samchain/econo-pairs-v1 huggingface dataset:
I should add that while IAS 39 applies to all users of financial instruments, I illustrate its implications below with particular reference to banking. Who and what are accounts for? It is widely accepted that published audited accounts are prepared first and foremost for the owners of a business, that is the shareholders. However, it is often maintained that this information also meets the needs of other stakeholders, including creditors, customers, employees and so on. And so it does up to a point. Yet there are many users who have an interest in the financial position of a firm. On the face of it, it would be rather surprising if a single presentation was ideal for all of them. Let me try to illustrate this for the financial world - where the Bank’s financial stability remit runs - by looking at the respective needs of shareholders, depositors and regulators of banks. Shareholders are particularly interested in the returns being earned by a bank (its profitability), both current and prospective. They are looking mainly at the economic value of the going concern. The focus of depositors, regulators and authorities concerned with systemic stability, on the other hand, is likely to be on whether bank liabilities will be repaid on demand or when due. Two specific examples may help to illustrate these different perspectives: the treatment of “own-credit risk” and the valuation of sight deposits.

At the macro-economic level, concern has been expressed that greater use of fair values could have a procyclical impact. Banks’ assets might be marked up in booms, as perceived credit risk declined, so boosting banks’ capital base and capacity for further lending. However, for the concerns about intensifying economic cycles to be realised two linkages would need to operate. First, the impact on bank capital would have to increase the volume of bank lending and, second, the increase in bank lending would need to have significant implications for real activity. Neither linkage can be taken for granted, and in any case discretionary policy action, whether monetary or prudential, by the authorities may mitigate any pro-cyclical effects. As I have indicated, we do, however, need to avoid accounting rules which introduce spurious volatility. An example, to which I will return in a moment, is the hedge accounting under IAS 39. The “mixed attribute” model The drawbacks of fair values in some contexts have led to widespread support in the banking industry for retaining the current “mixed attribute” accounting approach. While IAS 39 requires trading instruments, derivatives and many securities to be measured at fair value, bank loans generally continue to be measured at historic cost. However, the debate about IAS 39 has highlighted some difficulties with this mixed approach as it is presently formulated. The area of greatest difficulty has proved to be hedges which straddle the two measurement bases, where so-called hedge accounting comes into play.
Obviously, such principle applies to monetary-policy operations, where central banks have typically increased their level of risk taking during the crisis, but also to some extent to their investment activities. With the markets being shut-down for almost all financial institutions and the economy being strangled by lack of financing, the central banking community had to resort to a number of unconventional measures to support the continued provision of credit to the economy and to sustain the implementation of the monetary policy in an environment where its transmission could be endangered. In the language of risk managers, “unconventional measures” means larger exposures. Asset purchases, long-term operations, full-allotment tender procedures, relaxation of the collateral framework… All these measures have something in common: they raise the bar for risk management in central banking precisely in those times in which our brains are wired to shout “run”. But of course, we must exercise a disciplined and calmed responsibility and accept our role in crisis situations. Indeed, central banks are likely to be more exposed to risks in the event of a crisis. At the same time, they need to remain financially sound to ensure their independence and credibility in the conduct of monetary policy. This is particularly important at times of crisis, when inflationary expectations risk becoming unanchored.

Financial globalization and international integration, which are key components of the recipe for global prosperity, acted during the crisis as a channel for the transmission of shocks to the global economy. Systemic risks arose due to the interconnectedness of the financial systems and the impossibility to isolate the problems within the sectors and institutions that were hit first. The global financial architecture showed deficiencies that need to be addressed in order to strengthen the foundations of our economic systems. The role of risk management in the crisis In general, most of the causes of the crisis that I have just described relate to some extent to a clear deviation from well-established principles in the management of risk by financial institutions and investors. Common sense risk management practices such as “know your counterparties”, “invest only in products you understand”, “do not outsource credit risk management by relying exclusively on external credit assessments”, “do not rely exclusively on quantitative models, no matter how sophisticated they are” were abandoned. Overconfidence in: (1) the ability of portfolio managers to generate returns, (2) the advantages of financial innovation to spread in an efficient way risks and returns, (3) the adequacy of models and data used to estimate risks, (4) the efficiency of markets, and (5) the ability and willingness of monetary authorities to mitigate the effect of downturns in asset prices, did not allow the capital markets to adequately reflect upon and price-in the considerable risks that were being built. Quite obviously, the crisis has taught us some lessons.
Basel II, in this way, has motivated supervisors to analyse more deeply all that surrounds banks’ main business with the benefit of a clearer understanding of the underpinnings of banks’ risks. Needless to say, the introduction of a risk sensitive capital framework is based on the idea that, as credit conditions deteriorate, minimum requirements must increase and consequently, more cyclicality is added into the system. Particularly, under the internal ratings based approach (IRB), capital requirements are an increasing function of the main credit risk drivers, probability of default (PD), loss given default (LGD), and exposure at default (EAD), obtained for each loan. The problem is that this formulation may have distorting consequences in the evolution of regulatory requirements along the economic cycle. That is, in downturn conditions these risk parameters would deteriorate, leading to  BIS Review 552009  1  greater capital requirements, whereas in upswings these risk indicators would improve, resulting in lower regulatory needs. Nevertheless, the new Basel II Framework itself offers specific guidance that may soften the cyclical fluctuations in capital requirements. The calculation of risk parameters consisting on long run averages and the inclusion of a downturn bias in certain estimates would provide more stable parameters and requirements without abandoning the advantages of a risk sensitive scheme across different banks. This approach has been the one mostly implemented in Spanish IRB banks. This is the guidance Basel II itself offers to mitigate procyclicality but one might think that it is insufficient.

Priority 5: Improving cooperation and partnerships The fifth area relates to that which has been highlighted in the theme for this Forum, the need for greater cooperation and innovative partnerships. The goal of achieving financial inclusion that delivers real and positive impact to the poor is a shared responsibility. The barriers to financial inclusion can only be resolved when different stakeholders, each with different spans of authority and oversight, work together in a coordinated and cohesive manner. It will need to involve the cumulative efforts of the government, regulators, market agents, the financial industry and the consumers. At the national level, improving inter-agency cooperation is vital to ensure that the respective strategies are aligned to achieving the common goals of financial inclusion. This may call for institutional arrangements to bring authorities together to secure a joint commitment towards clearly defined and measurable financial inclusion goals, with well-defined lines of accountability. Brazil, Mexico, Tanzania, Indonesia and Fiji have also established national  BIS central bankers’ speeches  3  co-ordination frameworks, which offer AFI members diverse examples of such national collaboration. While we focus on financial inclusion initiatives at the national level, equally important is that adequate attention be accorded at the global level. In this regard, AFI assumes a unique role because it is the only global network that comprises of practising financial inclusion policy makers.
On the other hand, the European Banking Authority (EBA) has demanded a capital increase of the system’s major banks. Finally, US dollar financing pressure persists in some major banks. This has resulted in more stringent credit conditions, which may continue and have a profound impact particularly on small and medium-sized businesses and, eventually, on some countries’ foreign trade. 2  BIS central bankers’ speeches  The situation of the Eurozone is complex and we cannot rule out as a possible risk scenario a disorderly default of peripheral economies, due to the challenging debt maturity profile they face. This high risk scenario is, however, less likely that at the end of last year. The US economic data of the last months have been a pleasant surprise. The labor market and households’ expenditure seem to have behaved better than forecast. Although, the difficulties that persist in the labor market and the fiscal adjustments that are needed explain the continuing doubts as to how true and sustainable the recovery we are currently witnessing is. In spite of the more positive indicators, the Fed authorities extended from 2013 to 2014 the period in which it expects to keep interest rate at minimum levels. Certainly, the problem of fiscal indebtedness continues. In emerging countries the data are diverse. Over the course of the second half of 2011 we witnessed a generalized deterioration of consumer and business expectations. Neither case can be compared to what happened between late 2008 and the beginning of 2009. Generally, the data show a deceleration of activity.

Undoubtedly, there are still many things to improve. Attaining a level of development such that prosperity reaches the whole population is still far away, but at least we are on the right track. Thank you. BIS central bankers’ speeches  5
7 Accordingly, the link between monetary base and size of the central bank balance sheet and the interest rate has also been broken; bank reserves are remunerated at the market rate and the Riksbank can thereby determine the interest rate irrespective of how large the liquidity reserves in the economy are. 8  The repo rate is the main monetary policy tool ... When, in the initial stages of the financial crisis 2008–2009, policy rates had been lowered to levels close to zero, there was a need for further monetary policy expansion in several parts of the world. Central banks like the Federal Reserve and the Bank of England bought large quantities of bonds. The aim of these purchases was both to push down the general level of interest rates and to support some sub-markets that functioned poorly during the crisis, for example the market for mortgage bonds in the United States. In the euro area and in Sweden, central banks began similar purchasing programmes a few years later. The theoretical support for the claim that bond purchases make monetary policy more expansionary is quite weak and controversial. In spite of the weak theoretical support, many argue that the experiences of bond purchases are good. 9 Some even say that the bond purchases have worked so well that they should remain part of the monetary policy toolbox even in normal times. 10 This is a conclusion I find rash, at least as far as the Riksbank is concerned.

As a rapidly growing region, greater regional financial  2  BIS central bankers’ speeches  integration will support the more effective and efficient intermediation of Asia’s sizeable funds towards meeting the investment opportunities of the region. Efforts to enhance cross-border financial linkages and advance financial integration have also intensified in Asia in this decade, mainly through the progressive liberalization of the financial sector, the pooling of resources to promote the development of domestic capital markets and the integration of payments and settlement systems. These developments have also seen the growing presence of Asian financial institutions in the region. In 2011, central banks in the ASEAN region have endorsed an ASEAN Financial Integration Framework which will pave the way for greater market access and operational flexibility for qualifying financial institutions. This represents the collective commitment of the region in the efforts to strengthen the region’s capacity to intermediate regional and international financial resources to productive activity in the region. A third imperative is the alignment of the financial sector to Asia’s demographic trends. Demographic profiles vary widely across Asia and have a significant impact on economic potential of the region. For many parts of Asia, demographic developments foreshadow significant changes in consumption, health and educational patterns. These changes have reinforced the significance of domestic sources of growth. Asia’s rising domestic demand has been supported by the development of a much broader range of financing options.
Page 2 of 20  Central Bank of Chile September 2019  In 1981, annual output growth went from positive 9% in the first quarter, to 0% in the fourth quarter, and to minus 14% in 1982. That same year, unemployment reached a record of 25%, and businesses all over the country were seriously hampered, ultimately affecting their solvency. Banking profitability went quickly to negative territory and the delinquency rate quadrupled to 15% of the total portfolio, putting several banks at risk. Several factors contributed to the deterioration of the macroeconomic environment in 1982. External interest rates rose, the availability of external credit decreased, and terms of trade worsened in the wake of the escalation of oil prices. This put enormous pressure on the Chilean peso—which had been under a fixed exchange rate scheme since 1979. This regime broke down dramatically and spread to almost all business sectors, given large FX exposures, and heavily leveraged financial conglomerates. Page 3 of 20  Central Bank of Chile September 2019  All these factors interacted with one another to become an outright banking crisis. Nevertheless, whatever the causes of the crisis, unsustainable debt was mostly explained by internal vulnerabilities: inappropriate regulation, weak supervision, and lack of attention to excessive credit growth, leveraged on a fixed exchange rate scheme. The lessons learned from this crisis highlighted the fact that banking regulation and supervision needed to be substantially upgraded.

The different developments that are underway should contribute to financial stability and increase the crossborder use of the CLP, as well as the participation of non-residents in the domestic market. Therefore, authorities and market participants should be prepared to be part of a bigger and more internationally integrated FX market. Let me conclude by remarking that this journey for the Chilean financial system, through a deep financial crisis, has led to just new bank regulation but also to valuable lessons learnt for the future. A deeper and properly regulated financial system contributes to financial stability, inclusion and increased welfare. Page 19 of 20  Central Bank of Chile September 2019  Preventing stress episodes is a task that requires constant monitoring and early detection of potential sources of vulnerabilities and risk. The enactment of a new Banking General Act and internationalization of the Chilean peso, among other measures, open up a new phase for modern regulation. Even though significant progress has been made in this regard, there are still challenges ahead that must be faced to further strengthen our financial system. ***  Page 20 of 20
Since the registration of the consolidated societies as normal companies was costly and inconvenient, it was decided to register the district-wide organisations under the Companies Act as people’s companies, a corporate device available for small entrepreneurial spirit to enjoy both the limited liability status and common goal realisation through restricted membership. The formation of these people’s companies was an entry to a new era by the beneficiaries of the Isuru Project, since it was not even in the remotest goal of these beneficiaries at the time they joined the project. A that time, their sole objective was to have some kind of livelihood arranged for them to overcome the abject poverty with which they had been afflicted. However, after about 12 years of experience in microfinance and having tasted the social value of being recognised as responsible citizens in the community, they were now ready to move along the set development path and in a position to decide on their own destiny. The four Isuru Development People’s Companies in the four districts began their operations as new people based microfinance institutions with formerly poor women as directors at the helm.

However, the literacy rate of the project beneficiaries had increased to 97%, very much higher than the national average, by 2005. •  The Survey 1997 revealed that 80% had crossed the poverty line within 6-7 years of joining the project, while a further 2% had increased income, but was still in poverty (1997). By 2005, the poverty levels measured in terms of the threshold income used by the Department of Census and Statistics of Sri Lanka had increased, but still  23  When the project formed limited liability people’s companies at a later stage, all the positions of directors were filled by women having been elected by the shareholders. Not a single man could get elected as a director. Since the constitution required having at least two male directors, two women directors elected by shareholders had to step down to pave the way for two males in terms of the constitution. 24  One such partner of the Isuru Project, viz., Thrift and Credit Cooperative Societies or SANASA, has since formed its own specialized bank under the name Sanasa Development Bank. 25  The first survey conducted in 1997 surveyed a sample of 1425 beneficiaries, while the second survey conducted in 2005 had a sample size of 5238 beneficiaries. The first report is in the form of an unpublished internal document (Survey 1997), while the second one has been published under the title Report on the Impact Assessment Survey of the SFLC Project 2005 (Survey 2005).
The developments in the EUR/CHF exchange rate depend on the foreign currency demand and supply between the euro area and Switzerland, Romania having no influence on its quotation. The EUR/RON exchange rate is relatively stable and it reflects the favourable performance of fundamentals. The recent depreciation of the RON against the CHF is therefore entirely attributable to the appreciation of the CHF versus the EUR, USD and other currencies, as a result of the Swiss National Bank removing the 1.2 floor, following the European Central Bank’s quantitative easing decision. The NBR’s intervention to bring the CHF/RON exchange rate back to the 14 January 2015 level is not possible, as the international arbitrage does not allow that only the CHF/RON exchange rate be influenced, while keeping unchanged the exchange rates of the leu versus the other currencies. BIS central bankers’ speeches  1  In order to reverse the impact on the CHF/RON exchange rate following the Swiss National Bank’s decision, the leu would have to appreciate versus the euro to approximately RON 3.7 per euro. This EUR/RON exchange rate level could be maintained only temporarily, as pushing the EUR/RON exchange rate down to a level much lower than that perceived by the market to be correct would require considerable foreign currency sales (amounting to EUR billions) not only for achieving this objective, but also for enabling the systematic interventions necessary for subsequently maintaining this exchange rate. This intervention by the NBR would have short-term effects and significant economic consequences.

The aforementioned movements in the policy rate and reserve ratios led to a significant reduction in the debt service of borrowers with loans in domestic currency, an increase in leu-denominated loans and a contraction in foreign currency-denominated loans, confirming the stronger preference for loans in domestic currency. Consequently, the currency risk has receded. Prudential indicators show that the banking sector is stable and sound. The loan-to-deposit ratio (LTD), a relevant financial stability indicator, has fallen below 100%, coming in at 91.3% in December 2014. The solvency ratio stood at 17.1% in September 2014 against 15.5% in December 2013, significantly above the international prudential requirements, and liquidity is at an adequate level. The removal of non-performing loans from the balance sheets has led to negative profitability of the banking system, with credit institutions incurring net losses worth around EUR 1 billion in 2014. Out of the total stock of loans to households amounting to lei 101 billion, foreign currencydenominated loans account for the equivalent of lei 62 billion (or 61% of total). Mention should be made that out of foreign currency-denominated loans worth 62 billion when expressed in domestic currency, EUR-denominated loans held 83.8%, CHF-denominated loans accounted for 15.7%, and USD-denominated loans took 0.5%, as of November 2014.