samchain/econo-pairs-v1 huggingface dataset:
Institutions, very frequently due to the pressure exerted by the market, often decide to distribute these profits to shareholders through generous dividends, which in turn has a negative impact on the institution’s capital. When the downswing arrives and the risk assumed in the past turns into bad debts, the income statement is not capable of withstanding the losses. These losses may erode a very significant part or even all of the institution's capital. Recapitalising banks during downswings is not easy, as recent events have so starkly shown. By the way, I should note here that the current recapitalisation with public funds raises significant challenges in terms of management incentives at the recipient institutions and of competition policy for the entire banking system in question. However, this is neither the time nor the place to go into this in more details. BIS Review 149/2008  3  Accordingly, from the prudential standpoint, there are more than enough arguments to justify the development of regulatory policy instruments that enable credit institutions to recognise during upswings the higher level of credit risk accumulating in their balance sheets. The dynamic provisioning is a way to achieve this recognition. The idea, an extremely simple one, is that banks should set aside provisions for loan losses when the risk is assumed. They will then be able to use these provisions during the downswing, when the risk materialises.

To be clear, it is not the role of the official sector to set the internal culture of a firm—that responsibility lies squarely with the board of directors and senior management. Rather, the job of the official sector is to promote standards and practices that will mitigate misconduct risk and promote efficient and sustained financial intermediation and financial stability. Global supervisors have taken a number of approaches when it comes to understanding, influencing, and assessing culture at firms. In the whitepaper I mentioned earlier, my New York Fed colleagues and I included a section describing a selection of approaches that the official sector has employed. The Financial Stability Board Working Group on Governance Frameworks (FSB WGGF) has published a range of tools for supervisors to use in assessing firms’ management of cultural drivers of misconduct, as well as a summary of supervisory approaches and practices in supervising for culture.14 This variation reflects differences in mandates, tools, and authority. Looking across jurisdictions, we see supervisory efforts such as specialized units of behavioral experts, risk culture assessment frameworks, and supervisory guidance that directs supervised institutions to develop and promote a sound corporate culture. This variation in approach is a valuable feature of the official sector focus on conduct and culture reform. As the official sector innovates, experiments, and introduces new approaches, we’ll develop a better understanding of how to best promote a healthy culture and mitigate misconduct risk. Measurement and Assessment I’ll now turn to the question of measurement and assessment.
On the other side, Bank of Albania will encourage and support without any hesitation the further development and consolidation of the banking system in particular, and of the financial sector in general. We are deeply committed to undertake the necessary steps to implement all the recommendations given by FSAP. For this purpose, we are ready to offer all our human capacities to contribute in this direction. I use this opportunity to appeal on taking immediate actions towards redesigning the licensing and supervisory process of the other parts of the financial sector. Bank of Albania will continue to pursue a prudential policy in performing its function as a licensing authority of financial entities that are involved in the crediting activities. In the spirit of what I have stated above, I use the opportunity to express our commitment to involve in our supervisory structure all those credit companies or institutions, which one way or another mobilise the population’s funds or manage public funds in the crediting process. Assessing the information issue as a critical element in facilitating the lending activity, I would like to point out that Bank of Albania has already included the project of establishing the credit register in its immediate plans and we are strongly committed to implement it as soon as possible. This register shall be under administration of Bank of Albania and the participation of other member banks of the system will be compulsory.

I’ll talk about two types of market frictions that create the need for public sector intervention. The first is asymmetric information – the difference in what the borrower knows about an investment opportunity and what the lender or funder of that investment knows. The second is externalities – the ability of one firm’s decisions or actions to affect other unrelated market participants. Both of these forces can drive a wedge between private and socially – desired outcomes and motivate the need for public sector intervention. Conceptually, either supervision or regulation can help solve these problems and their relative efficacy depends, in part, on the type of information being assessed or the problem being solved. •  Asymmetric Information There is considerable academic research describing how asymmetric information can create a special role for financial intermediaries. The basic issue is that lending requires the production of private information about things like the probability of a successful investment outcome, but this can be difficult to convey to third parties who might be providing the funding. This creates a role for a financial institution to bridge the gap between borrowers and savers. Moreover, these information asymmetries create the scope for two problems endemic to credit markets: adverse selection where the riskiest borrowers are the most likely to seek credit and moral hazard where borrowers pursue riskier behavior after credit has been extended because their own funds are not invested. In both cases, mitigation requires costly screening and monitoring, which creates a role for a specialized financial intermediary.
As you know, I never comment on what my colleagues have said. On the basis of our decision, which was taken by the Governing Council with an overwhelming majority, I would like to emphasise the following points. First, we are totally independent of governments and pressure groups of any kind. It is not by chance that we have guaranteed price stability, but by taking decisions which have pleased neither governments nor lobby groups. Second, our mandate is price stability. From 1999 to the present we have delivered average annual inflation of 1.98% for 330 million European citizens. We are unswervingly committed to price stability. Third, we re-absorb all of the liquidity that is injected through our interventions. We are not printing money and there is no change to monetary policy. Fourth, the aim of our interventions is to enable certain markets to function more normally, in order to ensure the correct transmission of our monetary policy, which is unchanged. Fifth, we have taken note of the decision by governments not only to strictly comply with their undertakings to reduce deficits, but also, on the part of a number of them, to step up their budgetary consolidation efforts. For us, this is absolutely of the essence. BIS Review 76/2010  3  Does the situation of the Spanish banks concern you? I have no particular comments at this stage. On the international level, prudential supervision by the Banco de España has always been regarded as rigorous, particularly with its concept of dynamic provisioning.

Jean-Claude Trichet: Interview with Le Monde Interview with Mr Jean-Claude Trichet, President of the European Central Bank, in Le Monde, France, conducted by Mr Frédéric Lemaître, Mr Stéphane Lauer and Mrs Marie de Vergès, on 31 May 2010. *  *  *  Is the euro in danger? The euro is a very credible currency which keeps its value. Since its introduction 11½ years ago, average annual inflation has been below but close to 2%, in line with our definition of price stability. The euro’s capacity to maintain its value is absolutely essential for the confidence of investors both inside and outside the euro area. So what is the problem? The issue is that of financial stability within the euro area on account of bad fiscal policy in certain countries, in particular Greece. It is imperative that this be corrected. The responsibilities of each of the countries concerned are the primary cause. But there is also a true collegial responsibility. Close multilateral surveillance, which is fundamental in the spirit and the letter of the Stability and Growth Pact, has been terribly neglected. This is not particularly surprising, given that in 2004 and 2005 the Pact was unfortunately subject to severe criticism, including from large countries such as Germany, France and Italy. They set a very bad example, both in terms of managing and being accountable for their own fiscal policy, and as members of the Eurogroup and thus essential figures in the surveillance of the fiscal situation in each country.
It states: There are many competing views on what the term “good governance” should mean, but most donors agree that it should include some (if not all) of these: Increased public accountability and transparency; respect for and strengthening of the rule of law and anticorruption measures; democratisation, decentralisation and local government reform; increased civil society participation in development; and respect for human rights and the environment. Further, we are reminded that apart from the lack of precision in the meaning of governance, it is also an evolving concept, embracing new elements with the passage of time. This arises from its normative conception and the observation that “the values that provide the underpinning for governance are the values postulated by international donor institutions”. When it was initially embraced by the donor community in the early 1990s, it was seen as limited to the exercise of authority with respect to the management of resources for sound economic development. In the mid-1990s the requirements of transparency, accountability and participation were added to its characteristics. By 2000, the Development Assistance Committee of the OECD adopted a perception of good governance as requiring “a broad approach to partnership extending beyond government and parliaments to include civil society and the private sector”, and adding to the notions of transparency and accountability that of predictability. Given their centrality in the governance agenda, it would be advisable to expand a little on transparency and accountability. Transparency refers to the need for openness in government policies and decisions.

Yet in recent years, the central banks, including the SNB, have become quite creative and innovative when faced with difficult circumstances. However, two points need to be noted in this respect. On the one hand, central banks must never lose sight of their mandates. There should never be any doubt about their unflinching adherence to their stability mandates. On the other, it is important to recognise that monetary policy cannot be used to solve all economic problems. Otherwise we run the danger that, in the long term, monetary policy will no longer achieve its intended effects, and our money will deteriorate. As far as the Swiss monetary order is concerned, I am confident that the SNB is in a position to fulfil its mandate in the interests of the country – now and in the future –because of the backing it enjoys among the general public. My optimism is also founded in the history of the Swiss currency, which began moving in a positive direction after the memorable Ustertag of 1830. Admittedly, the efforts to achieve sound money in our country were not immediately crowned with success and it was a gradual process. However, our monetary order and institutions have enjoyed broad acceptance and a high level of basic trust for over 100 years now. This has made it possible, while adhering to the basic foundations of the monetary order, to carry out essential adjustments on repeated occasions, while at the same time allowing transient fashion trends to pass and forgoing experiments with uncertain outcomes.
My point here is that if somewhere at the back of your head you have a preconceived idea of how a crisis should develop then it is easy to miss signals that may indicate that the course of the crisis is moving in a different direction. 5  If the households need to consolidate their balance sheets then an expansionary monetary policy may be less effective as the households will be less inclined to take new loans. Such a situation is sometimes called a balance sheet recession. Lars Nyberg discussed balance sheet recessions in more detail in the speech “After the crisis – new thoughts on monetary policy” which was published on 6 December 2010. 6  See Reinhart, C. and K. Rogoff, (2008), “Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison”. NBER Working Paper No. 13761. 7  There are studies that indicate that the recovery after a financial crisis is slower if the crisis was preceded by low growth, see Cecchetti S., M. Kohler and C. Upper (2009),”Financial Crises and Economic Activity” NBER Working Paper 15379. BIS central bankers’ speeches  7  Some personal reflections on forecasting The things I have said about forecasts so far are fairly general observations that I believe my colleagues on the Executive Board would essentially agree with, even though they would probably express themselves differently. In this concluding part of the speech I would therefore like to take up some aspects of forecasting that are perhaps more personal.

Second, as a contingency, should the banking organizations fail to come up with a workable rescue plan, they should present an alternative plan to address the effects of a Lehman bankruptcy, because they should anticipate that would happen Monday morning. As was the case with Bear Stearns, the Government knew that a third party would have to finance a portfolio of Lehman’s illiquid assets in order to make Lehman acceptable as a merger partner. In this case, drawing upon the precedent of the rescue of Long Term Capital Management in 1998, the Government arranged for a consortium of private banks to provide the financing. And in fact, after much discussion and some disagreeable moments, the private banks agreed to do so. By Sunday, September 14, the counterparties had agreed to finance approximately $ billion of Lehman’s illiquid assets in order to facilitate Lehman’s rescue. While the structure was never finalized, it would presumably have resembled a private sector version of Maiden Lane LLC, the vehicle used to acquire the assets from Bear Stearns. The banks would have lent $ billion to their SPV, and the special purpose vehicle (SPV) would have purchased largely real estate-related assets from Lehman. This would have made Lehman more attractive to a potential acquirer. Lining up financing for the illiquid assets was a necessary condition for a rescue, but it was not sufficient. The sine qua non of the plan, as Secretary Geithner and others have pointed out, was a willing and capable merger partner.
During this process, the banks may suffer loan losses that in a worst case scenario could become so great that the banks fail or need assistance. This would threaten financial stability. By holding the repo rate higher, they say that the central bank can reduce the risk of this happening. While a higher interest rate means that demand is lower and unemployment higher than would otherwise have been the case, and that inflation may undershoot the target, this “insurance premium” may be worth paying if it means that one can avoid a much worse outcome in the future. This would appear to be the reasoning pursued. This chain of reasoning may appear fairly intuitive. But it contains at least a couple of critical statements that require closer examination. The first statement is that the level of household debt in Sweden today entails sufficiently large risks that it needs to be addressed. The second is that a higher repo rate could tangibly reduce these risks and that the lower risk is worth the lower inflation and higher unemployment caused by the higher repo rate. That is, the insurance premium in terms of lower inflation and higher unemployment is worth paying. There is also a third statement implied, that is, that there is no better instrument available, with greater or the same effect on the risks and less effect on inflation and unemployment. Let me examine these statements more closely, starting with the second and third ones.

The proportion of BAME employees is around 17%, greater than the proportion for the UK as a whole. Representation at senior management remains much lower at 5%, but is increasing. 56  Walton and Spencer (2009). 57  Page (2010). 58  Davies (2015)  59  Resolution Foundation (2015)  60  Although around half of that reflects the fact that there is a greater proportion of women working part time than men. 61  European Women on Boards (2016)  10  BIS central bankers’ speeches  Like many other organisations, the Bank has sought to support diversity through a range of diversity networks covering, among other things, gender, ethnicity, LGBT, mental health, disability, caring and some of the main religions. One of my responsibilities is as Executive Sponsor of the Bank’s Ethnic Minority Network. This Network has put in place some valuable new initiatives to support greater ethnic diversity across the Bank over recent years, including reciprocal mentoring schemes and an Afro-Caribbean Scholarship Programme which funds students through university. The Bank has also recently signed up to UPstanding – an initiative to showcase BAME professionals working in the US, UK and Ireland. Plainly, there is further to go along these identity-based dimensions of diversity, in the Bank and more broadly. But there is wind in society’s sails, as well as in the Bank’s, on these dimensions of diversity, which gives good grounds for optimism about the future.
Although there are different ways to do this (splitting banks, insuring pools of assets), they all have in common a commitment to provide contingent capital to banks so that core equity capital does not fall below some minimum ratio and so creditors are protected. It follows that governments must be prepared to hold whatever proportion of equity capital turns out to be necessary. The final part of the policy response relates to the longer term. There needs to be a clear exit route by which the extraordinary level of official financial support will be unwound as conditions return to normal. And there needs to be a credible commitment to implement the longer term reforms. For monetary policy, the inflation target provides a natural guide to when, and by how much, the extraordinary degree of policy stimulus should be withdrawn. In particular, the outlook for inflation will determine when and by how much asset purchases are in due course reversed and the timing of a return of interest rates to more normal levels. For fiscal policy, there needs to be a credible plan for consolidation of deficits and debt in the future contingent on the state of the economy. And in terms of support to the banking sector, governments should signal their commitment to return banks to the private sector once balance sheets have been restructured. In the UK that will be underpinned by UKFI formulating an explicit mechanism through which the Government’s shares can in due course be sold back to the private sector.

NGFS Network for Greening the Financial System- conference, Paris, 17 April 2019 Central banks and supervisors taking action on climate change Introductory remarks by François Villeroy de Galhau, Governor of the Banque de France Risque Climatique – Call to Action  Ladies and Gentlemen, It is a great pleasure for me to welcome you to the Banque de France’s premises to kick off this public session of the NGFS conference. We have been waiting for this moment for a while, and here we are. The NGFS is releasing today its first comprehensive  report,  entitled  “A  call  for  action”,  including  its  six  recommendations. Thomas Paine, an English-born political philosopher and citizen of the world, said in The American Crisis (circa 1776): “If there must be trouble, let it be in my day, that my child may have peace.” Climate change is real, it is global and irreversible. Even if policymakers bear the primary responsibility, we need all hands on deck to tackle climate change, as demonstrated today with this wide audience. Indeed, “preventing the airplane from crashing” remains a continuous endeavour, which is now undertaken by many more institutions every day. In mainstreaming sustainable finance, finance cannot replace policymakers but finance can help. And as a central banker and supervisor, the Banque de France is determined to help. Last year, in Amsterdam, I even said that this challenge is our “new frontier”.
People must realise that the Central Bank exerts a limited long term impact on the exchange rate. The exchange rate depends on various economic factors, including foreign trade, foreign investment in Iceland and investment by Icelanders abroad, and last but not least expectations about future economic developments. For example, there is little doubt that expectations in connection with power-intensive industry have already influenced the exchange rate of the króna, which at present is stronger than if decisions on large-scale investment in aluminium production had not been announced. Interest rates certainly affect the exchange rate, but experience in Iceland and elsewhere shows that in the long run this impact tends to fade out if monetary policy aims for rate of inflation close to the prevailing rate among trading partner countries. Likewise, the Central Bank's foreign exchange market intervention tends to have only a short-lived effect. If the exchange rate is moving with a strong momentum in a certain direction, no central bank can resist this for long. This is a common experience of all countries that have liberalized international capital movements, which was also shared by the Central Bank of Iceland when it tried to stem the depreciation of the króna from mid 2000 until autumn 2001. Recent calls for the Central Bank to set an exchange rate target are unrealistic.

It has been decided to bring forward a number public sector construction projects and launch the expansion of the Nordurál aluminium smelter at Grundartangi. Furthermore, activity on the Kárahnjúkar hydropower project will be more intensive than was previously assumed. Combined with the cut in the Central Bank’s policy interest rate in February, these three factors will lead to more demand in 2003 and 2004 than was assumed in the national economic forecast, and all things being equal this will spur GDP growth. Central and local government authorities have decided to bring forward construction projects amounting to a total of 10 b.kr., of which roughly 5½ b.kr. will be made in 2003 and 4½ b.kr. in 2004. Plans have been made for expanding the Nordurál aluminium smelter in two phases. Production capacity will be stepped up by 90 thousand tonnes per year in 2005 and by a further 60 thousand tonnes in 2008 and 2009. In connection with the expansion, projects will be undertaken at Nordlingaalda, Nesjavellir and Reykjanes to supply power for the smelter. Investment on account of the Nordurál expansion will total 2½ b.kr. in 2003 and 14 b.kr. in 2004. According to the latest projections by Landsvirkjun [the National Power Company] for hydropower development at Kárahnjúkar its expenditure on the project will be 5 b.kr. higher in 2003 than previously estimated, and just over half a billion kr. greater in 2004. 4  BIS Review 18/2003  In all, this represents a total extra investment of 13 b.kr.