samchain/econo-pairs-v1 huggingface dataset:
And we want to ensure the financial system provides the sort of funding – long-term and stable – which supports business investment. Corporate debt and financial stability The FPC’s primary objective is to ensure the resilience of the UK financial system by detecting, monitoring, and – where possible – countering systemic risk. These risks are often not contained within the financial system. As we saw at the onset of the pandemic, tight linkages between the financial system and the real economy mean that shocks emanating from one can transmit to the other. One potential source of risk we monitor closely is corporate debt. [1]  Page 3  Of course corporate debt is an integral part of the functioning of the real economy. It allows companies to smooth cash flows, and – as I’ll talk about later – fund investment. But corporate debt can come with spillovers – where actions after a shock can amplify its effect on others (externalities and market failures as an economist would say), with potential consequences for the stability of the financial system. The FPC has identified two main channels through which this could happen. Figure 1: Lender and borrower resilience channels  The first operates through lender resilience and brings the risk of a ‘credit crunch’. Over-indebted companies might face challenges servicing their debt. And if they default, lender losses can test lender resilience and hence provision of credit to the economy more broadly. The second operates through borrower resilience and brings the risk of ‘debt overhang  ’.

The resilience of lenders could be impacted if these headwinds result in large number of business insolvencies, or if insolvencies are concentrated in particular sectors. As everyone in the room is undoubtedly aware, since the ban on winding up petitions was fully phased out in early 2022, insolvencies have indeed increased rapidly. But how worried should we be from a financial stability perspective? A lot of this increase reflects insolvencies catching up after the moratorium. And, so far, the increase has mostly been driven by micro companies[2], which comprise the lion’s share of insolvencies but a small proportion of lender exposures. And much SME debt is government  Page 5  guaranteed Covid lending, reducing risks to lender resilience, and comes with low interest rates and forbearance options, which supports borrower resilience. Large corporates issue the majority of UK corporate debt, so any insolvencies in this space are more likely to transmit shocks to the financial system. So far, they haven’t seen the same increase in insolvencies as SMEs – perhaps because they have less floating rate debt, which shields them from the immediate impact of rate rises. The FPC monitors this risk by looking at the share of companies with low interest coverage ratios, a proxy for a company’s ability to service debt and a commonly used indicator of default risk. While the share of large companies with low interest coverage ratios has increased following the pandemic, it remains well below GFC levels.
We are analysing two options. The first would entail creating a bridge between market DLT platforms and central bank infrastructures. [12] This would allow a securities transfer on a DLT platform to trigger settlement in central bank money. It is very likely that a solution that builds on the existing TARGET Services could be implemented more rapidly than a solution based entirely on DLT. Another option would be to create a new DLT-based wholesale settlement service with DLT-based central bank money. [13] The Eurosystem could, for instance, launch its own DLT platform for settlement in central bank money. [14] Alternatively, we could make central bank money available on DLT platforms operated by market stakeholders, allowing both cash and assets to be transferred there. In any event, implications for governance, settlement efficiency and liquidity management need to be carefully assessed. And the suitability of any of these options would depend on which use cases prevail in the market and whether or not the market consolidates around a limited number of DLT platforms. Conclusion The Eurosystem is committed to providing settlement in central bank money for wholesale transactions through infrastructures that are fit for purpose. Our role is to provide state-of-the-art infrastructures as a basis for private actors to develop their innovative services. These infrastructures can act as a catalyst for innovation within Europe and beyond. We are analysing whether new technologies for settling wholesale transactions could help us continue to play this role effectively.

The payments system we live with today is a complex mix of national and cross border systems originally designed for a safer, slower, less complex, more segmented financial world. While many improvements have been made to this system over time, it is important that we work to strengthen further the core infrastructure of the payments system. We also need to promote further evolution in the framework of supervision and regulation of our more complex and integrated global financial system. To paraphrase Bob Rubin in a different context, we need a framework for supervision and regulation that is “as modern as the markets” and that stays abreast of the pace of change and innovation. Perhaps the greatest challenge we face – in macroeconomic policy and in financial supervision - is a challenge of imagination: How do we best prepare for the low probability of an extreme event; a crisis not captured by past experience? How do we generate the will today to build a greater degree of insurance against a more uncertain future, particularly if the risk of adversity seems remote and the immediate future looks strong? We can take considerable reassurance from apparent moderation in overall macroeconomic volatility recently, and from the ease with which our system has handled recent stress. Prudent macroeconomic policy actions will increase the likelihood that these beneficial circumstances will continue. But we cannot know with confidence that the future will bring an enduring reduction in volatility and risk, and it would be imprudent to plan for such a world.
Indeed, such was the surprise that the market immediately revised up its expectations for future interest rates. And there was a measurable increase in uncertainty, as different interpretations of the Committee’s unusual action were debated across the wires. This episode highlights the difficult balance which the mature Committee needs to strike between innovation and predictability. Today’s Committee members – only one of whom has been there since the beginning – quite reasonably do not want to be unduly constrained by the habits of their predecessors. But the passage of time has given ‘the Committee’ a collective personality. So changing established patterns of behaviour requires at least as much care and explanation as in the early days of the framework. Second, even if we have not changed our procedures very much over the past decade, other central banks have. They have become much more transparent. And the debate about how much central banks should communicate – and how – has moved on, among academics, central bankers and central bank watchers. For example, a long-standing issue is how much central banks should say about their expectations of future interest rates. The traditional concern has been that commentators would mistake a projection for a commitment, the risk being that when interest rates did not change as projected this would be damaging to credibility. However, in recent years other central banks have moved increasingly towards giving indications about the likely path of interest rates, given their forecast for the economy.

The so-called Great Stability of the past decade has bestowed on the MPC the great gift of credibility – a golden halo which eluded monetary policy-makers in the UK for most of the twentieth century. What part has the MPC played in its own success? It’s difficult to say. But it is hard to believe that luck played no role. My own view is that the MPC has benefited from a virtuous circle. As we have kept inflation close to target, people have increasingly come to expect us to do so in the future, and to act on the assumption that inflation will stay low. These expectations have underpinned the wages they have bargained for, and the prices they have set. And that behaviour has helped us to keep inflation under control in the face of destabilising events. However, the unusual degree of stability, and the prestige it has conferred on central bankers, may also have bred some less helpful attitudes: such as complacency about the ease with which the economy can absorb shocks, and unrealistic expectations about what monetary policy can achieve. Just to be clear: monetary policy can pin down average inflation over the medium term. It can not deliver inflation at target at all times and in all circumstances, and certainly not in combination with rock-steady growth in output. Let me illustrate these points by looking more closely at one of the key challenges I mentioned earlier, the impact of higher energy prices over the past two years.
The impetus for these reforms was either European, for example in network industries, or national, for example in retail trade or in regulated professions with the 2015 Macron law. It led in both cases to a significant decrease in prices, purchasing power gains for households and a cut in intermediate consumption costs for firms. One spectacular example is the arrival of a new competitor in the mobile services market, leading to an 11.4% telecommunication price reduction in 2012. A significant reform is underway with the ongoing railway reform preparing for increased opening to competition. [slide 14]. This is not yet done and you see again images of French strikes. But they shouldn’t have significant economic effects, and strikes are sometimes, at least in France, the road to reform. Finally, the European environment can support the French momentum. A strengthened Economic Union in the Eurozone can indeed be an accelerator for national reforms. There should be, according to me, four dimensions to this accelerator role: macroeconomic, microeconomic, fiscal and institutional. The macro accelerator is a collective economic strategy in the euro area. It is premised on one simple fact: economic growth and employment will be stronger in the euro area as we will combine more reforms in countries where they are needed, like France, with more stimulus in countries with leeway for it, like Germany or the Netherlands. The micro accelerator would rely on a Financing Union for Investment and Innovation.

The more we develop such a leadership group, the better our chances will be.”  BIS Review 19/2003  5  Collective response Third, while strong and visionary leadership is necessary, it is not enough. To be effective, the leadership must evoke a response, a resonance from the society as a whole. The society must rise to the challenge of changing itself and establishing a new order. There needs to be broad consensus among the population in support of the changes. In the Meiji Restoration, crucial roles were played by the peasant class that formed the armies and the merchant class that financed the military. In 19th century China, the reformers failed because of infighting within a weak leadership, as well as the advanced state of decay of the entire society. But a century later, Deng Xiaoping's reforms took root as the people experienced the benefits of rapid growth and the widespread improvements in living standards. In post-war Britain, the turning point in the public mood began with a sense of humiliation when the Labour Government had to call in the IMF in 1976, after the Exchequer ran out of money. In Singapore, our previous remakings succeeded because we mounted a strong collective response at independence a determination to beat the odds and survive, in 1985 a sense that if we made sacrifices together, we could make our economy competitive again.
The SNB’s interventions in foreign exchange markets  Let me now move on to my second main point, the interventions in foreign exchange markets carried out by the SNB during 2009 and 2010. The SNB acted on foreign exchange markets in this period for one reason and one reason only: the zero interest rate lower bound had been reached and the economic situation unequivocally called for looser, not tighter, monetary conditions. The goal was to maintain price stability, which meant, in these circumstances, avoiding deflation. One should always have in mind that there are no clear recipes for avoiding a deflationary trend in such a situation. The most famous illustration of this statement is the US experience in the late 1920s and early 1930s. At the time the US policymakers underestimated the consequences of a bout of deflation and failed to take aggressive action. The consumer price index (and the GDP deflator) declined by 24% from August 1929 to March 1933, after having been virtually flat from 1921 to 1929. This decline was accompanied by a fall in real GDP of almost 30 percent.9 A more recent example is Japan’s “lost decade”. There the situation was not underestimated to the same degree. However, public actions culminating in a doubling of Japanese public debt proved to be insufficient to avoid a protracted deflationary episode. Let me review the history of our interventions in more detail.

BIS Review 135/2010  3  Debt Management Office (DMO) and attempt to sell the same gilts to the Bank at a higher price. The first mitigant was that the MPC set a targeted rate of purchases initially three times faster than the DMO were issuing. In addition we incorporated several features into the design of the operations: (i)  We designed the operations as competitive (reverse) auctions that would deliver a clearing price close to the market. (ii)  We offered to buy from a bundle of 8–10 individual gilts in each operation not just a single stock at a time. The selection of which gilts we then bought depended on the prices offered. In that way, the purchases were less vulnerable to a “squeeze” in any one particular gilt. (iii)  We eliminated from the operations any gilts which we knew the DMO were about to issue or had issued in the previous week. Maintaining the programme I don’t want to imply that implementing and maintaining our programme of asset purchases was straightforward operationally. Far from it. For example, the gilt market became somewhat more dislocated as the Bank accumulated a large percentage of some of the particular gilts in issue. To alleviate stress in the market, in August 2009 we started to lend out, via the DMO, a proportion of the gilts the Bank had bought, in exchange for others that had readier availability.
In addition, inflation expectations, which may affect wage and price setting, appear to be edging lower: We see this both in survey results and in the financial markets— through noticeable declines in “inflation compensation”, measured by the difference between the yields on Treasury bonds with and without inflation protection. A third factor is productivity growth. BIS Review 52/2005  1  There have been concerns that a structural productivity slowdown was in the offing, which could put upward pressure on inflation; the good news is that structural productivity growth apparently still remains above the levels reached during the second half of the 1990s, although it may have edged down just a bit over the last few years. A final factor impacting the inflation outlook is the degree of slack in the labor market. Right now, the unemployment rate is relatively low: at 5 percent it’s near most estimates of the so-called natural rate. But other measures—such as the employment-population ratio, a survey of job market perceptions, and industrial capacity utilization—suggest that some slack still remains. Risks to economic growth and employment Now let me turn to the real side of the economy—growth and employment—and highlight some of the risks that affect my optimistic baseline projection. Even though overall growth has been respectable, economic activity has been burdened by some major drags over the past year or so. Three major ones result from the oil price shock, the deterioration of the trade balance, and a still relatively low level of business investment spending.

Inflation risks Let me start by looking at some of the factors that create risks for the inflation outlook and explain why I’m nevertheless fairly optimistic that inflation will moderate over the next few years. Of course, oil prices do pose an inflation risk. The price of oil has just about doubled over the past two years, from the low $ range to around $ per barrel recently. Higher oil prices are reflected in higher “headline” inflation. And they have been passed through to some extent to core inflation as well, but, unless they rise further, the effect on core inflation should begin to dissipate next year. Another risk relates to labor compensation, which is the single largest component of business costs. Recently, one measure of compensation per hour jumped abruptly. Here, too, though, I am not terribly worried because a good part of the jump is probably accounted for by one-time events, such as bonus payments and the exercising of stock options. This interpretation is supported by readings from an alternative measure of labor compensation, the Employment Cost Index, which excludes these items and has recorded only modest increases. I’m also quite encouraged by several developments that portend a moderation in inflation going forward. For example, even with the recent revaluation of the Chinese renminbi, the dollar has increased by 7½ percent against major currencies so far this year, which should take some of the pressure off of import prices.
Before I turn to that subject, I should like to address, very briefly, two broad interconnected subjects: first, the theme of competition, particularly in the context of the current programme of banking sector reform; and secondly, the question of consumer protection, in the light of increasing competition and other trends. Competition and banking sector reform We are now two years into our programme of extensive banking sector reform. In fact, the first measure under that programme was my clarification, at your dinner in June 1999, of the HKMA’s policy on the question of Lender of Last Resort. It was a pretty heavy-going speech for an after-dinner occasion, and I still recall the drooping eyelids and stifled yawns. But at least those of you who sat through it can take satisfaction in the fact that you were witnessing a minor historical event. Since then, the reform programme has made a great deal of progress. In 1999 we relaxed the “one building” condition on foreign banks licensed since 1978. Last year we expanded access to Real Time Gross Settlement and implemented the first phase in the deregulation of the remaining Interest Rate Rules. We also completed a study and a public consultation on the case for establishing a commercial credit reference agency. Earlier this year, a similar public consultation was completed on the case for a deposit insurance scheme. The general view in these consultations was that the two schemes should be pursued, although we fully recognise that there are dissenting opinions on the question of deposit insurance.

This is one of the HKMA’s key policy objectives, but it is also an area in which HKAB has a keen and constructive interest. In particular, HKAB, together with the HKMA, is joint owner of Hong Kong Interbank Clearing Ltd, which operates one of the key features of Hong Kong’s financial infrastructure, the Real Time Gross Settlement System. One other project on which HKAB can work closely with the HKMA is in the development of a Commercial Credit Reference Agency. Some of your members are already participating in the Working Group that is now engaged in thrashing out the details of how the CCRA would work. An issue which has been raised in the deliberations of the Working Group is whether HKAB should participate in the ownership of the CCRA, as it does in HKICL. This was not an idea that found much favour when we consulted the industry on the CCRA  4  BIS Review 55/2001  scheme last year. But perhaps, now that it seems likely that such a scheme will go ahead, it is an idea which should be revisited at some stage in the future. That is a matter for HKAB and it is one that I leave you to think about. Even if you were to confirm the earlier view not to participate directly in this particular project, it would not undermine the general principle that the HKMA and HKAB should, wherever feasible, work hand in hand in developing important pieces of the financial infrastructure.
Furthermore, if market expectations of upside currency gains persist, it could invite even more capital inflows, along with greater pressures on the exchange rate and higher chances of imbalance buildups in the future. For the real economy, it may delay some of the necessary adjustments. Finally, FX intervention is not costless. We have to fund the intervention with local interest rates that are higher than what we would earn from our international reserves. 2  BIS central bankers’ speeches  Experiences have also shown that, even after a large appreciation of the currency, capital inflows could still seep in and fuel speculative activities in markets such as real estate and equity. To help deal with specific pockets of the economy showing signs of potential bubbles, macro-prudential measures could be used. A recent example is the risk-weights adjustment related to the loan-to-value (LTV) ratio of loans made to property purchases. While macro-prudential measures aim to help lessen the effects of capital that has already flowed into the economy, capital account regulations can be used to deal directly with the size and type of incoming and outgoing flows. With an aim of creating more balanced capital flows, the Bank of Thailand has continued to liberalize our capital outflows, while on the inflow side we at times resort to tighter regulations when the situation deems necessary. Implementing a capital account regulation, or less of it, requires a delicate balancing act.

I hope that I have so far convinced you that living with capital inflows is not easy and will require efforts from the public as well as private sector. Indeed, to successfully live with capital flows is a delicate task, as the title of this speech suggests. On my part, what I want to assure you is that we at the Bank of Thailand are aware of the interrelated issues and always take them into account when making a policy. Tough choices, however, will always have to be made. We will try our best to balance between different stakeholders’ needs. For you, as investors, we take to the point that you value policy transparency, and we aim to provide you as such, in addition to macro-stability which is our overriding mandate. Thank you. 4  BIS central bankers’ speeches