samchain/econo-pairs-v1 huggingface dataset:
Key among them are the interaction between sovereign debt and banking fragility and the problem of big banks in small countries – of which my country, Iceland, was a prime example and Cyprus is the latest. I will expand on this shortly. The financial crisis and the policy responses to it, especially some of the drastic decisions taken in the heat of intense crisis management, have changed the structure of the financial sector and will do so more profoundly going forward. There are several reasons for this, such as the plain collapse and disappearance of financial institutions, the non-viability of certain business models and practices in the new environment, the need for the financial sector to shrink and deleverage after the real risks in this world had been revealed, the intended and unintended consequences of new prudential regulation, the coming effects of structural regulations that at least partly ring-fence insured deposits and payment systems from the “casino”. Then there is the shrinking of cross-border banking through the retreat of banks  1  See http://www.bis.org/speeches/sp081119.htm  BIS central bankers’ speeches  1  behind their national borders and the weakening and, in some cases, collapse of international financial centres in smaller countries. We can see where this is heading: towards a financial sector that is smaller, less leveraged, less complex, more fragmented, more regulated, and more national.

In other words, Icelandic banks had only limited access to ECB liquidity (although there was some access through subsidiaries in Luxembourg), which proved fatal during the global run on crossborder liabilities of banks that immediately followed the collapse of Lehman Brothers. But there is always a silver lining. The lack of an adequate safety net and the absence of international or regional co-operation at the peak of the panic forced Iceland to adopt a radical solution in order to ring-fence the sovereign from the collapsing banks. These were private banks, and a bail-out by the Icelandic sovereign would have bankrupted the country. The banks were split overnight into domestic and international banks without disruption in the public’s access to banking services, and the international part went into resolution. The result was a drastic cut in the leverage ratio of the remaining banking system, from over 30 to around 5. Yes, Iceland had to introduce capital controls, which are still in place. But those controls did not take the form of limiting deposit withdrawals from banks, as was done in Cyprus, and current account transactions have been mostly unrestricted. History and further research will tell whether this cold turkey response turns out to be better than more gradual approaches that sometimes turn into “death by a thousand cuts”.
After seasonal adjustment, employment has been increasing since the second quarter of last year. The unemployment rate, although significantly up from late 2008, did not go as far as some projections foresaw and is already descending (figure 11). Lately, the velocity of the creation of salaried jobs has outperformed that of total employment. Although aggregate employment has not restored the jobs lost between late 2008 and early 2009, the drop in employment in this cycle has been milder and shorter than it was in the late 1990s, with less social costs from lost output. The countercyclical stimulus from fiscal and monetary policies has been determinant in this behavior of consumption (figure 12). Baseline projections consider the fiscal policy scenario contained in the Budget Law. The drop in external demand has been reflected on the volumes of shipments abroad, which are forecast to fall by nearly 3% annually this year. However, it is worth mentioning, on one hand, the improvement in mining shipments and, on the other, the sharp deterioration of salmon exports in the past few quarters. Both factors, especially the reduced salmon exports, have affected GDP significantly. Thus, the baseline scenario of this Monetary Policy Report foresees the Chilean economy growing between 4.5% and 5.5% in 2010, after dropping 1.9% in 2009. This growth rate is not enough to fully bridge the gaps in the policy horizon.

As I have also said repeatedly, this is how the Central Bank of Chile contributes to the Chilean economy’s growth and stability. 6  BIS Review 9/2010  Figure 1 World growth (1) (annual change, percent) 15 12 9 6 3 0 -3 -6 -9 -12  15 12 9 6 3 0 -3 -6 -9 -12 80  84  88  92  96  00  04  World at market exchange rate  08  Chile (2)  (1) Gray area shows projections from 2009 onwards. (2) Growth for 2010 is the midpoint in the range of forecasts included in the Monetary Policy Report. Sources: Central Bank of Chile, International Monetary Fund and World Bank. Figure 2 Difference in growth in 2009 (*) (percent) 4 3 2 1 0 -1 -2 -3  Poland  Norway  Australia  Israel  Greece  Colombia  Chile  Brazil  Switzerland  Denmark  Korea  Canada  China  New Zealand  France  Belgium  Singapore  Netherlands  Spain  Sweden  United Kingdom  Thailand  Italy  United States  Germany  Japan  Finland  Turkey  -5  Hungary  -4  (*) Actual growth minus estimated growth. Growth estimate for 2009 based on change in the terms of trade, population, and per capita GDP. Sources: Central Bank of Chile, International Monetary Fund and World Bank.
This “procyclicality” mechanism works to exacerbate real shocks, raise the degree of economic fluctuations, and in extreme cases can play a part in leading to financial or economic crises. One remedy to this problem is to utilize the supervisory and regulatory function in pursuit of macroeconomic and system-wide stability objectives, particularly by reducing the degree of procyclicality. Such “macroprudential” approach to regulation is rapidly becoming a received wisdom among academics and practitioners, and indeed is the guiding principle underlying the recently finalized Basel III proposal. While it is encouraging that practical implementation has already been set in motion, there remains a degree of opaqueness at the conceptual  BIS Review 143/2010  1  level about the desirable features that should govern the design of macroprudential policy. This point leads me to my second topic that I want to focus my talk on today, that is macroprudential policy and long-term financial stability. In my view, there are three important issues regarding macroprudential regulation. The first is the objective of macroprudential policy, which conceptually is to safeguard financial stability. But, for practical purposes, the notion of financial stability is much more obscure compared to price stability, and the question of how macroprudential policy should be designed to target something that is loose in concept and difficult to measure in practice remains a challenge.

To address this, one approach has been to distinguish between the two facets of financial stability: the systemic importance of a given financial institution on the one hand, and the procyclicality of the overall financial system on the other. Such taxonomy implies that macroprudential policy should aim to improve the resilience of the financial infrastructure in these two aspects. With respect to systemic importance, various measurement tools have been developed, ranging from the network externality approach to the concept of conditional value-at-risk or CoVaR associated with the works of Adrian and Brunnermeier. The latter method has since been applied to the cases of Hong Kong and Thailand, by their respective central bank staffs. 1 On the second facet, there have also been attempts to get a handle on procyclicality quantitatively. Notably, credit-to-GDP ratio has been proposed as an intermediate indicator around which macroprudential policy such as countercyclical capital buffer can be designed. While scientific work on the conceptual and measurement issues are still progressing, central banks implementing macroprudential policies will need to be content with something less holy. At the Bank of Thailand, implementing macroprudential policy involves monitoring a large set of indicators, covering seven important areas in which experience and history have shown are prone to financial vulnerability. Such a wide coverage is designed to make up for any shortfall in terms of scientific measurement and increase the chance of detecting financial imbalances as they begin to develop.
Within this context it is relevant to note that while in general accession countries have made significant progress towards achieving macroeconomic stability, this progress has been far from uniform and challenges remain in this respect too. The paper to be given by Dr Lipschitz and the presentations on EU country experiences should provide some interesting perspectives on these issues. The relevance of transparency and good governance also applies at the corporate level, not least because financial difficulties in large corporations could undermine the well-being of individual financial institutions and markets. This is especially the case in small jurisdictions. Now it is a fact that corporations will always know a lot more about their financial position than any outside entity charged with monitoring them, and financial intermediaries are no exception in this regard. This is particularly true at a time when the complexity of financial products and the intensity of cross-market risks are stretching the capacity of central bankers and supervisors to remain fully in control. Several recent episodes in the financial world indeed confirm that the innate human predisposition to maximise selfinterest can induce behaviour that is not in harmony with the public interest. The implications of this are two-fold. While rules and regulations continue to play an important role in preventing systemic shocks, they will increasingly have to incorporate incentives and credible deterrents to discourage excessive risk-taking and moral hazard.

In such a scenario, it will be even more important for all institutions with financial stability responsibilities - be it the central bank, supervisory authority or other government agency - to co-ordinate their efforts in the area of system oversight and to share any information which could be relevant to the proper fulfilment of their respective functions. Indeed, whereas until recently the prevailing concern related to the choice of institutional arrangement for the supervision of the financial sector, it is now sometimes argued that it is not the institutional framework which matters most, but rather the existence of adequate mechanisms guaranteeing the exchange of information and policy co-ordination between the entities responsible for overseeing systemic stability and those that monitor the health of individual financial institutions. Beyond that, it is claimed, any institutional set-up can work. Likewise, any one can fail. While this conclusion might be valid from a national point of view, it does little to address the question of whether information exchange and policy co-ordination relating to financial sector developments affecting the EU as a whole would be more appropriately addressed by a supranational EU institution with supervisory responsibilities, or whether such tasks are best handled by the national authorities of member countries. This issue has certainly gained in importance in recent years with the increased recognition of the links between supervision and monetary policy.
Navigating the economy through the Covid crisis Speech given by Dave Ramsden, Deputy Governor for Markets & Banking  The Strand Group, King’s Business School 14 July 2021  With thanks to Tom Smith and Michael Yoganayagam for their assistance in preparing these remarks, and to numerous colleagues, including Saba Alam, Andrew Bailey, Nick Bate, Max English, Greg Kidd, Andrew Hauser, Maggie Illingworth, Sarah Illingworth, Sean Maloney, Alex Rattan, Andrea Rosen, Michael Saunders, Fergal Shortall and Silvana Tenreyro, for their many helpful contributions. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction It’s very good to be back speaking at this 51st Strand Group event and in my role as a Visiting Professor at King’s. This is the third Strand Group event I’ve spoken at but my first time speaking to you virtually. I’ve been involved in forecasting throughout my career, both in my current role as a Monetary Policy Committee (MPC) member and in my previous civil service career at HM Treasury.1 Outside of work I’m also a keen mountain walker – most recently being lucky enough to spend some time on the Isle of Skye – and it’s hard not to see parallels between the two activities. Forecasts act as a map for policymakers of where the economy is heading, showing what adjustments to the current path are needed to avoid impending hazards and ensure they safely reach their policy objectives.

Starting with my first consideration, whether recent strength proves persistent or temporary. Even absent a further impact from Covid, it is unlikely that the current pace of GDP growth can be sustained for much longer. Indeed if current strength represents a bringing-forward of the recovery that we had expected later in the year, then subsequent growth might if anything be expected to be weaker rather than stronger. The very latest indicators suggest the pace of underlying demand growth may indeed be slightly moderating, though as I mentioned previously the read from the latest GDP data itself is clouded by supply constraints. But there are certainly upside risks to household spending, if consumer confidence continues to rise or if households run down their accumulated aggregate savings faster than we have assumed. The current strength in the housing market is suggestive in this regard, both as a potential indicator of household confidence and due to the consumption of things like durable goods that goes alongside housing transactions. One of the early legacies of the pandemic appears to be an increase in the number of people taking advantage of the ability to work more remotely and moving house for lifestyle reasons, a trend which I think could be sustained for some time; like many of the long-term effects of Covid, that is likely to have differential impacts within regions and in different parts of the country.
Thus, trade restrictions affect the composition of trade but not the gap between exports and imports, which is determined by the difference between domestic savings and investment. At the end of the day, the protectionist country would produce more goods in sectors protected by higher trade barriers but also fewer goods for export. The expectation that higher trade barriers would save jobs ignores these critical second-round effects. Moreover, the story may not end there. What happens if another country that now faces higher trade barriers responds by raising its own barriers? That would push production even further out of high-value-added exports that are now deterred by the higher foreign trade barriers and into those exports that face lower trade barriers, or into the goods protected by the higher domestic trade barriers. Raising trade barriers would risk setting off a trade war, which could damage economic growth prospects around the world. Measures that raise trade barriers typically would protect lower-wage, import-competing jobs, but would also weigh on the prospects for jobs in the more efficient export sector, which tend to be higher-paying. The outcome would be countries producing more where they have a competitive disadvantage, and less where they have a competitive advantage—the exact opposite of what we should be aiming for. For example, in the United States, one of our largest manufacturing exports is aerospace parts (which requires skilled labor) and one of our largest imports is apparel (which requires less skilled labor). These second-round effects would also likely hurt productivity growth.

2  BIS Review 72/2002  Chairman, I could go on reflecting on our own experience of all this - but I'm conscious that the weekend beckons - and the relevant question is how it all relates to the development of the single financial market across Europe. The potential benefits of integration I take for granted. The continuing debate is about how - given that we all start from different positions and with different traditions and with different public policy priorities, we get from here to there. It may well be that continuous public pressure for higher and higher standards in financial markets everywhere are leading to greater official intervention any way. But integration was itself always bound to involve more intervention as the EU member states moved towards some degree of harmonisation of standards, requiring legal agreement at the European level and then reflected in national legislation. And a great deal of progress has, of course, already been made in that direction through the Financial Services Action Plan which is due in principle to be completed in 2005. But everyone accepts that a great deal remains to be done - in the context of the integration agenda - and in fact it is bound to be an ongoing process as markets evolve and new issues arise. In that context the recent agreement on Alexandre Lamfalussy's proposals for a faster track procedure in securities markets has been generally welcomed. But the on-going debate extends beyond that to where more precisely we want to get to.
At this critical juncture in the Asian recovery process, I think it is worth reviewing just how important a stable banking and financial system is to the health and vitality of any market economy - and particularly emerging market economies - and the crucial role that supervision plays in achieving and preserving financial stability. Indeed, effective supervision represents a crucial cornerstone of financial stability, both locally and globally. It is also clear that, given the accelerating pace of change and innovation in the financial services industry, our notion of supervision must encompass discipline applied by the marketplace, as well as official supervision. With these thoughts in mind, and noting the critical role banks play in a market economy, in my remarks today I will discuss the nature and form of an effective supervisory framework for the 21st century, addressing the role to be played by banks themselves, the broader marketplace and official supervisors. On the subject of official supervision, I will address the Basel Committee’s Core Principles for Effective Supervision, and then conclude with a discussion of the Committee’s major initiative to revise and refine the 1988 Capital Accord. Banks’ role in a market economy Let me first discuss the crucial role banks play in a market economy. While specific arrangements may vary from country to country reflecting differences in history, custom and culture, the basic principles are common to nearly all market economies.

Mr McDonough discusses sound banking systems: a new growth imperative  Speech by Mr William J McDonough, President of the Federal Reserve Bank of New York, before The Monetary Authority of Singapore, Singapore, on 24 March 2000. *  *  *  I am delighted to be with you today. It’s a special pleasure to be among so many old friends and colleagues. It’s also a great pleasure to be in Singapore under such happy and promising circumstances. Just two years ago, financial and economic conditions throughout Asia were rather grim and the outlook was uncertain. But since then, to the great credit of the people of Asia, significant progress has been achieved. In Thailand, Indonesia, Malaysia and especially Korea, meaningful headway has been made toward recapitalizing the banking systems, ridding banks’ balance sheets of problem assets, and improving supervisory and regulatory frameworks. And that hard-earned progress on the banking front is already bearing fruit. The economic contraction that devastated so many in the region has generally been halted and even, in some countries, impressively reversed. Equity markets have rebounded impressively, and yields on government securities have been cut by nearly two-thirds as foreign capital has begun to return. Without question, this is truly a remarkable turnaround. It must also be acknowledged that the economies of Asia are not out of the woods just yet. Important and even difficult work still lies ahead.
But we think it is leading to a better market outcome than if we had interpreted Solvency II very narrowly and limited the Matching Adjustment to, for example, long-dated, fixed rate sterling bonds, such as gilts. That could have led to higher annuity rates for UK policyholders whereas, in fact, there is no clear evidence that the introduction of Solvency II has affected UK annuity rates  7  ‘Dealing with a market turning event in the general insurance sector’ - CP32/16, Prudential Regulation Authority. DIRECTIVE 2009/138/EC (Solvency II), Article 77b (1): Insurance and reinsurance undertakings may apply a matching adjustment […]where the following conditions are met: (a) the insurance or reinsurance undertaking has assigned a portfolio of assets, consisting of bonds and other assets with similar cash-flow characteristics, to cover the best estimate of the portfolio of insurance or reinsurance obligations […] (h) the cash flows of the assigned portfolio of assets are fixed […] 8  5  All speeches are available online at www.bankofengland.co.uk/speeches  5  (see the Appendix). The overwhelming driver of sterling annuity rates over recent years has been the level of risk-free interest rates. I am well aware that some still see the Matching Adjustment as complex and too restrictive. As I have said earlier, we have sought to interpret the requirements as flexibly as we are able within the current legal requirements. We remain open to suggestions that fit within the current legal structure.

Accordingly, over the next few years, we will continue to strengthen the institutional framework for macroprudential surveillance through analysing liquidity and interest rate gaps and multicurrency foreign exchange risks, monitoring leverage of financial institutions, and enhancing credit risk assessments of the financial sector. As part of our macro prudential surveillance, a systemic risk survey is being conducted on a biannual basis to identify systemic risks to the domestic financial system. As part of a more complex monitoring system, a framework is to be developed to facilitate the identification and 21  analysis of financial cycles and business cycles. Multivariate stress tests are to be developed for LFCs. In addition, a country-wide assessment of household indebtedness is to be carried out. Over the year, the Central Bank has been actively involved in the adoption and implementation of measures that will not only strengthen the payment and settlement infrastructure but also facilitate the transition to a less-cash dependent society. During 2018, we will monitor the implementation of the National Card Scheme to facilitate introduction of low cost payment card products such as those pertaining to public transport and social benefit schemes. With the increased permeation of FinTech products, a regulatory framework is to be established detailing compliance requirements for such products and their usage. Further, as has been seen in recent times, cyber security is a threat to the stability and credibility of our financial sector.