samchain/econo-pairs-v1 huggingface dataset:
The latter increase in hard pegs reflects, to some extent, the establishment of the European Monetary Union in 1999. The share of countries with crawling pegs – a very popular regime among higher-inflation economies – dropped from 14% in  1  A new IMF database of de facto ER regimes adopted by IMF member countries allows to classify countries into three broad ER regimes: hard pegs (formal dollarization, currency union, and currency boards), intermediate regimes (conventional fixed pegs, crawling pegs, crawling bands, and tightly managed floats), and floating ER regimes (managed float with no predetermined ER path and independently floating rates). BIS Review 68/2007  1  1990 to 6% in 2001. In contrast, countries with a crawling band or a tightly managed float rose from 10% at the beginning of the 1990s to 31% by the year 2001. Crawling bands offer – at least in the short-term – more flexibility in coping with volatile capital flows and avoiding extreme ER misalignments, than rigid ER regimes. Tightly managed floats, on the other hand, keep the anchoring role of the exchange rate without committing to any explicit target parity. The transition of ER regimes has come with a shift of MP regimes based on an ER or monetarygrowth anchor to an IT framework, particularly in emerging economies. The number of countries under IT rose from 8 in 1999 to 21 in 2004 (tables 1-2), and many more are considering to adopt IT in the near future.

This transition in MP regime has been more pronounced in Latin America. While in 1994 twelve countries in the region had in place an ER anchor, and four others had a monetary growth anchor, by 2004 only three countries remained with an ER anchor. The transition of policy frameworks during 1994-2004 led to a significant rise in the number of Latin American countries with a floating regime (from three to twelve countries) and an inflation targeting framework (from one to five countries). 2. Chile’s transition to its current monetary policy framework  The macroeconomic institutional and policy framework of Chile has been transformed radically in the last 25 years, from one that made stabilization an exceptional result to one that has facilitated achieving price stability. Chile’s current macroeconomic framework is based on four pillars: (i) an autonomous Central Bank with the explicit mandate of safeguarding stability of prices and payments; (ii) a low public-debt to GDP ratio and a fiscal policy rule anchored to a structural fiscal surplus; (iii) a robust financial system, with a dynamic, competitive, and well capitalized banking industry, appropriately regulated and supervised; and (iv) a full-fledged inflation targeting monetary framework, complemented by a floating ER regime. Substantial progress was made in CBC autonomy since the 1980s, when autonomy was very weak, even at lower levels than in the average emerging economy. The granting of legal independence in 1989 through constitutional law, led to a much improved position in the international ranking of central bank autonomy.
Basel II will not only help banks to measure and allocate the provisions and capital necessary to withstand expected and unexpected losses, but it will also help supervisors and market participants to ensure that banks have done so in a way that will maximise the likelihood that they can continue to operate, even in the most difficult of circumstances. BIS Review 34/2005  3  Sound corporate governance The second reason I believe Basel II will promote financial stability is that it promotes more effective corporate governance. Risk management must be based on a strong foundation of corporate governance. A bank can have the most sophisticated measurement tools in the world, but if it is poorly governed, it will be vulnerable to financial and operational weaknesses. The Basel Committee recognised this when it developed the qualifications that banks must meet in order to adopt the most advanced approaches under Basel II. While much attention has been paid to some of the more complex quantitative aspects of Basel II, I believe the most important qualifying criteria are those that address how the bank’s risk management framework is governed. Banks that adopt Basel II will be expected to have a comprehensive and sound planning and governance system to oversee all aspects of their risk measurement and management process. The board of directors, senior management, and audit and other control functions will be expected to exercise their duties in a rigorous manner. I believe that better managed banks under Basel II will be safer, sounder, and more resilient.

I think that Basel II recognizes the importance of a combination of micro and macro factors for achieving greater financial stability. Furthermore, I would say that Basel II incorporates some of the key basic principles that are also built in modern approaches to monetary policy: a flexible and forward-looking approach, anticipatory rather than reactive behaviour to risk, and the need to take into account market views. Looking into the future, we must direct our resources to ensure that banking supervision in the 21st century is more dynamic, more preventive, more flexible, more inclusive, and more transparent. We should continue adapting and learning. I believe the ultimate objective of financial stability increasingly requires co-operation and properly aligned incentives on the part of the industry, markets, and supervisors. Thank you. BIS Review 34/2005  7
Reducing the high degree of duality in the Spanish labour market should therefore be very high on the economic policy agenda.10 One way of achieving this objective would be to establish a system in which workers, while in employment, build up part of the severance costs in advance in an individual fund (the “Austrian backpack” scheme). The European recovery fund could play a very important role in the switch to this system. Specifically, some of the funds could be used to finance the high costs of transition to this model. Finally, as I mentioned earlier and as a necessary corollary of the very robust economic policy measures adopted in response to the crisis to date, Spain will in future have to undertake budgetary consolidation to bring the high level of debt down to more moderate levels in the post-pandemic scenario. As we well know, sound public finances are crucial not only for an appropriate response to recessions like the current one, but also to avoid bouts of financial vulnerability like those seen in the context of the last financial crisis. Also, there is extensive evidence to show that high levels of government debt over long periods reduce the funds that could be available for more productive purposes and make it more expensive and difficult to finance the economy at the aggregate level, leading to distortions in private investment decisions and, consequently, lower economic growth.

Third, the financial authorities, including the Banco de España, have recommended that institutions temporarily eliminate dividend pay-outs and apply prudent criteria in their variable employee compensation schemes, so that they may channel their resources into shoring up their capital positions. These measures will be reviewed before year-end but, in any event, institutions’ dividend distribution and compensation policies should remain highly prudent until the current uncertainty abates and a solid economic recovery takes root. For its part, the EU has approved a package of measures to encourage banks to make full use of the flexibility inherent in the European accounting and prudential framework. The measures also make a series of adjustments to the applicable regulations, to encourage bank lending to households and firms. Included in this package of measures is the Capital Requirements Regulation “quick fix”, which adapts the SME support factor in the calculation of risk-weighted assets (RWAs), applies a prudential filter to changes in the value of sovereign debt instruments and reviews the temporary prudential treatment of credit risk impairment, among other measures. This response from the prudential authorities, accompanied by the fiscal and monetary policy measures adopted, has enabled the initial impact of the shock to be absorbed and has prevented materialisation of a systemic risk in the financial system that would have exacerbated the crisis and made it more persistent.
Banks with better measures of their economic risks will be able to allocate capital more efficiently and more closely in line with their actual sensitivity to the underlying risks. By doing so, the Basel II framework encourages developments in the management of a wide range of risks on a firm-wide basis and developing a more comprehensive approach to managing those risks together. Second, to achieve those capital benefits, the more advanced approaches to credit and operational risk require banks to meet strong process control requirements. Again, the increasing focus on a bank’s control environment gives greater weight to the management disciplines of measuring, monitoring and controlling risk. As an example, by relying on banks’ own internal credit assessments, the IRB approach builds on the risk management practices that most internationally active banks are already in the process of adopting for their internal purposes. To qualify for the IRB approaches, banks will need to adhere to various specific parameters and standards that may not be fully in place as yet. Our pilot reviews of U.S. bank readiness do indicate that there are a number of areas that both banks and supervisors will need to work on to be ready for full IRB implementation. These include addressing concerns about independence of the rating process, and accumulating necessary internal default and loss data to be able to produce more reliable quantitative estimates. Enhancements in these areas will be important, not just to ensure readiness for IRB, but for further improvement in credit risk management more generally.

While it is too early to draw definitive conclusions from the current episode, it is nevertheless apparent that progress needs to be made by credit institutions, for example in the management of credit risk, market risk, liquidity risk, the risks associated with certain activities such as asset management and risks linked to the valuation methods used for some financial instruments. Regarding credit risk: –  It is important to check that banks’ internal rating systems, along with the estimation of the different risk parameters they use, are updated in order to reflect the increase in default risk and losses in the wake of the current turmoil. It is indeed vital that these systems do not lead to risk being underestimated. This update appears all the more necessary at the present time given that in the case of real estate loan portfolios, estimates of risk parameters have perhaps not been sufficiently rigorously tailored by all banks to the specific features of some risky forms of credit such as US subprime mortgages. The same thing may have happened in other countries.
Under the new regulations, institutions with a shortfall submitted their strategy and compliance timetable to the Banco de España, which were approved on 14 April. The following day the FROB agreed to the strategies submitted, undertaking to provide the funds needed to those institutions which, as a priority option or alternative, had decided to resort to FROB aid to comply with the new ratio. The four banks that did not attain the required minimum opted, in the case of the two subsidiaries of foreign banks, to be capitalised by their parents, and the two Spanish banks, to issue instruments eligible as core capital. Depending on the strategy chosen, two groups can be distinguished among the nine savings banks indicated. The first, comprising four institutions, has opted for an IPO or raising private capital. The second, made up of another four savings banks, has opted to be capitalised by the FROB. There is a fifth savings bank that has proposed FROB backing as an alternative to a possible merger with another institution. In all these instances, the Banco de España received the recapitalisation plans ahead of the scheduled deadline. The situation concerning the four savings banks or groups of savings banks that have considered raising private capital is as follows. The four already have banks through which they are indirectly going to pursue their financial activity, and in three cases the transfer to the new bank of financial assets and liabilities has concluded following the approval of their respective assemblies and their mercantile registration.

Given this outlook, there was an evident need to restructure the sector and to support the process with an instrument that would help strengthen the solvency of those institutions that decided to pursue plans to improve their efficiency by means of mergers or other integration operations. In July 2009 the FROB was duly created. And over the course of 2010 it granted – or committed itself to – aid amounting to € billion for eight integration processes (although one of these did not finally go ahead when the initial Banco Base project collapsed) and for the restructuring of a non-viable institution, CajaSur, and its integration into BBK. The other savings bank officially intervened due to its lack of viability, Caja Castilla-La Mancha, received aid from the Deposit Guarantee Fund, at a time when the FROB had not yet been created. The year 2010 also saw successive episodes in which the public debt of euro area countries whose finances looked weak was punished. In spring we witnessed the Greek crisis and, at the end of the year, the Irish crisis. Although Spain’s macroeconomic indicators were not in the least comparable with those of Greece and Ireland, these episodes affected Spanish public debt spreads, owing to the uncertainty and to the difficulty ever-present in these situations of correctly assessing the information available. Later, into 2011, the country affected was Portugal, although at this stage of market tensions Spain was able to distance itself from the eye of the storm thanks to its resolute reforms policy.
Indeed, for the majority of my time on the Committee – in 28 of the past 55 months, CPI inflation has been 3% or more. The official commentary of the MPC on this inflation over-run has been to emphasise one-off factors pushing up inflation, such as oil and commodity prices and the recent rise in VAT. Such factors do clearly contribute to the volatility of inflation, but they do not tell the whole story. Oil and commodity prices have similar effects across a wide range of countries which have a similar economic structure to the UK. But when we compare our recent inflation performance to other European economies – whether they are part of the euro area, or have independent monetary policies, as Sweden and Switzerland do, the UK’s inflation experience looks noticeably higher through the recession and into the recovery. Chart 2 Inflation in selected European economies Annual percentage change in consumer prices 4.5 UK  Euro-Area  Sweden  Switzerland  4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2007-08 average  2009-10 average  Latest  Source: Thompson Datastream  As Chart 2 shows, our consumer price inflation has been around 1.5–2.5% above our peer group of European economies through the recessionary period and this gap appears to be persisting into the recovery. The recent VAT increase cannot account for this inflation gap,  2  Total UK employment according to the latest Labour Force Survey was 29.23 millions compared with 29.07 millions in the third quarter of 2006.

However, as I have argued in a number of recent speeches, these business survey indicators do not support the view that firms currently have a significant margin of spare capacity – particularly in manufacturing industry.7 And there also appears to be less slack in the labour market than we saw in the aftermath of the recessions of the early 1980s and early 1990s, as I noted earlier. Changes in demand conditions clearly do affect inflationary pressures. In a climate of stronger demand, firms will expect price increases to stick more readily than in weak demand conditions when discounting will be much more prevalent. But this pressure of demand is not well captured by simple “output gap” type measures which are too crude and prone to measurement error. Indicators of the growth of demand or changes in employment may be more useful, as they remove the need to make judgements about the sustainable level of economic activity.8 But it is probably unrealistic to try and capture the pressure of demand on inflation in any one single measure, particularly in an open economy like the UK where both domestic and international factors have a bearing on the rate of increase in costs and prices.
We understand that the task of strengthening and enhancing the financial stability of banks cannot be single-handedly managed by the Bank of Russia alone. It is important to place more responsibility for misconduct on the owners and managers of credit organisations themselves, to ensure the irreversibility of punishments for crimes. Qualitative changes are in store for the banking industry – these include a transition to a three-tier banking system, comprised of systemically important banks, banks with universal licences, and banks with basic licences. This is a radical change in the banking system, which we will need to implement with care in the near future. The three main tasks set before us, which we are currently resolving, are: to better manage risk, so as to protect the rights of depositors and creditors; to promote the availability of credit, including credit for small businesses; and to ensure fair competition, wherein a bank of any type will be able to work and earn within their niche in the market. Another pressing task is the implementation of a new resolution mechanism. We hope that it will be in place by autumn, when we will be ready to use it. This will allow us both to reduce the cost and to speed up the resolution mechanism, in order to make rehabilitated banks more attractive to investors. In the banking sector, as well as in the financial sector overall, the challenge lies not only in rehabilitating and cleaning up, but also in creating the conditions for development.

This will come to the fore over the course of the next five years. Creating conditions for development involves: introducing a system of individual pension capital – essentially a voluntary system for individuals; developing non-bank financing and the bond market; developing the capital market – in essence, creating long-term money for the country. At the moment we don’t have long-term money, and so we must and will be doing everything we can to create it. Further development of the payment system will involve a smooth transfer of the salaries of public sector employees and social payments on to a card system called “Mir". To make this transfer smooth and orderly is our task for the near future. We will also be aiming to expand the acceptance of the Mir card outside of Russia. We have already begun plans and arrangements with other countries on this front. Finally, I will return to the topic of financial technology development – I have also spoken about 2/3  BIS central bankers' speeches  this previously. The development of financial technologies will in large part determine the specific actions to be taken by us in the coming years. This will involve active joint efforts with businesses. Legislative support is also important here, particularly in terms of remote authentication, which will make new technologies and digital technologies possible. This implies a transition to electronic document workflow in the financial market.
One of these laws has enabled the extension to private commercial banks, the parate execution powers ie a Roman Dutch Law principle to sell movable and immovable property secured to a bank as collateral to recover debt without recourse to courts of law. Prior to the enactment of this law, the powers of parate execution were available only to financial institutions established by statutes passed in Parliament. I am informed that a bill prepared to amend this law to further widen and strengthen the powers of parate execution granted to financial institutions could not be passed in Parliament due to constitutional issues. The right to obtain injunctions against the execution of parate has thwarted the objectives of this law and this has resulted in banks being reluctant to lend to high risk borrowers even against security. With injunctions brought by the defaulters against the rights of exercise of parate execution by banks, the cost of recovery of bad debt has become phenomenal. Against this background, banks and financial institutions are reluctant to deal with industries that have become unviable irrespective of the reason that has led to it. Consequently, the sick and unviable industries are left alone without any outside financial or other assistance. The exercise of parate execution powers has been debated and questioned in various fora over the years and now, a need has arisen to examine whether there are other alternative routes to debt recovery.

We now know that this is not true: Since the eruption of the Global Financial Crisis in 2008 we have witnessed the fact that even the most advanced economies cannot be immune from financial instability. (ii)  there was the view that as long as price stability was attained, financial stability would not be a problem. We now know severe vulnerabilities in the financial system can build up even when inflation is stable and output volatility is low. (iii)  while very few people would doubt the need to avoid financial crises, there was no consensus view, not until more recently, on who or which institution should be given the mandate to maintain financial stability. Given what we have experienced after the Global Financial Crisis, the common view nowadays is that central banks should take a leading role in maintaining financial stability, given that central banks would, in a financial crisis, typically act as, amongst other things, the lender or liquidity provider of the last resort. (iv)  the term “macroprudential policies” was little known not long ago but has now become the buzzword that everybody in the financial and regulatory circles talks about. However, even up to now, there is no clear consensus on what these policies mean, what are the instruments and how effective they are, and who should be given the powers to decide when and how to deploy such instruments. 3. I am very pleased that at today’s Symposium we have managed to gather a very distinguished group of speakers and participants.