samchain/econo-pairs-v1 huggingface dataset:
This would make fiscal and wage flexibility even more vital in order to tackle cyclical fluctuations. In the current adjustment of the economy, the exchange rate of the króna has played a key role. Without a flexible exchange rate, the crucial instruments for tackling prevailing economic conditions would have been tight fiscal restraint, cuts in public spending and/or higher taxes, to help ensure that sharp rises in wages and prices did not excessively weaken the competitive position of Iceland’s trading sectors. Exchange rate volatility in the recent term was fuelled by the overheating of the economy, which is now cooling once more. The crucial factor for near-term exchange rate developments is to restore economic stability in Iceland with inflation on target, and to secure it in the longer run with prudent economic policies. It is doubtful whether claims that economic policy would necessarily become more prudent, if Iceland switched to the currency of a larger currency area, are justifiable. BIS Review 16/2007  5

The most important of those costs was probably the adverse effects of such interventions on risk-taking incentives – in other words, the moral hazard of government insurance (Alessandri and Haldane (2009)). This is not a new issue. The historical evolution of the financial system has been a game of cat and mouse between the state and the banking system (Haldane (2010)). Because the cat has typically failed to keep pace with the mouse, the result has been a widening and deepening of support mechanisms for banks over time. Elsewhere, I have called this dynamic link between bank and sovereign balance sheets the “doom loop” (Haldane (2012)). One measure of the extent of this problem is found in estimates of the “implicit subsidy” banks earn as a result of the expectation of government support. Chart 9 plots one measure of this “implicit subsidy” to UK banks. This peaked following the bail-outs at a remarkable £ in 2009. Since then, it has fallen substantially – to around £ in 2013 – as regulatory reforms have been put in place to constrain risk-taking and the financial strength of banks has improved. But it remains in positive territory, suggesting an on-going distortion to risk-taking incentives. Public policy responses The modern company harbours a range of micro-economic frictions. In some cases, these seem likely to have generated significant macro-economic costs, in the form of sub-optimally low rates of investment and sub-optimally high degrees of risk-taking.
A strong interest in gaining access to this capital can easily arise. There is a risk that entrepreneurship, talent and energy in the business sector and political life are used to acquire a piece of the economic rent – to dance around the golden calf – rather than for innovation, restructuring and growth. Decision-making forms in economic and political life must provide an effective shield to prevent special interests from gaining a dominant influence and control over petroleum wealth. The risk is particularly high in cases where markets are not efficient and where the remuneration for an assignment or the price of the resource that is transferred from the state are agreed through negotiations. The EEA Agreement restricts the scope for favouring individual enterprises or groups of enterprises. The eager control exercised by the surveillance body, the ESA, reduces the possibility for pressure groups to prevail. It is important for growth capacity that both national and international competition authorities engage in effective supervision in order to avoid the development of a business sector that is dependent on protection. Against this background, I would like to expand on the central government’s asset position and wealth management.

Our experience is that changes in the Norwegian interest rate level only have a predictable effect on the krone exchange rate when the change in interest rates also contributes to stabilising inflation. However, the relationship between interest rates and price and cost developments is uncertain. The setting of interest rates thus requires the use of professional judgement and discretion. The basis for exercising discretion is subject to limitations, however. Should any doubt arise as to whether the interest rate is oriented towards nominal stability, this would trigger substantial capital movements. House prices and real interest rate after tax Index 160  140  Per cent  8 Real house price (left-hand scale)  4  120  0  100  -4  Real interest rate (right-hand scale)  80  -8 1980  1984  1988  1992  1996  2000  An inappropriate setting of interest rates could easily jeopardise financial stability in the domestic economy. The experience of Norway and other countries shows that credit and property markets can be very unstable. If interest rates are kept at too low a level for too long, credit demand will rise  BIS Review 14/2001  3  sharply, as we witnessed in the 1980s. At that time, rising property prices generated expectations of further price increases, which in turn led to rising credit demand. When the bubble burst, recession ensued with falling asset values, a debt crisis and a growing number of bankruptcies.
At the beginning of May the Central Bank published its annual Financial Stability report. It includes an analysis of macroeconomic stability and the position and strength of financial companies. The Central Bank’s overall finding now was that in spite of rapid expansion and the macroeconomic imbalances that need to be tackled in the coming years, the Icelandic financial system is broadly sound. The position of the large commercial banks is crucial for the financial markets. They have produced robust profits and their capital position is very strong. Among other things, this has been shown by a stress test applied by the FME [Financial Supervisory Authority] and the Central Bank’s assessment of possible loan losses. These studies indicate firmly that the commercial banks’ capital position is strong enough to withstand a significant economic crisis entailing several large shocks in tandem. Their financial foundations are therefore strong. An important part of the exceptionally high bank profitability in 2005 and the first months of 2006 stems from trading gains, but even if these items are excluded, their operating profit would still be very healthy. Dynamic operations by Icelandic banks and the upgrading of their credit ratings and those of the Republic of Iceland have ensured easy access for them to international capital markets in recent years. This access has been used liberally and the banks have become more dependent on market financing. The commercial banks’ funding in international bond markets has changed recently. It was first noticed in the pricing of Credit Default Swaps in the autumn of 2005.

The Bank’s most recent interest rate decision must be seen in this light. The rationale behind it was explained in a press release issued by the Central Bank this morning [May 18, 2006]. As I mentioned, the rise in the housing component explains the bulk of recent increases in the CPI. So it is not surprising that people have wondered whether the housing component should be included in the index on which the inflation target is based. The Central Bank has held this view, partly because changes in housing prices tend to be a leading indicator of private consumption and inflation, and also because over the years the CPI excluding the housing component has been more volatile than with it. Including the housing component in the CPI in effect makes the index less volatile. Of course it is natural to ask whether the right reference is being used for the inflation target and the Central Bank is obviously open for such discussion. However, it is absurd to change the CPI or strip it of certain components that become temporarily troublesome. The monetary policy framework and its implementation must not be changed except when the economy is in balance, and then only on the basis of long-term perspective, not vague short-term interests. Financial stability Over the past weeks and months, the Icelandic financial sector has been in the spotlight domestically and, not least, internationally. Not all of this publicity has necessarily been worth striving for.
We know liquidity attracts liquidity, it is clear there is demand from borrowers and we welcome initiatives to continue to increase SOFR usage. There is also broad international consensus to support the US authorities and limit new use of US dollar Libor from the end of this year. So with the summit in sight let’s reflect on how far we have come in what was always a challenging climb, but let’s also make sure we complete the job properly and safely descend the mountain that is Libor. I am grateful to Raza Rehman, David Geen, Arif Merali, Stefania Spiga and Alastair Hughes for their assistance in helping me prepare these remarks. 1. Based on data from LCH. 2. The FCA and the Bank of England encourage market participants in further switch to SONIA in interest rate swap markets 3. Based on data from ClarusFT and Bank of England estimates. 4. The FCA and the Bank of England encourage market participants in a switch to SONIA in the sterling non-linear derivatives market from 11 May 5. Path to ending new use of GBP LIBOR-linked derivatives 6. Based on reporting to the Bank of England and Financial Conduct Authority. 7. LIBOR – are you ready for life without LIBOR from end-2021? 8. Based on reporting from International Capital Markets Association. 9. Announcements on the end of LIBOR 10. Interest rate benchmark reform: overnight risk-free rates and term rates 11. Interim Financial Stability Report - May 2020 12. Consultation on Term SONIA Reference Rates – Summary of Responses 13.

In line with our consistent message of supporting a smooth transition there is a ‘risk management’ exemption to help firms support their clients as liquidity in Libor decreases and end users actively transition to more robust alternatives. [5] I will, however, offer a warning to those firms regulated by the Prudential Regulatory Authority (PRA) who may be guilty of what I’ll call ‘lazy’ behaviors in unnecessarily sustaining Libor linked contracts. UK supervisors have been consistent and clear that they support the industry-agreed milestones of the RFRWG and have set their expectations in line with these. Across regulated firms the necessary reporting is in place and your supervisors will be speaking to you. The transition away from Libor is a risk management issue and relevant senior managers in firms will be responsible for ensuring suitable policies and oversight are in place. Firms regulated by the PRA in the UK that fail to prudently manage transition will be treated in the same way as firms demonstrating any other risk management / governance failings. As in other jurisdictions, lending markets have presented their own challenges. Market conventions and relevant infrastructure to support the use of overnight rates have been slower to settle and implement. But the industry and authorities have worked through these challenges together, and we see overnight SONIA compounded in arrears is now being actively used across billions of pounds of GBP facilities. [6] This includes bilateral, syndicated and multicurrency deals across a wide range of domestic and international users spanning a large range of commercial sectors.
This has raised other issues of rotation of auditors to prevent cozy relationships undermining the integrity of the audit. A periodic change of the firm might have led to more serious questioning of the accounts. Further, some US firms have announced plans to include, as an expense, the cost of executive stock options. The changes aim to more accurately describe the revenues and costs associated with companies’ primary business. And Standard and Poor’s has introduced new benchmarks for reporting corporate earnings. These are all positive examples of participants working together to enforce the spirit of the rules under which financial markets operate. What has been done recently in Switzerland to improve the transparency of Swiss financial markets? Some efforts have already started some time ago. Most notably, the Swiss Exchange and the Swiss Business Federation “economiesuisse” co-ordinated their efforts to develop two sets of rules which became effective on July 1, 2002: The “Swiss Code of Best Practice” and the “Directive Concerning Information on Corporate Governance”. This will hopefully lift the standards for corporate governance and improve the level of transparency for the publicly traded firms in Switzerland. We have also seen political initiatives aiming at more transparency in remunerations. Business uncertainty It would be shortsighted to believe that the recent stock market reaction has only been the result of misconduct and the lack of corporate governance. The world economy is still digesting the consequences from the deep retrenchment in capital spending, which started in 2000 in the high-tech and the telecommunications sectors.

Jean-Pierre Roth: The long path to restoring faith in financial markets Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the CEO Luncheon of the Swiss-American Chamber of Commerce, Zurich, 4 September 2002. *  *  *  At the outset I would like to acknowledge the long-standing ties between the Swiss-American Chamber of Commerce and the Swiss National Bank. In the past, members of the Governing Board have been invited to speak before this select audience. It is a great pleasure and honor for me to continue this tradition. My remarks today will focus on the present challenges faced by the global economy: a crisis in confidence which has pushed equity prices to unexpected lows and an economic recovery which does not seem to take the desired path. Nevertheless, I am convinced that the fundamentals are in place for a return to sustained growth. Inflation is low in almost all industrial countries, monetary policy is supporting the recovery, household consumption still plays a stabilizing role and public finances despite short-term difficulties - are not far from equilibrium. While numerous factors are responsible for the present economic uncertainty, the prolonged volatility witnessed in equity markets has hit investors particularly hard. In hindsight the stock market correction fits partially the classic story of fundamentals; one that is driven by a bubbles collapse in dotcom companies and the anticipated slowdown in economic activity.
Uncertainty, however, does not mainly come from the economic environment; it comes from the erosion of trust, based on an unbalanced distribution of globalization benefits, a long and slow recovery, decentralization and fragmentation – as the IMF’s First Deputy Managing Director David Lipton pointed out in a recent speech1 . The REO also speaks about the weakening support for globalization, which affects global trade and long term growth prospects, a thesis linked to the apparent retreat from cross-border integration and the move from multilateralism to bilateralism. And the report is right, in my view. After 3 decades of deregulation and liberalization, the consensus is being threatened by the return to protectionism. East European countries, being at the receiving end of capital movements, are the short term losers of what it looks like an exit from globalization as we knew it. I call this exit from globalization “Glexit” – which is much more than Brexit or any other individual exits. In the banking sector, Glexit means further deleveraging and higher financial burden for already over indebted nations, companies and households. We can do more, together, to rebuild trust in institutions, to improve the governance, and to make sure that the economic upswing that we are now enjoying will be more evenly distributed, that it will reach every household and company. While this is a long time-effort, we need to do more to put our house in order now.

Once the testing system is fully operational and we are convinced of its efficiency, these restrictions will be gradually lifted. We believe that at this juncture it is our responsibility to protect our investors. We might as well move forward some of the law regulations — those making customers’ qualification tests mandatory — from April 2022 to at least 1 October 2021. At the time, we went along with market players and provided for a fairly comfortable and soft transition period in the law. We had an extensive discussion with Federation Council members. It stands to reason however that the major shift in the situation calls on us to take meaningful action to protect consumer rights. I admit that financial institutions themselves are unlikely to welcome this proposal, and their feedback will be negative. This is where we count on you to help, just as we have always counted on your support of our initiatives related to efficient consumer right protection in the financial market. The key reason for this is the nature of financial institutions: they are financial intermediaries which should operate in the interest of businesses and consumers, just like the Speaker said. We therefore believe that now is the time for prompt and serious discussion of this matter to make a decision. I am now handing over the floor to Sergey Shvetsov, who will enlarge on these and other initiatives I have presented.
International financial market liquidity and the króna exchange rate Liquidity index  The króna exchange rate and bank stock prices  Index, January 2005 = 100  Index, January 2005 = 100  2  120  1  110  Index, January 2005 = 100  250  120 110  200 100  0  90 ‐1  100 90  150  80 ‐2 70 ‐3  80 100  70  60  60 50  ‐4  50 40  ‐5 2004  2005  2006  2007  2008  50 40  0 2004  2005  2006  2007  2008  Financial market liquidity (left axis)  Real stock prices for financial institutes (left axis)  Effective exchange rate (right axis)  Effective exchange rate (right axis)  The liquidity index shows the number of standard deviations from the mean (exponential moving average) from a simple average of nine liquidity measures,  Source: Bank of England, Central Bank of Iceland. Source: EcoWin Reuters, Central Bank of Iceland. As so often occurs in great tragedies, the two stories converged in a grand finale in early October 2008, when nearly nine-tenths of Iceland’s banking system collapsed when its three large cross-border banks – Glitnir, Landsbanki, and Kaupthing – were taken into special resolution regimes on the basis of the emergency legislation that had just been passed by Parliament.

The savings banks will be financially restructured in the coming weeks. The causes Earlier in my remarks I told you how the banks failed. Does this also tell us why they failed? I think it does so only partly. The interplay between trust, liquidity and solvency is complicated  7  Central Bank of Iceland (2009). Financial Stability 2009. 26 October 2009 (pp. 18–19, 68–70). 8  Financial Stability 2009, 22–37. 9  IMF (2008). “Iceland: Request for Stand-By Arrangement – Staff Report”, IMF Country Report No. 08/362, November 2008. IMF (2009). “Iceland: Staff Report for First Review under Stand-By Arrangement and Request for Extension of the Arrangement, Waivers of Nonobservance of Performance Criteria, and Rephasing of Access”, IMF Country Report No. 09/306, October 2009. For further information about the IMF Stand-By Arrangment and the economic programme of the government, please refer to the web sites of the Central Bank of Iceland (http://www.sedlabanki.is/?pageid=186&dt_date=2009-01-01), the Prime Minister’s Office (http://eng.forsaetisraduneyti.is/), and the International Monetary Fund (http://www.imf.org/external/country/isl/index.htm). See also Central Bank of Iceland (2009). Financial Stability 2009. 26 October 2009 (pp. 71–75). 8  BIS Review 9/2010  when it comes to banks. Banks fail because they lose trust. That loss of trust might not be warranted, in which case the bank will face a liquidity problem. However, it might still fail if it is not supported by a credible lender of last resort, or if the liquidity problem lasts long enough. The line between liquidity and solvency can be a thin one.
Available at http://www.bankofengland.co.uk/publications/speeches/2010/speech438.pdf. 2  BIS Review 135/2010  experience and those acted as a backdrop to our own operations. In the remainder of this speech, I want to discuss how we structured the UK’s asset purchases. One aspect of our policy design for QE was to act decisively to prevent the risk of deflation. In Japan, although their programme of outright purchases of government bonds (JGBs) amounted to some 13% of nominal GDP, those purchases were conducted over a period of 5 years (2001–2006). And they only began after deflation had already been observed. It is possible that this dampened the impact 8 and other policies were being pursued at the same time. In the UK we conducted the purchases in similarly large size (14% of GDP) but relatively quickly (over 10 months), to ward off the threat of deflation rather than as a response to it. A second aspect of the design was to target our purchases at assets held by the non-bank sector. The proposition is that, by buying gilts from pension and insurance funds (for example), those asset managers would have more cash in their portfolios than they desired, and would be incentivised to use that cash to invest in other, more risky instruments such as corporate bonds and equities.

BIS Review 135/2010  3  Debt Management Office (DMO) and attempt to sell the same gilts to the Bank at a higher price. The first mitigant was that the MPC set a targeted rate of purchases initially three times faster than the DMO were issuing. In addition we incorporated several features into the design of the operations: (i)  We designed the operations as competitive (reverse) auctions that would deliver a clearing price close to the market. (ii)  We offered to buy from a bundle of 8–10 individual gilts in each operation not just a single stock at a time. The selection of which gilts we then bought depended on the prices offered. In that way, the purchases were less vulnerable to a “squeeze” in any one particular gilt. (iii)  We eliminated from the operations any gilts which we knew the DMO were about to issue or had issued in the previous week. Maintaining the programme I don’t want to imply that implementing and maintaining our programme of asset purchases was straightforward operationally. Far from it. For example, the gilt market became somewhat more dislocated as the Bank accumulated a large percentage of some of the particular gilts in issue. To alleviate stress in the market, in August 2009 we started to lend out, via the DMO, a proportion of the gilts the Bank had bought, in exchange for others that had readier availability.