samchain/econo-pairs-v1 huggingface dataset:
Indeed, due in part to capital conservation measures – and the extension of transitionals to recognise, for capital purposes, the new accounting framework for provisions – many banks’ capital ratios improved during 2020.3 The stress created by the pandemic is far from over and it is important that we only reflect on its full impact at that stage. There are various projects underway to distil the lessons that emerge from it. The Basel Committee (BCBS) has started to assess the impact of the ongoing pandemic on the banking system and published a report on  1 For example the exceptional levels of market volatility in Q1 and Q2 2020 led to an elevated level of so-called Value-at-  Risk (VAR) back-testing exceptions across the industry. In order to mitigate the possibility of excessively pro-cyclical market risk capital requirements through the automatic application of a higher VAR multiplier, the PRA allowed firms – on a temporary basis – to offset increases due to new exceptions through a commensurate reduction in risks-not-in-VAR (RNIV) capital requirements. 2 Broken down into direct budget support of $ trillion; and additional public sector loans and equity injections, guarantees, and other quasi-fiscal operations of $ trillion. 3 The aggregate CET1 capital ratio for major UK banks increased from 14.8% at end-2019 to 15.8% at end-September 2020.

3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  preliminary lessons learned earlier this month.4 Also this month, the Financial Stability Board submitted an interim report to the G20 on lessons learned for the financial system as a whole.5 A major lesson that has emerged so far is that the banking system has remained resilient through the Covid19 pandemic while continuing to provide credit to the real economy. This is, in part, due to the substantial increases in capital and liquidity held by banks as a result of the adoption of the post-Global Financial Crisis reforms, and represents a major vindication of those reforms. If I can use the analogy of a fire, one did break out in the banking system following the onset of the pandemic, but because the locus was well fire-proofed – with capital and liquidity – and because both the monetary and fiscal firefighters were alert and acted quickly and decisively, the fire was put out before it could take hold. But it was not obvious that this would have been the case at the outset. In particular, it was by no means certain that the regulatory capital buffers built up ex ante by banks as a result of those reforms, and designed to allow them to lend to the real economy whilst absorbing losses, would actually be used in that way.
The banks are caught in a vicious circle. On the one hand they want to boost or at least maintain their liquidity. But if they do this by paying over HIBOR for deposits that they then place in the overnight interbank market at HIBOR, this is clearly costing them money. Banks do have the option of not paying the going market rate for deposits. But if they do this their customers may go elsewhere. The deposit base is therefore less stable than it was. The banks’ desire to stay liquid also means that they are more cautious about lending. Generally speaking, they will want to lend only if they can raise the deposits to do so, and deposits are growing more slowly. This caution also reflects their perception that credit risks have increased in the current economic environment. Of course, the demand for borrowing has also declined as the economy has slowed and the property and stock markets have weakened. But the supply of loanable funds has probably fallen even more, partly because of the decision of some foreign banks to cut back their lending in Hong Kong. This does not represent a loss of confidence by these banks in Hong Kong. Rather, it reflects the need of some banks to downsize their balance sheets and to concentrate more in the future on profitability rather than volume growth and market share.

3  Long-term interest rates, income growth and house prices  Favourable economic developments in Norway have had an impact on developments in our property markets. House prices have risen sharply over the past 14 years. Real house prices have almost trebled. This rise has been considerably stronger than earlier. Moreover, the rise in house prices has spanned a long period. With the exception of a few months in 2003, house prices have risen continuously since 1992. This is the second longest period of rising real prices since 1819. Statistics for earlier years do not exist. House prices also rose in the 18 years between 1954 and 1972, albeit at a more moderate pace. BIS Review 15/2007  7  Norway is not the only country where house prices have shown a strong rise over a long period. House price inflation has been particularly high in Ireland and the Netherlands, but Denmark, the UK and Spain also stand out. The countries where house price inflation has been high are the same countries where economic growth has been strongest. Since prices are rising in tandem in many countries, it is natural to look for common driving forces. With increasing cross-border flows of intermediate goods, capital and increasingly so labour, prices will largely reflect growth and competition in the global economy. If capital or labour becomes too expensive in one country, businesses can relocate production. Prices for fixed factors of production, such as property, will on the other hand reflect income developments in different countries.
As a complement to a good corporate governance structure, credit institutions should be equipped with a sound risk culture. Such a culture should infuse the design and workings of the organisation and its management criteria, systems and methods; it should be founded on control procedures whose reliability has been duly tested; and its application should be overseen by departments possessing sufficient power and independence. All this should be substantiated by internal and external auditors and be highly visible to the market. Finally, I would like to stress the need for all types of financial institutions to apply due diligence. They should know their clients and systematically monitor their operations so they might prevent, and where necessary curb, not only money laundering and the funding of terrorism but also any other attempt to use the financial system for illegal or unethical purposes. Beyond the obligation all individuals and corporations have to observe and comply with the law, good practices in this area have an important supervisory dimension, as they play a decisive role when preventing or curbing such serious risks as those pertaining to reputation, legal risk, and so on. Despite the unquestionable importance of market discipline and good corporate governance, these are complements to banking supervision and, therefore, cannot replace it in respect of its essential task, namely "to promote the sound functioning and stability of the financial system", as stipulated in article 7 of our Law of Autonomy.

The provision is designed to promote the provisioning of the foreseeable losses generated by credit risk at the time this risk is assumed, and not when, years later, such losses begin to emerge, frequently on the downward track of the cycle when activity is lower and the profit and loss account is weakened. I shall conclude this section with a reference to the position in 2001 of Spanish securities markets. Apart from the decline in equity indices and trading in favour of fixed income, I might mention the significant headway made in market integration, which crystallised in the creation of a holding company grouping all existing secondary and derivatives markets, together with all the securities clearing and settlement systems. This process of vertical integration will enable the unquestionable economies of scale and scope offered by the securities industry in Spain to be harnessed, thereby enhancing their efficiency and strengthening their competitive position on the international stage. Banking supervision I shall commence the final part of my address, dedicated to banking supervision, with a summary of events last year in both the international and the Spanish financial system. Given the speed of change in the financial environment, supervision requires an ongoing effort to improve and adapt itself to changing circumstances. This means proving equal to market innovations, developments and trends, but also involves being more attentive and sensitive to the changes that arise in the demands society makes of the financial system and its supervisors.
I would also like to thank the Minster of Economic Affairs and his Ministry for successful co-operation in recent months. I want to extend my thanks to other Ministries and institutions as well, not least the Financial Supervisory Authority and the Ministry of Finance. Other collaborators, including financial institutions and non-governmental organisations, and the staff of the International Monetary Fund, also deserve thanks for their co-operative efforts. And last – but certainly not least – I would like to thank the employees of the Central Bank for their work. Without them, there would not be much wind in my sails today. And in closing, I wish to say this: Iceland has been faced serious economic difficulties in the recent past, and there are certain dangers ahead. But we have the power to steer clear of them. We could be at the bottom, poised to rise up again and move forward, if we play our cards right. But we must ensure that we avoid turbulent waters and establish long-term stability. In order to do so, we must demonstrate the patience and resilience to allow the recovery of the economy and the financial system to play out. History teaches us that pride goeth before a fall – but it also teaches us that the darkest hour is just before the dawn. Let us bear that in mind as we welcome the spring. BIS Review 39/2010  9

Final remarks While the ESRB has a better chance of achieving its mandate now than it would have had earlier this decade, its tasks will be difficult and its challenges considerable. In particular regarding the issuance of risk warnings, the credibility of the ESRB will rest upon the minimisation and balancing of so-called type I errors and type II errors. Type I errors entail the possibility of identifying those risks that subsequently do not materialise, while type II errors relate to the possibility of failing to identify risks that subsequently do materialise. Identifying a long list of potential systemic risks to financial stability could minimise the  BIS Review 115/2009  11  probability of making type II errors but may lead to accusations of “crying wolf”. The opposite could lead to an important risk to the EU financial system being overlooked, which if it materialised, could harm the ESRB’s reputation. Both the rigour of the checks for potential sources of risk and vulnerability, and the quality of the risk assessments (based on the information made available to the ESRB) should have a substantive influence on the credibility and effectiveness of the Board’s work. Addressing the type I-type II error trade-off by selecting which risks merit risk warnings can only be done by combining a comprehensive and strict monitoring of all potential sources of risk with a well-informed and detailed risk assessment.
Joseph Yam: Financial integration and regulation Remarks by Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the conference: The Euro: Lessons for European and Asian Financial Markets, Hong Kong, 24 February 2006. *  *  *  Ladies and Gentlemen, 1. It is a great pleasure for me to open the proceedings of this conference on “The Euro: Lessons for European and Asian Financial Markets”. It is also an honour for the Hong Kong Monetary Authority to be co-sponsoring this event with the European Commission. The programme is a very rich one and it will be impossible for me, in these opening remarks, to cover all the topics to be discussed later this morning and in the afternoon. I do notice, however, that the words “financial integration and regulation” appear in several of the session titles. These are topics close to my heart, because I have come to believe that they can influence profoundly how Asian economies develop in the years ahead. Well managed financial integration, combined with sound regulatory practices, can help the region maximise its economic growth potential while maintaining financial stability. I have chosen therefore to focus on these topics. 2. I will try and lay out a case for closer financial integration in Asia, both as a means of achieving more efficient allocation of resources in the region, thereby contributing to continued economic growth, and as a means of supporting financial stability.

It would also be conducive to the stability and integrity of the financial system. I would emphasise the word “international” as there is no reason to develop regional standards different from those that have already been developed by international financial institutions and professional bodies, together with supervisory agencies. 17. The fourth element concerns the strengthening of co-operative efforts in financial system development. As I have already noted, in Asia we have been making good progress in our efforts to develop the domestic and regional debt markets through various regional forums and involving the international financial institutions. In the context of developing Asian Bond Fund 2, for example, we have achieved a few firsts, including the introduction of the first exchange-traded bond index fund in Asia, arranging for two Asian markets to allow exchange-traded funds for the first time, and opening up the renminbi inter-bank bond market for the first time to foreign investors. 18. The final, and probably most difficult, step towards creating an integrated Asian financial market involves the relaxation of statutory restrictions on cross-border capital flows. It is likely to be the most difficult, in part because it depends on the ability of the financial system in individual jurisdictions to cope with the ensuing risks. 19. This last point brings me to the next issue I wish to touch upon in my remarks, namely, the need for a strong and efficient regulatory framework that is adapted to the integration of the domestic financial system with that of other jurisdictions. 20.
As Raguram Rajan summarized in his book “Fault Lines”: “The financial sector is, in many ways, the brain of a modern economy. When it functions well, it allocates resources and risk effectively and thereby boosts economic growth. [...] It works for all of us. Of course, when it works poorly, as has done recently, it can do enormous damage while befitting a very few.”12 Part of the failures was certainly attributable to deficiencies in financial regulation and supervision. The regulatory overhaul of the financial sector is intending to correct this and thus help the financial sector to refocus on its servicing role. 10  See Schumpeter, J.A. (1934), “The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest and the Business Cycle”, Harvard University Press. 11  For this list of functions see Levine, R. (2005), “Finance and Growth: Theory, Evidence, and Mechanisms”, in P. Aghion and S. Durlauf (eds), The Handbook of Economic Growth, North Holland. 12  See Rajan, R.G. (2010), “Fault Lines”, Princeton University Press. 6  BIS central bankers’ speeches    Strengthening of bank capital and liquidity standards,    addressing systemically important financial institutions,    improving over-the-counter infrastructures,    and a reform of compensation practices, that I mentioned before,    these are all important elements in this process. derivatives  markets  and  core  financial  market  At the same time, regulatory reforms themselves require regular revaluation.

Or as Joseph Schumpeter put it in 1934: “He (the banker) stands between those who wish to form new combinations and the possessors of productive means… He is the ephor (the overseer) of the exchange economy.”10 In fact, all the elements that have been identified in the finance and economics literature as the key functions of the financial sector are eventually directed towards the support of the real economy:   providing information about investment projects and allocating capital;    monitoring investments and exerting corporate governance after providing finance;    facilitating trading, diversification and management of risk;    and mobilizing and pooling savings.11  In providing these services, the financial industry plays its role to contribute to sustainable economic growth. I would argue that, during the recent years, the financial sector has lost focus in playing this role. In a period characterized   by search-for-yield with inadequate risk assessment and pricing,    by weak underwriting standards,    by inadequate risk management practices,    by fragile short-term funding of long-term assets,    by a proliferation of opaque financial products,    and by excessive leverage,  the financial sector has become to some extent self-referential. Rather than helping with a proper diversification and management of risk, the financial sector itself created a huge tail risk for the rest of the economy.
This tiger has been stirred by the extraordinary events and policy actions of the past 12 months. It is possible that, as vaccinations are rolled out and some degree of normality returns, inflation will return to a stable state of rest. Indeed, if risks from the virus or elsewhere prove more persistent than expected, disinflationary forces could return. But, for me, there is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets. People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely. But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag. 23  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  23  References Batini, N and Haldane, A G, (1999), ‘Forward-looking rules for monetary policy’ in JB Taylor (ed) (1999) Monetary Policy Rules, Chicago: University of Chicago Press Broadbent, B (2021), ‘Covid and the composition of spending’, Speech available here. Evans, C, Fisher, J, Gourio, F and Krane, S (2015), ‘Risk management for monetary policy near the zero lower bound’, Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1) (Spring), pages 141-219. Fajgelbaum, P. and Khandelwal, A (2016), ‘Measuring the Unequal Gains from Trade’, The Quarterly Journal of Economics, 131 (3): 1113-1180. Friedman, M (1961) ‘The demand for money’, Proceedings of the American Philosophical Society , Jun. 27, 1961, Vol. 105, No. 3, pp.

While affecting both demand and supply, most economists believe the hit to demand from Covid has been larger than to supply, opening up output gaps. The IMF estimate the output gap among the G7 countries rose from around -0.4% in 2019 to 3.8% in 2020. In the UK, the MPC judge that the output gap has widened and will continue to widen in the near term, peaking at 3% and lowering inflation by around ½% in 2021. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10  Chart 10: Velocity of Broad Money  Nominal 0.3 GDP/Broad money  0.25 0.2 0.15 0.1 0.05 0 06  07  08  09  10  11  12  13  14  15  16  17  18  19  20  Source: ONS and Bank of England. There are contrasting views among economists about the pace at which these output gaps will close. The MPC’s central view is that the UK’s output gap will close this year, although uncertainty around the timing and pace is considerable. A key factor, as after the global financial crisis and the Great Depression, will be the extent and persistence of psychological scarring among lenders, households and companies. The deeper and longer-lasting these psychological scars, the slower the likely pace of recovery, the more persistent the output gap and the greater the disinflationary drag from the Covid crisis.
Mr McDonough discusses sound banking systems: a new growth imperative  Speech by Mr William J McDonough, President of the Federal Reserve Bank of New York, before The Monetary Authority of Singapore, Singapore, on 24 March 2000. *  *  *  I am delighted to be with you today. It’s a special pleasure to be among so many old friends and colleagues. It’s also a great pleasure to be in Singapore under such happy and promising circumstances. Just two years ago, financial and economic conditions throughout Asia were rather grim and the outlook was uncertain. But since then, to the great credit of the people of Asia, significant progress has been achieved. In Thailand, Indonesia, Malaysia and especially Korea, meaningful headway has been made toward recapitalizing the banking systems, ridding banks’ balance sheets of problem assets, and improving supervisory and regulatory frameworks. And that hard-earned progress on the banking front is already bearing fruit. The economic contraction that devastated so many in the region has generally been halted and even, in some countries, impressively reversed. Equity markets have rebounded impressively, and yields on government securities have been cut by nearly two-thirds as foreign capital has begun to return. Without question, this is truly a remarkable turnaround. It must also be acknowledged that the economies of Asia are not out of the woods just yet. Important and even difficult work still lies ahead.

Employment was indeed somewhat higher in 2003 as a whole than we expected at the beginning of the year. But this was primarily because the unexpectedly robust growth in the public sector countered weak growth in the private sector. We have no reason to expect any such pattern during 2004. The strained financial situation in the public sector points to weak employment growth in the public sector, while the economic upswing is likely to be reflected to a rather small extent in a rise in employment during 2004 in the private sector. Of course there is a risk that the weak labour market growth will affect households’ expectations of the future and propensity to consume, which is a risk that we highlighted back in December. The higher the rate of unemployment, the more cautious households are likely to be when it comes to purchasing and consuming. This in turn could entail a risk of lower growth in 2004. Nor as regards domestic economic activity is there now reason to make any large revisions compared with our assessment in December. A number of factors are indicating possibly weaker growth, but at the same time there are factors that are pointing in the opposite direction. Compared with the picture we had in December, however, developments in the labour market at the end of the year constitute a somewhat greater risk to economic activity at least in the coming year.