samchain/econo-pairs-v1 huggingface dataset:
3/7  But there is more to Basel III than this: there has been a move from a framework turning on a single metric, the risk-based capital ratio, to another comprising a set of requirements that should interact in a complementary fashion. As a result, a leverage ratio has been introduced which not only limits indebtedness, but also constitutes a non-risk-based capital requirement; two liquidity ratios have been incorporated (one short-term, and another that seeks to ensure a more stable funding structure); limits on large exposures have been set in place; and, finally, macroprudential capital surcharges have been included to prevent and mitigate both the risks derived from globally systemic institutions and those associated with excessive credit growth at the aggregate level. Risk sensitivity, complexity and comparability Given all these changes and regulatory innovations, was there anything left to do? The answer is yes, since following the onset of the global financial crisis in 2008, the soundness of the Basel framework was called into question, as was – more specifically – its risk measurement methodology. Almost 30 years ago, in 1988, the Basel regulations introduced the concept of risk sensitivity, assigning greater capital consumption to those exposures deemed to be of most risk. Under Basel I, this risk measurement was very simple, such that very few asset categories (those considered to be of least risk) had weightings lower than 100%.

For example, physical risks could negatively affect consumption demand if there is an adverse climate event, while the transition could positively induce investment in climate adaptation technologies, thereby affecting aggregate supply. The NGFS is seeking to better understand how climate change can potentially affect the transmission of monetary policy. Climate change could put pressure on banks' balance sheets due to higher credit risk or an abrupt repricing of assets, and ultimately constrain central banks' ability to influence credit conditions in the economy. We need to assess how climate change may affect the neutral rate of interest. A decline in productive capacity could pull the neutral rate down, while large investment outlays for greening the economy could push rates up. The influence of monetary policy on inflation expectations may also weaken, as physical and transition risks intensify and raise underlying price pressures. The climate scenarios developed by the NGFS has allowed more robust assessments of financial stability. Given uncertainty around the severity and frequency of climate-related shocks, we need to augment traditional analysis with climate scenarios. More than 30 central banks have used or referenced the NGFS climate scenarios. The IMF has also begun to use them to assess the impact of climate change on banking sector stability risks under the Financial Sector Assessment Programme. 2/5  BIS - Central bankers' speeches  The NGFS aims to make three enhancements in the next iteration of its climate scenarios.
Next, I will describe the latest economic and financial events, projections and risks surrounding our economy, and the way in which inflation will converge to 3% over a two-year horizon. 2  BIS Review 9/2010  Macroeconomic scenario As I pointed out before, the international economy has stabilized. The change in financial conditions has reduced risk premia, recovered key financial prices and restored investment flows towards emerging economies. Risk indicators are back to the levels they were before August 2007 (figure 4). The external borrowing conditions for Chile have also improved. Premia charged to Chilean banks above external reference rates have dropped (figure 5). The dispersion of these premia is greater than before the crisis, which reveals more discrimination by the suppliers of credit and gives the right signals to potential borrowers by rewarding those with a stronger financial position. New external counterparties have also been observed in these operations. Other constraints remain, however, such as shorter terms for the loans. Finally, some Chilean firms have placed their bonds in international markets after shunning these opportunities given the tight conditions by late 2008. Global economic activity has taken a path to recovery that is, generally, in line with projections in September’s Monetary Policy Report. Third-quarter output data show an upward trend, even exceeding expectations, while Consensus forecasts for global growth show a slightly stronger recovery than foreseen earlier, 4% on average for 2010–2011. However, the Board estimates that the risks of a weaker economy are still latent (figure 6).

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Our resolve on this agenda has not changed since the crisis. On the contrary, it has served to sharpen our focus in contemplating measures to place our financial systems on a firmer foundation. This crisis has focused attention on some important issues that calls for wide ranging regulatory responses. The degree of consensus on the spectrum of recommended reforms by the international community has however been mixed. Nevertheless, on some areas there has been a clear consensus. There is agreement that the regulatory framework needs to be  more responsive to risk. Equally, there is agreement on the need to materially improve risk management in financial institutions, and to strengthen the role of supervisors in the oversight of financial institutions. The need to enhance safety nets, in particular, in the liquidity support arrangements and deposit insurance, has also been widely acknowledged, as is the need for greater disclosure and transparency, particularly on off-balance sheet exposures. These have also been the areas of focus of most of the authorities in emerging Asia as we set to modernise our financial systems post the Asian financial crisis. In other areas, there has been substantial debate by the international community. The first concerns the degree of balance of regulation. This crisis has shown that market discipline needs to be complemented by regulation. The question however has centred on how far the pendulum should swing towards greater regulation. Should regulatory constraints be imposed on size, leverage and activities of financial institutions?

Before I explore issues like inflation in any greater depth, I should give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee or others in the Federal Reserve System. The U.S. Economy If monetary policy represents a set of scales, on one side we have a strong U.S. economy with unemployment near a 50-year low, and on the other, a more challenging and uncertain landscape. GDP looks to grow around 2 percent this year, and unemployment has stayed at or near historically low levels, boosted by solid job growth. At the same time, the Federal Open Market Committee (FOMC) has moved to cut rates three times. What’s going on? There are three trends I’ll explore today, which all demonstrate the commonalities and the interconnectedness of the global economy. The first is the low neutral rate of interest, or r-star, the second is slowing global growth, and the third is rising geopolitical tensions. All are critically important to the long-term prospects of the U.S. economy, and each tells an important story about the conditions we’re experiencing today. Low R-star Those of you who know me won’t be surprised that I’m starting with low r-star! The neutral rate of interest—the rate that prevails when monetary policy is neither restrictive nor accommodative— has been an area of study, and a personal passion, for the past two decades.
The end of the minimum exchange rate has major repercussions for the Swiss economy, and it was by no means an easy decision for the SNB. Yet this is not the first time that the Swiss economy has had to react to shocks and changes in the international environment, and the experience was often painful. The example of the watch industry shows that even a severe crisis can be overcome. Unfortunately, this example is not readily transferable to other export industries. Many companies currently find themselves compelled to seek cost reductions and efficiency gains. The economic outlook depends to a great extent on global economic developments. In its latest monetary policy assessment, the SNB is projecting that momentum in the global economy will pick up again. This should cushion the impact of the exchange rate shock somewhat, and allow Switzerland to return to positive growth in the second half of the year. While inflation has dropped well into negative territory, as things currently stand, a sustained price decline - or, indeed, a deflationary spiral - is not to be expected. Overall, the Swiss franc is currently significantly overvalued. Monetary policy is geared towards this challenging set of circumstances, and is guided by the SNB's willingness to take an active role in the foreign exchange market and apply negative interest rates. This twopronged approach is designed to ease the upward pressure on the Swiss franc. However, in the current climate there is, regrettably, no easy solution that would absorb all external disruptions.

In the Malaysian Islamic finance marketplace, the changes associated with the modernisation of laws facilitate the maturing of the Islamic finance industry, with the enactment of the new Act in 2013. It includes new provisions that strengthen the potential role of Islamic financial institutions as investment intermediaries for risk-sharing to effectively take place. Legal recognition of investment accounts provides differentiation from deposits, which thereby opens up the avenue for Islamic financial institutions to further explore the various modes of operationalising such investment accounts. In advancing this quest, technological advances need to be leveraged upon to develop new innovative platforms that can facilitate the implementation of investment accounts. Aimed to assist Islamic financial institutions in performing this investment intermediary function more efficiently, a multi-bank platform is currently being developed in Malaysia to effectively and efficiently match funds from potential investors with industries and ventures in the real sector. The platform would facilitate efficient mobilisation of private sector funds, both from individuals and corporates to finance targeted industries and ventures that are in need of funding. The platform would also be positioned to spur international connectivity as its outreach will also extend to international participation from foreign Islamic financial institutions and investors, through the offering of multi-currency financing options for foreign projects.
The smooth functioning of our payment systems, in turn, depends on the safe operation of clearing infrastructure and the mitigation of liquidity risk. Finally, central banks can act as a liquidity backstop or a lender of last resort. Such action could be needed if a banking default were coupled with severe market stress. In such a scenario, a CCP would certainly hold high-quality collateral, but it may be unable to generate cash in the market in the very short time it has to manage a default. Given the systemic importance of CCPs and the scale of potential funding needs, it is essential that CCPs have sound liquidity self-insurance so that a liquidity shortage remains an extreme tail risk and the associated moral hazard is mitigated. In light of these considerations, which apply across all locations, the ECB has a clear interest in ensuring the safety and soundness of euro clearing. To this end, we need to have a clear legal competence that, importantly, should cover both EU and third-country CCPs. Proposals to differentiate between EU and third-country CCPs would not only leave considerable pockets of euro clearing without appropriate ECB oversight, they would also raise concerns about market distortions or an unlevel playing field. For example, a responsible central bank cannot extend liquidity to any entity without having a minimum level of information and control over it.

Ardian Fullani: Recent economic and monetary developments in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the press conference on the Monetary Policy Decision of the Bank of Albania Supervisory Council, Tirana, 31 August 2011. *  *  *  Today, on 31 August 2011, the Supervisory Council of the Bank of Albania reviewed and approved the Monthly Monetary Policy Report. Based on the analysis of Albania’s latest economic and financial developments and following discussions on their performance outlook, the Supervisory Council of the Bank of Albania decided to leave the key interest rate unchanged at 5.25%. The Supervisory Council holds that the actual monetary conditions are appropriate for meeting the inflation target and for continuing to stimulate the economic activity. Let me now proceed with an overview of actual and expected economic developments and main issues discussed at today’s meeting of the Supervisory Council. Annual inflation in July was 3.6%, following the downward trend noted in the second quarter of the year. Consumer price performance continues to be under the pressure of rising prices in global markets, although lower than in previous months. Annual inflation was primarily formed by the contribution of processed food prices, most of which are imported. Decline of the annual inflation rate reflects the downward contribution of unprocessed foods as a result of increased supply of domestic agricultural products, a seasonal development, which in July 2011 appeared to be stronger than a year earlier.
Growth in demand and output is expected to remain high in the near term. Unemployment may fall somewhat more quickly than has been the case over the past year. The output gap is expected to be positive in 2005. Higher demand for companies’ goods provides scope for increasing prices. Experience shows that inflation is directly influenced by the level of capacity utilisation in the Norwegian economy. Some of the rise in prices for domestically produced goods and services can be attributed to higher margins in the business sector. The effects of the interest rate decline on demand, output and employment have been pronounced. It has taken time for inflation to pick up. This partly reflects low external interest rates and high oil prices, which have moderated the impact on the krone exchange rate. Higher imports from low-cost countries, competition and improved efficiency in Norwegian production have also kept inflation at a low level. Initially, it was the fall in prices for imported consumer goods that pushed down underlying inflation. After a period, the rise in prices for domestically produced goods and services also decelerated. This was due in particular to increased competition in some goods and service markets. At the same time, wage growth slowed as a result of lower capacity utilisation in the economy. A slower rise in house rents also contributed. Inflation measured by the CPI-ATE reached its lowest level in the first months of 2004. Inflation remained at less than ½ per cent until after the summer before picking up in autumn.

For example, China’s share of footwear imports to Norway increased by 4 percentage points to 20 per cent in 2004. The share of clothing imports increased by 2 percentage points to 32 per cent. The decline in prices for clothing and footwear will probably continue in the coming years. Prices for audiovisual equipment are still falling as a result of strong international competition and high productivity growth. We assume that the effects of structural changes in these markets will gradually be exhausted towards the end of the projection period. External price impulses via consumer goods are expected to increase in pace with unit labour costs among our trading partners. The projections in Inflation Report 1/05, published on 16 March, are based on a gradual increase in the interest rate. This is in line with financial and foreign exchange market expectations. The krone exchange rate is assumed to move in line with the forward exchange rate. This implies that the krone will remain fairly stable around the current level in the years ahead. Growth in private consumption is expected to remain buoyant both this year and next, primarily reflecting low real interest rates, strong growth in real disposable income and a continued rise in house prices. In the period ahead, higher employment and wage growth will continue to fuel household demand. On the other hand, household debt has risen sharply. This implies that a normalisation of interest rates will increase household net interest expenses. After a period, growth in consumption may be fairly low.
The Basel Committee is therefore working intensively on completing the current reform work by the end of the year 1. 1  However, it is still not clear when the review of the exposures to governments and public bodies will be complete. 3 [5]  Critics have expressed fears that the reforms I am talking about now will lead to minimum capital for certain banks increasing radically, which in turn risks resulting in a real economic decline. Here I would like to point out that the Basel Committee’s ongoing reform work does not aim to significantly increase the total global capital requirements. Instead, it concerns ensuring that all banks around the world have adequate resilience to manage financial crises and that risks are covered by capital in a uniform way in all banks and all countries. One result of this exercise is that banks that currently have very low risk weights will probably face higher capital requirements, while banks with very high risk weights may face lower capital requirements. Designing a uniform global regulatory framework is not an easy task, particularly as banking systems differ from country to country, but also because we are living in a changing world. The Basel Committee's work is therefore largely a question of finding compromises that all member countries can support and which will stand the test of time. Naturally, the Basel committee is also evaluating very carefully the effects of the proposals now under negotiation. This applies to the effects on the banks as well as on society.

Excessive debt is namely a common denominator in most financial crises. Even before the crisis, a number of banks expanded their operations substantially with the aid of debt financing. When the markets became shaky it turned out that many banks lacked sufficient capital to cover their losses. The idea of the leverage ratio requirement is that it should be a relatively simple and transparent supplementary capital requirement that sets an upper limit as to how much leverage the banks can take on. Basel II created too much freedom for the banks, with well-known results. We need to put this right. We will therefore now have a system with many different types of constraints. Government exposures are also risky Another question discussed by the Basel Committee is if and how the banks should maintain capital to cover their exposures to governments and other public bodies. Today it is in practice possible for the financial supervisory authorities to completely exempt such exposures from the capital adequacy requirement. We know from experience, however, that the banks’ exposure to governments is not risk free. The Basel Committee has therefore decided to review whether and how the regulations need to be changed. Almost 10 years on from the crisis – time to complete reforms The international regulatory work has been in progress since the global financial crisis broke out in 2007. It is important to many parties, not least banks, investors and policy-makers, to clarify how the global regulatory framework for banks will function.
So the bank has to have enough debt that can be bailed in to restore its capital so it can continue to operate as an authorised firm while it is being resolved. Smaller banks can be more easily separated into the parts that provide critical economic services and that can be sold and those that do not and can go into insolvency. Only the critical parts would be recapitalised in resolution. They need less bail-in debt. The very smallest institutions do not need to be kept in operation. Their abrupt cessation of activity should not generate contagion or damage the economy. Insolvency rather than resolution is the proportionate strategy here. They do not need bail in debt. Gradualism The second key principle is gradualism. The Bank is proposing to allow the full four-year transition period for banks to meet their MREL requirements. This will allow the market for MREL-eligible debt to develop and allow banks to smooth out their debt issuance, minimising issuance and interest costs. Clarity The third is clarity. Banks and their creditors need to have clarity – clarity in relation to the requirements of the new regime and clarity as to their liability if things go wrong. So we need to avoid uncertainty and get on and implement the EU requirements that came into force at the beginning of this year. Bank creditors need to know where they stand if things go wrong.

The realisation is setting in that bank creditors are at risk if the bank gets into trouble. There certainly appears to have been a jump in awareness at the beginning of this year. The average spread for senior debt issued by European G-SIBs increased by over 25% within little more than a week. In part, this is a result of the entry into force of the BRRD, and in the UK the Bank’s consultation paper on the setting of MREL.12 But it has almost certainly been reinforced by other events that have brought the issue into sharper relief. As a result, perhaps not surprisingly, there have been calls to amend the regime before it has even been implemented, on the grounds that it will raise costs for banks and make them less able to lend to the real economy and that it is politically impossible to bail in bank creditors. There are clearly some very important and difficult transitional issues here. And no major shift in preventative regulation is ever universally welcome. But, it is, however, possible to view this greater awareness of the new regime in a more positive light. I have mentioned already evidence that expectations of taxpayer bailouts have diminished.