samchain/econo-pairs-v1 huggingface dataset:
Under the proposals, essential payment services and insured deposits would be provided by a ring-fenced bank (RFB), capitalised separately and with no direct financial links to the group’s other businesses. If that succeeds in making the RFB super-resolvable, it should be easier for the UK authorities to retreat to maintaining at least the most basic payments services if a preferred strategy of top-down resolution of a whole group could not be executed. The introduction of ring-fenced domestic retail banks is, therefore, consistent with the broader international agenda on resolution. For each SIFI, the global authorities probably need not only a preferred resolution strategy for the group as a whole, but also a fall back. For example, are the clearing services provided by broker-dealers so important that they need to be maintained come what may? Recovery plans and preparing for resolution A final point. There is great emphasis on recovery and resolution plans, RRPs. As familiarly used, Recovery is a binary process – either it works, the firm survives and, thankfully, there is no resolution; or, alternatively, the best-laid and executed recovery plan fails, the firm fails, and it enters resolution. But this is too crude a way of thinking about Recovery. Of course Recovery is primarily about delivering recovery. That is what we all want. But it is not all. The period in which recovery is being attempted also provides a window for the firm and the resolution authorities to prepare in case recovery cannot in the event be achieved.

Therefore, their actions are focused, in all advanced economies, on making sure that the impact of their decisions is felt in all parts of the  2  BIS central bankers’ speeches  economy. In other words, they aim to ensure that the monetary policy transmission mechanism is working. Let us now turn to fiscal policy. In all advanced countries, and primarily in the US, the fiscal stance is being hotly debated. As we all know since Musgrave has introduced his famous distinction, fiscal policy has three dimensions: stabilization, allocation and distribution. In a post crisis environment, governments are struggling to find the right mix. Today, what constitutes a “growth-friendly” fiscal policy? Discussion has sometimes focused on the stabilization aspect, and more specifically, on one important, but limited feature: the so-called “fiscal multipliers” which are set out to measure the impact of a change in the fiscal balance on GDP. This narrow standpoint focuses on the negative impacts of fiscal consolidation, especially when the output gap is significantly negative, as is now the case. However, we need to take a broader perspective and take into account the effects of fiscal policy on consumer and investment confidence as well as on the efficient allocation of resources. Where could the gains come from? To answer this question, it is important to consider the interactions between the fiscal stance and debt markets.
Sweden is highly affected by what happens abroad but we have coped much better than many other countries, partly because we have not been hit by problems resulting from an excessive level of debt in either the public or the private sectors. Figure 2 Weak developments abroad have affected Sweden GDP, quarterly changes in per cent, annual rate, seasonally-adjusted data 12  12  9  9  6  6  3  3  0  0  -3  -3  -6  -6 KIX  -9  USA EMU  -12  -9 -12  Sweden  -15  -15 05  07  09  11  13  Note. KIX is an aggregate of countries that are important for Sweden’s international transactions. Sources: Bureau of Economic Analysis, Eurostat, national sources, and Statistics Sweden  2  BIS central bankers’ speeches  After the sharp downturn in 2008–2009, Swedish GDP growth initially recovered quite quickly. Unfortunately, the improvement in the rate of growth stopped short when the financial crisis developed into a debt crisis in Europe, and this has restricted Swedish exports. This has happened directly, as the euro area is Sweden’s largest export market, and indirectly, as the euro area affects industrial activity in other parts of Europe and Asia that in turn are important growth markets for the Swedish manufacturing industry. However, while indicators have long shown that the manufacturing industry is in a weaker than normal state, the financial situation of the households has been relatively strong.

The NGFS has acted quickly in looking into nature-related risks, well ahead of the financial industry. We collaborated with INSPIRE2, an independent research network, to produce reports setting out the importance of biodiversity for the macroeconomic and financial systems. These reports also made preliminary recommendations on how central banks and supervisors might align themselves with the structural transformations required to deliver a nature positive global economy. The NGFS, in the next phase of its work, will aim to equip central banks and supervisors with a common base of knowledge of nature-related risks. We will provide recommendations on how nature-related risks can be integrated into the other work programmes of the NGFS, including supervision, scenario analysis, and monetary policy. We will make nature-related risks more tractable, by focusing on nature-related risks with a nexus to financial risks. We will identify a few local case studies to work through concrete examples where the link from ecosystem degradation to climate change is clear, such as in deforestation. Finally, CAPACITY BUILDING AND TRAINING. The NGFS will provide guidance on how central banks and supervisors can build up their capabilities in climate-related and environmental risks. The importance of building capacity and expertise on climate issues within the central banking and regulatory community has been consistently espoused by the NGFS since its beginning. Our members are at different stages of progress in their ability to address climate-related and environmental risks. We want to make sure they have the support they need to make meaningful progress in addressing these risks.
For insurance companies, the PRA will have the second objective of contributing to securing an appropriate degree of protection for policyholders. Why do we need a second objective for insurance? One reason is that in taking out some forms of insurance policies, the public can become locked into very long-term contracts, much longer often than is the case in banking with deposit contracts. Bearing this in mind, the public interest I think justifies a second objective for insurance, which is more directly targeted at the situation of individual policyholders. There are a number of important points in this description of the PRA’s objectives. First, the emphasis on economic well-being as an ultimate goal aligns the supervision of banks and insurers more closely to the field of macroeconomic policy. This is in line with the definition of financial stability in terms of the continuity of supply of critical financial services which are important to the functioning of the economy. Four services stand out here: the protection of savings; the provision of payment services including access to funds; credit extension; and risk transfer. This definition is critical to clarifying the public interest-objective in a stable financial system, and that this public interest can diverge from the private interest of a firm in profit maximisation without reference to the public interest. One of the biggest lessons I take from the financial crisis is the need to ensure that the boards and management of firms appreciate and act consistent with the public interest.

First, I will talk about why the Basel Committee developed the Basel II capital framework and what it intends to accomplish. Second, I will share some thoughts on how prudential banking supervision contributes to the stability of the financial system. Next, I will discuss how I see Basel II contributing to financial system stability. Finally, I will offer some thoughts on steps countries can take in preparation for adopting Basel II. But let me advance the main conclusion of my presentation: In a nutshell, I think that the new capital framework represents a significant step towards achieving a more comprehensive and risk sensitive supervisory approach. Basel II is about much more than just setting better quantitative minimum capital requirements. It is about establishing incentive-based approaches to risk and capital adequacy management, within a comprehensive framework of three mutually-supporting pillars. In my view, the combination of better risk management, a stronger capital structure and improved transparency standards in the banking system can significantly improve financial stability. Why Basel II? Let me begin with an overview of the Basel II capital framework, which was released in June last year. As you may be aware, Basel II has probably attracted more public attention than any other banking supervision reform. While I will not go into the details of the new framework, it is important to spend a few minutes talking about what the Basel Committee hopes to achieve with Basel II.
The most famous cartoon of the Bank of England - Gillray’s The Old Lady of Threadneedle Street - shows Pitt, Prime Minister at the time, ravishing an old lady personifying the Bank - whose dress is made of one pound notes. The Pitt Government had made repeated demands on the Bank of England for gold to pay for the wars against France. Eventually, the fall in the Bank’s reserves forced it to suspend convertibility of its notes into gold, and low denomination notes were issued for the first time. The Gillray cartoon - which appeared in May 1797 was the origin of the moniker, the Old Lady of Threadneedle Street. Was it mere coincidence, or divine retribution, that it was exactly two hundred years later, to the very month, in May 1997, that the Bank of England regained its independence? In an age when governments are increasingly held responsible for more and more aspects of our lives, there are not many examples of major decisions being delegated to a non-political body. The Monetary Policy Committee has broken new ground in British constitutional history. Only three months before the MPC was set up, Peter Hennessy described the British system of government as dependent upon “a handful of inside advisers spinning between them what Phillip Ziegler has called ‘instantly invented precedents’ from the warp and woof of past constitutional practice and experience”. For much of the past forty years there have been rather too many “instantly invented precedents” in the conduct of monetary policy.

On the Committee itself various suggestions have been made: to extend the terms of appointment of members of the MPC, to make those longer terms non-renewable, and to appoint people with more diverse backgrounds. By far the most fundamental of these suggestions is the proposal to appoint representatives of different industries or regions to the Committee, as opposed to monetary policy experts. That would change the nature of the debate and undermine the mutual confidence of members of the Committee in each other if it were felt that some were representing a specific interest group. With experience of the MPC, I think that this argument has come to be accepted. The proposal that the minutes of MPC meetings should include more description of individual views I discussed earlier. The Committee has been opposed to such a change for the reasons I gave. In its early days the Committee was sensitive to the view that the minutes, then published six weeks after the meeting, should be published earlier, and it shortened that lag to 13 days in October 1998. The forecast process has attracted much attention, and was discussed at length in the Kohn Report. Presenting the forecast in terms of a fan chart, in order to highlight the balance of risks to the outlook, has proved successful. But it has proved more difficult to explain the role of a projection conditioned on the assumption of constant official interest rates.
At this time, although monthly value of land transactions has risen back to the previous peak level in 1996 and bank credits extended to real estate developers has picked up, we feel that there is no sign of overheating in this sector yet. Latest land prices have increased only by 14 percent on average, while housing prices for low- and medium-income families rose by less than 10 percent over that of last year. Nonetheless, it is important to keep a watchful eye on developments in the real estate sector, by making sure that bank lending to this sector is prudent. And for our part, there is now greater willingness to use the necessary prudential measures to discourage or forestall any undesirable development. Financial institutions are now required to report all real estate loans exceeding 100 million baht. Any real estate lending that is deemed too risky would require immediate additional provisioning. This should help ensure that growth of the real sector is driven by quality growth with least amount of bubbles, and that policy is proactive enough to prevent a reoccurrence of the real estate bubble prior to the 1997 crisis. To improve our ability to monitor this sector, we have developed a housing price index in cooperation with a number of agencies including the Government Housing Bank. This housing price data will be important for assessing the underlying conditions in the housing market, and will allow us to monitor any concentrations of risk before they develop in this sector.

As for households, despite a reported rise in household debt by the National Statistical Office, the current level of household debt in Thailand is still much lower than average levels of both industrial and regional economies. While the Thai household debt to GDP ratio stands at 33 percent, the corresponding figures for Australia, Singapore and South Korea are 84, 85, and 63 percent respectively. If we look at the components of household debt, we see that mortgage loans increased by a reasonable rate of 15 percent, while we see an increase of over 30 percent in credit cards loans. Therefore, as a precaution, the Bank of Thailand has implemented a number of prudential measures to curb possible build-up of imbalances in the credit card loans. In November 2002, we have raised the minimum income levels for credit card qualification. And later on in April 2004 we have raised the rate  2  BIS Review 58/2004  of minimum monthly payments from 5 percent to 10 percent. These proactive measures so far have yielded desirable and positive results. Let me now move to the financial sector Stability of Thailand’s financial system, in particular the banking sector, has improved remarkably in the past few years. The 1997 crisis has weakened our financial system. Commercial banks’ returns on assets were persistently negative, and NPLs stood at a record high level. Since 2001, the Bank of Thailand has tackled these problems in two steps.
Looking back we can see that it was the pains and problems of those decades culminating in being forced out of the ERM that produced a broad political consensus on a new approach to monetary policy and the independence of the Bank. And my predecessors can take great credit for the success of recent years. We have also been benefiting from benign world conditions with the emergence of low cost producers in the Far East and strong world GDP growth, which has been over 5 % in the last 3 years, the strongest 3-year period of growth since 1968-70, and there is every reason to hope that this benign trend will continue. However it is important not to exaggerate this stability or to forget the substantial uncertainties that still exist. The last decade has seen some big and unanticipated changes. Since 1999, oil prices have risen from below $ a barrel to over $ a barrel, the US Fed  BIS Review 84/2007  1  funds rate has varied between 1% and 6.5%, and the stock market has experienced its post dotcom boom, bust and recovery, with the FTSE All Share falling from its 2000 high of over 3200 to below 1660 in 2003 before now recovering to over 3400. We have seen 9/11 and the onset of a new form of international terrorism, the explosive growth of new financial instruments and new players to exploit them, and we have seen the emergence of China and India into major forces in the world economy.

During 2005 and 2006, anecdotal evidence suggested that UK pension demand for gilts (and associated hedging by dealers) was a contributory factor in driving long-horizon sterling nominal and real interest rates lower. Indeed, this may have been one reason why UK long-term real interest rates fell by more over this period than overseas rates. Assessing the impact on gilts prices is important for the Bank because we commonly use the differences between indexed and conventional gilts to estimate longer term market inflation expectations. And these calculations have shown an increase in forward inflation breakevens especially in the last few months as nominal long term rates have increased (Chart 10). If that reflects a genuine increase in investors’ expectations of future inflation in the long term that would imply a loss of credibility in the UK regime. However, there are few signs from surveys and market intelligence that UK long-run inflation expectations have picked up. Market contacts cite the sheer weight of institutional demand in the relatively illiquid index-linked gilt market as a more likely explanation why the price of long-dated index-linked gilts has not fallen by as much as conventional bonds over recent months. The comparisons are complicated by the fact that the measure of inflation that is used to index gilts is the RPI while our target is set for the CPI and the gap, which largely reflects the impact of interest rates and house prices on the RPI is significant, is about 0.7% on average and variable (Chart 11).
Banks, like other companies, need to discover what will or will not work in the internet world. They are thus exposed to their own mistakes. But they are also exposed to the potential mistakes of their customers. For example, if the telecom companies in Europe really have taken too big a gamble on 3G, this would have repercussions for the banks that have financed them. These challenges are also confronting banks in Asia as they recover from the hangover of the Asian crisis. I do not think that bankers anywhere would ever claim that they have an easy life. But certainly the existence for banks in Asia before the crisis was easier than it is now. If I take Hong Kong as an example, the banks here have always competed actively. But that competition was taking place in a buoyant market, whereas business is currently much harder to find. A few simple statistics illustrate the point: in the six years from 1992 to 1997, domestic lending by the locally incorporated banks grew at an average rate of 21% per annum, and pre-tax profits rose at an annual rate of 15% during the same period. In contrast, the equivalent annual figures for the three years to mid-2000 were 1¼% and 4½% respectively. It is true that bank profits staged a sharp recovery in the first half of this year. But growth in bank lending has remained sluggish.

At over 400 USD/ounce, the gold price was at a seven-year high at the beginning of December. Because of the weak dollar, the gold price increase in francs was more modest. However, its peak of approximately 17,000 CHF/kg was still the highest for several years. The main reason for this rise was persistently modest hedging activity by gold producers. 2  BIS Review 58/2003  Equity markets International equity markets exhibited a positive course overall, steadily making up lost ground after their mid-March low (see graph 3). As the equity environment began to present a perceptibly brighter picture, turnover also picked up. This, together with the more confident investor sentiment, reduced volatility. The ambitious profit expectations now reflected in share prices suggest that market players are optimistic about the economic situation and the corporate environment. To sum up, the financial markets are currently influenced by a complex interplay of factors: a globally synchronised economic recovery is taking place against a backdrop of external imbalances. An autonomous economic recovery outside of the US - underpinned, not least of all, by supply-side reforms - would help substantially to redress these imbalances. Key features of the SNB’s future investment and risk control process The SNB’s investment activity is subordinated to monetary policy and is determined by the criteria of liquidity, risk and returns. The new National Bank Law will extend the SNB’s investment opportunities. The current National Bank Law (NBL) limits eligible investments to gold and fixed-interest securities, and eligible borrowers to states, international organisations and banks.
The way our economy has reacted to the recent changes in the terms of trade and external financial conditions is precisely a reflection of our policy regime, which allows for timely adjustments in the real exchange rate and interest rates, letting the economy grow near its potential, smooth the capital account’s adjustments and maintain the credibility of the inflation target. This marks a difference with our economic history. 2  BIS central bankers’ speeches  Over the years, the Central Bank has given proof of its commitment with price stability and the inflation target. It has operated with consistency in order to build credibility and trust, which gives us the necessary flexibility for monetary policy and the real exchange rate to work as buffers of the business cycle whenever advisable. In the past, when our economy’s fundamentals were not as strong, and the exchange rate regime was rigid and poorly suited to confront external shocks, when faced by a drop in the terms of trade or stringent financial conditions, in order to stop a currency depreciation the Bank had to sell international reserves and raise the interest rate to reduce capital outflows. Monetary policy, far from cushioning the external cycles, made them worse, generating economic costs and financial risks. More often than not, these experiences ended badly. Overall, as usual, the present scenario has varied risks, most of them coming from emerging economies, because of both their importance in commodity prices and the behavior of world financial markets.

Scenario analysis can be an important and useful tool in the hands of financial institutions and their supervisors to guide such necessary 2/3  BIS central bankers' speeches  effort. Thanks a lot for your attention. 3/3  BIS central bankers' speeches