samchain/econo-pairs-v1 huggingface dataset:
Monetary policy responded with a force never previously seen in history. Today, the most likely shocks or downside risks to the economy are very different in their source and impact. They arise from factors such as global trade wars and Brexit. These shocks are different in their duration – more slow-burn than spontaneous conflagration. And they are radically different in their source, as they hit the supply potential of the economy, as much as its demand side. 31  El-Erian (2016). 32  All speeches are available online at www.bankofengland.co.uk/speeches  32  Consider the effects of Brexit uncertainty on the UK economy. By far the largest effects have been on companies’ investment and productivity. According to our Decision Maker Panel, investment among UK companies is estimated to be between 6-14% lower, and firms’ Total Factor Productivity (TFP) around 2-5% lower.32 These are large negative shocks to the economy’s supply-side potential. They are hits that monetary policy is not itself well-placed to mitigate. There is a risk of people normalising the deviance in monetary policy since the crisis. Around a quarter of adults in the UK working population have never experienced Bank Rate above 1% in their adult lives.33 In these changed circumstances compared with a decade ago, it is important that monetary policy is not a prisoner of its past, that the monetary cavalry are not called at the first whiff of grapeshot, that a dependency culture around monetary policy is not allowed to develop.

This certainly will bring new challenges for the BNB and commercial banks to deal with, as this will require changes to their timetables and the relevant calibration of the resources earmarked for this purpose. Let me sum up in conclusion. The current issues relating to inflation and the legislative programme must be considered in the wider context of the needed political and fiscal consolidation. Otherwise the measures in these spheres will remain sporadic and ineffective. The BNB and commercial banks have been systematically and consistently working on the issues within their competence concerning the euro adoption, but they are prepared to calibrate the tasks and the resources for their performance should the target date be changed. 4/4  BIS - Central bankers' speeches
In this speech, I will take a whistle-stop tour through the twentieth century to examine the increasing role that supervision has played in the regulation of financial institutions and why it remains an essential ingredient of the regulatory framework here in the UK. This is especially true in the context of regulatory arbitrage and, of course, Brexit – themes to which I will return later in this speech. First, though, I will consider the three main roots of supervision during this period, namely the individual regimes of oversight relating to banks, building 1  societies and insurers . I will proceed in alphabetical order in the hope that this will avoid offending any sector, even if (regrettably) it means the bankers get in first. 1  My colleague Mark Yallop has given an excellent speech in similar terrain. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  Banking Supervision Let’s begin in 1890. Our scene is Cannon St and an establishment which printed a weekly chronicle that went by the name of The Statist. Hot off the press is a headline: “Messrs Baring Brothers’ Issues”. Then follows a well-informed, highly sceptical article which questioned the quality of much of the foreign business being embarked upon by what was, at the time, considered by many to be the most respectable house in the 2  City of London .

Christian Noyer: Basel III – CRD4: impact and stakes Introductory speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the Board of Directors of the Bank for International Settlements, at the Autorité de contrôle prudentiel (ACP) conference, Paris, 27 June 2012. *  *  *  Ladies and gentlemen, I am delighted to welcome you today to this new conference organised by the Autorité de contrôle prudentiel (ACP). This morning, the conference will be dedicated to the impact and stakes of the Basel III reform and, this afternoon, to the supervision of business practices in banking and insurance. I would like to thank all the participants for the interest they have shown in these crucial exchanges between regulators, supervisors and market participants. This conference is being held against the backdrop of an economic and financial environment that remains very difficult, characterised in particular in Europe by the ongoing sovereign debt crisis. Many questions surround the future of the European banking system, which has already undergone major transformations in the recent period while significant changes in its prudential framework and the organisation of its supervision are currently being reviewed.
Like Kashmir, it is difficult to see a definitive solution to the North Korean problem. But this too can be managed. The six party talks have reduced the risk of accidental war. The key actors are rational and, despite their differences, share a common interest in a peaceful resolution of the issue. Kim Jong Il is a master of brinkmanship. But he too is rational and must know that war will lead to the outcome that he fears most, the disappearance of North Korea as a sovereign state. Therefore, while he may go to the very edge, unlike Saddam Hussein, Kim will not deliberately step over it. The North Korean issue is a strong incentive for the US and China to cooperate for their common interest. The risks of miscalculation are perhaps highest over Taiwan. The issue is extremely delicate because it engages the domestic politics of China, US and Taiwan. There is growing tension between economic forces that are integrating Taiwan with the Mainland and Taiwan’s desire for a separate identity. No PRC leadership can ever tolerate a bid for independence by Taiwan. If Taiwan pushes too far, the Chinese must react or be exposed as a ‘paper tiger’. The US stand, and perceptions of the US stand in China and Taiwan, are key to the problem. President Bush has said publicly that he does not support Taiwan’s independence. But the US may still be drawn into a Cross Straits conflict. If this happens, there will be serious consequences for the entire region.

Today we focus very much on the price increases on some services after the introduction of euro coins and notes, but let us bear in mind that prices on durable goods that are more subject to cross border comparisons, have indeed increased less than the average or even decreased. There are already signs of a convergence of prices on such durables and there is also area-wide euro pricing from some firms, which reflects increased price competition across borders. To conclude, the Monetary union presents an attractive proposition for Sweden, given that we continue to improve the functioning of wage formation and labour markets and that we ensure a solid institutional foundation for fiscal policy to stabilise the economy. The same could in fact be said about the euro area countries: With structural reforms and more solid foundations for fiscal policy, the present EMU-countries would have much better possibilities for employment growth and productivity gains. Monetary Union is putting pressure on both industry and politicians to improve their performance in the years to come. 4  BIS Review 70/2002
BIS Review 9/2010  7  Figure 3 Monetary policy interest rate (MPR)  MPR change  MPR level  (basis points)  (percent)  Japan U.S.A. Canada Switzerland Sweden Chile Hong Kong U.K. Israel Eurozone Peru Czeck Republic Norway Korean Republic Malaysia New Zealand Colombia Poland Australia Philippines Mexico India China Hungary Turkey Indonesia South Africa Brazil Russia Argentina Iceland  Turkey Chile Colombia New Zealand Iceland Peru South Africa U.K. India Brazil Norway Sweden Mexico Korean Republic Israel Australia Eurozone Hong Kong Indonesia Canada Poland Switzerland Czeck Republic China Hungary Russia Philippines U.S.A. Malaysia Japan Argentina -1,200 -1,000  -800  -600  -400  -200  0  0  200  From 4.Sep.08 to 15.Dec.09  2  4  6  8  10  12  At 15.Dec.09  Source: Bloomberg. Figure 4 Liquidity conditions of the interbank market at three months (*) (basis points)  400  400  300  300  200  200  100 0  Jan.07  Jan.08  Japan  U.S.A.  Jan.09  100  Volatility in developed markets (percent)  100  80  80  60  60  40  40  100  20  20  0  0  0  Jan.07  Eurozone  Jan.08  Jan.09  VIX index volatility  (*) Spreads between the Libo rate and the Overnight Index Swaps rate. Source: Bloomberg.

Dealers de-risked their balance sheets rapidly as the crisis hit, and this reminds us that their capacity and willingness to stand in the way of major market moves (akin to catching a falling knife) was always constrained. 6 And all of this happened before any new regulations were put in place. Last on this point, it is worth recalling the background to the large increase in inventories from around 2002/04. Here, regulation does appear to have played a role, and not a good one. The first amendment to the Basel I capital standard came in the mid 1990s in the form of the so-called Market Risk Amendment. It enabled a substantial reduction in the capital held against trading book assets such as inventories, to a level that could be less than 1% of those assets. To illustrate this point, here is a quote from the FSA’s report into the failure of RBS. “The capital regime was more deficient, moreover, in respect of the trading books of the banks ….. the acquisition of ABN AMRO meant that RBS’s trading book assets almost doubled between end 2006 and end 2007. The low risk weights assigned to trading assets suggested that only £ billion of core tier 1 capital was held to cover potential trading losses which might result from assets carried at around £ billion on the firm’s balance sheet. In fact, in 2008 losses of £ billion arose in the credit trading area along (a subset of total trading book assets).
Another much more dangerous conflict of interest could arise where the bank is capable of exercising a decisive shareholding power in another non-banking firm, of which it is at the same time a major creditor. This could have unacceptable consequences not only for the firm’s other shareholders but, if the practice became widespread, could even lead to structural distortions for entire industries. To avoid this happening, I would favour rather strict regulations. For instance, mutual funds managed by banks should either have limits on the equity participation in individual firms or not have access to the firm’s Board. The same should apply, a fortiori, to any bank’s direct and permanent equity participation in a non-banking firm - unless, perhaps, the bank remains just a shareholder (as if it were, say, a pension fund), without direct banking operations with the firm in question. 4. Under the last point, I already touched on one particular aspect of corporate governance, namely when a bank can play a decisive role in a non-banking firm’s life. But you will also have to face up to the reverse problem: when a non-banking firm becomes a bank’s key shareholder and could therefore potentially induce risk-taking by the bank in its favour, at the expense of the bank’s other shareholders or of its depositors or customers. This is a particularly acute danger in countries where there are not many non-bank institutional shareholders, where the defence of minority shareholders has no tradition and where depositors are not properly protected.

Some of this deficit was covered by direct foreign investment, but the greater part of it was financed by borrowing, as a result of which by the end of 1994 the net external debt had reached 46% of GDP and the exceptionally high level of more than 160% of exports of goods and services and unrequited transfers. 2. I have not yet seen the full 1996 figures, but estimates based on the first eleven months suggest a current account deficit of around (or even less than) $ billion. This looks much more reasonable, not only because it was more than covered by foreign direct investment but also because of what lies behind this improvement. The $ billion drop in the current BIS Review 16/1997  -2-  account deficit between 1994 and 1996 was made possible (a) by a 35% increase in exports, accompanied by a modest increase in imports of about 14%, and (b) by the steady and rapid increase in services income, mainly (but not exclusively) derived from tourism. 3. Since there was also a sizable inflow of foreign direct investment in 1995 and 1996, the country’s net external debt dropped from $ billion at end-1994 to about $ billion at end-1996. Net external debt declined to 31.2 expressed as a percentage of GDP, and to 71.6 as a percentage of exports of goods, services and unrequited transfers.
Also, an increasing number of banks are recognizing climate change risk in response to investor and other stakeholder initiatives. Judging from this evidence, while the response of financial institutions is positive, it is still very much in an early stage. And in the case of Asia, the progress is even more limited. The main supplier of carbon credits in CDM is China, while the rest of Asia lags behind. In Asia, the engagement of financial institutions on climate change is scattered and not yet a momentum. The progress is hampered partly by inadequate supporting framework that includes lack of clear policy and incentive as well as information. Let me now discuss some of the current problems in Asia and the prospects for the financial system in emerging markets, especially in Asia, to become more engaged with the issue. Given limited progress so far, the challenge is how to engage the financial system in emerging markets more extensively on climate change. In moving this issue forward, a critical role has to be played by policy, especially on the role of incentive and the development of tools that can facilitate the response to climate change. On incentive, a good starting point is to discuss the principles that would be important in guiding the design of policy, which in my view, four key principles stand out. First, the role of the states and policy are critical to ensure that the global rule of the market is clear and continuous beyond 2012.

Certainly, the measure which became effective in January where we reduce the reserve requirement for lending to net exporters and producers of electricity is already productive, we have already extended such loans worth approximately Euro 70 million this year, while the measure that should underpin the Denar savings for the account of the Euro savings became effective at the beginning of the year and we expect that the banks will adjust their interest rate policies to this measure in the following months. Did your forecast from the beginning of the year materialize, that the Government is not going to borrow much on the domestic market, at least in the first quarter? Within this period, since the beginning of the year, the Government is not borrowing much on the domestic market, because it has accumulated enough funds on their accounts with the  2  BIS central bankers’ speeches  National Bank. Also, the funds it borrowed from abroad in the beginning of the year are still disposable on their account, because of which there was no need for additional debiting on the domestic market. However, some of the economists fear that exactly the foreign debiting is unfavorable, saying that it was made for unprofitable, unproductive purposes. How do you see this situation, is there a risk? Well, Macedonia has a lack of domestic savings, and as a country, we will need foreign savings for a long time, and that is the situation with most of the developing countries, if I may say.
I think that there are two characteristics of these kinds of systems which merit particular attention. First, the ability to take swift measures and to write down claims quickly. It is important to restore access to the liquidity held in the bank accounts as quickly as possible not only for the insured depositors, but also more generally. Second, the system is constructed such that the principle that owners take the first loss, and after this the creditors in any order of priority that might exist, cannot be circumvented. The swift intervention means that there is no point in running to the bank to “get first in line”. The fact that the possibility of a profit reflects a risk of a loss is fundamental in a market economy, and the system thus ensures that this principle is maintained. …with robust financing of the deposit guarantee A related issue refers to the need to set up a deposit guarantee scheme in such a way that the responsibility for the small depositors is fully internalised by the banking sector not only on paper but also in practice. In addition to the need for a quick pay-out to depositors to avoid the risk of a run, it is also important that the financing of the scheme is robust.

Stefan Ingves: The need for a strengthened insolvency and resolution framework for banks – a central banker’s perspective Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, at the International Bar Association’s 14th Annual Global Insolvency and Restructuring Conference, Stockholm, 19 May 2008. *  *  *  As a central banker, the tasks assigned to me are to maintain price stability and to promote a sound and efficient payment system. In short, I deal with economics and finance. So what does this have to do with your business, insolvency law? What is a central banker doing opening this conference on insolvency and restructuring? Actually, there are more links between the fields than you might think. As I said, one of my tasks is to oversee the payment system. Without a functioning payment system, no modern economy is able to function for very long. But what we call the payment system is really not much more than a system where money is transferred electronically from one bank account to another, in a longer or shorter chain of intermediaries with the central bank as a hub. If there is a problem in one of those intermediaries, there is a problem in the payment system. And if the problem is not technical but financial in nature, this may lead you right into the area of insolvency law and bank restructuring regimes. But in fact, there is also a link of a more general nature.
Finally, I will highlight what is missing and mention a number of important ongoing initiatives that could help to overcoming the key challenges in terms data that we still need to deal with. 2. The macro-prudential oversight function and the role of the ECB  Let me start by reflecting on the macro-prudential oversight function. There are three main components in the macro-prudential oversight process. The first concerns the surveillance needed to identify plausible and (systemically) important sources of risks and vulnerabilities on the basis of an analysis of the individual and collective strength and robustness of the constituent parts of the financial system – institutions, markets and infrastructures. The second involves the assessment of the potential costs and the ability of the financial system to cope with these costs should some combination of the identified risks and vulnerabilities materialise. This requires the ability to measure (and model) the potential costs and to calibrate the plausibility and importance of the various risks. The third component is the possible policy response that needs to be clearly justified and interlinked with systemic risk assessments. In particular, it should inform policy decisions on the appropriate timing of interventions and the selection of tools. The role that the ECB and the national central banks of the EU Member States play in contributing to financial stability is set out in the Treaty on European Union.

Thirachai Phuvanat naranubala: The role of non-bank financial institutions in relation to monetary policy Speech by Mr Thirachai Phuvanat naranubala, Deputy Governor of the Bank of Thailand, at the Regional Seminar on Non-Bank Financial Institutions in East Asia Region, Bangkok, 4 September 2002. *  *  *  I wish to congratulate the Securities and Exchange Commission of Thailand and The World Bank for organizing such an interesting seminar in Bangkok, and to thank them for inviting me to share my thoughts with you today. I can see that the topics in the seminar will cover many important aspects of non-bank financial institutions’ operations -- ranging from the regulatory and supervisory framework to capital market development as well as the issue of governance. But I am the only person touching on monetary policy aspect. Monetary policy does affect an important part of your business, which is the bond market. Because the one factor reflected in the bond market yield curve is inflation expectation. Therefore, if the framework and the conduct of monetary policy result in low and predictable inflation, it will help curb volatility of the yield curve and support development of the bond markets. Change in monetary policy stance also directly affect interest rate and hence the bond market. Thus, it pays for you to understand monetary policy. Monetary Policy in Thailand In order for you to do that, I have to start by telling you about how the monetary policy framework has evolved here in Thailand.
Market capitalisation of domestic bond markets more than doubled over the past nine years - from an average of 20% of combined GDP in 1995 to 47% in 2003. During the same period, the combined share of bond markets in total financing grew from 11% to 19%. Bond markets are, therefore, a growth industry. Quite apart from the considerable initiatives by the private sector, bond market development has been a particular target of initiatives by governments and multilateral agencies. There are good reasons for this. My intention in this short address is to set out briefly these reasons - to put the case for an Asian bond market - and then to examine some of the work that is in progress in this field, particularly from the point of view of the central banks. The need for an Asian bond market The underdeveloped state of the Asian bond market - compared with the bond markets in the industrialised economies - has been well documented in recent years. Despite the impressive growth of the size of the Asian bond market that I have just mentioned, it still lags behind the developed economies in terms of breadth and depth. For example, the market capitalisation of the domestic bond market in the US, the UK and Japan is equivalent to over 150% of the GDP compared with just 47% in ex-Japan Asia. Activity in the secondary market is also relatively low.

We must always bear in mind that monetary policy is not an “exact science” based on well-defined natural laws. It is not possible to fine-tune the interest rate to attain the objectives with high degree of precision. Irrespective, the criteria for a good interest rate path provide a guide for our interest rate policy. 4. Inflation volatility, deviations from the inflation target and external shocks Inflation adjusted for energy prices and taxes has been low in Norway in recent years. It has risen somewhat, but it is still considerably lower than the target of 2.5 per cent. BIS Review 26/2006  3  Inflation has been and is still being restrained by the fall in prices for imported consumer goods, an unexpected high level of competition in domestic markets and increased cross-border labour flows. The trend in prices for consumer goods and services over the past two or three years is a result of favourable developments in the Norwegian economy. Low inflation is being accompanied by real income growth and a rise in production and is not the result of declining demand, activity or employment. Deviations from the inflation target in Norway have been somewhat higher than in other countries, which may partly reflect the degree of openness of our economy. Chart 12 shows deviations from target and the degree of openness. The higher the columns, the larger the deviations are from target. The lines indicate the degree of openness.