samchain/econo-pairs-v1 huggingface dataset:
However, these downside pressures were not the only challenge to policy. Oil prices which had been pushed up by the rapid growth in emerging markets took another dramatic jump and food prices began rising more quickly too. Between 2007 and mid-2008 oil more than doubled in price, while food prices rose by around 80%. At the same time sterling which had climbed to $ in November 2007, fell back. The result was that consumer price inflation in the UK rose well above target to 3% in April and over 5% in September, its highest rate since 1992 (while RPI inflation has been over 4% for all but 4 months out of the past two years). Not surprisingly expectations of inflation also rose sharply (Chart 4), raising the risk that higher inflation would become embedded in decisions on the prices for other goods and services and on pay. Of course commodity prices and inflation more generally have now begun to come down but I believe the risk of dislodging expectations was a real one, not a mirage. Certainly I felt that to reduce rates during months when inflation was not only rising rapidly, but was rising faster than we had forecast, would be confusing and might weaken confidence in our resolution and the credibility of the inflation target . On similar grounds, despite the appreciation of the euro, the ECB raised rates in July this year.

However, this is not an easy task by any mean. Rating agencies should satisfy several criteria in order to be eligible. These criteria, as you might already be aware of comprise experience, freedom from external influence, publicly available assessments, requirements to disclose assessment models and approaches, sufficient resources and finally validation or recognition by supervisory authorities in our countries. Third but certainly not the least, the new system poses a challenge to all banks to improve their capacities in order to comply with the new framework to successfully compete and survive. Banks should start adopting a more dynamic and forward looking approach to the evaluation of risk and  provisions since under a risk sensitive approach there is always the risk of pro-cyclicality1, which means bank capital ratios are likely to fluctuate more over the course of business cycles. In spite of the above challenges, in Albania we have already started addressing some of these issues. First, by making sure that we have consolidated the achievements of our supervisory function by completing the requirements of Basel I. We are glad that the good progress has been confirmed also by the FSAP assessment during their mission in February-March, this year. Certain recommendations related with requirements about consolidated supervision, will be followed very attentively; Second, we have been pushing already our supervisory process and the banks, toward a more risk oriented attitude.
This period of strong growth in the US peaked in 2000, and the following rapid deterioration in the economy prompted the Federal Reserve to reduce the interest rate from 6½ per cent in May 2000 to today’s record low 1¼ per cent. Weak developments are reflected in expectations of low interest rates ahead. Interest rate expectations in the US have been lowered considerably since summer 2002. In the summer, market participants expected interest rates to rise fairly rapidly. In the autumn, there were expectations of a gradual increase in interest rates. Now, the federal funds rate is expected to remain below 1¼ per cent throughout 2003. Expectations concerning future interest rates are also considerably lower now in Europe. The period of strong economic expansion in the US was driven by strong growth in investment. With low interest rates, households had less incentive to save in banks (and they chose instead to invest in the equity market). At the same time, costs related to corporate investment were reduced, leading to a sharp rise in lending and credit-driven investment growth. This resulted in over-capacity, particularly perhaps in the telecommunications and IT sectors. With the absence of accelerating inflation, the level of activity in the economy remained high, and low interest rates at the end of the 1990s may have contributed to maintaining a high level of investment. When share prices fell in autumn 2000 and spring 2001, investment came to a halt.

In 1997 and 1998 the economy shifted from an upturn with high growth rates to an expansion with lower growth but low unemployment, labour shortages in many sectors and strong growth in labour costs. The period of strong expansion has ebbed away in the course of the past year. Winter 2002 marked the turnaround in the Norwegian economy. Growth in the mainland economy is now lower. Unemployment is approaching the average for the 1990s. Industrial leaders are pessimistic. Companies report a decline in production, employment and orders for both the export and domestic markets. Many companies have relocated or have plans to relocate all or some of their production operations abroad. In particular, enterprises producing capital goods are experiencing problems. The number of bankruptcies has increased sharply. The number of bankruptcy petitions is the highest in nine years. If we disregard personal bankruptcies, there has been an increase of 32 per cent from the first quarter of 2002 to the first quarter of 2003 - 200 more than a year ago. The largest increase in the first quarter is in retail trade and the property management and commercial services sector, while manufacturing and the construction sector accounted for the largest increase in the previous quarter. The number of bankruptcies increased in all counties compared with 2002, with the sharpest increase in Hordaland, Buskerud and Oslo (161, 111 and 18 per cent respectively from 2001 to 2002). Oslo accounted for most bankruptcy petitions, with 249 in the first quarter.
Consumer goods price inflation hovered around zero for most of the last ten years, until the recent rise in oil prices. As a result, the purchasing power of UK consumers has risen with higher real wages achieved without any cost to employers. In other words, for a period the beneficial tailwind allowed the economy to run at a higher level of activity than would otherwise have been the case, without generating additional inflationary pressures. But the economic environment overseas has taken a turn for the worse. In many ways it is a tale of two cycles. The financial cycle The first cycle has been in the financial sector in the West. A banking cycle is not a new phenomenon but the scale of the expansion of cheap credit for some years and speed of the downswing in the last year has been exceptional. It started in the US with a real downturn in the housing market and rising default rates on sub-prime mortgages in particular. That led to a freeze in the structured credit markets built on those loans as investors lost confidence in the credit ratings they depend on. In finance at least, it is still true that when America sneezes the rest of the world catches a cold and the sub-prime crisis swiftly spread to financial institutions across the world. They became uncertain about the value of the financial positions they held, let alone what their counterparties held.

Ardian Fullani: The development of the financial market and money market in Albania Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the General Assembly of the Dealers Association, Tirana, 25 October 2007. *  *  *  Mr. Chairman Distinguished Guests, It is a great pleasure to be here amongst old and new friends and colleagues. I have dearly welcomed the reorganization and reactivation of the Albanian Association of Dealers, and the attempts made by its new board to affiliate ACI-Financial Market Association. I am confident that this reactivation will promote, above all, the market development, education and professional training of new members. I deem that the meetings of the Dealers Association is a good opportunity to share with you some thoughts and concerns regarding the development of the Albanian financial market in general and the money market in particular. I would like to emphasize that the interbank money market is the starting point to the transmission mechanism, driven by base interest rate change. Currently it is the most important channel of transmitting monetary policy decisions to the economy. I have to remind you that where you realize the profit, the Bank of Albania implements the monetary policy, whose efficiency depends directly on your capability to maximize profit in this market. This policy is based on the assumption that market participants are rational and their primary purpose is profit maximization under the conditions of a competitive environment.
In fact, the GIC has exceeded that mandate and has generated an average return of 9.5 per cent in US dollar terms since inception. The size of the assets managed by the GIC is not publicly known. The GIC has stated that it manages more than USD 100 billion but some estimates have put their assets under management at over USD 300 billion. The assets of the GIC are invested in ten asset classes – developed market public equities, emerging market public equities, private equity, infrastructure, nominal bonds, inflation-linked bonds, real estate, commodities, hedge funds and short-term assets including currency overlay. Geographically, its investments are concentrated in the US, Europe and Japan, but span almost 50 countries. Based on what is known about the GIC, and judging by the reasoning I have outlined in my lecture this evening, there is little cause for concern about the UBS equity stake the GIC will likely acquire. Over the past quarter century, the GIC has gained a solid reputation as a  28  The original idea of setting up a dedicated government investment institution separate from the MAS was conceived by the then Deputy Prime Minister Dr Goh Keng Swee and endorsed by the then Prime Minister Lee Kuan Yew, who continues to serve as the GIC’s Chairman of the Board. BIS Review 150/2007  7  global investor.

First, a number of European politicians are calling for increased transparency requirements relating to actual portfolio positions of SWFs. 19 A more far-reaching development are the calls for legislation that would block SWFs from taking major stakes in companies in any strategic sectors. 20 Second, a number of politicians have proposed the principle of reciprocity as a guiding principle for granting market access to SWFs. 21 For example, Jean-Claude Juncker, the Luxembourg Prime Minister and Euro-group president, has stated, "Countries that protect their own markets cannot expect to be allowed to make unimpeded investments in Europe." 22 In a strict sense, the principle of reciprocity means that SWFs are only allowed to invest in a foreign country if companies in that country are allowed to invest freely in the home country of the SWF. Since many SWFs are located in countries which are financially less open than a typical OECD country, a strict application of the reciprocity principle would place strong limitations on SWF investments. Third, Larry Summers has suggested that if SWFs were to invest through intermediary asset managers, most risks associated with SWFs would be mitigated, if not avoided. 23 Incidentally, Summers argues that the added benefit of such an indirect investment philosophy is that it generates a better risk-return profile. Fourth, there is now considerable political momentum behind the idea of a code of conduct or a set of guidelines for SWFs.
Likewise, the progressive re-opening of commercial establishments deemed non-essential since early May prompted a pick-up in retail sales that month, more markedly so in the case of products whose sales were more affected during the lockdown, such as personal equipment goods, home equipment and motor fuel. This improvement in consumer spending is expected to have run into June, according to the information available on payments made using cards. Throughout Q2, the labour market moved on a path of recovery similar to that described for economic activity. Consequently, the fall in Social Security registrations eased in May and, especially in June, following the heavy declines recorded in the second half of March and in April. In any event, registrations provide a partial picture of the scale of the labour market adjustment since the start of the crisis, insofar as the workers affected by furlough-like schemes (ERTEs) continue to be considered as registered, despite the fact they are not contributing to production. For a truer assessment of changes in the labour force since the onset of the crisis, regard is had to the series of registrations after having stripped out workers subject to ERTEs. This series, which might be dubbed “actual registrations”, is estimated to have shown a year-on-year decline of 22% at end-April, with much sharper reductions in some of the services segments most affected by the restrictions on movement 2  associated with the state of alert, such as the hospitality sector.

7  The launch of the new ICO (Official Credit Institute) line of guarantees, recently announced by the Government and worth € billion, will significantly reinforce at a most timely juncture this important instrument for combating the economic effects of the pandemic. Against this backdrop, the findings of the latest Bank Lending Survey anticipate the possibility of a tightening of credit standards for European firms in Q3 this year. Should this be confirmed, prolonged or increased support measures for the financing of firms would be advisable, in order to sustain the recovery. In any event, in this second phase of the economic policy response, credit support mechanisms should focus on prioritising access to these funds for firms with sound viability prospects, with a view to providing for the necessary cross-firm and cross-sector reallocation of productive resources. Likewise, it is admittedly highly likely that a significant number of firms will emerge from this crisis with high debt levels and with diminished demand prospects, at least for some time. In this respect, it is also a pressing concern to review corporate restructuring and insolvency processes, with the aim of establishing pre-emptive, flexible and simplified administrative procedures enabling firms to pursue their business activity while they are still viable. The second decisive contribution of economic policies to alleviating the consequences of the crisis has been the use of furlough arrangements (ERTEs). This has also been a very important instrument for mitigating firms’ liquidity needs.
As Englund (2011) shows in the Riksbank’s inquiry into the risks in the Swedish housing market, the fundamental value of housing is largely determined by the long real mortgage rate after tax and the value of the housing services provided by the housing. The value of the housing services in turn has a stable relationship to disposable income (housing costs comprise 25–30 per cent of disposable income).7 Put simply, the after-tax mortgage rate determines how much a homeowner is prepared to pay for his or her home for the housing costs to be 25 to 30 per cent of the homeowner’s disposable income. This means that the relationship between housing prices and disposable income is largely determined by the long real mortgage rate after tax, including the effects of wealth and property taxes. As Englund  goals of maximum employment and stable prices”. In this case too, maximum employment means maximum sustainable employment. The Federal Reserve Board (2012) also emphasises the longer-run normal rate of unemployment. 7  Statistics Sweden (2012, table 9.1.8). BIS central bankers’ speeches  3  demonstrates, developments in Swedish housing prices in relation to disposable income are largely explained by a strongly negative trend in long real mortgage rates after tax since the mid-1990s. The established view of monetary policy is that it is not able to affect short and long real interest rates in the long run.

The US sub-prime mortgage market, while small compared to the entire global financial system, could deliver a large impact on the back of US housing concerns, credit crunch and global liquidity squeeze. It made for a bad prognosis especially as last year’s growth momentum relied heavily on net exports. When all is said and done, however, the Thai economy managed to grow at the rate of 5.7 per cent for the fourth quarter and 4.8 per cent for the whole year. Government pump-priming contributed to this favorable growth outcome. But most importantly, it turned out that net exports contributed to almost 60 per cent of the overall GDP growth. Indeed, exports grew at a remarkable rate of 18 per cent in US dollar terms in 2007. The robust expansion was due  BIS Review 33/2008  1  to the ability of exporters to adjust through quality improvement and search of new markets. But exceptional export performance was due no less to healthy global growth, which translated into strong trading partners’ demand. Another factor that contributed to the success of exports was our ability to preserve overall price competitiveness in the face of sharp dollar decline. I will come back to this point in a few minutes. I would like to turn briefly now to economic stability. Monetary policy has been accommodative to growth since the beginning of 2007 with an aim to shore up domestic demand while keeping inflation in check.
As it happens the UK has moved slightly in this direction of this “model” (if that’s not too grand a word) over the past few years. One of the reasons mortgage debt is lower than a decade ago, relative to income, is that the share of owner-occupiers has fallen and more people rent (it’s also true that the share of equity in the housing market has risen a little). But that hasn’t made for cheaper housing overall. While the share of income going on mortgage interest has declined, the share going on rents has risen. Overall, in the data, the combined spending on rents and mortgage interest is more stable than either on its own. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  that level but to insure against the risk of faster growth and the deterioration in credit quality that would probably have accompanied it. Corporate debt: risks from the surge in leveraged loans Most corporate debt too is used to finance productive capital, not to pay day-to-day bills. The main alternative is equity, and the main question in the field of corporate finance is why some firms might choose one form of funding over another. Economists now have a reasonably well developed understanding of this. The starting point for the literature – which is vast – is the celebrated result of Modigliani and Miller (1958). This says that, under perfect market conditions (defined in a particular way), the choice is irrelevant.

In other words, people might implicitly be assuming that less debt would necessarily mean greater net wealth. If that’s really what’s being asked – would we be better off if we were all better off? – then the answer’s obvious. But most debt, including the significant majority of household debt, is used to buy or finance assets. It’s true that, in principle, easier credit conditions could result in higher consumer spending, a lower rate of saving and therefore a slower rate of accumulation of net wealth. “Debt-fuelled consumption” is certainly possible. It’s just that, taken in isolation, the numbers on household debt don’t really tell you that much about that process. At least excluding car and student loans, unsecured household debt is no higher than it was 25 years ago, relative to income. Mortgage debt is still well above those levels. This is the inevitable result of the boom in house prices in the early years in the last decade, itself caused by the preceding decline in the neutral rate of interest. The counterpart to the faster mortgage growth wasn’t higher consumption but a transfer of financial wealth to those trading down the housing market (largely from younger to older people). And, to complete the circle, the decline in the neutral rate of interest, from extremely high levels in the early 1990s, makes a given quantity of debt more affordable. I’m not claiming that higher debt involves no extra risk at all.
Tarisa Watanagase: Bank of Thailand’s perspective on the retail banking industry Keynote address by Dr Tarisa Watanagase, Governor of the Bank of Thailand, at the Excellence in Retail Financial Services Convention 2008, Bangkok, 15-16 May 2008. *  *  *  Distinguished Guests, Ladies and Gentlemen, I am pleased to be invited to give the keynote address for this prestigious convention organized by the Asian Banker. It gives me the opportunity to share with you the Bank of Thailand’s perspective on the retail banking industry, which I hope would help both service providers and consumers alike to better understand our regulatory objectives and priorities. Retail banking business in Thailand has enjoyed rapid growth since after the Asian financial crisis, as banks – having learned the lesson of risk concentration – began to shift their strategies to diversify their portfolios and revenues by making inroads into the retail market segments. Over the past five years, bank consumer loans have grown at an average annual rate of 20 percent, outpacing the corporate loans which have increased three percent annually. As a result, consumer loans now constitute almost a quarter of total loan portfolio of the banking system in Thailand, compared with 16 percent in 2003. Housing loans continue to account for the largest share, followed by personal loans and credit card loans. Competition in the retail banking business has been intense, with more variety of product offerings and new delivery channels introduced to satisfy customer needs.

The second challenge is maintaining high standards of credit underwriting and risk management in the face of more intense competition. It may be tempting for service  2  BIS Review 64/2008  providers to lower underwriting standards in order to compete for market share in the face of greater competitive pressures. In view of the severe consequences of the current global market turmoil that originated from poor underwriting standards in the US subprime market; this temptation should be resisted at all costs. Let me assure you that the Bank of Thailand, as prudential supervisor of banks, will remain vigilant to ensure that similar problems will not happen here. The third challenge is managing security risks associated with the use of new technology. Advances in IT and communications technology have enabled banks to provide faster, cheaper, and safer electronic banking services to an increasingly larger group of customers. However, proliferation of internet banking, mobile banking, and e-payment also increases the risks of IT fraud, network security breach, and identity theft, etc. If these risks are not properly managed, they could have severe financial and reputational consequences for the banks. In this regard, I urge banks to pay close attention to the best-practice guidance on IT and e-banking security risk management that we issued some time ago.