samchain/econo-pairs-v1 huggingface dataset:
In the particular case of micro and macro-prudential policies, as reiterated by the Basel Committee on Banking Supervision, banks should make use of the Basel III capital and liquidity buffers during this crisis to absorb financial shocks and to support the real economy by lending to creditworthy households and businesses. In this regard, supervisors will allow banks sufficient time to restore buffers, taking account of economic and market conditions as well as the circumstances of individual banks. And institutions’ dividend distribution and compensation policies should remain highly prudent until the current uncertainty abates and a solid economic recovery takes root. In parallel, it is necessary to ensure that the different flexibility measures applied do not lead to delayed recognition of actual quality impairment of credit exposures and provide institutions with the incentives necessary to maintain the appropriate standards. On the monetary policy front, the fragility and heterogeneity of the recovery in the euro area, projected medium-term inflation far below our objective and a nominal effective exchange rate that has, in recent months, offset a large part of the ECB stimulus measures lead us to conclude that there is no room for complacency. Significant monetary stimulus will have to be maintained until we achieve a solid recovery. Moreover, we cannot rule out the possibility  13  that the measures described above may have to be recalibrated, or new measures introduced, in order to fulfil our price stability mandate, understood always in a symmetrical manner.

More than 6 pp of this change corresponds to downgrades within the investment-grade category, almost 5 pp to movements within the high-yield category, and less than 3pp to a downgrade from investment grade to high yield. Downgrades, which have decelerated in recent months, have affected to a smaller share of firms in comparison to the global financial crisis. A similar picture is observed both at the European and global levels. However, we cannot rule out another wave of rating downgrades if economic outlook deteriorates significantly. Past experience shows that extensive credit rating downgrades below investment grade in the corporate sector can generate adverse second-round effects that exacerbate crises. A recent study by the European Systemic Risk Board illustrates how important this vulnerability may be6. Specifically, it is estimated that investment funds and insurance companies hold the bulk of BBB rated corporate debt holdings, one-third of which are associated with sectors considered to be pandemic-sensitive. A large-scale downgrading of this debt to below investment-grade status would entail considerable potential losses for the entire European Union financial system. Credit rating agencies play a fundamental role in this process. Accordingly, when making their assessments, they need to take into account the long-term outlook for the corporations concerned and avoid excessively procyclical behaviour. Indeed, this time round, credit rating agencies appear to have been more cautious than in the global financial crisis.
Privatization initiatives noted earlier will also require investment of tens of billion of riyals. In addition, the maintenance and expansion of infrastructure in the various sectors will require significant pools of capital. A rough estimate of the financing needs of the projects announced so far by the Government over the next 10 years exceeds USD 500 billion. However, the way that these financing needs are met by the Banks and capital markets in future is likely to be different. First, these projects and initiatives will require longer term financing which will be difficult to finance through traditional bank loans. Second, it will require a mixture of equity and debt obligations. Third, the funding could be multi-currency  4  BIS Review 85/2007  and attract multinational institutions and investors. Fourth, it could take form of various types of capital instruments, not yet seen in the Saudi and regional capital market including corporate bonds, debentures, mortgages, subordinated loans, preferred shares, etc. Also, there will be an opportunity to raise funds through Islamic finance instruments such as Sukuks and Ijara. It is no doubt that the financing needs of Saudi Arabia will require a collaborative effort by Saudi authorities, Saudi banks, and the regional and international banks. It will also requiring tapping various investors through the domestic and regional capital markets. Each will have an important role to play in this process.

Hamad Al-Sayari: Financing a changing world Speech by His Excellency Hamad Al-Sayari, Governor of the Saudi Arabian Monetary Agency, at the Euromoney Saudi Arabia Conference 2007: Financing a Changing World, Riyadh, 8-9 May 2007. *  *  *  I am pleased to be here today at this international gathering of experts who share a common interest in the economic development of Saudi Arabia. The theme of this Conference is "Financing a Changing World" and I intend to share with you my views on the role that the Saudi Banks and the Capital Market are playing in this regard. This gives me an opportunity to recap the important contribution of our banks and our growing capital market in channeling the financial flows to and from the Kingdom. I will also outline the future direction and challenges in this regard. In recent years, international fund flows have been affected by different phenomenon, including rising imbalances in trade balances originating from the export dominated economies in Asia, the pace of economic growth in developed economies in Europe and North America, and the volatile energy and commodity prices affecting all countries. Addressing the impact of these global phenomenon are causing significant challenges to the economies of all countries. For the Gulf region including Saudi Arabia, a major challenge is to ensure that the increased financial flows into the region are channeled efficiently to the most productive sectors of the economy and to profitable enterprises and projects.
Indeed, some recent suggestions seem to imply that the Eurosystem should react more or less automatically to exchange rate movements or other specific variables such as unit labour costs. The Eurosystem’s monetary policy stance is not one of benign neglect with respect to the exchange rate. The Eurosystem’s stability-oriented monetary policy strategy takes into account the external value of the euro as one, potentially important, determinant of the outlook for price stability. Obviously, if a strong and abrupt appreciation of the euro were to occur, this would lead, all other things being equal, to downward pressures on price developments. In such a situation, there would be a stronger reason for lowering the ECB’s interest rates, which might then, in turn, help to counteract part of the prior exchange rate movement. However, monetary policy reactions to the exchange rate, or to any other variable, can never be mechanistic or automatic. According to its stability-oriented strategy, the Eurosystem always has to analyse carefully a wide set of indicators, the nature of any disturbances and their implications for the overall outlook for price developments in the medium term. In any case, it must be borne in mind that the Treaty on European Union also requires the single exchange rate policy to respect the primary objective of price stability. Thus, the ECB cannot commit itself in advance to any specific reaction with respect to the exchange rate.

Failure to act promptly will only exacerbate the intensity and duration of the problem, making it more costly to solve. Indeed, the actions that the Central Bank must take to ensure its convergence to 3% in two years’ time depend significantly on the outcome of policies with macroeconomic impact. The 7  ongoing fiscal consolidation process is a key element on the road to restoring economic balances. In fact, the baseline scenario of this Report assumes, first, that the future path of fiscal spending will be as outlined in the latest Public Finance Report, a document that proposes a reduction of the structural deficit to -0.3% in 2026 and, second, that demand stimulus policies such as those we had during 2020 and 2021 are not repeated. The Central Bank is responsible for maintaining low and stable inflation, but doing so efficiently at the minimum costs possible requires coordinated action with the different policies. If the projections presented in this Report prove true, inflation would be approaching a turning point. The pace of price increases will slow down in the coming months and annual inflation will begin to decline.
Since the peak, adjustments in house prices appear to have been completed in Ireland, while those in Spain are correcting more gradually. In both cases, the house price boom has left household debt-to-income ratios in these countries far above their pre-crisis levels with only a slow decline. To summarise, while euro area aggregate dynamics appear different from those observed in Japan at the beginning of the 1990s, some euro area countries do share some features that are very similar to the Japanese experience in that a prolonged balance sheet adjustment is underway. 3  Of course, in a ﬁnancially integrated area comprising several countries, ﬁnancial deﬁcits (or surpluses) of a given sector in any country can, in principle, be ﬁnanced (or invested) equally well in any other country within the area. Following this line of reasoning, cross-country patterns in sectoral ﬁnancial balances could reflect increased financial integration within the euro area. At the same time, the build-up of external deﬁcits and surpluses across euro area countries reﬂects not only growth differentials, but also rising imbalances in competitiveness, particularly when measured by unit labour costs. 2  BIS central bankers’ speeches  Notwithstanding this cross-country heterogeneity, a common response was required from monetary policy in the euro area to counter the initial fallout. The cuts in ECB policy rates together with our non-standard measures were crucial to contain the risks to price stability and to support the transmission of monetary policy across the currency area.

While the ratio of financial sector liabilities to GDP has broadly stabilised, euro area large and complex banking groups have steadily increased the median core Tier 1 ratio from 8.3% in 2009 to above 11% in 2013.7 To strengthen their capital position banks have issued equity, converted hybrids, received capital injections and raised the levels of retained earnings. The stronger capital positions also mean that the relative share of debt in financing is reduced and substituted by more equity, which should provide a better buffer against economic shocks. After all, debt is a relatively inflexible form of financing as it requires repayments on time and in full. But the stronger capital positions have also meant that banks have been shedding assets, a process which depresses credit growth and puts a drag on the economy. In addition, as households and non-financial corporations also reduce their indebtedness, they are demanding less financing from banks. Taken together, we can expect that bloated balance sheets will contract further. It is important that this deleveraging process occurs in an orderly manner by balancing the adjustment of assets and liabilities. Most of all, unnecessary fire sales generating detrimental falls in asset prices and credit rationing for productive investments need to be avoided. Throughout the crisis, the ECB has demonstrated its ability to actively mitigate these effects by ensuring abundant funding to the banking sector through its liquidity operations.
In doing so, we must define robustly the boundary between going and gone concern loss absorbency ;  -  second, a framework for capital which comprises minimum capital requirements and capital buffers, with the buffers varying in size depending on a bank’s size and the nature of its activity and risk, and varying through the cycle;  -  third, using a combination of different approaches to assessing capital adequacy – risk-based approaches, stress tests, and a leverage ratio;  -  fourth, within the risk-based approach, striking a balance which recognises the potential benefits of firms’ internal models while guarding against their weaknesses and the incentive problems they create. A major principle of the new framework is that there is no single “right” approach to assessing capital adequacy. The very important role that is now given to stress tests illustrates the point. This year the PRA and FPC are running their first concurrent stress tests for the major UK banks, building on the past development by the FSA and then PRA of sequential firm-by-firm stress tests. This is a key device to examine and mitigate tail risks,  5  http://www.bis.org/publ/qtrpdf/r_qt1309e.prf. 6  http://www.bis.org/publ/work357.htm. 7  https://www.imf.org/external/pubs/ft/wp/2013/wp13102.pdf. 8  http://www.bankofengland.co.uk/research/Documents/workingpapers/2014/wp486.pdf. 6  BIS central bankers’ speeches  and like all good forecasting exercises, the stress test is designed to probe important issues rather than just provide a single answer.

BIS central bankers’ speeches  On the form and use of capital instruments, the Basel I Accord also allowed hybrid debt capital instruments to support the required deductions from the capital calculation, such as goodwill, expected losses (introduced later under Basel II with the internal models regime for credit risk) and investments in other banks’ capital instruments. However, as a matter of fact, rather than reporting, any losses arising from these items hit common equity because it will absorb losses first in the going concern state, according to the hierarchy of the capital structure. As a result applying these deductions at the level of total capital, or Tier 1 capital, has the effect of overstating the core equity capital ratio. The Accord therefore incentivised wrongly the issuance of hybrid debt capital instruments to cover deductions. A further flaw was that deferred tax assets were not deducted from capital and minority interest assets were recognised in full. This, too, was a mistake. DTAs depend on future profitability (which is not assured) and minority interests are not fully transferable to absorb losses for a group. Last on the capital side, there were problems starting in the original Basel Accord in relation to the treatment of provisions. Under the current international accounting standards provisions are based on incurred rather than expected losses.
Jessica Chew Cheng Lian: Credit reporting and risk management training Welcoming and opening address by Ms Jessica Chew Cheng Lian, Assistant Governor of the Central Bank of Malaysia, at the Third Credit Reporting and Risk Management Training, Kuala Lumpur, 26 September 2011. *  *  *  It is my great pleasure to welcome you to Malaysia and to the third series of the Workshop on “Credit Reporting and Risk Management Training”, jointly organised by the International Finance Corporation (IFC) and Bank Negara Malaysia. This annual workshop has provided an important platform for experts from the different parts of the world to exchange views and experiences on developments in the credit registry landscape and the role of credit registries in preserving financial stability and in contributing towards economic and social development. Indeed, centralised credit information registries, or credit bureaus, are a critical part of the infrastructure that facilitates and enables the efficient expansion and outreach of credit intermediation in an economy. This is now well-supported by empirical evidence. A wellfunctioning credit bureau serves as a lubricant to the intermediation process by overcoming one of the fundamental challenges with any credit market, that is the asymmetry of information between lenders and borrowers.

The Central Credit Reference Information System, or CCRIS, (owned and operated by Bank Negara Malaysia) was established in October 2001 and has since been acknowledged as one of the most comprehensive public registries in the world. The operationalisation of CCRIS expanded the role of the credit information registry beyond a supervisory focus to supporting prudent and more efficient credit and financial management decisions among Malaysian borrowers and financial institutions. CCRIS enables real time access to both positive and negative credit information on all borrowers in the banking system and of a selected group of non-banks. At present, the system contains more than 21.9 million outstanding credit accounts and 7.6 million borrower records. The system is supported by rigorous controls that protect the integrity of such information, which in turn, enables the Bank and supervisors to perform granular and multidimensional analysis and assessments of credit risks and credit-related vulnerabilities in the banking system. For banking institutions in Malaysia, the ability through CCRIS, to tap into ten years of borrower credit records spanning the entire population of banking institutions has been  BIS central bankers’ speeches  1  instrumental in accelerating enhancements to the management of credit risk by banks, in particular the development and validation of credit scoring models. Today, information extracted from CCRIS is used as a key input in banks’ credit decisions. The availability of current information has also facilitated more expedient and robust credit decisions.
The risk of a rare event is not an easy thing to judge and, having gone so long without a serious problem in the financial system, our attention was distracted by the more easily monitored task of stabilising the economic cycle. Maybe people were too beguiled by the “Great Stability”, if only because data confirming it arrived with such regularity, to notice what was going on within the financial system. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  One obvious lesson has been that the stability of inflation is no guarantee of financial stability – hence the (re-)creation of macro-prudential policymaking. I think another lesson is that it’s better to grant these powers to a single, accountable body, “ring-fenced” from the other functions of the central bank. I don’t want to overstate the case and I’m certainly not suggesting any sort of “Chinese wall” between the two functions. There are clear advantages in having them housed in the same institution. Many economic issues are relevant for both and, in the Bank of England, the MPC and FPC regularly receive joint briefings on such matters. Even if the two hands are separate, it is important that the one should know what the other is doing, and in that respect it helps that some people sit on both committees.

Bush, O., Guimaraes, R., and Stremmel, H. (2015), “Beyond the credit gap: quantity and price of risk indicators for macroprudential policy”, mimeo. Dixit, A. and Lambertini, L. (2003), “Interactions of Commitment and Discretion in Monetary and Fiscal Policies”, American Economic Review, Vol. 93 No.5. Elliott, D. J., Feldberg. G. and Lehnert, A. (2013), “The History of Cyclical Macroprudential Policy in the United States”, Finance and Economics Discussion Series, 2013-29. Fernie, S. and Metcalf, D. (1999), “It's Not What You Pay it's the Way that You Pay it and that's What Gets Results: Jockeys' Pay and Performance”, Labour: Review of Labour Economics & Industrial Relations, 13 (2), pp. 385-411. Ferrero, A., Harrison, R. and Nelson, B. (forthcoming), “Concerted efforts? Monetary policy and macroprudential tools”. Groves, T., Hong, Y., McMillan, J. and Naughton, B. (1994), “Autonomy and Incentives in Chinese State Enterprises”, Quarterly Journal of Economics, 109:1, pp. 183-209. Goodhart, C. (2015), “Linkages between macro-prudential and micro-prudential supervision”, Butterworths Journal of International Banking and Financial Law, 30 (10), pp. 607-609. Holmstrom, B. and Milgrom, P. (1991), “Principal-agent analyses: incentive contracts, asset ownership, and job design”, Journal of Law, Economics, & Organization, Vol. 7, pp. 24-52. 15  All speeches are available online at www.bankofengland.co.uk/speeches  15  Kohn, D. (2017), “Cooperation and coordination across policy domains”, Speech given at the Joint Financial Stability Institute and Bank for International Settlements conference on supervisory policy implementation in the current macro-financial environment, available at https://www.bankofengland.co.uk/speech/2017/cooperation-and-coordination-across-policy-domains.
Banks are now at a critical phase in the credit cycle. After years of high quarterly profits, low delinquency rates and comfortable capital ratios, it is easy to forget the fundamentals of sound lending. And, as any good coach will tell you, it’s the fundamentals, the basics, that make or break your performance. The most important of the fundamentals is maintaining rigorous credit standards, especially in an environment of increased competition for new and existing customers. Experience teaches us that the worst loans are often made in the best of times. And because things are awfully good at the moment, I can’t help but remind bankers and supervisors alike that the sun doesn’t always shine so brightly. 1  BIS Review 32/2000  Indeed, sometimes it even rains. To paraphrase Mark Twain, reports of the business cycle’s demise are greatly exaggerated. In circumstances this favorable, loan officers must make doubly certain that there is every reason to believe that the loans they make are collectible. This is especially important for younger bankers who, given the length of this expansion, have never experienced a serious recession and may mistakenly view current conditions as ordinary rather than as exceptional. Lending granted on that erroneous basis would have grave consequences for the industry’s ability to weather weaker economic conditions which are, to be sure, inevitable. From a supervisory perspective, I believe it is time for us to exercise an extra measure of caution.

Regarding monetary policy – even uncertain forecasts have some value When it comes to monetary policy, we are pleased at Goodhart’s and Rochet’s conclusion that the Riksbank has discharged its fundamental duty – to conduct a policy of flexible inflation targeting – well. As I mentioned earlier, we will return with more in-depth views on the evaluation during the coming consultation process, but I nevertheless intend to take this opportunity to say a few words about some of the recommendations put forward. One recommendation in the monetary policy areas is that we at the Riksbank should in future express a little more “self-doubt” when putting forward our proposed paths for policy rates. We can achieve this either by a greater emphasis on the uncertainty of interest rate forecasts, or by basing them beyond some horizon on some formula that incorporates the market yield curve. The reason given for this recommendation is that there is no real information in interest rate forecasts that extend further than a couple of quarters ahead. We at the Riksbank are well aware of how uncertain interest rate forecasts are in the longer run and we have therefore endeavoured to draw attention to this uncertainty. We have done so, for instance, by publishing uncertainty bands around the interest rate paths and by repeatedly emphasising the fact that the repo rate path is a forecast and not a promise.