samchain/econo-pairs-v1 huggingface dataset:
On the other hand, the private sector should continue taking precautions to increase efficiency; establish strong and transparent balance sheets; shift towards capital markets; pay attention to the principles of risk management and pay effort for the allocation of resources to the research and development activities. Parallel to this, banks should increase their contributions to the sustainability of growth through diversification of credits they offer to the private sector. Dear Guests, Upon mentioning the growth process in our country, now I would like to dwell on another important item on the agenda, which is employment. Looking at the data about the labor market, we see that the number of the employed has been on the increase as of 2002. This increase is more apparent especially in the sectors other than agriculture. 660 thousand new jobs were created in the last year in the sectors other than agriculture as of September 2006. A comparative improvement in the unemployment figures was recorded parallel to the increase in employment. When compared to the same period of the last year, decreasing by 0.6 points, the unemployment rate became 9.1 percent in September 2006. Nevertheless, these favorable developments in the labor market have not yet arrived at a satisfactory level. The main reason for the delay and weakness of the improvement in the labor market despite the results taken in the other fields of economy are the structural problems in the labor market. Agricultural sector leads the list of these structural problems.

In doing so, they should exert utmost care not to make wrong or spurious judgements and give false alarms about an impending catastrophe in a central bank. To do their job effectively, auditors should be more knowledgeable of the technical side of the operations of a central bank than its internal technical staff. Moreover, they should arm themselves with knowledge of how other central banks are operating, how some central banks had got into difficulties due to irresponsible behaviour and the emerging global best practices of central banking. Hence, it is a continuing learning and knowledge enhancement process for auditors of a central bank. By any measure, this is not a simple challenge. 2  BIS Review 58/2009  It is only with this superior knowledge base that auditors acquire the capability of making a proper risk assessment of a central bank and play their new role as a “risk-alerter” to the management and legislators. This requirement equally applies to both internal and external auditors of a central bank. The major risks faced by a central bank The policy failure risk, (that is, the inability to maintain the stability of the value of the currency on a continuous basis) and the associated reputation risk (that is, the public no longer trusts the central bank and its action) of a central bank are well known. But, a lesser known risk of a central bank is the “insolvency risk” which could loom over a central bank with or without the presence of the policy failure risk.
Growth has been good and this has contributed to maintaining demand for working hours. At the same time, demographic developments have been relatively favourable and there have been ample unutilised resources in the economy following the crisis of the 1990s. However, when it comes to the labour supply, there is less reason to be optimistic about future developments. Developments in working hours have been held back during recent periods for structural reasons. The demographic situation, with a declining percentage of the population of working age, will deteriorate significantly in the long term, particularly after 2010. In addition, working hours per person may instead tend to decline in the long run when greater prosperity is taken advantage of to increase leisure time. The assessment in the October Inflation Report is that employment, labour force participation and mean working time will rise during the economic upturn forecast for the coming years and will contribute to an increase in the number of hours worked of approximately 1 per cent a year during the period. In a longer perspective, it is more realistic to assume that the labour supply will not make any contribution to growth. The simulations in, for instance, the Long-term Planning Commission’s most recent report, indicate that the number of hours worked on average will not show any significant change. However, the simulations show that the situation could be improved significantly, at least in the short term, if measures were taken to increase the labour supply.

In recent years, both the percentage of people at work and the hours worked per person have fallen and thus provided a negative contribution to the change in the total number of hours worked in the economy. The fact that mean working time has fallen is partly due to a decline in overtime and normal working hours. The reason behind this development is not entirely clear. Cyclical effects as well as the effects of taxes and benefits are possible explanations. Seen in a longer-term perspective ahead, it is likely that households will tend to want to reduce the mean working time per person so as to use some of their increased prosperity in the form of more leisure time. So what conclusions can we draw regarding developments in the total number of hours worked in the economy on the basis of this review of the various components? Unfortunately, the prospects are not so bright if no measures are taken to improve the situation. In a long-term perspective, the demographic development is very unfavourable because the percentage of the population of working age is decreasing. The problems will be exacerbated if the rise in early retirement and long-term sick  2  The Swedish National Social Insurance Board, “Vem önskar lämna arbetslivet med förtidspension?”(Who wants to leave work on a sick pension? )’, RVF Analyserar 2004:7, and Statistics Sweden, Välfärd (Welfare), No. 1 2003.
Luis de Guindos: Coming to the forefront - the rising role of the investment fund sector for financial stability in the euro area Speech by Mr Luis de Guindos, Vice-President of the European Central Bank, at the Opening Conference, 21st Euro Finance Week, Frankfurt am Main, 12 November 2018. * * * I am honoured to speak at this Opening Conference of the 21st Euro Finance Week. People often think that central bankers – by profession and perhaps even by nature – are predisposed to constantly warn about risks. We therefore need to avoid being perceived as ‘crying wolf’ too often. After all, persistently warning about threats that fail to materialise may be just as counterproductive as being over optimistic. Striking this delicate balance is crucial for central bankers – but also for markets. And looking at how markets currently price risks across a number of asset classes and geographies, I am not so sure that they are achieving this balance. I am raising these doubts in particular in light of the economic and political developments that we are currently witnessing – globally as well as in Europe. In my remarks today, I will briefly discuss what we see as the main financial stability risks for the euro area, before zooming in on the situation in the investment fund sector. Over the past decade, this sector has almost tripled in terms of total assets and has taken on more risk. So it deserves greater attention from a financial stability perspective.

This is partly because about 60% of all investment funds fall under the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive and so face tight leverage constraints. On the other hand, many alternative investment funds do not face any binding restrictions on leverage. Among those alternative funds, we find a tail of highly leveraged bond and hedge funds, which sometimes have a leverage multiplier of more than 30. I urge authorities to use the new data which is available to shed more light on this highly leveraged part of the sector. 5 This may help to better understand some of the lightly regulated and less transparent activities where risks may be building up. For instance, private loan funds may potentially erode credit standards and take on higher credit risk in the current market environment, whereas private equity funds may facilitate excessive leverage in the non-financial sector. Some of these activities may be escaping our attention, as statistics on them are scarce and they are often conducted by funds outside the euro area. Leverage may be building up, for instance, by the use of derivatives or in off-shore centres. Therefore, consistent reporting frameworks have to be developed with a view to gaining a system-wide perspective on evolving risks, also at global level.
It is true that in the run-up to the start of the crisis, and for some time thereafter, the FSA mingled insurance and bank supervision in terms of its operating units, but I think that did not work effectively, and the FSA and now the PRA moved to a clear distinction, with insurance supervision headed by Julian Adams. Insurance supervision is a skill of its own, and while our supervisors do move roles between insurance and banking in both directions, we want to ensure that we have groups of truly expert insurance and banking supervisors. Recently, we have taken a further step on insurance supervision by formalising two directorates, for General and Life Insurance, reporting to Julian, and headed by Chris Moulder and Andrew Bulley respectively. Chris and Andrew bring a wealth of experience of insurance supervision and for Chris auditing. Alongside Julian, Chris and Andrew is a policy directorate headed by Paul Sharma who is, I think I can say, a true veteran of insurance supervision. And, I am delighted that Nick Prettejohn has joined the PRA Board. Nick brings extensive insurance expertise to our work as a board. Most important of all, we have a new Governor and Chairman of the PRA Board, Mark Carney.

An important part of our new supervisory approach is a focus on business model analysis. This might come across as a bit of a fad, but it isn’t meant to be. Instead it is grounded in such basic questions as: where does the firm make money; are the revenue streams sustainable; how well does the firm stand up to tests of stresses on its balance sheet; does it generate cash flow to cover dividends; is the leverage of the firm sustainable; what are the risks from competition on premium income; are there conduct risks which could pose a prudential threat? These are basic questions, but in another field, if the answers to such questions had prompted action in the past by banks, history would be different. What I have just described is judgemental supervision that must be forward-looking to the risks that may arise. This is crucial, and was not properly a part of the pre-crisis approach to supervision. Let me give a few current examples of this for insurers. We are focused on the impact of very low interest rates staying with us for a protracted time, and when I say this I am offering no view whatsoever on the likely course of monetary policy. Likewise, we want to know that the prudential position of firms also captures the possible impact of an unexpected upward shift in the slope of the yield curve, and again I am offering no view on monetary policy.
And, we understand better the tone at the top – even though the top is somewhere other than the U.S. – as well as the risk culture of the firm. It’s simply not enough to understand tone at the top in the U.S., if the top is really somewhere else. Three things that supervisors can do •  First, improve communication with firms. The counterpart to asking you to improve your communications with us is raising the expectation that we do the same. We need to be timelier in our communication of relevant findings in our supervisory efforts, and we need to shorten the time between the conclusion of supervisory work and our feedback to firms. More timely communication should also include sharing information in the earlier stages of our work, before all issues have been confirmed or facts sorted out, but at the point at which we suspect there’s something not quite right. This is important not just in the context of formal supervisory efforts like examinations, where we may have an early read on an issue, but also in areas where we see something or something has been flagged through other means and we raise it with you for discussion and attention as needed. Our communication needs to be more candid and direct. Too often I hear that our communication has too much “nuance” and that firms struggle to understand exactly what we are looking for.

And, for our part, we need to: •  improve our communications with firms, including being more timely and clearer in our feedback;  •  improve collaboration with home and other host supervisors; and,  •  make supervisory colleges more effective, by promoting more robust discussions and more direct feedback to firms. Thank you for your attention today. I look forward to continuing to work with you on these issues as we seek to enhance our supervisory programs. BIS central bankers’ speeches  5
1 / 19  BIS central bankers' speeches  In recent years, the ECB has deployed an innovative, multi-pronged approach in the design of its policy stance. While it is always possible to envisage a wider range of instruments, the current policy mix includes four elements: (i) pushing the policy rate into negative territory, (ii) forward guidance on the future policy path, (iii) the APP, and (iv) TLTROs. Importantly, these measures work as a package, with significant complementarities across the different instruments. I will outline the effectiveness of these four measures. Doing so shows the capacity of our policy framework to provide the monetary accommodation required to return inflation to the mediumterm goal, even when the policy rate is no longer in conventional positive territory. Furthermore, the effectiveness of these tools also provides leeway for further easing if it is required. Negative policy rate (deposit facility rate) The 2014 decision by the ECB to push the relevant policy rate (the deposit facility rate) into 2 / 19  BIS central bankers' speeches  negative territory was a crucial policy innovation. Subsequent cuts have taken the deposit facility rate to its current level of minus 40 basis points. An important mechanism that reinforces the impact of negative interest rates relates to the way expectations about the future path of monetary policy are reflected in market interest rates.2 At any point in time, a wide range of future interest rate paths is conceivable and market participants assign probabilities to different parts of this distribution.

The inflation target will be fully reached towards the end of 2013, which is broadly in line with last year’s forecast. The difference is that the target will be reached from above, and not below. What caused such a radical change? First of all, there were increases in oil and other commodity prices. Second, the króna depreciated by 6½% in the first half of the year, bottoming out in mid-July before reclaiming about 4% of that loss. Third, house prices rose. Fourth, wages rose far in excess of productivity increases. Early in the year, it was primarily external – and presumably transitory – factors that caused the spurt in inflation. But as the year progressed, domestic cost pressures played a progressively larger role – wage increases in particular. For example, unit labour costs are expected to increase by 5½% this year and core inflation 3 excluding tax effects was up by 4½% in October, as opposed to just over 1% at the beginning of the year. Now let us look at monetary policy year-to-date. At the Monetary Policy Committee’s first meeting of the year, in February, it was decided to cut the Bank’s interest rates by 0.25 percentage points and communicate a neutral bias regarding the future interest rate path. This proved to be the last interest rate cut of the year. What we call the “effective policy rate”, which is where the Bank’s interest rate spectrum has maximum effect on short-term market rates, was then 3.6%.
It’s tempting to stop there, but in all honesty it would not be the full story. Banks and insurers have one crucial thing in common which distinguishes them from other financial services providers, namely that they bring the funds customers deposit or invest directly onto their balance sheets and therefore expose customers directly to the risk inherent in those balance sheets. We did not, however, place insurers under the PRA because they are like banks, even though there are important similarities in the prudential approach we apply to both sectors. Why then? For me, the logic has to do with what we have learned about our role during the crisis. The traditional model of supervision has been quite industry specific. The FSA regime introduced in 1997 created a single authority, but within the FSA the framework of rules applied to insurance supervision is unique to the industry. It is true that in the run-up to the start of the crisis, and for some time thereafter, the FSA mingled insurance and bank supervision in terms of its operating units, but I think that did not work effectively and we have moved to a clear distinction with an insurance supervision directorate headed by Julian Adams. Insurance supervision is a skill of its own, and while our supervisors do move roles between insurance and banking in both directions, we want to ensure that we have groups of truly expert insurance and banking supervisors.

John Gieve: Sovereign wealth funds and global imbalances Speech by Sir John Gieve, Deputy Governor of the Bank of England, to the Sovereign Wealth Management Conference, London, 14 March 2008. * * * Introduction Much of the debate on sovereign wealth funds (SWFs) has focused on political questions: do they reintroduce the failings of public ownership into market economies by the back door, will SWFs use their ownership rights to pursue political ends, and will resistance to foreign ownership lead to a new wave of protectionism. I want to concentrate today on some economic issues: why have they become so prominent recently, how does that relate to imbalances in the world economy, how are they affecting financial markets and what are the policy implications of their growth. Background But first let me set out some of the background. There is no off the shelf definition of an SWF. What I have in mind is a government investment vehicle that manages foreign assets with a higher risk tolerance and higher expected returns than for central bank foreign currency reserves. 1 The size of such funds is hard to measure, but may be in the $ trillion range. Origins of SWFs Investments by SWFs are one type of capital flow between countries so they have always been closely related to global imbalances in trade. When countries run surpluses on their current account, they generate equal and opposite net capital outflows of one sort or another and those capital flows produce an investment income.
More generally speaking, it is a problem if Sweden chooses to deviate from international or European standards, as it implies a risk of us losing international influence and of us having problems to implement new regulations in an efficient and consistent way. And the problem is particularly major given that we have a large banking sector by international comparison. In light of this, there is also reason for us to reconsider whether we should apply to take part in the EU’s Single Supervisory Mechanism (SSM). Through this, the ECB has been given the overall responsibility for supervision in the euro countries and in other EU Member States that apply to and are permitted to take part in the SSM. For the past couple of years, the ECB has been responsible for supervision in 19 of the 28 EU Member States. The ECB’s influence will strengthen over time as regards the design of both microprudential supervision and macroprudential policy in Europe. Even if Sweden were to have only limited influence as an SSM participant, since we are not in the euro area, we would nevertheless gain a better insight into SSM discussions and could make our voice heard. As an outside country, however, we would in practice have to accept, to a large extent, the implementation of changes already agreed on by the ECB/SSM. The fact that Sweden has large, cross-border banks is reason enough to believe that we will have to adapt to the SSM rather than the other way around.

By promoting digitization, both for banks’ own internal operations and for 2  BIS central bankers’ speeches  customers’ experience, the cost for both parties would be lowered. Additionally, we may set up and promote more usage of common utilities such as banknote handling centers or common Point of Sales (POS). From the policy perspective, standards and ecosystem should be developed to ensure compatibility, interoperability, security and confidence. Moreover, competition in market segments with low competition, particularly payment services, will be promoted in the third Financial Sector Master Plan. On inclusiveness, merely upgrading the technology would not be sufficient. Following our earlier analogy of driving a car on a journey, we must take into account the needs of all the passengers. In this case, our next milestone is to achieve a more inclusive banking system that serves all groups of customers, particularly household and SMEs, many of whom have been left on the side of the road while others are driving by on the journey. For individuals and households, they should be able to more easily access financial services and at a more reasonable cost. I am not merely talking about loans, but also basic services such as deposits and fund transfers. The latest financial access survey indicates that lack of access is partly because of the distance to nearest service providers is too far and the cost is too high. This is where technology and collaboration such as the use of agents can help.