samchain/econo-pairs-v1 huggingface dataset:
Moreover, most of these banks’ capital is of the highest quality, and thus loss-absorbing. However, in the current environment, the resilience of these banks, as measured by the regulatory capital indicators, is overestimated.   First, certain risks are not captured by the regulatory requirements. This applies, in particular, to interest rate risk in the banking book, which covers traditional deposit and lending activities. In the current situation, with historically high interest rate risk exposures, this is a significant shortcoming.   Second, the current capital requirements have a procyclical effect. Thus rising real estate prices, by causing loan-to-value ratios to fall, can lead to lower capital requirements. Given the growing imbalances on the real estate market, banks’ resilience, as measured by the regulatory capital indicators, is overestimated.   Third, the low level of diversification of most domestically focused commercial banks is not taken into account in capital requirements. The main focus of these banks’ business activities, and their risk exposures, relate to mortgage lending. This concentration of activities is compounded by a geographical concentration at the cantonal or regional level. In the light of these factors, the SNB considers that action is needed on two fronts: First, the capacity of some banks to bear the risks incurred must be reviewed, and strengthened if necessary. This applies particularly to banks which have cumulative risks, such as high interest rate risk and high exposure to the mortgage and real estate markets. FINMA’s microprudential measures will play a key role in this regard.

Despite the fact that this progress has been achieved, the SNB considers that the big banks’ loss-absorbing capital is still below the level needed to ensure sufficient resilience. This assessment is based on three factors: First, in the event of a further escalation of the euro  BIS central bankers’ speeches  1  area crisis, the loss potential for the big banks would be substantial compared to their lossabsorbing capital. As I have just pointed out, the big banks have only moderate direct exposure to the most vulnerable peripheral euro area countries, yet if the crisis in these countries were to deepen, a general deterioration in economic and financial conditions could be expected. In such a case, the potential losses for the banks would extend to a significant portion of their credit and trading positions. Second, the SNB’s assessment is based on a comparison with capitalisation levels at other international big banks. This comparison uses the definitions of the Basel III framework once fully implemented. These definitions yield the most accurate picture of a bank’s true resilience. The comparison based on these definitions reveals that both Swiss big banks – and in particular Credit Suisse – are below the international average. Given the importance of the big banks for the Swiss economy and for financial stability, an above-average capitalisation level would be appropriate. Third, the leverage of both big banks remains very high, despite a reduction in risk-weighted assets.
Page 6  That remains my absolute priority – and influences how I see the prospect for both Bank Rate and the Bank’s balance sheet, as I will discuss in a moment. Drivers of the economic outlook But before doing so, allow me to review the three main drivers of the MPC’s economic outlook, as embodied in its recent forecast: international energy and good prices; domestic business and labour market conditions; and the outlook for monetary policy. International energy and goods prices The MPC’s most recent inflation forecast does not make for pretty reading. Inflation is projected to reach double digits towards the end of this year, a significant overshoot of the 2% inflation target. The bulk of this overshoot is accounted for by developments in international goods and energy prices. Bottlenecks in international markets, stemming from a pandemic-induced combination of changes in the global pattern of consumer spending and disruptions to global supply chains, have driven up the price of tradable goods, for which the UK is essentially a price taker. Belying tentative signs these bottlenecks were easing towards the end of last year, the new Covid wave in China and Russia’s invasion of Ukraine have exacerbated supply disruptions, prolonging the inflationary impulse. Chart 3: CPI inflation and CPI inflation excluding energy (a)  (a)Energy prices include fuels and lubricants, electricity, gas and other fuels.

On the other hand, significant increases in international energy, food and goods prices over the past year imply a substantial squeeze in UK residents’ real incomes, which will weigh on future demand and employment. Looking beyond the shorter term, UK inflation is set to fall as global commodity prices stabilise, bottlenecks in global supply chains ease, and domestic inflationary pressure dissipates as the real income squeeze opens up a margin of economic slack. These two elements define the two sides of the narrow path along which the MPC has to navigate. The MPC sees an upside skew in the risks around the inflation baseline in the latter part of the forecast period. The balance of risk is tilted towards inflation proving stronger and more persistent than anticipated in that baseline. A number of underlying structural developments point in this direction. For example: (1) Brexit may  Page 14  have reduced the contestability of UK labour markets by EU immigrants and workers;[13] (2) the broader globalisation process – which helped contain external inflationary impulses to the UK around the turn of the century[14] – looks to have stalled and may be in retreat, reducing the competitive pressure on UK producers to contain costs; and (3) the impact of aging and longerterm health consequences of the pandemic may have led to a decline in UK labour force participation.
This is because the difficulties besetting financial markets have made these products less attractive to customers and because institutions have changed their product mix. It thus seems that their customer sales focus has moved from fee-generating products which they themselves market, such as pension and investment funds, certain insurance products, etc. towards deposits. This has unquestionably helped traditional fund raising at a time like the present, but at the cost, irrespective of other considerations, of lower fee and commission income in profit and loss accounts. Another area in which institutions' income statements have come under pressure is in gains on financial transactions, which decreased significantly in 2008, largely due to the difficulties besetting financial markets, which have adversely affected trading book gains. In any event, as mentioned above, in the Spanish banking model the weight of income from financial transactions is low compared with that in the originate-to-distribute model. Operating expenses grew moderately, albeit still at a rate similar to that of activity. This was the result of changes in their two main components: personnel costs, which, with a weight of nearly 60% of the total, grew by nearly 7%, and administrative expenses, which increased by 9%. These rises, which can be considered high in the current circumstances, meant that both the relative weight of operating expenses in average total assets and the efficiency ratio showed signs of stagnation in 2008, after having improved continuously over recent years. Finally, loan loss provisioning expenses increased sharply against a backdrop of rapid and significant rises in bad debts.

And as I mentioned earlier, I am expecting further improvements in economic activity, with real GDP growing at around 3 percent over the next 18 months and the unemployment rate declining further to a little over 5 percent by the end of 2016 – in line with what I think is its long-run neutral level. So I do see us getting back close to our policy goals over the next two to three years. A balanced approach to monetary policy It is important for me to say that this forecast is predicated on the assumption that the FOMC takes a very patient approach to reducing policy accommodation. Let me elaborate on why I think this is appropriate. I see two important and divergent ways my forecast could go wrong. One is that I may be overestimating the underlying strength in the real economy, so that a successful and sustained exit from the ZLB may be more difficult than I currently believe. Guarding against this risk calls for a more patient removal of accommodation. The second is that I may be  BIS central bankers’ speeches  3  wrong about the inflation outlook, and we could be poised for a much larger rise in inflation than I am forecasting. This risk calls for more aggressive rate hikes. How do I think policy should balance these divergent risks? How should they affect the FOMC’s strategy of pursuing a balanced approach to achieving our policy goals?
Since the end of the Great Recession almost six years ago, U.S. growth has averaged a somewhat disappointing 2.3 percent. But growth has picked up recently, and the latest Blue Chip forecast is for growth to average slightly below 3 percent over the next year. There are good reasons to think that a period of stronger growth can be sustained. •  Household balance sheets are in much improved condition, with total household liabilities well below their 2008 peak, and debt service burdens at the lowest share of disposable income in more than 30 years. Moreover, consumers are benefitting from the positive wealth effect of higher house and equity prices. •  Labor market improvement has picked up pace, with payrolls gains over the last several months the strongest since the mid-1990s. Workers are finally beginning to see at least modest real wage gains. And the U.S. unemployment rate has fallen to the lowest level since mid-2008. •  The recent drop in oil prices is providing a significant boost to household spending power with nearly a percentage point increase to real disposable incomes. •  The housing sector is now in much better balance. The inventory-sales ratio for homes is near, or even slightly below, levels typically considered “normal,” and there has been a significant drop in the fraction of households carrying mortgage balances in excess of the value of their homes. •  The fiscal restraint that has held back growth in recent years has given way to a more neutral posture.

The FOMC has taken a number of steps in recent years to increase transparency and improve communications. This includes press conferences by the Fed chair following FOMC meetings; the publishing of growth and inflation forecasts of FOMC participants; participants’ projections of the Federal Funds rate at various horizons; and a concerted attempt to lay out the guideposts that the FOMC will look at to assess progress toward its mandate. These steps are aimed at reducing the risk that Fed policy adjustment might be associated with undue market volatility. The stance of Fed policy will be far from the only thing affecting the global landscape facing EMEs. As the FOMC considers the appropriate timing and pace of moving to a less accommodative policy stance, central banks in the Euro area and Japan are in the process of implementing additional easing measures. Other important factors affecting the global terrain include China’s slowing of credit growth without derailing economic growth, the behavior of oil and other commodity prices, and EMEs’ own domestic fundamentals and growth dynamics. Fed policy will be only one factor. EME fundamentals are likely to be an important determinant of how EME financial conditions respond to Fed policy normalization. This was one of the key lessons from the Taper Tantrum. At first, market pressure was somewhat indiscriminant and then later became more discerning with respect to EME fundamentals. Financial conditions tightened, especially for countries with fundamental vulnerabilities including: large current account deficits, a heavy reliance on portfolio inflows, and high and above-target inflation rates.
We therefore consider risks to price stability broadly balanced and mainly relating to the outlook for economic activity, higher than expected oil prices, as well as higher than expected indirect taxation and administered prices. •  Since the beginning of the year, financial conditions have continued to improve gradually with corporate bond spreads, stock market volatility, money market term spreads and government bond spreads declining. Is this improvement genuine or is it due to policy measures by governments and central banks? If the latter was true this would be a classical case of moral hazard. These measures cannot be sustained for ever. In this sense, there is no room for complacency. There is rather the risk of a reemergence of moral hazard once temporary measures by governments and central banks are perceived by financial market participants as permanent. •  Where do we stand with financial sector adjustment? Several estimates have been made, both by private and public sector institutions, of the potential losses to be absorbed by the financial system as a consequence of the crisis. Let me illustrate the situation with some key figures: for euro area financial institutions, we estimate the total losses over the period 2007-2010 to be around USD 650 bn. Write-downs on securities have so far amounted to over USD 200 billion. Banks have provisioned and written off over USD 150 bn of their loan exposure. Therefore we estimate further potential losses to be a little below USD 300 bn.

•  Over the past months good progress has been made in the various areas and the momentum needs to be maintained to establish a sound regulatory framework. Work has been completed on a number of issues (e.g. enhancements of Basel II, as mentioned below) while other areas still need more consideration before they will be finalised by the end of 2009 or at the beginning of 2010. •  The Basel Committee on Banking Supervision (BCBS), which is the driving force regarding initiatives in the area of micro-prudential regulation, issued in July 2009 a final package with measures to improve the Basel II framework. •  On accounting the IASB (International Accounting Standards Board) is taking various initiatives and shows openness to collaboration with regulatory authorities. A couple of important projects are under way. •  But significant challenges remain. Again: International bodies and governments must not lose momentum in their efforts to strengthen financial regulation and supervision. All the aforementioned issues equally deserve due consideration and should be addressed as a matter of urgency. BIS Review 102/2009  The world economy after the crisis The crisis is not over yet. However, it is worthwhile discussing some preliminary reflections about the world after the crisis. •  First, beyond these regulatory and supervisory challenges, a successful crisis resolution will also impinge on economic structures world wide. The global growth model of the last 15 years has failed.
In combination with transparent processes, including recurrent evaluations by national parliaments or in other arenas, this could put pressure on politicians to act. Is the Stability and Growth Pact not sufficient in itself? After all, it is designed to ensure fiscal discipline in the member countries. The answer here is clear; it could have been had the Pact only been followed. But now the situation is different. As the Pact has not been followed by the larger euro countries, there is a risk that the newcomers will take the same attitude. However, this could be a dangerous conclusion. It would be wiser to look at the issue the other way round. Both Germany and France attained the 3 per cent mark for the public deficit criterion by the narrowest of margins despite what was a global upturn. But they clearly did not do enough afterwards in terms of consolidation, despite intense pressure from many of the smaller countries. Today, this is a significant problem not only for the euro area as a whole; the countries themselves are also paying the price in terms of a deeper and longer downturn. This, if anything, is a warning to new euro adopters. Conclusions Having raised these complex issues, let me be very clear about my sentiments. I do not wish to see any new obstacles or separate rules for the new member states; equal treatment is essential.

Following the finalisation of the Basel III reform in December 2017, the main focus for financial regulation is no longer bank solvency, but non-bank liquidity. We nonetheless need to avoid making two mistakes. The first would be to favour one sector over another, be it banks or shadow banking: the existence of opportunities for regulatory arbitrage could to lead to the transfer of capital-intensive activities to less regulated, or even unregulated entities, which would be counterproductive. The other mistake would be to impose banking regulation on shadow banking, as the risks are not the same; in particular, the same 2/3  BIS central bankers' speeches  capital requirements cannot be applied. At the global level, the non-bank sector needs to be provided with microprudential and macroprudential regulations that are tailored to its particular business model and risks. With regard to macroprudential regulation, France is a pioneer in this field with its decision to introduce, as of 1 July this year, a measure regarding large enterprises that also takes into account their market debt. We shall publish details on how it will work this week. But we need to be honest with ourselves and admit that our experience of using macroprudential tools outside the bank sector is still very limited. One of our priorities in terms of regulation should also be to develop liquidity management tools for investment funds, and to refine the measurement of their leverage, two issues that, fortunately, the FSB has already identified.
Ms Hessius comments on the inflation target and the state of the economy in Sweden  Speech given by Ms Kerstin Hessius, Deputy Governor of the Sveriges Riksbank, before the Swedish Economic Association, in Stockholm on 12 December 1999. *  *  *  I would like to begin by thanking you for inviting me to come and speak at this meeting of the Swedish Economic Association. I am looking forward to this evening’s discussion. Sweden is now in its seventh year with an inflation target since it was announced at the beginning of 1993. A number of other OECD countries have also been pursuing inflation target policies for several years, so by now there is a rich fund of experience to draw on. This evening I intend to take up some of the challenges for monetary policy under an inflation target regime, bearing in mind in particular the position of Sweden. How active should an independent central bank be in stabilising economic conditions? What form of interplay between monetary and fiscal policy leads to favourable economic development when monetary policy is directed towards an inflation target? Naturally this is a big question, so I intend here to confine myself to a few key points. In conclusion, I thought I would make a few remarks on the “new economy”. Stable conditions rather than stabilisation policy Stable conditions in the form of less variability in the real economy mean enhanced welfare for society as a whole.

Households and companies may feel growing uncertainty both about developments in public revenues and expenditure, and about the formulation of monetary policy. This can be costly for the economy if it leads to a failure to carry out investments and to unnecessarily cautious decisions about the allocation of resources. To sum up, then, it becomes more costly to pursue an excessively expansive fiscal policy when monetary policy is guided by an explicit inflation target. A good policy mix makes for better conditions A better policy mix arises if the orientation of fiscal policy does not make for higher inflation risk premiums. It can avoid this if the orientation of fiscal policy appears to be sustainable in the long run. The surplus-target in the public finances is a good example of this. One means by which the confidence felt by the general public in economic policy can be monitored consists of inflation expectations, which should not diverge substantially from the Riksbank’s inflation target. When expectations of inflation diverge from this target in the longer term - whether upwards or downwards - it implies that monetary policy should be adjusted so as to steer expectations back towards the target. In this connection it is important to observe that a central bank whose inflation target commands high credibility often has more scope for acting than one that has little credibility. Assume, for example, that an economy where the credibility of the inflation target is high experiences a positive disturbance to the business cycle, leading to higher demand.
5  For an in-depth description of the risks linked to household indebtedness in Sweden, see for instance, Alsterlind Jan, Ulf Holmberg, Kristian Jönsson, Björn Lagerwall and Jakob Winstrand, “Risks to the macro economy and financial stability arising from the development of household debts and housing prices”, Council for Cooperation on Macroprudential Policy’s memo 6, Sveriges Riksbank. 6  One can read more about this in, for instance, the article “Financial imbalances in the monetary policy assessment” in the Account of Monetary Policy 2013, Sveriges Riksbank. BIS central bankers’ speeches  3  However, there was agreement among the Executive Board on the need to cut the repo rate to bring inflation up to the target within the forecast period. Although the economic prospects look fairly good, inflation is too low, and has moreover been lower than expected recently. Our assessment is that inflationary pressures will be lower in the coming period, too, compared with the assessment made in April (see Figure 10).7 A further factor that I mentioned earlier, is that policy rates abroad are expected to be lower (see Figure 2). When the policy rate is higher in Sweden than abroad, the krona exchange rate tends to strengthen, which contributes to lower inflation through lower import prices. All else being equal, lower policy rates abroad therefore imply that interest rates in Sweden will also be lower, so that the krona does not strengthen too much (see Figure 5 for the latest forecast for the krona).

BIS central bankers’ speeches  7  GDP growth in the euro area are to some extent counteracted by the good development of the economies in the United States, the United Kingdom and China. In the United States, GDP grew rapidly during the second quarter, and labour market data indicate that developments will remain strong. Prior to the next monetary policy meeting, we will of course continue to monitor developments in Russia and Ukraine, and we will analyse what they may mean for economic prospects abroad. With regard to developments in Sweden, GDP growth was somewhat weaker during the second quarter than we were expecting in July. Household consumption and housing investment remained strong, while exports remained weak. The indicators we have received regarding growth give slightly mixed signals. The business tendency survey, which summarises the situation for the Swedish economy, fell somewhat in July. On the other hand, the purchasing managers’ index for the services sector for the same month increased substantially. One can also note that the outcomes for unemployment received for June and July on the whole have been somewhat lower than the July forecast. The inflation figures for June and July show that both the CPI and the CPIF increased somewhat faster than the forecast in July. As you may note, the information received since the monetary policy in July tends to point in different directions, and it is too early yet to say how monetary policy will be affected.