samchain/econo-pairs-v1 huggingface dataset:
What does it mean for an investment to be responsible or ethical? Certainly, human behaviour is the only one liable to be qualified as ethical. Actions by animals or acts of nature lack this dimension, irrespective of whether their consequences are good or bad. Finances, as an exclusively human activity, could thus also be analysed from this dimension. Broadly, we identify ethical or responsible investment as that which meets certain standards, namely ESG (environmental, social and governance) criteria. As I mentioned, this is a very topical subject in the press, but we are clearly dealing with something more than a passing trend. Large companies, credit institutions, multilateral banks, official credit agencies and even governments themselves have been making a growing number of debt issues that meet these criteria, generally under the name of “green bonds”, which are duly focused on environmental sustainability. But issues of “social bonds” are also beginning to emerge. However, these ESG standards go beyond any debt class. Companies are increasingly incorporating these criteria into their decisions and actions. And banks are certainly no exception to this trend. 1  Banks have, for some time, had corporate social responsibility areas. But their involvement needs to go further. As we supervisors have been insisting, banks also need to incorporate these elements into their risk analysis and management. In this respect, both the European Single Supervisory Mechanism (SSM) and the Banco de España have recently published supervisory expectations relating to the inclusion of environmental risk in banks’ management.

We are also working on the inclusion of these risks in the stress test methodology for the Spanish financial sector. In sum, banks and supervisors alike are moving along this path, which poses all sorts of challenges. For instance, it is in no way straightforward to envisage these risks as part of the commonly used valuation and measurement methodologies. Moreover, there are cultural factors hampering their inclusion, which calls for involvement from the uppermost levels of organisations. And, above all, one of the main challenges is the lack of information, which enormously hinders further progress. Allow me briefly to refer to these valuation-based aspects and the absence of data. Traditionally in finances there is a tendency to value investments exclusively from the standpoint of economic return. The classic focus of study in finances would be cash flows; once capitalised or discounted, these enable us to compare different investment options. From a theoretical standpoint, responsible investment reminds us that we should not value and compare different investments looking solely at an Excel chart. Rather, we should perhaps look at variables that are not directly monetisable in the expected return on each investment. Measuring this “non-monetisable” return is clearly not straightforward. The approach being followed focuses on the measurement of “impact”. For example, environmental sustainability has for some time used measurements that take “footprints”, be they carbon, hydric, environmental, etc.
2017, a turnaround year At this same time last year, I made the paradoxical wish that the euro area, despite all its electoral uncertainties would be "an area of relative stability". 2017 was supposed to be a year full of dangers in Europe; and yet, our continent, and France above all, has proven to be a beacon of hope and strong growth, whereas the United States has abdicated from its leadership role. Two figures illustrate this: that of GDP growth, which greatly exceeded forecasts in 2017 – it is expected to reach 1.9% in France according to our latest forecasts, with notably 280,000 net job creations, and 2.4% in the euro area, which is the highest rate since 2010; the other key factor is confidence, reflected notably by the confidence in the euro, 74% of euro area citizens – the highest figure since the outset –, 71% of French citizens, and as many as 81% of German citizens claim that they are attached to our single currency. The second positive element in 2017: the acceleration of reforms in France. This acceleration of reforms has changed the image of France in the eyes of Europe and the world, which is extremely positive. Lastly, in 2017 Basel III was finalised. Bankers – largely represented this evening – had expressed, alongside others, serious concerns. The agreement of 7 December 2017 is the best possible agreement for our country and for Europe, thanks to the particularly active commitment of French negotiators.

I will start off briefly with the past journey of Asian development, and then focus on how to prepare our bank centric financial system for challenges and opportunities that lie ahead in this rapidly evolving economic environment and financial landscape. Having a smooth-functioning financial system is of course a necessary condition for growth as finance is often referred to as the life blood of the economy. On the other hand, if the blood is infected, it could lead to severe malfunctions of the body and serious adverse consequences. Thus, going forward, in pursuit of the prosperity of Asia, I propose that the role of finance and banking must focus on three key words: “productivity, immunity, and inclusion”. I will come back to these three key words later in my talk. Ladies and Gentlemen, Let’s begin by looking back over the past fifty years. Undoubtedly, it has been an incredible journey of Asia’s achievements. From a primarily agrarian and poor region in the 1960s, Asia has transformed itself into today’s key engine of the global economy. According to the latest IMF’s World Economic Outlook, emerging and developing Asia is expected to 1  grow at 6.4 percent in 2017, making it the fastest growing region and contributing almost half of the world’s output growth. To get to where we stand today, Asia has gone through various rounds of boom and bust cycles.
In the case of those banks that use the advanced approaches offered by Pillar 1, Pillar 2 can be a useful tool for ensuring a constant enhanced dialogue between the supervisors and banks throughout the whole sequence of procedures and estimates, reflecting the ideas that wider freedom for banks to evaluate their own risks requires closer involvement by the supervisor. 2  BIS Review 34//2005  The third pillar, market discipline, imposes higher levels of transparency in banks’ financial reporting. It complements and reinforces the two previous pillars in the following sense. First, it stimulates a more efficient management of banks, since more transparency entails closer scrutiny by market participants. Second, it provides the supervisor with a most valuable ally, namely stronger external incentives for prudent risk-management. In sum, Basel II constitutes a forward-looking approach to capital regulation that blends some of the ideas and practices that have shown a more solid record of success in finances with the best regulatory principles we have learned over time. At the same time, I think that Basel II incorporates two of the key basic principles that are built into modern approaches to monetary policy and which have successfully resolved the debate between rules and discretion: a flexible and forward-looking approach, anticipatory rather than reactive behaviour to risk, and the need to take into account market views. Let me underline additionally two features that are important for our monetary policy discussion.

Under the most realistic case, in which the monetary authority only possesses noisy information on the presence of unsustainable patterns, the remedy could be worse than the illness, since one can never be certain that a true illness is the case. Yet this is not to say that there is nothing left to be done by monetary policy to deal with low-probability high-impact events, such as an asset market collapse and/or a deflationary spiral. As we have moved towards a scenario of price stability and lax credit conditions, some leading central bankers have been inclined to consider more prevention-oriented policies. To the extent that monetary decisions may be a useful tool for reducing the likelihood of a major financial disruption, or for mitigating the effects of a really adverse shock on the entire system (full deflation, for instance), it might be desirable to pursue a monetary strategy that pays due attention to these unlikely crisis scenarios if the associated impact is disproportionately high. This idea is at the root of what Chairman Greenspan refers to as the risk-management approach to monetary policy. Martin Feldstein has described the essence of this approach in a very insightful and simple way: “A prudent man carries an umbrella even when the forecast says there is only a small chance of rain. If there is no rain, he suffers the small inconvenience of carrying the umbrella. But if he does not bring the umbrella and it does rain, he may suffer the much larger inconvenience of being caught by a downpour”.
Inflation is expected to stabilize around 5 percent in the medium term (Figure 24). Hence, assuming that a limited monetary tightening will bring credit growth rate down to 20–25 percent in 2011, our revised forecasts indicate that inflation would be close to the target by the end of 2011. I would like to highlight that the envisaged monetary tightening in 2011 may be through various combinations of different policy tools. The monetary tightening could be implemented by either required reserve ratios or policy rates, or a combination of both. Moreover, during the tightening process, both instruments could move in either the same or the opposite direction. Yet, it should be emphasized that the baseline scenario envisages the net impact of the policy mix on credits and domestic demand to be on the tightening side. We believe that evaluating our forecasts in comparison with those presented in the previous Report would serve to provide a better understanding of the changes in forecasts. As I have mentioned earlier, the rapid decline in unprocessed Food Prices pulled short-term inflation forecasts down, while the upward revision of oil and other commodity price assumptions drove end-2011 inflation forecasts higher (Figure 25). The output gap has been revised slightly upward for the last quarter of 2010 (Figure 26). Moreover, taking into account the lagged effects of monetary tightening, the output gap is assumed to close slower than what was suggested in the previous report.

Lars Heikensten: Monetary policy and wage formation Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, to the Riksdag Committee on Finance, Stockholm, 13 February 2003. *  *  *  Firstly, I would like to thank you for the invitation to come here to the Riksdag and discuss wage formation together with Anders Lindström from the National Mediation Office and Ingemar Hansson from the National Institute of Economic Research. I shall begin by describing how we take wage formation into account when making decisions on interest rate changes. Then I shall comment on the assessment made in our most recent Inflation Report (published in December), which we did not find reason to alter significantly at our last monetary policy meeting on 6 February. I shall continue by discussing how wage formation may develop in future. In conclusion, I shall summarise and mention some of the challenges facing wage formation. Just over a decade ago, there was a comprehensive realignment in economic policy. The budgetary process was tightened up. At around the same time, monetary policy changed direction, the exchange rate was allowed to float and the new target was to limit inflation to 2 per cent, with a tolerated deviation of plus/minus 1 percentage point. The economic policy realignment can only be described as a success.
Sources: National central banks and the Riksbank  Figure 8. Rising housing prices in relation to disposable income Index 1995 Q1 = 100 250 200 150 100 50  95  00  05  10  Sweden  Denmark  Norway  USA  Finland  UK  15  20 Canada  Note. Quarterly data. The index shows nominal house price index in relation to nominal disposable income per capita. Source: The OECD  32 [35]  Figure 9. Household liabilities an increasing part of disposable income Index, 1995 =100 250 200 150 100 50  95  00  05  15  10  Sweden  Denmark  Norway  USA  Finland  UK  20  Canada  Note. Index shows household debt as a percentage of disposable income. Sources: OECD, Statistics Sweden and the Riksbank  Figure 10. Size of the Riksbank’s balance sheet has varied substantially over time Per cent 30 25 20 15 10 5 0 1800  1825  1850  1875  1900  1925  1950  1975  2000  2025  Note. Riksbank’s total balance sheet as a share of GDP. Source: The Riksbank  33 [35]  Figure 11. Many central banks’ balance sheets have grown Per cent of GDP 140 120 100 80 60 40 20 0  16  17  18  19  20  The Riksbank ECB Federal Reserve  21  Bank of England Bank of Japan  Note.

Most important among these are: improper lending to related parties if directors or senior management; improper lending to influential personality to maintain the goodwill and relationship, improper lending to clients in exchange for the right to equity participation or to benefit sharing from their businesses; and the improper profiteering by management from large procurement projects. The directors should be alert and on the look out for such situations. Sixth, the long-term future of a bank rests on continued acceptability from clients and society at large. Therefore, the directors must pay special attention to ensure that clients are treated in a fair manner. Of even more importance is the social perception of the bank. If there is a social perception that the bank has not conducted its business in high moral standings, or fails to look after the interest of the country, then social mistrust and sanction can lead to reputational risk, and the damage may have far reaching implications and difficult to restore. The directors can play a very important role here. Typically, high-flyer managements tend to aggressively pursue growth and profits, often at the expense of social perception. Directors, on the other hand, tend to comprise more eminent personalities, who are relatively more mature and broadly experienced than management who may have been in one profession all along. Seventh, this principle applies to the person performing the role of Chairman.
…  6  BIS central bankers’ speeches  I therefore consider it important that monetary policy is conducted in a clear and comprehensible manner so that it can be evaluated easily and fairly. At present, the Riksbank makes a qualitative assessment of resource utilisation based on a number of different measures. This contributes to making the justification for the monetary policy decisions unclear and it also makes it more difficult to assess the Riksbank and hold it accountable. I thus instead want to focus on stabilising unemployment around a long-run sustainable rate and not on trying to stabilise a number of other, quite shaky measures of resource utilisation in the economy, such as the output gap. Compared with other measures of resource utilisation, unemployment has a stronger link to household welfare, is better understood and more familiar to the public, is measured often and with fewer errors and is seldom revised. The fact that other measures of resource utilisation are not appropriate as targets for monetary policy of course does not prevent them from playing an important role as indicators when assessing inflationary pressures and constructing inflation forecasts. Nor do I see that there is any support for a qualitative assessment of resource utilisation instead of a quantitative, measurable target fulfilment. In economic policy it is now wellknown that targets must be measured quantitatively to obtain sufficient weight and to be fulfilled in practice. “What is measured gets done,” as they say.

This development could also be a source of concern for those wishing to safeguard financial stability. If households have taken on more debts than they can manage to pay, it could lead to loan losses for the banks. Debts have also grown much more quickly than incomes in recent years. Today household indebtedness is even higher than it was prior to the crisis breaking out. Households’ total debts in relation to their annual disposable incomes amounted at the end of 2006 to just over 140 per cent. Despite this high percentage, I do not feel any great concern. This is because even if debts are now at higher levels than they were prior to the crisis, today the costs of bearing these debts are not as great. The low real interest rates have meant that households' interest expenditure in relation to their incomes is at a historically low level. In addition, the households with the most debts are also those with the highest incomes and largest assets. The Riksbank’s analyses of individual households’ finances show that these in general have good margins for managing rising interest costs 3 . Households’ loan-to-value ratios therefore do not appear likely at present to cause the banks such large loan losses that they would be a threat to the stability of the banking system. But even if the household sector as a whole has good margins for paying its loans, there is of course always a risk that certain individual households have borrowed too much.
This development was made possible because for some time economic conditions in both the US and the rest of the world were extremely favourable, with low interest rates, low and stable inflation, and robust growth. The low interest rates resulted in increased indebtedness and willingness to invest, which in turn contributed to rising asset prices, especially in the property markets. Rising asset prices allowed further indebtedness, which once again fuelled asset prices. Parallel to this trend, financial market participants engaged in increasingly aggressive strategies in the search for yield. Banks and mortgage institutions eased credit terms in order to gain market shares. High-risk loans were packaged in complex structured products that were perceived as more secure investments than they actually were. At the foundation, the art of financial engineering that underpins the development of these products is undoubtedly positive, making it possible to convert illiquid loans into liquid securities and enabling investors to trade in credit risk without having to handle individual loans. However, it is essential that the products can be purchased and sold on a market where investors are offered clear and continuous pricing information. However, this was not the case. The variety of instruments became so immense and their complexity so great that few people – if anyone – were capable of assessing these markets. One driving force behind the development was the large US investment banks, which in many cases were the creators of the new products and which were also highly leveraged and invested in these and other risky instruments.

The task of the central bank is to provide the financial system with liquidity when needed. As we know, this has also taken place to a large extent. However, there are limitations to what the central banks can do. Other measures must be taken for banks with inadequate solvency. For these purposes a functioning order to handle banks in insolvency is needed. Where taxpayer money is involved, the process must be carried out on  BIS Review 125/2008  5  condition that the socioeconomic costs are minimised and that the owners of the financial institutions that are taken under public administration must carry their own losses. The coordinated crisis package that the Euro countries launched earlier this week contains the essentials and largely offers the desirable components for such a package. After the Lehman Brothers bankruptcy it became clear to financial market participants that even the largest financial enterprises could fall. This insight caused the freezing of the markets that has now lasted for almost a month. Promises by leading nations that this will not be allowed to happen again will hopefully help to thaw the financial markets. It is both welcome and desirable that the government support measures are accompanied by tough counterdemands on the banks. The Swedish government has announced that it intends to carry out a nationally adapted version of this crisis package in Sweden.
The ideal would be policy instruments and processes which are effective in preventing the build up of asset price bubbles and economic imbalances and efficient in minimising the associated costs to the real economy. This would allow short-term interest rates to continue to be the primary tool for hitting the inflation target in the short-to-medium term, supported by additional instruments which are used to manage emerging imbalances which may pose substantial risks to economic stability further out. Strengthening the policy framework in this way should lead to greater economic and financial stability. But we should not be lulled into a false sense that it will solve all our problems. Operating such a framework will continue to require finely balanced judgements and difficult decisions. And no policy toolkit can anticipate all future changes to the structure of markets and the economy, or to the shocks hitting them. The process of increasing the robustness of the macroeconomic policy framework should be seen as continuous, not a one-off response to the current crisis. 3. A response to some criticisms of the asset purchase programme  Strengthening the policy framework in this way should help to reduce the likelihood of future crises. I thought I would end today with a few words on the progress we are making in managing the current crisis and, in particular, by addressing some of the concerns that have been raised about the asset purchase programme.

The public commitment that the Committee will do whatever it takes to hit the inflation target is central to the conduct of monetary policy. It underpins the credibility of the inflation target. This commitment is more important than ever in the current environment of unprecedented shocks and unconventional policy measures. Recent events have raised the question of whether the Committee could provide even more information about its policy strategy by committing to keep interest rates low for a particular period of time or until the economic outlook evolves in some specified way. The difficulty is in designing such a commitment that would be both useful and that the Committee would be willing to adhere to. A commitment to keep interest rates low for a certain period of time runs the risk of being overtaken by events. The past eighteen months has demonstrated only too well how rapidly the state of the economy can change. I truly have little idea as to how long Bank Rate will need to be maintained at its current low level in order to meet the inflation target. As such, it would make little sense to commit to a rule that suggested I did! The potential benefit of a state contingent commitment – in which the MPC commits to maintaining Bank Rate at its current level until the economic outlook has evolved in a particular way – is that it may aid the public’s understanding of how the Committee is likely to react to economic developments.