samchain/econo-pairs-v1 huggingface dataset:
This lack of transparency was present in a number of different places: •  Valuation. CDOs and other securitized obligations were complex and difficult to value. This reduced liquidity, pushed down prices and increased uncertainty about the solvency of institutions holding these assets. BIS Review 125/2009  3  •  Prices. The lack of pricing information led to a loss of confidence about accounting marks. Sometimes identical securities were valued differently at different financial institutions. •  Concentration of risk. Because there was no detailed reporting of exposures, market participants did not know much about the concentration of risk. This led to a reluctance to engage with counterparties, which, in turn, pushed up spreads and reduced liquidity further. Regulatory reform These four strands – understanding interconnectedness, mitigating pro-cyclical system dynamics, improving incentives and increasing transparency – should be critical areas of focus in our efforts to enhance the resiliency of the banking and financial system. We will do this through several channels, including international regulatory reform, enhanced capital requirements, the introduction of common liquidity standards and clear expectations for compensation practices. Today I am going to spend some time talking about how we might take account of these strands to ensure that our regulatory capital regime helps to facilitate a more robust and stable financial system. In my view, the regulatory capital framework would benefit from four changes: •  Improving the risk capture associated with the capital requirements.

Incentives Some of the pro-cyclical dynamics embedded in our financial system occur because market participants do not always have the incentive to behave in ways that will be good for the system as a whole. This occurs, in part, because market participants often do not have to bear the full costs of their actions. For example, the incentive to take on more risk without regard for the broader implications of those actions arises from a number of factors, including poorly constructed compensation schemes, ineffective risk management and gaps in regulatory oversight and risk capture. One problem evident during the crisis has been the reluctance of banking organizations to raise sufficient capital to be able to credibly have the resources to withstand particularly adverse economic conditions. This reluctance stemmed, in part, from concerns about what a capital raise would signal about the firm’s strength, but it also stemmed from an unwillingness to unnecessarily dilute shareholders. The reluctance led to more uncertainty about the adequacy of banks’ capital positions, which, in turn increased concerns about counterparty credit risk. These worries led to a further deterioration in market liquidity. These dynamics tightened financial market and credit conditions, increasing the downward pressure on economic activity and on the financial system. The Supervisory Capital Assessment Program (SCAP) exercise that we undertook in the United States leaned against this.
My conclusions are that the financial sector can support the international competitiveness of the UK economy and contribute to growth in the medium to long-term when: UK firms successfully compete to win business around the world; The UK is a top tier global financial hub where firms from around the world choose to do business; and The financial sector supports growth by meeting the needs of the wider national economy. That last point needs emphasising. Finance matters because it does useful things. Financial firms help people and businesses to make payments. They channel savings to businesses with promising projects that create growth. They help people and businesses manage risks. And they give families ways to smooth over shocks to their finances. The more efficiently the financial sector does these things, and the fewer gaps there are in the services it provides, the greater the benefit to the wider economy. Good regulation is a good foundation for success Sadly, the PRA cannot claim credit for success when all these conditions are met. This is because success is primarily driven by the work of the financial services industry themselves. The success of the financial industry is also a consequence of many other factors beyond the PRA’s control, such as a trusted legal system, a competitive tax structure, reliable infrastructure, the selfreinforcing benefits that arise when a skilled workforce and large number of firms converge in one jurisdiction, and even a convenient time zone. Clearly the PRA cannot deliver all of that.

Some reporting requirements for insurance firms, especially smaller firms, have already been removed. The PRA will be consulting in the coming months on easing insurance reporting burdens further. The PRA has also started a review of banking reporting requirements. 20. On empirical research supporting this argument, see Ross Levine, ‘Finance, Growth, and Inequality’, IMF Working Paper WP/21/164 (2021). 21. PRA CP 4/23 – ‘The Strong and Simple Framework: Liquidity and Disclosure Requirements for Simpler-regime Firms’, February 2023. Proposals include replacing the NSFR with a simpler retail deposit ratio for firms with large retail deposit bases, simplifying liquidity reporting templates (including simplifying the ILAAP template), reducing Pillar 3 disclosure requirements, and removing Pillar 3 disclosure entirely when firms do not have listed financial instruments. 22. PRA CP 5/23 – ‘Remuneration: Enhancing proportionality for small firms’, February 2023. Proposals include removing requirements to apply rules on malus, clawback, and buyouts for eligible firms. 23. On earlier reforms to IRB modelling of mortgage risk, see PRA Policy Statement 13/17 – ‘Residential mortgage risk weights’, June 2017; PRA Policy Statement 7/19 – ‘Credit risk: The definition of default’, March 2019; and PRA Policy Statement 11/20 – ‘Credit risk: Probability of Default and Loss Given Default estimation’, May 2020. 24. For owner-occupier mortgages with LTV ratios below 50%, the gap between risk weights could narrow by between 50% and 70%. 25.
But the other side of this coin is also important: in years when economic conditions are favourable, when the private sector is at full speed, the government should hold back and put aside reserves to boost its financial strength so that it can provide support when the economy needs it.” Nicolai Rygg (1948), “I økonomisk stormvær” [In stormy economic weather], festschrift for Joh. H. Andresen, also published as an annex to the periodical Statsøkonomisk tidsskrift nr. 3/4 1948, p. 23. In this article, Rygg highlights his assertion that government budgets must balance over the business cycle. 15  Governments consistently overestimate growth in their forecasts (Frankel 2011). But this is difficult; in summer 2008, the average OECD country overestimated the budget situation in 2007 – the year prior to the forecast – in an amount equivalent to 2 percent of GDP (National Budget 2013). 16  In his 1933 pamphlet “Saving and Circulation Regulation”, Frisch proposed the establishment of an advisory committee on the business cycle, composed of economics experts. 6  BIS central bankers’ speeches  In retrospect, we can acknowledge that simple rules of thumb can often be useful. For my own part, many years’ experience of economic policy have led me to notice the prevalence of the figure 4.17 A current account deficit exceeding 4 percent of GDP is often a harbinger of future problems. Spain is a case in point: government finances were fairly healthy, but deficits were building up in the private sector.

You probably remember that last year, when we completed the asset quality review, this was a topical issue. No problems were found in this sphere, but we did know that some issues needed to be resolved. The new legal amendments help us make a step forward in this direction. 1/2  BIS central bankers' speeches  A global development that we should mention and that will affect every one of you is the beginning normalisation of the leading central banks’ monetary policies. This coincides with a period of economic recovery both nationally and internationally. We will enter a new cycle of increasing interest rates. This is not going to happen overnight. The process is expected to run smoothly and to become more ostensible in 2019. This immediately raises the question of the actions that we all have to take to manage credit risk and regarding expense policies. Let me briefly outline what we are doing with regard to non-performing loans. Over the last two years the improvement in this area is considerable indeed. At the end of 2014 the portion of these loans was around 17%, now it is around 11%. Only a couple of days ago we sent the banking association a draft of guidelines on the continuation of this trend. We expect to receive your views on these guidelines so that we can finalise them as soon as possible.
For example, should a country facing severe liquidity pressures decide to suspend payments temporarily, then the IMF should be willing to support that decision while remedial policy measures are put in place. This support could take the form of bridging finance – so-called IMF lending-into-arrears. The pre-conditions of lending-into-arrears could be designed to ensure that payments suspensions are handled in an orderly fashion – for example, that they are time-limited and equitable, and the debtor is negotiating in good faith. This would reduce uncertainty on the part of both debtors and creditors as to how the end game would be played out, thereby reducing borrowing costs. These sets of procedures represent evolution in, rather than revolution of, the international financial architecture. They are about ensuring the official sector's own actions are clear, consistent and accountable, so that they contribute effectively to the resolution of financial crises. These procedures are fully consistent with the principles of private sector involvement outlined in the IMFC communiqué last September and more recently by the G7 Finance Ministers last month. The framework set out here is an attempt to begin to add some operational colour to those overarching principles. To sum up, both borrowing countries and private sector creditors must expect that, except in exceptional cases of systemic concern, the limits on official finance means that they and they alone will be responsible for dealing with a resolution of problems concerning debt repayment. Standstills and debt restructuring will be only one of many options open to negotiation between debtors and creditors.

This reflects trends that point to smaller household sizes; the young moving out from family homes earlier, including to take jobs in urban cities; and an ageing population preferring to remain in their homes than move in with their adult children. Such demand pressures have been further compounded by income levels that have not increased in tandem with the increase in house prices. All told, the shortage in affordable housing based on 2014 data is estimated at 960,000 units. This could rise to one million units by 2020 if further measures are not taken to increase supply of affordable houses and improve affordability. Financing measures implemented by the Bank along with fiscal measures by the Government between 2010 and 2013 did in fact achieve this to a certain degree. House price growth has 1/4  BIS central bankers' speeches  since moderated to 5.5%, closer to income growth, following measures taken to dampen speculative activities in the housing market and manage high household debt levels. Lending standards that are more aligned with the level of income have also encouraged private developers to shift their focus to the more affordable segments which should help improve supply conditions. Approval rates for housing loans by the banking sector remain high at 74%, with more than 60% of the new housing loans extended for house purchases below RM500,000. Loan rejection rates for houses in the affordable segment have actually been on a declining trend, falling by 18% since 2012.
And for both the IMF and the World Bank, a critical question today is legitimacy. And the way emerging market economies are playing a more important role in the global economy – not only they are representing a larger share of world output as compared to before, but also represent at this point a solution for the crisis – it is imperative that these countries have a proportional weight in the governance structure of the two Bretton Woods institutions. Another fundamental development these days is the increasing role played by the G20, for the very same reason of the growing participation of emerging markets economies in global output. It is clear today that the G7 alone or even the G10 are not able to address all relevant issues that affect the world economy, which are better dealt by a larger group as the G20. Evidently there is always a trade-off, the larger the group, the more difficult its effectiveness. But that is a challenge that we have to face. The first meeting of heads of states of the G20 was an essential step towards making the G20 a more effective decision-making forum. The next topic is a global supervisory authority. The G20 suggested the creation of a college of supervisors, following a Financial Stability Forum recommendation. President Köhler raised here the idea of having the IMF playing this role.

This includes to avoid creating new vulnerabilities, especially from foreign currency debt and financial imbalances, as well as hedging their risks appropriately. Businesses and investors that benefit from a ringgit depreciation should also take advantage of the weaker ringgit. For example, for those in tourism and exports to increase production and capitalise on this opportunity, and for those with a global presence, to reinvest back home. 21. On a broader note, as an open economy, the policy priority for Malaysia is to sustain economic growth within an environment of price stability and to further strengthen economic fundamentals through the necessary reforms. This will provide more enduring support for the ringgit rather than resorting to capital controls or re-pegging as some have suggested, which would create more harm to the economy. Reforms to secure our future Ladies and gentlemen,  22. This brings me to the second half of my speech today, where I will touch on how Malaysia can secure a more sustainable and prosperous future in the face of future challenges and uncertainties. Malaysia has gone through challenging periods in the past and history has shown that we can rise to the occasion when we need to. Let us rewind back some history. 23. Less than 50 years ago, Malaysia was primarily an agriculture- and commodities-based economy – think of tin and rubber. When commodity prices for tin and rubber slumped in the early 1970s, our economy was badly affected. Unemployment skyrocketed to close to double digits.
While communications land, trust is built. This is true to an increasing degree, as the model of trust-building among the public of the past – anonymised and centralised – has been replaced by one which is instead personalised and distributed.37  As institutions used to communicating in a centralised, anonymised way, this shift in trust-building poses new challenges for central banks. Like many public institutions, central banks have historically been better at talking than listening, better at public understanding than understanding the public. Building trust has required central banks, counter-culturally, to engage with far more diverse audiences using different media. Prior to Covid, I spent several years visiting left-behind parts of the UK listening to groups with whom the Bank had not traditionally engaged – workers, charities, community and faith groups. This is the economics of wandering around or “deep hanging out”.38 These visits were one of the most rewarding things I have ever done professionally, a unique source of intelligence on the economy or “folk wisdom”.39 My only regret was committing to visit every county in the UK before having first counted them (there are loads). 35  Haldane (2017b). Haldane and McMahon (2018), Haldane, Macaulay and McMahon (2020) and Bholat et al (2019). 37 Botsman (2017). 38 Geertz (1998). 39 Haldane (2018a).

UK inflation expectations ratcheted down by a further 50 basis points on announcement, as credibility stepped-up.5 The Monetary Policy Committee (MPC) was soon formed and met for the first time in June 1997. Internally, a new machine and procedures were developed to service and support the MPC. The centrepiece of this support was a meeting called “Pre-MPC”. This was a full day of briefing presentations by Bank staff to the MPC. It is, and remains, the closest you will ever get to economic theatre at the Bank of England. Bank Staff sit on one side of the amphitheatre armed with Powerpoint presentations, the MPC sit on the other armed with tricky questions. As luck would have it, I gave the first-ever pre-MPC presentation at the first-ever pre-MPC. The room was rammed with banks of screens, crowds of people and clouds of cigarette smoke – three of the MPC were smokers, including the Chair Eddie George. I was a bag of nerves. Eddie gave me the nod, I pressed the button on my PC to start the presentation – and all the screens went blank and an ear-piecing noise let out around the room, the type of which instantly causes teeth to grind. 3  Haldane (1995). Briault, Haldane and King (1997). 5 King (2002). 4  5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  With my bag of nerves now full to overflowing, I peered through the fug of Rothmans to see Eddie staring back at me.
Reliability of a central bank, in turn, can be assessed based on the accuracy of its projections, its ability to identify financial risks, the quality of its statistics and the safety of the domestic currency and payment systems. For adaptability, a central bank must develop its analytical skills to identify structural changes in the economy and emerging sources of risk, telling them apart from necessary innovation. To this end, it may need to deepen its knowledge of markets and agents, and to be on top of technological developments. Adaptability also depends on the preparedness to react to unforeseen events. Central bank integrity requires appropriate access to information, control of conflicts of interest, strong middle office arrangements in market operations, and effective auditing across different areas and processes. For accessibility, communication of monetary policy is essential, as well as analysis and communication of financial risk, consultation in the issuing of new regulations, and well-structured accountability. The fairness dimension of trust can be enhanced through prevention of crises and risk management, financial education and inclusion, and securing equal opportunities in staffing and promotion decisions. Assessing public trust in a central bank across these dimensions does not need to start from scratch. Instead, it provides a framework to organize existing data in a more meaningful way. It can also shed a new light on how to read and use data coming from different streams of the literature. The substantial work on central bank transparency led by some of our participants in this conference is a good case in point.

Malta, in fact, was not among the first wave of new entrants in ERM II - Estonia,  Lithuania and Slovenia joined the mechanism in June 2004 - despite expectations among many international observers that Malta would have been a candidate. Put simply, we are not rushing. It should also be clear by now that even if we wanted to rush, we would not be allowed to do so. The argument has been made in some circles that the adoption of the euro should be postponed to allow a slower pace of fiscal consolidation. My reaction to that - which is spelled out in my speech to the Institute of Financial Services in November 2004 - is that fiscal consolidation is an end in itself, regardless of whether Malta adopts the euro in the short-term or not because healthy public finances are a fundamental aspect of sound economic management. A country cannot live beyond its means indefinitely. Easing the pace of fiscal consolidation, moreover, would also make meeting the fiscal criteria at a later date even more difficult as it would result in the accumulation of debt and higher debt-service payments, requiring even greater cuts in non-interest spending or increased taxation later on. This would send negative signals abroad about the country's resolve to undertake the necessary reforms, probably leading to a downgrade by credit rating agencies and harming both Malta's image as an investment location and the exchange rate.
But this effect relied on people mistaking nominal for real wage increases and therefore couldn’t last. “There is a temporary trade-off between unemployment and inflation; there is no permanent tradeoff”. Friedman’s main concern was to point out the fruitlessness (not to say danger) of asking the monetary authority to target or “peg” some arbitrary rate of economic growth or the level of unemployment. These are real things that cannot ultimately be affected by monetary policy: “The monetary authority controls nominal quantities…and can use this control to peg [another] nominal quantity – the exchange rate, the rate of inflation, the rate of growth of nominal national income. It cannot use [monetary policy] to peg a real quantity – the real rate of interest, the rate of unemployment, the level…or growth rate of real national income”. For our purposes, the important implication of this conclusion is that if something else shifts those “real quantities” monetary policy cannot offset it. The picture in Chart 5 is one (very high-level) way of representing this “dichotomy” between real and nominal things. The left-hand column divides the original, underlying drivers of the economy in two, the right-hand side does the same for economic outcomes. Solid lines represent long-run, permanent effects, dotted lines temporary ones. The key point is that the long-run channels run purely horizontally: over time, monetary shocks (including from monetary policy) can only affect nominal outcomes; enduring changes in real things – productivity, real incomes, any relative price – can only have been caused by real disturbances4.

The Riksbank has a target for inflation, not for the krona exchange rate – but the exchange rate affects inflation The krona and the role it plays, and will play, for inflation in the future is an issue that has been in focus in the economic debate. The Riksbank discussed this in connection with our decision in February. In brief, our assessment was that the weakening of the krona towards the end of last year is contributing to raising underlying inflation to some extent now at the beginning of 2023. But given that the krona has weakened over a long period of time, it is at the same time uncertain how companies take the exchange rate into account and how great the impact will be on inflation in the period ahead. Another reason why we talked a lot about the krona in February was to dispel the myth that the Riksbank is now completely disinterested in the exchange rate. We wanted to emphasise that the Riksbank actually follows the development of the krona closely. At the same time, I pointed out that this does not mean that we have an explicit or implicit target for the exchange rate. The Riksbank has an inflation target and we adjust monetary policy to stabilise inflation around this target. But there is, as I said, a link between the development of the krona and inflation. If the exchange rate weakens substantially, this leads to higher inflation prospects, which requires adjusting monetary policy. This is true.