samchain/econo-pairs-v1 huggingface dataset:
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The overall banking system represented more than 700% of GDP. In terms of employment, every third job was related to the financial and professional service sector. An active use of the relevant policy tools could – and indeed should – have curbed these unsustainable developments. But prudential supervision was too weak and did not prevent the build-up of large financial sector imbalances. Asset growth outpaced deposit inflows. Banks became increasingly exposed to funding vulnerabilities. They tried to attract deposits by offering very high deposit rates – on average, nearly 2 percentage points higher than in the rest of the euro area 1. Domestic credit expansion and imprudent lending practices fuelled a domestic property boom. As the bubble burst, non-performing loans increased dramatically. Moreover, Cypriot banks underwent sizeable losses following the Greek debt restructuring. This further deteriorated the soundness of their balance sheets. The lop-sided nature of the economic model was not confined to the banking sector alone. At the same time, significant external and internal imbalances had built up – notably persistent current account deficits, significant losses in competitiveness, rising fiscal deficits and public debt. All this left Cyprus in a weak position to tackle the problems of its banking sector. And these problems appeared to be daunting – especially compared to the small size of the  1  The rate for term deposits from households and non-financial corporations as of March 2013 was 4.4% in Cyprus and 2,5% in the euro area. BIS central bankers’ speeches  1  economy.
We will get a much clearer focus from splitting prudential and conduct regulation for banks and insurers, from introducing macro-prudential regulation to help to protect the financial system as a whole, and from  4  BIS central bankers’ speeches  focusing our regulation on applying judgement in a transparent way. Firms that mess up should, and will, be allowed to fail, but it must not be at the cost of damaging the financial system and economy. Ringfencing commercial and investment banking will help to achieve that objective. And, out of these reforms I hope we can encourage a banking system that is more open to competition and serves the public more effectively and, more broadly, a financial system that delivers the public policy objective of financial stability. Thank you. BIS central bankers’ speeches  5

That was corroborated by our Agents’ pay survey which was pointing to a ½ percentage point increase in settlements this year, from around 2½% to around 3%, with the ability to recruit and retain staff the number one factor driving growth. Since February the picture has remained the same. Wages did indeed pick up to 2.8% by the May Inflation report. And the very latest observation, of 2.9% regular pay growth in March, was slightly higher than our expectation even in May. Wage growth has now been rising steadily over the past six months, and unit labour costs have been rising towards growth rates consistent with overall inflation at target. The period of unusually subdued growth in wages appears to be coming to an end. The year so far That brings me to the third unusual situation that that we have had to contend with – developments in the economy so far this year, and how the MPC have responded to them – most recently at our May policy meeting. At the time of the February report we judged that the trade-off between managing slack and controlling inflation was much diminished. We went so far as to say that “were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat 14  See: Ramsden, D (2017), “Monetary Policy from End to End: Define, Decide, Deliver”, speech at King’s College London, 20 November 2017.
Christian Noyer: Is the euro a success story? Speech by Mr Christian Noyer, Governor of the Bank of France, at the First French-Indian Financial Forum, Paris EUROPLACE, Mumbai, 16 May 2007. *  *  *  It is a great pleasure for me to be here today and to have the opportunity to address such a distinguished audience. I want to talk to you about a success story: the euro. As you well know, there have been difficult times for the European integration. The Treaty creating a Constitution for Europe was not ratified in 2005 and the future of political integration is still fraught with uncertainties. Also, much remains to be done, in terms of structural reform, if the European countries want to achieve the same level of long term growth as other developed economies. Nevertheless, I feel very optimistic. And the reason for this optimism is the euro. The single currency has demonstrated its potential to bring enormous benefits to European nations, which they can use to achieve a high degree of stability and prosperity. 1)  What are those benefits? The first, and most obvious, is price stability. Over the last years, inflation has stayed broadly in line with the price stability objective set by the European Central Bank, i.e. inflation below but close to 2% over the medium-term. Gone are the days when European citizens had to worry about the purchasing power of their savings. This stability goes beyond the behaviour of prices.

In this context, global growth lost momentum somewhat in the third quarter. This was largely attributable to special factors, such as production losses in the German automotive industry and extreme weather events in Japan. Economic expansion in the US and China remained robust. Employment figures in the advanced economies rose again and unemployment continued to decline. The growth in international trade in goods also continued. In our baseline scenario for global economic developments, we anticipate solid growth in the coming quarters. In the short term, the world economy is set to continue to expand somewhat above potential, benefiting from the clear improvement in the labour market situation and the ongoing expansionary monetary policy in the advanced economies. However, a gradual slowdown is likely in the medium term. Nevertheless, we also see significant risks to this baseline scenario, primarily in connection with political uncertainties and protectionist tendencies. These risks have considerable potential for damage. The resulting uncertainty alone can curb growth and weaken the resilience of the global economy. For instance, surveys indicate that trade tensions have prompted companies to reassess their investment plans and value chains. As far as Brexit is concerned, uncertainty remains high following the postponement of the vote in the UK parliament. The tension surrounding Italy’s fiscal policy also persists. All these risks could lead to turbulence in the financial markets, jeopardise global economic growth, and also influence monetary policy.
There are always several aspects to be taken into account and the question of which scale weighs the heaviest will depend on the specific situation at the time of each repo-rate decision. And the further inflation is from the target, and the longer it remains so, the greater the weight this scale will carry, despite the remaining risks linked to household indebtedness and the housing market. 27  HM Treasury (2014): “Circumstances may also arise in which attempts to keep inflation at the inflation target could exacerbate the development of imbalances that the Financial Policy Committee may judge to represent a potential risk to financial stability. The Financial Policy Committee’s macroprudential tools are the first line of defence against such risks, but in these circumstances the [Monetary Policy] Committee may wish to allow inflation to deviate from the target temporarily, consistent with its need to have regard to the policy actions of the Financial Policy Committee.”  BIS central bankers’ speeches  9  References Alsterlind, Jan, Holmberg, Ulf, Jönsson, Kristian, Lagerwall, Björn and Winstrand, Jacob (2013), Risks to the macroeconomy and financial stability from the development of household debt and housing prices. Memo 6 of the analysis group of the Council for Cooperation on Macroprudential Policy. Sveriges Riksbank. Bank of Canada (2012), Backgrounders – Monetary Policy. Bayoumi, Tamim, Dell’Ariccia, Giovanni, Habermeier, Karl, Mancini-Griffoli, Tommaso, Valencia, Fabián and the IMF Staff Team (2014), Monetary Policy in the New Normal. IMF Staff Discussion Note 14/3, IMF.

“Modified Jackson-Hole consensus” The first view is in principle based on the same monetary policy strategy as I have described earlier and called the standard prior to the crisis, but with a few small additions. Smets calls this view a “modified Jackson-Hole consensus”. According to this view, there is indeed a need to prevent financial imbalances, that is, it is not enough to wait until afterwards and deal with the problems caused by the imbalances. But the preventive work should be entirely done by macroprudential policy, while monetary policy should have the same role as before.7 The monetary policy strategy as such thus does not need to be changed very much. The most common argument in favour of this view, according to Smets, is that monetary policy is a blunt instrument and has limited effects on the financial risks one wishes to counteract. The macroprudential policy tools, on the other hand, are regarded as much more effective for this purpose. The interaction between macroprudential policy and monetary policy can thus be kept to a minimum, and it is perfectly simple to keep the objectives and tools separate from one another. “Leaning against the wind vindicated” Characteristic of the second view is that one is more doubtful that macroprudential policy will always manage to prevent financial imbalances on its own. It could, for instance, be because the macroprudential policy tools are not as effective in practice as many people believe and hope. If this were the case, macroprudential policy would need support.
Currently, the activities of financial institutions and commercial banks have a limited scope; however, we are starting to see the signs of financial conglomeration. We have no doubt that this trend will grow and continue in the future. It will bring innovation, new financial instruments and products in the market. Along with this, rapid growth of credit and debit cards as well as other systems of payments will continue to grow. While these instruments might not subside or even reduce the use of cash, this trend must be taken into account. Transition economies of the region are lucrative markets. They are growing substantially faster than traditional European markets and offer impressive prospects for high profits and significant growth. To give you an example, return on banking activity in Albania during the last two years has been around 20 percent. These positive prospects and the eagerness to compete quickly and beyond rational limits for profits and market share may create potential risks. If managers were to lose sight of the entire picture, and financial constrains, such competition might result in mismanagement, nonperforming loans, and other banking problems. Therefore, there is no room for sloppy managerial attitude. It is very important that managerial staff must be up to the challenges which, if materialized, could be more complex than in the self-regulated developed markets. It is important to act enbloc and engage in regional projects of infrastructure including here the financial ones.

We have great confidence in the ability of the banking system to promote the best banking and cautionary practices; however, I believe that preemptive action is needed to ensure that latest observed trends do not hamper financial stability. Therefore, we cannot neglect improving our legislative, regulatory and prudential measures as a major element of financial sector reforms in Albania. 2  BIS Review 121/2006  In this regard, a new Draft Banking Law is prepared by Bank of Albania; likewise, a new Law on Securities will be introduced shortly. In addition, efforts are underway to revise legislation on Pension and Investment Funds, and draft a Law on the Payments Systems, which will substitute several sublegal acts issued by the Bank of Albania until now. This process aims at gradual harmonization of the banking legislation with that of the Acquis Communnautaire. To address issues of increased competition, poor managerial practices and safeguard stability, the Bank of Albania is working toward establishing a Credit Registry, revising regulatory framework on capital adequacy ratio and credit risk management, increasing on-site supervision, and improving its stress-testing models. Following Financial Stability and Assessment Program (FSAP) recommendations, a separate entity “The Authority of Financial Supervision”, has been established recently to supervise the securities, insurance and pension funds markets. Last but not the least, I would like to address the implementation of the Basel II accord. While it will shape the financial market, I believe it will pose challenges to our banking system and to us at the moment.
While one hopes that the situation will reverse quickly, this decline underlines the fragility of the recovery and the fact that the “attitudinal crisis” could have an unwarranted negative impact on economic developments in the months to come. According to the Central Bank’s forecast, GDP will continue to grow in the medium term. It is expected to grow by around 2% year-on-year in 2011, 2.7% in 2012, and 3% in 2013. This will suffice to reduce unemployment beginning in Q2/2011, as unemployment generally begins to decline somewhat after output growth has begun to recover. Unemployment is forecast to taper off steadily throughout the forecast horizon, falling to 3% by 2013. As I mentioned earlier, underlying inflation is already very close to target. According to the Bank’s new baseline forecast, inflation will reach the target by the end of 2010. Due to the spare capacity in the economy and the expectation of further (albeit modest) appreciation of the króna, inflation will continue to subside, falling below 2% around mid-2011. It will then rise slowly and return to target towards the end of the current forecast horizon, which extends until Q4/2013 (see Chart 3). But these are “only forecasts”, as it were, and uncertainties are more numerous and more prominent than in the average year. External factors could change the scenario, but the authorities could also have either a positive or a negative effect on matters. The new  2  BIS Review 158/2010  Monetary Bulletin lists a variety of uncertainties.

In general, the lower such risk premia are, the greater the interest rate differential with abroad, and the lower the exchange rate is, the more favourable the conditions for lifting controls of this type. This is because the exchange rate is supported by a larger risk-adjusted interest rate differential and expectations of currency appreciation are more likely to outweigh expectations of depreciation. In my opinion, all of the conditions for a marked decline in risk premia should be in place in the next few months. Inflation will also fall somewhat further in the near future. Consequently, I am of the opinion that plans to lift the capital controls do not change the fact that there is still some room for further reduction of interest rates. Last Wednesday, in connection with the Bank’s interest rate announcement, I issued a statement on the capital controls. There is no reason to repeat it in full here, as it is available on the internet, but the thrust of it is that no broad-based steps will be taken to lift controls on capital outflows until March 2011 at the earliest, and before that is done, a revised financial account liberalisation strategy will be publicised. The intervening months will be used to lay the foundations for potential liberalisation. To all appearances, the statement was well received, and bond market yields fell markedly thereafter. As I said at the beginning of my speech today, monetary policy implementation is unusually complex at present.
Having said that, I would still venture to identify the root cause of the Global Financial Crisis. In so doing, it is inevitable that one has to simplify and generalise matters considerably so as to draw some conclusions. 2. In my view, regardless of the causes of the global imbalances, both the Global Financial Crisis in 2008 and the current European sovereign debt crisis have been driven by excessive leverage in private and public sectors alike in the major industrial economies, resulting in dangerously high levels of debts. In 1980, the average debt level of the 18 major industrial economies was at 165% of GDP. In 2010, the ratio rose drastically to 320% of GDP. In the US, the debt-to-GDP ratio remained stable at 150% from mid-1950s to early 1980s, but the ratio rose sharply and steadily to slightly under 300% in 2010. 3. Why did households, companies and governments borrow so much more than before in the past decade or two? Some put the blame on financial innovation, such as securitisation, which made it much easier to obtain finance or gearing. Some suggest that declining real interest rates in the US and other major economies since the 1990s have increased the ease and affordability of debts and leverage. Some others believed that the Great Moderation beginning in the mid-1980s has nurtured a euphoric view that economic prosperity, job security, income growth and continued rise in asset prices could be taken for granted.

John C Williams: Now is the time for banking culture reform Remarks by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Governance and Culture Reform Conference, Federal Reserve Bank of New York, New York City, 18 June 2018. * * *  Introduction It’s a pleasure to speak at today’s conference on this critically important issue, one that Bill Dudley and his colleagues have done tremendous work bringing to the forefront over the past few years. It’s also an honor to be sharing a stage with Bill today, and I’d like to thank him for his outstanding leadership of the New York Fed. I’ve learned a great deal from this conference, especially hearing the diverse perspectives and experiences of regulators from across the globe, industry leaders, and academic experts. The speakers and discussions have already covered a lot of ground, so I’ll keep my remarks brief. This afternoon I’m going to talk about the urgent need to focus our attention on banking culture in supervision and what that means in practice. Before I go any further, I have to give the usual Fed disclaimer that the views I express are my own, and not necessarily those of anyone else in the Federal Reserve System. The Good Times Are When to Get Your House in Order In the wake of the financial crisis and ensuing economic downturn, the world’s attention was trained on financial services.
But changing deposit structures is a lengthy process. The second imbalance that the Spanish banking sector must overcome derives from its continuing high exposure to the construction and real estate sector, which after a lengthy period of excessive growth is now undergoing a severe adjustment. The Banco de España’s latest Financial Stability Report laid bare both the potential scale of the exposure to this sector of activity and the coverage existing to meet any associated risks. In this respect, the Banco de España has just published, for public consultation, an amendment of its financial reporting standards, in particular those relating to estimation of necessary credit risk coverage. Without going into further details here, suffice it to say that the reform deals with transparency and with the establishment of minimum criteria for institutions; criteria which have been simplified and made more consistent and which primarily respond to the lessons learned during the crisis. Moreover, and although in this respect there was no need for regulatory reform, the changes clearly reaffirm the understanding that certain banking practices, such as asset foreclosures, despite being legitimate problem management tools, cannot in any circumstances warrant delaying the recognition of losses. The third imbalance is connected with the Spanish banking industry’s excess capacity. During the growth years, banking sector activity rose very significantly. In a retail banking model based on proximity to customers, this continued upsurge in activity prompted sharp growth in organisational structures and in new branch openings.

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As regards the private debt trajectory in Cyprus, the private non-financial debt, that is the sum of households and non-financial corporations' debt - to - GDP ratio has exhibited a decline of about 33% since reaching its peak level of 353% in the first quarter of 2015. Based on latest data, the ratio now stands at 236% in 2022Q2. This decline is evident in both non-financial corporations and households. Specifically, the domestic non-financial corporations' debt fell to 157% of GDP in 2022Q2 from 226% in 2015Q1, whilst about 60 percentage points of this is attributed to debt held by Special Purpose Entities. These entities in the case of Cyprus are mostly shipping companies with no physical presence in Cyprus and limited impact on the Cyprus real economy. On a similar note, domestic Household debt decreased to 79% in 2022Q2 from 131% in 2015Q1. Despite this significant reduction, the domestic non-financial private debt ratio is still relatively high compared with an average of 140% for the euro area. Both households and non-financial corporations' debt exhibit a passive deleveraging behaviour, given that their decline is mainly driven by increases in nominal GDP, known as a denominator effect. Today, in an economic environment of high inflation, high interest rates and weakened growth prospects, the risks for a deterioration in asset quality leading to even higher private debt levels and a higher crowding out effect are considered to be on the upside.

Better understanding of past losses can obviously help. Projects like the open-source Oasis Loss Modelling Framework of the IDF are leveraging the expertise of the private sector, the public sector and academia to improve the data available for risk analysis in low and middle income countries.15 New products, such as insurance-linked securities based on parametric triggers, are vital to help reduce macro protection gaps and increase resilience. These are generally cheaper to structure and administer and more efficient to blend with commercial finance if required. Of course, increasingly climate-related tail risks could prove uneconomic for private sector insurers to cover. That is where development agencies and Multilateral Development Banks can step in. Disaster reinsurance could be one of the most effective uses of development financing. On the asset side, infrastructure investments will be essential. To transition to net zero, all countries need to step up their investments in sustainable energy. The reality of climate change also means that all countries, but particularly developing and emerging economies, will need to invest in new climate-resilient infrastructure in order to adapt to the new realities of a hotter and more volatile climate. There are various estimates – they are all enormous - ranging between $ trillion over the next decade, three quarters of which are in emerging and developing economies.16 It’s imperative to act now to create practical tools and frameworks to support climate-resilient infrastructure investments – ranging from broader use of catastrophe bonds to greater risk pooling for the most vulnerable countries.