samchain/econo-pairs-v1 huggingface dataset:
Chart 15 takes the UK flows of funds map shown earlier and colour codes this according to one measure of its data availability. There remain a number of key areas for improvement, particularly within the nonbanks part of the intermediation chain, as well as among companies, households and externally. In response to this, the Bank and the UK’s Office for National Statistics (ONS) have recently initiated a project to improve the UK’s flows of funds data. Although at an early stage, this aims to provide more granular picture of sectoral (“who-to-whom”) flows. Once complete, this should enable interactions between and within the financial and real sectors of the UK economy to be better tracked and modelled. This pattern of data gaps is mirrored globally. Global flow of funds data beyond banking is patchy. Data on flows, and in particular stocks, of cross-border portfolio and foreign direct investment are often low in quality and lack timeliness. For example, official data suggest the UK has a net external liability position of around 20–30% of GDP. But if foreign direct investment stocks are valued at market (rather than book) prices, this switches to a net asset position of around the same amount (Bank of England (2014)). Derivatives positions and net foreign currency positions are also imperfectly captured in global flows of funds data, particularly for companies. For example, over recent years many emerging market companies have borrowed cheaply in dollar-denominated instruments.

This provides a powerful secular incentive for non-decomposable socio-economic systems. Moreover, if these hyper-connected networks do face systemic threat, they are often able to adapt in ways which avoids extinction. For example, the risk of social, economic or financial disorder will typically lead to an adaptation of policies to prevent systemic collapse. These adaptive policy responses may preserve otherwise-fragile socio-economic topologies. They may even further encourage the growth of connectivity and complexity of these networks. For example, policies to support “super-spreader” banks in a crisis may encourage them to become larger, and more complex, still over time (Haldane (2009)). The combination of network economies, and policy responses to failure, means socio-economic systems may be less Darwinian, and hence decomposable, than natural and biological systems. It is against this backdrop that a complex, socio-economic “system of systems” may emerge. This can defined as one comprising an interlocking set of individually complex webs ((Gorod et al (2014)). The system of system concept initially emerged for engineering and enterprise systems, which involved the multi-layered assembly of component parts. But it has since found its way into a number of other domains including military planning, ecological evolution, power grids, transport networks and neurological structures (Gao et al (2014)). Although still in its infancy, there are some general properties of a “system of systems” perspective that are worth bringing out. For example, Kurant and Thiran (2006) look at the behaviour of a particular topology – a layered complex network.
Incomes have also developed positively – at least for those who still have jobs. Another important explanation of why house prices have not fallen more is that the real interest rates faced by the households are at historically low levels. The construction of new housing has also been at a low level since the crisis of the 1990s. This is despite the fact that in most of the large urban areas it pays to build new house in comparison to what it costs to buy an existing house. 9 At the moment, when the crisis appears to have bottomed out and optimism has begun to grow, housing prices are beginning to increase again, especially in the major cities. The Riksbank will closely monitor developments in the period ahead with regard to both the housing market and the market for commercial properties. The Swedish banks can cope with large losses in the Baltic states In the deep recession that we are now experiencing, it is not possible to dismiss the fact that the Swedish banks are facing significant loan losses. During the first six months of this year, these losses amounted to SEK 30 billion, which translated into annual figures is equivalent to 0.84 per cent of total lending. A large part of these losses, 44 per cent, stem from the Swedish banks' operations in the Baltic states.

There were large savings deficits in both the private and public sectors and a high level of indebtedness in the private sector. The loans also gave rise to a growing currency crisis. In addition, increasing cost pressures gradually undermined the competitiveness of the three countries. When the global financial crisis broke out, economic growth in the Baltic states had already begun to decline. Declining growth and the large current account deficits led investors to begin reappraising the value of eastern European and central European assets. Capital inflows dried up, which made it more difficult to fund many projects and further reinforced the downturn in economic activity. The credit rating agencies downgraded the Baltic states, one after the other, which further aggrevated the shortage of capital. The lack of capital thus helped to reinforce the downturn in the same way that the surplus of capital once reinforced the dramatic upturn. There are some signs that the real economy in this part of the Baltic region has now begun to stabilise, but unfortunately the recovery may be a long, slow process. This is partly because external demand is still weak as a result of the global recession. Above all, however, it is because domestic demand is low due to the fact that the Baltic states are now carrying out so-called internal devaluations. This means that wages and other costs have been substantially reduced to restore competiveness and to counteract the serious weakening of public finances.
Frequently, the disadvantaged and those who are not able to access the formal financial system have resorted to the informal financial systems. Recourse to these financial sources have also been due to the lack of awareness. These may be in the form of deposit schemes that entail high risk, access to financing from sources that are highly costly, and almost inevitably against high collateral. Very often, the practices are unfair and deceptive. Examples in predatory lending are found to be unscrupulous and highly disadvantageous to the borrower. Fourthly, in some Asian societies, traditions continue to create cultural pressures that restrict a woman’s choices and liberties. Though there is increased freedom for women to pursue education and careers, in some societies, cultural pressures still make it more difficult for a woman to get the exposure on financial matters. In addition, the increased incidence of divorces and single parenthood mean that more women are left to fend for themselves and their children. In certain Asian societies, single women may face unusual difficulties in arranging their finances. In some cases, a woman may even have difficulty claiming her legal rights in a contract, even though the law does not dispute such a right. Deeply entrenched human behaviour is not able to change as rapidly as the financial system is evolving. Fifthly, statistics on life expectancy confirm that women tend to live longer.

Let me stress two elements in this direction: • We are data driven, we are not forecasts driven. And recent data show that even if we are obviously still far from the inflation target, our monetary policy is at work, and is working : inflation has peaked in the euro area, core inflation has declined for the second consecutive month, and there are several other signs that underlying price pressures are softening. According to yesterday’s inflation forecast, which is a rather cautious one, inflation should be at 3 % in the euro area by the end of this year, and at 2% by 2025: we are confident that we will deliver on our inflation target in the next two years. • We have already shown our determination on interest rates through this overall 400 basis point increase. We obviously covered most of the  Page 2 sur 6 ground, and we are clearly in restrictive territory on all maturities: the key issue now is the transmission of our past monetary decisions, which is proceeding forcefully to financial conditions but could take up to two years for its full economic effects. Hence, the duration matters more than the level; persistence matters more than the peak. II. Forces pushing for greater diversification in the IMS Despite the end of the Bretton Woods system in the 1970s, the US dollar still plays a dominant role in the international monetary system (IMS).
Ardian Fullani: Overview of Albania’s latest economic and financial developments Speech by Mr Ardian Fullani, Governor of the Bank of Albania, on the Monetary Policy Decision-Making of the Bank of Albania’s Supervisory Council, Tirana, 29 January 2014. *  *  *  Today, on 29 January 2014, the Supervisory Council of the Bank of Albania reviewed and approved the Monetary Policy Statement of the Bank of Albania on the second half of 2013. Given Albania's latest monetary and economic developments and discussions on their outlook, the Supervisory Council of the Bank of Albania decided to keep the key interest rate unchanged, at 3.0%. The Supervisory Council deems that the inflationary pressures from the real and financial sectors of the economy are weak and will remain so. These circumstances require maintaining a stimulating monetary policy over the period ahead. The monetary stimulus, transmitted through the low key interest rate and ongoing liquidity injection, provides the proper conditions for meeting our inflation target in the medium term. Let me now proceed with an overview of the economic developments and key issues discussed at today’s meeting. *** Year 2013 was a difficult one for the Albanian economy. Aggregate demand and economic growth remained at low levels; inflation fluctuated around Bank of Albania's lower targeted band, while the budget deficit and public debt increased sharply. The unfavourable economic environment, both at home and abroad, led to this performance. Moreover, Albania’s June parliamentary elections added uncertainties to the economy and financial markets.

However, the lek loan price has not fully reflected our monetary policy, indicating the presence of high risk premia and containing the monetary stimulus transmission to the economy. These risk premia are also reflected in other lending terms, unrelated to the loan price, and appear tighter as compared to their historical performance. *** Under the Bank of Albania's baseline scenario, the economy will improve slightly during the current year. Increase in exports and a better performance of consumption and investments will continue to support the aggregate demand. The monetary policy will support the domestic demand, by maintaining macroeconomic stability and ongoing injection of monetary stimulus in the economy. Also, payment of arrears will help improve the balance sheets of firms and the private sector, and is expected to improve business borrowing. Excluding the payment of arrears, the 2014 budget has projected a fiscal adjustment needed against the backdrop of a rapidly increased public debt. Reflecting the weak economic and monetary dynamics in the country, inflationary pressures are expected to be weak. After four quarters, inflation is expected to vary 0.7%–3.8%, with a 90% probability of occurrence. This will require maintaining a stimulating monetary policy even in the medium term. *** At the end of discussions, the Supervisory Council decided to keep the key interest rate unchanged, at 3.0%. Given the expected inflation developments, the Supervisory Council deems that the monetary policy will remain stimulating in the medium term.
If it is decided that the resources available for resolution lie principally within the existing waterfall, that would further suggest that resolution authorities must have the ability to intervene and to take action before the end of the waterfall. But where does that boundary lie? The UK resolution regime sets the statutory definition for entry to resolution as being the point where the CCP is failing or likely to fail and there is no reasonable prospect of action being taken to restore it to viability. Integral to this test is the principle that this is a forward-looking judgement, capable of being exercised flexibly at different points in a CCP’s distress and dependent on a multitude of factors that drive an eventual decision at the time. That can make it difficult to pin down a single universal trigger point but it is possible to identify some circumstances that could be indicative of this boundary being reached. Those possible scenarios could include an assessment that the default management procedures of the CCP have failed, or are likely to fail, to both absorb losses fully and replenish the CCP’s resources in a sufficiently timely manner to allow the CCP to continue to operate. That failure might arise through legal challenge hindering the default management process or from an assessment that if the losses were allowed to continue they would exceed caps on contributions and could not be credibly absorbed via other means.

Mr. Carse reports on the initiatives taken concerning financial industries in Fujian, Hong Kong and Taiwan Speech by the Deputy Chief Executive of the Hong Kong Monetary Authority, Mr. David Carse, at the Symposium on the Financial Exchange and Cooperation of Fujian, Hong Kong and Taiwan, held on 8/8/98. I am pleased to be here this morning to welcome you to this Symposium. The Chinese Banks’ Association is to be congratulated for organizing this important initiative with the co-sponsorship of the Fujian Provincial Government and Chinatrust Commercial Bank. The idea of the Symposium, as I understand it, is to facilitate the exchange of ideas concerning the financial industries in the three regions and the exploration of cooperative opportunities between them. 2. Such an initiative could not have come at a better time. The current financial crisis is creating havoc among the Asia economies. Initially, the damage was felt in the financial sector. But the full impact is now being seen in the real economy as output and trade are crippled by higher interest rates, the burden of foreign currency borrowing and the credit crunch. The Mainland of China, Hong Kong and Taiwan have survived the crisis in better shape than most other economies in the region. But they have not been unaffected as events of this week have demonstrated in Hong Kong where we have witnessed further speculative pressure on the Hong Kong dollar. 3.
(Figure 2)  BIS central bankers’ speeches  3  Figure 2 The banks’ funding December 2010 Per cent  Source: The four major banks’ reports and the Riksbank. At the same time, the Swedish banks’ exposures towards the Baltic countries became increasingly onerous. The global financial crisis became the factor to trigger an economic crisis in the Baltic countries. Investors saw the Baltic as a high-risk region where the devaluation of the currencies was also expected. Knowledge of these risks made international investors increasingly unwilling to lend money to Swedish banks. Even the Swedish banks that did not have any lending activities in the Baltic were affected by this, to a certain extent. The Riksbank’s measures dampened the negative effects When the crisis had finally struck with full power, we acted rapidly and forcefully. Over three months, the Riksbank lent an amount corresponding to about SEK 500 billion to the banks. This meant that the Riksbank’s balance sheet increased from about SEK 200 billion to about SEK 700 billion. We acted in our role as lender of last resort.3 All lending took place against collateral. So as to avoid restricting the banks’ opportunities to borrow, we eased the regulations for collateral slightly. Among other changes, we accepted more types of security than previously. However, these new types of collateral were also of very high quality. To make it possible for several institutions to use certain of the Riksbank’s lending facilities, we also decided to increase the number of counterparties.

I am looking forward to learning from what I hope will be both an open-minded and a constructive dialogue about the future of monetary and macroprudential policies. Thank you. BIS central bankers’ speeches  1
Over time this should also be fostered by an improvement in employment and employment expectations. This is our assessment and it is supported by the available forecasts and projections. Obviously, any such forward-looking evaluation is conditional and subject to risks. At this juncture, risks are primarily related to the persistent imbalances in some regions of the world and the weakness of private consumption in the euro area. Concerning private consumption, European citizens who still perceive that inflation is higher than measured by official indices should be assured that the official measures are accurate and that we will continue to maintain price stability in the future. Moreover, the prevailing uncertainties surrounding fiscal policies and structural reforms in some euro area countries may have had a negative impact on consumer sentiment. Ensuring clarity about the content and timing of these reforms and a better understanding of their benefits to all citizens would make a very important contribution to supporting household confidence. Turning to price developments, we expect some short-term volatility in HICP inflation rates to continue. According to Eurostat’s flash estimate, annual inflation in the HICP was 1.6% in March, unchanged from February and down from 1.9% in January. However, over the coming months, annual inflation rates could edge up again, on account of less favourable base effects and increases in indirect taxes. BIS Review 20/2004  1  Looking beyond these short-term fluctuations, we expect price developments to remain in line with price stability.

In this context, the Bank of Albania will continue to work on improving the control and management systems, to reduce operational risks and improve communication and transparency. In addition, the Bank of Albania emphasizes the need to continue structural reforms, which will allow faster, more sustainable and more inclusive growth for different social levels of the society. Thank you! 2  BIS central bankers’ speeches
In carrying out this review, is it a condition for the ECB that countries commit themselves in advance to covering a capital shortfall if necessary? This asset quality review will provide clarity about the banks’ balance sheets. Of course we don’t want to take on any “bad eggs”; the reputational risk is ours alone. However, from our perspective, a lack of clarity about the balance sheets is one of the main obstacles preventing banks from extending more credit. Clarity would also improve the functioning of the interbank market. In that sense, the review is not a threat but an opportunity. If it is to be a success, we must know what will be done should a capital shortfall emerge. If there is no  BIS central bankers’ speeches  3  answer to that, people will suspect that the review was too favourable. That doesn’t help anybody. So you are confident, all in all. But some observers find that the crisis is unresolvable, pointing to what they see as unbridgeable conflicts of interest. Yes, I have a fundamentally different view. Look at what has happened since 2012, much of that would have been hard to imagine in advance. To name a few examples: the fiscal compact, the German-style debt brake in 25 EU countries, the steps towards banking union with the single supervisory mechanism and the ESM. I am aware that the ESM is controversial in Germany, but as a crisis management tool that did not exist before, it nonetheless fills an institutional gap.

You have clearly argued in favour of indicating who voted for what and why. Now it seems that these will be more like summary accounts indicating the primary arguments. My opinion has not changed. I do indeed believe that demands are higher today in terms of transparency. The ECB was once right at the forefront in this regard, when it introduced its monthly press conferences. Now, though, we are lagging way behind when you see what other central banks are doing. That’s why I believe that publishing accounts that summarise the general course of the discussion would be helpful. I personally would also be in favour of indicating how people voted. That would require all members of the Governing Council to explain how their own arguments and their own voting behaviour were in line with the ECB’s European mandate. What about the argument that individual central bankers would then be put under pressure? I think the concerns that the pressure would become too great have been exaggerated. Someone who takes on a job like that must be capable of withstanding pressure. Nobody will be put in prison for voting for an interest rate rise in the euro area. People shouldn’t be that sensitive in this regard. I was in favour of OMTs because they were – and still are – the right response for Europe, despite the fact that many in Germany are opposed to them. The OMT programme has made a significant contribution to the easing of the euro crisis.
Where we draw the line within that for being in scope of this initial first step of the strong and simple framework will impact the extent of simplification we can achieve while maintaining strong standards. There is also the risk that simplifying requirements for smaller firms could increase barriers to growth, if the step up to the next level of our framework is too big. That being said, we could in the long run move to a graduated approach that covers all nonsystemic firms. Under such a regime the complexity of the framework would grow 2/5  BIS central bankers' speeches  commensurately with the size and complexity of a firm’s activities, minimising potentially steep barriers to growth. This is in fact the long-term vision we have outlined in our paper. But doing this will take time and, rather than delaying the roll-out of a simpler framework for everyone, we thought a better approach would be to do this step-by-step. One possible first step is to start with the smallest firms that would benefit the most from a radically simpler regime – but, as with all the trade-offs in our paper, this is something we would welcome views on. We also need to consider the position of foreign banks that operate in the UK. Internationally active firms will continue to be in scope of international standards; likewise, it may be appropriate for subsidiaries of international groups to stick with the international standards. But we have an open mind on this.

On the one extreme, the PRC and FPC might now decide that the current scope of the framework has served us well, and that it is enough for PRC to continue with its leverage ratio supervisory expectations that currently apply to all firms. On the other extreme, the PRC and FPC might decide that there is benefit in extending the leverage ratio framework to all PRA firms, whether from a micro-prudential or a system-wide perspective. Similarly, the Bank’s MREL review is considering the thresholds for being subject to a resolution strategy requiring use of the Bank’s stabilisation powers, and in connection to that the resulting MREL calibration for mid-tier firms. These links and their implications for the different reviews are being closely coordinated across the three authorities – the PRC, the FPC and the Resolution Authority. No decisions have been made on either, but I expect all three authorities to be saying more on these reviews over the summer – so watch this space. Mortgage risk-weights Finally, I want to close with something that I hope is of interest to both the larger and smaller firms in our audience. Last time I was here, I spoke about the significant decline in UK mortgage risk-weights for firms using internal models – from an average of around 15% in 2009 to around 10% today. This has led to increased prudential risks, and an increasing divergence between firms that use these models and firms that do not.