samchain/econo-pairs-v1 huggingface dataset:
However, the fall in home equity combined with a pro-cyclical tightening of refinancing standards and fees means that many borrowers who would like to refinance cannot do so. Problems in housing By many measures – including affordability ratios and price-to-rent ratios – home prices have fallen back to or below their pre-boom levels. Indeed, housing no longer appears overvalued. In many former boom localities, the price of existing homes has fallen below the cost of building a new home.6 Also, after several years of depressed construction the national stock of housing no longer looks excessive relative to the nation’s population. Nevertheless, housing currently remains in excess supply, in part, because household formation rates remain depressed. Normally, when there is excess supply, markets self-correct fairly efficiently. Prices fall until they reach a level at which supply and demand are balanced. Unfortunately, the housing market has a number of specific features that complicate this adjustment process and mean it could undershoot – and remain weaker for longer than is necessary. Housing is a very long-lived asset. Once new building ceases in stressed markets, further reductions in demand cannot be matched by further supply reductions.7 This means that the market clearing price for housing is highly sensitive to those factors that influence demand. Moreover, there is a feedback loop from prices to demand, with weaker prices leading to weaker demand. If house prices are anticipated to increase, then the expected capital gain helps to offset the financing cost of owning a home.

Many of these policies simply seek to solve or bypass the legal and incentive problems in the market today and mimic efficient private actions that might be taken if mortgage loans were all held in portfolio and accounting rules did not discourage net present value maximization. Others seek to solve coordination problems and take account of the externalities or spillovers to generate outcomes that are superior from the broadest perspective of the nation as a whole. Earlier this week Chairman Bernanke sent members of Congress a thoughtful analysis of housing policy11 by staff at the Board of Governors in Washington that evaluates a number of these same issues. What I would like to do today is to elaborate on some specific proposals we have developed in New York, in order to try to persuade you that there are workable solutions to our housing problems at costs that I deem very reasonable relative to the economically inefficient path we are on. Of course, I am open to other promising alternatives that would address the same issues. I note also that a truly comprehensive approach would also include long-term reform –including reform of Fannie Mae and Freddie Mac – to put housing finance on a more stable footing and to equip the market to deal more effectively with any future systemic shocks. But I will not discuss these issues in-depth today. Access to mortgage credit Restoring demand for housing requires new mortgage debt to be offered to creditworthy borrowers on reasonable terms.
Chart 5: Inflation Report forecasts of wage growth from 2012 Four-quarter wage growth (per cent)  8 6 4 2 0 -2 -4  2001  2003  2005  2007  2009  2011  2013  2015  2017  Data Source: ONS, Bank of England and Bank calculations Note: Chart shows realised four-quarter whole economy wage growth and vintages of May Inflation Report forecasts from 2012 to 2017. 20  All speeches are available online at www.bankofengland.co.uk/speeches  20  Chart 6: UK Phillips curve Wage inflation (%)  40 35 30 25 20 15 10 5 0 -5  0  2  4  6 8 Unemployment rate (%)  10  12  1971-1997  1998-2012  2013-2018q2  Fitted 1971-1997  Fitted 1998-2012  Fitted 2013-2018q2  14  Sources: ONS and Bank calculations  Chart 7: US Phillips curve Wage inflation (%) 10 8 6 4 2 0 0  2  4  1971-1982 Fitted 1971-1982  6  8  Unemployment rate (%) 1983-2011 Fitted 1983-2011  10  12  2012-2018Q2 Fitted 2012-2018Q2  Sources: FRED and Bank calculations. Notes: The measure of wages used is four-quarter growth rate of total private average hourly earnings of production and nonsupervisory employees.

However, its effects can be mitigated by monetary, fiscal and financial policy actions. Although the negative scenarios dominate, it is possible that Eurozone policy makers succeed in building a set of measures and reforms that soon restore market confidence. In any case, in such a scenario, given the required fiscal adjustments, the developed economies would continue to lag for a long period and would hold on to their loose monetary policies for some time. This would intensify the dichotomy between growth in advanced and emerging countries. In this context, a resurgence of capital inflows to emerging economies is a possibility. Domestically, one risk that cannot be ruled out are stronger effects from the higher external uncertainty, hitting harder the local financial markets, confidence, and consumption and investment decisions. Notwithstanding the capacity of economic policies to mitigate the effects of a more adverse external environment, it is important for the private sector to properly administer financial risks. Worth noting are the favorable financial indicators of the corporate sector (figure 10). In addition, currency mismatches continue to be stable and bounded, despite the increasing role of external debt as a source of funding. Still, it must be pointed out that financial intermediaries would be wise to keep a watchful eye on credit risk, considering its negative effects on external demand implied in the risk scenarios. 4  BIS central bankers’ speeches  As for households, on average the financial situation has not deteriorated. The recent increase in private consumption has evolved hand in hand with labor income.
In my remarks this evening, I’m going to talk about the current state of the economy, where it’s headed, and what the Federal Reserve is doing to boost growth while keeping inflation low. My remarks represent my own views and not those of others in the Federal Reserve System. It’s been over two-and-a-half years since the end of the worst recession of the post-World War II period. The economy is growing, and the recent economic news has been increasingly positive. This is very welcome progress, but it’s brought us only part of the way back. Unemployment remains a huge problem, and that means real hardship for millions of Americans. The severe recession and subdued recovery have prompted the Fed to carry out a series of extraordinary policy actions to restore the economy to health. Most notably, we’ve kept our benchmark short-term interest rate near zero for over three years. This aggressive Fed response is an important reason why the economy has moved to more solid ground. But, as I’ll explain, the Fed’s job is not over yet. Far from it. Congress has assigned the Fed two goals: maximum employment and stable prices. We have lots of work to do before we can say we’ve met those goals. Looking at past deep recessions, you would have expected the economy to be doing much better than it is by now. Why has this recovery been so lackluster? The reason has everything to do with what took place beforehand.

The policy actions the Fed takes will depend on how economic conditions develop. If circumstances change, our policies will adapt. No matter the circumstances, I assure you that we at the Fed are doing everything we can to achieve the goals of maximum employment and stable prices. Thank you very much. References Board of Governors of the Federal Reserve System. 2011. “Minutes of the Federal Open Market Committee”, June 21–22. Board of Governors of the Federal Reserve System. 2012. “Press Release”, January 25. Federal Reserve Bank of New York. 2010. “Quarterly Report on Household Debt and Credit”, August. Feroli, Michael E., Ethan S. Harris, Amir Sufi, and Kenneth D. West. 2012. “Housing, Monetary Policy, and the Recovery”. Presentation to the 2012 U.S. Monetary Policy Forum, New York, February 24. Jordà, Òscar , Moritz Schularick, and Alan M. Taylor. 2011. “When Credit Bites Back: Leverage, Business Cycles, and Crises”. NBER Working Paper 17621. Mian, Atif, Kamalesh Rao, and Amir Sufi. 2011. “Household Balance Sheets, Consumption, and the Economic Slump”. Presentation at American Economics Association meetings, Atlanta, GA, January 8, 2012. Reinhart, Carmen M., and Kenneth S. Rogoff. 2009. This Time Is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press. 7  For more information, see Board of Governors (2012). BIS central bankers’ speeches  5  Williams, John C. 2012. “The Federal Reserve’s Mandate and Best Practice Monetary Policy”. Presentation to the Marian Miner Cook Athenaeum, Claremont McKenna College, February 13. 6  BIS central bankers’ speeches
However, the digitalisation path should be pursued after a cost-benefit analysis, having regard to the risks and additional costs that are taken on. It should, moreover, be accompanied by processes that allow for the identification, monitoring and mitigation of such risks, in such a way that ensures they are included in price-setting models. In sum, any effort geared to obtaining comprehensive knowledge of the profitability of the activity being pursued and to refining price-setting processes with a long-term vision will be time well spent. That said, while the foregoing condition is necessary for ensuring sustained, profitable activity over time, it is not however a sufficient one. The analysis must, moreover, be strategically oriented to anticipating future changes. Reflection is needed on the capacity of banks to manage and strategically focus the business. A strategic reflection Reflection on the business model should allow medium and long-term objectives to be set and a path plotted towards attaining these objectives. Appropriate business models are those that generate recurring and sustained profitability over time, this being the fundamental pillar for the organic generation of capital. This is the virtuous circle that must be drawn and, to do this, banks’ management bodies will have to take the necessary measures enabling them to face a changing and demanding future. This task will involve taking into account all factors that may affect how the bank pursues its business, and everything that defines its environment which, by definition, is a changing one.

Both documents, the guidelines and the addendum, clearly demonstrate the attention the supervisor has been paying to credit risk in general, and to non-performing exposures in particular, and they represent the benchmark supervisory tool in the supervisory dialogue with banks. In July 2018, the ECB announced that, along with the foregoing, and with the aim of achieving similar coverage of the flows and stock of non-performing loans, the setting of bank-specific supervisory expectations in respect of prudential provisioning levels for the stock of non-performing loans would also form part of the supervisory dialogue. The better prepared institutions are for this dialogue, the more fluid it will be. Before addressing the last of the key strategic aspects I wish to talk about today, namely governance, I believe it should be said that any strategic reflection should also include appropriate liquidity planning. This should take into account those elements that may most affect it, with particular attention to monetary policy implementation decisions. To conclude these considerations on strategic reflection by banks, I shall refer to governance and risk management. The crucial element for being able to properly manage and attain profitable business models over time is to have suitable governance structures. Governance structures shape the decision framework on risks. They are thus determinants of how a bank’s risk profile develops and, ultimately, of its medium and long-term sustainability. They are a necessary and basic element without which success in any project cannot be expected.
I am confident that the distinguished speakers from various institutions, who are present at this conference, would share further helpful ideas and suggestions (we already heard some very interesting ones in the previous discussions), thus ensuring the formulation of sound measures to be incorporated in our policies on remittances. And I strongly hope this exchange of experiences and expertise will continue in the future and contribute producing adequate human, infrastructure, and institutional capacities to transform remittances from potential into real driving forces for the development of our countries. Again, my highest consideration for this activity and Thank you for your attention! 5/5

Arthur Yuen: Bank account opening and maintenance Opening remarks by Mr Arthur Yuen, Deputy Chief Executive of the Hong Kong Monetary Authority, at the Briefing cum networking session on "Bank Account Opening and Maintenance", Hong Kong, 21 April 2017. * * * Good afternoon, ladies and gentlemen, 1. A very warm welcome to all of you to this briefing and networking session. We are going to discuss the important issue of business account opening and maintenance, and this event is jointly organised by the HKMA and Invest Hong Kong. I would like to first of all welcome all the representatives of Chambers of Commerce, who share the same concern as the HKMA that some SMEs and start-up companies from overseas are finding it difficult to open bank accounts in Hong Kong. 2. I am sure you would all appreciate that over the past years, customer due diligence (CDD) requirements have tightened globally, and Hong Kong followed this international trend. Needless to mention is also that a very small number of banks, for a variety of reasons, need to comply with requirements or standards mandated by their head offices or overseas authorities, thus leading to de-risking efforts in some instances. Surely no one would disagree that we are now in a more complex world, and sometimes we indeed have to deal with sub-optimal outcome. But I totally appreciate that knowing it is one thing, and experiencing the effect of it is quite another. 3.
Benoît Cœuré: Interview in Kathimerini Interview with Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, in Kathimerini, conducted by Ms Eirini Chrysolora and published on 5 September 2018. * * *  Does the completion of the programme mark a new era for Greece in your view? Is enhanced surveillance not just a continuation of the programme? Let me start by saying that it would be all too easy to take the opportunity of Greece graduating from the programme to turn the page and say “mission accomplished”. The programme years have been very difficult for the Greek people. Policymakers across Europe have a duty to learn the lessons of this painful journey and improve policy, at both European and national levels. With hindsight, one can argue that the design of the programmes could have been more effective in supporting social safety nets and combating rent-seeking, that the pace of reform of the financial sector could have been faster, and that the need for debt reduction was overlooked by creditors. All this has gradually improved over time. I would like to congratulate the Greek government for its remarkable work in recent years, implementing key reforms in the economy and the society in general and in the financial sector in particular. For example, social solidarity income helps direct scarce resources to those who need them most, and opening up industries or sectors, such as pharmacies, benefits households which have borne the brunt of crisis adjustment.

We do not intervene in internal political discussions, whether in Greece or elsewhere. It is important that the independence of the Bank of Greece and its governor is preserved. Personally, I have the highest appreciation for Mr Papademos and Mr Stournaras as economists and policymakers. I must stress that an independent statistical system is also crucial. I won’t comment on Greek judicial decisions, but one should not underestimate the damage inflicted on Greece’s credibility by never-ending legal action against the former president of Elstat. Mr Georgiou discharged his duty in compliance with the European framework and his findings remain unchallenged today, including by the government. Do you think that the planned pension cuts for 2019 should be suspended or postponed, as the government wants? Has the government made any concrete proposals ahead of the mission and in view of the 2019 draft budget? The government also plans tax cuts in 2019 using the expected excess primary surplus, affecting ENFIA and social security contributions, among others. Do you agree with these measures? In line with what I said on the refocusing of our contribution to the programme, we do not want to discuss specific fiscal policy measures. What is essential for us is that fiscal targets for 2019 are met and that the budget composition is growth-friendly. As is the case in a number of countries in the euro area, it is important that the level of direct income taxation supports economic growth while ensuring that fiscal targets are met.
In the context of benefits for Switzerland, I have already discussed why the argument that EMU membership would induce the Swiss political authorities to embark upon a necessary and otherwise impossible economic reform program should be dismissed. For the United Kingdom, the economic cost-benefit assessment of EMU membership is a different one. Analogous to the Swiss case, the UK would lose monetary policy as a flexible instrument to respond to asymmetric domestic shocks such as the current steep rise in domestic house prices (Chart 6). However, unlike Switzerland, the UK would gain from lower interest rates. In this context, it must be remembered that the Bank of England’s post-monetary independence highly successful monetary policy under an inflation targeting regime follows a long period of stop-and-go monetary policy and relatively high inflation (Chart 7). The argument that EMU would somehow induce further structural reforms is equally irrelevant for the UK as it is for Switzerland though partly for different reasons. As I outlined earlier, initiated by the economic shock experience of the late 1970s, the United Kingdom has independently and autonomously embarked upon a long-standing and far-reaching economic liberalization course. The current nature of the relative business cycles between the UK and the Euro-zone points to higher economic costs of UK membership in EMU than for continental European countries. This is illustrated by the different interest rates settings of the ECB and the Bank of England in recent times.

I am not going to talk today about what banks must do, which is a lot. I will merely give some examples of the tasks outstanding for the authorities. With regard to cleaning up balance sheets and levels of capital, the latest reform has been a very important step, but nothing in life is final. If the Spanish economy eventually recovers, it will have been more than enough, but if the economy deteriorates by more than expected, then capital will have to continue to be increased and improved if banks are to remain solid. Also, new instruments to increase credit to SMEs will have to continue to be tested. Some of these were discussed at a workshop held by the Banco de España in February in collaboration with the Spanish National Securities Market Commission (CNMV). At some point political decisions will need to be taken in this area. Another area of work is to continue to reduce the size of savings bank governing bodies in order to avoid any duplication when they have transferred their financial business to banks they have set up, which must be stock-exchange listed when above a certain size. A more substantial alternative would be a law requiring savings banks to cease holding significant stakes in credit institutions, within a reasonable period, and to invest as they see fit, perhaps obtaining higher returns, in order to continue to pursue their welfare aims.
They then concluded it was for someone else to address macroprudential risk. The trail of macroprudential policy goes rather cold at this point. The prevailing view seems to have been that if the regulation and supervision of individual firms was right and if central banks had the necessary Tiberius-like instruments to intervene in crises, sufficient stability could be ensured. It was the realisation in the last years of the last century that an ever more liberalised and globalised financial sector was generating ever more difficult financial crises that led to the reawakening of interest in macroprudential policy. This was led by Andrew Crockett, then the General Manager of the Bank for International Settlements and a former Executive Director of the Bank of England.

At present we are using stress testing to help us judge how resilient the banking system is to different severely adverse, but plausible, scenarios. A development of this approach would be to use stress testing more countercyclically. Rather than testing every year against a scenario of constant severity, the severity of the test, and the resilience banks need to pass it, would be greater in boom times when credit and risk is building up in the financial system and it has further to fall and then reduced in weaker periods when there is less risk in the system and the economy needs the banking system to maintain lending. Third, macroprudential risk goes wider than the banking system. Risks can arise in other parts of the financial system and in the real economy. A year ago, the UK housing market was clearly developing significant momentum. Prices were growing much faster than incomes. Borrowers were increasingly driven to borrow a greater amount relative to their annual income. The amount of such new mortgages at high loan to income (LTI) ratios – borrowers borrowing over 4 times their annual income – had exceeded its pre-crisis peak. The risk the Committee saw was that if the number of high LTI mortgages continued to grow, there would be increasing numbers of highly indebted households very vulnerable to a change in economic circumstances. This would increase both macroeconomic volatility and systemic risk. The Committee came to the view that this was a macroprudential risk that needed to be insured against.