samchain/econo-pairs-v1 huggingface dataset:
The aim is twofold: First, banks with more equity are better equipped to absorb losses that can arise as a result of excessive lending growth. Second, costs for mortgage lending rise, counteracting the build-up of imbalances in this segment. The buffer is called countercyclical because capital requirements increase when the mortgage market is on the rise. This dampens the upswing and strengthens the safety buffer of banks and of the financial system. The requirements are reduced in a downturn when banks have more capital available to absorb potential losses on loans. This mitigates the likelihood of systemic risk materialising and leading to a downwards spiral of emergency sales and loan defaults. Acting on proposals by the SNB, the Federal Council activated the sectoral CCyB in 2013 and, in 2014, increased it to 2% of risk-weighted mortgage loans for residential property in Switzerland. In addition to the sectoral CCyB, there are two measures in particular which the industry introduced in 2012 in the form of self-regulation. These measures address the demand for loans: First, the obligation that mortgage borrowers have to supply a minimum amount of own funds. Second, the obligation that part of the loan has to be repaid within a set period if the loaned amount constitutes more than two-thirds of the property value. 24  Cf. Smets (2014).

But, you might say, the behaviour of borrowers and lenders, whether rational or based on distorted expectations, ultimately depends on interest rates. Only if interest rates are low, can such a dynamic develop. Interest rates in turn are strongly influenced by central banks. In the last part of my speech I would like to address this argument, and discuss the question that has come back into focus since the financial crisis: What role do central banks play in the event of excesses and crises on the credit market? The fundamental task of central banks like the SNB is to ensure price stability, while taking due account of economic developments (cf. slide 17). The main instrument they use for this are key or reference interest rates. If, for example, the inflation rate threatens to fall too low, key rates are lowered. This has a positive impact on price development via various channels. 19 One of these is loans: An interest rate cut reduces borrowing costs and creates incentives for expanding the credit supply. This encourages investments and consumer expenditure and ultimately has a positive effect on price development, too. With their interest rate decisions, central banks therefore consciously influence lending practice. If, for price stability reasons, interest rates have to be kept low for a prolonged period, it is possible that over time there  18  SFBC (1998). 19  The literature distinguishes different channels through which monetary policy can impact on aggregate demand and thus inflation.
In Europe, the ECB’s deposit facility rate was already set at -0.5% before the COVID-19 crisis.6 In our statements, we have stressed that this rate could be further lowered in the future. Yet in any event, looking back it seems clear that conventional monetary policy — i.e. that based on controlling the short-term interest rate — has less scope for action than, for example, a few decades ago. The lower bound on interest rates generates asymmetry in monetary policy conduct. As I commented earlier, if inflation rises above its target, central banks may increase interest rates as much as necessary in order to “cool” the economy. However, in the face of deflationary shocks driving inflation below its target and leading the central bank to cut its interest rates, these may ultimately “collide” with their lower bound. This asymmetry makes monetary policy potentially very effective for combating inflation, but less so for combating deflation or even persistently low inflation. The latter may lead to a dangerous vicious circle. Against a backdrop where central banks’ hands are expected to be frequently tied by the lower bound on interest rates, economic agents will expect any inflation overshooting to be corrected swiftly. However, this is not the case for undershooting. Therefore, average expected inflation over a long period will tend to run below target.

Faced with this situation, the digital euro could be a vehicle for retaining the option whereby citizens have access to the central bank’s safe money and avoiding the risks that would arise from total dependence on private means of payment. However, before launching a digital euro we must resolve many questions. Only thus will we be in a position to respond to the challenges and react swiftly where necessary. For one thing, we have to acquire practical experience regarding the possibilities technology offers for the operational design of this digital euro. Within the Eurosystem we must consider, among other matters, what the most appropriate technology would be, how we should shape it to ensure maximum resilience and how we would have to involve the private sector in the provision of the digital euro. Purely technical issues aside, we must further analyse the macroeconomic and financial consequences of a digital euro in the different scenarios identified, as there are basic aspects regarding the potential impact of the digital euro on the economy that would have to be clarified before taking a decision on issuing it. By way of example, I would highlight the need to minimise the adverse impact that potential banking disintermediation would have on financial stability, or the possible effects of the digital euro on situations of financial instability. These aspects probably require an additional analytical push to ensure that these unwanted secondary effects can be avoided.
For example, quality engagements with first-time buyers and the underserved will go a long way in closing the huge protection gap which remains our most important priority right now. We will also be looking more closely at the experience with direct distribution channels to date. We would like to see greater impact from direct channels, including online or mobile platforms, in supporting higher insurance penetration. Today, the Millennials and iGeneration expect significant technological innovations in the entire chain of insurance experience – from product comparisons, purchase, claims, and customer support. The industry cannot ignore this fact as they will become the key customer segment in the near future. Further attention also needs to be given to the role of shared infrastructure to support insurance undertakings, building further on the fraud and motor insurance databases. From the Bank’s perspective, our aim is to facilitate innovation in three main ways. First is by lowering the barriers to innovation and competition. This is achieved by providing an environment through the regulatory sandbox for the industry, including non-insurance firms, to test innovations without costly regulatory reprisals. It also allows the Bank to appropriately tailor our rules to better suit innovations as we too, learn from observing the solutions that are tested in the sandbox. Second is through proportionality. We aim to better reflect proportionality in our regulatory framework.

Here again, there is a nexus in the appropriate rhythm and interaction between the liberalisation of financial versus real markets. Once financial liberalisation has started, the process benefits from continuous innovation and from its own impetus. The same does not apply to reforms in the labour and good markets where rigidities and obstacles are often deeply rooted. BIS Review 64/2007  3  Lastly, better integration into the global economy requires an appropriate exchange rate strategy. An emerging economy with high productivity gains and potential growth in the tradable sector is prone to receive large capital inflows and have a real appreciation of its currency in the long term. The latter may come either or both from nominal appreciation or higher relative inflation. Arguably, exchange rate appreciation, which may result in an overvalued currency, is a risk for emerging economies that conduct export-led growth strategies. In order to stem appreciation and maintain their competitiveness, some emerging economies – like China – have accumulated ever larger amounts of foreign reserves. However, undervalued currencies also represent a significant risk, not only for inflation but also because it allows foreigners to buy cheaply national assets. In addition, undervalued currencies contribute to ballooning global imbalances. "En passant", I am pleased to note that both India and the Euro area post significant but not extravagant levels of reserves and that neither is responsible for the persistence of global imbalances.
We based our targeted loan approach on a framework that prioritizes the use of loans in areas of activity that support investment, production and employment. With our macroprudential tools, we also prevented the risks that credit growth may pose to price stability and financial stability. As another pillar of our targeted loan approach, we have effectively utilized advance loans against investment commitment with a grace period of two years and maturities up to ten years to encourage increased exports and investments in the production of import-substituting goods. Up to now, a total of TRY 111.47 billion in advance loans against investment commitment (YTAK) have been allocated to 740 industrial and tourism investments in 67 provinces. Moreover, we increased the limits, reduced interest rates and extended the maturities of rediscount credits extended to exporters and firms engaged in FX-earning services and activities, making this convenient financing opportunity more affordable and accessible. In addition, while changing company-based credit limits to Turkish lira in line with the Liraization Strategy, we decided that the rediscount credit limits allocated to banks be also revised to Turkish lira as of 2023. 2/4  BIS - Central bankers' speeches  In 2022, 346 billion Turkish lira worth of rediscount credits were used by our exporters. Facilitated access to rediscount credits led to a huge increase in the share allocated to SMEs compared to previous years. The number of SMEs using rediscount credits surged from approximately 1,900 in 2021 to 5,972 in 2022.

And as you know, the profit and loss account is the first line of defence when it comes to averting banking crises. Another criterion that has proven most useful relates to the substantial amount (up to € billion) authorised by Parliament to meet the recapitalisation needs that may arise during the crisis, but to contain in turn the budgetary impact of the restructuring process. The more than € billion that are to be lent to Spanish banks are no doubt a considerable sum. But it is actually a very small amount when compared with the outlay in other countries, which reacted by pumping towering amounts of public funds into private banks, leading to most serious increases in public debt that in some cases have ultimately caused problems for the country concerned. Where necessary, there are more than sufficient backstops to meet recapitalisation needs, but it is absurd to inject public funds unnecessarily. Let’s now turn to the role of financial markets in the second phase of the financial crisis, the so-called “sovereign debt crisis”, which erupted very recently, in spring this year. The behaviour of the sovereign bonds markets could be analysed from the standpoint of market failures or in how they are regulated. While this is an interesting perspective, proposals for reform on any major scale have not yet been set in train, unlike with banking regulation. The crisis has disclosed numerous shortcomings in the functioning of markets, and one frequent criticism is that these same markets influence the public policy agenda.
I hope to touch on some of the topics, and leave you with some thoughts as you go about today’s and tomorrow’s sessions. The last decade 7 As we celebrate ASIFMA’s 10th anniversary this year, let us reflect on how far Asia’s capital markets have grown over the past decade: a. Ten years ago, only two Asian stock exchanges ranked in the world’s top ten by market capitalisation. Today, four out of the ten largest exchanges are in Asia 7. Asia contributes nearly half of the total number of IPOs globally, compared to 28% a decade ago 8. The value of share trading in Asia grew 80% over the past ten years, almost double the pace worldwide (41%)9. b. Asia’s bond markets grew to USD 4.7 trillion in 2015 from about USD 700 billion ten years ago, representing an annualised growth rate of 24%. As a result, Asia’s share of the global bond market has increased significantly, from just 2% in 2006 to 9% in 201510. 8  The developments are being supported by two trends: a. On the demand side, Asia’s middle class is growing, per-capita incomes are rising, and saving rates remain high. The Asian Development Bank estimates that 64% of ASEAN, 79% of China and 69% of India populations will move into the middle-income bracket between 2010 and 203011. This reflects a more than three-fold increase to 3.6 billion persons in 2030, and will continue to drive the need for long-term investment for retirement. b.

In other cases, where a business is rotten through and through, a more “traditional” break-up of a group may be needed, perhaps using a “bad bank” in some cases. Planning for that will not be easy, and so for those extreme cases there is a special need somehow to ensure continuity in the provision of absolutely critical services to the economy. In the UK, that is one way that ring-fencing fits into resolution planning. Implications for supervision All this has important implications for prudential supervisors. In the first place, supervisors get some allies: debtholders. The prospect of taking losses will incentivise bondholders (and fellow banks) to monitor the risks taken by banks – pricing or rationing accordingly. This is market discipline: an extra line of defence. Risk being priced into bank bonds will not, as some suggest or threaten, kill the market. It would be uncertainty  4  BIS central bankers’ speeches  about the regime governing what happens in the event of distress that would kill the market because that kind of uncertainty could not be priced. Supervisors won’t be idle though. Resolution needs preparation. Hence the international agreement that firms should prepare Recovery Plans and contribute to Resolution Plans. To be clear, while the firms will own the Recovery Plans, the authorities will design and own the Resolution Plans. It has to be that way. To a much greater extent than ever before, supervisors will need to work backwards from the end game, working with resolution authorities.
And it is also clear that that transition in thinking needs to lead soon to transition in action, if we are to reduce these financial risks in a timely manner and so avoid a late and abrupt transition to the low carbon economy to which governments have committed. To make this happen, we need to learn by doing, to identify decision-useful information that will support the necessary transition; and we need to identify the barriers to the mainstreaming of green finance so that the transition can be financed in practice. It’s a tough ask that gets more pressing by the day. The prize could not be more important. We must keep up the good work. 7  https://www.banque-france.fr/en/financial-stability/international-role/network-greening-financial-system 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  References Carney, M. (2015), “Breaking the Tragedy of the Horizon – climate change and financial stability”, speech given at Lloyd’s of London, September 2015. Carney, M. (2016), “Resolving the climate paradox”, Arthur Burns Memorial Lecture, Berlin September 2016. Climate Bonds Initiative (2017) “Bonds and Climate Change, The State of the Market 2017”. Climate Bonds Initiative and UNEP Inquiry into the Design of a Sustainable Financial System (2015) “Scaling up green bond markets for sustainable development”. OECD (2016), “A quantitative framework for analysing potential bond contributions in a low-carbon transition”. PRA (2015), The Impact of Climate Change on the UK Insurance Sector. Scott, M., Van Huizen, J. & Jung, C. The Bank of England’s response to climate change. 98–109 (Bank of England, 2017).

The shared response to climate change: turning momentum into action Speech given by Sarah Breeden, Executive Director, International Banks Supervision, Bank of England  Based on remarks made on 19 March 2018 following the second formal meeting of the Green Finance Initiative and Green Finance Committee, London  Published 14 May 2018  1  All speeches are available online at www.bankofengland.co.uk/speeches  Introduction Thank you for the opportunity to explain what might otherwise not be obvious – why the Bank of England has an interest in climate change. In addition to outlining our interests, I shall stress how this is a shared challenge – where the private sector and the financial authorities need to work together, respecting our different mandates, if we are to rise to the challenge ahead. And in doing so I will pay tribute to the work you have done here in the China-UK Green Finance Taskforce. Turning momentum into action is imperative. The practical work you are doing in the Taskforce is key to making a real difference. Climate change, financial risk and the Bank of England’s objectives Climate change, and society’s response to it, presents financial risks which impact the Bank’s objectives. Those risks arise principally on two dimensions: the physical effects of climate change (for example from more frequent or intense storms); and the impact of changes as we transition to the lower-carbon economy that is consistent with the commitments made by governments in Paris two years ago.
Tony Latter: Bond markets - where are we heading? Speech by Mr Tony Latter, Deputy Chief Executive of the Hong Kong Monetary Authority, to the conference “The Credit Revolution: Charting Change in the Asian Debt Markets”, at the Conrad International, Hong Kong, on 12 July 2000. *  *  *  A notable feature of the world’s leading national bond markets over the past couple of years has been the adjustment required of both issuers and investors to the often remarkable shifts into surplus, or much reduced deficit, that have occurred in the financial positions of governments in most major economies - with the notable exception of Japan - as a result of the successful application of fiscal discipline, assisted in some cases by favourable economic growth or a beneficial cyclical position. This has led to significant net retirement of government debt, notably in the United States and the United Kingdom. For example, in January the US Treasury projected buy-backs of $ billion this year, and some observers now expect that figure to be exceeded. The design of debt retirement strategies has itself posed some unfamiliar, though perhaps not entirely unpleasant, challenges for the authorities, as they search for the most cost-effective means in terms of prospective interest savings, grapple with the novelty of reverse auctions, or consider how best to sustain and possibly reinforce liquidity of the key remaining benchmark issues. There are a number of significant consequences of this transformation of government finances for markets more generally.

But I would expect that there is enough potential here to ensure that the debt markets in Hong Kong as well as in the wider region continue to develop and prosper as we look ahead. BIS Review 57/2000  4
Growth in demand is still robust, and investment in the petroleum sector has increased further. Solid growth in other countries and high prices for Norwegian goods are still generating strong positive impulses to export-oriented mainland enterprises. A number of factors are buoying up growth in household demand this year. As a result of a continued increase in employment and rising wage growth, household real disposable income is growing at a faster pace this year than in 2006. Households are optimistic regarding their own financial situation and the Norwegian economy. Growth in housing investment nevertheless appears to be slowing. This may partly reflect rising construction costs and a growing share of capacity in the construction sector  BIS Review 97/2007  1  being used for commercial buildings. The favourable trend is also reflected in Norges Bank’s regional network, which so far has reported continued solid production growth in most sectors. Capacity utilisation has reached a high level as a result of strong activity growth. Employment has risen as rapidly as in the years prior to the cyclical peaks in the 1980s and 1990s, and unemployment is now at a very low level, measured both in terms of the number of registered unemployed and according to Statistics Norway’s labour force survey (LFS). Enterprises report a shortage of qualified labour, and many positions are vacant. The number of vacancies per unemployed person has not been higher since the 1980s.

Funds and investors in Europe, Australia and Asia started reporting higher losses. The turbulence also spread to other financial market segments, for example stock markets which have declined sharply since mid-July. The contagion to other markets was caused by uncertainty about the risk associated with securities backed by subprime mortgages, and a lack of information about the investors in this market. As a result, financial institutions became highly reluctant to provide credit. This had a considerable impact on money market rates and gave rise to liquidity problems. On 9 August and in the days ensuing, many central banks offered extra liquidity to the banking system to ensure the functioning of the money market. Norges Bank supplied liquidity to the Norwegian banking system through ordinary market operations on 9 August. A few days later, the US Federal Reserve lowered its discount rate by 50 basis points. The turbulence led to a marked increase in risk premia in financial markets as investors fled to safer havens. The price of credit risk in terms of the price of credit default swaps (CDS) rose sharply for both banks and other companies, also in Norway. As shown in the chart, the increase in the CDS price for DnB NOR was appreciably smaller than for an index of European banks, however. 4  BIS Review 97/2007  Such an increase in the price of risk in some financial market segments is not necessarily negative.