samchain/econo-pairs-v1 huggingface dataset:
Addressing the stigma issue is extremely complex and has potentially affected a number of central bank operations internationally. One way of addressing perceptions of stigma is through appropriate policies on disclosure. While headline results of the Bank’s auctions, such as total bids and total amount allotted, are published immediately at their conclusion, we publish only the average daily amount outstanding in the DWF over the quarter, aggregated across firms, and even that with a one-quarter lag. The intention is that DWF drawings will not be disclosed until after they have terminated. Moreover, where structured as a liquidity upgrade, DWF borrowings would not be visible on the Bank’s balance sheet, reducing the risk that any drawing is unintentionally revealed. Another possibility is that counterparties are concerned about being “spotted” using DWFsourced gilts in the repo markets. For the majority of cases, however, I think there are simple ways to alleviate these concerns – for example by encouraging banks to set up multiple repo counterparty relationships and rotate their regular gilt repo business amongst them. That would deliver wider business and financial stability benefits, even in the absence of the DWF. Indeed, the FSA requires banks to test their repo capacity by lending out gilts from their liquid asset buffers. Ultimately we expect a counterparty would draw on the DWF if it had to, despite any stigma concerns. The risk is that the perception of stigma might delay an application to borrow, making a firm’s liquidity position more perilous.

This maturity mismatch between assets and liabilities is an essential part of the banking business model and large unexpected shocks can leave even well-run banks short of liquidity. And the degree of spill-over to the system as a whole is particularly elevated in the banking system. 1  See Fisher (2010), “Managing Liquidity in the System: The Bank’s Liquidity http://www.bankofengland.co.uk/publications/Documents/speeches/2010/speech450.pdf. 2  In this speech, references to commercial banks should be taken to include building societies. BIS central bankers’ speeches  Insurance  Operations”,  1  By way of contrast, if a car manufacturer fails, people will buy other cars. If a bank fails, it can cause a loss of confidence and hence a run on other banks. Commercial banks can self-insure against liquidity risk by holding buffers of liquid assets which they can readily exchange for cash in the money markets. It is obvious in hindsight that the banks’ collective holdings of liquid assets prior to 2007 were insufficient to cope with the ensuing crisis and that they should hold more – although precisely how much more is still being debated in international regulatory circles. Nonetheless, liquid asset buffers can only go so far – one can always conceive some event which renders a bank’s self insurance buffer insufficient. Such scenarios could range from short-term IT malfunctions which prevent payments being received, through to full-blown global financial crises. That is why the central bank needs to stand ready as lender of last resort.
At the same time, the net fiscal costs - adjusted for the value of the government’s shares in the banks - were estimated at 0.8 per cent of GDP5. As referred to above, for the whole period up to the present a positive return was achieved on the capital invested. It might be interesting to compare fiscal costs in Norway to fiscal costs in Sweden which had a crisis of similar size relative to the size of the economy. Looking at simple non-discounted sums, gross fiscal costs for Sweden were 3.6 per cent of GDP in 1997. For Norway, the comparable figure was only 2 per cent6. Part of this difference can probably be traced back to Sweden’s use of government-financed asset management companies as part of their crisis resolution. However, during a banking crisis there are important costs to society in addition to the pure fiscal costs. Some attempts have been made to estimate the cumulative effects of the banking crisis on Norway’s GDP. These estimates vary considerably from a low of 9.8 per cent of GDP to a high of 27.1 per cent7. This wide variation illustrates the methodological difficulties involved in isolating the effects of the banking crisis per se. No doubt the economic costs of the crisis - however measured - would have been far larger if the problem banks had been forced to close.

4/4  BIS central bankers' speeches
The IMF also finds that the probability of bubbles bursting in the housing market is greater than is the case for stock markets. A decline in the housing market also has a greater impact on output and employment. Housing wealth has a greater impact on consumption than other assets. The contagion effects via the banking system are stronger because housing and property loans normally account for a substantial share of banks’ loans. A sharp rise in asset prices and debt build-up may pose a risk to economic stability. To minimise this risk, there may be situations when it is appropriate to apply a somewhat longer horizon than the normal two-year horizon for achieving the inflation target. A precondition for this is that financial market participants are confident that inflation will be low and stable over time. The current situation Today, private sector debt and house prices are at a historically high level. Banks’ loan losses will probably rise. However, our assessment is that the banking sector is reasonably well equipped to cope with the increase. For a long time, household debt in Norway has risen at a far higher rate than income growth. The debt burden has therefore risen rapidly and is high in a historical context. Partly as a result of the reduction in interest rates, interest expenses are moderate. High and growing debt means, however, that households are vulnerable to sharp increases in interest rates or a substantial rise in unemployment. Some groups of households are particularly at risk.

A dramatic scene in the book is the following: When the clock struck 1, Taraldsen hurried in - the old messenger from Norges Bank; he always trotted with arms flailing. He stopped at Marcussen’s desk and greeted him; an uncertain smile quivering on his old face as he asked: "It is - hmm - of course an oversight?" "What!" responded Marcussen drily. The smile disappeared rather quickly and in breathless surprise Taraldsen asked again: "Aren’t your bills of exchange to be redeemed today?" "No." "Mr. Marcussen! People say that you are a jocular man; but this -" "I’m not joking - damn it!" Old Taraldsen straightened up; everyone was hunched over their work; only young Rasmus’ eyes met his. The boy was white as a sheet; he began to understand. It also started to become clear for old Taraldsen; but immediately afterwards, he became very confused again; because he understood the entire scope of this; he had the entire town's bills of exchange in his head; and of course he had seen a lot of this kind of thing during his long life but all of those were trifles compared to what would happen now. His voice shook as he almost ceremoniously asked: "Will Carsten Løvdahl’s papers be protested?" "Yes," replied Marcussen without looking up. Old Taraldsen trotted out of the offices; but on the steps he met the messenger from Aktiebanken: "Is it true? - Taraldsen!" "Now the entire town is collapsing," answered the old man, throwing up his arms in despair."
But to harness the full potential of the banking union, it is important to ensure the quality of the bank review exercises to be conducted before the ECB assumes its new supervisory responsibilities. But the banking union will not reach its full potential if progress is not made in the design of its other component parts, most notably a single resolution mechanism and fund, i.e. a harmonised or common procedure for the treatment of bank crises. Spain I shall now turn to the situation of our economy. The Spanish economy is showing signs of improvement, although the momentum for a sustained recovery remains weak. During the current year the rate of contraction of economic activity has eased, posting a quarter-on-quarter decline of only 0.1 pp in the second quarter. The as yet incomplete data for the third quarter suggest that this improvement has continued in recent months, meaning activity in Spain may have ceased to fall in the July-September period and may have even posted a slight increase, following two years of continuous declines. I thus believe it is not unwarranted to state that the Spanish economy appears to be overcoming the second recession of this protracted crisis. Several factors lie behind this change. Undoubtedly, the pick-up in euro area activity has contributed, along with a highly favourable tourist season. But the sound course of exports, and to non-euro area destinations moreover, indicates that the most notable gains in competitiveness are contributing considerably to this improvement.

Thus, after the May cut in rates, in July the ECB announced that the Governing Council expected rates to remain at the new level, or at a lower level, for a protracted period. In any event, the contribution monetary policy can make to resolving the problems at the root of the crisis is limited, and can hardly go beyond providing the time needed for other economic policies to bear fruit, policies that do have the wherewithal to curb these problems. For full normalisation of the area to come about, Member States must successfully see through the adjustments to their domestic economic policies to adapt them to what a monetary union requires to function. From this perspective, I believe we should assess the progress made towards banking union in Europe. In the coming days, the European Union Council will approve the legislation to underpin the creation of the Single Supervisory Mechanism (SSM). That will formally set in train the process that will culminate in the assumption, by the ECB, of microprudential supervision in the euro area in autumn next year. There is virtual consensus around the conviction that the banking union will be a decisive instrument for breaking the loop between banking risks and sovereign risks, enabling the degree of financial fragmentation still prevailing in the area to be reduced and, we trust, ultimately eliminated.
[5] Reference rates play an important role, for the impact of monetary policy and in financial contracts. In only a few years’ time, Nibor may be replaced by other reference rates. This may affect the design of a range of financial contracts. Preparing for new reference rates will require ample time and planning. When the working group presents its proposals in 2019, an important first step will also have been taken in Norway. How will consumption be affected by a rise in interest rates? Let me return to today’s situation. There are now prospects for a gradual rise in interest rates in the years ahead. A less expansionary monetary policy aims to prevent the economy from overheating further ahead. Households account for a substantial portion of demand in the economy. Households’ response to higher rates will therefore have a considerable impact on the effectiveness of the interest rate increase. In the Bank’s current assessment of the outlook for the Norwegian economy, it is assumed that the gradual rise in interest rates will curb growth in household consumption somewhat. Many households have likely become accustomed to a low interest rate level over the past few years. In the past ten years, the key policy rate has been reduced as many as 13 times. In the meantime, household debt ratios have increased. Almost one quarter of total debt is now held by households that have never experienced an interest rate increase. With a higher level of debt, an interest rate change will have a more pronounced impact.

Øystein Olsen: How does the key policy rate operate? Speech by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the Centre for Monetary Economics (CME), BI Norwegian Business School, Oslo, 25 September 2018. * * * Accompanying charts of this speech. Introduction Just over a week ago, we marked the tenth anniversary of an event that shook the global economy. The Lehman Brothers bankruptcy added fuel to a smouldering financial crisis, which gathered strength and spread quickly. Financial market activity came to a halt. Investors demanded high risk premiums. Faced with a crisis that could lead the economy into a deep recession, central banks cut policy rates sharply and injected liquidity into the market. It was the beginning of ten years of historically low interest rates and the use of unconventional instruments. It would take a long time to get economies back on their feet again. For Norway, the financial crisis brought an abrupt end to a three-year long period of gradual increases in the key policy rate. In the course of autumn 2008, the key policy rate was lowered three times, by a total of 2.75 percentage points. By the following summer, the key policy rate had been lowered further, to 1.25 percent. Even though growth in the Norwegian economy picked up fairly quickly, Norwegian interest rates over the next few years were influenced by a persistently low international interest rate level.
Now while we have several explanations for this “productivity puzzle”, I think it is fair to say that none of them yet seems to provide a completely convincing explanation. And although different MPC members place different weights on the possible explanations, we all agree that there is considerable uncertainty as to how productivity will evolve as the recovery proceeds. Unemployment is certainly not a perfect guide to slack in the labour market. For instance, the recent increase in the number of workers wanting to work more hours suggests it understates the absolute level of slack1. But it is not unreasonable to expect this margin of “potential hours worked” to move in line with unemployment. And, unlike in the 1980s, we have not seen a substantial movement in the labour force participation rate, which suggests that the number of discouraged workers has not risen markedly. So overall, changes in the unemployment rate are, we think, likely to provide a reasonable guide to the evolution of labour market slack. Now consider what will happen if the weak productivity performance of recent years is simply a consequence of the weak state of demand and so reverses as the recovery proceeds. In that case, businesses will be able to supply the extra demand without greatly expanding their workforces and unemployment will be slow to fall. In these circumstances, it is indeed appropriate to keep monetary policy loose as potential output is well above actual output. Conversely, suppose that the financial crisis and subsequent recession has wrought lasting damage to productivity.

They will need to weigh the costs and benefits of direct membership compared with the existing practice of using a settlement bank. The important point is that the RLBs are now in a position to make that choice based on their own business needs. If the RLBs feel that there are any remaining impediments to their joining the system we would be pleased to hear from them. Interest rate deregulation The first phase of interest deregulation also produced a muted response. This is not unexpected nor is it unwelcome. We are trying to avoid “big bang” deregulation that might be disruptive. Some banks have introduced new overnight deposit accounts, which pay interest above the savings account rate. But so far we have not seen any large-scale migration from savings accounts to 24-hour call accounts. This is perhaps not surprising given the ample liquidity in the banking system, which means that the banks have a reduced incentive to bid actively for fresh deposits. This is reflected in the unusually small differential between the interest rate on savings accounts and those on time deposits. For example, the gap between the savings account rate and the one-month time deposit rate was only about 0.5% at the end of August. This reduces the incentive for depositors to forego the loss of liquidity involved in switching into time deposits.
François Villeroy de Galhau: What responses to terms of trade shocks in poor and vulnerable countries? Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Bank of France-FERDI (Fondation pour les Etudes et Recherches sur le Développement International) conference, Paris, 24 January 2017. * * * Good morning and welcome to all in the auditorium of the Banque de France. It is a great pleasure to welcome you here with Patrick Guillaumont, President of FERDI and coorganiser of this conference, to whom I extend my warmest greetings. I would also like to welcome Jan Gunning, Professor Emeritus at the Free University of Amsterdam, as well as all the speakers who honour us with their presence. The Banque de France has established research partnerships with several foundations and universities: the Paris School of Economics, the Toulouse School of Economics and the Fondation nationale des Sciences politiques. The partnership with FERDI (Fondation pour les études et recherches sur le développement international), which we are pleased about, focuses on extending and enriching discussions and research on monetary and financial issues related to development, including: the financing of development, in particular the mobilisation of domestic and international savings, the competitiveness of African countries and exchange regimes and strategies, regional integration in Africa, which was the theme of our first conference in 2014, the “curse” of commodities in low-income countries, and the management of the Dutch syndrome and the terms of trade cycles, i.e.

Public action should instead focus on improving the business climate, which is the only way to promote entrepreneurship in the formal sector and ultimately improve the country’s international attractiveness. Diversification is only sustainable if one avoids the Dutch syndrome, characterised by an excessive appreciation of the real exchange rate, restricting the growth of other export sectors. The accumulation of external savings contributes to this objective. Finally, the third priority concerns the robustness of the financial sector. I will emphasise the importance of measuring, via stress tests, the potential effects of a sharp drop in commodity prices on the solvency of the banking system. These stress tests make it possible to determine the adequate level of bank capital needed to withstand shocks. * * * Allow me to conclude briefly by expressing once again my gratitude to all the speakers and participants who came here today to share their thoughts on these crucial issues. I wish you fruitful exchanges and now give the floor to Patrick Guillaumont. Thank you for your attention. 3/3  BIS central bankers' speeches
I’m referring in particular to the supervision of the development of decentralised finance, where the usual regulatory frameworks are constrained by the fact that issuers and service providers are not easily identifiable in an environment where protocols are automatically executed without intermediaries, and there is no fixed jurisdiction for the services offered. Lastly, in order to be effective, regulation must be multidimensional and coordinated at national and international level. At the Banque de France, we are very attached to coordination with other national and European regulators, which seems all the more essential given the increasingly cross-cutting nature of the issues. This is also a priority for us, to limit regulatory arbitrage or indeed prevent it altogether. For this reason, we are closely involved in the work of multilateral fora (G7, G20, FSB, CPMI),especially on crypto-assets and the improvement of cross-border payments. Another action we see as a short-term priority is to facilitate and accompany initiatives by regulated players, which can help to foster a diverse and competitive market for efficient solutions, tailored to user needs. Our institutions – such as the Banque de France’s Lab, its Infrastructure, Innovation and Payments Directorate (DIIP), the ACPR’s Fintech-Innovation Unit, with its ACPR-AMF Fintech Forum – are fully mobilised to facilitate these initiatives and help them grow. Among these initiatives, three in particular are worth highlighting. First, those in the field of instant payments, which open a new chapter in the payments industry. Second, the continuing development of open banking, thanks to the European financial sector’s work on APIs.

Looking at just the past four or five years, there is no doubt that certain laws of economics have been stretched to their limits and, in order to convince outsiders that the stakes have not been set too high, we have had to insist – and rightly so, I hope – that Iceland’s economic environment has various advantages that are not immediately obvious to those who are accustomed to operating in larger and more restrictive conditions. Here there is great flexibility, official measures are very transparent and channels of communication are shorter, which enables easier decision-making so that households, businesses and the authorities are quicker to respond to economic incentives or challenges than is the case elsewhere. To give you all a more complex and interesting topic to discuss at a conference such as this, the government itself promoted a number of measures that will benefit Iceland and its people in the long run. However, their timing and scope may have been more questionable. Thus the government itself was mostly responsible for attracting the largest single investment that has ever been made in Iceland, to which the state-owned power company, Landsvirkjun, had to respond by matching it with an investment of its own on the same scale. The inflow of capital was enormous.