samchain/econo-pairs-v1 huggingface dataset:
Asset quality indicators improved (the non-performing loan ratio dropped below 8 percent, thereby entering the EBA-defined intermediate bucket), Romania posting the fastest adjustment pace of NPL ratio in the past three years (Figure 13). The NPL decline occurred for all categories of debtors and the NPL coverage by provisions has remained adequate (Figure 14). Looking at the asset structure, loans to the real sector have risen slightly. Turning to the liability structure, the banking sector has further seen an uptrend in household deposits, counterbalancing the drop in foreign liabilities, which is likely to mitigate the contagion risk to external shocks (Figure 15). Banking sector profitability has strengthened against the background of a favourable local macroeconomic environment, the significant reduction in net impairment loss on financial assets, the protracted low level of funding costs, and of the recovery in leu-denominated lending. Operational efficiency is in a better position compared to the EU-wide average, but there is still room for improvement, especially for small- and medium-sized banks (Figure 16). The banking sector has continued to consolidate. The entry into force of the new international financial reporting standards (IFRS 9) in 2018 implies both implementation costs and increases in impairment loss. For the credit institutions in Romania, the impact would be low: (i) total capital ratio would decline by 24 basis points and the Tier 1 capital ratio would fall by 25 basis points; (ii) expected losses would rise marginally against the current level of impairment loss (0.5 percent).

It was deemed necessary to be emphasised as a distinct risk that is on the rise on account of three reasons which make it more dangerous today than previously: (i) the reduction in the vulnerabilities in banks’ balance sheets (through the clean-up of the non-performing loan portfolio) does not translate into a corresponding decrease in the vulnerabilities in firms’ balance sheets, which reveals the persistence of structural issues economy-wide; (ii) the vulnerabilities in firms’ balance sheets have persisted even in an environment of above-potential economic growth; and (iii) after the conclusion of the arrangement with the International Monetary Fund and the European Union, part of the reforms carried out during the period covered by the agreement with regard to strengthening payment discipline in the economy (cutting arrears, in particular) were reversed. 7  In fact, the reversal of structural reforms seems to have started shortly after the completion of the arrangement with the IMF and the EU, being manifest in the case of at least two of the highlighted risks: the tensions surrounding macroeconomic equilibria (as a result of giving up fiscal consolidation) and the weakening payment discipline in the economy. A risk of lower magnitude, yet related to the increase in household indebtedness, refers to property prices. The faster increase in property prices further poses a risk to the banking sector, as credit institutions’ exposures to the real estate market are substantial.
Then I would like to address some of the questions and issues about Basel II that banks and supervisors in emerging market countries have shared with me. After that, I look forward to hearing the thoughts of my fellow panelists and those of others on what Basel II might mean for the Indian banking sector. Why Basel II is necessary: an overview of the new capital framework Before we discuss how Basel II may affect banks in India, allow me to begin by addressing why the Basel Committee drafted Basel II. The Committee published the text of the new capital framework this past June. This marked the culmination of nearly six years of difficult work for supervisors and for banks. Why did we take such pains to revise the existing capital rules? After all, the 1988 Basel Accord was a tremendous success in many ways. I think that several factors led us to conclude that a new approach was necessary. As you know, the 1988 Accord established the first internationally accepted definition and measure of bank capital. It was adopted in over 100 countries. As a result, it became acknowledged as one of the benchmark measures of a bank’s financial health. While the simplicity of the 1988 Accord was an asset in promoting its acceptance, today its simplicity is quickly becoming a liability for some bankers and supervisors alike. Over the past 16 years, the methodologies for measuring and managing risk have evolved in ways that the architects of the 1988 Accord could not have anticipated.

For one, advances in technology, telecommunications, and markets have changed the way that banks collect, measure, and manage their risks. Having gained experience in quantifying exposures to market risk, leading banks today are quantifying and using increasingly reliable estimates of the credit risk associated with particular borrowers. Evolution in markets has furthermore provided banks with more tools for managing and transferring credit risk, such as through securitisation transactions and credit derivatives. Likewise, many banks seek to quantify in a more reliable manner their exposures to operational risk, or the risk of losses stemming from failures in internal processes or systems or from damage caused by an external disruption. As risk management becomes more sophisticated, the simple and static rules of the 1988 Accord are becoming less relevant. Leading banks increasingly view the old rules as a burden, constraining their abilities to administer their businesses relative to the best information and practices available today. Supervisors, for our part, have less confidence in the 1988 Accord’s measures of risk for banks that engage in the most sophisticated forms of risk taking and risk mitigation. By the late 1990s, it became clear to banks and supervisors that we needed a new capital framework. But the Basel Committee sought more than just a reworking of the minimum requirements. We wanted instead to create incentives for the industry to enhance the state of the art in risk management.
In particular, the supervisor should have the real capacity to influence bank managers’ decisions through moral suasion and to formulate non-legally binding recommendations, in the sure knowledge that they will in practice be very widely followed. Supervisory actions would otherwise be excessively hampered by a regulatory framework which, despite having been honed in recent years, can hardly envisage all situations of supervisory significance or include the full range of instruments needed to tackle such situations with the speed required in each instance. Finally, it is difficult for supervision to be effective if it does not include a thoroughgoing review of banks’ financial statements. Allow me to elaborate on this point. Evidently, an essential aim of supervision is to oversee banks’ solvency through the monitoring of capital ratios. Insofar as these ratios are calculated on the basis of accounting information, it is essential to ensure that such information properly reflects the value of the bank’s assets and liabilities. It is true that auditors and securities supervisors also perform this task. However, the specific nature and complexity of bank business, the evident relationship between published financial information and financial stability, and the occasional lack of specificity of prevailing accounting principles all make it advisable that the prudential supervisor should contribute to encouraging supervised banks to follow the best practices, in full conformity with current regulations and the distribution of competencies among institutions thereunder.

Norwegian covered bonds are very different from US CDOs backed by subprime mortgages. The regulations ensure that Norwegian covered bonds are a more transparent and substantially more secure investment alternative. The cover pool in the mortgage credit institutions consists of mortgages with a maximum loan to value ratio of 75 per cent. The loan to value ratio of the cover pool in Norwegian mortgage credit institutions that have so far issued covered bonds is well below this. All holders of covered bonds have the same right to the mortgage credit institution’s cover pool. In other words, there is no tranching as is the case for CDOs backed subprime mortgages. Investors will also have an overview of the risk parameters for mortgages that are part of the cover pool. This means that Norwegian covered bonds are far more transparent with respect to the assets that are the bondholders’ cover than CDOs backed by US subprime mortgages. Another difference between subprime mortgages in the US and Norwegian mortgages is that the regulations relating to the provision of credit are stricter in Norway. Subprime mortgages in the US have been sold through agents and mortgage brokers that have not been subject to federal supervision. In a number of cases, mortgages have been extended to persons with no income. Before Norwegian banks extend a loan, they assess a customer’s debt-servicing capacity. Norwegian banks are also required to advise a customer against taking out a mortgage if they feel that the customer will find it difficult to service the loan.
First, an escalation of the war in Ukraine could result in a worse-than-  Page 2/3  Berne, 16 June 2022 Fritz Zurbrügg  News conference  expected economic slowdown in Switzerland. This could lead to a deterioration in the quality of credit portfolios. Second, a significant tightening of financial and monetary conditions could trigger a correction on the Swiss mortgage and real estate markets. Domestically focused banks’ exposure to these markets has increased further since the publication of last year’s Financial Stability Report, with mortgage volume at these institutions having grown once again. As regards credit quality, the strengthening of banks’ self-regulation in January 2020 has led to a reduction in the share of new mortgages with a high loan-to-value ratio in the residential investment property segment. However, affordability risks as measured by the loan-to-income ratio have increased for new mortgages. The SNB’s stress scenario analysis suggests that most domestically focused banks’ capital buffers remain sufficient to cover the loss potential stemming from relevant stress scenarios. These include the scenario involving a severe recession and the scenario involving an interest rate rise with a simultaneous correction in real estate prices. However, these simulations also suggest that the capital ratios of certain banks could decline significantly and approach, or even fall below, the regulatory minimum requirements. Given the risk exposures of these banks, adequate capitalisation is particularly important. The recent reactivation of the countercyclical capital buffer will help to maintain the banking sector’s resilience.

The SNB will continue to monitor developments on the mortgage and real estate markets closely, and to assess whether further measures are necessary to mitigate the risks to financial stability. Page 3/3
Borrowing money enables the government to bridge temporary gaps between income and expenditure without having to resort to higher taxation or short-term cuts in spending. Lending enables creditors to make optimal use of their available capital  As we have seen, borrowers can make optimal use of their income over time thanks to the credit system. From a lender’s point of view, too, providing loans generates substantial benefit. This brings me to the second basic function of the credit system. The possibility of lending enables available capital to be invested as profitably as possible, and enhances the 4 5  6  In reality, private investors who buy shares in the company concerned play a role in the funding of start-ups that is at least as important as that of loans. Loans also allow companies to use future revenue to cover current expenses. Income from their business activities is not always available precisely at the time they need to purchase means of production or pay salaries. Instead of always aligning production and labour demand to their current income, they can avoid bottlenecks by means of operating or purchase loans. In this case, loans help stabilise production. This improves planning reliability both for companies and for their employees, which also has a positive impact on prosperity. If a household were to draw the entire income of a lifetime in a single instance, they would probably spend it fairly evenly year by year (according to the ‘Life cycle theory of consumption’, cf.

I think the answer is a clear “no,” principally because the returns earned by investors primarily are due to the absence of sufficient private balance sheet capacity rather than underlying credit risk. In fact, from the Federal Reserve’s perspective, the risk of loss is very low. Indeed, there are three layers of protection that stand between the Federal Reserve and losses. First, the underlying securities are AAA-rated, which means that losses on the underlying loans have to be unusually large to move that high up in the capital structure. And although some of the rating agency models have not held up well in the crisis, the consumer ABS models have proven to be reasonably robust. In other words, a AAA-rating still means quite a bit in this market. This is in contrast to the collateralized debt obligation or CDO market, where AAA-rated securities often used subprime and Alt-A mortgage loans as their raw ingredient. Second, as noted earlier, the Fed has taken additional haircuts against the underlying securities averaging about 10%. These haircuts provide additional protection to the Fed. Third, if the underlying collateral is put back to the Fed, the Fed puts the collateral into a special purpose vehicle. In such a situation, the Fed would be protected by the excess spread earned on the TALF loans and Treasury-provided TARP capital. Only if those buffers were wiped out, would the Fed suffer losses. BIS Review 69/2009  3  We have done stress simulations on the underlying loans.
The times we are experiencing are very different from every other period of economic contraction in modern history. Most importantly, their origin is outside the economic realm, as it is a sanitary situation that calls for drastic measures which involve economic costs but are necessary for a higher goal, which is to save human lives. It is important to understand that the sanitary emergency causes a very deep initial shock in the economy, due to paralyzation of activities, in some cases total. But at the same time, as the pandemic is brought under control, economic activities can resume normally, reversing the initial shock more quickly than in a traditional cycle. Accordingly, our projections show a very significant drop-in activity in the second quarter, but from there on we foresee a recovery that is expressed in the projected growth rebound in 2021, when the Chilean economy will grow between 3.75 and 4.75%. This is quite different from other recessions, where the duration of the shock was longer and the economy was down for more than a quarter, and growth took longer to recover. A different aspect of this emergency is its worldwide reach. The pandemic has swept over every continent, and many countries are applying similar containment measures, causing an unusual simultaneous contraction in both domestic and external demand.

Figure 4 2020 growth forecast in latest Monetary Policy Reports (*) (annual change, percent)  8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4 EE.UU. Eurozona  China  A. Latina  (*) Evolution of forecasts from MP Reports of September 2018 to March 2020. Source: Central Bank of Chile. 10  Figure 5 Commodity prices 2020 forecasts (1)  Terms of trade (2)  (USD/lb; USD/ barrel)  (índex, 2013=100)  3.00  65  110  110  2.75  55  100  100  2.50  45  90  90  2.25  35  80  80  2.00  25  70  Copper  70 04  Oil  07  11  14  17  20  (1) Evolution of the forecast between the MP Reports of March 2019 and March 2020. (2) Red diamonds show forecasts for the period 2020-2022 contained in the MP Report of March 2020. Source: Central Bank of Chile. Figure 6 How do you feel about the performance of your business over the next six months? 100  Very preoccupied  Slightly preoccupied  Not preoccupied  50  100 50  0  0 Unfolding of social conflict  Effects of Covid-19  Global economic situation  Tightened lending standards  How will your firm's number of employees evolve in 2020 with respect to today?
In the scenario we consider to be the most likely given present-day and expected conditions, the larger part of the adjustment to the MPR we began in June 2010, and which has amounted to an increase of 475 basis points, has already been completed. In this scenario, we use as a working assumption that the MPR will be within the range of values that have historically been considered neutral. However, we must keep in mind that the behavior of both the domestic and the external economy in the past several years may have changed those ranges, introducing a high degree of uncertainty about the true short-term level of the neutral MPR. All in all, exactly how far and when we will take the MPR in the current cycle is something the Board will be analyzing with incoming information on the evolution of the Chilean economy and the international scenario. It is worth pausing for a few moments to take a look at the evolution of the world economy. In our most likely scenario, we estimate that the world will continue to add momentum to Chile’s GDP growth, although gradually declining in the coming quarters. However, as I already mentioned, there are important risks. Developed economies may enter a stage where output fails to pick up and new economic policy efforts are needed to boost growth. The big problem they are facing is the exhaustion of their traditional policy tools.

Again I am happy to inform you that the central bank in partnership with the Bankers Association of Zambia are in the process of developing credit reference bureau guidelines and will in the near future issue licences to deserving companies. Lastly, but not the least, the issue of lack of an effective secondary financial market in Zambia is being addressed with Commencement of work on the Financial Sector Development Plan (FSDP). Let me join the Honourable Minister of Finance in wishing Barclays Bank Zambia PLC the very best of success with the launch of the Home Loan product. I thank you!! BIS Review 6/2006  1
Prasarn Trairatvorakul: The strength of the Thai economy and future development in Thailand’s financial system Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the British Chamber of Commerce, Bangkok, 4 September 2012. *  *  *  Ladies and gentlemen, First of all, I would like to thank the British Chamber of Commerce for inviting me to give a keynote speech at this prestigious gathering. The Great Britain and Thailand have built strong economic relationship and business ties over the decades. Within Europe, the Great Britain is by far the second biggest trading partner of Thailand, accounting for 13.9 percent of total trade volume between Europe and Thailand. In terms of foreign direct investment, Britain is also the second most important investors among European nations, particularly in banking, real estate, and retail sales sectors. I, therefore, hope that Thailand and Britain will continue this strong tie both in terms of trade and investment, and to prosper together in the future. The past few years have brought us many economic surprises and challenges. After severe floods took a toll last year, Thailand is currently facing much challenge from the global economic downturn, particularly from the continued Euro debt crisis and more intensified global competition. Despite this backdrop of strong headwinds from abroad, I believe that the Thai economy will be able to sail through. I am pleased to say that during the first half of this year, post-flood recovery has been robust.

But it’s key to remember that this GDP growth is taking place on a backdrop of historically low unemployment, and low, stable inflation. Unemployment is at 3.8 percent and inflation continues to run just under 2 percent. 1/3  BIS central bankers' speeches  The Fed is tasked with two goals: Low and stable inflation and maximum employment. From the perspective of monetary policy things are going very well. And the economic fundamentals indicate that slower growth is—far from a sign of doom and gloom—what we should expect. The Economic Fundamentals The 3 percent growth of 2018 was boosted by a number of tailwinds. Strong global growth, fiscal stimulus, and accommodative financial conditions all helped drive GDP growth and a tight labor market. These tailwinds have calmed, and in fact reversed in some cases. Three developments contribute to this view: a downturn in global growth, heightened geopolitical uncertainty, and the effects of tighter financial conditions. If you strip away these factors you’re left with the underlying drivers of potential growth, which are demographics and productivity growth. Both of these have slowed significantly. Baby boomers are retiring and fertility rates have come down, which has significantly slowed labor force growth relative to past decades. Productivity growth has also fallen considerably from the boom years of the late 1990s and early 2000s. I put the potential growth rate of the U.S. economy at about 2 percent, which is in line with the forecasts we’re seeing for this year. Of course, a number of different scenarios could play out.