samchain/econo-pairs-v1 huggingface dataset:
The imminent entry into force of the regime allowing state-guaranteed loans to be accepted as collateral will give banks even greater access to Eurosystem financing. 2.3 Adaptation of prudential policy The ECB, ACPR and banking supervision bodies (the European Banking Authority, the Basel Committee, etc.) have also decided to take account of the impact of the crisis by making intelligent use of the flexibilities that they have as supervisors in the implementation of the regulations: we have reduced certain capital requirements and called on banks to reduce their precautionary reserves. We sometimes hear the suggestion that this is an unjustified relaxation: it is precisely the opposite. It is for this sort of exceptional circumstance that the reserves of capital and liquidity were built up. This is indeed in the spirit of the regulation that they should be used now, in a countercyclical way. This equates to a temporary reduction in the minimum capital requirement of about 3 percentage points for French banks. We have also temporarily reduced certain workloads by postponing stress-tests and easing certain reporting conditions. In addition, the European Commission recently proposed a series of targeted revisions to the CRR, to provide a regulatory response to the crisis on top of the flexibilities granted to the supervisor. While preserving the resilience of the banks, there is a need to make some adjustments to the prudential framework, to limit some procyclical effects of the current crisis on the level of capital requirements.

In other words, under this definition, the CCyB should allow for the accumulation of shock absorption capacity that banks could use in the downward phase of the cycle to continue providing households and firms with the necessary credit flow. In many macroeconomic and financial contexts, the activation of the CCyB will be justified on the basis of the three objectives mentioned by the BCBS simultaneously. This would certainly have been the case in the boom period of the Spanish economy before the last financial crisis. However, there might be cases where, based on available data, only one or two of these objectives can warrant the activation of the CCyB. In particular, there have been numerous examples of economic recessions not preceded by excessive credit growth. This promptly begs the question: should these buffers be exclusively built when the credit cycle is in a boom phase, or also when the economy is buoyant, i.e. when the business cycle is expanding? In my view, sound arguments may justify the use of the countercyclical capital buffer to accumulate loss-aborbing capacity in good times to be used in bad times, even when there is no evidence of the emergence of excessive credit growth. The main argument, in my view, stems from the evidence that, even in those situations, when the recession comes, borrowers’ default rates rise, 5/11  negatively affecting the profit and loss account and the capital position of banks.
Basis for the interest rate forecast In forecasting economic variables, Norges Bank uses an approach that captures and juxtaposes many different elements. The chart provides an illustration of the structure of forecasting. One important source of information on the current situation is current statistics. In addition to official statistics, information from our regional network plays an important role. In the course of a year, around 1400 interviews are held with leaders from various parts of the corporate and public sectors about economic developments in their enterprises and institutions. In our forecasting, we seek to build a bridge between our assessments of the current situation and the knowledge we have about long-term relationships in the economy. As a tool in this work, the Bank uses several macroeconomic models: one core model and a number of smaller models. Central to this process is the use of judgment. The macroeconomic models provide a very simplified description of the economy and only serve as a forecasting tool. The forecasts for inflation, output, the interest rate and other variables in the economy must be perceived as a result of the Bank’s best judgment. There is no mechanical relationship between the models the Bank uses and its forecasts. Nevertheless, the models are a very useful tool in the conduct of monetary policy. In the process of arriving at an interest rate forecast that in the Bank’s opinion provides a reasonable balance, a model system is needed where the interest rate and other variables in the economy are interdependent.

Economic agents therefore need to understand the central bank’s intentions in its interest-rate setting. Otherwise, agents might perceive future interest rate developments as unnecessarily uncertain. Decisions on consumption and investment will then be more difficult to make. This might lead to greater instability both in terms of variables in the real economy and in inflation. As I mentioned earlier, Norges Bank only influences the shortest money market rates. Open communication concerning our future response pattern will probably also allow us to have more influence over somewhat longer-term interest rates and thereby conduct a more effective monetary policy. Many agents outside the Bank place considerable emphasis on Norges Bank’s projections when they make their decisions. The projections are also evaluated by agents outside the Bank and by Norges Bank itself. The interpretation and evaluation of these projections will be more difficult if they are based on an interest rate assumption that is not consistent with the rate Norges Bank considers most realistic. If the forecasts for inflation and output are to reflect the Bank’s best estimates, the underlying interest rate assumption must be a rate the Bank believes to be realistic. 2  Arguments in favour of the publication of an interest rate forecast by the central bank are discussed in more detail in some of the papers presented at the conference hosted by Sveriges Riksbank entitled: “Inflation Targeting: implementation, communication and effectiveness”: http://www.riksbank.com/templates/Page.aspx?id=15814.
The marvellous thing about Icelanders is that we have never let trivial matters like population undermine our steadfast belief that we can stand shoulder-to-shoulder with other countries in everything that we endeavour to do – if we only take the matter seriously enough. This is the attitude that we should take towards economic policy. In this context, I agree with Icelandic independence leader Jón Sigurðsson when he warned about Icelandic individualism, saying, “Many tend to think of Iceland as being alone in the world and deny that other countries’ experience matters.” It is never stressed often enough or loudly enough that monetary policy is social welfare policy. Economic volatility generally leads to unexpected changes in people’s personal situation – particularly for people with low income. The cost of inflation is more onerous for low-income people and causes purchasing power to fluctuate. Successful economic policy reduces the level of uncertainty in people’s everyday lives, and price stability delivers increased purchasing power and a predictable housing market. Economic 3/4  BIS central bankers' speeches  stability is a normal and appropriate thing for people to demand – and the principal objective of the Central Bank of Iceland. Successful monetary policy is therefore extremely important for general well-being and reduces the likelihood of poverty, while economic policy mistakes are costly, not least for those with the lowest income. Increased credibility of monetary policy leads to lower interest rates, thereby improving debtors’ situation.

And we’ve been on our own ever since. Iceland has a number of unique characteristics that complicate economic policy. The economy is extremely small. Its export sectors are homogeneous and prone to cyclical fluctuations. Most of its financial markets are relatively shallow and illiquid, which complicates price formation. Not only is our currency small, it is also bordered on both sides by two of the largest currency areas in the world – which cannot but make independent monetary policy conduct more difficult. And there are other factors as well. Icelanders demonstrate a decided herd mentality in their consumption decisions, which causes wide fluctuations in private consumption. With its small population, Iceland has a limited number of workers to do all that is needed – operate the healthcare, education, and administrative systems – and conduct monetary policy as well. Anyone discussing Iceland’s monetary policy concerns is bound to acknowledge these problems. On the other hand, it is clear that the greatest problems facing domestic monetary policy do not stem from the structural flaws inherent in Iceland’s history and geographical characteristics – flaws that are unlikely to change. The biggest problems are institutional, political, and – perhaps most of all – societal: They centre on fiscal policy decisions, collective bargaining agreements, and overall societal consensus. These we can change.
More generally, shadow banking is being replaced with market-based finance that adds diversification, competition and resilience to the system. As for the macroeconomic impacts, it has been apparent for some time that having well-capitalised, liquid banks is a pre-requisite—rather than an impediment—to growth. In those economies where reform has moved the quickest, the recoveries have been the most robust. 3  Indeed, the broader benefits of reforms are now being realised as the global financial system moves from fragility to resilience. Credit is now growing in all major economies. The cost of financing has remained low. Sources of finance are increasingly diversified between banks and markets. And the system is demonstrating an ability to dampen shocks rather than amplify them. The biggest question now is how to best take advantage of these years of hard work. In my remarks today, I will suggest three priorities. 1  “Some current issues in financial reform”, remarks by Mark Carney, Governor of the Bank of Canada, to the IIF, Washington DC, 25 September 2011. See: www.bis.org/review/r110927a.pdf. 2 The FSB conducts thematic and country-specific peer reviews (see http://www.fsb.org/what-we-do/implementationmonitoring/peer_reviews/) and the IMF conducts Article IV consultations and the Financial Sector Assessment Programme (FSAP) (see https://www.imf.org/external/about/econsurv.htm and https://www.imf.org/external/np/fsap/fssa.aspx). 3 Countries like Canada and Australia, with well capitalised and generally well-managed banks that did not require any bail-outs, saw their economies substantially outperform their peers in the wake of the crisis. Of the countries at its epicentre, those that moved most decisively, like the US, have experienced the fastest recoveries.

Certainly I seriously underestimated the scale of the downside risks from a potential financial crisis, and that implied overrating the ability of monetary policy to offset this shock. I will return later to the question of how a more long-term perspective might sometimes alter the desirable approach to policy. Before that, I want to discuss some issues around the MPC’s inflation projections and how we assess uncertainty. The balance of demand and supply The MPC’s projections for inflation, absent external shocks, are determined to a significant extent by our judgements about inflation expectations and about the likely developments in the pressure of demand on supply (this phrase is a better description than the more usual “output gap” – however I will now use the latter as a convenient shorthand). During my stint  4  Large (2005). 5  Gieve (2009). 2  BIS Review 27/2010  on the MPC, the way in which we have chosen to assess the output gap, as reflected in the assumptions underlying our main macro-model, has changed on a number of occasions. Of course, one model has never been the sole guide to our projections – a number of other models are also drawn on as appropriate. And the final shape of the fan charts published in the Inflation Report is the product of the MPC’s judgement including on the insights from these models.
Kiyotaki, N and Moore, J (2008), “Liquidity, business cycles and monetary policy”, Manuscript, Princeton University. Thomas, R (1997), “The demand for M4: a sectoral analysis, part 2 – the corporate sector”, Bank of England Working Paper, No. 62. Tobin, J (1958), “Liquidity preference as behaviour towards risk”, The Review of Economic Studies, Vol 25, No 2. Vayanos, D and Weill, P-O (2008), “A search-based theory of the on-the-run phenomenon,” Journal of Finance, Vol 63, pp 1361–98. Walsh, C (2003), Monetary theory and policy, The MIT Press. Woodford, M (2003), Interest and prices, Princeton University Press. 8  BIS Review 29/2010

An appreciation of the Swiss franc against the euro would run counter to the relaxation in monetary conditions brought about through the interest rate channel. This is why the SNB will continue to act decisively to prevent any excessive appreciation of the Swiss franc against the euro. An assessment of monetary conditions can be misleading if it is based on prices, which, like currently the libor, have reached a bound. For this reason, an assessment based on quantities – money and credit – is particularly important in the current circumstances. The monetary base has increased substantially since October 2008, when the financial crisis entered a new phase following the collapse of Lehman Brothers. We supplied the interbank market with sufficient liquidity to meet burgeoning demand in a climate of uncertainty, in order to prevent any increase in money market rates. Since then, precautionary base money demand has declined and we have reabsorbed liquidity accordingly. The monetary base has thus fallen by 28% compared to the peak recorded in April 2009. The level of sight deposits is, however, still almost ten times higher than before the crisis. There is thus a risk of excessive money creation once confidence is restored. Monetary conditions should not be judged in terms of banking sector liquidity, but rather on the basis of the liquidity available to households and firms – i.e. the monetary aggregates. M3 growth, which had been modest for a long time, has accelerated. In October, it reached an annual rate of 7.7%.
Counterparties’ reluctance to deal with Lehman intensified starting on Monday, September 8, 2008, such that by Thursday, September 11, 2008, it was apparent to us that Lehman faced a liquidity crisis – i.e., it would not be able to pay its debts as they came due. The issue was no longer whether this public company could fashion its own rescue. We had come to the point of no return, where Lehman faced two alternatives: bankruptcy, or some kind of third-party rescue. The United States Treasury Department, working in conjunction with the Federal Reserve and the SEC, convened a meeting of the chief executive officers of major financial institutions at the New York Fed after the close of markets on Friday, September 12, 2008. Secretary Paulson opened the meeting with a short and plain declaration that there would be no public money to support Lehman. The Government then gave the CEOs two tasks. First, it was suggested they form a consortium to finance certain of Lehman’s illiquid assets in  3  Richard S. Fuld, Jr., Statement before the United States House of Representatives Committee on Financial Services, April 20, 2010. 4  Transcript, Hearing on Lehman Brothers Bankruptcy Examiner Report, United States House of Representatives Committee on Financial Services, April 20, 2008, pp. 136, 153. BIS Review 112/2010  3  order to facilitate an acquisition.

The benefits of the euro for individuals and businesses, its contribution to a more effective participation of Maltese enterprises in the Single Market and the possibility of using the euro as a means of competing on international markets were also important considerations. But while there were many compelling reasons for an early adoption of the euro, there was also an understanding of the need to avoid the economic costs of a premature entry. Consequently, there was some hesitation in adopting an ambitious reform programme. These concerns were well-founded. At the time Malta was preparing to join the EU, the economy was emerging from a period of stagnation, a widening output gap and a slow pace of productivity growth. In addition, while the Government planned to reduce the budget deficit from almost 10% of GDP in 2003 to below 3% by 2006, an adjustment of that magnitude clearly presented considerable political risks, not least because some fiscal tightening was already underway. The unemployment rate, meanwhile, was edging upwards in response to the ongoing restructuring process and the further liberalisation of markets as a result of EU accession, making any further retrenchment painful for most households. 1  For a fuller treatment of Malta’s case for adopting the euro, see Malta’s Strategy for Participating in Economic and Monetary Union and Adopting the Euro, Government of Malta, Central Bank of Malta, April 2005. BIS Review 77/2007  1  At the same time, many indicators suggested that Malta was well suited to participate in the EU single currency area.
I described capital flows to emerging Asia earlier, largely in terms of cyclical factors relating to monetary policy. But there is a larger secular phenomenon underpinning these flows to Asia – the structural rebalancing of investment portfolios towards emerging economies in general, and Asia in particular. Given the size of developing Asia, there is not enough portfolio investment in Asia and not enough portfolio investment by Asia. There is scope for both to increase – dramatically. 31. First, global investors will invest more in Asia. Advanced economies represent only half of world GDP but three-quarters of global market capitalisation. A reallocation of just 5% of advanced economy equity portfolios to emerging economies translates into a potential flow of $ trillion. 32. You know the story well – strong economic growth, sound fundamentals, and favourable demographics will support the valuations of Asian assets and draw a growing tide of institutional investor interest from the rest of the world. At the same time, rapid urbanisation will mean large infrastructure needs in Asia – the ADB has estimated that Asia needs about $ trillion through 2020 to upgrade its infrastructure. This financing need cannot be met by public funds alone. Infrastructure funds are set to play an increasingly important role in the asset management landscape in Asia. 33. Second, Asian investors will invest more, both in Asia and globally.

Our financial education programmes, informative publications on banking products and services, coupled with regulation, licencing, introduction and support for new payment and financial services technology and instruments, are aimed at enhancing financial inclusion and generating opportunities for financial access for all groups of the society. The Bank of Albania deems that more may be done with regard to designing and promoting financial products that satisfy better the needs of such groups. In addition, we think that there is more space for faster growth of credit to the private sector, particularly for certain sectors, in which inequality is more notable. More concretely, agriculture is a good example to illustrate this point. While it contributes a significant share to the gross national product, it only gets a small share of credit and other financial products. Beyond these policies and strategies for developing financial products, the real fight against poverty and inequality in the long term should be based on accomplishing structural economic, legal and institutional reforms, designed in the framework of the European integration process. The priorities of our economies should focus on maintaining macroeconomic and financial stability, continuing structural reforms in infrastructure and the labour market. Creating favourable conditions for doing business and for honest investors, by fighting informality, should be accompanied with the creation of human capital and preparation of the workforce in accordance with the actual technological developments and challenges. Dear participants, The Transition Report 2016–2017 of the European Bank for Reconstruction and Development is an important document for all of us.
I would like to remind you that as far back as this summer the oil price exceeded $ Therefore the baseline scenario is built on the basis of the average annual oil price in 2015, which will be slightly below the average price in 2014. Further on, we project a gradual downward  2  BIS central bankers’ speeches  adjustment of the average annual oil price. If necessary, we shall review the base assumptions of oil price before submitting the final draft of the document to the State Duma. Another difference of the forecast prepared by the Ministry of Economic Development is in the fact that its projected 2015 inflation is 5.0–6.0%, which is higher than the forecast of the Bank of Russia. In our assumptions we expect the exhaustion of the factors that have caused the rise in inflation this year, and in the baseline scenario, we assume that the inflation will reach 4–4.5%. According to our estimates, the difference between the key parameters of the federal budget, calculated on the basis of the forecast of the Ministry of Economic Development (this is the way the draft budget is calculated) and the one calculated on the basis of the Bank of Russia forecast, is also insignificant. The federal budget deficit in 2015–2017 will remain low.

Elvira Nabiullina: Guidelines for the Single State Monetary Policy in 2015 and for 2016 and 2017. Presentation by Ms Elvira Nabiullina, Governor of the Bank of Russia, at a meeting of the Committee on the Budget and Taxes of the State Duma of the Russian Federation, Moscow, 13 October 2014. *  *  *  Accompanying slides can be found on the Bank Russia’s website: Slides (PDF). Dear colleagues, good afternoon! Today we present for discussion the draft Guidelines for the Single State Monetary Policy in 2015 and for 2016 and 2017. This document was prepared in rather difficult conditions. The first factor is a slowdown in economic growth. The second is the volatility and tension in the foreign exchange and financial markets. And the third is a leap of inflation, which occurred recently. This all creates a rather complicated environment for developing the strategy of the guidelines for the monetary policy. We have prepared three scenarios. I suggest starting with the baseline scenario in slide 2. The baseline scenario is based on the assumptions of a steady recovery of the global economic growth, a slight decrease in oil prices, a gradual resolution of geopolitical problems and lifting during 2015 of most of the imposed mutual sanctions and restrictions. Nevertheless, in the first half of 2015, in our view, factors limiting investment activity will remain, and investment activity is one of the key elements that can affect the trends in economic growth.