samchain/econo-pairs-v1 huggingface dataset:
Such lending can tide a bank over while it is taking steps to remove the cause of the concerns that generated a run or lack of confidence. But it can also serve to conceal the severity of the underlying problems, and put off the inevitable day of reckoning. I hope it is now understood that the provision of central bank liquidity, while essential to buy time, is not, and never could be, the solution to the banking crisis, nor to the problems of individual banks. Central bank liquidity is sticking plaster, useful and important, but not a substitute for proper treatment. Just as a fever is itself only a symptom of an underlying condition, so the freezing of interbank and money markets was the symptom of deeper structural problems in the banking sector. So let me explain why a major recapitalisation of the banking system was necessary, was the centrepiece of the UK plan (alongside a temporary guarantee of some wholesale funding instruments and provision of central bank liquidity), and was in turn followed by other European countries and the United States. Securitised mortgages – that is collections of mortgages bundled together and sold as securities, including the now infamous US sub-prime mortgages – had been marketed during a period of rising house prices and low interest rates which had masked the riskiness of the underlying loans. By securitising mortgages on such a scale, banks transformed the liquidity of their lending book. They also financed it by short-term wholesale borrowing.

Muhammad bin Ibrahim: The lessons of managing risks during the global financial crisis – the Malaysian banks’ experience Opening remarks by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia, at the Asian Institute of Finance (AIF) and Institut Bank-Bank Malaysia (IBBM) Risk Roundtable Forum 2010, Kuala Lumpur, 12 October 2010. *  *  *  My opening remarks will consist of three parts. Part I, I will make comments on global financial reform and regulatory priorities. Part II, I will share some regulatory initiative embarked upon by BNM. Part III, I will conclude by giving you an assessment of the banking industry during the recent financial crisis and why it had remained resilient. Global financial reform and regulatory priorities The global financial reform initiative to strengthen the financial sector is consistent with our priorities to enhance prudential regulation and supervisory framework in Malaysia. Efforts to further improve risk management and corporate governance, strengthening the role of supervisors in the oversight of financial institutions and improve market discipline are not new to Malaysia. We have been doing this well before the global financial crisis and these initiatives will continue into the future. For example stress testing on banking institutions was introduced many years ago. In carrying out our regulatory responsibility, we will continue to ensure an effective balance between maintaining prescriptive rules and allowing some degree of flexibility under a more principle-based approach to regulation. Our principled based approach to regulation will be supported by effective supervisory oversight.
In fact, such communication might be particularly important in the current circumstances, because financial market participants have no history from which to judge the FOMC’s approach and anticipate its actions. 6  BIS Review 128/2010  Fifth, how much flexibility should the FOMC retain to change its policy approach? The original asset purchase programs specified the amount and distribution of purchases well in advance. 9 However, the FOMC would be learning about the costs and benefits of its balance sheet changes as it implemented a new program. This might call for some flexibility to be incorporated into the program, providing some discretion to change course as market conditions evolve and as more is learned about the instrument. Conclusion I hope that my remarks today have offered some insight into the recent balance sheet programs undertaken by the Federal Reserve. Adjustments to the size of the Federal Reserve’s securities holdings are a new policy instrument for the FOMC. That presents challenges, both to policymakers in terms of determining how to use the instrument and to market participants in terms of anticipating that usage and understanding its effects. Given these challenges, I believe it is important for the Federal Reserve to communicate effectively about the factors affecting its balance sheet decisions and the implementation of those decisions. In my view, the evidence suggests that the expansion of the securities portfolio to date has helped to foster more accommodative financial conditions, and further expansion would likely provide additional accommodation.

3  See, for example, Joseph Gagnon, Matthew Raskin, Julie Remache, and Brian Sack, “Large-Scale Asset Purchases by the Federal Reserve: Did They Work?” Federal Reserve Bank of New York Staff Report no. 441, March 2010. Several private-sector firms have estimated yield effects of similar magnitude. In addition, a working paper by James Hamilton and Jing Wu, “The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment,” finds that changes in the Federal Reserve’s asset holdings produce considerable yield effects. 2  BIS Review 128/2010  Under this view, the FOMC’s influence on financial conditions is associated with the size and composition of its securities portfolio. This perspective provides a clear rationale for the reinvestment decision made at the August FOMC meeting. The decline in the size of the Federal Reserve’s portfolio that would have occurred in the absence of the reinvestment program would have amounted to a passive tightening in the stance of monetary policy, as the portfolio balance effect would have gradually reversed. Moreover, the extent of this tightening was increasing in response to the weakening of the economy, as lower longerterm yields were leading to more rapid repayment of MBS. This perverse effect was seen by the FOMC as working against its efforts to reach its dual mandate. In effect, the policy approach that was implemented before the August meeting acted to mute the amplitude of movements in longer-term interest rates.
Our forecast is that the surplus this year will correspond to around 7 per cent of GDP this year, despite exports being expected to fall by around 16 per cent. One reason for the large surplus in the current account is that exports have developed strongly since the early 1990s. At that time exports corresponded to around 30 per cent of GDP, but now the figure is around 50 per cent of GDP. This means at the same time that exports are very important to the Swedish economy and that the weak economic growth abroad therefore hits Sweden particularly hard. New information during the summer points to a slight improvement To summarise, the new information received during the summer tends to point to a slightly stronger economic activity than we had forecast at the beginning of July. GDP was three tenths of a percentage point better and employment fell two tenths of a percentage point less than we had forecast. A number of indicators have also exceeded market expectations. All in all, this supports the view we had that the deep economic recession has bottomed out. However, most indications are still that the recovery will be weak. Inflation fell slightly more than we had anticipated in July, but underlying inflation was in line with our forecasts. However, we will not make an overall assessment of economic developments until it is time for our next monetary policy decision on 2 September.

This is a slightly better outcome than in our July forecast, where we assumed that GDP would fall by 0.3 per cent in the second quarter and that the fall would not come to a halt until the third quarter. However, there was unusually great uncertainty regarding the preliminary national accounts figures on this occasion. In recent months various confidence indicators have also shown an improvement. The National Institute of Economic Research’s Economic Tendency Survey, which summarises companies’ and households’ views of the economic situation, increased by almost seven units in July, to 87.1. However, the level is still below 100 and indicates that the mood among companies and households is still much weaker than normal (see Figure 13). 6 The purchasing managers’ index for July was also more positive than market expectations had implied. It rose by almost four units to 54.3 and was thus above 50 for the second month in a row (see Figure 14). The purchasing managers’ index is usually a slightly quicker indicator of developments than the economic tendency survey and an index above 50 indicates growth. 7 Labour market continues to weaken Our assessment in the most recent Monetary Policy Report was that the labour market would continue to be weak. A deterioration in the labour market usually lags behind in an economic downturn, which was also the case this time.
Next year, the Swiss electorate will probably be asked to vote on the "COSA initiative", which proposes allocating the first billion Swiss francs of our current profit to the cantons, with the balance going to the state Old Age and Survivors' Insurance scheme (AHV/AVS). The National Bank has consistently taken the line of not intervening in domestic political debates unless the fulfilment of its constitutional mandate is in jeopardy. Two years ago, I mentioned to you that the COSA initiative threatened to undermine our autonomy. Linking the National Bank's profits to the financing of a key element in our country's social security system would create a mechanism that would force the SNB to manage its reserves for the purpose of generating the highest possible returns rather than for performing its monetary mandate. This would weaken our international credibility and hence also the credibility of our policies. No other central bank of an industrialised country is faced with a similar situation. All of these banks deliver their profits to the state, and the SNB is no exception. Our main argument against the COSA initiative, however, is that it rests on an illusion – namely, that a central bank is able to transfer profits of over CHF 1 billion every year. Once this illusion has been dispelled, it will become clear that the initiative makes no sense, as nothing would remain for the state pension scheme. And, as we have often stated in the past, the current disposable profit of CHF 2.5 billion Swiss cannot be sustained.

You would agree with me that it is quite difficult for a central bank, like ours, to implement monetary policy effectively in an environment characterised by inadequate banking facilities. It is for this reason therefore that I commend the Management of Stanbic Bank Zambia for bringing banking facilities closer to the people. In this regard, I wish to assure you that on our part we shall continue to support you in your endeavours to open more of such branches, because we firmly believe that you are making our work and that of the Government much easier. However, may I take this opportunity to advise the Management of Stanbic Zambia that if you want this branch or many of such branches you intend to open in future to be beneficial to the communities in which they operate, kindly be flexible on the requirements for opening accounts as well as lowering  BIS Review 13/2005  1  the minimum account balances to be maintained by your clients. I say so because communities like Matero and the surrounding areas comprise mainly of people who are in the informal sector. Therefore, it would be unreasonable for you to ask an unemployed prospective customer to bring a letter from their employer before an account could be opened with your branch! In other words, I strongly urge you to tailor your banking services to the needs of the community you operate in.
As I see it, this was partly because our policy framework provided such clear arguments for our actions – inflation would turn out to be below the target if the interest rate was not reduced. During the past year the Riksbank’s appraisal of economic activity and inflation prospects has been revised about as much as and more or less concurrently with the opinions of other observers. The sizeable changes in economic assessments are thus something we have in common with others. Individual economists and analysts have naturally voiced views or criticism from time to time but I at least have not encountered more concerted criticism of our economic and inflation assessments. (Figure 1). The path of the krona last autumn generated more heated discussions. The Riksbank saw the depreciation as essentially connected with the international financial unrest. This made investors more averse to risk, with effects that hit small markets in particular. Other observers attached greater weight both to what they perceived as a lack of clarity in monetary policy and to structural problems in the Swedish economy and Sweden’s position outside the euro area. The risks in the latter respect were presented in a rather lurid light. As regards interventions, the Riksbank has been very restrictive in recent years but early last October we found they were called for. The marked depreciation of the krona did not reflect the fundamental situation in the Swedish economy.

The banks have always passed the stress tests, most recently the one carried out on their balance sheets at year-end 2007. At that time, the equity ratio of Iceland’s largest banks ranged from 11.2% to 11.8%. The result of the stress test was that, even if various severe shocks inherent in the premises of the test were to occur simultaneously, the banks would still have an equity ratio ranging from 10.4% to 11.2%. Their liquidity position was ample at year-end, so there was no driving need to seek funding in the international credit market. But at some point in time, they will need to return to the capital markets. All of Iceland’s large commercial banks have an international credit rating. Though these credit ratings are comparable to those awarded to similar banks in other countries, there is an abiding suspicion in the market toward Icelandic banks. This is difficult to explain fully, and it results, for example, in CDS spreads that are higher than in foreign banks, although CDS spreads also differ among Icelandic banks. It is worth remembering that Kaupthing Bank’s CDS spreads rose when the bank announced its intent to acquire a Dutch bank last August. As the autumn progressed, the other banks’ CDS spreads increased also. That trend continued intermittently until now. When Kaupthing abandoned its plans to acquire the Dutch bank, the reason for the increase last August vanished. Spreads declined slightly thereafter, as a large uncertainty factor had been eliminated.
The essential raison d'être of banking is that an economically advancing society needs effective intermediation between savers and borrowers, and mechanisms for making payments efficiently. As already noted, the initial basic intermediary function of providing deposits and loans expanded subsequently into the organisation of alternative channels of intermediation such as bonds and equities (these activities may be conducted in some jurisdictions outside the narrowly defined banking sector, but the distinction is not material in the present context). Although it is human nature for savers to complain that the returns are inadequate, and borrowers that costs are extortionate, in the marketoriented economies competition in financial intermediation has mostly been quite intense, and most of us would probably agree that this has worked to the increasing benefit of customers on both sides of the balance sheet. Meanwhile, the provision of payment services has developed markedly at both the wholesale and retail levels. Banks are at the centre of this activity, typically supported by the central bank as ultimate provider of liquidity. In fact, whereas many other types of institution may nowadays be involved in lending money or providing avenues for savings, banks themselves remain firmly at the core of the payments system. A sound and efficient payments system is acknowledged to be a prerequisite if an economy is to realise fully its potential.

With this correlation, the tendency in the data is for bonds to rise in value when equity prices fall. Chart: Correlation between equities and bonds There has been a marked change in the correlation between equity and bond returns in recent years. In the period from the early 1960s to the end of the 1990s, the correlation between equities and bonds was positive. This trend has reversed. Since the beginning of the 2000s, the correlation between equities and bonds has generally been negative. This shift is clearly reflected in the chart, which is based on the correlations between US equities and bonds. The same shift is evident in the financial markets of a number of other countries. The decline in the correlation has received considerable attention in the financial literature.3 It has been suggested that this change may be the result of a shift in monetary policy in many countries 4/7  BIS central bankers' speeches  towards giving greater weight to stabilisation of the real economy in the face of supply side shocks. This means that there is now some divergence in response between equity and bond markets to this type of macroeconomic shock. This type of shock has also occurred less frequently in the past couple of decades. A lower correlation means that bonds reduce the risk associated with equity investments more effectively than earlier. Investors may thereby be willing to accept lower expected returns on bonds with long maturities.
MONETARY POLICY REPORT PRESENTATION BEFORE THE FINANCE COMMISSION OF THE HONORABLE SENATE OF THE REPUBLIC  Rosanna Costa Governor Central Bank of Chile 7 December 2022  The December 2022 Monetary Policy Report can be found at http://www.bcentral.cl  Introduction Mr. President of the Honorable Senate’s Finance Commission, senator Juan Antonio Coloma; senators members of this Commission, ladies and gentlemen, One more time, I begin by thanking the Commission for inviting the Bank to present our views on recent macroeconomic developments, their outlook and implications for monetary policy. It is this view that is presented in detail in the December 2022 Monetary Policy Report that we released this morning. This background is also the rationale behind the Board's decision at yesterday's monetary policy meeting. This is my fourth Monetary Policy Report, and I would like to pause briefly to look back at my first few months as Governor of the Central Bank of Chile. During this period, the institution has been significantly renewed. In February, Luis Felipe Céspedes joined the Board, followed in May by Stephany Griffith-Jones, two professionals with outstanding careers in the economic field. We have lived through a very difficult year in terms of inflation. In the March Report presentation, I stated that inflation and its outlook continued to rise and that it would reach around 10% by the middle of this year and then decline to 5.6% by the end of 2022.

The changing structural pattern of trade in the region reflects the growing intra-regional trade which now accounts for almost half of Asia's total trade from just a fifth a decade ago. Intra-regional trade has also been enhanced by the opening up of large regional markets such as China. The share of East Asian exports to China has doubled in the past decade to about 10%. While there has been significant attention on the  2  BIS Review 62/2002  competition that China will create for other countries in the region, the focus should also be on the complementarities that are already feeding the regional growth process. A third discernable trend in the region is the growing importance of domestic demand in the regional economies, supported by domestic-oriented policies in recent years, which would ensure that the gains in intra-regional trade could be sustained. In terms of financial flows, the development of regional markets is contributing towards strengthening the prospects for a deepening of Asian financial markets and promoting greater regional financial integration. The region is also studying the feasibility of establishing an Asian Bond Market to recycle part of the region's high level of savings to finance productive activity within the regional countries. To encourage the regional flows to be recycled into investments in the region, efforts have been taken to develop the capital market particularly in the area of securitisation, credit guarantee and market infrastructure.
Thomas Jordan: Why a strong education system must be an important concern for the Swiss National Bank Summary of a speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the opening ceremony of the Faculty of Economics and Management at the University of Lucerne, Lucerne, 6 September 2016. *  *  *  The complete speech can be found in German on the Swiss National Bank’s website (http://www.snb.ch/). A strong education system is a cornerstone for a country’s prosperity. Switzerland has a federally structured, flexible, high-quality education system. It stands out for its focus on the goal of employability, which is particularly reflected in the dual vocational training system that is closely aligned to the real needs of companies. The education system contributes to an innovative, flexible and robust Swiss economy which – given structural and technological changes – can continue to be successful in future. The labour market would not work nearly as well without solid education, and the culture of stability would be less well-anchored in society. These strengths allow the Swiss National Bank (SNB) to conduct a monetary policy geared toward long-term stability. Attractive universities are an important component of a good education system. The SNB maintains an intensive exchange of information and ideas with academia, with the focus on topics relevant to central bank policy. For it can only fulfil its mandate optimally if the relevant research results flow adequately into the decision-making process.

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If they tighten, and the recovery seems to be falling short of the strong growth we need, we will consider carefully whether, and how best, to stimulate the recovery further. Our forward guidance was clear that, although we would not reduce the stimulus until the recovery is secure, we would if necessary provide more. Crossing the threshold to a healthy banking system Confidence that interest rates will stay low is a necessary step to securing the recovery, but it is not sufficient. The UK also needs a fit and healthy financial sector. It plays a vital role in generating services output in the UK, creating jobs and in exporting to the rest of the world. To serve the needs of the wider economy by extending credit to where it is needed, banks must command the confidence of their customers and investors. That is why a second element of the Bank of England’s strategy is to ensure that banks reach a clear threshold of good health. Some argue that the repair of banks’ balance sheets holds back economic recovery because it causes banks to cut back their lending. The reality is the opposite: where capital has been rebuilt and balance sheets repaired, banking systems and economies have prospered. US banks have added more to their capital base since the crisis and, as a result, have been able to provide more credit to their economy than UK banks have to ours. In the past two years, UK banks have reduced their lending to the real economy by 1%.