samchain/econo-pairs-v1 huggingface dataset:
  The usual hand-off from inventory-led growth to private final demand is not yet fully established. Instead, we have ongoing sluggishness in two key sectors that have led past recoveries: consumer spending and housing. The slow recovery of consumer spending and housing in the face of very substantial monetary and fiscal stimulus reflects the painful unwinding of the dynamics at work during  BIS Review 137/2010  1  the expansion that preceded it. Beginning around 2003, underwriting standards for residential mortgages were significantly relaxed, leading to a sharp rise in household borrowing and in home prices. The rise in home prices helped to support additional demand for credit as households used the collateral represented by their homes to borrow large sums of money via home equity lines of credit and second mortgages. This also fueled a strong boom in home construction. But house price increases could not be sustained without limit. When home prices peaked and started to turn down, the dynamic linking house prices, credit and consumption went into reverse, forcing substantial adjustments on the part of the household sector and in the housing market itself. I’ve discussed in recent speeches the role monetary and regulatory policy can play in helping to support economic activity and in improving economic outcomes relative to what would otherwise be experienced in the absence of this support. These steps include critical reforms that make the financial system safer and accommodative monetary policy that make mortgages more affordable and make the investments that create jobs are more attractive.

What are the repercussions that banks are exposed to? The weak economy results in a deterioration in the quality of loan portfolios, and the collapse of stock prices has an adverse effect on profits. Banks not only suffer losses on their own securities portfolios. The stock market slump also has an impact on earnings from commissions and services. Lucrative services in investment banking, such as those in connection with IPOs or mergers, are less and less in demand, and the reluctance on the part of many investors – with the resultant lower turnover – cuts into the income from commission business. In the wake of falling stock prices, profits in asset management are declining as well. This is because a part of the fees and commissions levied on the assets under management is value- or performance-based. This year, the big banks recorded profit setbacks in most areas compared with year-earlier quarters, in some cases even considerable losses. This was especially due to the poorer results from trading for own account and to a decrease in investment banking business (new issues, mergers and acquisitions). Particularly insurance business accounted for these losses. In traditional banking business, notably in retail banking, the big banks recorded satisfactory results, however. The BIS equity ratios disclosed by the big banks clearly exceed the required minimum.
The rapid transformation of economic structure and the development of interbank markets and economic agents were coupled with fundamental changes in the monetary policy transmission mechanism. The latter has now become more complex, involving more players whose sophistication is ever-increasing, and incorporating more instruments and financial contracts that are timely structured and indexed to different indicators. The Albanian economy is now economically and financially integrated into the global economy, having the characteristics of a market economy but at the same time featuring the typical challenges of economic management that such an economy entails. These changes have called for the constant monitoring by the monetary authority in order to make the necessary changes in the monetary policy regime and the operational aspects of its implementation. Against this background, the Bank of Albania has been committed to a process of constant evaluation of the interbank market performance and at the same time fine-tune its monetary policy regime. The Monetary Policy Document for the 2009–2011 Period was a major step in this regard. In this Document, the role of monetary aggregates as indicators of inflationary pressures in economy and as intermediate targets of monetary policy was complemented with a wide range of information provided by the real sector of the economy, which is systemized and finalized in the inflation forecast performance. This change was entirely based on the Albanian experience.

Broadly speaking, this operational philosophy is guided by the need to steer the short-term interest rates in the interbank market close to the key interest rate set by the monetary authority. As such, it serves better to keeping the short-term horizon of the interest rates’ curve under check, making the conduct of monetary policy more transparent and providing clearer signals for the economic activity. Steering our operations to the stability of interbank market interest rates will serve to a more relaxed functioning of the interbank market and lowering of risk premiums. In addition, this operational target is well-framed in our mediumterm steering and commitment to adopting the inflation targeting regime, making up an important link of its successful adoption. Concluding my theoretical discussion of this change, I would like to underline that our longterm commitment to keeping our foreign reserve at optimal levels to cope with the shocks Albania may be faced with remains an unquestionable objective of our monetary policy. In an institutional aspect, I would like to note that such a move does not only attest to the level of maturity of our interbank market. It also crowns our constant efforts in achieving its utmost efficient management. In this context, the Bank of Albania has made utmost efforts to develop liquidity forecast models, to dampen the impact of fiscal flows into the money markets and to develop optimal procedures and modalities of interbank market interventions.
On the contrary, the significant contraction of domestic demand, in particular for imported durable goods and inventories, spontaneously and quickly undid the incipient external deficit of the second half of 2008 and interest rates in Chile dropped. The Chilean economy has continued to show a very solvent net external position. BIS Review 93/2009  3  Figure 2 CPI and selected inflation measures (annual change, percent) 0  10  8  8  6  6  4  4  2  2  0  0  -2  01  02  CPI  -2  Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09  CPIX  CPIX1  CPI minus foods and energy  Sources: National Statistics Bureau (INE) and Central Bank of Chile. As we have pointed out on earlier occasions, persistent movements of the exchange rate may have inflationary consequences that must be taken into account when deciding on the monetary impulse. Anyway, our floating regime admits intervening in exceptional cases, whenever an overreaction of the exchange rate is detected that is giving misleading signals to the financial markets. In addition, although there is no obvious misalignment of the current real exchange rate from its long-term fundamentals, the present inflationary scenario may accommodate a nominal depreciation that does not compromise our price stability objective. In fact, imported inflationary pressures influence medium-term inflation, so if the recent appreciation of the peso persists, inflationary prospects will certainly moderate, which, as I just stated, has implications on the conduct of monetary policy.

In this regard, the emergence of Islamic finance into the mainstream of the financial system is an opportunity for the Nusantara financial intermediaries, in particular, for Malaysia and Indonesia and other neighbouring countries, to open new frontiers and in so doing strengthen further the economic and financial linkages. The building of a Nusantara financial platform would not only facilitate and mobilise the pool of investable funds from the respective economies but also allow for the more efficient allocation of the funds into the productive investments in other parts of the region. This would not only contribute towards lowering the cost of funds but it would also allow for greater diversifications of risks. More recently there has been growing interest in cross border participation in investment activities in our respective economies. Malaysia's capital inflows into Indonesia has increased by three-fold totalling USD2.2 billion in 2006 compared to the previous year. It is estimated that Indonesia requires  BIS Review 73/2007  1  approximately an annual investment of USD22 billion for the next several years for the development of its infrastructure, with a large part of the funding to be provided by the private sector. In the same way, the Ninth Malaysia Plan for the period of 2006 to 2010 has a financing requirement of RM107.6 billion. The development of our regional financial intermediaries and markets will facilitate the mobilisation of resources towards financing these potential activities and thus contribute to sustaining development in the Nusantara economies.
Chart 6 Estimated effect of quantitative easing surprise on the OIS curve (basis points)  Sources: Based on Altavilla et al. (forthcoming). Notes: Surprise impact normalised to 10 basis points for the ten-year maturity. The academic literature distinguishes broadly between two channels through which this policy works: signalling and portfolio rebalancing. [19] Under the signalling channel, central bank asset purchases serve as a commitment device to keep policy rates at low levels for an extended period of time. Under the portfolio rebalancing channel, the central bank’s withdrawal of net bond supply from the market induces investors to reshuffle their portfolios, and these changes in demand-supply constellations affect bond prices and yields. Under the signalling channel, the expectations component of bond yields decreases upon news about asset purchases, whereas under the portfolio rebalancing channel, the term premium component is compressed. The expectations and the term premium components cannot be observed separately. Econometric modelling is required to discriminate between the two components and provide a deeper understanding of the transmission channels of asset purchases. An important episode studied by ECB researchers is the period before the announcement of the APP in January 2015. Between summer 2014 and the official announcement, some events reinforced the view of market participants that ECB government bond purchases were likely to start in the near future. The events examined by ECB staff occurred between the Governing Council meetings on 3 September 2014 and 22 January 2015, the day when the ECB announced the APP.

Shkëlqim Cani: Review of the Albanian economy Statement by Dr Shkëlqim Cani, Governor of the Bank of Albania, for Euromoney Yearbooks, Global banking and financial policy review, Tirana, 9 August 2004. *  *  *  The Albanian economy experienced a recovered pulse of economic growth over the year 2003. Positive developments are marked in respect of consolidating the country’s macroeconomic stability, economic growth and a sound development of the financial system. A recovery in economic activity and 6% growth of Gross Domestic Product in real terms was proved by all sectors of the economy, but was particularly evident in the construction, transport and services sectors, which are the most dynamic sectors of Albanian economy. The year 2003 was characterised by a low inflation rate, within 2%-4% of the targeted range. The inflation rate as of December was 3.3%, meeting the Bank of Albania (BoA) target. Despite the various factors this low rate emerged from a diligent management of the domestic demand as an outcome of appropriate fiscal and monetary policies. BoA’s monetary policy has been a moderate one throughout 2003. Such a trend will continue during 2004 and was recently reflected by the reduction of the core interest rate in the economy. Since April 2003 the REPO rate has been lowered by 2.5%. The 6% REPO rate, decided on May 12, 2004, is the lowest ever in the Albanian economy. The policy aims to reduce borrowing costs in the economy and maintain price and financial stability.
Fernando Restoy: Capital requirements and banking union Speech by Mr Fernando Restoy, Deputy Governor of the Bank of Spain, to the Analistas Financieros Internacionales (AFI) conference on banking regulation, Madrid, 27 January 2014. *  *  *  Good morning. Thank you, Emilio, for your kind introduction and for the invitation to take part in this AFI (Analistas Financieros Internacionales) conference on banking regulation. As we move into 2014, we face a year of major challenges for the banking industry. This is so, above all, because of the historic importance of the start-up of the single supervisory mechanism, which will effectively come on stream next November. At that point the ECB will assume supervisory powers over the main euro area banks. And this institutional change, marking the origin of the banking union, will come about against a background of deepseated changes in the regulatory framework of banking activity. Allow me to begin by reviewing some of the latest regulatory changes in the prudential field, before sharing some thoughts with you on the ongoing construction of the banking union in Europe. Solvency regulations One of the pillars of the financial reform, which arose in response to the shortcomings evidenced during the crisis, has been the measures aimed at strengthening bank solvency. As you know, the new solvency rules, known as Basel III, have been applied since the start of this year in the European Union. They have been incorporated into legislation through a Directive and a Regulation on capital requirements.

Under this process, the system of burden-sharing among the national and mutualised funds will be gradually adjusted until the national compartments disappear completely around January 2025. The complex agreement reached has yet to be accepted by the European Parliament, so there is still uncertainty as to the final design of the mechanism. Moreover, the capabilities of the mechanism will foreseeably be limited at first, since the single resolution fund is constrained by its modest size and reduced mutualisation. Furthermore, for the time being, the agreement does not include common public mechanisms for the resolution of vulnerable banks after the available private funds have all been used up. 4  BIS central bankers’ speeches  In this respect, although the new resolution rules reduce the foreseeable scope of the required external funds, provision should be made for public financial support at EU level to ensure the orderly resolution of systemic banks if necessary. For example, following the example of the US, we could consider an arrangement in which the European Stability Mechanism could provide the resources needed to the common resolution fund with a charge to future contributions from the industry. Otherwise, the single resolution mechanism would, at least in the short-to-medium term, foreseeably be insufficient to prevent banking crises from continuing to be resolved with a charge to national funds, whether public or private. That said, the agreement reached should by no means be underrated.
Finally, low potential growth can have a direct impact on the tools available to monetary policy, as it increases the likelihood that the central bank runs into the lower bound and has to resort recurrently to unconventional policies to meet its mandate. The euro area’s weak long-term performance also provides an opportunity. Since many economies are distant from the frontier of best practice, the gains from structural reforms are easier to achieve and the potential magnitude of those gains is greater. There is a large untapped potential in the euro area for substantially higher output, employment and welfare. And the fact that monetary policy is today at the lower bound, and the recovery still fragile, is not, as some argue, a reason for reforms to be delayed. This is because the short-term costs and benefits of reforms depend critically on how they are implemented. If structural reforms are credible, their positive effects can be felt quickly even in a weak demand environment. The same is true if the type of reforms is carefully chosen. And our accommodative monetary policy means that the benefits of reforms will materialise faster, creating the ideal conditions for them to succeed. It is the combination of these demand and supply policies that will deliver lasting stability and prosperity. ***  In every press conference since I became ECB President, I have ended the introductory statement with a call to accelerate structural reforms in Europe.

17  Under full credibility, firms anticipate the full amount of the implied long-run increase in output, which leads to an immediate increase in asset prices and, hence, firms’ net worth, triggering more investment already in the short term. Similarly, households anticipate an increase in real wages and, hence, life-cycle income which in turn supports current consumption. In the case of imperfect credibility, firms and households instead partially  6  BIS central bankers’ speeches  case for a structural reform in the services sector – and we find the benefits of reforms are clearly brought forward, even in a situation where monetary policy is constrained by the zero lower bound (Chart 11). This provides a strong rationale to implement reforms in a way that is committed, credible and consistent. 18 And such an approach is in fact And such an approach is in fact even more important for reforms to yield short-term benefits in the special environment we face today. Following seven years of crisis marked by several false dawns, firms and households have become more hesitant about taking on economic risk. This is mirrored in the fact that medium-term growth expectations among forecasters have not only shifted downwards in that period, but the distribution of possible outcomes has also widened (Chart 9). In this uncertain context credibility is key, as the strength of the reform signal has an even stronger determination over the magnitude of the short-term benefits.
Like you, I recognize the need for small and medium-sized enterprises to retain access to credit at reasonable and fair prices. Access to credit matters not just because credit can enable small businesses to grow, but more because small businesses enable the whole economy to grow. This is true not just for the “Mittelstand” in Germany, but also of entrepreneurial ventures around the world. In the United States, for example, small businesses traditionally create the majority of new jobs, invent a large proportion of all new technologies, and are responsible for nearly 40% of our gross national product. Preview I know that you are deeply interested in the steps that the Basel Committee is taking to ensure that small businesses continue to enjoy fair and open access to credit, and I am pleased to share with you the good progress that the Committee has achieved since the release of the Second Consultative Paper in January 2001. I’ll begin with an overview of the importance of regulatory capital to the stability of the banking systems – and that of the economy – and how the Committee’s current efforts will reinforce that stability. Second, I’ll discuss some changes that are of particular interest to banks that lend to smaller businesses and to owners of small and medium-sized enterprises as well. I would like to close by giving you some insight into the process and the timeframe that is guiding our work to complete the impact studies and to move toward release of the final Consultative Paper.

William J McDonough: Bank supervision and credit standards under Basel II – perspectives for SMEs Remarks by Mr William J McDonough, President and Chief Executive Officer of the Federal Reserve Bank of New York and Chairman of the Basel Committee on Banking Supervision, at the Gürzenich Köln, Cologne, Germany, 25 April 2002. *  *  *  Introduction Graf von Hohenthal, Herr Dr. Breuer, members of the panel, “meine Damen und Herren…” It is an honor to join your discussion on the efforts of the Basel Committee on Banking Supervision to ensure that the international rules on capital adequacy serve the needs of twenty-first century banking effectively. What makes this a special privilege for me is the opportunity to meet so many entrepreneurs, owners of small and medium-sized businesses, and others who make up the real engines of the economy. Your interest in the work of the Basel Committee reminds us all that we must look beyond the banking sector to ensure that the foundation we lay provides for the stability and growth of the entire economy. I have long emphasized that the role of supervisors is not to hinder growth or profit, but rather to promote the responsible pursuit of opportunity and innovation. As we improve the rules for bank capital, we must certainly keep this mandate in mind and consider the effects that changes to those rules may have on the economy.
While pull factors actually improved, and rating upgrades by Moody’s outnumbered downgrades by three to one in 2005, they cannot fully account for the magnitude of capital flows to emerging markets in that year. For example, BIS provides a measure of an average sovereign credit rating for emerging markets based on long-term foreign currency Standard & Poors ratings. While credit spreads fell to an all-time low, at the same time emerging markets sovereign ratings remained below their highest levels recorded in 1997. Therefore we may conclude that push factors have been playing an important role in emerging markets. For example, the hedge fund community came to a view that in early 2004 the Polish zloty was an obvious “no-brainer” trade, partly because it had depreciated significantly in previous years and partly because EU accession resulted in a significant and permanent drop in the country’s risk premium. In early 2005, hedge funds were telling me that the Brazilian real was another “no-brainer” trade, as the central bank would have to keep high rates to control inflation and a good external balance indicated that the exchange rate could appreciate. In both cases, the Polish zloty in 2004 and the Brazilian real in 2005 were star performing currencies, and hedge funds pursuing carry trade and momentum strategies were important players on these markets. Such a situation poses a true challenge for many central banks in emerging markets.

Since the second half of 2004, the liquidity of offshore spot zloty market has increased significantly and average daily turnover reached almost USD 1 billion. In addition, high nominal values of single transactions between non-residents contribute to a segmentation of the zloty foreign exchange market. This phenomenon is even more visible in the case of the zloty option market. At the same time the consolidation of the Polish banking sector, transfer of treasury operations to parent banks and very limited amount of Polish banks’ capital, which determines the scope of risk they can take, limits the liquidity of the domestic market. In the future, financial market for instruments denominated in zlotys could become even more segmented and therefore less effective in absorbing different kinds of risks. 12 This process will accelerate with our accession to the eurozone. Experience of some EMU members, e.g. Finland, indicates that EMU membership will be accompanied by a visible contraction of the domestic market. 13 The introduction of the euro will change banks’ internal organisation of risk and liquidity management. Treasury activities will be centralised on a multi-country group level and proprietary trading will be transferred abroad to head offices. This process might be accelerated by the already observed transformation of subsidiaries into branches of foreign banks. Domestic outlook Let me turn to domestic outlook of the Polish economy.