samchain/econo-pairs-v1 huggingface dataset:
Research into the “reversal” level of the policy rate – the level at which any further rate cuts become counterproductive – is still in its infancy. Initial results thus far suggest that the reversal rate is below zero but could be time dependent, rising the longer that policy rates are held in negative territory. 32 The precise level of the reversal rate varies significantly by jurisdiction and depends on factors like the structure of the financial sector. In the UK, the Bank’s analysis finds that very low interest rates are highly stimulative. Evidence from our panel survey of households suggests that a 50 basis point cut in Bank Rate (even at low levels) raises spending by 0.1% through cashflow effects alone. Moreover, the vast majority of savers who might lose some interest income from lower policy rates stand to gain from increases in asset prices that result from monetary policy stimulus, since only 2% of UK households have material deposit holdings without material financial assets or property wealth.33 Concerns that low policy rates could weigh on investment because they cause companies to divert funds towards improving the solvency of defined benefit pension schemes are also overdone, because these funds are not that large and companies are come likely to make up shortfalls by cutting dividends than capital expenditure. 34 The binding constraint on Bank Rate reductions is their impact on the financial sector, particularly on the net interest margins of building societies.

On balance, the global economy risks being trapped in a vicious cycle of lower global equilibrium interest rates reducing monetary policy space, exacerbating downside risks, pushing down equilibrium rates further, and leading to a global liquidity trap. This environment raises questions over whether the current inflation targeting framework will provide monetary policymakers sufficient scope to respond to adverse shocks to demand, whether it needs to be adjusted or even replaced. Currently, there is insufficient conventional policy space based on past experience. The average change in policy rates across easing and tightening cycles pre-crisis was around 150 basis points in the UK, and around 250 basis points in the US and the euro area.29 The average easing cycle in the UK prior to the crisis was 250bps. All else equal, insufficient conventional policy space could lead to more frequent, and more costly, episodes at the lower bound. Research indicates that if the equilibrium real interest rate settles at 1%, policy rates could hit zero as much as 40 per cent of the time, resulting in shortfalls of inflation from target and output from potential of up to 2 percentage points.30 Prior to the crisis, the zero lower bound was expected to bind just 10 per cent of the time, with only modest costs as each episode was anticipated to be short in duration.31  27  These flaws reduce the rate of global potential growth, increases its downside skew, and bolsters the likelihood of an extreme downside event (a fatter left tail).
The Central Bank of Sri Lanka also had to consider domestic developments, such as the depreciation pressure on the currency due to capital outflows and the widening trade deficit, subpar economic growth, deceleration in monetary aggregates and credit, moderate levels of inflation as well as continuing deficit liquidity conditions in the money market. The tight monetary policy stance pursued by the Central Bank, since end 2015, by way of raising the Statutory Reserve Ratio (SRR) and policy interest rates yielded the desired outcomes, especially on demand driven inflation and trends in money and credit aggregates compared to 2016 and 2017. Such developments, in particular, the favourable developments in inflation, inflation outlook and the trends in the monetary sector, in an environment of lackluster growth performance, induced the Central Bank to signal the end of the tightening cycle in early April 2018, by way of reducing the Standing Lending Facility Rate (SLFR) by 25 basis points. Nevertheless, global economic 12  conditions and the pressure on the exchange rate has compelled the Central Bank to maintain a neutral monetary policy stance since April 2018. In the conduct of monetary policy, market based policy tools, particularly policy rates and open market operations (OMOs) were widely used, while the SRR was also used as a tool of injecting liquidity to the market on a permanent basis.

Andrew G Haldane: The big fish small pond problem Speech by Mr Andrew G Haldane, Executive Director, Financial Stability, of the Bank of England, at the Institute for New Economic Thinking Annual Conference, Bretton Woods, New Hampshire, 9 April 2011. *  *  *  The views are not necessarily those of the Bank of England or the interim Financial Policy Committee. I am grateful to Shekhar Aiyar, Shaheen Bhikhu, Martin Brooke, Damien Charles, Spencer Dale, Andrew Hauser, Robert Hills, Glenn Hoggarth, John Hooley, Marius Jurgilas, Priya Kothari, Salina Ladha, Lara Lambert, Chris Peacock, Jonathan Rand, Maureen Snow, William Speller, Jo Spencer, Iain de Weymarn and Peter Zimmerman for comments and contributions. 1. Introduction  Global capital markets are engaged in a footrace. On the one foot, capital markets in emerging market countries are widening and deepening in order to improve domestic capital intermediation. On the other, international investors in developed countries are diversifying their portfolios in order to boost returns and spread risk. Both are typically seen as essential ingredients of global financial liberalisation and integration. Yet their implications for global financial stability are potentially quite different. The first determines the absorptive capacity of high-return, capital-recipient countries. The second defines the distributive capacity of lowreturn, capital-providing countries. Any imbalance between the rate at which international capital is distributed and absorbed may spillover to global capital markets. Reducing these spillovers may require a rethink of the rules of the international financial system. Experience during 2010 provides a good illustration.
The first one, which we may call the pan-European approach, has tended to produce a lot of numbers on aggregates and averages in the financial stability analysis. No country wants to stick out in the assessment; they hide behind these broad numbers. But you cannot identify weaknesses and vulnerabilities through averages. “On average”, banks’ credit portfolios and capital ratios may be robust but an FSAP should look for the outliers – the ones which will break first. Whichever approach you select, you would need to include a detailed analysis of those major financial groups which cross the borders between the European countries and sometimes also operate outside the region. These groups are in many cases so large that they could influence countries both positively and negatively depending on developments. Let me give you a recent example from my own country: Icelandic investors have bought large stakes in Swedish financial firms. The investments are rather small from the Swedish point-of-view but significant for their parents in Iceland. Recently, there has been volatility in the Icelandic financial and currency markets. Luckily, the investments in Sweden are doing very well and have rather contributed to strengthening the Icelandic financial system. But in another situation the reverse could have been true – had the Icelanders made these investments during the Swedish banking crisis in the 1990s the Swedish holdings would have contributed to weakening the Icelandic economy.

What makes our task harder is that the goalposts are moving all the time. Ever increasing complexity  4  BIS Review 52/2006  and interlinkages in the international economic and financial system mean that legislators and standard-setters must run just to try to catch the moving train. In the European context, cross-border integration has progressed further than in other parts of the world, which strengthens financial development and presumably also stability. But integration means increased risks for contagion and we must be vigilant to identify and deal with any vulnerability in the system. Regional FSAP-type assessments are at the same time broad and focused and thus useful for this purpose. In my view, it would be totally wrong to regard the FSAP as a process where the IFIs are the providers, the countries the recipients and the other stakeholders form an interested but passive audience. We need an ongoing dialogue to understand and improve the process. Hence, I am particularly grateful to our Belgian hosts for having arranged this seminar which will give us an opportunity to discuss these important issues. Thus my final conclusion, which answers the question posed in the title of this speech, can be very short: Yes, I strongly believe that regional financial stability assessments in the EU and EEA areas can provide additional values to financial stability and to a better understanding of how the cross-border interlinkages between the financial groups and the infrastructural financial arrangements under certain circumstances may add to the vulnerability of the systems.
Thus indirect risks pose a serious threat to Swiss banks, even if direct risks – measured by the direct claims on those countries particularly affected until now – are moderate. In this climate, it seems inappropriate to us that banks increase their appetite for risk. Reforming the regulatory framework / “too big to fail” A year ago, we emphasised the urgency of alleviating the “too big to fail” issue. Where do we stand today? Allow me to state clearly right now: the “too big to fail” issue will not resolve itself. Last year, the big banks significantly reduced their balance sheets – a move explicitly welcomed by the SNB. The “too big to be rescued” issue has thus also receded somewhat. However, there has been hardly any alleviation of the “too big to fail” issue. Big bank liabilities, which at the end of 2008 were still almost six times Swiss GDP, were reduced by the end of 2009 to just over four times GDP. Nevertheless, the big banks’ share of markets relevant to the Swiss economy – and hence their systemic importance – remains just as high as before: the big banks grant a third of domestic loans and hold a third of domestic deposits. In other words, Switzerland is still vulnerable, and the need for action remains great. This opinion is shared by the commission of experts appointed by the Federal Council on “Limiting the economic risks posed by large companies”, of which I am Vice Chairman.

As one example, it is estimated that annual investment in sustainable infrastructure could top £ billion for decades. 27 Firms that align their business models to the transition to a carbon-neutral world will be rewarded handsomely; those that fail to adapt will cease to exist. The new finance can smooth the transition to a carbon-neutral economy. The City has been leading the way. UK underwriters, led by the former Lord Mayor Sir Roger Gifford, helped create the green bond market which has doubled every year since 2012 to reach $ outstanding.28 UKbased banks, like Barclays and HSBC, insurers, like Aviva, and asset managers, like Generation, helped develop climate financial disclosure standards and were amongst the TCFD’s first adopters. Now a range of firms at the heart of the City are beginning to reshape the management of climate-related risks and opportunities. But we must go much further if the UK is to reach net zero carbon emissions. Disclosure must become comprehensive. Risk management must be transformed. Sustainable investing must go mainstream. 26  See: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/790626/2018-provisionalemissions-statistics-report.pdf. 27 See: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/703816/green-financetaskforce-accelerating-green-finance-report.pdf. 28 Source: Climate Bonds Initiative Data. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  Fortunately, the momentum is growing.
But as a general rule banks should not be prevailed upon against their better judgement to be providers of economic aid or social services, whether domestically or internationally, unless there is the political consensus that taxpayers are willing to fund them in that role. The internet Turning now to the internet, I believe that this has some relevance to the overall theme of this symposium, not so much because of questions about the availability of banking services to those who need them, but rather because of possible implications for the location and structure of banking activity. Let me begin by observing that, ever since the telecommunications and IT revolutions began substantially to impact on banking – and that, depending on how exactly one defines the terms, was at least two or three decades ago – some commentators have been forecasting the imminent demise of financial centres as such. The argument is that all the humdrum work will be carried out in computer centres and call centres in low wage countries, while the high value adding executives can locate where they wish – depending on their preferences for recreation, culture, climate and so on – and tele-conference one another when necessary. The former – the migration of routine operations to lowcost places – has happened to a degree, but the latter has not. Even if colleagues within a bank can sometimes substitute a conference call for a meeting, their customers have been less eager.

Tony Latter: Banking and development Address by Mr Tony Latter, Deputy Chief Executive of the Hong Kong Monetary Authority, at the 2001 APEC Economic Outlook Symposium held in Hong Kong, 28 June 2001. *  *  *  I should like this morning to address three particular aspects of the broad topic of banking and development. One is the contribution of banking – or the financial sector more generally – to the economy in terms of activity. The second is the role of banks as providers of cross-border finance for development. The third is the implications of the internet revolution for the development of banking itself. Contribution of banking to the economy Our very distant ancestors survived without money, let alone banks. With the passage of centuries and the growing complexity of barter, physical money emerged as a useful unit of account, a medium of exchange and a store of value. Still later, banks emerged as intermediators between, on the one hand, those with holdings of money surplus to immediate need and attracted by the prospect of earning interest, and, on the other, those willing to pay interest in order to be able to accelerate their spending. With the further passage of time various other means of intermediation, such as marketable securities, also developed. A key point here is that banks only emerged because of the evident utility in the service they provided.
BIS Review 29/2007  3  We cannot turn back the clock on innovation or reverse the increase in complexity around risk management. We do not have the capacity to monitor or control concentrations of leverage or risk outside the banking system. We cannot identify the likely sources of future stress to the system, and act preemptively to diffuse them. The most productive focus of policy attention has to be on improving the shock absorbers in the core of the financial system, in terms of capital and liquidity relative to risk and the robustness of the infrastructure. These issues are the principal focus of day-to-day supervision and market oversight in the major financial centers around the world. The Federal Reserve is actively involved in a range of efforts, working closely with the primary supervisors of the major global financial institutions and the critical parts of the financial infrastructure, to encourage further progress. In this context, we are working to put in place a stronger regulatory capital regime and to strengthen the capacity of firms to absorb losses in stress conditions. We are encouraging more sophisticated and more conservative management of credit exposures in over-the-counter derivatives and structured financial products, as well as of exposures to hedge funds. And we are encouraging a range of efforts to modernize the operational infrastructure that underpins the over-the-counter derivatives markets, and to improve the capacity of market participants to manage a major default.

The ease with which the U.S. financial system absorbed the substantial scale of corporate defaults that peaked in recent years in 2002 provides some support for the argument that broader and deeper capital markets make the system more resilient. In general, there does not seem to be strong empirical support for the proposition that derivatives increase volatility in financial markets. Volatility is not higher where derivatives are most prevalent. Credit market innovation does not appear to have resulted in a large increase in leverage in the corporate sector, as some had feared. Indeed, nonfinancial corporate leverage in the United States is currently low by recent historical standards. The overall degree of balance sheet leverage by corporations, for example, is higher in some more traditional financial systems than it is in systems where credit market innovations are more advanced. Default rates do not appear to have risen, nor recovery rates fallen as these credit innovations have spread, despite concerns they might lead to excess lending, the mis-pricing of credit risk and more messy and more complicated workouts, resulting from the greater diffusion of the investor base. And although the sources of the broad moderation in GDP volatility observed in the United States over the past two decades are still the subject of debate, the fact that this moderation occurred during a period of extensive innovation in credit and other financial markets should provide some comfort for those who expected the opposite. Innovations in credit markets are inevitably accompanied by challenges.
And, while pausing to enjoy the view, it has also found it possible to look beyond through the mist to the taller peaks gleaming in the distance. WTO and Hong Kong 3. The most prominent of these peaks – at least among those visible to us now – is the prospective accession by China to the WTO. It is still not clear when exactly this event will take place, although the latest predictions seem to put it at some time during the second quarter of next year. Nor is it entirely clear how extensive an impact the event will have on China, on the world, on the region, or on Hong Kong – or how fast or slow the impact will be to take effect. 4. Some initial assessments about the impact on Hong Kong of China’s WTO accession were, in fact, quite negative. A few were even alarmist. The trend of analysis now seems to be more positive. It is, however, qualified by a recognition of the challenges that Hong Kong faces, and of the standards we need to maintain, and improve on, if we are to make the most of our uniquely advantageous position. The Chamber’s own detailed analysis of the implications (which has provided a solid basis for the discussion at this summit) is, in my view, an excellent example of what we need to help us understand this historical turning point in world trade relations: a rational, balanced, informed approach to a complex issue.

Technology does not only manifest itself in web and wires, but also in the rarefied area of financial engineering, with advanced mathematical models and complex equations developed to price new derivative products. These have become useful instruments for hedging purposes and for offloading and allocating risks to those who have the appetite and capacity to take them on. 22. But these developments have brought dangers and anxieties as well as benefits and convenience. The Y2K episode – though it was well managed and ultimately uneventful – underlined how dependent we have become on the technology created over the last decade or so, and how irreversible that technology is. More recently, and now that the Y2K anxiety has been overcome, the rapid development of e-banking has underlined other concerns about privacy, security, risk management, customer protection – even about the very nature of banking – in a borderless world. The dangers posed by innovative financial products hardly need to be laboured in a place that has been very much at the brunt of their more destructive forces in recent years. 23. What can a monetary authority do in the face of such difficulties? I have referred already to the drastic measures taken in 1998, and more than enough has been said on that matter elsewhere. In the field of regulation and supervision, we need to ensure that we keep pace with the rapid 5  BIS Review 114/2000  developments going on, so that anxieties about e-money and e-banking – real or imagined – are properly addressed.
Chaired by Michael Bloomberg, it is in the process of developing consistent, comparable, reliable and clear disclosures around climate-related financial risks. The Task Force has just published its phase 1 report for public consultation in advance of its final recommendations to G20 Leaders over the next year. 11 Improved private disclosure will also support public climate action. Better information will allow policymakers to assess companies’ speed of adjustment relative to countries’ nationally determined contributions (NDCs). It will support more informed policies, including early responses if there are clear shortfalls. Virtuous circles could be more quickly established. If Governments build credibility by implementing their NDCs, this will raise the probability of further action to achieve 2 degrees. Markets can then do what they do best and pull forward that adjustment. Early awareness of the risks and opportunities associated with a low-carbon economy will attract mainstream institutional capital. That impact will be maximised if there are the right vehicles. In this regard, green bonds have the potential to align the interests of issuers and investors. To investors, green bonds offer a stable, rated and liquid investment with long duration. To issuers, they could tap the $ trillion global institutional fixed income investor base. Moreover, the shift to the capital markets from banks will free up limited bank balance sheet capacity for early-stage project financing and other important infrastructure lending.

Large shares of the sizeable oil revenues were transferred to our sovereign wealth fund, the Government Pension Fund Global (GPFG). GPFG assets are now more than double the GDP of Norway’s mainland economy. High oil prices and a profitable petroleum production industry have been accompanied by record-high oil investment in recent years (see Chart 4). The level in 2014 was equivalent to overall investment in domestic non-oil industries. The positive spillovers to the oil service industry and other private operators have been substantial. Employment has remained high and unemployment low, even when the financial crisis hit in 2008. The Norwegian economy has made use of favourable winds and seized the opportunities offered. The other side of the coin is an economy that has become increasingly dependent on oil, and thereby more vulnerable to changes in oil prices and petroleum revenues. The vulnerability manifests itself in several ways. 2  BIS central bankers’ speeches  A large share of the business sector and the labour market is now linked to the oil industry. A relatively small share is directly employed in the oil and gas production industry. But if account is taken of all the suppliers to the petroleum sector, about 1 in 9 jobs in Norway, a total of 300 000, are linked to the oil industry.2 Exports from Norway to the oil industry in other countries account for a growing share of this activity, and this may be a path forward in the face of a decline in petroleum investment in Norway.