samchain/econo-pairs-v1 huggingface dataset:
We always have to take into account the costs and benefits of our measures. Assume that the supervisor, as an early intervention measure, asks the bank to draw up a capital plan. The bank might then be required to disclose this request to the markets as it shows that the supervisor is seriously concerned. This might erode trust in the bank and, in the worst case, trigger a bank run. This would bring about the very crisis that the supervisor wanted to prevent in the first place. If an early intervention measure does more harm to the bank than it does good, supervisors might be obliged not to apply the measures. Instead, they could ask for the same thing, but frame it as a standard tool. In that case, the bank would still have to draw up the capital plan, but would probably not need to disclose the request to the markets. Hence, the standard supervisory tools can be considered as less intrusive than the early intervention tools. So the overlap between the two tools should be removed. There should be a clearly defined set 3/9  BIS central bankers' speeches  of standard tools and early intervention measures and a clearly defined escalation process leading from one to the other. The second reason why it is challenging to use early intervention measures is because those measures are defined in the Bank Recovery and Resolution Directive, or BRRD. And as the BRRD is an EU directive, it has to be transposed into national law.

In Europe, this is the Single Resolution Board, or SRB for short. The SRB then has to answer two basic questions. First: are there any measures, private or otherwise, that could restore the viability of the bank? If the answer to this question is “no”, the second question is: should the bank be resolved or liquidated? And the answer to this question depends on a number of things. The objective should always be to ensure that the financial system is not disrupted. If the bank performs critical functions, these need to be continued one way or another. In addition, measures need to be taken to prevent the bank from “infecting” other banks or the markets in general. And finally, public funds and the bank’s insured depositors, for instance, need to be protected. So, it is crucial to conduct what we call a “public interest test”. If all these goals can be met by liquidating the bank, then that’s what will happen under national insolvency law. And this is something of a weak spot, because these laws still differ significantly across the euro area. A minimum level of harmonisation is thus called for. In particular, the triggers for “failing or likely to fail” decisions and for liquidations need to be aligned. If they are not, banks that are deemed failing or likely to fail according to European rules might not be deemed as such under national insolvency laws. This is obviously a huge stumbling block to the harmonised treatment of bank failures.
8  BIS central bankers’ speeches  Chart 1  BIS central bankers’ speeches  9  Chart 2  10  BIS central bankers’ speeches  Chart 3  BIS central bankers’ speeches  11  Chart 4  12  BIS central bankers’ speeches  Chart 5  BIS central bankers’ speeches  13  Chart 6  14  BIS central bankers’ speeches  Chart 7  BIS central bankers’ speeches  15  Chart 8  16  BIS central bankers’ speeches  Chart 9  BIS central bankers’ speeches  17  Chart 10  18  BIS central bankers’ speeches  Chart 11  BIS central bankers’ speeches  19  Chart 12  20  BIS central bankers’ speeches  Chart 13  BIS central bankers’ speeches  21  Chart 14  22  BIS central bankers’ speeches  Chart 15  BIS central bankers’ speeches  23  Chart 16  24  BIS central bankers’ speeches  Chart 17  BIS central bankers’ speeches  25  Chart 18  26  BIS central bankers’ speeches  Chart 19  BIS central bankers’ speeches  27  Chart 20  28  BIS central bankers’ speeches  Chart 21  BIS central bankers’ speeches  29  Chart 22  30  BIS central bankers’ speeches  Chart 23  BIS central bankers’ speeches  31  Chart 24  32  BIS central bankers’ speeches  Chart 25  BIS central bankers’ speeches  33  Chart 26  34  BIS central bankers’ speeches  Chart 27  BIS central bankers’ speeches  35  Chart 28  36  BIS central bankers’ speeches  Chart 29  BIS central bankers’ speeches  37  Chart 30  38  BIS central bankers’ speeches  Chart 31  BIS central bankers’ speeches  39

Regionally, the establishment of the Chiang Mai Initiative Multilateralisation (CMIM) further enhances the regional capacity to cope with capital flows and safeguard financial stability of the region. The HKMA fully supports this important regional initiative, and indeed we have played an active role in its development and participated directly in the arrangement. 10. The third area is enhancing the capacity of regional capital markets to absorb capital inflows and channel them to productive uses. In this regard, the HKMA took the lead in developing the Asian Bond Funds (ABF) under the aegis of the Executives’ Meeting of East Asia Pacific Central Banks (EMEAP). The ABF, as a pioneer product, aimed to provide a convenient low-cost local-currency instrument for investment, and at the same time help identify and remove the impediments to bond market development. In parallel, with the strong support from the ADB, ASEAN+3 members have undertaken a range of projects under the Asian Bond Markets Initiative to promote the development of the local currency bond markets. Notwithstanding these regional efforts, we still have a long way to go in developing a regional bond market that is broad and deep enough to channel the region’s abundant savings to meet its huge investment needs. Continued national and regional efforts in this regard are much needed. 1  Emerging Asia includes China, Hong Kong, India, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand. 2  BIS central bankers’ speeches  11.
Striped bars/broken lines refer to the Riksbank’s forecast. 7  7  Sweden The world  6  6  5  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2 -3  -3 80  82  84  86  88  90  92  94  96  98  00  02  04  06  08  10  Sources: the IMF, the OECD and the Riksbank  10  BIS Review 132/2007  6. Tighter labour market Thousands of persons. Broken lines refer to the Riksbank’s forecasts. 4800  4800 Labour force Employed  4700  4700  4600  4600  4500  4500  4400  4400  4300  4300  4200  4200  4100  4100  4000  4000  3900  3900  3800  3800 81  83  85  87  89  91  93  95  97  99  01  03  05  07  09  Sources: Statistics Sweden and the Riksbank  7. Percentage open unemployed Per cent of labour force. Broken line refers to Riksbank’s forecast.

To quote an English translation: “A commercial bank operates independently, takes up responsibility for all risks that it may encounter and for its own profits and losses it may bear, and exercises self-regulating mechanisms on the management principle of economic efficiency, safety and liquidity.” 25. What this means is that the board of directors and senior management of banks have the main responsibility to ensure that effective systems of internal governance are in place to plan for the future, to identify and manage the risks to which they are exposed and to control the operations of the bank on a day-to-day basis. I believe that this point is appreciated around the region - from our contacts with fellow supervisors, we know that in many banking systems there is a heightened awareness of the importance of sound risk management. But the difficulty is in turning this into actual changes in behaviour, which requires great efforts to be devoted to the training of staff, for example in credit skills, as well as more fundamental changes in culture in some banks. 26. This change in culture may require some banks to wean themselves off property lending which is sometimes seen as an easy option, given that it is based on collateral and on expectations of ever-rising property values. This can prove to be a fallacy, as the Japanese example shows only too well.
Armed with the whole array of price and quantity indicators of 12  The observer updates her distribution over the probability using Bayes’ law. Chart 9 is the mean of that updated distribution as a function of the number of years of data that the agent has observed. 12  All speeches are available online at www.bankofengland.co.uk/speeches  12  risk we – and others – can make informed judgements about the right level of loss-absorbing capital in the banking system and about the appropriateness of more targeted policy tools. And if it takes time to demonstrate decisively a reduction in system-wide risk, there are some policies whose effects are more immediately obvious. In 2014, responding to concerns about growth in riskier mortgages, the FPC introduced limits on the share of banks’ mortgage lending at high (>4.5) loan-to-income ratios. Recently, the committee noted that there’s since been quite a bit of “bunching” in new loans just below this limit. I’m not so sure this is a problem: for my part I see it mainly as clear and timely evidence that the policy has had an impact. The point remains, however, that the FPC’s objective is inevitably less precise, and its success less immediately measurable, than that of the MPC. Recalling the results of the analysis I discussed at the start of the talk, on the appropriate allocation of tasks, this suggests that there might well be a cost if you asked a single body – an “FMPC” – to meet all these objectives at once.

In general, and certainly if someone’s performance can be easily verified, it helps to offer incentives of this sort1. But if over-simplified targets sufficiently distort an employee’s incentives, because they ignore the less verifiable aspects of a job, it can be better simply to pay a flat wage2. The same analysis can also be used to think about how multiple tasks should be allocated in the first place. In some cases the various aspects of a job are inextricably linked – they can only be done by one person. Those broader parts of a child’s education have to be provided by the same institution – a school – that teaches what’s needed to pass exams. But in other cases the allocation may be a matter of choice. When it is, it turns out that it makes sense – all else equal – to group the more visible objectives together, in one job, and the less verifiable tasks in another. This limits the risk that one dominates the other. I think this insight has some bearing on how central banks, whose responsibilities have been expanded since the crisis, should be organised. Specifically, it’s relevant when deciding whether the newly created “macroprudential” policies should be conducted separately or jointly with monetary policy. Some have argued that, because there are significant interactions between the two, monetary and macroprudential policy should be housed not just in the same institution, but in the same policymaking committee within the central bank. The distinct MPC and FPC should become a single “FMPC”.
Currently, the main source of funding are either companies’ own funds or bank loans. Alternative financing by providing funds through the capital market is limited, as confirmed by the low share of the stock exchange turnover in GDP, which on average in the period 2010 – 2013 totaled 1.5% of GDP. In this context, a significant support could be provided by international financial institutions. All in all, in our views, solid economic growth higher than 4% is expected also in the next two years. The main growth factors are the present and the announced foreign investments, as well as the fiscal impetus in the infrastructure, which are key determinants of the growth of investments and exports. Credit support and growth in demand and price of labor are considered factors that will support also the private consumption. The risks around the baseline scenario are mainly downward and depend on the external environment. However, what is crucial is to increase the development potential and productivity of the economy in the long run, wherefore it is especially important to continue the plan for structural reforms, particularly in the already established vulnerable areas. 4  BIS central bankers’ speeches

Zdeněk Tůma: Frontiers of monetary policy Speech by Mr Zdeněk Tůma, Governor of the Czech National Bank, at the Forecasting Dinner 2009, Czech National Bank, Prague, 12 February 2009. *  *  *  Ladies and gentlemen, dear colleagues, I had the opportunity to speak on the occasion of the Forecasting Dinner several times, but this year is rather special in one respect and that is the global economic crisis, in the midst of which we are right now. Severity of the crisis brings new challenges to central bankers which result in unconventional methods of the monetary policy conduct. Indeed, the policy interest rates in the United States reached effectively zero and the European Central Bank is expected to lower its policy interest rate to historically low level soon. Global economic outlook is worsening and the latest macroeconomic forecast of the Czech National Bank expects the economic growth to be around zero this year and only roughly one percent growth in the year 2010. Accordingly, we expect inflation to hit almost zero in summer this year but return close to the Czech National Bank inflation target of 2% in the first half of the year 2010. Challenges we face as central bankers lead me tonight to talk about frontiers of monetary policy, issues that have been heavily discussed among central bankers recently but are not completely resolved yet.
And it is in this assessment of the timing of the increase that the Riksbank, like several other central banks, has taken into consideration developments in the asset market. Rising prices for household assets in the form of property and shares contribute to increasing household consumption and corporate investment. This effect is partly because monetary policy has been, and still is, expansionary. Property prices – and also share prices – have now risen much more than the general price level (see Figure 3). History shows that both property prices and share prices can fall rapidly and heavily – which many of us remember from the crises in the early 1990s or from the IT crash a few years ago. We also know that these prices are sensitive to interest rate changes. There is thus a risk that property prices and share prices may fall too quickly in connection with an increase in interest rates. Household consumption and corporate investment would then risk declining more than is desirable and contributing to poorer growth in employment. The recent interest rate increases in small stages are aimed at reducing the risk of this occurring. The earlier policy Before I go more deeply into the role of monetary policy with regard to the labour market, I would like to make a brief review of how things worked prior to the introduction of inflation targeting in 1993. During the 1970s and 1980s there were often cost crises and deficits in foreign trade.

At the same time, we signalled that there would probably be a need to increase the rate later in the year. Growth in the world economy and in the Swedish economy is robust and our assessment is therefore that inflation will increase gradually towards the 2 per cent target, reaching it a couple of years from now (see Figures 1 and 2). However, this development assumes that the repo rate will be increased, as otherwise inflation will exceed the target. Current monetary policy Despite the fact that inflation has been clearly below target for some time, the Riksbank increased its key rate twice during the winter, by a total of 0.5 percentage points. Perhaps some people may wonder if this was really necessary; we are still in a situation with high unemployment and we cannot as yet see any inflationary pressures stemming from wages – one of the most important factors behind rising costs/prices in the economy. However, it is not today’s inflation that determines whether we shall increase or decrease the interest rate; it is the future inflation rate. The Riksbank’s forecasts and decisions refer in particular to inflation  BIS Review 43/2006  1  a couple of years ahead. We assume that it will take roughly this long before interest rate changes have a full impact on demand and thus on inflation. The Riksbank does not wish to achieve an inflation rate of 2 per cent at all costs. This is neither possible nor desirable.
Monetary policy Central banks in other countries are deploying strong measures to buoy up economic activity and inflation. Key interest rates in many countries are close to zero. Central banks in the US, UK and Japan have made large-scale bond purchases and thereby expanded their balance sheets in order to push down long-term interest rates. It is likely that the sharply expanded access to long-term liquidity from the European Central Bank (ECB) has reduced the risk of a banking crisis in the euro area. At the same time, ECB measures have contributed to stabilising government bond markets, and short-term funding costs for Italy and Spain have declined. BIS central bankers’ speeches  9  Chart 9  The EU is working on measures to restore financial market confidence – and public confidence. Greece has reached an agreement with its private creditors on a substantial debt restructuring. On this basis, euro area heads of state or government have approved a new loan package for Greece. Banks have been instructed to increase their core capital. Chart 10  10  BIS central bankers’ speeches  The Norwegian economy is still well equipped to withstand the negative effects of the financial crisis. Oil prices are high, contributing to Norway’s favourable terms of trade. Growth is being sustained by high activity in the oil industry. We have room for manoeuvre in economic policy. However, a number of enterprises are feeling the impact of the downturn abroad.

Its average holding in European companies is today around three times as high as in the Americas and Asia. The chosen regional distribution is related to Norway’s import pattern and has been viewed as a form of currency hedging. But the result has been that a large proportion of the Fund is invested in a region that has experienced weak growth over the past decade. Analyses show that exchange rate risk in the Fund is relatively small and less than previously assumed. Based on these findings, the Norwegian Government has decided that the relative share of European investments should be reduced over time, so that the Fund’s geographical diversification is further improved. A more even distribution of the Fund’s ownership will provide us with the opportunity to take part in value creation in regions with strong growth. This implies a reduction in the allocation to European equities and an increase in the allocation to the Americas and emerging economies. High economic growth in Asia may provide sound returns on investments in that region, even though today’s equity prices already reflect expectations of higher growth in eastern than in western regions. A more even distribution will nonetheless improve the trade-off between risk and expected rewards. Petroleum revenue spending Norway as an oil nation stumbled at the start. The current account surplus at the end of the 1960s had reversed to a deficit of 12 percent of GDP by 1977. The deficit was three times as large as that recorded by Italy and Spain last year.
In Chile, activity and domestic demand, specially consumption, have not worsened significantly. This does not mean that our vision of the effects that the crisis in the developed world will have on our economy or the rest of the world has changed. However, it is a fact that activity at the beginning of the year is at a higher level than we envisaged a few months ago. On the other hand, this has been compounded by an increase in the oil price. Political tensions in the Middle East have again put pressure on this price, thus affecting domestic prices. The effects of a higher oil price can be interpreted at least twofold, with opposing implications for monetary policy. On one hand, in a situation of tight output gaps – as is the case of many emerging economies, Chile among them – an increase in the price of energy may exacerbate domestic inflationary pressure, making the dynamics of inflation more complex and demanding great care when assessing the evolution of the inflation trend. On the other hand, in the face of existing risk scenarios, an increase in the oil price also has a negative effect on world activity. If we take into account the fragile state of households, businesses and governments in the developed world, a higher price of energy may further weaken their position and lead to a more lasting and deeper economic fragility.

Nonetheless, it is difficult to identify how much of this decline is due to a lower external stimulus, how much is accounted for by a natural slowdown in each economy, and what part is explained by particular events. All these elements add up to a situation in which, although the external scenario is not worsening, the belief that risks have disappeared is far off. It is possible to think that the likelihood of extreme scenarios is low, but, in my opinion, it is still there. More challenges for monetary policy As already mentioned, the change in how the global panorama was perceived led many emerging economies to change their views on their future economic policies. This made them halt their processes of lowering expansiveness and/or made them resume impulse. However, the new change of mood brought about by the greater calm of the beginning of the year, coupled with geopolitical factors, has again put us in a dilemma. On one hand, probably as a result of the recent memory of the late 2008 and early 2009 global confidence crisis, most economic authorities quickly set up a close monitoring system and prepared a batch of instruments to implement a quick offsetting of the adverse effects of a global crisis. However, time has shown that the effects of the crisis of the Eurozone area have been fairly limited so far. Financial markets have suffered the biggest impacts, but trade, output and employment have not been greatly affected.