samchain/econo-pairs-v1 huggingface dataset:
The progressive lifting of these restrictions in Q2 allowed a gradual recovery in activity to ensue. Indeed, in Q3 as a whole, GDP is estimated to have risen by 16.7% on the previous quarter, according to INE’s flash QNA estimate released last Friday. Notably, in any event, this high quarter-on-quarter rate is largely a statistical consequence of the marked fall-off in output in the two previous quarters. Hence, and returning to the incomplete nature of the current recovery I referred to earlier, it is important to bear in mind that Spanish GDP in Q3 was still 8.7% down on the same period a year earlier and 9.1% below the end-2019 figure. Moreover, as I shall set out in detail later, the intensity of this recovery will have been adversely affected since early July by the fresh outbreaks of the virus in our country, which have prompted a fresh deterioration in the epidemiological situation. 3  GDP aside, the pandemic has also had a very significant negative impact on the labour market. Part of this impact has been through the decline in social security registrations, which at end-September were 2.3% below their level in the same period in 2019 (almost 440,000 fewer registrations) and 2.7% down on the end-2019 figure (532,000 fewer registrations). An even greater part of the negative impact of the pandemic on employment has taken the form of the recourse to furlough schemes (ERTEs by their Spanish abbreviation). Thus, at end-September, the employment of almost 730,000 workers had been fully or partly suspended.

The fiscal adjustment drive has been most significant, as shown by the structural primary balance (the cyclically adjusted balance, excluding interest payments), which posted a correction of 1.2 pp of GDP. 2013 was the first full year of application of the mechanisms of the Budgetary Stability and Financial Sustainability Law approved in 2012. Moreover, measures were taken to improve the sustainability of public pensions (the sustainability factor and revaluation index). Private-sector deleveraging and bank lending To conclude this section, I will refer to the correction of private-sector overindebtedness. The Spanish economy’s cyclical position suggests, along with past experience, that several quarters of economic growth will still be necessary before lending at the aggregate level resumes positive growth rates. However, there were actually signs of an improvement in this connection in 2013. Since mid-year, lending to companies has been shrinking at increasingly lower rates, a change which has begun to be discernible also in the case of households since early 2014. The more disaggregated analyses conducted by the Banco de España support the idea that the contraction in debt at the aggregate level is proving compatible with a shift in the mix of  BIS central bankers’ speeches  3  debt towards those companies in a sound position which are, therefore, better placed to channel funds to new investments that translate into more growth and more employment. Spanish banking sector I will now refer to the position of and outlook for our banking sector.
I said I would come back to Simple, Transparent and Comparable (STC) securitisation. Unfortunately, we have done our best to confuse people by using a bewildering range of acronyms and terms for this project – STC, SST, STS, qualifying, high quality etc. Today I  1  The case for a better functioning securitisation market in the European Union: a discussion paper, European Central Bank and Bank of England, May 2014. 2  Joint response from the Bank of England and the European Central Bank to the Consultation Document of the European Commission: ‘An EU framework for simple, transparent and standardised securitisation’, March 2015. BIS central bankers’ speeches  1  am using the STC term developed by the taskforce of global banking and securities regulators that I co-chair. But I can reassure you that these will be brought together into a single set of criteria in European legislation. I believe the intention is that they will then be applied consistently across different sectors – for example, banks, insurers and funds – and different regulations – for example capital and liquidity. I see the aims of the STC criteria as threefold. First, to help investors. An STC securitisation should meet the “What You See Is What You Get” principle. The structure should not have hidden traps or complications, allowing investors to focus on analysing the credit quality of the underlying assets. But, importantly, the STC criteria are not a credit opinion on those assets and STC will certainly not mean “risk free”. Second, to help issuers.

As well as potentially helping to broaden the range of investors, the STC criteria should make risk transfer more robust. And third, to help regulators. Setting risk sensitive capital requirements for securitisation tranches is challenging. One solution is to use credit ratings but the shortcomings of that approach were exposed during the crisis. Another is to use a regulatory formula capturing dimensions of risk such as the credit quality of the underlying pool, tranche seniority and maturity. In our view, including a differentiation based on STC in that capital calculation helps to capture other important dimensions of risk related to structure, transparency and governance. Because one of our objectives is to broaden the investor base, it is important that the STC designation makes things simpler for investors, particularly non-banks. For example, they should be able to place greater reliance on it when conducting their own due diligence on matters covered by the STC criteria, such as risk retention. Investors would thus be in a position to concentrate with more confidence on other, existing due diligence requirements, such as in relation to the creditworthiness of the underlying assets and cash flows characteristics. The implementation process for the STC designation is therefore important. In our view, the primary obligation should be on the originator to attest compliance with the criteria. But this needs to be in the context of a regulatory regime with effective supervisory oversight and sanctions. We must also be careful not to label all non-STC transactions as “bad”.
To conclude the first part of my remarks, the crisis has revealed the need for economic policies, and monetary policy in particular, to have a largely medium-term orientation, rather than supporting the procyclical behaviour of agents. To this end, central banks must pay considerable attention to developments in the financial markets, both domestic and global, in order to identify potential imbalances and forestall their effect on monetary and financial stability. The analysis that I have just conducted with regard to monetary policy clearly needs to be extended to other policy areas, such as fiscal policy or financial regulation. It is essential to conduct an in-depth analysis of these subjects in order to fully understand which problems caused this crisis and how to rectify them in order to prevent them from happening again. An interesting aspect, in some ways worrying, is that despite the consensus that has developed with regard to the analysis of the past, and the causes of the crisis, there does not seem to be a great deal of willingness to incorporate the lessons learned into present and future behaviour. To paraphrase St Augustine, give economic policy-makers more chastity and continence, but not yet. It is this apparent contradiction that leads to the view that this level of analysis is insufficient. I believe that we need to ask an additional series of “why” questions in order to understand thoroughly what induced economic policy-makers to make certain choices. A traditional response to this question is the short-sightedness of politics, which also applies to economic policy.

The baseline scenario reflects the developments that the Board believes to be the most likely to occur with the information at hand at the statistical closing of the Report. However, there are risk scenarios that, if materialized, might change the macroeconomic outlook and, therefore, the course of monetary policy. On this occasion, after evaluating the alternative scenarios, the Board estimates that the risk balance is downward biased for output and unbiased for inflation. On the global front, a first risk comes from China, namely the fragility of its financial system, among other factors. As I said at the beginning, the banks’ off-balance-sheet financial intermediation has been increasing and credit has accumulated enormous growth in the past few years, with a substantial portion going to local governments. In other economies, episodes of rapid credit growth have resulted a few years down the line in a deterioration of the quality of banking assets and financial intermediaries’ balance sheets, and in a slowdown in domestic demand. Although the Chinese financial system has some features that differentiate it from others, there is no denying that any difficulties in this field could have negative effects on China’s growth for a longer period. If so, it would hurt world growth and commodity prices, particularly for copper. A second risk coming from abroad has to do with the way emerging economies will accommodate the withdrawal of monetary stimulus packages in developed countries.
If a situation arises where Norges Bank is not able to return the krone to its initial range without such consequences, as already mentioned, the Bank will inform the government authorities that measures  BIS Review 105/2000  10  other than those available to the Bank are required. This may involve recommendations concerning fiscal measures that make it possible to return the krone exchange rate to its initial range and to stabilise it. In the event of pronounced and prolonged shifts in the economy, fiscal policy and wage determination must contribute to restoring balance in the economy. However, if fundamental and permanent changes have taken place in the framework conditions for the Norwegian economy, it may also be appropriate to consider a revision of the guidelines for monetary policy. Monetary policy instruments In theory, Norges Bank conducts its monetary policy through two main instruments: the interest rate and exchange market interventions. However, in Norges Bank’s experience, extensive and sustained interventions to influence exchange rates have yielded poor results. Interventions can often lead to game situations in which market operators regard the central bank’s attempts to influence the exchange rate as an interesting opportunity to make a profit. Events in autumn 1992, at the start of 1997 and in autumn 1998 show that exchange market interventions cannot stem the pressure on the krone. This is why Norges Bank’s primary instrument of monetary policy is the interest rate. The interest rate is a powerful instrument for influencing cyclical trends, and thus inflation, in Norway.

This is due in part to the weakness of the euro, not least against the US dollar and the Japanese yen. On the other hand, the effective krone exchange rate - the krone exchange rate measured against an average of our trading partners’ currencies - has not been particularly strong. If Norges Bank were to respond to this situation by using the interest rate to attempt to fine-tune the krone exchange rate against the euro in the short term, this would lead to higher price and cost inflation. This would lay the foundation for subsequent instability in the krone exchange rate. 13  BIS Review 105/2000  The orientation of monetary policy in the past year (and in the future) Projections of future inflation and macroeconomic developments play an important part in the orientation of monetary policy. Norges Bank’s projections are published in quarterly Inflation Reports, which provide an overview of recent price trends and factors influencing price and cost inflation. These Inflation Reports contain a review of the outlook for the Norwegian economy, and the Bank’s projections of inflation with a two-year horizon. Norges Bank’s assessments are summarised in a leader in each report. If the Bank’s inflation projections, for a given interest rate scenario, do not approach the level of inflation aimed at by the euro area countries at a two to three-year horizon, this will constitute grounds for adjusting interest rates. This system has similarities with what Lars Svensson terms “inflation forecast targeting”.
There are two ongoing initiatives to enhance financial infrastructure that I would like to draw attention to today. Both demonstrate the Bank’s willingness to define ourselves in terms of best practice of governance and transparency, and our ongoing commitment to working closely with end users of this infrastructure. The first is the reform of the SONIA overnight interest rate benchmark. In April next year the Bank will take on end-to-end administration of this key market benchmark, which is also a critical input to the MPC and FPC’s assessment of conditions in sterling money markets. The key outcome of the reforms will be to improve the sustainability and representativeness of this piece of infrastructure by using a broader dataset covering both brokered and bilateral transactions, collected as part of the Bank’s Sterling Money Market data collection. Following the implementation of SONIA reforms the Bank will publish an assessment of its compliance with IOSCO Principles for Financial Benchmarks, alongside an external assurance report. Consistent with those principles, a SONIA Oversight Committee comprising of a mix of Bank and independent members will provide scrutiny on all aspects of the benchmark. A more robust SONIA provides markets with a credible alternative to sterling Libor as a key reference rate and benchmark. Indeed SONIA has recently been confirmed as the market’s preferred alternative rate by the Sterling Risk Free Rate Working Group. That is a necessary step in ending the current over-reliance on Libor.

The increase may be a way of safeguarding the real economy in the long term A common reaction to the decision to increase the interest rate was that the Riksbank pays too much attention to inflation and too little attention to the real economy. I would like to comment on this claim. One reason for increasing the interest rate was that an increase was needed to prevent the high level of inflation from becoming entrenched. This could happen if the price increases for energy and food begin to spread to other areas. This could ultimately lead to a risk of the Riksbank's ability to hold inflation in check being called into question and of inflation expectations remaining at a consistently high level. This is what happened in the 1970s in many parts of the world, although inflation at that time became entrenched at much higher levels than would be the case today. But even though the levels are much lower today, it could still be relatively costly to get inflation back to the target. It cannot be ruled out that this could require quite a long period with high interest rates and restricted demand. There is thus a risk that conducting too expansionary a policy today would sooner or later give rise to costs in the real economy that, furthermore, could be quite considerable. I do not feel, therefore, that it is correct to say that the increase in the interest rate is an indication that the Riksbank does not care about the real economy.
Bank governance would be a wealth-weighted democracy, a hybrid of the mutual and joint-stock models. This would help put risk incentives in the right place, while enhancing diversity within the financial system.16 (d) Performance and remuneration The behaviour of the financial system would be improved by an alternative set of performance metrics. The ideal metric would be less focussed on a narrow subset of the balance sheet (such as equity) and do a better job of adjusting for risk (than ROE). One metric satisfying those criteria would be return on assets (ROA). This covers the whole balance sheet and, because it is not flattered by leverage, does a better job of adjusting for risk. It would be a relatively small step for banks to switch from ROE to ROA targets in their capital planning and compensation. Yet the effects on risk-taking and remuneration could be large. Imagine if the CEOs of the seven largest US banks had in 1989 agreed to index their salaries not to ROE, but to ROA. By 2007, their compensation would not have grown tenfold. Instead it would have risen from $ million to $ million. Rather than rising to 500 times median US household income, it would have fallen to around 68 times.17 Conclusion The words “bank” and “bankrupt” have common etymological roots, dating from the 13th century. In the 13th century, it was bankers bankrupting banks. In the 21st century, bankers are still bankrupting banks. But it is no longer just banks.

This was followed with the establishment of other institutions, which included the Securities Commission and the domestic rating agencies. The Bank also put in place a comprehensive and modern depository, delivery and settlement system to facilitate the issuance, trading and settlement of debt securities in the market. Mechanisms to increase liquidity in the market to enhance the overall price discovery process were also introduced through the provision of updated market information. In addition, measures were also introduced to release the captive holdings and to facilitate the efficient borrowing and lending of securities. More flexible foreign exchange policies was also implemented to facilitate capital raising and investment by non-residents to further accelerate the development of our domestic bond market. Today, the Malaysian bond market is the largest in the ASEAN region, accounting for nearly 90 percent of our gross domestic product. Corporations now have access to more innovative and sophisticated financing solutions through the bond market to meet their diverse funding requirements. Financing through the bond market by the corporate sector now accounts for 58 percent of their total financing compared to 33 percent prior to the Asian financial crisis, when there was greater reliance on the banking system for financing. With the advent of new financing instruments and supporting infrastructure, trading activity in the secondary market have also increased by more than three fold, with the trading volume now amounting to RM516 billion. A key development of the Malaysian financial market is the enormous growth of the sukuk market.
At the top is the head of the business groups, again of different job sizes. The next level is four kinds of work units reporting in a hierarchy or directly reporting to the head of business groups depending on the best way the work can be undertaken. This is in place of the previous system where there were six management levels and only one level of operation, which made for lengthy approval processes and inadequate delineation of responsibility. Personnel systems have also been totally redesigned with career development, performance and potential evaluation, as well as succession and replacement plans being already effective or soon to be implemented. A cornerstone of this may well be that at certain levels promotion is by examination rather than selection allowing capability to be a key determinant rather than just the traditional ability to get on well with people, primarily young superiors. In the more difficult areas of manpower, recruitment and pay structure, work has just begun or will begin early next year as this requires that the restructure of organization and work processes be rather complete. The restructure has still to be extended into a fully bank-wide process, whereas at present re-engineering of work processes and organization has begun at only four of the 25 businesses groups. Pay schedule will also have to be redesigned and here probably lies the biggest single difficulty, as in the lower-ranking jobs under the present scale, some people are paid five times more than another doing the same job.

The ceiling, being the average in the last decade of our 22 competitor countries, reflects our determination to be internationally competitive with them for the years to come. Our inflation targeting model, although linear-quadratic, shows the zone or banding features by exhibiting a fan-shaped prediction both for the GDP and inflation. The Inflation Report that we issue at the end of each quarter shows an advanced feature in that it gives a sensitivity analysis around a band of exchange rate and a range of oil prices, something countries more advanced than us have hitherto been unwilling to enter into. But as I have said, we are trying to be transparent and trying to get our people and investors to be able to act as accurately as possible and to form a view as to what the future of the economy might look like. We believe entirely that the better the estimates, the lower will be the costs one puts or has to put for taking the risk of investing in the economy and that, in the long run, the country will be more competitive using less resources to produce the same goods other countries are producing. For this reason, we are constantly trying to improve our techniques.
W A Wijewardena: John Exter – central banker for all times Article by Mr W A Wijewardena, Deputy Governor, Central Bank of Sri Lanka, on the first anniversary of the death of Mr John Exter (Founder Governor of the Central Bank of Ceylon/Sri Lanka), issued to Sri Lankan newspapers, 28 February 2007. *  *  *  The first death anniversary of John Exter, Founder Governor of the Central Bank, falls on 28th of February. He died in 2006 after living a very productive life for 95 long years. John Exter can be regarded as one of the history makers in modern Sri Lanka. He lent his wisdom, intellect and experience, without any reservation, for the establishment of the Central Bank of Ceylon, the name of the Bank at that time. The Bank was established in 1950 on the basis of the recommendations made by him as a one man committee, the report of which is now known as the Exter Report. He made history once again by becoming the governor of that maiden bank at the young age of 39, an age normally considered as too low for that prestigious and demanding position. His task was to establish the bank, staff it and lead it in the first few formative years, so that it could eventually be taken over by a Sri Lankan management. His history making did not end there.

However, Exter did not expect this arrangement to be effective at all times. Hence, he made the proviso that “it would depend on the men occupying the key positions” and not on any legal formula. He argued quite correctly that such complex and delicate relationships cannot be established full-blown by a piece of legislation. It must be the result of years of experience and the slow growth of political conventions. The writer has been questioned on this point on many occasions at numerous public fora. The position taken by him agrees fully with that of Exter. This position requires the critics to compare central bank’s independence with the relationship within a family unit. Both spouses have their personal interests, but work together for the well-being of the family unit. There are at times occasions where one spouse overrides the other. But, as a normal rule, the family unit moves forward without publicizing those internal family debates and sometimes family fights. This is the main lesson which Exter has left for us in the twenty first century. That is, both the Governor of the Central Bank and the Secretary to the Ministry of Finance should know their rights and responsibilities well and act on an ethical platform in which they continue to appreciate the distinctive roles to be played by them for the well being of the country. John Exter, in his wisdom, firmly believed that when laws fail, human beings working with moral consciousness could do wonders. BIS Review 20/2007  3