samchain/econo-pairs-v1 huggingface dataset:
Yields on bonds with high credit ratings are also very low in Switzerland. At the beginning of June, ten-year Confederation bonds attained a new all-time low, at around 0.5%. Thirty-year bonds were trading in the market at yields of under 1%. For short to medium-term maturities, yields were in negative territory, in some cases very negative. The low interest rates continue to be reflected in robust growth in lending and rising real estate prices. As a result, the imbalances on the Swiss residential mortgage and real estate markets have increased further. Following my presentation, my colleague Jean-Pierre Danthine will take a closer look at the risks for financial stability in connection with the mortgage and real estate markets. SNB monetary policy Let us now return to the SNB’s monetary policy. The debt problems in some euro area countries have deteriorated seriously over the recent period. Accordingly, the euro has lost value against most countries since May. This has led to increased upward pressure on the EUR/CHF exchange rate. Even in this difficult environment, we have consistently enforced the minimum exchange rate of CHF 1.20 per euro. To defend the minimum exchange rate, we purchased foreign currency. This has led to a further expansion in Swiss franc liquidity and the SNB balance sheet. Even when the minimum exchange rate was first introduced, we drew attention to the fact that its enforcement could have significant consequences for our balance sheet.

The stabilising effect of the minimum exchange rate against the euro played a major role in this development, with goods exports declining only slightly in the first quarter, in an international environment that remained weak, while exports of services rose. An improvement in consumer confidence encouraged a substantial increase in private consumer spending. However, GDP growth was also supported by temporary effects. Value added in the banking industry benefited from the optimistic mood on the financial markets during the first months of the year. In manufacturing and the hospitality industry, however, activity declined, underscoring the particularly negative impact of the strong Swiss franc on these industries. For the second quarter, we expect a significant slowdown in GDP growth. Since the global economy is expected to recover slowly, and the value of the Swiss franc is still high, the demand for exports is likely to remain subdued, even in the subsequent period. The high level of uncertainty and the pressure on profit margins are impacting negatively on corporate investment. Only because of the unexpectedly strong winter half-year does the SNB now expect growth of around 1.5% for 2012. Swiss inflation outlook The inflation outlook for Switzerland has remained largely unchanged from the monetary policy assessment in March. Since the fourth quarter of 2011, the annual inflation rate has been in negative territory. This is mainly attributable to a base effect, because last quarter the price level remained almost unchanged from the previous quarter.
Andrew G Haldane: Global imbalances in retrospect and prospect Speech by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the Global Financial Forum, Chatham House Conference on “The New Global Economic Order”, London, 3 November 2010. *  *  *  I am grateful to Charlie Bean, Martin Brooke, Oliver Bush, Richard Davies, Katie Farrant, Samuel Knott, William Speller, Gregory Thwaites, Iain de Weymarn, Tomasz Wieladek, Michelle Wright and Gabriele Zinna for comments and contributions. Global imbalances are colossal. At their high-water mark in 2006, imbalances of the G7 economies totalled around 5% of GDP. Like Colossus, global imbalances straddle many of today’s most important global public policy issues. These include the architecture of the international monetary system, the future of the international trading system and the design of the international financial system. These are high stakes. This paper assembles some facts from the past on global imbalances. More speculatively, it also assesses some of the factors shaping the course of imbalances in the future. Those medium-term forces suggest that imbalances may get worse before they get better. If so, this global financial fault-line could cause further tremors to the international monetary, trading and financial system in the period ahead, the like of which we are currently experiencing. Global imbalances – past Global imbalances are a natural by-product of free trade in goods, services and capital. In others words, capital flows are a necessary ingredient of trade and capital liberalisation. In that sense, they are good cholesterol.

Today, it contributes around a tenth. China has been the mirror image. Having contributed less than 5% in 1980, today China is the single largest source of global saving, contributing around one fifth. It has been argued by some that these trends could simply reflect different cultural attitudes towards saving among US and Chinese citizens. In the US, it is often said that there is a culture of spending rather than saving – neurologically, the impatience gene may be dominant (Haldane (2010)). In China, by contrast, the culture may be biased towards saving rather than spending, with the patience gene dominant. In other words, differences in agents’ rate of time preference, or degree of patience, might account for savings imbalances (Buiter (1981)). 4  BIS Review 174/2010  But a recent survey of time preferences in 45 countries suggests cultural differences are not the full story (Wang, Rieger and Hens (2010)). Asked to choose between a payoff this month and a larger payoff next month, 68% of US students choose to wait; they exhibit patience. Facing the same trade-off, 62% of Chinese students made the same choice. These differences are small. 3 They are also the “wrong way around” to explain imbalances. So if cultural factors are not the explanation, what is? Charts 8 and 9 plot national saving rates in China and the US, broken down on a sectoral basis. There are striking differences in saving behaviour across the government, household and corporate sectors in the two countries.
But interconnections could switch from friend to foe when shocks were large. Connectivity then amplified, rather than dispersed, risk; it spread contagion. The more connected the system’s nodes – the larger the number of “super-spreaders” - the greater this fragility. This “robust-yet-fragile” property of complex webs struck a cautionary note about the true stability of modern finance.19  When it came to managing systemic risk, complexity science was rich in answers too. In avoiding fragility, one effective solution was to ring-fence activities, the financial equivalent of fire-breaks, to contain contagion. A second solution was to focus on inoculating, or risk-proofing, the super-spreaders to prevent them serving as a conduit for contagion. And a third was to manage emergent aggregate risks to the system by explicitly leaning against the risk cycle, moderating its emerging excesses. I am still waiting for comments on my 2005 memo. With hindsight, one of my career regrets was not to make more of the results until it was too late. This framework did, nonetheless, prove useful after the global financial system went into meltdown in 2008. The robust-yet-fragile property of modern finance was then laid bare. The double-edged sword of financial integration did then cut through the financial system. And super-spreaders did suddenly appear on our high streets, as people queued in the streets for their money. None of this is to suggest that me or anyone else foresaw the true horror of the Global Financial Crisis.

2  BIS Review 55/2007  4. Fund managers/dealers/traders  Interbank market The tight monetary policy stance adopted by CBSL and its possible continuation would result in increased reliance by banks on the inter-bank call market. Given the self imposed limits by banks on lending to each other, if a few banks attempt to raise a large volume of funds from the inter-bank market , there could be volatility in interest rates. Banks should not often rely on a potentially volatile call money market as an alternative to mobilizing deposits or exploring other funding sources. The heavy reliance by some banks on the call money market drives short term interest rates and make borrowing costs to investors and business community to very high levels. The volatility in the call market also creates uncertainty among the businesses and that adds to inflationary expectations. Forex market Given the current account imbalances, there is a mismatch in foreign exchange inflows and outflows. Sri Lanka’s foreign exchange market is not deep enough to absorb relatively large transactions, though its size and operations have gradually increased. In such a market, huge speculative trades could be rather disturbing and they could move the exchange rate against economic fundamentals. No doubt, forex market is a key source of foreign exchange income to banks. Its price, which is the exchange rate, is determined according to demand and supply forces.
Svein Gjedrem: A central banker’s comparison of the Nordic countries Introduction by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the panel discussion of the ACI Nordic Congress, Göteborg, 24 August 2002. Please note that the text below may differ slightly from the actual presentation. *  *  *  For outsiders, it may be convenient to see the Nordic region as consisting of countries with very similar characteristics. However, the countries are different in several ways. First, they differ in their relations to the EU and with respect to their monetary policy regimes. Sweden, Denmark and Finland are members of the EU. Finland is also a member of EMU. The euro has replaced the markka as legal tender, and Finland and the other 11 member countries of EMU have a common monetary policy. Denmark is in ERM II while Sweden, Iceland and Norway have inflation targets. In Norway the inflation target of 2½ per cent was adopted on 29 March 2001 and now functions as the nominal anchor for the Norwegian economy. The introduction of the inflation target did not imply a significant shift in the way monetary policy was conducted. However, the introduction of the inflation target brought monetary policy in Norway more in line with common practice internationally, and facilitated communication. Although the approaches differ, inflation has been relatively low and stable in the Nordic countries in recent years. Second, the Nordic countries are different in terms of industrial structure.

USD based price indexes 1  0,8 Dec 93 - 1997  0,6  1998-2002  0,4  0,2 Denmark  Finland  Norway  Sweden  Source: EcoWin / Financial Times SG 240802  4  BIS Review 47/2002  Key interest rates in the Nordic countries 12,0 11,0 10,0  12,0 11,0 10,0  Iceland  9,0 8,0  9,0 8,0  Norway  7,0 6,0 5,0  7,0 6,0 5,0  Denmark  4,0 3,0  Sweden  2,0 1999  2000  Finland (EMU)  2001  4,0 3,0  2,0 2003  2002  SG 240802  Nominal effective exchange rates January 1990=100 130  130 Appreciation  120  Iceland (January 1997=100)  Denmark  110  110 Norway  100 90  120  100 90  Sweden  80  80 Finland  70  70  Depreciation  60  60 90  91  92  93  94  95  96  97  98  99  00  01  02  Source: Bank of England and Central Bank of Iceland SG 240802  BIS Review 47/2002  5  Norway: Effective exchange rate and 12-month interest rate differential against trading partners 4,0  93  3,5  96  3,0  Interest rate differential (12 months) (left-hand scale)  99  2,5  102  2,0  105  Effective exchange rate (right-hand scale)  1,5 1,0 jan.99  108 111  jul.99  jan.00  jul.00  jan.01  jul.01  jan.02  jul.02  Source: Norges Bank SG 240802  Norway: Effective exchange rate 90  90  95  95  100  100  105  105  110 115 1990  Forward exchange rate (UIP)  110 115  1992  1994  1996  1998  2000  2002  2004  Source: Norges Bank SG 240802  6  BIS Review 47/2002
Whilst in the United States, over the last twenty years, unemployment has declined significantly during the economic cycles as a result of a successful deflationary and stability policy introduced by the Federal Reserve, unemployment in Europe has increased further in the same period. Since the beginning of the year, the rate of unemployment has stabilised at around 10% in the euro area. Those Member States with more flexible employment markets and more restrained wage bargaining generally have much higher levels of employment than the average in the EU. It is still hoped that the current upturn will not be slowed down by excessive demands for higher wages and will be used to make decisive structural policy reforms. Flexibility in the employment and commodity markets would therefore appear to be urgently needed. As you know, at the summit in Cologne the European Council called for an Employment Pact to be created with the aim of achieving a sustained reduction in unemployment. The Pact underlines the need for the implementation of structural reforms in Europe. It is hoped that the Pact will achieve this objective. Together with the national fiscal policymakers, the unions and the European Commission, the Eurosystem will also take part in the macroeconomic dialogue. We shall use this dialogue to make it absolutely clear to the other parties that structural unemployment cannot be reduced without decisive reforms.

Whilst in Switzerland disturbances affecting, in particular, the demand for central bank money “for reasons still unknown” have increased in recent years, the ECB faces additional uncertainties at the beginning of Monetary Union in terms of the effects of the shift of regime to a single monetary policy in Europe. It is difficult to assess whether conventional and reliable macroeconomic relationships are changing as a result of the introduction of the euro. In view of these uncertainties, but also in general, it is unwise to rely on a few indicators or only one when making monetary policy decisions. Indeed, to date our studies have  BIS Review 99/1999  2  revealed that the M3 monetary aggregate shows clear signs of stability and healthy indicator properties. This provides a sound basis for the prominent role given to the M3 monetary aggregate. Monetary policy instruments and the operational framework of the Eurosystem The operational framework of the Eurosystem has proved to be an effective instrument for steering money market interest rates and for limiting fluctuations. The Eurosystem controls money market interest rates by means of either the provision or withdrawal of liquidity in the banking system. Open market operations play an important role in the context of monetary policy strategy. The weekly main refinancing operations give an indication of the Eurosystem’s monetary policy and provide the largest share of liquidity. Longer-term refinancing operations provide the banking system with longer-term liquidity (three months).
The contribution of bank crediting to the production investments is still low and furthermore, considering the high share the credit takes in supporting trade activity, we can come out with the conclusion that the major part of credit is going for the financing of imports. Likewise, the degree of using the banking system is not within the required parameters of the time and, furthermore, the degree of cash use continues to be high. In addition, the financial markets continue to remain superficial and subject of speculations. The restricted alternatives of investing free funds are indeed a reason to this situation. The financing of budget deficit continues to be still as the best alternative. However, the banking system should think seriously of enriching the market with other instruments rather than of using at maximum this riskless investment. To be more concrete, I will highlight further on some directions, which, I think, in the medium-term perspective are of priority to further stimulate and activate the bank credit in the economy, as the main instrument through which the banking system promotes the economic development of a market economy. Beginning with the Bank of Albania contribution, it relates first to the duty of meeting the legal obligations to achieve the overall macroeconomic stability with a special emphasis on inflation control. We remain determined in our position that inflation under control is a valuable contribution to achieve the objectives of the country’s economic growth, the enhancement of employment and of the living standard in general.

On the other side, Bank of Albania will encourage and support without any hesitation the further development and consolidation of the banking system in particular, and of the financial sector in general. We are deeply committed to undertake the necessary steps to implement all the recommendations given by FSAP. For this purpose, we are ready to offer all our human capacities to contribute in this direction. I use this opportunity to appeal on taking immediate actions towards redesigning the licensing and supervisory process of the other parts of the financial sector. Bank of Albania will continue to pursue a prudential policy in performing its function as a licensing authority of financial entities that are involved in the crediting activities. In the spirit of what I have stated above, I use the opportunity to express our commitment to involve in our supervisory structure all those credit companies or institutions, which one way or another mobilise the population’s funds or manage public funds in the crediting process. Assessing the information issue as a critical element in facilitating the lending activity, I would like to point out that Bank of Albania has already included the project of establishing the credit register in its immediate plans and we are strongly committed to implement it as soon as possible. This register shall be under administration of Bank of Albania and the participation of other member banks of the system will be compulsory.
BIS Review 28/2004  3  this are the UK and Australia, two countries that have tightened monetary policy during the past half year, referring explicitly to price developments in the property markets. Monetary policy and asset prices I would like to round off with some reflections on an interesting discussion that has been going on for some time among researchers. The discussion is about whether central banks should attempt to influence asset prices. The generally low level of interest rates in many countries, and in particular historically low key interest rates, have together with the stock market bubble during the second half of the 1990s helped to raise a discussion about monetary policy and asset prices.3 At present, low inflationary pressures coupled with low interest rates have resulted in large volumes of liquidity in the world economy. There is quite simply a lot of money in circulation. This money has to be invested somewhere, and the major beneficiaries have been the world’s asset markets such as equity and bond markets as well as property markets. In combination with improved corporate earnings and increasing confidence that the economic upswing has taken root, this has led to steep rises in these markets in the past year, notably in equity markets. The discussion is about whether central banks can and should attempt to stabilise asset prices, which are not included in the CPI.

Jaime Caruana: What’s next for Basel? Remarks by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the “Basel II: Reality Check” Conference, sponsored by Financial Times Business and the Banker Magazine, London, 10 November 2004. * * * 1. Introduction and overview  I would like to thank the Banker magazine and the Financial Times Business for inviting me to join this important discussion today on the practical implications of the new capital framework for banking organisations. It is an honour to represent the Basel Committee on Banking Supervision at this event. The organisers have selected a provocative and highly appropriate title for this conference. As I will discuss this morning, the “real” reality checks for Basel II lie just ahead. Basel II’s effectiveness in encouraging improvements in risk management, and in motivating banks to hold adequate levels of capital, will depend principally on the degree to which it reflects the true risks and rewards facing banks. That is the focus for banks and supervisors now as we work toward the implementation of the new framework. Will Basel II be effective in promoting sound risk management? I am confident that the answer is yes on at least two levels. On the microeconomic level, I believe that Basel II will help to increase the rigour and comprehensiveness of an individual bank’s decision-making.
In fact, real gross domestic product (GDP) grew just 1.7 percent in 2012, below the 2.2 percent rate of the preceding two years. This lackluster and disappointing performance masks the fact that the underlying conditions that support growth have been gradually improving. However, in the near-term, this improvement in fundamentals is being offset by federal tax increases and spending cuts, which economists call “fiscal drag.” The most obvious example of this is the end of the partial payroll tax holiday at the beginning of this year. This reduced the take-home pay for all those that pay into the Social Security system. In a recent speech to the Economic Club of New York, I discussed a number of areas where economic fundamentals have improved. Here, let me concentrate instead on some areas of the economy where the impact of this improvement in fundamentals has been most evident: consumer spending, the housing market, and investment in equipment and software. Despite the increase in payroll taxes and in high-income tax rates, real – that is, inflationadjusted – personal consumption expenditures rose solidly in January and February. As has been the case for some time, the growth of consumer spending has been led by purchases of durable goods. Car and light truck sales in the first quarter were at the highest pace since the fourth quarter of 2007. This growth in consumer spending probably is due, in part, to improvements in labor market conditions, household balance sheets and household access to credit.

Regarding collateral valuation, it cannot be ignored that provisions apply to the uncollateralised part of each loan. Consequently, guarantees pledged to each loan represent a central element in the new approach for measuring credit risk. To fulfill their role, guarantees have to be effective, that is to say, they need to be validated as a mitigant of credit risk. For this to be true they must subject to strict, rigorous and verifiable valuation criteria. To facilitate this last point, banks should have procedures for the valuation of the collateral with updated information based on revised appraisals adapted to changes in the macroeconomic situation and reliable analysis of trends of market prices, particularly for real estate collateral. Finally, estimates of credit losses and provisions should rely on credit risk models developed on a sufficiently quantitative basis where prudence should be reinforced. In any case,  1  See G. Jiménez and J. Saurina: “Credit Cycles, Credit Risk, and Prudential Regulation”, International Journal of Central Banking, 2006. 4/7  estimates should be based on credible assumptions that are sufficiently justified and consistent over time. The methodology used must be readily understandable and the results intuitive. Also, consistency should be an objective. Banks should establish procedures for periodically testing the reliability and consistency of the results obtained. The periodic testing of the calculation of provisions should be done regularly through, for example, back-testing the estimated credit losses with those actually observed in finalised credit operations.