samchain/econo-pairs-v1 huggingface dataset:
For example, one of the banks under our direct supervision published its own climate strategy – which aims at achieving net zero emissions for its lending portfolio by 2050 or sooner – in tandem with a number of (interim) targets and related metrics, as well as the progress made in meeting them. For each of these targets and metrics, the bank discloses the sectors covered, the underlying methodology and the scenarios used to draw up benchmarks. For the methodologies and scenarios, it reports on the options it chose, the data sources it used and the changes it made with respect to the previous disclosure. Another bank endeavoured to align its portfolios with science-based transition pathways, including technology pathways originating from the International Energy Agency’s “Net Zero by 2050” report. The bank disclosed dashboards that displayed the performance of its loan books in various transition sectors, such as power generation, oil and gas, automotive, steel, cement and real estate, against a science-based transition pathway. It also disclosed the precise indicators used, the underlying methodologies and the reference scenarios for each indicator. For each of 3/4  BIS central bankers' speeches  the indicators, the bank then disclosed its current and projected performance against the pathway and set associated targets. Importantly, many of the banks raising the bar in C&E disclosures are small and medium-sized – showing that remarkable progress is achievable by all.

In that respect, the strict separation between monetary and supervisory functions is instrumental in safeguarding against potential conflicts of interest between these two functions. BIS central bankers’ speeches  3  Moreover, finishing the repair process requires actions in other policy areas. At the European level, the most pressing is to complete the Banking Union. An effective Single Resolution Mechanism is particularly important, as it will further reduce the sovereign-bank nexus and thus work towards the elimination of fragmentation across national borders. But fixing the financial system is not a sufficient condition for economy recovery. Healthy banks can better intermediate between those who save and those who want to invest, and are thereby necessary for future growth. Yet, proper framework conditions need to be in place so that the right incentives to invest exist. For example, it is important that firms can flexibly adjust to changing economic conditions, and that excessive rents in sheltered sectors do not distort the allocation of capital. Creating such framework conditions is largely the responsibility of national policies. Let me therefore now turn to the national dimension of the reform process. Improving sustainability and growth At the time of the sovereign crisis, the most pressing preoccupation of national governments was to repair public finances and restore the trust of financial markets. Therefore, fiscal consolidation was necessarily their first priority, and the national reactions in this domain were both forceful and effective. Let me remind you of some key facts.
Unlike the traditional financial supervision – microprudential policy – which focuses on the risks in individual institutions, the focus of macroprudential policy is on risks in the financial system as a whole. The European Systemic Risk Board, ESRB, began its operations in 2011, with the task of identifying threats to the financial stability of the EU. However, the ESRB has no binding instruments at its disposal; it can instead issue warnings and recommendations. For instance, in January 2012 the ESRB published a recommendation to EU countries regarding national mandates for macroprudential policy. This stated that responsibility for macroprudential policy should rest with an institution or council and that this body should have control over appropriate tools to attain its objectives. The way the framework for macroprudential policy has been set up differs somewhat from country to country. As you know, we have had such a framework in Sweden now for a year, with Finansinspektionen (the Swedish Financial Supervisory Authority) having the main responsibility for the macroprudential policy tools. The new framework also entailed establishing a forum for representatives of the Government, Finansinspektionen, the Swedish National Debt Office and the Riksbank to meet and discuss questions of financial stability, what is known as the Financial Stability Council. To some extent, macroprudential policy involves taking a backward step towards a greater element of regulation in the credit market. As we see here, history has a tendency to repeat itself.

We remain ready to enforce the minimum exchange rate, if necessary, by purchasing foreign currency in unlimited quantities, and to take further measures as required. I would like to take this opportunity of stressing, once again, that the minimum exchange rate does not represent a peg to the euro. The Swiss franc is able to move freely above CHF 1.20 per euro. As I said, it is high, and should weaken with time. For many years, interest rates have been at a low level due to the overall economic situation. However, the danger of a longer period of low interest rates is that imbalances can build up, and we can indeed observe such a development in the Swiss mortgage and real estate markets. Allow me therefore to give you our assessment of this situation. Mortgage and real estate markets and countercyclical capital buffer The Swiss residential mortgage and real estate markets have been growing strongly for some time, giving rise to imbalances. Some time ago, these reached a level, in the view of the SNB, that poses a risk to the stability of the banking system and hence the Swiss economy. Why does the SNB not simply increase interest rates in order to slow down the mortgage and real estate markets? Although an increase in the interest rate would have a dampening effect, it would, at the same time, intensify upward pressure on the Swiss franc and, given the current situation, threaten price stability. Consequently, an interest rate increase is not an option.
4  BIS Review 113/2010  Change in interest rate forecast over time  The interest rate forecast is an expression of a balance between various monetary policy considerations and a response pattern that households, firms and financial institutions can build on. The interest rate forecast is based on our understanding of the functioning of the economy. The uncertainty surrounding the interest rate forecast is highlighted in our fan charts with uncertainty intervals around the interest rate forecasts. The forecasts have shifted considerably over time. This reflects that the interest rate is an instrument that should react to all news that may influence the inflation outlook. Publication of interest rate forecasts – how does the market react? When we started forecasting the interest rate in 2005, we could refer to the experience of New Zealand 2, which had just experienced pronounced shifts in the interest rate and interest  2  The chart is from Archer, D. (2005): “Central-bank communication and the publication of interest rate projections”, presented at Sveriges Riksbank’s conference: “Inflation targeting: implementation, communication and effectiveness”: http://www.riksbank.com/templates/Page.aspx?id=15814. BIS Review 113/2010  5  rate forecasts. The chart illustrates that we were not able to anticipate the financial crisis in autumn 2008, but have otherwise been on track. Our latest interest rate forecast suggests that the interest rate will remain low for a long period. But we also note that market participants believe it will take even longer for the interest rate to move up to a more normal level.

Another sign of improved confidence is the larger than expected early repayment by counterparties in the first of our two three-year longer-term refinancing operations settled in December 2011 and March 2012. This indicates that banks are less uncertain about their  BIS central bankers’ speeches  1  funding prospects than a year ago. We will closely monitor conditions in the money market and their potential impact on the stance of monetary policy, which will remain accommodative with the full allotment mode of liquidity provision. The risks surrounding the economic outlook for the euro area continue to be on the downside. They relate to the possibility of weaker than expected domestic demand and exports, slow implementation of structural reforms in the euro area, as well as geopolitical issues and imbalances in major industrialised countries which could both have an impact on developments in global commodities and financial markets. These factors have the potential to dampen the ongoing improvement in confidence and thereby delay the recovery. Annual inflation in the euro area has continued to moderate, falling from 2.5% in October to 2.2% in November and December and 2.0% in January, as we had foreseen. Inflation is expected to decline to below 2% in the near term.
The first danger is that there are sharks lurking under water-- in the form of highly leveraged institutions and hedged funds. No matter how well you try to manage your economy, no matter how good your intentions, there will often be some things out of synchronization. This will cause your currency or your stock market to be temporarily out of balance, or even wrongly perceived to be so. This is exactly when you need some time to work out the problems. But the attack by sharks can rob you of this precious time. I asked myself -- how can these sharks create so much trouble for the emerging markets? The problem is that these sharks are often able to command oversize resources financed by large international banks. I strongly believe that these financing should be curbed. Leveraging beyond a certain threshold is particularly risky. I propose that the international banks that give credits to such institutions should be required to weigh these risks, in their capital requirement calculations, at a much higher rate than the 150 per cent currently being considered in the new Basle Accord. The second danger is that during good weather you tend to get assistance from many international banks. They will give you tow lines hitched to their catamarans that help increase your speed. However, when your ship starts to leak, they tend to cut the lines just when you need them most. On this issue, therefore, I strongly support the idea of private sector involvement that the IMF is proposing.

The risks multiply. What can one do about this? You can, of course, opt for the easy approach. You can continue to maintain tight controls and resist liberalization. But this will hinder the development of your domestic financial markets, and also the skill of the people involved, both the regulators and the commercial banks themselves. In my opinion, the right approach is for the emerging market to create, or improve and maintain the right fundamentals. In a way, instead of trying to extend your breakwater further and further, it is better to change from the less stable rowing boat to a more sturdy and seaworthy ship, one that can handle the rough ocean better. In this respect, there are three things that I wish to highlight. The first is the need to ensure that the country conducts proper macroeconomic policy. I mention this even though it is not directly the job of supervisors because it can overwhelm everything. To take the example of Thailand, we used the fixed exchange regime for too long, but without the domestic flexibility to adjust wages and prices to correct lack of competitiveness. We therefore could not maintain the parity for long. It also led to distortion in risk perception that led to excessive foreign exchange risk mismatch, over investment in the non-traded sector and damaging speculation, especially in real estate.
In the case of free assets, foreign currency investments are more diversified and are also partially hedged against exchange rate risks. Around half of the free assets are currently exposed to currency risks. The risks relating to the National Bank’s assets are primarily assessed and monitored using the value-at-risk method. Moreover, a number of different stress analyses are increasingly being carried out. In risk measurement, it is taken into account that the investment horizon, in particular for the monetary reserves, is a long-term one. Where monetary assets are concerned, gold price and exchange rate risks - notably those on the dollar - play a decisive role. Interest rate risks, while significant in their own right, are quite small by comparison. The overall risk with free assets is considerably lower. On the whole, the credit risks are relatively small. The National Bank’s investments are valued daily at market prices, thus making it possible to form an up-to-date impression of the earnings situation. Owing to the high degree of risk exposure to the gold price, the exchange rate and the interest rate level, the earnings situation can change dramatically from quarter to quarter and year to year. In this year alone, the quarterly returns on total assets fluctuated between +2.7% and -3.2%. So far this year, the National Bank’s assets have yielded 1.3% overall. Given its long-term investment horizon, short-term fluctuations generally do not present a problem to the National Bank. The long-run yield is of greater importance.

CBRT Interest Rates (Percent) Non-CBRT Average O/N Funding Rate in BIST CBRT Average Funding Rate 1 Week Repo Rate Late Liquidity Window  14 13 12 11 10 9 8 7 6  02.17  01.17  12.16  11.16  10.16  09.16  08.16  07.16  06.16  05.16  04.16  03.16  02.16  01.16  5  Source: TURKSTAT, CBRT. I would like to underline that the recent policy we have been implementing is not equivalent to the previous discretionary monetary policy under a flexible corridor framework where the policy stance shifted at daily and weekly frequencies. This is a clear and stable policy tightening which will be preserved until we see a considerable improvement in medium term inflation dynamics. The significant tightening in the monetary policy stance can also be observed directly by looking at the yield curves. The left side figure shown below compares the most recent yield curve with the one materialized in early January, right before the CBRT response (Figure 13). It is clear that the short-end has shifted up and the longer-end has fallen, which is a typical response after a credible monetary tightening. As another indicator of the monetary tightening in time dimension, the 9  right side figure below shows the evolution of the slope of the yield curve at the cross currency swap market, which also clearly reveals a flattening in the yield curve (Figure 14). Figure 13. Figure 14.
Capital inflows, depending on the degree of variability, may cause speculative pressures on the Denar exchange rate, which would increase the vulnerability of the economy. The experience of the more advanced transition economies shows that these effects may be partially mitigated by attracting foreign direct investments and securing their dominance in the composition of inflows, where the generally higher rates of return on investments provide certain protection from quick and sudden changes in the capital flows. Another issues is the size of the capital inflows that given the implementation of the strategy of exchange rate targeting potentially puts at test the capacity of the NBRM for their sterilization and causes certain implications upon the monetary policy conduct, and the exchange rate regime. Through the presentations that follow we will likely see a number of such experiences. 2. Foreign capital inflows, especially the facilitated access of the banks to foreign capital, may cause credit boom and expansion of the domestic consumption. That may generate additional increase in the current account deficit. From the point of view of the current situation, the upward trend of credit growth that started in the Republic of Macedonia in 2003, largely emerges from the low starting point and at the same time indicates the natural process of increase in the degree of financial intermediation.

In spite of this, such flows may not be considered as one-time effects, but as flows that are characteristic for the process of transition and which have to be incorporated in the monetary policy conduct. The implications of the capital inflow and appreciation of the domestic currency, as well as the reactions of the macroeconomic policy decision-makers will vary from case to case and will depend on the features of the economy itself. Balance of payments deficits, potential factors that may cause their deepening and the liberalization of the capital flows, obviously pose numerous challenges for the monetary policy, both regarding the monetary strategy and the exchange rate regime and regarding its operational setup. The central banks, as key institutional macroeconomic policy makers, and at the same time institutions that permanently work on strengthening and maintaining of their own credibility, unavoidably should focus on the contemporary challenges of the monetary policy, making attempts for timely comprehension of the possible solutions and repercussions. Having in mind this objective, I am glad that on the today's conference are present distinguished experts, governors and representatives of central banks from a number of countries across the world, as well as high rank officials from important international institutions, whose expertise and experience may contribute to good quality discussions regarding the specified contemporary challenges for the monetary policy.
Meanwhile, on the supply-side of the economy, there is little evidence as yet in the productivity data that would suggest an acceleration in the underlying rate of capacity output growth such as we have seen in the US, and which, while it lasted, would allow the economy to grow correspondingly faster without necessarily generating inflationary pressure. We might all fervently hope to become infected by that particular disease - but the actual evidence so far suggests that up to now we have remained immune. That does not necessarily mean that we will not see accelerating productivity growth. But we can’t afford to gamble on that happening either. When people approach me with the sound-bite “give 3  BIS Review 18/2000  growth a chance”, what I hear them saying is “take a risk with inflation”. But equally when they say “you must take no risks with inflation”, I hear them saying “the world will never change”. The truth is that nobody knows with any great confidence. The important thing is to keep an open mind and to monitor intensively all of the data as they becomes available to us, and then draw what inferences we can as to how those data affect the balance of risks around the inflation target looking ahead. And that of course is precisely what we do in the Monetary Policy Committee.

Perhaps most important, the normal cyclical dynamic in which housing, consumer durable goods purchases and investment spending rebound in response to monetary easing is unlikely to be as powerful in this episode as during a typical economic recovery. The financial system is still in the middle of a prolonged adjustment process. Banks and other financial institutions are working their way through large credit losses and the securitization markets are recovering only slowly. This means that credit availability will be constrained for some time to come and this will serve to limit the pace of recovery. If the recovery does, in fact, turn out to be lackluster, the unemployment rate is likely to remain elevated and capacity utilization rates unusually low for some time to come. This suggests that inflation will be quiescent. For all these reasons, concern about “when” the Fed will exit from its current accommodative monetary policy stance is, in my view, very premature. In contrast, I think it is important to address today the issue of “how” the Fed can exit from the current stance of policy when the time comes, even if its numerous special facilities and purchase programs continue to keep the size of its balance sheet at an expanded level. Why do I believe it is so important to explain the issue of “how” having just argued that “when” is not yet a pressing issue?
If we are to believe the financial industry itself, this possibility has an impact on investment strategies. It cannot be ruled out that because this rule makes it possible to record substantial income flows during cyclical upswings, it has contributed to greater risk-taking by some institutions in order to maintain these income flows year after year. In a more general way, the extension of the scope of application of fair value accounting has very probably, during cyclical upswings, also contributed to many assets being accounted for at market value whereas the intention of market participants to manage these assets on a fair value basis was not clear. My aim here is not to make a judgement about the relative merits of accounting choices. It is to highlight the fact that these choices have implications that go beyond accounting policy. In concrete terms, therefore, the question that we need to ask collectively is: what is the optimum policy response? Do accounting conventions need to be modified? Or can other regulatory frameworks correct these effects? Consistency of valuation rules This leads me to the last point that I would like to an address today: the consistency of rules and practices with respect to valuation. There are currently differences of approach between accounting practices, prudential regulation and risk management practices. It is thus wholly accepted in the financial industry that there is inevitably uncertainty surrounding the valuation of financial instruments, particularly when they are complex or illiquid. In addition, the limitations of mathematical models are recognised.

Christian Noyer: Lessons from the crisis. A central banker’s reflections on some accounting policy issues Speech by Mr Christian Noyer, Governor of the Bank of France, at the European meeting of the accounting profession, Paris, 11 December 2008. *  *  *  Ladies and Gentlemen, I am delighted to be taking part in this European meeting of the accounting profession. This discussion seems to me to be especially timely since the current crisis has raised a whole series of questions related more or less closely to accounting policy. It is no coincidence that the latest Banque de France Financial Stability Review is devoted to issues of valuation. I am convinced that the crisis will force us to carry out an in-depth assessment of the concepts and tools relating to valuation. I am not an accountant. The point of view I am putting forward today is that of a central banker who is responsible in particular for financial stability. With this perspective in mind, I propose that together we take a look at three topics. •  an overview of the crisis from the point of view of valuation  •  the issue of the neutrality of accounting conventions  •  the consistency of rules and practices with regard to valuation  Financial crisis, a crisis of valuation In many respects, the current crisis is about valuation. To be sure, the factors underlying and accounting for the crisis are numerous.