samchain/econo-pairs-v1 huggingface dataset:
Svein Gjedrem: Monetary policy and the economic situation Speech by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at a meeting of the Mid-Norway Chamber of Commerce and Industry, Trondheim, 14 November 2002. The address is based on the assessments presented at Norges Bank's press conference following the Executive Board's monetary policy meeting on 30 October and on previous speeches. Please note that the text below may differ slightly from the actual presentation. Charts in pdf for this speech can be found on Norges Bank’s website. *  *  *  A year and a half ago, the Government and the Storting adopted new guidelines for economic policy. Over time, the use of petroleum revenues is to be equivalent to the expected real return on the Government Petroleum Fund, i.e. 4 per cent of the Fund. The use of petroleum revenues is expressed in the structural, non-oil government budget deficit. It is this deficit which, according to the fiscal guideline, should be 4 per cent of the value of the Fund over time. This means allowing higher tax revenues to strengthen the budget balance during a boom in the economy, and to have the opposite effect during a downturn. This means that the automatic stabilisers will function. Norges Bank shall set the key rate with a view to maintaining low and stable inflation. The inflation target is set at 2½ per cent.

We have also expanded our balance sheet on a scale that would have been unthinkable before the crisis: around 55% in the last 12 months. Question : The ECB expects that the economy will gradually start to recover again in 2010. Where are the impulses for growth likely to come from? Answer: The growth and inflation projections you mention come from the staff of the Eurosystem central banks. They are not the forecasts of the Governing Council of the ECB. BIS Review 1/2009  3  We look closely at these projections, but we also consider other forecasts, such as those from the private sector. Question: And what conclusion do you arrive at? Answer: Taking into account the staff projections, we believe that the risks to growth in the euro area are on the downside. That being said, we are in an environment of great uncertainty and we must treat new data and figures with the greatest humility. But we also have to take into account the fact that some developments, such as the drastic reduction in the price of oil and other commodities, are simultaneously disinflationary and expansionary. Question: Why is the Governing Council of the ECB so reluctant to give indications regarding the interest rate decision in January? Answer: As I said at the last press conference when reporting on the position of the Governing Council, we are concentrating at present on the impact of our previous decisions. We have already cut rates by 175 basis points within a very short span of time.
Detailed recommendations on the regulatory treatment of shadow banking are expected to be prepared only by 2012. In the EU, work on shadow banking, however is at a relatively early stage, currently focussing on a stocktaking of existing regulations and conducting a data sharing exercise. Finally, let me also mention that the development of effective bank resolution regimes, which has been on the top of the global and EU regulatory agendas, is also a key element of a successful policy response to the recent crisis. There is now a broad consensus that all distressed institutions, particularly systemic ones, should be dealt with by authorities in a way which safeguards the stability of the financial system as a whole and minimises public costs and economic disruption. In the US several banks were allowed to fail in an orderly manner in the recent years, which could provide an example for other countries as well concerning the set-up of an efficient resolution regime in a national context. However, it has to be acknowledged that most of these banks in the US were rather small compared to average European bank sizes and they were almost exclusively national based with no or very little cross-border operation. Therefore, substantial challenges remain for authorities around the globe to establish effective cross-border resolutions schemes, in particular for global systematically important banks.

For the year 2009, a GDP loss of about 4 percent was recorded for the OECD countries. There is possibly also a permanent depressing effect on medium-term potential output.3 Governments and central banks took unprecedented action globally in response to the perils originating from the financial market turmoil. Euro area governments, for instance, increased their deficits on average by more than 5 percentage points of GDP in 2010. This was a joint consequence of rescue packages for financial institutions, cyclical stimulus packages and operations of automatic stabilizers. In 2010, Ireland recorded a deficit of over 30 percent, resulting from a one-off support for its banking sector. Debt-to-GDP ratios in advanced economies have increased on average by about 25 percentage points since 2007. Central banks around the world expanded their balance sheets, though to different extents and with different asset-liability structures. It is clear that in our democracies, such measures taken by fiscal and monetary authorities can only be an exception. They are not at all repeatable, neither in nature nor in scale. The disasters that we witnessed in the financial system must not repeat themselves. It all leads to one conclusion: Reforms are urgent! The Basel III framework means some progress on the way towards a more sound and resilient financial system and in my view it is at the core of financial regulation. Nonetheless, to complete the G20 Action Plan, further policy actions need to be taken.
1  1 The value of independence in economic authorities and supervisors In the area of the economy, monetary policy and financial supervision are two of the spheres habitually occupied by independent institutions in the developed countries.1 In our case, for the euro area, the European Central Bank (ECB) – of whose system the Banco de España is a part – is the independent monetary authority whose primary objective is to maintain price stability (see Annex 1). Moreover, the Banco de España has, among other functions, regulatory and supervisory responsibilities for the banking sector (the ECB has also assumed these responsibilities in respect of significant institutions). It is also responsible for the stability of the financial system as a whole, the preventive resolution of financial institutions (in the framework of the European Single Resolution Mechanism), the protection of bank customers, the supervision of payment services providers and the correct operation of payment systems and market infrastructures. Further, it advises the Government, produces reports and studies and compiles and publishes statistics relating to its functions. The National Securities Market Commission (CNMV) is the independent agency entrusted with the oversight and inspection of Spanish securities markets and the activity of all securities market players. Other areas of the economy are also habitually covered by independent agencies.

In December last year, the People’s Bank of China and the Bank of Thailand concluded the bilateral local currency swap arrangements during the visit of Vice President Xi Jinping to Thailand. The Agreement provides for the exchange of respective local currency upto 70 billion yuan or 320 billion baht, to facilitate bilateral trade and investment. I believe this is a crucial role that the public sector can provide to give assurance to the private sector on the availability of their access to the yuan and the baht for their trade and investment needs. In addition, the Bank of Thailand received approval from the People’s Bank of China and China Securities Regulatory Commission to participate in the interbank bond market and securities market here in China. Our investment would allow our asset allocation and diversification to better reflect the increasingly important role of the yuan in international monetary system. Last but not least, I hope that the inauguration of our Beijing representative office will be more than just another success story. I truly hope that the spirit and friendship behind this long-standing relations and successes, nurtured earnestly over centuries, will continue to serve as solid foundations that will lead to even greater and closer future cooperation between our two nations. Let me end by thanking everyone for being an important part of this success. And, with Your Royal Highness’ permission, may I propose a toast to future success and cooperation as well as to your Royal Highness’s good health and prosperity. Thank you.
This, however, does not mean that we should be complacent. In the case of the Bank of Thailand, we have asked banks to carry-out stress-tests to ensure that bank’s Board and management are fully alert to the increased risk, have the strategy to manage it, and have adequate capital and liquidity even in severe risk scenarios. The result of the stress-tests shows that the system remains resilient, but we will continue to monitor developments closely, and stand ready to take necessary actions to ensure financial stability. Why have both financial institutions and regulators in mature economies and elsewhere not been fully prepared for such a challenge? First, there were many factors that caused the deterioration in the credit discipline, including financial innovation such as the originate-distribute model of securitisation which tends to lessen governance in credit process. The key lesson here is that financial innovation can be a mirage which misleads us into disbanding the fundamental discipline required for good risk management and governance. This lesson is not new; it re-emerges with different variants over the years. Therefore, going forward, we need to continue to be vigilant of this risk. Secondly, as risk-profiles become more complex, so too must risk management and riskbased regulatory framework. Here, the lesson from CDOs is clear in that the regulatory framework, even at the level of international standards, have not properly converged, and there are regulatory arbitrage which resulted in excessive risk taking, to the detriment of the overall financial system.

And thirdly, the level and complexity of interconnectivity of various types of financial institutions have increased very rapidly, and with this, increased counterparty risk and systemic risk implications. Much of this is in the OTC derivatives markets which are hard to monitor, and presents huge problem in unwinding during a crisis, even with standard agreements such as the ISDA Agreements. The overhaul of international regulatory framework is a major challenge, but as we all know, this process will not be immediate, as the regulators of major economies are still focused on solving the turmoil. In the meantime, it is up to all of us to be aware that conforming to minimum standard, even one prescribed by international best practices, may not be adequate if the risk profiles dictate a higher level of vigilance, risk management, and capital adequacy. In this regard, given the complex nature of financial conglomerates in emerging markets in Asia today, a robust framework of risk management and supervision on a consolidated basis is a must. In the case of Thailand, we have undergone the Financial Sector Assessment Programme (FSAP) of the IMF and the World Bank in 2007. FSAP assessed the regulatory framework of banks, capital market, insurance, the payment system, against international best practices such as the Basel Core Principles for Effective Banking Supervision, as well as the Insurance Core Principles of IAIS. Overall, the FSAP team found the Thai financial system to be resilient and with the regulatory framework broadly conforming with international best practices.
In the face of a collapse in world trade even faster than that in the 1930s, countries needed no persuasion of the necessity of policy stimulus. But it has proved much harder to form a consensus on how to tackle the underlying problems. So, three years later, the imbalances in demand remain. Around the world, short-run stimulus packages of various kinds, and unsustainably low interest rates, have bought time. So far that time has not been used to deal with the underlying imbalances, or the weaknesses in bank and sovereign balance sheets. Four years after the financial crisis began, the foreign exchange reserve holdings of China are substantially larger than at the onset of the crisis. Markets now realise that before the crisis banks were seriously undercapitalised and so react in a volatile way to any news about the health of the banking system. And the indebtedness of governments around the world is certainly greater. Time is running out. So what is to be done? One way or another, domestic spending must be raised in the surplus countries and lowered in the deficit countries, relative to current trends. In the past, marketdetermined exchange rates have played an important role in rebalancing world demand and trade. Exchange rates are the natural safety valve, which can limit the extent of imbalances in demand across countries.

Savers are afraid that Germany could at some point end up being liable for the collapse of, say, an Italian bank. What would you say to that? A European deposit guarantee scheme is not about paying for other countries. It does not mean permanent transfers and it does not mean new taxes. A European scheme would increase confidence in banks and help them to operate on a pan-European basis, supporting the Single Market and hence growth and jobs. At the same time, it is of course important to keep reducing risks in European banks, in particular when it comes to non-performing loans. Savers need to be patient. The ECB has decided that it won’t raise interest rates before the summer of 2019. Why can’t it happen sooner? The euro area economy is growing and unemployment has fallen significantly. Price pressures are gradually picking up. But this doesn’t happen in one day. Ample monetary stimulus will remain needed to support a sustained convergence of euro area inflation towards our aim of 2/3  BIS central bankers' speeches  below, but close to 2%. In other words: monetary normalisation has started, but it is a gradual one. We expect interest rates to stay at the current level at least through the summer of 2019. But we have already started to reduce our net asset purchases and anticipate to end them after the end of December. That is an important step towards normalisation. What role does Brexit play in your planning?
through the adjustment of domestic prices and costs relative to external ones, and by curbing government spending and revenue shortfalls, in real terms. This is what the Spanish economy has, with great effort, been achieving since 2012. In the truly difficult circumstances of 2012, Spain avoided a bail-out that would have been very painful in many ways, and certainly from an economic and social standpoint. Spain never lost its access to the capital markets. Admittedly at very high interest rates, and with very large risk premiums, our Treasury was always able to fund itself on the markets, because the markets, while mindful of the risks involved, very quickly appreciated (I am referring to the summer of 2012) the seriousness and decisiveness of the corrective action being taken. Spain reacted as a responsible and loyal European Union and Monetary Union member. It did not attempt to shift the blame onto anyone else, even though the euro crisis, which affected us very directly, obviously did not arise exclusively, or originally, in the Spanish economy. BIS central bankers’ speeches  3  To call the correction of unsustainable imbalances (like the balance of payments deficits of 2007 and 2008, of around 10% of GDP, and the budget deficits, which ranged from 9% to 11% between 2009 and 2012) austerity, is not really a very good description of reality. Changing direction when on a path towards impossible and unsustainable situations is not “austerity” but common sense and, in a very real sense, patriotism.

To create greater clarity, monetary policy is guided by a principle that the Riksbank’s ambition is normally to bring inflation back on target within two years. One might say that this two-year horizon is a restriction that the Riksbank has placed upon itself to maintain confidence in the inflation target. 1  A description of the Riksbank’s objective and strategy for monetary policy can be found in the document “Monetary policy in Sweden”, which can be downloaded from the Riksbank’s website, www.riksbank.se, or ordered in printed form. 2  See Lars Heikensten’s speech at the Swedish Economics Association on 22 February 2005, “Thoughts on how to develop the Riksbank’s monetary policy work”. BIS Review8/2007  3  We have chosen a two-year horizon for monetary policy because this is considered to give sufficient scope in most cases to ensure acceptable developments in the real economy. However, the exact pace at which inflation should be brought back on target within this horizon will of course depend on what kind of shocks have affected the economy. 3 Sometimes the deviations from target can be so large that there is reason to allow inflation to return to target beyond the normal two-year horizon. In these cases, we shall explain this clearly in connection with our decisions. These thoughts on how to take into account developments in the real economy are not, of course, unique to the Riksbank.
We also stated that, in view of the economic situation and outlook, the current interest rate level appeared broadly appropriate for the next several months. In other words, significant new developments would be required for the MPC to raise interest rates – or lower them – at upcoming rate-setting meetings. I notice that the bond market seems to have realised the implications of this, as yields at the longer end of the market have not risen since the last interest rate announcement. But looking further ahead, it should be clear to everyone that if GDP growth forecasts materialise in coming  BIS central bankers’ speeches  3  years and the slack in the economy disappears, the monetary slack manifested in a negative real policy rate of over 1% must be removed over time. So where do we stand with respect to the monetary policy stance? Is monetary policy lax or tight? Chart 3 shows the Central Bank’s real interest rate measured by the effective policy rate and twelve-month inflation. The chart shows that, in spite of two recent rate hikes, the real interest rate will be lower in Q4/2011 (assuming unchanged interest rates in December) than at any time since the financial crisis struck, with the exception of Q1/2009, when inflation soared up above 18% and a dramatic disinflation episode was in the offing. Chart 3  Chart 4  But what about the Taylor rule, shown in Chart 4? There is a significant deviation at the moment – one that perhaps requires some explanation.

Naturally, opinion differs on the appropriate monetary stance at any given time, as uncertainty is a permanent feature of economic life – not only uncertainty about the future, but also about the present and the recent past. 6  BIS central bankers’ speeches
And if any of you think that I’m not living up to those principles, please find a way of getting that message to the fifteenth floor, that I personally am not living up to those three principles. Because, that, in-terms of leadership, that is important. I need to be able to set an example, and I am going to do my best to do so and you have ever any shortcomings as I said, I would like to hear. I want to encourage a culture of discussion, of debate, of openness, so please help me to do that. It should never be personal if somebody has a different opinion to you. We need to put our heads together. We will have different views, we need to throw it out in the open, discuss and then eventually, find the best way forward. And you know there is always concern about the balance between politics and economics. In my view for much of our post independent years – I’m not putting this on one party or the other party, or one government or the other – but if you look back from 1948, for most of the time, politics has trumped economics. It is our job to convince our politicians that good economics is good politics. We need to, as a central bank, to get away from this cycle of stop – go policies, of creating artificial booms through misaligned policies. We need to set a good framework, as I said, for the economy.

News conference  Berne, 13 December 2018 Fritz Zurbrügg  Introductory remarks by Fritz Zurbrügg  In my remarks today, I will be looking at the current developments in the area of financial stability. I shall look at the big banks first before turning to the domestically focused banks. Big banks  The financial market situation facing the two big banks has become more volatile since the press conference in June. Given this heightened uncertainty on the markets, the share prices of big banks both in Switzerland and abroad have come under pressure. By contrast, premia for credit default swaps of such banks have remained at a similar level as in June overall. The SNB’s assessment of the situation at the two big banks is essentially unchanged from that at the last press conference. This applies both to resilience and to the orderly resolution of a distressed bank. As regards resilience, Credit Suisse and UBS are still on track to meet the revised ‘too big to fail’ requirements on going-concern loss-absorbing capacity. They already meet all final 1 risk-weighted capital requirements. However, as regards the leverage ratio, i.e. the unweighted ratio of capital to assets, further improvement is needed. The big banks have made significant progress in recent years in the area of resolution. They have steadily expanded their holdings of bail-in instruments. At group level, both institutions are already compliant with the final requirements for gone-concern loss-absorbing capacity.