samchain/econo-pairs-v1 huggingface dataset:
CCPs are therefore increasingly large participants in the repo markets. The requirements for trades to be centrally cleared are still being introduced, so the demand from market infrastructure to exchange cash for collateral will rise. The rise in importance of CCPs is indicative of the generally increasing role played by non-bank financial institutions in recent years. Since these institutions do not hold accounts at the central bank, they are unable to access the deposit facility. The demand from these non-banks to find a secure place to deposit cash is a contributory factor to repo rates trading below the Eurosystem’s Deposit Facility Rate (DFR). Last but not least, changes in the interbank lending market have led to increased collateral demand. In the period since the onset of the crisis, loan losses and weak profitability have constrained the availability of capital for banks. Unsurprisingly, there has been a marked trend in interbank markets away from unsecured towards secured lending in order to achieve more favourable risk weights for interbank lending. I would also like to acknowledge at this point the role of the Eurosystem’s monetary policy in shifting the balance of the repo market. Since the onset of the crisis, the ECB has undertaken a number of necessary and proportionate measures to ensure the efficacy of monetary policy. The first measure relevant here was introduced to repair the transmission mechanism, which had become impaired and threatened the singleness of monetary policy within the euro area.

At the same time, the APP is said to have withdrawn increasing volumes of high-quality liquid collateral from the market, exacerbating pricing tensions, especially for special bonds. 1/5  BIS central bankers' speeches  While monetary policy may, in some circumstances, exacerbate repo market tensions, I believe it to be far from the only factor at play today, or indeed the most important one. The situation in the repo market today in fact reflects a confluence of longer-term trends that have affected both the supply and demand for good collateral. I will review some of these trends in a moment. Before doing so, I would like to recall an important point. Our mandate is clear: to deliver price stability. This is our primary objective and the sole orientation for our policy. What we aim to do is to act in a way that is necessary, proportionate and that limits side-effects. This is why we have designed our programmes in such a way as to deliver our objective without creating excessive distortions in market functioning and price discovery. And it is also why we have taken measures to mitigate some effects of our measures on repo markets. These measure, too, are governed by the principle that they must be necessary and proportionate, as well as not being in conflict with our price stability mandate.
It is interesting that there was evidence of financial markets making their own switch in valuation convention during the course of the crisis. As funding maturities shortened, the probability of asset liquidation rose. It became rational, then, for investors to begin valuing even banking book assets at market prices, as in Chart 7. For a time, this process appeared to generate its own downward dynamic, with shortening maturities and falling asset prices eroding the impliedly mark-to-market solvency position of banks in a liquidity/solvency loop. Some have argued this downward dynamic itself justifies switching-off fair values. But the perils of doing so are clear. Persisting with an inappropriate valuation metric may give an inaccurate picture of banks’ true solvency position. It will also reduce banks’ incentives to adjust funding structures to guard against such a dynamic. It is precisely such risk management incentives that appear to explain the relative success of some firms, including Goldman Sachs, during this crisis. Therein may lie a lesson. Conclusion The fortunes of fair value have waxed and waned historically, particularly at crisis time. So it is no surprise that fair value is under attack today. We may be at yet another pivot point. With financial markets still thick with fog and filthy air, now would be an unfortunate time to starve balance sheets of the sunlight provided by fair values. Blocking out the sun or, worse still, claiming it revolves around the earth will not serve banks or regulators well in the longer run.

4  BIS Review 104/2006
Second, the guidelines ensure the necessary flexibility to allow automatic stabilisers to work. Third, they allow for careful countercyclical policy.5 Structural public non-oil deficits have counteracted movements in the output gap since the fiscal rule was adopted. In particular, reserves accumulated in the fund provided fiscal leeway during the economic setback in 2008 and 2009. At the same time, cyclical fluctuations in mainland production are strongly influenced by petroleum-related demand. This indicates that there is a strong link between Norway’s mainland output gap and the oil price. Chart: The size of Norges Bank’s balance sheet including the oil fund There is a direct link between the fund mechanism and the central bank’s purchases of foreign exchange. Petroleum taxes are paid in Norwegian kroner. The central bank buys foreign exchange to transfer to the fund in order to secure the necessary net capital outflow. The fund ends up on the asset side of the central bank’s balance sheet and these assets are exactly offset by government claims on the central bank. Bank reserves held in the central bank are unaffected by this and have remained low and stable in comparison. Chart: Real exchange rate and oil price The krone clearly responds to oil price shocks. However, compared with other commoditybased economies, like Canada, Australia and New Zealand, fluctuations in the real exchange rate have been moderate.6 The build-up of the fund may have helped contain a temporary real appreciation during a period of high oil revenues. 5  Norwegian fiscal policy has become more countercyclical. See e.g.

4  BIS central bankers’ speeches  Management of the fund Besides making monetary policy decisions, one of Norges Bank’s main tasks is to manage Norway’s oil fund. Chart: Governance structure The Ministry of Finance holds the political responsibility for the fund. The overall management principles and strategy are anchored in parliament and the Ministry reports to parliament at regular intervals. The management of the fund is fully delegated to the central bank – to Norges Bank. Our task as manager of the fund is strictly commercial: to maximise returns within the guidelines defined by the government. All investment decisions are made by Norges Bank Investment Management, a separate division within the central bank. Neither Norges Bank’s Executive Board nor the Ministry of Finance is involved in any individual investment decisions. This governance structure was set up to ensure that the fund was not used as an instrument of foreign policy. The purpose of the fund is to ensure that future generations receive their fair share of Norway’s petroleum wealth. To achieve this, the fund was designed to be invested for the long term. Size and a long investment horizon are the fund’s two key characteristics. Together, they form the backbone of the fund’s investment strategy: •  First, the fund’s long investment horizon implies substantial risk-taking capacity. We are able to act as a countercyclical investor. •  Second, the fund’s size makes it possible to take advantage of investment opportunities worldwide, in a number of asset classes.
In the primary market, government’s demand for funding is reflected in the increased yields of government securities. However, the trajectory of yields retained its trend, showing low inflation expectations by market agents. As regards the economy’s performance outlook, our projections and assessments suggest a continuation of economic growth, in terms relative to those of the first quarter. Composition of aggregate demand is expected to be different to the one of the first half of the year: private sector of the economy is expected to be more vivacious in the second half, while the contribution of the public and external sectors are expected to be more moderate. Size and speed of the private sector recovery shall define the stability of economic growth in the future. In spite of assessments for increased aggregate demand, economic activity in Albania is expected to remain below its potential, thus conditioning the continuation of spare  2  BIS central bankers’ speeches  capacities in the economy in the period ahead. Subsequently, inflationary pressures originating from the aggregate demand are expected to be contained. In addition, foreign prices effect is expected to be more moderate in the upcoming months while inflation expectations of economic agents continue to be within the target band. Consumer price inflation is expected to continue its downward trend in the next months, gradually approaching the Bank of Albania target. Taking into consideration the information above, the Supervisory Council concluded that inflationary pressures in the medium term are contained.

Economic activity relied on the public sector and external demand, although more moderately than in the first quarter of the year. In the meantime, the private sector demand appears sluggish, also conditioning our projections for economic growth for the rest of the year.   Private investments continue to be slow, compared with their historical rates and the country’s needs for quantitative and qualitative production capacities. This  BIS central bankers’ speeches  1  The expected easing of funding terms during the second half of the year as well as the decline of perceived uncertainty by businesses and individuals are expected to be accompanied by the somewhat more positive performance of private consumption and investments in this period.   Stimulating nature of fiscal policy during the first half of the year is reflected in a positive contribution of public expenditures to economic growth. For the first seven months of the year, public spending increased by 5.9% in annual terms. Moreover, performance of fiscal revenues was slow, reflected in their annual growth of 2.3% during this period. This behaviour of income and expenditures is materialised in a higher budget deficit than a year earlier. Fiscal impulse to the economy was consistent throughout this period. It showed tendencies of moderation during the second quarter, which are expected to strengthen further during the rest of the year, in conformity with the revised budget of 2011.   Contribution of foreign demand to economic growth was lower during the second quarter of the year.
Consequently, shareholders were not covered by the government guarantee and would lose their equity investments to the same degree as the Government had to provide support for their banks. This provided an incentive to the owners to avoid applying for state support unless it was absolutely necessary, to minimise the amount of support and to reduce the time-period of receiving support. We used a very simple, but clear and easy-to-explain, method of identifying banks which should be given support in order to survive and those which should be liquidated or merged. First you write-down the bank’s bad loans. Then you test the bank in a micro- and macroeconomic model. If the model indicates that the bank will be adequately profitable again in the medium-term future it should be given support to survive. But if the model indicates that the bank will never be profitable again the bank will not be of economic benefit to the society and should thus be closed or merged in an orderly manner. 4. Strict valuation rules were used from the onset of the crisis. This was deemed necessary in order to restore confidence but the policy was not without risks. All bank assets had to be marked-to-market even if the market, such as that for real estate, was exceptionally weak. This led to higher bank losses and a weaker financial position than if a somewhat more flexible valuation rule had been adopted.

Mr. Heikenstein discusses the Swedish financial crisis of the early 1990s Speech by the Deputy Governor of the Bank of Sweden, Mr. Lars Heikenstein, at a seminar arranged by the Swedish embassy held in Seoul, Korea on 15/7/98. Let me begin with a thank you to the organisers of this seminar. I am honoured to have the opportunity to share with you some experiences from the Swedish financial crisis in the early 1990s. 1. Introduction An IMF study from 1996 showed that in the past fifteen years, 132 of the Fund’s 182 member countries had experienced macroeconomic and/or financial crises. Today the figure is even higher. Crises are a recurring phenomenon. In spite of every effort to prevent them, I fear that crises will continue to occur. We should therefore use the opportunities to learn from each other, both in order to avoid making the same mistakes and to find the appropriate correctives sooner. Needless to say, there are no single “best solutions”. Crisis situations are always specific in some respects, not least with regard to their structural and political environment. Had they not been specific, they would probably never have occurred because they would have been “spotted” in advance. Having said this, however, there are a number of globally accepted “truths” about what constitutes a good response to crises. Discussions around crisis situations are usually divided into two parts: crisis prevention and crisis management. In this presentation I will be focusing on the latter.
As a result of these crises, and in collaboration with other international agencies and with national authorities, the Fund conducted a far-reaching review of the so-called “international financial architecture”. Numerous initiatives were adopted over recent years with the aim of lessening the frequency and cost of crises and of improving the stability of the international monetary system. Accordingly, there has been a notable effort to increase the transparency of member countries’ economic policies and to improve the information at the disposal of economic agents and, in particular, international financial markets so that the latter may exert market discipline more effectively. Specific measures have been adopted to reinforce financial systems. And it has also been sought to improve the crisis prevention and crisis resolution mechanisms available to the international financial community, including those particularly difficult cases in which sovereign debt restructuring proves inevitable. Moreover, instead of relying on exhaustive international regulations which, as experience has shown, are difficult to approve and even harder to implement, all these reforms have relied on voluntarily mechanisms, based frequently on the adoption of codes of best practices, international standards and systems that offer incentives for their application.

Not only have we worked hand-in-hand for many years on various matters; we also share a similar mission and vocation, as well as similar concerns in many respects. The world has changed in the past 60 years, and the transformations both institutions have undergone bear witness to this. We have moved from a system of fixed but adjustable exchange rate parities to one where floating is the norm. Economic integration has made enormous headway during these years, both multilaterally and through regional agreements, the European Union being perhaps the most advanced. From a world of widespread capital controls and multiple exchange rates, we have moved to a very different one in which enormous cross-border flows take place daily in the form of a wide array of financial instruments, among which derivatives, which were virtually non-existent at the end of the Second World War. Undoubtedly, free capital movements have contributed to a significant improvement in the allocation of global saving to more profitable uses, although they have also entailed a swifter transmission of financial shocks across highly integrated markets, a phenomenon behind some of the recent crises. Economic policies - fiscal, monetary and structural - have been increasingly geared to providing a framework of stability and appropriate incentives for decision-making by agents. In addition to contributing to smoothing cyclical fluctuations, these policies help set in place the right conditions to achieve sustained economic growth based on flexible, competitive and efficient markets where comparative advantages are tailored to the changing circumstances of international markets.
In the latter part of the 1800s, Norway benefited greatly from free trade and free capital movements and became a relatively prosperous country. Access to international technology, competence and capital were important when the first industrial base was established in the late 19th century. The banking sector also expanded rapidly in this period. As this chart shows, value added in manufacturing and services became more important and increased as a share of total GDP. Employment and value added in agriculture, fisheries etc., on the other hand, declined markedly. By the beginning of the 20th century, the standard of living in Norway did not lag behind that of other European countries. This change in industry structure is necessary and lies at the heart of economic development. The second half of the 19th century also represents a golden age for Norwegian cultural development, with the literature of Henrik Ibsen, the music of Edvard Grieg and later the paintings of Edvard Munch. In the period preceding the First World War, the world experienced a period of strong growth in trade and cross-border capital flows. There were few political barriers and major technological advances fostered growth in trade. Prosperity increased. But this period was interrupted, and in the interwar period protectionism gained ground, with trade barriers and a contraction in international trade. This was combined with deep economic recessions. Economic policy after the Second World War After the Second World War, a strong belief evolved in Norway that the economy could be controlled and steered in the desired direction.

2  Schoenmacher Dirk (2015), “Stabilizing and Healing the Irish Banking System: Policy Lessons”, CBI-CEPRIMF Conference, Dublin, 15 January 2015. 3  IMF Country Report No. 14/165. BIS central bankers’ speeches  1  was also known. 4 Losses were considerable, equity had to be written down sharply and the bank needed fresh funds to stay afloat. At that time, Foreningsbanken was indisputably Norway’s largest bank, with total assets of more than NOK 600 million, equivalent at the time to 16 percent of GDP. On behalf of the bank’s board of directors, the businessman and former Prime Minister Christian Michelsen argued in favour of a rescue package in negotiations with the authorities. Michelsen warned Norges Bank of the problems that would result from allowing the bank to fail. Michelsen requested a government guarantee for the bank, or at least a NOK 100 million loan. There were drawn-out negotiations between Norges Bank, headed by Governor Nicolai Rygg, and the board of Foreningsbanken. The resumption of pre-war gold parity, fiscal concerns and Norges Bank’s financial position were crucial for Norges Bank’s choice. But Rygg also emphasised the importance of Norges Bank’s not supporting activities that should be wound up, activities that he referred to as “unsound lending and non-viable businesses”. The negotiations ended with Norges Bank’s refusal to provide support. “We’ll survive the bank’s closure too,” Rygg is reported to have said. “Even if you’re skinned alive, you’ll still live”, Christian Michelsen responded. 5 In any event, there would be pain.
The PRA’s recent survey of 90% of the UK banking sector found that these horizons averaged four years – in 3  See IPCC (2018), ‘Global Warming of 1.5 °C,’ http://www.ipcc.ch/report/sr15/ As estimated at the time of the Paris Accord. According to the UN Emissions Gap Report (2017), full implementation of the unconditional pledges of the Paris Agreement is consistent with a temperature increase of 3.2° by 2100, relative to pre-industrial levels. Implementation of the conditional NDCs would lower the projected warming by 0.2°. 5 IPCC (2018). 6 See PRA (2015), ‘The Impact of Climate Change on the UK Insurance Sector’, September 2015. 4  3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  other words, before risks would be expected to be fully realised and prior to ambitious climate policies taking effect.7 Our latest report finds that the majority of banks are starting to treat the risks from climate change like other financial risks – rather than viewing them simply as a corporate social responsibility issue. For some firms, oversight of the financial risks from climate change and overall responsibility for setting the strategy, targets and risk appetite relating to these risks is beginning to be considered at the board level. Banks have begun considering the most immediate physical risks to their business models – from the exposure of mortgage books to flood risk, to the impact of extreme weather events on sovereign risk.

Over 500 organisations have endorsed the TCFD recommendations, with a total market capitalisation of $ trillion. 9  See TCFD (2017), ‘Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures,’ June 2017. 5  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  5  The implementation report issued by the Task Force in September 201810 – a year after the recommendations were first published – assessed some 1800 companies (that made some reference to climate in their reporting) using artificial intelligence, and analysed in more detail an additional 200 of the largest companies, drawn from eight representative sectors. Across both, it found that a majority of companies already disclose information in their 2017 filings that aligned with one or more of the TCFD’s recommendations. Reporting by the largest companies appears to have been more sophisticated – with a higher share of the firms reporting against more of the TCFD recommendations. This is remarkable given companies only had about six months to respond to the final TCFD recommendations in their 2017 filings. That said, compared to both the recommendations and user expectations, more progress is needed.