samchain/econo-pairs-v1 huggingface dataset:
I would first like to accentuate the widespread and laborious work carried out for many years, on both a national and international basis, to promote stability and prevent crises from arising, but without impairing the functioning of the markets. Experience shows that a necessary condition for avoiding crises is to pursue a fiscal and monetary policy that is aimed at creating stability and that inspires confidence. The common denominator for countries that have experienced financial crises is that the problems were based on mistakes in economic policy and deficiencies in regulatory frameworks. The financial market is often merely the messenger illustrating the fundamental problems. It is important that the choice of exchange rate regime is in line with the economic policy pursued and with the capacity of the economy to adapt. Countries that have experienced currency crises during the 1990s have had fixed, but adjustable, exchange rates. Today, therefore, an increasing number of countries choose to have either floating exchange rates with inflation targets, or completely fixed exchange rate regimes, such as currency boards. Experience also shows that it is necessary to have a general regulatory framework that is applied properly, and that contains norms and institutions, in order for both national and international financial markets to function well. Countries therefore cooperate in international organisations, such as the BIS, the central banks' organisation in Basel, to work together on producing norms for suitable regulations and norms in various fields important to financial stability.

In particular, these set out the minimum requirements for systemically important financial market infrastructure and the principles of ongoing system oversight by the National Bank. The task for the next few months will be to determine which payment and securities settlement systems are to be classed as systemically important. Then we will have to define the practical modalities that are best suited for implementing ongoing system oversight as effectively and efficiently as possible. Oversight is focused on infrastructure that is vital for the Swiss financial centre, i.e. especially those systems which together constitute the Swiss value chain. In addition to Swiss Exchange SWX, which will remain under the supervision not of the National Bank but of the SFBC, this infrastructure consists primarily of the payment system Swiss Interbank Clearing (SIC), the securities settlement system SECOM and the central counterparty x-clear. The first talks have been held with representatives of these systems to establish the implementation of system oversight. Investigations over the next few months will clarify whether other systems are also to be subject to oversight. By the end of July, all payment and securities settlement systems in Switzerland must report to the National Bank. As mentioned earlier, system oversight was not the product of a crisis. This can also be seen from the new Financial Stability Report, which examines specific aspects of the current financial market infrastructure and gives them a clean bill of health.
Second, banks need to be sufficiently incentivised to monitor their borrowers, who would otherwise misuse the funds; this requires that the real profits from lending exceed the effort of monitoring, λt per unit of loans. Formally, the incentive-compatibility constraint takes the form: 12 (1)  (Dt + Bt)(Rkt+1 – λt) ≥ DtRt ,  where Rt is the real (gross) return on deposits. Consequently, there is both a spread between the real loan and deposit rates and an implied leverage limit on banks. Were banks to try to lever up beyond this point by taking in more deposits and extending more loans, it would reduce the return on bank capital net of monitoring effort, leaving them with insufficient incentive to monitor the borrowers. Equilibrium leverage is therefore a decreasing function of  12  This is analogous to the no-shirking condition in some efficiency-wage models. Monitoring effort is unobservable and therefore uncontractable. The resulting wedge between the deposit and lending rates also means that the capital stock is inefficiently low. BIS Review 111/2010  19  monitoring costs and an increasing function of the real loan-deposit spread, while total lending is just the product of equilibrium leverage and the available bank capital. While additional loans for investment only affect production possibilities in the following period, they indirectly also raise current output because households supply more labour in order to avoid having to cut back current consumption to make room for that investment.

In both countries, an important driver of house price inflation over the period is house price shocks, though a wider range of influences appear to have been involved in driving the expansion in credit. The moral from these results would appear to be that although monetary policy may have played a role in fuelling the credit/house-price boom that preceded the crisis, it is rather more Rosencrantz than Hamlet. We return in Section 5 to the question of whether these findings suggest that policy should be set differently in future. The third point of note is the significant role played by shocks to macroeconomic volatility (blue bars), particularly in regard to credit growth, with noticeably more rapid expansion in credit taking place during tranquil periods. In particular, over the period 2002–5, macroeconomic volatility accounts for, on average, an extra 0.7 percentage points on US annual real credit growth and 0.5 percentage points on US annual real house price growth. In the United Kingdom, the corresponding effects are even larger: 2.1 percentage points on annual real credit growth and 2.0 percentage points on annual real house price inflation. A reduction in volatility also confers a sizeable “growth dividend”, suggesting that the stability of the Great Moderation period boosted the sustainable rate of growth, while the current period of high volatility has had the opposite effect; that is consistent with the cross-country evidence of Ramey and Ramey (1995), who find that higher volatility tends to be associated with lower growth.
CBEST was officially launched in the summer with the same thirty six firms that participated in the questionnaire. Tests are at an advanced stage for a number of firms and we expect to include the results when we report back to the FPC in the coming months. So this covers how we are responding to the FPC’s recommendation. But we are also looking beyond this. I have already noted the benefit for individual firms of enhanced cyber resilience across the sector. To realise that, firms need to cooperate not compete in this space. With that in mind, we are working with industry to strengthen arrangements for information sharing, reviewing existing forums for tactical information sharing and supplementing them where necessary with arrangements for more strategic information sharing including on good practice. We are also working with the sector on how existing arrangements for responding to a major operational disruption would work in the event of a severe cyber attack. We have used simulation exercises  4  Further information on CBEST can be found on the Bank of England’s website: http://www.bankofengland.co.uk/ financialstability/fsc/Pages/cbest.aspx. 5  http://www.bankofengland.co.uk/publications/Documents/records/fpc/pdf/2014/record1412.pdf. 6  All of the CBEST material is available under Creative Commons Copyright (free) on the Bank of England’s website. BIS central bankers’ speeches  3  like Waking Shark II 7 to test response frameworks. And, as was announced last week, a joint testing programme between US and UK governments and authorities will start this year.

All parts of an organisation need to understand cyber risk and their responsibilities towards improved cyber hygiene. This includes Board level engagement. Front line business areas need to understand and own the risk. Management of cyber vulnerabilities needs to feature in strategic planning. 3  2  The Bank, Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). BIS central bankers’ speeches  3. Cyber requires effective and regular testing: Of people, processes and technology. Industry investment in cyber is significant but testing the effectiveness of this investment has not kept pace. Assurance is often based on audits and control sampling which is not sufficient, not least because of the challenge for internal audit departments to keep pace with change in this area. And of course, given the dynamic nature of the threat, such tests should take place on a regular basis. This leads me onto the other element of our response to the FPC recommendation I wanted to talk about: vulnerability testing through the CBEST 4 program. CBEST is a framework that we have developed working with government, industry and commercial providers of penetration testing and threat intelligence. The idea is to bring to bear the best available intelligence on potential threats to test directly a firm’s ability to protect, detect and respond to cyber attacks. The scope of a CBEST test is tailored to the business of the firm and the critical services it provides.
The Quarterly Journal of Economics 110-3, 663-691. Kiyotaki N. and J. Moore (1997), Credit Cycles, The Journal of Political Economy 105, 21148. Meltzer A. (2003), Rational and Non rational Bubbles, in Hunter, Kaufman, Pomerleano (eds), "Asset Price Bubbles". MIT Press. 6  BIS Review 37/2009

We are, above all, interested in the question of whether banks are sufficiently capitalised in view of the aforementioned vulnerabilities, and are able to maintain their economically important functions such as lending despite incurring losses. Our stress tests confirm the relevance of the aforementioned vulnerabilities. They show that banks would suffer substantial losses in the event of an abrupt and steep interest rate rise combined with declining real estate prices. Affordability risks would materialise, meaning that numerous borrowers would no longer be able to pay their mortgage interest. Furthermore, many mortgages would be insufficiently covered, i.e. the mortgages concerned would no longer be fully secured by the value of the properties. In such a scenario, the capital ratios of numerous banks would drop below their target values and, in some cases, even below the regulatory minimum requirements. Equally, our stress tests underscore the importance of the capital buffers currently held by banks, which comprise voluntarily held buffers besides the capital required by statutory regulations. With these capital buffers, our assessments suggest that most banks would be capable of absorbing potential credit losses. In other words, we consider the resilience of most banks to be adequate. Current situation requires vigilance  Ladies and gentlemen, the fact that we consider banks’ capitalisation to be sufficient at present does not mean that we can relax with regard to the vulnerabilities on the mortgage and real estate markets. That the current situation is not more precarious is due not least to the measures taken in recent years (cf. slide 5).
Bandid Nijathaworn: Update on the Thai economy Luncheon address by Mr Bandid Nijathaworn, Deputy Governor of the Bank of Thailand, at the Rotary Club of Bangkok South (RCBS), Bangkok, 20 November 2009. *  *  *  Good afternoon, First, let me thank the Rotary Club of Bangkok South (RCBS) for the invitation, and especially I want to thank Peter Williams for a very warm introduction. It is an honor to be speaking to you today, and my topic this afternoon is updating on the Thai economy. As you are all aware, this year has been an exceptionally challenging year economically, not just for Thailand but also for most other economies. This year the global financial crisis, which has been with us since August 2007, continues to impart negative impact on economic activities, employment, and access to financing worldwide. The good news is that things are looking up. There are better news coming from the advanced economies, suggesting that economic situations are improving and financial markets are stabilizing. In Asia and the Pacific, signs of recovery are also strong and lead those in the rest of the world. On the homefront, recent economic data for Thailand are also more positive and indicate that the economy is slowly returning to growth after a sharp contraction we saw late last year and in the first quarter of this year.

This has been one of the Committee’s priorities and many significant steps have been taken and will be taken to improve the ownership of the standards and inclusiveness of the processes. For example, the Committee has a long-standing working group that includes representatives from sixteen non-member countries, and we have increased our interaction with this working group. This past July, the Committee met in joint session with this working group in Krakow, Poland to discuss, among other things, Basel II implementation issues. In addition, we encouraged non-G10 supervisory participation on working groups that are addressing issues related to validation and operational risk. I believe that this dialogue will, over time, foster greater consistency among Committee and non-Committee members. The Committee is therefore committed to heightening this dialogue and will consider further ways to promote consistency. I noticed a quote on the cover page of the FBE’s response to the European Commission’s Green Paper on Financial Services Policy: “time passes quickly, we can not save it or buy it, but we can make it work and be fruitful”. In the context of this speech I hope that you feel the past 20 minutes have passed quickly, have worked and been fruitful, and I wish you successful discussions for the rest of the day. Thank you for your attention. BIS Review 84/2005  5
Mugur Isărescu: The single currency – a central banker’s viewpoint from an EU Member State outside the euro area Opening speech by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the 2015 COFACE Country Risk Conference, Bucharest, 29 April 2015. *  *  *  Dear Professor Issing, Ladies and gentlemen, I am delighted to have the honour of opening this conference, the more so as this is an opportunity to meet Professor Issing again – the similarity of our surnames brought us literally side by side at many events over the years. Professor Otmar Issing’s career is stupendous, but it is only natural that the general public has been remembering him as a prominent figure of the European Central Bank, whose inaugural chief economist he was, and as a key contributor to the building of the Economic and Monetary Union. I.  Euro adoption by Romania: between desirable and feasible  My intention today is to speak about the issue of the single currency from the viewpoint of a central banker in an EU Member State still outside the euro area. During my address, it is inevitable to touch upon various opinions which our distinguished guest has expressed over the years. I start by recalling what Otmar Issing said back in 2006, in a dinner speech occasioned by his leaving the ECB: “We were all privileged to participate in a historically unique experiment: the creation of a new currency for Europe.

Obviously, not only the developments in the Eurozone, but also the progress in non-euro area countries contributed thereto. As for Romania, I cannot refrain from underscoring that, while in 2008 the country did not fulfil any of the Maastricht criteria (the only indicator below the reference value was that on government debt, which is part of the fiscal sustainability criterion), today it is a frontrunner in terms of macrostability. This refers to the fulfilment of the nominal convergence criteria and the observance of the reference values in the scoreboard for the surveillance of macroeconomic imbalances (net international investment position is the only indicator in excess of the reference value, the same as in all new Member States). BIS central bankers’ speeches  1  This is the right time to reassess the schedule for euro adoption, especially in the context of the governance framework reform that is underway in the euro area and of the wait-and-see approach of other non-euro area Member States (I am referring to Central and Eastern European countries, namely Bulgaria, the Czech Republic, Croatia, Poland and Hungary). We should ask ourselves whether setting a target date is a good idea. The answer would be: yes, to the extent that it helps reach political consensus, while also providing a policy anchor by rendering macroeconomic policies more coherent and acting as a catalyst for structural reforms.
Linked to this shift, a property debt overhang is leading businesses with such property exposures to experience more constrained access to finance, something that, other things equal, will take time to work through. Our evidence tends to support this dichotomy between the position of companies where commercial property is either the source of their business or the source of their security for borrowing, and those where there is no such dependence. The conclusions I draw from this are that as well as our part in creating the right incentives for credit to be on offer, there is a need to extend the work done by Kate and her colleagues, to consider information flows in terms of particularly of credit assessments, and the issue of whether some types of commercial property are acting as a restraint or access to finance. It is also consistent with comments I hear from businesses and banks that the “distribution” capacity of SME lending lags a long way behind the mortgage market. In conclusion, we are determined to put behind us the legacy of issues that have called into question the capital position of banks during the crisis. We are approaching the sixth anniversary of the start of the crisis, so this is hardly overly hasty action. The resilience of the financial system is our objective, but this is not just for its own sake but also to support the economy and credit creation.

At the end of March, the FPC – consistent with its remit – announced that UK banks had around a £ billion capital shortfall against the 7% Basel 3 yardstick. To be clear, that £ billion referred to the shortfall in banks’ balance sheets at the end of 2012. And at the time of the FPC’s announcement, I said that firms had already made plans to deal with half of the £ billion number. The PRA has translated all of that into firm by firm numbers. And, the PRA Board is taking a view on whether for each firm it agrees with the quantum of capital implied by the FPC’s figure, and the timing of action it requires from banks. This is entirely consistent with the “comply or explain” nature of FPC recommendations to the PRA. We have not released bank by bank numbers because as a prudential supervisor we want to spend time discussing with each bank our judgement on the need for capital, and their judgement on the actions they can take. I make no apology for doing this quietly. I am much more interested in the outcomes that the running commentary. Within the past two weeks, you will have read that RBS and Lloyds now have plans to make good their capital shortfall without raising new equity. Some commentators have written that this means RBS and Lloyds have been let off the hook.
Employment growth is projected to be fairly moderate this year in relation to growth in demand and output. Only a slight decrease in unemployment is projected for 2004. Unemployment is projected to edge down in 2005 and 2006. After several years of high wage growth, pay increases in last year’s settlement were more moderate. Annual wage growth was nonetheless 4½ per cent as substantial increases with effect from 2003 were awarded in the 2002 main wage settlement. Wage growth is projected to decline to 3¾ per cent this year. The labour market appears to be improving somewhat more rapidly than expected previously. In isolation, this may contribute to pushing up wage growth relative to previous projections. The effect is, however, expected to be more than offset by the prospects of very low inflation this year. In 2005 and 2006, wage growth is projected to increase as a result of a tighter labour market. In connection with the 2004 wage settlement, the Government has stated that proposals concerning employment-based pensions will be put forward this year, including proposals for certain minimum  BIS Review 23/2004  5  standards that will be apply to all employees that are not already included in more favourable schemes. The proposal implies that many private sector employees that are not currently covered by a company pension scheme will be included in the proposed scheme. The proportion of employees without any employment-based pension is greatest in retail trade, the hotel and restaurant sector and the construction industry.

However, due to the increase in household net debt, net interest expenses will fall considerably less than this. The impact of the interest rate decline also depends on how long interest rates are expected to remain low. When the sight deposit rate was reduced last autumn, longer interest rates showed relatively little change. The interest rate reductions in December and January, combined with the decline in inflation, have had a stronger impact on long-term interest rates. This indicates that financial market participants expect interest rates to remain low for a longer period. The rise in inflation from February to March, however, gave rise to somewhat higher interest rate expectations and a stronger krone exchange rate. The outlook for the business sector is brighter now. The fall in the value of the krone over the past year has strengthened Norwegian business and industry. The business sector is, however, still feeling the effects of the sharp rise in labour costs over a period of several years. Relative labour costs measured in a common currency are in line with the level prevailing in 1990, but approximately 10 per cent higher than in the mid-1990s. The internationally exposed sector has been scaled back. Companies that are still in operation may be in a better position to cope with the high wage level. In 2003, employment and investment both fell, although investment picked up somewhat towards the end of the year. Efficiency-enhancing measures are expected to continue to characterise the business sector in 2004.