samchain/econo-pairs-v1 huggingface dataset:
Stock exchanges were established at different points in the transition process: Bulgaria, Hungary, Poland, Russia and Slovenia opened their stock markets in 1990–91; the Czech Republic, Lithuania and the Slovak Republic followed in 1993; Latvia and Romania were next in 1995, followed by Estonia in 1996. Turkey’s stock exchange was established much earlier than those of the transition countries, in early-1986. 9  11  SMEs that are more prone to bank credits), some of the causes are related to supply-side factors. And when discussing the latter group of reasons, commonly four important aspects are highlighted: 1) the role of equity; 2) the role of institutional investors; 3) household preference for bank deposits and 4) regulatory environment. When it comes to equity, a large distance compared to the EU-28 average is visible in the area of financing through local equity market and venture capital availability, with a rank of 90 and 74 (EU-28 average rank is 61 and 55). Yet, concerning the availability of venture capital, some CESEE countries (the Baltics, Czech Republic, Slovakia, Bulgaria, Macedonia) score rather well, reflecting the public support and a favorable regulatory environment. “This is encouraging given the importance of this financing channel for start-ups and innovative companies”.

The level of investment, ten years after the emergence of the crisis, is below the pre-crisis maximum in the EU as a whole, and in the CESEE region as well. Exception is countries such as Macedonia, Poland, and Estonia recently, where investment pattern was different, and the current level is above the pre-crisis one. Chart 3: GDP and demand components, 2008=100 CEE  160.0  160.0  140.0  120.0  120.0  100.0  100.0  80.0  80.0  60.0  60.0  40.0  20.0  20.0  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017  40.0  180.0  SEE  140.0  Baltics  180.0 160.0  140.0  140.0  120.0  120.0  100.0  100.0  80.0  80.0  60.0  60.0  40.0  40.0  20.0  20.0  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017  160.0  Region  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017  180.0  Source: Eurostat and NBRM calculations. At the current juncture, an important question is whether such slow post-crisis investment recovery should be perceived as a natural cyclical adjustment, or are there some structural forces that also play role?
To date in 2014, the rate of decline of lending to the resident private sector has shown signs of easing, in terms both of bank lending to households and of that to non-financial corporations, especially those not pursuing real estate or construction-related activities. In any event, the performance of lending at the aggregate level is affected by the need to continue redressing high private-sector debt. The NPL ratio of the Spanish banking industry continues to post higher levels than those observed a year ago. However, it has improved slightly in 2014. This correction has come about despite the fact that lending, the denominator of the ratio, has continued posting negative rates of change. Hence, the comparatively larger fall in NPL in 2014 has been the main determinant of this reduction. In the first half of this year, the Spanish banking industry posted somewhat lower consolidated profits than in the first half of 2013, although they were far removed from the heavy losses of 2012. In a setting still marked by low volumes of activity, low interest rates and a still-high level of non-earning assets, banks’ ability to generate interest income remains subject to downside pressure. These factors were offset by the decline in operating expenses and by lower losses attributable to asset impairment. As to the industry’s solvency, Spanish banks as a whole had a CET1 ratio as at June 2014 that comfortably exceeded the required minimum.

The firming and intensification of these trends will largely depend on developments in the Spanish economy and on recovery taking root. The outlook for the economy remains favourable; so far, it has proven resilient to an external environment in which growth forecasts for the global economy have been revised downwards, and in which the recovery in European countries – those most important for our economy – has lost momentum. Thus, on the domestic front at least, it would be necessary to embed the reforms under way, thereby enhancing our capacity for recovery. 2  BIS central bankers’ speeches  The start-up of the Single Supervisory Mechanism Among the challenges posed by the SSM is that of attaining quality bank supervision, applying strengthened and uniform standards and making the most use possible of the acquired knowledge of the various national authorities, while setting in place a common supervisory culture. In light of the work undertaken to date and the intense collaboration between the ECB and the national authorities, these goals are realistic. The Banco de España is striving to ensure this is a successful process, cooperating with the ECB and the other SSM participants. We have adapted our organisational arrangements and working methods to smooth interaction with the SSM and the ECB. A further key challenge will be to maintain a level playing field in the member countries, applying uniform supervisory principles. That is a major challenge, given that in Europe there is a wide diversity of banking models and legal systems.
The Central Bank Gold Agreement also provides a striking example of where central bank transparency ex ante and ex post has had significant benefits in preventing market disturbances, in the patrimonial interest of its participants. A similar level of transparency could therefore be extended to SWFs, for their own benefit. Some of them have already adopted such good practices: the Norwegian Government Pension Fund is widely recognised as a model in that respect: it provides detailed information about its asset allocation, its quarterly results and its investment policy on its website. More generally, public pension funds typically set a useful example. For instance, the French Fonds de Réserve pour les Retraites also endeavours to ensure transparency and accountability. From the perspective of financial market stability, a lack of information regarding SWF holdings and strategies can contribute to herd behaviours, with a potentially very negative impact on financial markets dynamics. With that overriding concern in mind, a code of conduct would be welcome, which could be designed within international fora (for instance  BIS Review 119/2007  7  under the aegis of the World Bank or the IMF), in order to establish minimum requirements regarding adequate information disclosure. Further progress in that field would greatly alleviate concerns over risks of capital misallocation as well as possible negative macroeconomic and financial market externalities of large foreign asset management. 8  BIS Review 119/2007

Inflation has varied slightly more in the past few years. In a period of increasing cross-border labour flows, substantial technological advances, changes in competitive conditions and new trading patterns, we may, with our very open economy, have to accept a somewhat greater variation in inflation and deviations from the target, as we have witnessed over the past two to three years. An overall assessment implies that the interest rate in the baseline scenario gradually increases to a more normal level. The projections are based on the assumption that interest rates in Norway and abroad will rise somewhat faster than may be implied by today’s forward rates. Since the previous Inflation Report, the upward movement in Norwegian and international long-term interest rates has become more pronounced. Exchange rate movements are difficult to project. In Inflation Report 1/06, the path for the interest rate in Norway and abroad was assessed to be consistent with an approximately unchanged krone exchange rate. The high rate of economic growth implies that price and cost inflation will edge up after a period. Inflation measured by the CPI-ATE is projected to increase from today’s level of around 1¼ per cent, up to almost 2 per cent at the end of 2007. There are prospects that inflation will increase further and be close to the target of 2.5 per cent three years ahead. With a gradual reduction in unemployment, Norges Bank expects wage growth to edge up.
In other words, an international financial centre is an international meeting place between those with surplus funds and those in need of funds. Thus when Hong Kong provides a significant platform for investors from, for example, Europe and America to invest their money in financial instruments issued by fund raisers from the Mainland of China, or provides the window for investors on the Mainland to access investment opportunities in the rest of the world, we qualify for the status of an international financial centre. With this definition in mind, the crucial pre-requisites for an international financial centre are first the existence of sizeable overseas demand for international financial services – the mobilisation of savings overseas and the attraction of foreign capital – and secondly the willingness for such demand to be satisfied there. Of course, there are also the ability to provide those financial services and the many attributes that go along with that ability, including the protection afforded by the rule of law, an efficient financial infrastructure, a quality environment, and so on. But I think it is the existence of substantial demand for financial services from a large hinterland that comes first. New York, of course, has the largest economy in the world that is free and open to support its status as an international financial centre, providing financial services that mobilise US savings to the rest of the world and attracting foreign investments, and servicing domestic financial intermediation at the same time.

Credit risk One purpose of the method we use to determine the currency allocation is to limit the need for very liquid assets, for earnings reasons. It is not possible to exclude these assets entirely. This is because we need very liquid assets in the important intervention currencies if we are to be able to intervene. A fairly large part of our assets must therefore consist of US and European government bonds. As I mentioned earlier, our need of this type of asset is limited under the current exchange rate regime. This gives us scope to invest some of our assets in securities with credit risks 10 , which provide higher interest. Assuming that the assets’ yield does not covary perfectly, this can raise the risk-adjusted earnings 11 . However, the Riksbank’s possibilities to make use of this are limited, as we currently invest solely in fixed-income securities. The covariation between different fixed-income securities is relatively high, regardless of whether they contain different degrees of credit risk. It should also be emphasised that an investment in credit bonds makes considerable demands of risk management, analysis and capital adequacy, in addition to that captured in risk measures such as volatility calculated on historical earnings. It is therefore also important to maintain a high degree of diversification within the credit risk segment by spreading investment over several different issuers and sectors. Our internal regulations give us relatively large scope to choose between different fixed-income asset types.
Philipp Hildebrand: Swiss monetary policy Summary of a speech by Mr Philipp Hildebrand, Member of the Governing Board of the Swiss National Bank, at the Annual Meeting of the IFZ (Institute for Financial Services Zug), Zug, 1 June 2006. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Having successfully pursued a strategy of money supply targets for around 25 years, the Swiss National Bank (SNB) decided to adopt a fundamentally new monetary policy approach in 1999. Although it integrated some of the important elements of inflation targeting, it did so less strictly, thus allowing greater flexibility. Money stocks and credits continued to play a vital role in the new concept. Unlike the European Central Bank, the SNB chose not to make the monetary analysis a separate pillar in its concept. An important distinction to inflation targeting is that monetary policy focuses on maintaining price stability in the medium to long term, while inflation targeting is generally oriented towards short-term and, in some cases, variable inflation targets. The SNB's monetary policy uses an inflation forecast as a central indicator and sets its operational goal in the form of a target range for the three-month Libor. A monetary policy that is geared to the medium and long term affords leeway for a certain degree of stabilisation of the real economy.

In particular the distribution of responsibilities between the centre and the national authorities could naturally change as a result of the accumulation of expertise in the ECB and the progress made in developing the other two pillars of banking union: namely, an integrated resolution regime and a common deposit guarantee scheme. Indeed, the idea that a fully effective banking union requires also the establishment of those two additional components is quite compelling in my view. Moreover, it could be argued that the combination of a centralised supervisory mechanism with decentralised resolution schemes may generate some dysfunctionalities and incentive compatibility issues. More importantly, the mitigation of destabilising financial risks and of their impact on sovereign risks requires not only a strong crisis prevention scheme, but also an effective common crisis resolution regime. Even if banks are supervised under a common system, episodes of financial distress may still deteriorate the perceived cohesion of the eurozone if purely domestic mechanisms are used to restructure or resolve weak banks and to protect depositors. That is conceptually contradictory with the goals of a banking union. In that context, the communication by the Commission to shortly make legislative proposals in this area above and beyond the Directives which are currently under discussion is obviously welcomed. In any event, there is a lot of work to be done in the short term to put in place the new unified supervisory mechanism. At present, important differences remain between the characteristics of the national supervisory models which affect powers, means, practices and procedures.
The way in which financial services are delivered to consumers is also moving towards more cost-efficient channels that reduce the need for face-to-face contact. Enquiries and complaints are largely handled by phone or e-mail, and usually in a highly fragmented manner by different parts of a financial institution. This can mean less effective advisory support for the vulnerable groups of financial consumers. More recently, the wider adoption of electronic channels to make and receive payments has had enormous potential for greater financial inclusion. Key to this progress is the access to the relevant technology and safeguarding its security and thus gain the willingness to trust it. This will also involve the awareness of its benefits. These developments can be overwhelming to consumers and businesses who are illequipped to make informed financial decisions due to their inadequate knowledge on financial matters, thus diminishing their effective participation in the financial system. Symptomatic of this has been the rapid growth in household debt and leverage in a number of countries. This has been particularly prevalent in an environment of ample liquidity and low interest rates. This is also being reinforced by changing social norms, such as social pressures to spend, which has further eroded financial discipline among households. Such pressures are further compounded by the rising cost of living in the urban areas. Financial capability levels have however generally lagged the socio-economic changes that are taking place, resulting in poor financial management.

Jean-Pierre Roth: Impact of the global crisis on Switzerland Introductory remarks by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the Schweizerisch-Deutscher Wirtschaftsclub, Frankfurt am Main, 2 March 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  What started as a financial crisis has now become a global economic crisis. Although the Swiss economy was in a very sound state before the crisis set in, Switzerland’s standing as a financial centre, its real economy and its public finances have all been strongly affected by the global turmoil. Recovery will depend largely on the development of the US economy. Despite having reached worldwide proportions by now, the crisis was not triggered by globalisation itself. Rather, it is the result of a lack of discipline in the industrialised nations. Monetary policy today must contribute to the stabilisation of the financial system and the real economy without losing sight of its principal task, which is to maintain price stability. BIS Review 24/2009  1
6  Lectures on Jurisprudence, B, Report dated 1766, p493. 7  Theory of Moral Sentiments, III,ii,7,p117. 2  BIS Review 102/2006  promise to share his meat and, knowing that, it is what gives the arrow-maker the confidence to stop hunting. It was the “main pillar that upholds the whole edifice. If it is removed, the great, the immense fabric of human society… must in a moment crumble to atoms”. 8 But Smith recognised our own frailty. The temptation to follow our immediate selfinterest could sometimes be overwhelming, and our own ‘selfish passions’ would take precedence over the judgment of the “impartial spectator”. As commercial society evolves, and we exchange with those much more remote from us, our human frailties matter more. We need a mechanism to help us exhibit the “sympathy” that is both desirable and necessary. We need social institutions to bolster our often erratic ability to see things from the perspective of the impartial spectator. These social institutions are not just given to us. We choose to build them as a framework for collective decisions that constrain individual behaviour. We make them, and sometimes we break them. These two points from Smith’s commentary – the importance of institutions and our desire to build them – are closely related to the role of trust in a modern economy. 9 How could we drive, eat or even buy or sell unless we trusted other people? It is surely trust not money that makes the world go round.

Smith’s close friend, the chemist Joseph Black, said that he was “obliged to weigh when strange students come, there being a very large number who bring light guineas, so that I should be defrauded of many pounds every year if I did not act in self-defence against this class of students." 16 And so we reach paper money. I have here a £ note. What is it? Money you say. Surely it is just a piece of paper. What is the difference between a piece of paper and money? You can “buy stuff with it”. 17 Why can we get anything in exchange for these intrinsically worthless pieces of paper? It is because those to whom we give the paper expect that they will, in turn, be able to get something for it. That rests on the expectation that whoever they pass the paper to will in their turn be able to get something for it, and so on, ad infinitum. In short, the value of money depends on trust. But it is not easy to trust paper money unless we trust the issuer. Much of the financial history of the past 150 years is the story of our collective attempts to manage paper money. In a democracy, we  13  Wealth of Nations ,I, iv,p38. 14  See Kiyotaki and Moore (2002). 15  Wealth of Nations ,I, iv,p38. 16  Rae (1895), p 49.
Take, for example, the bank sector’s solvency, measured as the ratio of equity capital to the balance sheet total. This amounts to only a few per cent, whereas the level in non-financial firms is 20, 30 or even 40%. So a simple way of solving the bank sector’s vulnerability would be to raise the capital base to what is customary in other companies. Banks would then be in a better position to cope with unexpected disturbances in the financial markets. Maintaining a large reserve of equity capital for unexpected events is, however, costly and someone would have to pay for this. The solution would therefore lead to expensive credit and low interest on  1  BIS Review 9/2000  deposits. Projects that are not exceptionally profitable would not obtain finance and the level of saving in the economy would be low. With little investment and low saving, growth would ultimately falter and prosperity would suffer. From this it will be readily understood that unduly tight capital adequacy requirements for the bank sector can be very costly for the entire economy. So if the whole economy would be liable to suffer because the banking system opts for or is coerced into holding a sizeable capital reserve, one can say that this is not a viable remedy for ensuring the financial system’s stability. But how, then, are financial crises to be prevented?

Unlike a unitary state, the euro area has 17 Heads of State, 17 Finance Ministers, and countless national parliamentarians. It can only be expected that their communication on difficult topics may sometimes diverge. As we have seen on many  BIS central bankers’ speeches  5  occasions, this triggers difficult feedback loops between politics and markets which ultimately undermine the impact of agreed policy measures. On one level this is a procedural problem: our institutions are not effective enough in ensuring political leaders speak with one voice. But on a deeper level, it is a problem deriving from the fundamentally different expectations of domestic populations and financial markets. Markets expect messages of confidence, of immediacy, of unlimited capacity to act. Domestic populations want to know the limits of their liability, to ensure that actions are just and fair, to make sure past mistakes are not repeated. A classic example of this divergence has been the debate over private sector involvement. For a domestic audience, banks should internalise the consequences of their lending decisions and should be punished for their past behaviour. But from a financial market perspective, such communication is disastrous. It signals to investors that assets that were previously risk-free are no longer so, that the euro area is a market where their investments are not guaranteed. And as markets are forward-looking, they sell their assets today. This immediately undermines the progress I have just described. A second example is the implementation of crisis response decisions.