samchain/econo-pairs-v1 huggingface dataset:
We have a three-pronged approach: surveillance, strengthening the financial infrastructure and, as a last resort, crisis management. We start with surveillance. We need to keep a watch on the institutions in the financial sector and their interactions, both amongst themselves and with lenders and borrowers outside the financial sector. The soundness of individual banks is a key area of the FSA’s activities. And we are in daily contact with them. Reassuringly at present this area of threat looks quite remote - in the UK itself at least. Supervision has come a long way in the past five to ten years as have the banks’ risk management systems. But nowadays financial crises do not necessarily just involve banks. There is an increasing overlap and interaction between banks and securities markets, and between both of them and the insurance sector. A problem in one can have a knock-on impact in the others. Most of these organisations are prudentially supervised by the FSA. But there are also organisations that are not supervised but which could be of systemic importance. The case of the hedge fund LTCM is perhaps the most notable example in recent times. And one to which I will return. But it is not just the wide range of institutions that potentially play a part in the emergence and propagation of financial crises. You also need to consider the wide range of instruments. Some of them are extremely complex.

Derivatives, structured products, and so on are now centre stage in all  BIS Review 49/2003  1  areas of financial intermediation. We need to understand their implications and the threats they may pose as well as the benefits they can bring and we have accordingly increased our emphasis on market intelligence in this area. We also have to monitor the systems which underpin the functioning of markets, notably payment, clearing and settlement systems. CHAPS and BACS may be unknown acronyms to you. But they are the essential plumbing in handling UK cash payments. Without these systems the financial machinery as a whole could not operate. If any of them failed to perform this could rapidly lead to a liquidity crunch. So we need to understand how they operate; how robust they are; how good their risk management processes are; and how effective their corporate governance is. The Bank has a specific oversight responsibility for UK payment systems. And beyond the payment and settlement systems we need to understand the financial infrastructure more generally. I don’t just mean physical infrastructure such as stock exchanges and other trading platforms. I mean also the plethora of prudential, accounting and legal standards and conventions, such as the prudential capital rules as per the Basel II agenda; International Accounting Standards due to be implemented in Europe in 2005; standards of good audit practice. I could go on. We need to consider whether people have confidence in the standards themselves, and are they fit for their purpose?
We have also experienced game situations in which one or more major operators were behind the krone exchange rate fluctuations and at the same time took speculative positions in the capital market in the expectation that Norges Bank would raise its key interest rate to defend the krone. If we focus too narrowly on the exchange rate when setting interest rates, we are liable to end up in game situations. Speculators have little to gain from such game situations if Norges Bank proceeds gradually and avoids abrupt shifts in the setting of interest rates. 5  BIS Review 92/2000  In practice, the interest rate is the only monetary policy instrument available to Norges Bank. The interest rate can influence the exchange rate directly through the differential between domestic and foreign interest rates, and indirectly through inflation expectations. Higher interest rates normally make krone positions more attractive. An increase in the interest rate will therefore result in an appreciation of the krone, and a lower interest rate will weaken the krone. However, this relationship presupposes that the market is confident that monetary policy provides the economy with a nominal anchor. In some situations, interest rate changes may have the opposite effect. A higher interest rate can weaken the krone if it contributes to a deflationary recession, and a lower interest rate can strengthen the krone if it contributes to preventing a deflationary recession.

1  BIS Review 92/2000  The objective of monetary policy Norway has a tradition of having a fixed or stable exchange rate, although we cannot say that we have had a high degree of continuity in monetary policy. On the contrary. In the 1970s and 1980s, the economy lacked a nominal anchor. Interest rates were low in nominal terms and they were politically  determined. Frequent devaluations were used to redress the negative effects of high price and wage inflation on competitiveness. The average rate of increase in prices between 1973 and 1987 was almost 10%. The value of the Norwegian krone against the German mark was nearly halved from 1973 to 1987. We paid about 2 kroner for a mark in 1973 and close to 4 kroner in 1987. The low interest rate and devaluation policy collapsed in the mid-1980s. Following a shift, which can now perhaps be said to have occurred in 1986, monetary policy has created nominal stability. Through the 1990s inflation in Norway was on a par with the level elsewhere in Europe. At the same time, the value of the krone against European currencies is about the same today as it was in the early 1990s. The exchange rate against the German mark is still around 4 kroner. BIS Review 92/2000  2  Norway abandoned a fixed exchange rate system in 1992 in the wake of heavy speculation against the krone during the period of turbulence in European foreign exchange markets.
In current conditions of uncertainty, investors – reading our rate guidance – tend to anticipate a more extended period of time to the date of a rate hike. By the chained structure of our forward indications of all instruments, this automatic adjustment mechanism extends the horizons for full reinvestments too, and thus reinforces the impact of rate guidance on longer-term interest rates. Moreover, our new series of long-term refinancing operations (TLTRO-III), which started in September 2019 and will end in March 2021, help to ensure favourable bank funding conditions in support of an efficient bank-based transmission of monetary policy in the euro area. The combination of our monetary policy measures continues to prove effective in stabilising the economy and in ensuring very favourable financing conditions. This is evident in the successful pass-through of our policy measures to financing conditions that matter for the real economy. In fact, bank lending rates for both firms and households have continued to decline in the recent months and remain close to historical lows. Loan growth to non-financial corporations, while moderating in tandem with the slowdown in the economy, is still supporting capital creation and the mortgage market. Our recent Bank Lending Survey confirms that credit supply conditions are favourable. 2/3  BIS central bankers' speeches  Overall, the present monetary policy stimulus lends substantial support to growth and inflation developments, buffering to a large degree the negative impulse from global factors.

Developing the renminbi market – Preparing for the future That said, with the transformation of RMB to become international reserves currency, coupled with China’s strong FDI presence and push for financing infrastructure in Asian countries as part of One Belt One Road plan, it is timely to enhance the strategies moving forward. I would suggest to look at a few key aspects: 1. The first is to increase the stock of renminbi liquidity onshore. With a stable and larger renminbi liquidity pool, banks will be able to offer renminbi loans and financing. Currently, the RMB deposit balance with the banking system is relatively low, hovering around 3% of total foreign currency deposits. Malaysia is a net receiver of FDI from China and with substantial exports to China – banks should be proactive in approaching clients to facilitate these flows in renminbi. Banks with regional presence should also expand its renminbi business through its branches overseas, using Malaysia as a launch pad and leveraging on the renminbi liquidity infrastructure available in Malaysia. The offshore CNH renminbi market is well developed, and the gap between CNH and CNY markets has narrowed significantly. As such, banks should be able to offer competitive pricing for clients to manage and hedge renminbi exposures. With the various liquidity facilities in place, we can expect the renminbi market here to be able to meet their requirements. 2. Second, is to further develop the renminbi foreign exchange onshore market to increase the depth and liquidity.
3 – A year of inclusion We can look forward to two real advances in inclusion in 2019: a fifth consecutive year of declining household over-indebtedness, by almost 40% over this period, and the implementation of a cap on bank charges at EUR 25 per month for more than three million vulnerable customers. Within this population, the specific offer – capping charges at EUR 20 per month and EUR 200 per year – now benefits 464,000 customers, or an increase of 32% compared with end-2017. I would like to take this opportunity to thank the banking community, which has worked hard to meet its commitments. Now, these commitments must be enhanced, and sustained. Enhanced in 2020: banks must detect fragile customers even more efficiently; they must correct the few remaining shortcomings; and they must raise awareness of their specific offers. These commitments must be sustained over time, and will be monitored by the ACPR, and by the Observatory for Banking Inclusion, which I chair, with an active role for the associations. Climate change will also be the priority in 2020. And you can count on the determination of the Banque de France and ACPR – with its new Climate and Sustainable Finance Committee – to support the greening of the financial sector. We will conduct the first climatic stress tests in the coming months. The aim of this exercise is twofold: to better identify the resilience of banks and insurers to climate risks, and to speed up the methodological work in order to have quality assessments.

By early entry I mean entry close to the earliest possible date, which one can recognise to be around year 2006, given the assumption of entry to the European Union in 2004. It is this time neighbourhood we need to consider. The points would be as follows. First of all, let me say, that, in my opinion, arguments applicable to Poland are also largely true for other candidate countries in most of the cases. Poland has achieved a relatively high level of structural convergence with the European Union. It can be measured, for example, by a share of exports to the EU in relation to all exports. This number is actually higher in Poland right now then it had been in Greece, Portugal and Spain before their respective entries to the EU and the MU. We have also achieved a high degree of cyclical convergence. These two points combined, translate to a situation in which Poland is not so sensitive any more to, what is called, an asymmetric shock. Second, we have achieved a tremendous extent of disinflation. Inflation in Poland this year would be between 4% and 5% and similar figures will apply to other candidate countries. If one compares this data with inflation rates in some of the EU countries, one cannot see much of a difference - look at Holland. Third, Poland had managed to achieve a high level of disinflation while introducing a high level of price liberalization. It means there is only a limited scope for further corrective inflation.
As our economy becomes even more financialised, it is important that banks strike a balance between legitimate profit-seeking goals, and their responsibility to provide the public with full and fair access to financial services. Some banks today are still falling short of expectations to offer basic banking services to the people who only need such services. We have observed poor communications by the front-line staff of such banks on the basic banking products which must be offered by all banks. In some cases, prohibitive conditions are attached to the opening of basic banking accounts in clear violation of Bank Negara Malaysia’s requirements. This must change. In offering basic banking services, banks should also leverage on technological advancement that can support inclusive finance initiatives. These include adopting more innovative delivery channels, leveraging on big data to reach a wider community and to offer suitable products that are priced affordably. Concluding remarks The world as we know it is set to change dramatically just as it had over the last few decades, except that future changes will happen at a much more rapid pace, and in sectors where we least expect it. The ability of banks to adapt will be critical to its relevance. More likely than not, banks that are agile and have absolute clarity on their value proposition for their customer, society and wider economy, will be the ones that will endure. Banking as we know today will no doubt change in form as the future takes shape.

Across various sectors, disruptive technologies are rapidly expanding the horizon of economic opportunities while challenging existing business models. In the case of banking for instance, we have already seen greater competition from new entrants amid the emergence of fintech. Rapid urbanisation, which is more pronounced in emerging markets, and demographic changes such as an ageing population are other key trends which have major implications on economic and socio-political conditions. At the same time, there is a growing appreciation for the far-reaching impact of climate change, giving rise to calls for more sustainable growth models and innovation. All these developments that are taking place in the banking industry today have created an environment much different from the one prior to the crisis. And together with the implementation of the post-crisis global regulatory reforms, which remains a key priority, their implications require careful and deep thinking as banks plan for the future. Domestic policy continuity and priorities Our banking industry is facing the current rapidly changing and challenging economic environment from a position of strength, following the successful reform measures that were implemented. Given the high degree of openness of the Malaysian economy and the increased integration with the international financial system, external developments have continuously affected our domestic economy. But the economy has been able to weather these challenges and have remained on a steady growth path of 4 to 6% over the past five years. In recent quarters, economic growth, however, has moderated.
Thus, the main mechanisms of growth stem from the improvements in the functioning of financial markets, and the effect this has on transforming risks and maturity of assets and liabilities of which capital markets development plays an important role. Ladies and Gentlemen, even as the private sector takes centre stage in this process, the government also has an important role to play. The absence of government means that financial markets operate without proper regulatory structures. Without a formally regulated financial system, informal financial markets tend to fill in the gap but at sub-optimal levels with high transactions and other related costs. As a result, there is less efficient allocation of capital which in turn translates into low levels of economic growth as investment funding is limited by the cost of transactions. Therefore, efficient capital allocation relies chiefly on a properly functioning financial system, which enables firms and households to share risks and also facilitates the transformation of more liquid liabilities into illiquid but productive investments. 2  BIS Review 149/2010  Instruments and the structure of capital markets Distinguished ladies and gentlemen: Looking at the objective of every economy, it is clear that all countries develop the depth and breadth of their financial markets to meet the needs of the real economy. This includes making a wide range of choices available to investors and issuers of securities in fixed-income and equity markets. Bond issuers, for example, would ideally be able to issue a variety of maturities with both variable and fixed rates.

As a matter of fact forward-looking decisions should be made on the basis of an ever larger and timely information; They should be constantly consulted with specialized economic and financial market agents. The Bank of Albania, likewise other central banks, endeavors to increase the qualitative and quantitative data base, in order to improve analyses and the decision-making process in making new steps. The finalization of the several-year project of the Bank of Albania, along which the Business and Consumer Confidence Indicator was consolidated, is an accomplishment of one of the medium-term development strategy objectives of our institution. The decision to publish these indicators passed through a prudent process and matured only after experts and decision-makers of the Bank of Albania were convinced that the confidence indicators, together with other indicators, revealed valuable additional  BIS Review 36/2009  1  information about the recent and future developments in the country’s real sector of the economy. Allow me to briefly summarize some of the basic concepts on confidence, tendency and the foregoing indicators. They have been widely used in many advanced countries of the world, particularly over the last two decades. These indicators are constructed on the basis of information collected from surveys, which are technically referred to as Business and Consumer Confidence/Tendency Surveys. The Bank of Albania conducts these surveys in cooperation with INSTAT.
This will also lead to a change in the real krone exchange rate, so that the expected return on investments in Norway and abroad become about the same. However, over time long-term real interest rates have largely followed international rates, and in line with international developments long-term interest rates in Norway have also fallen markedly. Low risk? Real interest rates abroad are unusually low, and the risk premium is also low. Savers and investors are offered a wide range of investment options. Risk and expected returns are assessed when choosing among the alternatives. The premium that investors require to take risk has fallen considerably in recent months and is now generally low. For example, there is little difference between government bond yields and yields on bonds issued by private enterprises. The extra premium that emerging economies have to pay on loans is also small. Moreover, premiums paid to hedge against future fluctuations in foreign exchange and equity markets are small. The low risk premiums may reflect fairly solid growth in the world economy and a strengthening of corporate profits and financial positions. It seems that credit risks are fairly well diversified in securities markets and international banks appear to be solid. Fewer major negative events have shaken the markets in recent periods. But another explanation may be that low interest rates have prompted investors to take more risk, thereby pushing down risk premiums. In that case, lower premiums reflect an expansionary monetary policy rather than low real risk.

Today I will elaborate only on two of them, which I consider important from my own experience. They are: a) rent-seeking behavior, and b) lack of broad political support for reforms (which I partly discussed before). a)  Rent-seeking  If private returns on predation are larger than private returns on production, this will send “wrong” incentives to people and society will not develop in the desired direction. Therefore we have to make every effort to “get the incentives right”. This is not an easy exercise. Socialism and, sometimes even more, early transition, have created vested interests and it is understandable that every socio-economic 4  In no way am I trying to imply that the main cause of the banking crisis is inadequate supervision and regulation. But, they can certainly deepen banking problems. BIS Review 43/2000  6  group will fight either to preserve their status quo or try to “grab” even more. The problem is especially exacerbated if the prevailing mentality in a society as a whole is the “take it” and not “make it” philosophy. Every change is a redistribution, redistribution of power and relative wealth. Transition by definition is a change. People on average resist change. I have called this the Newtonian Law of Transition, namely: “Every action creates a reaction.” (Škreb, 1998). This resistance to reform (changes) is probably “time-dependent” and positively correlated with the time spent in transition. In the early stages reforms are more general (macroeconomic stabilization) and there is much more support for them.
Had a single European supervisor existed prior to the crisis, it could have spotted the unsustainable growth in private sector debt and the excessive leveraging of banks’ balance sheets associated with it – and hopefully taken early preventative measures. Mitigating the crisis What about the role of Banking Union in mitigating the crisis? Here I can see two key ways in which it would have been instrumental. First, it would have lessened the so-called “bank-sovereign loop” that drags down the fiscal sustainability of sovereigns. This loop is driven by bank bailouts or just by the expectation that sovereigns will have to bail-out struggling banks, which then increases borrowing costs for sovereigns and further drives up funding costs for banks. A Single Resolution Mechanism would avoid this by resolving banks rather than saving them and by making the private sector rather than the taxpayer pick up the bill. Moreover, any residual fiscal burden on sovereigns would be distributed across the euro area through the common fiscal backstop. Second, a Banking Union would have reduced the fragmentation in financial markets that holds back bank lending and economic growth. At present, market fragmentation is severely disrupting the transmission of the ECB’s monetary policy. In some countries, changes in our main interest rate are being passed on fully by banks; in others, because bank funding is  3  2  Schoenmaker, Dirk (2011): “The Financial Trilemma”, in Economics Letters, 111 pages 57–59. BIS central bankers’ speeches  tight, interest rate changes are being passed on hardly at all.

I thank you for your attention. 4  BIS Review 105/2010