samchain/econo-pairs-v1 huggingface dataset:
Our findings were the same as for the entire sector as a borrower group - the debt was mainly held by the same group of households that had assets and sizable incomes. The group of households that had narrow financial margins were a fairly miscellaneous group, but most of the households were debt-free. We will be updating this study with data for 2002 in the next Financial Stability Report, to be published at the beginning of December. So it doesn’t appear likely that households as a group would run into payment difficulties in the event of an unexpected rise in interest rates or a decrease in incomes due to increased unemployment. And even if households should encounter considerable difficulties, it would not have any significant impact on the banks’ risk capital. As I see it today, the issue of housing prices and household borrowing is not a question that affects the stability of the Swedish banking system. It should be pointed out, however, that even though the risk to households as a group is small, individual households could be hit hard if their margins to cope with rising interest rates are narrow or if they suffer a loss of income in some shape or form. It’s important therefore that the banks ensure that their borrowers are well capable of coping with higher interest rates. Price stability That both assets and debts are increasing in relation to incomes does, however, make households more sensitive to changes in interest rates and asset prices.

As in the case of foreign currency mortgage loans — and you remember how we had to deal with the crisis related to foreign currency mortgage lending — when people choose a product with a floating interest rate, especially where the initial interest rate is lower, they may be unable to comprehend that they are accepting serious interest rate risks associated with changes in market conditions and rate increases. In this regard, it would be better to prevent a situation we had to address in foreign currency mortgage lending. This also requires regulation, in our opinion. Currently, we are closely studying the international experience in floating interest rates regulation. These practices are quite diverse and comprise both prohibitions and certain limits on a floating range. We also need to introduce such regulation into our laws. Summing up this part of my statement, I would like to stress that we can certainly see no good in establishing new restrictions again and again. Actually, this is not our policy to continuously introduce new restrictions. However, we may not follow Wild West rules, given the maturity level of our financial market. We will need such direct restrictions on an ongoing basis until the banking sector implements efficient self-regulation. The worst thing is that we have to constantly play cat and mouse with you. Banks are inventing a new ‘relatively legal’ scheme — we are liquidating it. This is inevitably increasing the number of disappointed clients.
The transmission of instability typically occurs as a consequence of increased margin calls and mark-to-market losses that strain firms’ liquidity and capital positions and put additional pressure on firms to further deleverage. Such scenarios can have material adverse repercussions on other market segments and market participants. It is vital that we take steps to address this risk now, during a period when markets are functioning without stress, in order to improve the resiliency of this market before the next crisis occurs. This is especially important in light of the heightened threshold established by the Dodd-Frank Act for future central bank interventions in the event of a market disruption. Even if this constraint did not exist, the experience of the recent financial crisis has served to strengthen our resolve to ensure that the market is structured in a way where risk is accurately priced and resilient to stress on a day-to-day basis, without the need for official sector intervention as a first resort. As many of you know, the Federal Reserve has been calling for action on this issue over the past two years, and all three Financial Stability Oversight Council annual reports have highlighted this as a significant issue worthy of our attention. However, the diversity of participants in the tri-party repo market has made it difficult to move forward quickly with a market solution that addresses the risk I have outlined. Industry leadership is absolutely critical to overcoming these challenges.

•  Additional work is also needed on the concept of liquidity buffers, with some firms continuing to rely too much on uncommitted sources of liquidity. •  And stress testing and scenario planning remain areas of continued focus, with challenges in designing scenarios that are sufficiently extreme. Beyond liquidity, additional work is needed in the area of capital planning. While this is not an area that financial market utilities have spent considerable time and resources on in the past, it is an area we will continue to focus on in our reviews and expect continued development and improvement over the coming year. As the industry continues to build resilience to future shocks, by enhancing the management of and the amount of capital and liquidity, as two important elements of resilience, the financial system will continue to grow stronger. It’s essential, though, that all parts of the financial system – banks, non-bank financial firms, market utilities – achieve enhanced resilience. Simply having one part of the system robust to future shocks, with other parts – connected and linked within the system – less robust, leaves the system vulnerable to future shocks and instability. Management I’d like to turn now to the second element of our supervisory framework: management. In addition to our focus on resiliency as an essential element in strengthening the financial system, we see enhanced risk management and corporate governance as a complement to resiliency and necessary to achieve stronger firms and a stronger system.
Let me stress two elements in this direction: • We are data driven, we are not forecasts driven. And recent data show that even if we are obviously still far from the inflation target, our monetary policy is at work, and is working : inflation has peaked in the euro area, core inflation has declined for the second consecutive month, and there are several other signs that underlying price pressures are softening. According to yesterday’s inflation forecast, which is a rather cautious one, inflation should be at 3 % in the euro area by the end of this year, and at 2% by 2025: we are confident that we will deliver on our inflation target in the next two years. • We have already shown our determination on interest rates through this overall 400 basis point increase. We obviously covered most of the  Page 2 sur 6 ground, and we are clearly in restrictive territory on all maturities: the key issue now is the transmission of our past monetary decisions, which is proceeding forcefully to financial conditions but could take up to two years for its full economic effects. Hence, the duration matters more than the level; persistence matters more than the peak. II. Forces pushing for greater diversification in the IMS Despite the end of the Bretton Woods system in the 1970s, the US dollar still plays a dominant role in the international monetary system (IMS).

4  BIS central bankers’ speeches
This convergence was also evident in the academic literature, as reflected in the similarity of approaches adopted by Goodfriend and King (1997) and Rotemberg and Woodford (1997), despite the former coming from a classical / monetarist starting point and the latter from a New Keynesian perspective. 11. See Busetto, et al. (2022), which builds on Haldane et al. (2016) and Bailey, et al. (2020). 12. See Friedman and Schwartz (1963). 13. See Hatzius, et al. (2010) for a discussion. 14. See Giese et al. (2021) and Czech, et al. (2021) for examples of this form of analysis. 15. See Joyce, et al. (2011) for the starting point of this analysis in the UK. 16. The ‘toy model’ outlined in the Annex is a highly stylised version of parts of the much richer empirical model presented in Cloyne, et al. (2015), which has been used to undertake analysis at the Bank of England. 17. See Bank of England Monetary Policy Report, August 2021, Box A.

Permit me to pay tribute to all other former Governors who have contributed immensely to our institutional development over the years. I want to take this opportunity to thank them all for their contributions in reforming the Bank and upholding the dignity and effectiveness of our noble institution. Your Excellency, distinguished guests, the recent global economic and financial crisis was a wake-up call to the realisation that low and stable inflation, a sound banking system, as well as high and sustainable economic growth, though necessary, are not sufficient conditions for financial stability. As you are aware, the Bank had developed the Financial Sector Development Plan (FSDP) which was approved by cabinet in 2009, to address the shortcomings in the financial sector. It is expected that funding for the FSDP would be provided under a basket fund arrangement with development partners, including KfW, GTZ, and AfDB, with the World Bank assuming a leading role. The Bank is in the process of setting up a secretariat for successful implementation of the FSDP for which the Head has been appointed. Your Excellency, distinguished ladies and gentlemen, permit me to proceed with the discussion on the highlights of the reform policies to reposition the Bank and the current state of their implementation. Strengthening the supervisory role of the Bank of Sierra Leone Your Excellency, distinguished guests, even though the Bank was granted legal sanction by the Bank of Sierra Leone Act 2000, its powers and operational autonomy are limited.
They gain and lose symmetrically as returns rise and fall. Many shorter-term investors face no such restrictions. If their timing is right, they can win on both the upswings (when long) and the downswings (when short). For them, the road to riches is a bumpy one – and the bigger the bumps the better. As in Merton’s model, all volatility is good volatility. Perhaps reflecting that, there is evidence of the balance of shareholding having become increasingly short-term over recent years. Chart 8 shows the average duration of holdings of US, UK and European bank shares. Average holding periods for US and UK banks fell from around 3 years in 1998 to around 3 months by 2008. Banking became, quite literally, quarterly capitalism. Today, the average bank is owned by an investor with a time-horizon considerably less than a year. A second piece of evidence on equity short-termism, which is specific to banks, comes from trends in banks’ capital planning. Since the late 1990s, there has been increasing focus on return on equity (ROE) as a performance target. Indeed, major banks have recently set explicit numerical targets for ROE as a guidepost for shareholders and managers. These targets are revealing about investor and managerial incentives. ROE is an entirely equity-focussed concept. As such, ROE targets provide strong incentives for banks to increase equity returns, either by boosting asset volatility or gearing up their balance sheet. ROE targets hard-wire in the North-Easterly drift evident in Chart 5. Instead of adjusting for risk, ROE is flattered by it.

By the end of the 1930s, there were only six British banks left with reserve liability. In the US, a similar process was underway. Systemic bank failure during the Great Depression was taken as evidence of the inadequacy of extended liability in protecting depositors. As in the UK, making a call on shareholders was deemed likely to make a bad situation worse. It was quickly replaced with Federal deposit insurance in 1934. With reserve liability gone, so too did the rationale for shareholder vetting. So by the 1930s the governance and balance sheet structure of banks was unrecognisable from a century earlier. Ownership and control were amicably divorced. Ownership was vested in a widely dispersed set of shareholders, unvetted and anonymous. Their upside payoffs remained unlimited, but their downside risks were now capped by limited liability. The pool of reserve capital had largely evaporated. Later in the 20th century, these governance and balance sheet features spread across the financial system. During the 1990s, many of the larger global investment banks abandoned their private partnership status to become limited liability public companies. In the UK, a number of mutually-owned building societies followed suit and turned public. The rationale was familiar from a century earlier – the desire to break their balance sheet chains. By the end of the 20th century, joint stock banking was pre-eminent. What impact did these governance changes have on banks’ risk-taking incentives? Finance theory here is admirably clear.
Also, recent bond market developments in the euro area have differed from those in the United States. Last year, the ten-year GDP-weighted yield rose well above the levels implied by the estimated revisions to the expected future path of short-term interest rates (Slide 10, left-hand side). We have seen similar developments across Member States, also for issuers with the highest credit rating (Slide 10, right-hand side). In Germany, for example, ten-year yields have increased by about 160 basis points over and above the pure expectations component since December 2021. Rising uncertainty has pushed term premia higher The question, then, is why we have seen such a broad-based and persistent rise in sovereign yields in the euro area, and whether, and to what extent, it is related to changes in investors’ expectations about the size of the Eurosystem’s balance sheet. In answering this question, it is useful to recall that the gap between euro area long-term government bond yields and the expected average short-term rate can reflect two types of risk compensation: one is the term premium on the risk-free rate, which in the euro area is typically estimated from rates in the OIS market. The other is a country-specific risk premium, which includes liquidity and credit risk. This premium can simply be measured by the spread of a euro area bond yield over the equivalent OIS rate.

Reducing the size of our balance sheet is warranted for three reasons: first, to regain valuable policy space in an environment in which the current large volume of excess liquidity is not needed for steering short-term market interest rates; second, to mitigate the negative side effects associated with a large central bank balance sheet and footprint in financial markets; and third, to withdraw policy accommodation to support our intended monetary policy stance. I will then explain the effects of the reduction of our balance sheet on broader financial markets. While QT will not simply be a reversal of QE, investors anticipating balance sheet run-off are likely to have gradually reversed some of the risk premium compression induced by our asset purchases, thereby contributing to the timely return of inflation to our 2% target. Why quantitative tightening? Let me start by discussing the rationale for QT in more detail. Regaining policy space when excess liquidity is higher than needed The first reason relates to the ECB’s operational framework. After the start of the APP in 2015, we de facto moved from a corridor system for steering short-term market rates towards a floor system, as the large increase in excess liquidity caused money market rates  to converge to the rate applied by the Eurosystem to its deposit facility (the deposit facility rate, or DFR; Slide 2). [4] In the ongoing review of our operational framework, we are analysing whether in the future we will operate under a floor or a corridor system.
Kristina Persson: Globalisation, imbalances and possible ways forward Speech by Ms Kristina Persson, Deputy Governor of the Sveriges Riksbank, at a conference on social economics, Stockholm, 3 May 2006. *  *  *  Thank you for the invitation to come here and speak on a topic that interests me very much, both in my role as representative of the Riksbank and privately, as a person with a strong interest in social issues. Let me begin by saying that I will not be talking about the current economic situation in Sweden. The discussion from the most recent monetary policy meeting will be published on 11 May. I shall begin with a run-through of the opportunities and challenges that economic globalisation entails for a country like Sweden. I will then go on to discuss the imbalances that currently exist in the global economy, particularly in the exchange of goods, services and capital between Asia and the United States. The trade deficit is financed through the global financial markets, which are an important driving force in the globalisation process. Finally, I shall talk about some of the reforms currently being discussed within the International Monetary Fund (IMF). Introduction Ten years or so ago the word globalisation did not arise in the public debate, the term used then was internationalisation. The question is whether this indicates that something new has happened?

The high level of investment has been almost entirely financed through domestic savings. The saving ratio in China amounts to around 45 per cent of GDP, which is a much higher level than in most other countries. According to estimates, Chinese households save one third of their incomes. One reason for the high level of saving is the lack of a social safety net and a general pension system. As a consequence of the high level of saving, private consumption is relatively low. China has had relatively strong growth in exports; in the past five years alone exports have trebled. 4 The country is currently a nation as open as, for instance, France and Italy, measured in the percentage of foreign trade in GDP and considerably more "open" than the United States. China has come to be called “the factory of the world” as an increasing number of foreign companies have chosen to purchase goods and locate parts of their production there. For instance, China manufactures more than two thirds of all photocopiers, microwave ovens and DVD players, and 40 per cent of all of the world’s computers. 5 However, a large part of the input goods for these products are imported from neighbouring countries, but the prevalent picture that China can only compete with lowcost products is slowly changing. In recent years China has gone from specialisation in simple, labourintensive low-cost products to also producing more technically-advanced and internationallycompetitive products.
To help prevent strains in dollar funding markets from intensifying and spreading, and hence creating more widespread pressure on financial markets, the Federal Reserve established liquidity swap arrangements with the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan. These arrangements provide foreign central banks with the capacity to deliver US dollar funding to institutions in their jurisdictions. The credit is extended by the foreign central bank against the collateral that each accepts, and the interest generated from those transactions is returned to the Federal Reserve. From the perspective of the Federal Reserve, the liquidity swap arrangements are safe. After all, the Federal Reserve is extending credit to the foreign central bank and not to the financial institutions that obtain dollar funding. The credit we extend to the foreign central bank is collateralized by foreign currency deposited with the Federal Reserve. Moreover, the operations do not involve any exchange rate risk for the Federal Reserve, because the swap transactions are unwound at the same exchange rate at which they are established. There is currently only a very small amount of outstanding credit extended through the liquidity swap arrangements, in contrast to the dramatic usage that was observed during the financial crisis. The reason is that the circumstances surrounding the recent establishment of the swap lines differed from those in the middle of the financial crisis. During that earlier period, the need for dollar funding was more severe, and funding markets had become completely dysfunctional.

Mario Draghi: Exchange of views with members of the Irish Parliament Introductory statement by Mr Mario Draghi, President of the European Central Bank, during his exchange of views with the House of Representatives, Dublin, 8 November 2018. * * * Thank you, Chairman. I am happy to be back in Dublin and honoured to be invited to speak at the Oireachtas. On this occasion, I am joined by my colleague, Philip Lane, whom you meet regularly in his capacity as Governor of the Central Bank of Ireland. While the ECB is accountable to the European Parliament, we greatly value our exchanges with national parliaments. In September, some of you already met the Chair of the Supervisory Board, Danièle Nouy, in Frankfurt and discussed the ECB’s supervisory policies. In full respect of the functional separation between the ECB’s monetary policy and its supervisory tasks, today is an opportunity to discuss our monetary policy and policies to make the euro area economy and its constituent parts more resilient. In this respect, I expect an open exchange from this meeting, which will give us a chance to listen to and better appreciate each other’s positions. I am conscious that I am speaking in a country that went through a severe crisis. The Irish people made tremendous efforts, for which I have great respect. And these efforts are now paying off.