samchain/econo-pairs-v1 huggingface dataset:
As I have said, property-related lending is the largest component of UK banks’ domestic loans. Mortgage lending, in particular, is the single largest asset class on UK banks’ balance sheets. This was not always the case. Until the 1980s, short-term loans to non-financial businesses constituted the majority of UK banks’ loans. Looking back further, fewer than 10% of banks’ loans to businesses at the start of the twentieth century had a contractual term greater than a year – loans were mainly used for working capital or to support cash flows rather than to finance long-term assets. 10 Banks acted in line with the advice in George Rae’s celebrated banking textbook, published in 1885: “As a banker, you are a dealer in money, or in securities readily exchangeable for money, and building-land does not come within this category. It is practically inconvertible into money on rational terms, and ought therefore to have no place amongst a banker’s assets.” 11 It is clear that, now more than ever, the returns and resilience of the banking system are intimately tied to property markets. Is banks’ unwillingness to follow George Rae’s advice responsible for their current subdued market values? Banks: a crisis of resilience or returns? UK banks currently have an average price to book ratio of around 0.7 compared to an average of two in 2006. In other words, investors seem to be assuming that, looking  9  http://www.ipf.org.uk/asset/0D24F055-38E6-419F-8E117665F4F47854/  10  See Knott et al (2014). 11  See Rae (1885).

Some of this is probably due to the fact that with low interest rates and high employment, impairment charges are at a very low rate by historical standards – impairment charges as a proportion of total loans are now back to pre-crisis levels. Of course, underlying returns only tell you part of the story. When one adds in the cost of misconduct, including for PPI, that banks have paid and are likely to pay on past retail  12  Banks’ current price to book ratio would be associated with CDS spreads of over double their current level if the relationship between banks’ price to book ratios and CDS spreads between 2008 and 2013 still held. 13  Estimates of return on equity on individual business lines should be treated as indicative for a number of reasons, for example, not all banks calculate return on equity by business activity, definitions of business activities can vary across banks and some banks find it difficult to attribute equity to individual divisions or products. 6  BIS central bankers’ speeches  lending activities, and other costs, the overall returns drop markedly. But even adjusted for conduct and other costs, returns on retail lending still seem to be around 10%. Cost of equity is the relevant comparator for return on equity. For large UK and international retail and commercial banks it is estimated to be around 9%. So retail lending does not seem to be the source of the problem. Nor, on the surface, does corporate lending.
But inflation and economic activity in the shorter run – during the normal forecast period – also play a major role in the decisions. A monetary policy that leans against the wind is thus, like most economic policies, a question of degrees. It is not the case – as one might sometimes believe from the debate – that one either refrains entirely from leaning against the wind or leans against the wind one hundred per cent and disregards everything else. It is thus no 0–1 variable. As I have explained, the Riksbank’s policy in recent years has been at the same time to support the recovery and get inflation to rise towards the target, and to some extent to address the risks that may be a threat to sustainability. When things happen in the economy, this balance is of course affected. As I mentioned earlier, inflation has for some time been lower than the Riksbank and other analysts have expected, and it has now undershot the target for a fairly long time. Moreover, long-term inflation expectations have fallen. Although these are only a few tenths of a percentage below the target of 2 per cent, the trend has been downward for some time (see Figure 10). As the basis of an inflation-targeting policy is that long-run inflation expectations are anchored around the target, this development has made it even more important to prioritise bringing up inflation. In other words, the cost of taking risks into account by holding the repo rate a little higher has increased.

Because of the infamous “long and variable” lags between changes in interest rates and their impact on inflation, the MPC does not yet have much of a track record in terms of inflation outturns. But since the target given to the MPC is for inflation, let me start there. Between June 1997 and March 1999 (the latest month for which inflation has been published) RPIX inflation averaged 2.7%. During that period, inflation ranged from a low of 2.4% to a high of 3.2%. Over the past nine months it has remained within 0.2 percentage points of the target, a remarkable degree of stability. It is most unlikely that inflation can remain, month-by-month, as close to the target as that. Unexpected movements in the exchange rate, oil or other commodity prices, indirect tax rates or a multitude of other influences could all lead to divergences of inflation from target. Because of the lags I mentioned earlier, it would take the MPC some time to bring inflation back to the target level. What matters, however, is not relatively small month-to-month movements in the inflation rate, but the expectation that inflation will average 22% over a number of years. As part of the arrangements for accountability, the Governor, on behalf of the MPC, is required to write an open letter to the Chancellor whenever inflation deviates by more than a percentage point from the target.
Nonetheless, the NPL ratio can be an imperfect indicator of the effect that non-productive or problem assets may have on a bank’s solvency, since it does not take into account the asset collateral or the provisions set aside. The so-called Texas ratio, an approximation to which is  2  According to data for Spain from the EBA 2015 transparency exercise (consolidated data, significant institutions). With data for business in Spain, drawn from individual financial statements, the related ratio for the resident private sector in Spain stood at 10.4% in December 2015. BIS central bankers’ speeches  3  illustrated in Chart 4, offers a much broader view in that it also includes in its calculation the provisions and capital available to the bank. Chart 3  Chart 4 TEXAS RATIO PROXY (a)  NPL RATIO  1.6  %  30  1.4  25  1.2  20  1.0  15  0.8 0.6  10  0.4  5  0.2  0 UK  DE  FR  EU Avrg. SSM Avrg. (a)  ES  DECEMBER 2014  PT  IT  IE  JUNE 2015  0.0 UK  DE  FR  EU Avrg. DECEMBER 2014  ES  SSM Avrg. PT  IT  IE  JUNE 2015  SOURCE: European Banking Authority. Transparency Exercise 2015 (104 institutions). SOURCE: European Banking Authority. Transparency Exercise 2015 (104 institutions). a. The SSM average includes data on 15 of the 19 euro area countries.

The MAS staff responsible for the Gallery have put a lot of thought into its design and content. But the Gallery will keep evolving, and we will want it to stay relevant to Singaporeans young and old. It is significant too that we are opening the Gallery in 2016, when we commemorate the 45th anniversary of the MAS. If we think about what we have achieved in these 45 years, what’s most precious is credibility. Credibility is the most precious asset that a central bank and a financial regulator can have. The MAS’ credibility was founded in its early years. I want to mention the leaders and staff who were involved in putting in placed these foundations of today’s credibility. Mr Hon Sui Sen in particular, our first Chairman (1971-1980), Mr Michael Wong Pak-Shong, who was the Managing Director, and the staff at that time, including Mr Ng Kok Song, Mrs Ong-Ang Ai Boon, Mrs Elizabeth Sam. Together they built an organisation, bringing together no fewer than nine different offices and functions in Government at the time, melding them together in one organisation. They also set the foundations for an international financial centre. Singapore was not a serious financial centre until then. Mr Hon Sui Sen and his team built the foundation for a financial centre that went beyond Singapore.
Edwin Schooling Latter will talk more to these issues this afternoon. Having put in place the foundations for a decisive switch in swaps liquidity to SONIA, the next challenge for derivatives markets is to accelerate transition in futures and non-linear products. In preparation for the provision of a robust forward-looking sterling term rate, many banks are now streaming executable SONIA swap prices to regulated trading venues. Having the inter-dealer market able to trade SONIA in a single click is a key building block to helping firms hedge with the smallest friction possible. The Working Group will be considering what more needs to be done to drive transition in these markets over the coming months. 11  www.bankofengland.co.uk/-/media/boe/files/speech/2019/join-the-revolution-why-it-makes-business-sense-to-move-on-from-liborspeech-by-andrew-hauser.pdf 5  All speeches are available online at www.bankofengland.co.uk/news/speeches  5  Progress in sterling markets: cash instruments and lending  If derivatives are well on their way, the big challenge for 2020 is to drive transition in the sterling cash markets – and in particular to hit the market’s target of no new issuance of term LIBOR-linked cash instruments after Q3. We know it can be done. SONIA has quickly become the default reference rate for floating-rate notes and securitisations – accounting for around 85% of new issuance across the two markets in the second half of 2019. But these are predominantly wholesale transactions, involving a relatively small number of experienced counterparties.

More detailed material on both has been published this morning on our website. 10 In the rest of my remarks today, I want to take stock of progress so far, and explain how our new initiatives will work. Progress in sterling markets: derivatives instruments  As this ISDA audience will know well, by far the largest sterling LIBOR exposures come from derivatives positions – and progress here has been good. Swaps account for the lion’s share of sterling derivatives, by notional value – and last year approximately half of new cleared sterling swaps referenced SONIA. That’s some £ trillion a month. That ratio rose to more than two-thirds in January this year, amidst a sharp rise in trading of expectations on the outcome of that month’s monetary policy decision (Figure 2). That demonstrates the depth of liquidity in the market to absorb additional interest. But we can’t rest on our laurels – SONIA usage still needs to be higher. For some time there has been a sense that progress could be accelerated if a way could be found to overcome the potential ‘first mover’ challenge for intermediaries otherwise keen to switch. For that reason, and following consultation with the industry, the Bank and FCA have strongly encouraged market makers to use SONIA as the standard reference rate for sterling interest rate swaps from 2 March 2020 – that’s next Monday. From then, market makers should consider SONIA first.
The SNB’s investment policy The SNB’s investment policy outlines the principles governing its asset management. Our assets chiefly consist of currency reserves, namely foreign currency investments and gold. A small proportion are Swiss franc assets. In principle, the SNB is able to define its own investment policy. However, due to its monetary policy mandate, the SNB’s investment policy is subject to certain restrictions. It has to be designed in a way that helps the SNB fulfil its mandate. To a certain degree, the function of our investment policy is to serve monetary policy. What does this mean exactly? Objectives  In applying its investment policy, the SNB has two main objectives. The first is to ensure that its balance sheet can be used at any time for monetary policy purposes. Investment policy may not restrict monetary policy in terms of either a possible expansion or a possible reduction of the balance sheet. The investment universe must be designed in such a way that we are able to purchase foreign currency and invest it quickly when necessary. But we must also be able to sell the investments again quickly if monetary policy requires it. The second objective of investment policy is to ensure that the currency reserves preserve their value over the long term. Currency reserves serve to build confidence. They are used not just to overcome, but to also to prevent potential crises. Currency reserves allow us to intervene in the market if the Swiss franc weakens.

Page 7/10  Chart 1  Chart 2  Page 8/10  Chart 3  Chart 4  Page 9/10  Chart 5  Chart 6  Page 10/10
I am sure you would agree with me that it would not necessarily be appropriate to tighten the monetary policy stance simply because the euro had depreciated, if, at the same time, we were in a recession with increasing downward pressures on prices. As such mechanistic reactions to exchange rate developments could easily endanger price stability and destabilise economic developments in the euro area, we deliberately excluded any kind of exchange rate targets or target zones from our strategy. BIS Review 9/1999  –5–  In line with its clear mandate enshrined in the Treaty, and for sound economic reasons, the ECB has to decide which monetary stance best serves the maintenance of price stability over the medium term and then act accordingly. At the same time, the Treaty also emphasises the need for sound fiscal policies. This clear separation of responsibilities is both efficient and transparent. The Eurosystem is open, transparent and, above all, accountable for its performance. As part of its communication strategy, the Governing Council of the ECB regularly informs the public about changes in its assessment of the monetary, economic and financial situation in the euro area and about specific monetary policy decisions. The Governing Council meets every fortnight. The first meeting in every month is immediately followed by a press conference and the release of the President’s Introductory Statement, which is a summary of the conclusions of the Governing Council with regard to its assessment of monetary, financial and other economic developments.

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.
I will conclude here my brief address, wishing you fruitful debates and viable, useful solutions by the end of today. To all the foreign guests, may you enjoy your stay in Romania. Thank you. 2/2  BIS central bankers' speeches

The pre-positioning drive has gathered pace in the last year or so – there is now over £ of collateral pre-positioned for use in the DWF. After applying appropriate haircuts to each piece of collateral pre-positioned, this means the Bank could, subject to solvency and viability assessments and repayment plans, lend around £ in the DWF without the complications of further detailed collateral checks. 11 Although not a substitute for firms  9  Further details on how central banks can use their money market operations to implement monetary policy and provide liquidity support to banks are set out in Clews, Salmon and Weeken (2010), “The Bank’s money market framework”, available in the Bank’s Winter 2010 Quarterly Bulletin. 10  Further details are available at http://www.bankofengland.co.uk/markets/marketnotice100719.pdf. 11  That is around 10% of annual nominal UK GDP in 2011 – slightly higher than that in the United States, where the lendable value of collateral pledged by all depository institutions in the Discount Window (around $ in January 2012) is equivalent to around 8.5% of nominal US GDP in 2011. BIS central bankers’ speeches  5  building up their own holdings of high quality liquid assets to a more satisfactory level, that represents a very substantial “war chest” of potential liquidity in the event of significant adverse shocks. There is limited cost to the counterparty of pre-positioning, as collateral can be withdrawn on demand for use in other operations or market transactions.
China alone has been responsible for a third of the growth in global oil demand over the past four years. Meanwhile supply has struggled to keep pace – partly because of policy decisions by oil producing economies, but partly because it takes quite a long time for investment in extra production capacity to come on stream. What are the risks that oil prices will stay around their current level for a time – and maybe go even higher? It’s hard to say – but the market is not discounting the possibility of even higher oil prices. Options prices point to an increase in near-term uncertainty – and an increasing concern about further large price rises. 3  Using US consumer expenditure deflator to adjust for inflation. BIS Review 136/2007  3  There are risks on the downside too: the last time the world economy slowed significantly, oil prices slumped. Could a slowdown in the world economy cause oil prices to collapse again? Projections for the growth in oil demand over 2007 and 2008 have been revised downwards a little recently. But much may depend on the pattern of any slowdown – and in particular whether China continues to expand strongly even as the US economy slows. What’s the likely impact of higher oil prices on the UK economy? Twenty or thirty years ago, sharp increases in energy prices coincided with much higher inflation and much lower growth.

Should we take heart from the relatively muted impact of previous increases in oil prices? Or does the fact that workers had already absorbed the impact of a doubling in oil prices since 2004, even before the latest surge, make it more not less likely that they will hold out for higher pay? A key point for the MPC is that its own actions will help to determine how far oil prices have a lasting impact on inflation. There are always risks in signalling that policy will be eased, at a  4  BIS Review 136/2007  time of rising energy prices. This is all the more so after a year when inflation has been above target and on some measures remains uncomfortably high. On the other hand, we need to be very alert to the risk that the economy may be slowing too abruptly. At current interest rate levels, monetary policy may be on the restrictive side. And the duration and impact of financial turbulence is very hard to call. There must be a risk that at some stage it will spill over into asset and property markets more generally, and trigger a damaging loss of confidence. Conclusions The MPC faces a tricky period as we try to weigh the risk of an unduly sharp downturn, against the threat to inflation posed by a sharp surge in global energy prices.
There are clearly identified upper-tail companies, who are fast adopters of new technologies which then appear to spread quickly and widely across the firm. Adoption of innovation is rapid and diffusion widespread. This helps explain why these companies are on the productivity high road. But there are many more companies where, by contrast, technological adoption has been slow or nonexistent. Even when adopted, technologies have tended not to have been quickly or extensively employed. For this lower tail, neither innovation nor diffusion has been rapid or widespread. This, in turn, probably helps explain why these companies’ productivity performance has been stuck on the low road. (c)  Human Capital  One of the key mechanisms through which ideas and innovations are diffused across countries and companies is, unsurprisingly, through people. As workers transition between companies, their expertise and experience is transferred within them. Empirical evidence from a range of countries confirms the importance of human capital as a transmission and diffusion channel. 36  Can these human capital channels help explain the UK’s productivity gaps? One aspect studied in some depth is management skills. A survey by Nick Bloom and John van Reenen found that UK companies had management skills around half a standard deviation lower than competitor countries, such as the US. These management skills-scores have a statistically-significant link with levels of company productivity. 37  The UK also exhibits a greater degree of dispersion in management skills than competitor countries.

Third, it is necessary to implement the legislative program, which is not a matter of readiness with draft legal acts, but rather a matter of parliamentary procedures for discussion and adoption of the prepared legal acts. Next, in fourth place, are the tasks related to technical and logistical preparation. The banking sector has made relatively good progress and continues to work actively and systematically on this issue. The fifth group of tasks is related to the communication campaign, which must be launched without further delay and which will be an important factor in reaching both the messages and the answer to the specific questions to businesses and people. The success of the overall euro accession process will depend crucially on our ability to achieve political, institutional and fiscal consolidation. Thank you for your attention! 5/5  BIS - Central bankers' speeches