samchain/econo-pairs-v1 huggingface dataset:
In retrospect, this should perhaps have flashed more of a warning signal, but with credit card receivables starting from a very low base, it was not surprising that the amount outstanding should expand rapidly. The quality of the card portfolio actually held up well for some time. But the cumulative effects of deflation, rising unemployment and increasing indebtedness were taking an increasing toll. Coupled with the delayed impact of the more permissive bankruptcy regime introduced in 1998, these factors produced an explosion of personal bankruptcies in 2002. Bankruptcy petitions jumped to almost 27,000 in that year and the charge-off ratio for credit cards rose to 13.25%, compared with 5.46% in 2001. In the first quarter of this year, the bankruptcy situation seems to have improved a bit, with the number of petitions falling to 6,119. Credit card charge-offs have also shown signs of slackening off. The average charge-off ratio for the first two months of 2003 was down to about 11.3% - still not good, but an improvement on the final quarter of 2002. The question facing the banks is whether this can be sustained in the current environment. Apart from credit cards, asset quality has generally been benign. In particular, the all-important mortgage portfolio has held up well, with the three-month delinquency ratio standing at just over 1.1 %. This is despite the ominous rise in the number and amount of mortgages in negative equity. At end-2002, we estimated that there were around 78,000 cases of negative equity with a value of $ billion.

Among the measures taken, banks have established command centres to monitor the situation and to take appropriate action following reports of confirmed or suspected cases of infection among staff. Typically, this involves sending home colleagues in contact with the infected staff member and cleansing the office or branch concerned. This is part of a more general increased focus on office and personal hygiene. Staff are generally being required or strongly encouraged to wear masks and gloves for their own protection and to limit the spread of the disease. The banks have also activated back-up sites for critical operational areas such as computer systems, dealing and settlement. Teams of staff that could man these operations in an emergency have been identified and have been segregated in locations outside the main office such as the back-up site or other branches. Some staff have also been working from home. In some cases, arrangements have been made with overseas branches to cover at least part of the activities of the Hong Kong operations in case of need. The number of overseas trips and meetings has been cut back. 2  BIS Review 21/2003  So far these special arrangements seem to have been effective. Banks have been able to maintain their operations without major disruption, except for the temporary closure of a few branches. Hopefully, it will be possible to wind down the arrangements in the near future. No doubt lessons have been learned from the experience that can be incorporated in the banks’ contingency plans.
The more complex and interconnected it gets, the more vulnerable it is when exposed to small, and localized, shocks. These may worsen and compromise the stability and integrity of the whole. This is what is now happening in Europe, as it happened before with subprime mortgages in the US. In both cases, problems of limited size – the Greek public debt in the case of Europe – have had a disproportionate impact because amplification mechanisms have occurred inside the financial system. In Europe, three separate dynamics have been at work. BIS central bankers’ speeches  1  First, between solvency and liquidity of sovereign debtors. In times of turmoil, sovereigns, like financial institutions, can be either illiquid or insolvent, or both. In many cases, the distinction is blurred. When uncertainty is high, sovereigns face liquidity shortages, and they can only issue new debt at ever higher interest rates. This, in turn, creates doubts about their ultimate solvency, triggering a negative spiral. Good fundamentals are an absolute necessity, but not always a sufficient condition. Liquidity spirals, when allowed to develop, can lock a country, just like a financial institution, into a bad equilibrium. This process has clearly been at work in peripheral Europe, especially Spain and Italy, since the beginning of August. A second interaction occurs between sovereigns and banks. Both are perceived as closely linked by the market. Indeed, sovereign CDSs act as floors to bank CDSs. And, conversely, banks’ creditworthiness depends on their exposure to sovereign risk.

Conclusion History has taught us that financial crises can be extremely violent. The current turmoil in Europe is no exception. In the most intense phases, it is difficult to imagine that there is light at the end of the tunnel. But history has also taught us that crises provide opportunities for reform and progress. We live in democracies and have to accept that political decisions follow their own process and  4  BIS central bankers’ speeches  obey their own constraints. But I am confident that the euro area will emerge from this period stronger and more cohesive. There are, indeed, some reasons for optimism. On the supply side, our economies are robust and dynamic. Corporate balance sheets are very strong. Our banking system is robust and well supervised. Emerging economies are well placed to enjoy strong and sustainable growth in the years to come therefore contributing to sustained global demand. Above all, the community of nations seems ready to face the extraordinary challenges we are confronted with. BIS central bankers’ speeches  5
Unemployment has fallen back, in Europe too. In parallel with this, longer-term structural developments have changed the economic landscape. A more closely integrated world economy and technological changes are transforming aspects of everyday life and also have consequences for economic policy. Trade and technology Trade and technology have been key driving forces of growth in Norway over the past two hundred years. Oil and gas resources have provided a substantial boost to our income level, but even more important is the efficient use of our labour and capital. Technological advances, increased education and better capital equipment have made us more productive. Contact with other countries has helped us get more out of our common resources. Many innovations have come from abroad, where we have also found markets for our own products. Over the past fifty years, global trade has more than doubled as a share of global GDP (Chart 2). The scaling back of trade barriers has been an important driving force. Since 2011, trade has expanded at a slower pace, primarily reflecting lower growth in the world economy. Private investment in particular has lagged, but growth has also slowed because trade barriers are being reduced more slowly than earlier. 1)  Chart 2 Global trade as a share of GDP.

The potent medicine has worked. Growth in all the major advanced economies has gained a firm footing. Unemployment in major economies is lower than before the financial crisis. Price and wage inflation is rising from low levels. The need for monetary accommodation is thus diminishing. Global interest rates have bottomed out. Policy rates in the US, UK and Canada were raised in the course of 2017, with more central banks likely to follow suit in 2018. The Federal Reserve has begun to unwind its bond holdings. Other central banks have tapered their asset purchases. The global interest rate rise will probably be gradual (Chart 11). After a long period of very low rates, the effect of higher interest rates on the economy is uncertain. It is also uncertain how quickly wage and price inflation will rise as activity gains momentum. 1) Chart 11 Policy rates. Percent 8  8  Current policy rate 2)  Expected policy rate 2021  6  Historical average 1990 – 2007  6  4  4  2  2  0  0  –2  –2 US  Euro area  UK  1) In the chart, the policy rate for the US refers to the mid−point of the target range for the federal funds rate. For the euro area, historical policy rates are calculated using the interest rate on the ECB’s main refinancing operations from 1999 to 2007. Before 1999, the Bundesbank’s discount rate is used.
Is it right for the bank to do business with Russian 1  BIS Review 98/1999  customers and to handle funds flowing out of Russia where it cannot be sure about the origin of the funds? No doubt many banks are asking themselves these questions, in the wake of the stories of huge amounts of Russian money being laundered through Bank of New York and possibly other Western banks. Note that there is no suggestion at this stage that the banks actively participated in money laundering. Indeed, it is not yet clear if money laundering, as opposed to capital flight, is what was going on. However, difficult questions are going to be asked, not least by the US Congress, and the banks concerned are going to have to cope with the negative publicity. Ethical dilemmas can also arise when banks try to innovate, particularly when they stray outside their home territory. Take an example from my own country, in the form of the Bank of Scotland’s proposed joint venture in telephone banking with the American evangelist Dr Pat Robertson. This was designed to enable the bank to expand abroad with the help of new technology and to attract $ billion in deposits. On the face of it this appears to be a reasonable business decision, so where does the ethical dimension arise?

Banks from small countries with independent currencies are more exposed to this risk than, for instance, banks within the euro are. Second, country size and bank size relative to countries matter for the viability of bailout options. To take an example, the balance sheets of Iceland’s three cross-border banks were 10 times Iceland’s GDP, and 2/3 denominated in foreign currencies. Nationalising them or guaranteeing their debt would have turned a failure of private banks into sovereign default and national bankruptcy. Third, the design of the deposit insurance system inside the EU violates the insurance principle of pooling, which calls for EU-wide insurance. In many applications, it also ignores the difference between insuring deposits in domestic currency and in foreign currencies. The issue here is that there is a link between the ability to stop runs through LOLR operations and the ability to insure deposits. The bottom line is that we cannot have a level playing field in banking inside the EU/EEA, except perhaps in risk-adjusted terms, as long as the EU passport is not matched by EU supervision and an EU-wide safety net, which is the logical solution. But is it politically and practically feasible? I have my doubts. Potentially, a more practical solution would be to change the European passport system by having two types of bank licences.
Yet at the moment, rates of inflation in advanced economies are trending downwards. As the recent reduction in the ECB reference rate shows, concerns about deflationary trends are more predominant in the euro area at present. Neither can any inflationary threats be identified for Switzerland. The SNB’s conditional inflation forecast from September (cf. chart 10) shows a very small increase in inflation to 2015, despite the assumption that the three-month Libor remains at zero over the entire period. Explanations for this low level of inflation include the fact that the output gap is still negative in Switzerland, the Swiss franc is strong, and commodity prices are stable or even declining. We are keeping a very close watch on price developments, and we have the necessary instruments to correctly assess any inflation or deflation risks and counter them with appropriate measures. BIS central bankers’ speeches  5  Concluding remarks Is a return to normal on the horizon? Yes, but much more slowly than expected. Overall, financial markets have calmed and risk markets have strengthened considerably. The exceptional measures taken by the central banks made a major contribution to these developments, and in most cases, these measures are still in place. Thus it is clear that monetary policy is still far from returning to normal. The fact that international monetary policy is still very expansionary is not surprising, in view of the slow recovery of the global economy. As far as Switzerland is concerned, the minimum exchange rate will remain a necessary instrument for the foreseeable future.

Exceptional circumstances still apply for monetary policy Clearly, exceptional circumstances still apply for monetary policy. This is the case not only for Switzerland and the euro area, but also for the US, Japan and the UK. As you know, the ECB reduced its refinancing rate by a further 25 basis points two weeks ago. In the US and Japan, current quantitative easing measures are giving rise to a further expansion in central bank balance sheets. The fact that monetary policy in the advanced economies is likely to remain exceptionally expansionary for some time to come can be seen in market expectations for reference rates (cf. chart 3). At the moment, the markets are assuming that the Federal Reserve will increase its key interest rate in the second quarter of 2015, the ECB in the fourth quarter of 2015 and the SNB in the first quarter of 2016. Last year, a number of central banks introduced the principle of forward guidance, in order to further increase the effectiveness of their expansionary monetary policy. Forward guidance involves the provision of information on the expected movement of short-term interest rates. To some extent, information of this kind has already been provided by central banks in the past. What is new with forward guidance is that some central banks give an explicit indication of how long they expect low interest rates to continue. For instance, the Federal Reserve and the Bank of England have tied the assessment of their respective reference rates to a threshold for the unemployment rate.
Benoît Cœuré: Structural reforms on the way to a complete Economic and Monetary Union Speech by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at the International Conference on Structural Reforms in Advanced Economies, Hertie School of Governance, Berlin, 17 June 2016. *  *  *  The Footnotes can be found at the end of the speech. Introduction Many people would like central bankers to remain quiet about the need for structural reforms. In the end, we have a clear and narrow mandate defined as price stability[1]. And in undergraduate-level economics we learn that inflation in the long run is always and everywhere a monetary phenomenon. So why do we bother? And why should we, unelected policymakers, venture into policy debates so obviously shaped by political considerations? I agree that central bankers should tread very cautiously in other economic policy areas. But monetary policy, and particularly so in a monetary union, does not operate in a vacuum. Although central bankers take their decisions independently, they also have to take into account what other parties are doing. As I have already said elsewhere, monetary policy is independent and interdependent. [2] In this respect, there are at least three reasons why central bankers cannot be indifferent to structural reforms. First, the combination of low potential growth and the debt overhang inherited from the crisis threatens the European social contract, a contract that was established in the post-war era and that was fair and affordable at that time[3].

This in turn is a threat to the sustainability of our social market economy, which is the environment in which our monetary policy operates. Second, factor reallocation over time and across sectors is necessary in order to adjust to shocks and therefore key to the smooth transmission of monetary policy. And third, convergence between economies is both an economic and political prerequisite for a wellfunctioning monetary union. I will argue today that for structural reforms to successfully lift potential growth in a monetary union, they have to fulfil two important criteria: (i) they need to be comprehensive and well sequenced and (ii) all-encompassing. “Comprehensive” means that a narrow focus on labour market reforms is not sufficient. Structural reforms are also about incentivising innovation, competition and fighting rentseeking and monopolistic structures. They entail offering new income chances – particularly for the younger generations – by reducing and redistributing rents, and by encouraging economic players to adjust. [4] “All-encompassing” means that reforms cannot focus only on addressing inefficiencies in Member States, but have to take into account externalities and inefficiencies at the level of the Union. This implies reforms in the area of economic governance, and progress in completing the Single Market. And they will form the basis for a better functioning Economic and Monetary Union. Why do we need structural reforms? Potential output growth in the euro area, as in other advanced economies, has been on a steady downwards trajectory for several decades.
It recommended a fixed timetable for meetings between Chancellor and Governor and for the announcement of decisions on interest rates. Many of the recommendations were carried over to the independent MPC that followed. The optimal time for meetings was thought to be the end of the first week of the month, and with minor changes the timetable of a two-day meeting culminating with an immediate announcement of the decision at noon on Thursday was adopted within a couple of weeks. The key difference was that a purely advisory committee would not have published minutes of its own deliberations – only the minutes of the meetings between the Chancellor and Governor would have been made public – and voting was not an agreed feature of such a committee. My predecessor – Eddie George – was informed of the new and enhanced role for the Bank early on the morning prior to the announcement – a Bank Holiday Monday. Returning from the tennis court, I received a call from Eddie asking me to meet him in the Bank as soon as possible. That was the last I saw of the sun for quite a time. We sat in his office with a sense of excitement that now we really did have a chance to show what the Bank of England and price stability could do for this country.

Now some people may argue that “offshore” markets in national or regional currencies complicate the conduct of national or regional monetary policy, with the implication that national or regional currencies should somehow be confined to their national or regional space. I must confess that this view seems to ignore the fact that it has in practice over the past twenty or thirty years proved perfectly possible for monetary policy to be conducted successfully despite the existence of the euro-markets. And I do not see how one could realistically expect to contain the use of a major currency, which the euro will certainly be, within territorial borders in any event. But as I have made clear, the UK’s interest -- “in” or “out” -- lies unambiguously in doing all that we can to ensure that the single currency succeeds. And in this context we would, of course, co-operate with the ECB in any way we could, to avoid potential disturbance to European monetary policy, were it shown to exist. Mr Chairman, London does not hold its pre-eminent position as Europe’s major financial centre as of right. We must continue to earn it. If we are to take advantage -- “in” or “out” -- of the opportunity that the euro will bring, then we must be technically well prepared. We will be. There is increasing evidence that financial institutions in the UK are now taking the steps necessary to ensure that they are ready for the introduction of the euro, whether or not the UK joins EMU.
The elevated level of uncertainty reinforces the importance of a data-dependent approach to our policy rate decisions, which will be determined by our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. The key ECB interest rates remain our primary tool for setting the monetary policy stance. 2/3  BIS - Central bankers' speeches  The reduction of the asset purchase programme (APP) portfolio – the second topic for today's hearing – is part of our monetary policy normalisation. As of the beginning of this month, the APP portfolio has been declining at a measured and predictable pace of € billion per month on average and will continue to do so until the end of June 2023. The subsequent pace will be determined over time and the Governing Council will regularly reassess the pace to ensure it remains consistent with the overall monetary policy strategy and stance, to preserve market functioning and to maintain firm control over short-term money market conditions. Conclusion Let me now conclude. With war in Europe and high inflation requiring immediate action, policymakers may be inclined to divert their attention from long-term challenges – but we must all strive to keep up our efforts to address the existential crisis of climate change.

In my speech today, I want to look at these effects from two angles. In the first part, I shall attempt to explain how low interest rates have impacted the behaviour of issuers and investors on the Swiss franc capital market. In particular, I note that, despite much more favourable financing conditions, the Swiss franc bond market has not grown over the last few years. At the same time, the share of foreign investors has steadily declined. In the second part of my speech, I address the question of how investors build and hold Swiss franc positions resulting from the additional demand for Swiss francs. Available statistics  Seite 2/7  show that, for some time now, investors have increasingly been opting to build up Swiss franc positions using forward foreign exchange contracts (derivatives). No increase in capital market debt despite record low interest rates Despite the low interest rates, the Swiss franc bond market has contracted slightly due to special factors. Allow me to explain the context here in a little more detail. Against the backdrop of low interest rates worldwide, the cost of borrowing has steadily fallen in recent years – and the SNB’s policy of negative interest has further accentuated this trend in Switzerland. One would have expected issuers to have exploited this situation to take on more debt – and that this, in turn, would have resulted in higher issuance and a greater volume of outstanding bonds.