, bank and piece of critical infrastructure in the world. If the Year 2000 problems that exist within software programs and embedded computer chips are not repaired by January 1, 2000, the affected systems will cease to function or will malfunction. Those firms that have checked for Year 2000 problems overwhelmingly have found that their systems were affected and would not have functioned normally in the Year 2000 without being fixed. Moreover, the efforts of firms around the world have demonstrated that while the extent of the Year 2000 problem varies, no country or sector is immune from it or can afford to ignore its impact. Financial sector organizations such as banks, securities firms and insurance companies are typically among the most highly affected organizations. National and local government systems and services are affected.
The existence of a liquidity premium results in an understatement of the level of expected inflation derived from the break-even inflation rate. Some in-house research suggests this bias to be at around 5 to 15 basis points. Besides these technical biases, institutional arrangements may also introduce distortions in real yields, which impact in turn on the break-even inflation rate. I will mention two examples. Institutional biases The tax bias: the main source of distortion is probably related to taxation. Investors are primarily interested in real net-of-tax cash flows, which implies that differences in tax treatment between conventional and indexed bonds will influence their relative prices and therefore the break-even inflation rate. In the French case, where inflation compensation gains and interest rate income are equally taxed, this bias is generally considered as relatively small - less than 10 basis points. But even if it is small, it constitutes another upward distortion in the break-even. New regulations - supply and demand factors: as I mentioned, earlier, and I will conclude this section by this point, the French OATi, which so far has been the main inflation-indexed indicator used by the ECB in its economic and financial assessment, has been distorted by a significant upward demand shift which can be, to a certain extent, attributed to the adoption by the French Banking and Finance Regulation Committee (CRBF) of a new regulation on Livret A (passbook saving vehicle), aiming at linking this savings account partly to inflation .

Central banks must also avoid misperception and for that reason, they should not rely on a limited set of indicators but should use a comprehensive and rigorous analysis aimed at picturing the economy as a complex and permanently evolving system. Central banks also have the difficult task of identifying shocks hitting the economy and of addressing them appropriately by assessing their potential implications in terms of risks to price stability. Model analysis, monetary analysis, model -based forecasts are additional useful tools employed in this context. This is precisely the approach taken by the ECB, which developed its two-pillar-strategy in order to help to sort through the wealth of potentially conflicting statistics. Conclusion Let me now briefly conclude my remarks by asking the question: what information do we really get from asset prices, and particularly from inflation - indexed securities? Financial markets do indeed play a critical role in the process of setting monetary policy. In effect, the influence of monetary policy on the real economy and ultimately on prices is largely transmitted through asset prices. As pointed out by Blinder, the economic activity is not directly affected by the changes in the key policy rates, but rather by long-term interest rates and, where relevant, through wealth effects. In short, monetary policy affects the economy through its interaction with long-term expectations, which in turns affect asset prices and then economic activity and inflation. But central banks also rely on financial markets for information to help explain their monetary policy decisions.
[11] Just as the main reason the MPC forecasts headline inflation to rise to double digit levels at the end of this year is the impact of higher international energy and goods prices over which it exhibits little influence, the main reason the MPC projects headline inflation to fall sharply in 2023-24 back towards the 2% target is its assumption that those international energy and goods prices stabilise or fall six months from now. Of course, such assumptions may be wrong. We’ve seen that in the past. I’ll come back to the risks around the random walk forecast for commodity prices in a moment, since these are an important influence in our policy assessment. Alternative assumptions about the path for Bank Rate But first I want to underline that this emphasis on the external drivers on UK inflation is not to suggest that UK monetary policy has no influence. In line with its normal practice, in May the MPC published two inflation projections: a baseline that is conditioned on the path of Bank Rate implied by current market pricing (which peaks at 2.5%  Page 12  towards the end of 2023); and a variant projection where Bank Rate is held constant at the 1% level established at the May MPC meeting. In the baseline, headline inflation falls significantly to 1.3% at the end of the forecast horizon, a significant margin below the 2% target. By contrast, in the constant rate scenario, headline inflation remains above target throughout the forecast, reaching 2.2% at the end point.

Page 1  The economic situation and monetary policy − speech by Huw Pill Given at ACCA Cymru Wales  Page 2  Published on 20 May 2022  Huw Pill talks about what we’re doing to bring inflation down. And he gives his view on the outlook for the UK’s economy. Speech Good morning everyone. It is a great pleasure to speak here in Cardiff this morning. Thanks are due to: Lloyd Powell, Head of the Association of Chartered Certified Accountants (ACCA) Cymru Wales, for the invitation to speak here today; to Steve Hicks and Ian Derrick – the Bank’s Agents in Wales – for organising a fantastic visit, of which this is one of the highlights; and of course to all of you for coming this morning at what I am sure are busy and challenging times. On Wednesday, we learnt that UK consumer price inflation currently stands at 9.0%. [1] The MPC forecasts that it will rise to double digits in the fourth quarter of this year. For a monetary policy maker charged with achieving an inflation target of 2%, this is obviously a very uncomfortable situation. But, of course, my discomfort as an MPC member in these circumstances is as nothing to the challenges facing those most directly exposed to the current cost of living crisis. These are difficult times for many people, especially for the less well off, who spend a higher proportion of their income on energy and food, where recent price rises have been most significant.
Scharfstein, D S and Stein, J C (1990), “Herd Behavior and Investment”, American Economic Review, vol. 80(3), pages 465–79, June. Schularick, M and Taylor, A M (2009), “Credit Booms Gone Bust: Monetary Policy, Levrage Cycles and Financial Crises, 1970–2008”, NBER Working Paper Series 15512. Schwert, G W (1989), “Why Does Stock Market Volatility Change Over Time?”, The Journal of Finance, 1115–1153. Steiner, J (2008), “Coordination Cycles”, Games and Economic Behaviour 60, pp 308–327. Taylor, J (2010), “Commentary: Monetary Policy After the Fall”, Presentation at the Symposium “Macroeconomic Challenges: The Decade Ahead”, Jackson Hole. White, W R (2009). “Should Monetary Policy ‘Lean or Clean’?”, Federal Reserve Bank of Dallas Globalisation and Monetary Policy Institute Working Paper 34. BIS Review 168/2010  35

Before I end my remarks, I would like to take this opportunity to highlight the importance of continuing a close and effective partnership in Islamic finance between Malaysia and the UK. Collaboration between financial centres in Islamic finance is an important part of the process  4  BIS Review 161/2010  that would contribute towards expanding global development of the industry. With London’s keen ambition to establish itself as the center in Islamic finance in Europe, there is certainly much room for cooperation between Kuala Lumpur and London. The importance of our relationship has been cemented not long ago with the signing of the Memorandum of Understanding between Bank Negara Malaysia and the UK Trade and Investment. Our strong collaborative endeavors are already visible in the area of education and capacity building, evidenced by the growing number of strategic alliances between several Malaysian and the UK education and training institutions in recent years. Several UK financial institutions have also successfully established presence through joint-venture with local partners in our takaful market. I am most hopeful that there will be more collaborative endeavors going forward to exploit the strength and synergies between the two centers, particularly in areas that will lead to enhancing the efficiency of Islamic finance and greater cross-border transactions. On that note, I wish all of you a successful Workshop. Thank you. BIS Review 161/2010  5
The effects on the international financial system were thus slight, although the crises affecting both Asia and Russia led to extensive redistribution of wealth and political tumult in the countries concerned. There are probably several reasons why the effects were so limited. One is probably that economic policy has become more predictable in many countries in recent decades, with sound public finances and stable, low inflation. The markets should therefore be less sensitive to shocks. However, another reason is actually that the financial system has become more resilient. The fact that risks have a better spread makes the system more stable. The risks are also transferred to the agents who want them or should have them. There is also the fact that the banks have gained more experience of operating in deregulated financial markets. The development towards more market-based transactions means that banks can now concentrate on the risks they are best at managing. They have also become better at managing them, with well-developed risk management methods and models. So far, so good. A better spread for risks and improved risk management can contribute to better absorption of shocks to the financial system. On the other hand, there can be elements that increase the risk of more serious shocks that also spread throughout the whole system. …or have they become more prone to risk? One such tendency could be an increased propensity among market agents to take greater risks and to copy others’ actions.

If we do this what will we call it? We thought perhaps we could go for: “strong and simple”. I rather like this, but perhaps others will say it is clear why we are not in the advertising industry. Simple design  In designing a strong and simple regime we will have to decide on two things:   first, which firms are in it; and    second, how to simplify requirements. On the first of these, size measured by total assets is likely to be one good proxy – not least because it is simple. But other factors could also perhaps be brought in. For instance, purely as an illustration we could consider making eligible all firms with total assets of less than £ and who are also:   not systemically important;  6 In fact, the Financial Services and Markets Act 2000 (as amended) is explicit that it is not our role to ensure that no firm fails. 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6    not internationally active;    not involved in trading activities;    not approved to run an internal model for capital requirements; and    capable of exiting the market in an orderly way, for example through solvent wind-down or an insolvency procedure. Now I’m quite sure that our disgruntled bank chair will be spluttering over their coffee at one or other of the items I just listed.
As the Riksbank’s reporate changes have a major impact on inflation measured in terms of the CPI, it is in this context most relevant to look at inflation measured in terms of the CPIF, that is the CPI with a fixed mortgage rate (see Figure 3). As can be seen in the figure, CPIF inflation was around 3 per cent when the Swedish economy was hit by the fall in demand at the end of 2008. It is now down to levels of around 1 per cent. The fact that Sweden has a substantial surplus on its current account, as shown in Figure 4, also indicates that domestic demand is relatively low. BIS central bankers’ speeches  3  Figure 4. Current account as a percentage of GDP Per cent 10  10  8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4 Spain  -6  -6  Ireland USA  -8  -8  Sweden  -10  -10 90  94  98  02  06  10  Source: IMF WEO, October 2012. The current account reflects the difference between the value of what is produced and the value of what is absorbed in the economy through consumption and investments. It also shows the difference between total saving and total investment in the economy.

As a rule, foreign funding, excluding equity and reserves, did not exceed 10% of all sources of financing of the banking sector. There has always been a difference amongst individual banks, a reflection of the different strategies for funding and acquiring sources, yet the overall importance of foreign funding is not in its percentage, but in its long-term nature. This is the premise on which the good business relations between parent banks and subsidiaries is based. When the crises stroke the relative importance of domestic deposits in financing the claims on Macedonian borrowers actually increased. In the Republic of Macedonia the ratio of loans to domestic GDP is still 47–50%, while the ratio of deposits to domestic GDP is around 55%. These ratios in the developed world tend to be above 100%, which shows the potential for growth. Similarly, the ratio of household debt, including mortgages, to household disposable income, is around 25%, substantially lower than most countries at a similar level of development, also offering opportunities for the banking sector. Regulatory capital allocation, on average, is 17%, more than two times the legal minimum of 8%. The high capitalisation of banks means they have the capacity to take losses and do not need to evergreen existing loans, but lend to new customers that are more likely to borrow. Strong capital ratios are one of the bright spots of the Macedonian economy. The Macedonian banking sector comprises 16 banks.
Simple measures of margins, such as the profit share, have been relatively resilient. And a recent survey by the Bank’s Agents suggested that margins on average were only a little below normal, despite the marked contraction in demand. 8 Why so? In part, aggregate margins may have been boosted by the sharp rise in sterling export prices following the depreciation of sterling. The increase in exporters’ margins may well have masked a decline in margins earned by domestic producers. 5  That is consistent with some surveys of companies’ capacity utilisation, which do not seem to have fallen by as much as the fall in output might suggest. 6  An important issue determining the evolution of supply in the medium-term is how quickly this mothballed capacity is either brought back on stream or eroded. This is likely to depend on the pace of the recovery. 7  Strictly, the model I am discussing talks about the mark-up over marginal cost, whereas margins are calculated with reference to average costs. Margins have the advantage that they can be calculated from companies’ published accounts, wheras mark-ups are not directly observable. But different estimates of the mark-up in the United Kingdom have appeared to move in a similar direction to margins across economic cycles. See Haskel et al (1995) and Macallan and Parker (2008).

Harvard University Press. Fisher, P (2010), “Why is CPI inflation so high?”, Remarks based on a talk given to Merseyside Young Professionals, available at: http://www.bankofengland.co.uk/publications/speeches/2010/speech438.pdf Haskel, J, Martin, C and Small, I (1995), “Price, marginal cost and the business cycle”, Oxford Bulletin of Economics and Statistics, Vol. 57, pages 25–41. Ihrig, J, Marazzi, M and Rothenberg, A (2006), “Exchange rate pass-through in the G7 countries”, International Finance Discussion Paper No. 851, Board of Governors of the Federal Reserve System. Macallan, C and Parker, M (2008), “How do mark-ups vary with demand?”, Bank of England Quarterly Bulletin, Volume 48, No. 2, pages 167–173. Marshall, A (1920), Principles of Economics, London: Macmillan. Posen, A (2010), “The British recovery in international comparison”, Speech given to the Society of Business Economists Annual Conference “Sustaining the Recovery”, London, available at: http://www.bankofengland.co.uk/publications/speeches/2010/speech439.pdf Ravn, M, Schmitt-Grohé, S and Uribe, M (2006), “Deep habits”, The Review of Economic Studies, Vol. 73 (1), pages 195–218. Salop, S (1979), “Monopolistic competition with outside goods”, The Bell Journal of Economics, Vol. 10 (1), pages 141–156. Sentance, A (2009), “Monetary policy in turbulent times”, Speech at the Agricultural Engineers’ Association Annual Conference, Institute of Civil Engineers, London, available at: http://www.bankofengland.co.uk/publications/speeches/2009/speech385.pdf Spence, M (1976), “Product selection, fixed costs, and monopolistic competition”, The Review of Economic Studies, Vol. 43 (2), pages 217–235. 8  BIS Review 122/2010  BIS Review 122/2010  9