samchain/econo-pairs-v1 huggingface dataset:
In the GFC’s aftermath, as the costs of ignoring the build-up of systemic risks became painfully clear, national regulators and international institutions joined forces to build the foundations of our current macroprudential frameworks. These comprise two types of policy. First, policies that aim to contain the build-up of vulnerabilities, for instance by reducing 1  Cf. Jordà, O., M. Schularick, and A. M. Taylor (2015), Leveraged bubbles, Journal of Monetary Economics, vol. 76(S): 1-20, and Jordà, O., M. Schularick, and A. M. Taylor (2015), When Credit Bites Back, Journal of Money, Credit and Banking, 45: 3-28.  excessive credit growth and bank leverage, or by improving the average quality of bank assets. Second, and absolutely essential in my view, policies designed to strengthen banking sector resilience. By this, I mean ensuring that the banking sector has enough capital to absorb losses that could materialise in a crisis, and is able to continue to provide financial services to the real economy without the need for government intervention. It is important to remember that macroprudential policy cannot always prevent financial crises. Rather, by pursuing its objectives and in particular by ensuring banking sector resilience, macroprudential policy should reduce the likelihood of financial crises occurring, and limit the extent and duration of recessions if a crisis occurs. Ensuring resilience is particularly important in Switzerland, given the large size of the Swiss banking sector relative to the size of the economy – also by international standards – and the dominant role played by a small number of banks.

The information provided by the SME Credit Bureau can further support efforts by banks to strengthen risk management for their SME portfolios, regardless of the level of sophistication and size of the institutions. Banks with an SME credit model already in place can benefit from the Bureau information in various ways. For example, as the Bureau rating is determined based on diverse information obtained from various sources including CCRIS, trade credit data and the Companies Commission of Malaysia, banks can use such information to bridge any information gaps and address the limited pool of internal data available for their internal models. Such gaps currently exist, as banks in general are highly dependent on borrower information alone. In addition, given the diversity of information available within the SME Credit Bureau, banks would now have access to information on various economic sectors that may not be available within existing credit portfolios. At the same time, Bureau ratings could be used by the banks to validate the robustness of their own internal models by comparing the ratings produced between their internal ratings and that by the SME Credit Bureau. For smaller and less sophisticated banks, the Bureau information will supplement the current SME credit assessment methodology that is traditionally qualitative in nature. Such banks will be able to obtain quantitative information from the Bureau database to enhance the overall credit evaluation process, thereby supporting more informed and objective credit decisions.
In that sense, the innovation that led to the exponential growth of new structured credit markets in recent years was not just a product of new technology and more aggressive risk taking in Western financial markets; it was also a flawed response to these wider imbalances in the global economy. Sources of procyclicality But weaknesses in modern credit markets, and the “originate to distribute” model of banking, have certainly been a good part of the problem. The development of new markets and credit instruments has tended to amplify the financial cycle – they have been pro-cyclical in the jargon – and has introduced or strengthened the misalignment of incentives and flawed measures of risk. Of course financial markets have always tended to develop a strong cycle. There is a natural feedback between asset prices and credit availability. When credit supply increases, households and companies who were previously credit constrained find it easier to borrow. Their increased ability to buy assets bids up prices. And these higher-priced assets can be used as collateral to secure loans. So as asset prices rise, so does collateral, thereby increasing the willingness of banks to supply credit. But in recent years this has been reinforced by some structural and regulatory changes. The growth of credit risk transfer through securitisation has tended to increase the proportion of banks’ balance sheets that come under mark-to-market accounting. Even gradual changes in the values of the underlying loans have tended to appear as abrupt changes in banks’ trading and treasury books.

The Icelandic interbank market has operated smoothly with rates consistently staying comfortably within the interest rate corridor of the Central Bank. The Bank has also modified other rules towards ECB standards, including the rules on reserve requirements. The evolution of our financial system over the coming months and years will of course be very much affected by developments in the global financial system. Once conditions improve generally at the world level and the access of banks to financing improves, the most creditworthy banks will be at the head of the queue but others further back. Thus, it will take longer for Icelandic and other banks closer to the fringes of the international financial system to gain normal access to international financing. This is the scenario which the managements of banks will have to adjust their thinking, strategies and operations to. If they do that, I am sure that they will fare well. If they don’t, their business will be more difficult. The business of banking is much dependent on confidence. It is therefore of the utmost importance for the Icelandic banks and others to do everything that they can to strengthen confidence in their operations and not to postpone any measures to that effect in the misguided hope that the operating environment will recover soon. In conclusion, I would like to mention that on May 8 the Central Bank of Iceland will publish its 2008 report on financial stability. It will be available on the Bank’s website on that day.
The Croatian National Bank noted the following in its 1991 Annual Report: “At the end of 1990 ... five banks were solvent, ten banks were solvent with problems related to the settlement of claims, eleven banks were technically insolvent and two banks were seriously technically insolvent.” Accordingly, already prior to the war, 13 out of a total of 28 banks were insolvent. Therefore, in 1990s the Croatian National Bank was trying to forge a political consensus for the rehabilitation and restructuring of banks. The Government financed the linear rehabilitation of the banking system. Nonetheless, banks continued to operate poorly, largely due to a further provision of loans to big state-owned enterprises and implicit financing of the war. Four out of five largest banks had to be recapitalized again in mid-90s, after the war. The biggest one, did not, as it was mostly a retail bank, dealing with households rather than the state and SOEs. This time, after the war, it was done better, making the banks sound and sustainable. Managements were replaced, banks downsized, costs cut, and banks were prepared for a privatization. The total cost of these two sets of rehabilitations rose to 31% of GDP, which is one of the most expensive rehabilitations of the banking system (Jankov, 2000). This was, then, immediately followed by privatisation of four systemic state-owned banks, and, with further liberalisation, by the entry of new players to the market. The establishment of new, private banks, was thought to be a large part of solution to legacy issues.

For instance, we sponsor the Consumer Credit Panel, or CCP, a quarterly report on household credit based on a large sample of credit data from Equifax. We have also developed the Survey of Consumer Expectations, or SCE, a monthly survey of consumer expectations about inflation, the labor market and household finance. These reports and summary data are available from the New York Fed’s Center for Microeconomic Data, which can be accessed on the Bank’s website, newyorkfed.org. Aside from producing these public reports, New York Fed researchers also use the underlying data to do detailed econometric analysis, some of which forms the basis of the blog series you’ll hear about today. In some cases, we are able to link the CCP, SCE and other data sets to derive insights into a wider set of factors affecting workers and consumers, such as educational attainment, student debt burden, job satisfaction, job transitions, access to credit and housing choices—and consumer expectations about many of these factors. Why do we do this? Why is it important to generate insights about individual workers rather than relying just on analysis of the aggregate data? The first, and most obvious, point is that the aggregate masks the experiences of individuals. Not all workers and consumers experience the economy in the same way. Employment, wage and income growth, housing, education, credit and a host of other outcomes vary significantly across different cohorts of individuals and these differences in turn can vary over the business cycle.
At the same time, the banking model in Spain is less reliant on developments in financial markets and on investment banking activities. Second, the data mentioned previously show that Spanish institutions’ income statements have been affected by the gradual deterioration of the economic situation. Although it is natural to some extent that, in more adverse conditions, results and profitability have not increased as notably as in recent years, there is a clear and pressing need for resolute action by managers aimed at countering these pressures. I would like to briefly describe the developments in the main income statement captions and then identify the courses of action available. The net interest margin performed well in 2008 and its growth of around 14% over the same period of the previous year was higher than that of activity. This favourable performance, despite representing a slowdown with respect to other years, reflects highly recurrent core income from banking activity, a characteristic of the Spanish banking system. Also, net interest margin growth was favoured by the high percentage of lending granted at variable rates, which allowed institutions to progressively raise interest rates in the first half of 2008. However, financial costs also grew strongly, and may continue to do so in the future. The higher pressure from funding costs has three sources.

In this respect, from the standpoint of income statements, credit institutions have limited room for manoeuvre. Nevertheless, they should avoid imposing indiscriminate rules on customers when they grant new loans; further, they should select borrowers more cautiously and appropriately differentiate the interest rates applied to each of them. Against this background of moderate lending growth and higher loan loss provisions, it does not seem that fees or gains on financial transactions can offset the pressure on the income statement. First, as I just mentioned, because it is unlikely that growth rates will be very high in this more sluggish economic environment in which financial market difficulties persist. And second, because, even if they are, given the weight of these items in income statements, they would be unlikely to act as offsetting mechanisms because of the sheer size of the pressures mentioned earlier. The most effective course of action, and that on which institutions' efforts should focus, is operating expenses. And homing in on operating expenses means not only limiting their growth, but should also lead to reducing those expenses which, because of their nature, are more variable. It is essential to exercise utmost care in taking on overheads, which are difficult to reverse. At a time like the present, it is preferable to have flexible cost structures which enable greater room for manoeuvre. The effort needed is formidable, and will undoubtedly require operating structures to be accommodated to the new competitive reality of the sector.
I do not consider financial dominance to be a problem at present, but one cannot rule out the possibility of such a situation arising at some point in the future. We therefore need to continuously monitor developments and take measures to prevent this from happening. The Riksbank is responsible for inflation being stable, while responsibility for financial stability is shared between Finansinspektionen (the Swedish Financial Supervisory Authority), the Riksbank, the Swedish National Debt Office and the Ministry of Finance. The responsibility for macroprudential policy lies with Finansinspektionen. One of its aims is to limit financial imbalances, but monetary policy also has effects on financial imbalances. While macroprudential tools are particularly effective when one knows where risks in the financial system are building up, such as an excessive build-up of private debt. However, when interest rates are low for a long time, it can be difficult to know where in the system the main risks lie. In some situations it may therefore be reasonable to use the policy rate as a complement to macroprudential policy, as the policy rate has a broad impact on financial markets. There is an ongoing discussion in both academia and the central banking world about the extent to which monetary policy should counteract the build-up of risks in the financial system. This is an interesting and important discussion that I am following, but I do not want to belong to any particular camp in this discussion.

The net interest margin of the retail banks in Hong Kong as a whole has substantially declined from over 2.19% in 1997 to an annualised level of 1.67% for the first quarter of 2004. The new sources of income include most notably the sale of investment and insurance products. The key challenge for banks is simply whether they are capable of managing the risk arising from these new intermediary activities. This is particularly so when, encouraged by advanced technology, the range of products being offered to customers expands from plain vanilla types to more complex structured instruments. Furthermore, the awareness of customers about their consumer rights has increased, thus exposing banks to greater compliance, legal and reputation risks when venturing into these new areas of activities. We have seen in recent years an abundance of cases against the misselling of products by banks even in jurisdictions with more developed financial markets. Banks will need to properly equip themselves, including substantially upgrading their compliance and internal audit processes, in order to rise to this challenge. International standards The fifth set of influences affecting the banking industry is the number of key international standards that will be introduced over the next few years. These include regulatory and accounting standards, and Basle II is the standard most prominent in our minds. Another example is the implementation of IAS 39. The adoption of these standards will have profound implications for the operation of banks in Hong Kong.
Higher domestic inflation eventually weakens competitiveness; with exchange rates irrevocably fixed, once a cost crisis is there, it may be difficult to rectify. Improved productivity can provide a remedy but achieving it is not easy. In practice, this presumably leaves either fiscal tightening at a later stage to retard the rate of wage increases or an adjustment of labour taxes, neither of which is simple. For the credibility of the EMU project it is important that no country is already in such a situation at the start. Countries with a risk of high inflation are therefore likely to experience strong pressure in various processes, for example in Ecofin. On the whole, it seems to me that the question of adjusting fiscal policies to the ECB’s monetary policy will be a major issue. The same applies to how any fiscal adjustments are to be allocated across countries. Labour market problems It is an established fact that the functioning of the labour market is a problem in many Member States. A solution to the employment question clearly presupposes that the European labour market is made to work more smoothly than before. The matter is also directly connected with monetary union. There will no longer be any possibility of using a national monetary policy to deal with labour market shocks. It is then all the more important that the labour market functions properly.

In these matters, however, most decisions have to be made at the national level. But the connection with conditions for monetary policy is evident: the better the economy can be made to work, the higher the growth that can be achieved without this generating increased inflation. Monetary union is likely to accelerate the process towards increased integration in Europe. In this way it will also contribute to new demands for structural adjustment. One of monetary union’s primary purposes is, in fact, to stimulate competition and structural changes, primarily to the benefit of consumers in the EU area. At the same time, such a development will probably entail a greater degree of joint action and harmonisation in the Union. 3. Interaction As I have outlined, monetary union involves a central direction of monetary policy and a broadly national direction of budget policy, though discretion in budget policy is demarcated by the Maastricht Treaty and the Stability Pact, for instance, and is being further curtailed by the gradual extension of international integration. At the same time, structural policy is to varying degrees a common EU concern. This raises the question of how a balanced policy can be constructed in such an environment. Bodies for decision-making and cooperation One approach to this question involves describing the EU institutions that have been set up for economic policy decision-making and cooperation. •  Ecofin, as the decision-making body for the ministers of finance and economy, is the principal forum in the field of economic policy.
Fiscal sustainability also needs the economy to swiftly restore its dynamism and to achieve a high potential rate, since this is a fundamental means of financing the public spending increases to which population ageing is inevitably going to lead. The proposed pension  BIS central bankers’ speeches  3  system reform submitted by the government in January this year is also a key step towards curbing these costs. The financial markets have understood that this reform strengthens fiscal sustainability, so it would be advisable to set this proposal down in the form of legislation as soon as possible. Further, the sustainability to which the reform refers should be specified, so that a procedure is in place to ensure at all times that pensions growth is on a sustainable path. On the financial front, further headway in restructuring the banking sector has been made in 2010 and in 2011 to date. The most significant regulatory step here was the creation, in 2009, of the Fund for the Orderly Restructuring of the Banking Sector (FROB). The FROB has proven most useful in paving the way for merger and integration processes in the savings bank sector, which was highly fragmented. As a result, the number of institutions in the sector has fallen relatively quickly from 45 to 18. In those operations that received funds from the FROB, the institutions concerned submitted restructuring plans that envisage reductions in the number of offices and in other operating expenses.

I will focus on what is happening in the banking sector in response to the crisis, and also from a broader strategic perspective. The banks entered the current crisis well-prepared thanks to what has been done in recent years. I will only mention the unprecedented in their scale and depth asset quality review and stress tests conducted in the banks by the BNB and the European Central Bank. One of their main objectives was to get the banks prepared for the most adverse macroeconomic scenarios which many, at the time, considered to be impossible to materialise. Now that we are going through these ‘impossible’ scenarios, we see that the banks are responding adequately and they continue to be in good shape. This good preparation helped us, at the very beginning of the crisis, to take additional measures and reinforce the banks’ capital position and liquidity. Among the measures were the full capitalisation of all the profits in this sector, strong reduction in foreign exposures, and also cancellation of the planned additional capital requirements associated with cyclical risks. This package of measures ensured an additional resource of BGN 9.3 billion in the banking system. The package of measures has not been launched only and exclusively for banks. It has rather been designed to ensure that banks are able to take steps and cushion the effects of the crisis for businesses and households. The main tool that was used to this purpose and is still in place is the so-called ‘private moratorium’ on loan payments.
But during the second half of July, concerns increased again when reports were received of the weak finances in Spanish regions. This contributed to new speculations regarding whether the loan to the Spanish banks is sufficient, or whether it will be necessary to implement a full-scale support package for Spain. Yields on Spanish government bonds with both short and long maturities rose to new heights. Italy was also affected by the unease. At the same time, yields on German and French government bonds remained at extremely low levels. The problematic situation on the bonds markets was discussed by the European Central Bank, ECB, at the beginning of August. After the meeting, ECB Chairman Mario Draghi made it clear that countries needing acute assistance should first turn to the EFSF/ESM and accept support under the terms they stipulate. After interventions might be undertaken by the ECB, within its mandate for price stability, and the ECB will investigate potential measures. It was already clear that potential bond purchases by the ECB would focus on bonds with shorter maturities. Expectations were fairly high prior to the ECB meeting, and Spanish and Italian bond yields had fallen during the days before the meeting. When the ECB did not announce any immediate measures, yields rose quite strongly at first. They have since fallen somewhat again, primarily yields on government bonds with shorter maturities.

Abdulrahman A Al-Hamidy: Brief overview of the Saudi Arabian insurance industry Speech by His Excellency Dr Abdulrahman A Al-Hamidy, Vice Governor of the Saudi Arabian Monetary Agency (SAMA), at the First Symposium on Insurance, held at the Institute of Banking, Riyadh, 22–23 March 2011. *  *  *  It gives me pleasure to welcome you all to the first symposium that the Saudi insurance industry has organized in collaboration with the Institute of Banking. I hope more such events will be organized to discuss future plans to expand insurance activities, and to set up mechanisms to improve the working environment of the insurance industry to enable it to serve better. Dear Audience, Thanks to Allah, that the Saudi economy has witnessed considerable economic and social development since the turn of the century. This has largely resulted from the restructuring of the economy and improvement in the regulatory apparatus that has greatly facilitated domestic and foreign investment and thereby has helped enhance the efficiency and competitiveness of the economy. The non-oil real GDP has grown by an annual average of 4.4 percent in the past five years. The private sector production went up by 4.5 percent and its contribution to real GDP increased to 48.8 percent in 2010 from 45.5 percent in 2006.