samchain/econo-pairs-v1 huggingface dataset:
We have initiated the implementation of the new accord, but we are currently being pragmatic to approve only the adoption of well understood elements of Basel II that can be implemented in a safe way. Now, I would like to shift your attention to the other important pillar of banking reforms: the role of the central bank itself and its monetary policy. The contribution of the Bank of Albania to the economic reforms comes also through maintaining stable prices and helping to ensure financial stability. Over the last five years the Bank of Albania stability oriented monetary policy has generated low and stable inflation; it has also ensured that medium and long run inflation expectations have been well contained. The economic growth has been robust at around 5-6 percent of GDP, while enjoying a high degree of financial stability. Reflecting broadly on the nature of the monetary policy I would say that it has always been focused on maintaining price stability and using the control of monetary aggregates as an intermediate target. Current account and foreign exchange transactions were liberalized at the early stages of transition along with the adoption of the free floating exchange rate regime. Indirect instruments are been used to transmit interest rate and liquidity signals to the market. Repo rate has become the signaling tool for short term interest rates while repo and reverse-repo operations are used to manage liquidity.

His answer was simple but true: “It is not important for me where I like to live – he said – it is important where the opportunities are”. As the gap in living standards closes and Albanians see opportunities flourishing in Albania, they will come back. They will bring important human capital and managerial skills, which they have gained in the countries where they work. Many Albanian emigrants are at this stage of the migration cycle and we see potential benefits from such a process. It is the role of banks to match this human capital with necessary financial capital and provide financial services to develop their entrepreneur skills. This role comes very naturally to Greek commercial banks that operate in Albania, which I take the opportunity to thank for their early confidence in Albania. They are natural partners for these new entrepreneurs who are familiar with the culture, and probably have a long history operating with respective Greek offices. The fact that such ventures could also involve Greek capital in the case of pure joint investments makes one more argument in support of my observation. According to the Bank of Albania surveys, Greek companies are ranked first by the size of capital invested in the Albanian economy, while holding the second place for the number of Foreign Direct Investments. The involvement of these banks in financing such activities will play a positive role in shifting the balance of the loans portfolio from retail and consumer crediting toward production activities in industry and agriculture.
Luis de Guindos: Interview in Expresso Interview with Mr Luis de Guindos, Vice-President of the European Central Bank, and Expresso, conducted by Mr João Silvestre on 15 April 2020. * * *  Is this the greatest crisis in living memory? According to the International Monetary Fund (IMF), this will be the worst downturn since the Great Depression. There is a great deal of uncertainty and, given this degree of uncertainty, we need to define and analyse several scenarios. The IMF’s baseline scenario is very similar to other public and private sector forecasts. It’s important to bear in mind that the impact on the economy, which will be huge, is concentrated in the second quarter of the year – as well as in March – and that the impact will be severe, but temporary. This temporary aspect is important. The calculations point to a contraction in the second quarter by as much as 20% compared with the previous quarter. And it will also have an impact on public finances and the financial markets. Despite the uncertainty you have mentioned, is a rapid recovery possible in 2021? The key factor is the duration of the lockdown – the longer it lasts, the greater the impact. We hope that the containment measures will start to be eased over the coming months, reducing the negative impact on the economy, and that we will see a return to positive growth rates in the second half of the year.

Am I to conclude from your comments that the ECB is prepared to strengthen the programme or take other measures in order to respond to any tensions that may arise? We have a programme that we are implementing. The ECB’s Governing Council has not made any decisions regarding further programmes. We are keeping an open mind in terms of how to respond to further developments and tensions within the markets. Because we are completely committed to maintaining stability in the financial markets and to avoiding the fragmentation that could prevent the functioning of the monetary policy transmission mechanisms. In countries such as Portugal, Spain and Italy, people are concerned that we could see another crisis, like the sovereign debt crisis in 2010–11. Can the ECB confirm that it will do all that is needed to avoid such a scenario? We have shown our commitment, with liquidity, by making capital requirements for banks more flexible and with the asset purchase programme. We are extremely committed. The current crisis is quite different to the one we saw in 2010–11. It did not originate in budgetary issues or the banking system. It was a massive exogenous shock. This is a health emergency which has become an economic problem. Our current efforts are focused on preventing it becoming a debt crisis. Are banks in Europe better equipped to deal with this crisis than in 2008? Or can we expect to see banks fail in various countries? Things are very different to ten years ago.
Decreasing value of the debt necessitated write-offs and eroded bank capital; (ii) lower market value of government bonds also strained liquidity, given the widespread use of these bonds as collateral for funding in the private repo market, a prime source of non-retail financing for banks; (iii) faced with a fragile banking system, some governments had to spend public money on keeping otherwise insolvent banks afloat. This was a full-blown twin banking and sovereign debt crisis. But it did not affect all euro area countries in the same way. Instead of the convergence and financial integration we want to see in a monetary union, we were witnessing increasing heterogeneity and financial fragmentation within the euro area. Moreover, many countries neglected the need for structural reforms. They faced severe competitiveness deficiencies and therefore built up substantial current account deficits. Tensions in financial markets made the financing of these deficits more difficult. And this set the stage for hopefully the last layer of the iceberg. In the summer of 2012 the hitherto loose talk of a possible break-up of the euro area translated into investors’ fears, then panic, and manifested itself in what we call a perceived redenomination risk, or in other words: an exorbitant widening of the spreads in yields on government bonds issued by stressed countries as opposed to those issued by the hard core of the monetary union. Monetary policy response to the crisis  Let me now describe in more detail how the ECB has responded to these crisis elements.

More public equity has been issued so far this year than at the same point in any year in the past decade. [See slide 5 of accompanying deck]  But that issuance has all been by listed companies. On our estimates, the vast majority of the possible equity needed will be for companies not listed on a stock exchange. And so the challenge is to give a wide range of businesses every opportunity to access growth capital. That’s capital willing to invest in assets – like unlisted equity – that can’t easily be traded and doesn’t deliver a quick or stable return. Unlocking more growth capital  Unlocking more growth capital is not a new challenge. Three years ago, the Treasury launched a review of what it called Patient Capital. Since then, many changes have been made. The Pensions Regulator has clarified its guidance to funds. New funds, including British Patient Capital (a subsidiary of the British Business Bank), were established. And the Financial Conduct Authority now permits retail investors greater access to funds invested in illiquid assets. There is more to do. And the need for more equity finance to minimise the scarring to the economy now creates a case for ambition. A range of authorities have a role to play. Lots of attention tends to be given to schemes and ideas involving public money and the taxation of equity relative to debt.
It is only when confidence improves, typically following a major policy intervention, that the downturn both in the business and financial cycles begin to stabilize. With reference to the current crisis, there were at least two specific features of the financial structures in the advanced economies that amplified the procyclical tendencies in the three cycles I have just described, thereby making the situations worse than might have been. First, the duration of the upswing in the financial cycle was made longer by changes in the financial structures that resulted from financial innovation, misplaced incentives, and the way businesses had expanded by circumventing financial regulation which allowed risk to be underrecognized for a long period. A case in point is the originate-to-distribute model, the CDO derivatives, and the use of SIVs as a vehicle for taking risk out of banks’ balance sheets. Second, in this crisis the downturn of the cycles were particularly damaging partly because of the interactions or feedbacks within the financial system, as opposed to the interactions between the financial system and the real economy. These within-the-system interactions took the form of positive feedback loops in various market segments that were set in motion in the downturn as market participants responded to the emerging problems and distress. Such feedback loops included the SIV shutdown and its compounding effects on CDO losses, the asset fire sales driven by risk management response by banks, and heightened concern about counterparty risk that precipitated the hoarding of liquidity.

This story was much more unique, as it involved the first banking crisis in Europe since the EU single market was formed in the early 1990s. Let me briefly discuss each of these in turn, in order to set the stage for the policy discussions. First, the macroeconomic boom-bust story. All the usual suspects were present: very strong capital inflows fuelling a credit and asset price boom that subsequently turned into a bubble at the same time as the economy overheated and an unsustainable external position developed, as could be seen in a double-digit current account deficit. And macroeconomic and prudential policies were not up to the task. At the deepest level, this part of the story was related to three factors: 1. The complications that tend to arise with macroeconomic management as very small, open economies become more and more financially integrated;  2. The specific conditions of ample and cheap credit at the global level;  3. And major policy mistakes in Iceland, both of the type that would be deemed to be such in any book (such as giving an already overheated economy a demand stimulus), and those more closely related to the orthodoxy prevailing at the time: freely floating exchange rates, interest rate policy focusing mainly on low inflation in terms of goods and services, and good micro-supervision; and let the markets do the rest. The first factor is perhaps of interest here.
At the end of 2016 Q3, ten-year yields on inflation-linked bonds in the largest markets varied from –2 percent in the UK to 0 percent in the US. Yields on longer-term inflation-linked bonds are somewhat higher, but still considerably lower than their historical level. Chart: Driving forces behind the fall in the global real interest rate The reasons for the global fall in the real interest rate are complex. The fundamental driving forces are nevertheless reasonably well understood and are shown in the chart. The large current account surpluses of oil-exporting countries and emerging economies have been one important factor. In addition, population ageing and a more uneven distribution of income have driven up saving in many countries. At the same time, investment has been low in many 2/7  BIS central bankers' speeches  advanced economies. One reason for this could be prospects for low returns on investment in productive capital. Since the financial crisis, these structural factors have been amplified by cyclical conditions. While deleveraging has pulled up savings, greater uncertainty may have dampened the willingness to invest and increased the propensity to save. Unconventional monetary policies in many countries have also contributed to pushing down real bond yields. Moreover, the spread between the return on fixed income products with long and short maturities, the so-called term premium, has shown a marked decline in recent years. Historically, investors have been rewarded for providing loans with longer maturities – the term premium has been positive. This is not necessarily the case today.

VOLATILITY IN THE FUND’S VALUE Let me now turn from expected returns to the return volatility that must be expected when different equity allocations are applied. The most common measure of risk in financial markets is standard return deviation, i.e. return volatility around the average. The standard deviation of the fund’s benchmark portfolio is determined by two factors: equity return volatility and bond return volatility, and the degree of covariance between the two asset types. Chart: Equity allocation and volatility Volatility is lower for bonds than for equities. As illustrated by the straight line in the chart, this means in isolation that portfolio risk increases with the increase in equity exposure. There is a pattern in our data showing that the standard deviation for equities has over time been two to three times higher than for bonds. The analyses do not support estimates that differ from those of ten years ago for equity risk relative to bond risk. Equity and bond returns do not move in tandem. As a result, bonds reduce the variation in the fund’s value in addition to the contribution from lower volatility. For a given equity allocation, portfolio volatility will be smaller the lower the correlation between equities and bonds is, as illustrated by the dashed curves in the chart. The blue curve assumes a degree of positive correlation between equity and bond returns. This means that although bond and equity price often covary, this is not always the case. For the purple curve, we have assumed that the correlation is negative.
This, the so-called Leaning Against the Wind debate, has become one of the most hotly debated issues in macroeconomics, in policy as well as academic circles, and will be one of the main topics we will be discussing and learning about during these couple of days. Let me contribute to this debate with the perspective of a policymaker in a small-open economy like Chile. In our case, financial vulnerabilities have been often related to large and volatile capital flows, with their consequent effects on asset prices and credit spreads. In this context, raising the interest rate in normal times due to financial stability concerns as the LAW strategy would prescribe, may be counterproductive as it would attract more capital flows, would tend to appreciate the domestic currency and would encourage foreign-currency borrowing. These mechanisms, of course, have been at the core of monetary policy in developing countries for many years. In the case of Chile, they were more evident during the 90s when capital controls were in place to try to give more autonomy to monetary policy in a context of persistent and large capital inflows. However, these mechanisms are relevant as well when debating about the role of monetary policy in actively pursuing an objective of financial stability.

Central Bank of Chile’s Twenty-first Annual Conference “Monetary Policy and Financial Stability: Transmission Mechanisms and Policy Implications” Opening remarks by Governor Mario Marcel  Good morning and welcome to the Twenty-first Annual Conference of the Central Bank of Chile. It is a pleasure to host this event that every year gives us an opportunity to reflect and discuss about issues that have direct implications on our work as central bankers from a broader perspective. I am looking forward to active discussions through the rest of the week on this year’s conference theme: monetary policy and financial stability. Ten years have passed since the onset of the Global Financial Crisis and we are still dealing with its economic consequences. But we have learnt a lot, and a decade of hindsight about the causes and long-lasting effects has led us to rethink the way we conduct monetary policy, how to ensure financial stability, and how these two elements are, or should be, interconnected. One of the most important policy lessons from the crisis concerns the relevance of actively seeking financial stability in a context of ever-increasing financial complexity. And central banks worldwide have been increasingly involved in assuring this, since it has become clear that financial stability is a pre-condition for price stability.
But the most debatable issue is the imposition of new restrictions on temporary hires, especially if permanent hiring does not improve sufficiently. In the current conditions, with more than 4.5 million Spaniards unemployed, all job creation opportunities must be kept open and not in the least impaired until the new channels for permanent hiring prove effective. In short, the fiscal consolidation programme, the pension reform proposals and the labour market reform measures are three areas in which significant advances have been made by the authorities in the last few weeks, but in which much work remains to be done. Let me now move on to the area of reform which falls directly under the responsibility of the Banco de España, namely the restructuring of the financial system and, more specifically, of the savings bank sector, where there has been appreciable progress in recent weeks. In the last few months a very significant portion of Spanish savings banks has concluded merger agreements with other savings banks, in what is the largest restructuring of the Spanish banking sector in a long time. These movements started with the creation of the FROB (the Fund for the Orderly Restructuring of the Banking Sector) in June 2009, nearly two years into the international banking crisis affecting the markets and financial systems of all developed countries, and to which Spanish financial institutions were exhibiting a marked resilience that most have maintained to date. This new Fund responded to the need to downsize the Spanish banking sector, particularly the savings bank segment.

After a prolonged period of growth, this segment had reached a size which, given the evolving demand for banking services, entailed a clear excess of capacity. From an individual standpoint, the prolongation of the crisis affected the capacity of institutions to generate profits for the following reasons: an increase in non-earning assets (doubtful loans and repossessed real estate assets), the narrowing of margins due to a fall in income associated with rising non-earning assets and to a higher cost of funds, the decrease in business volume, etc. Moreover, the high growth of previous years, due particularly to increased business with the real estate sector, had raised the dependence on wholesale debt markets, exposing savings banks to the liquidity risk associated with adverse developments in those markets. Compounding this is the intrinsic limitation of savings banks when it comes to raising core capital, a limitation which is important because the trend in both the markets and the prudential financial regulation currently under international revision is clearly towards stepping up requirements in this area. Given the need to downsize this sector and the conviction that the productive structure of many credit institutions had to be rationalised to hold efficiency at adequate levels in a sector characterised by growing competition, the time was ripe for the creation of the FROB, under whose auspices many savings banks have arranged their mergers or institutional protection systems (hereafter referred to by the Spanish acronym “SIP”).
(2020), When markets fail – the need for collective action in tackling climate change, Speech at the European Sustainable Finance Summit, Frankfurt am Main, 28 September 2020 x Carney, M. (2015), Breaking the tragedy of the horizon – climate change and financial stability, Speech at Lloyd’s of London, London, 29 September 2015. xi Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions; The European Green Deal Investment Plan, 14 January 2020. xii Securities eligible as collateral or for purchases under the CSPP. xiii Scope 3 carbon emissions i

Forbes, K. and Warnock, F. (2012) “Capital Debt ‐and Equity‐Led Capital Flow Episodes,” Working Papers Central Bank of Chile N°676, Central Bank of Chile. Fratzscher, M., Lo Duca, M., and Straub, R. (2012) “A global monetary tsunami? On the spillovers of US Quantitative Easing,” CEPR Discussion Papers 9195, C.E.P.R. Discussion Papers. International Monetary Fund (2013) “Western Hemisphere Regional Economic Outlook: Time to Rebuild Policy Space,” World Economic and Financial Surveys, International Monetary Fund, May 2013. Korinek, A. (2011) “The New Economics of Prudential Capital Controls,” IMF Economic Review, International Monetary Fund, 59(3), pp. 523–561, December 2011. Krishnamurthy, A. and Vissing‐Jorgenson, A. (2013) “The Ins and Outs of LSAPs,” Proceedings Jackson Hole Symposium 2013, Federal Reserve Bank of Kansas City. Lim, C., Columba, F., Costa, A., Kongsamut, P., Otani, A., Saiyid, M., Wezel, T., and Wu, X. (2011), “Macroprudential Policy: What Instruments and How to Use Them? Lessons from Country Experiences,” IMF Working Papers 11/238, International Monetary Fund. BIS central bankers’ speeches  5  Rey, H. (2013) “Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence,” Proceedings Jackson Hole Symposium 2013, Federal Reserve Bank of Kansas City. 6  BIS central bankers’ speeches