samchain/econo-pairs-v1 huggingface dataset:
Policy Panel: Investment and growth in advanced economies Remarks given by Mark Carney, Governor of the Bank of England  2017 ECB Forum on Central Banking, Sintra 28 June 2017  1  All speeches are available online at www.bankofengland.co.uk/speeches  The experience of business investment in the UK since the onset of the financial crisis broadly matches that elsewhere in the advanced world – a sharp fall followed by a feeble recovery (Chart 1). Peak to trough, the level of UK business investment fell by 20%, and it was six years before it surpassed its pre-crisis level, putting the recent experience at the bottom of the swathe of past UK cycles (Chart 2). In my brief remarks today, I will offer some possible explanations for this performance before concluding with comments on the outlooks for UK investment and monetary policy. I. Investment since the crisis In part, weak investment reflects a weak economy, with the recovery following the crash being the slowest since the Great Depression. Weakness in demand is not, however, the whole explanation. Business investment has underperformed relative to output since the crisis, with the ratio of the two falling in the UK by around 2 percentage points in the immediate aftermath (Chart 3), similar to the experience in other advanced economies. 1  Falls in investment tend to be more persistent for recessions associated with financial crises (Chart 4). This partly reflects restrictions in credit supply constraining investment, as well as productivity, wages and economic performance more generally.

With detailed contingency planning for the financial stability impacts of Brexit, UK companies can be confident of continued access to finance in an uncertain world. Reforms mean the UK financial system is working well. Net lending to private companies is been growing following six years of contraction. Corporate bond spreads are well below their long-run averages (Chart 13). And credit conditions among SMEs have been steadily improving. If the opportunities present themselves, UK corporates could readily draw on this finance as their balance sheets are in good health following a decade of de-levering to ratios amongst the lowest in advanced economies. 12  Turning now to monetary policy, the Bank operates within an established framework, anchored in the inflation target (Chart 14). The MPC set out in advance of the referendum how it would apply that framework, emphasising that the effects of the process of leaving the EU on inflation would depend on its impact on demand, supply and the exchange rate. The Committee has repeatedly stressed that, as a result, the implications for monetary policy would not be automatic. The MPC has also clearly set out its reaction function consistent with its remit. Under the exceptional circumstances Brexit entails (with an inflation overshoot driven entirely by an exchange rate depreciation caused a large fundamental shock), the Committee is required by its remit to balance a period of abovetarget inflation with a period of weaker growth.
Hence, a broad class of ABSs may qualify as collateral, both residential- and commercial-backed securities, all sorts of consumer credit backed ABSs, cash-flow collateralised loan obligations (CLOs) and CDOs. Overall the volume of eligible ABSs constitutes approximately 60% of the entire outstanding European securitisation market. As regards the developments in the use of collateral since the start of the turmoil (see Chart 4), they show clearly that counterparties have made active use of the leeway the collateral framework provides. Quite understandably, they have economised on the use of central government bonds, which has been often almost the only collateral counterparties could still use in interbank repo markets. Instead they have brought forward less liquid collateral to the Eurosystem, including ABSs, for which primary and secondary markets have basically dried up. The annual average share of asset-backed securities pledged as collateral increased to 16 percent in 2007, up from 12 percent in 2006 and 6 percent in 2004. However, I would like to issue a note of caution here. The fact that counterparties post ABSs as collateral with the Eurosystem does by no means imply that those assets are refinanced on a one-to-one basis by us. The majority of national central banks operate with a so called “pooling system”, in which much more collateral can be deposited with the central bank than counterparties actually need to cover their outstanding credit with the Eurosystem.

Banks subsequently extended the securitisation  1  I am very grateful to Pontus Aberg, Valia Rentzou and Isabel Von Koppen-Mertes for their valuable inputs and contributions, and to David Marqués for useful comments. 2  See ECB (2008), “Securitisation in the euro area”, Monthly Bulletin, February. BIS Review 68/2008  1  model to other forms of credit, such as consumer credit and student loans, that were historically regarded as highly illiquid. In Europe, the market for structured finance products has grown rapidly during the last 5-10 years, often at double-digit rates (See Chart 1). This development was maybe even more pronounced in the euro area compared with other regions due to several factors, including the introduction of the single currency, further financial market integration through the use of 3 credit derivatives and related financial instruments, and an innovative financial industry. Growth in structured finance products has also been fuelled by high demand from investors stemming from the search for yield and diversification opportunities. Securitisation has also been positively affected by the move towards a more market-based financial system. Increasing securitisation of lending-related assets, together with relentless financial innovation in credit markets, have led to the diffusion of a new business organisation – the “originate to distribute” model – among banks, particularly those of large size. There is certainly no need to explain to this audience how, under this new business model, the loans originated by banks are transformed into marketable asset-backed securities.
Joseph Yam: The Asian Bond Fund initiative Keynote remarks by Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the Global Bond Summit, Hong Kong, 14-16 November 2005. *  *  *  Introduction Ladies and gentlemen, I am very glad to have the opportunity to speak at this Global Bond Summit, all the more so because it is being held here in Hong Kong and because development of a deep and liquid bond market in Asia is a subject that is very close to my heart. 2. It has been suggested that I should talk specifically about the Asian Bond Fund (ABF) initiative. I am happy to do so not only because ABF is an important initiative for promoting the development of bond markets in the region but also because of the active involvement of the HKMA in the past three to four years in the project, including chairing the EMEAP Working Group that gave birth to it. But I cannot, of course, speak for the eleven central banks and monetary authorities comprising the EMEAP group, but only for the HKMA, and so my comments today are those of the HKMA. Asian finance 3. Let me begin at the more macro level and draw your attention to one aspect of Asian finance that has always struck me as odd, and this is how financial integration in Asia is lagging behind economic integration.

Broadly speaking, economic and monetary developments and prospects provide growing signs of an ongoing recovery, mostly indicating that the upswing will gain momentum during the coming winter. Some slack still exists in the economy, however. There are no clear signs of a turnaround in the labour market and seasonally adjusted unemployment has still not decreased. Leading indicators such as credit growth, business surveys of labour demand, and growing turnover and imports nonetheless strongly suggest that demand will rise in the near future. Boosted by increased quotas during the  4  BIS Review 45/2003  coming fishing year, more public sector construction projects and aluminium industry investments, a reasonable level of output growth can be expected this year. However, since the growth rate is below estimated potential, the slack in the economy will increase slightly compared with 2002. The growth rate in 2004 is expected to exceed estimated potential at 3½%, meaning that the output gap could turn positive next year. Inflation will nonetheless remain below the Central Bank’s target until the final quarter of 2004, according to the forecast. This is explained by the low current rate of inflation and excess output potential. Two years ahead, inflation is forecast to creep above the target. On the whole the future looks fairly bright, but as always we should not allow the celebrations to get out of hand. BIS Review 45/2003  5
This leads to a collective suboptimal situation: according to a study by Banque de France staff7, the opportunity cost of not sufficiently coordinating our fiscal policies in the aftermath of the crisis may have amounted to 1 to 2 GDP points in the euro area. Moreover, taken together, deficiencies in the coordination of both our fiscal and structural policies may have cost between 2 and 3 GDP points between 2011 and 2013. Although our common monetary policy works well, it cannot be a substitute for economic policy coordination or for the lack of reforms. In Maastricht, our aim was to build an Economic and Monetary Union. We have succeeded in Monetary Union, but we have not delivered on Economic Union. And so, in a nutshell, a new trilemma has emerged. It now seems impossible for euro area countries to achieve their full growth potential – the first point of the triangle –, if they wish at the same time to achieve the two other points of the triangle: on the one hand, keeping the autonomy of their economic policies at the national level; on the other hand, keeping the “Euro framework” of coordination unchanged, that is to say maintaining the status quo, with a cooperation between countries based only on rules without institutions and without a common strategy. We have to drop one of the points of this triangle in order to achieve the other two.

And to be effective, it would need to be able to directly issue common debt – for the future – and/or raise taxes. Obviously this would be a “quantum leap” in the nature of our Union, which would require resolute political will, but this is our chance to make a real difference. *** Ladies and gentlemen, let me conclude by quoting a British citizen, who happened to be one of the greatest Europeans of the past century. Winston Churchill said in August 1949 10: “I am certain that it is within our powers to overcome the dangers still before us, if we so wish. Our hopes and our work point to an era of peace, prosperity and abundance and the inexhaustible wealth and genius of Europe will turn it once again into the very source and inspiration of the world’s life.” The European Union remains to this day a unique political and economic experiment that has no equivalent in modern history. And we have from 2017, following the electoral cycle in Europe, a unique window of opportunity. Nothing should be taken for granted, but much is open. We should not let this opportunity pass us by. Thank you for your attention. 1 “Tommaso Padoa-Schioppa: Economist, policy-maker, citizen in search of European unity”, Speech by Lorenzo  Bini Smaghi, European University Institute, Fiesole, 28 January 2011. 2 Source: European Commission, Reflection paper on the Deepening of the Economic and Monetary Union, May  2017. 3 European Commission, Standard Eurobarometer 86, Autumn 2016.
This would need to be every bit as radical as the first, but would require central banks to engage with, and draw on, the general public – their “folk wisdom” – as never before. Central banks were put on earth to serve the public. The second revolution is about putting the public more firmly into public institutions. At a time of raised expectations and lowered trust, a reinforcement of central banks’ social contract with society could make them even more effective in the period ahead, whether you are the Bank of England (into its fourth century) or the Bank of Estonia (commencing its second). Let me start by saying a word about the central bank revolution of the recent past, before turning to the present and the future and the challenges and changes that may lie ahead in engaging the general public. The Bank of England has already begun taking important steps towards increasing its engagement. Some 1  For example, Tucker (2018). 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  of the steps taken by central banks may have relevance to other public institutions, many of which face similar challenges of raised expectations and diminished trust among the general public. A Central Bank Revolution You do not typically associate central banks with revolution, unless the “r” is silent. Yet I do not think it is an exaggeration to say that, over the course of recent decades, a revolution has swept through pretty much every central bank on the planet.

As monetary easing in the euro area is likely to stay for quite some time, policymaking in the noneuro area countries affected by the ECB’s monetary policy needs to remain attentive. From a regulatory and a supervisory perspective, both positive and negative externalities from the euro area to our economies will need to be properly managed. The original text is published in English and can be read here . 1/1  BIS central bankers' speeches
On the basis of that guidance, we scrutinise the banks’ strategies and provide feedback. So we are keeping a close eye on how banks are addressing the problem. And today, we have published an addendum to our guidance. This addendum will help to ensure that NPLs remain a problem of the past once they have been dealt with. To that end, it lays out how we expect banks to provision for new NPLs. More specifically, it refers to exposures that are newly classified as non-performing as of 1 April 2018. The addendum is not a binding document, but it specifies our expectations and will thus serve as a starting point for our dialogue with each bank. Conclusion Ladies and gentlemen, Rest assured that I have not exhausted the topic of my speech. But I may well have exhausted you. So I will conclude quickly and painlessly. First, banks are important for the economy, particularly here in Europe. That said, it might be good to add a bit more capital market to the mix; but that is a topic for another day. Second, banks must be able to fail. If they are not, the economy will suffer in the long run. But if banks fail, they must do so in an orderly manner. If not, financial stability will suffer in the short run. The new European resolution framework helps to make orderly failure possible. Third, failure is the least desirable outcome, of course. We need banks which are profitable and resilient in the first place.

If each country were to go its own way, the market for the relevant financial instruments would become too fragmented. The ECB welcomes current proposals which foresee the introduction of non-preferred senior debt instruments and a general depositor preference rule. This would further facilitate bail-ins. The second question is: what happens if the Single Resolution Fund runs out of money? What if there’s a major crisis, and the € billion is not enough to cover the losses? Well, in such a situation we would need a common European backstop for the SRF. And we need it quickly, and in any case before 2023, which is when the SRF will reach its target volume. European leaders committed to this when setting up the SRF, and they should stick to their commitment. The backstop could take the form of a direct credit line from the European Stability Mechanism to the SRF. The important thing is that it can provide both solvency and liquidity support. And now to the third and final question: has public support for failing banks really become a thing of the past? “Almost” is the answer to this question. And the rules are now such that any public support for a bank in fact triggers a “failing or likely to fail” decision. There are a few exceptions, however. One of these is known as precautionary recapitalisation. It allows governments to recapitalise banks using public funds. But the scope for this kind of state aid is very narrow.
Before explaining the Bank’s thinking about these two issues, we need to lay out some basics about the Bank’s objectives, and how it seeks to meet them using its balance sheet. The Bank of England’s objectives and its balance sheet The Bank has two core purposes: maintaining monetary stability and contributing to the stability of the financial system. With some variations, these are the two cornerstones of policy for most central banks around the globe. Monetary policy is quite widely understood in a general sense – the Bank specifically defines it to mean price stability and confidence in the currency.1 Financial stability is less well understood generally but it entails detecting and reducing threats to the financial system as a whole, in order to make it more resilient.2 One major reason why it is for the central bank to pursue both of these purposes is because it has a balance sheet that can be used both to implement monetary policy decisions and to carry out financial operations to support financial stability. A simplified time-series of the Bank’s balance sheet is shown in Charts 1 and 2 below.3  1  Bank of England, Annual Report 2010, page 1. 2  See “A New Approach to Regulation”, HM Treasury consultation document Cm 8012. 3  The Special Liquidity Scheme and Asset Purchase Facility are off-balance sheet, so are not included in the charts.

That counterparty bids more aggressively for funds – something that is immediately observable from the pattern of bids (Table 2 and Chart 6). These examples highlight how the new ILTRs can provide an “early warning indicator” of stresses in the market, at both an individual and aggregate level. That information can be used to determine the size of and frequency of subsequent ILTRs (hence solving one important problem with the old LTRs). The ILTR supply curve The Bank’s supply curve is pinned down by its preferences – namely to provide liquidity insurance to the banking system at a price that doesn’t undermine the incentive to prudently manage liquidity. The Bank summarises its preferences using a Relative Supply Schedule (RSS). The RSS dictates how the proportion of each auction allocated to the wider collateral set responds to changes in the bids submitted, and specifically the difference between the clearing spreads on the narrow and the wider collateral set (known as the stop out spread). Chart 7 below shows some illustrative examples of an RSS. A larger stop out spread increases the proportion of the auction allocated to the wider collateral set, so the Bank’s “supply schedule” is upward sloping. Consider two simple examples. With a perfectly inelastic RSS, the Bank essentially pins down the quantity of funds it would provide against wider collateral, regardless of the bids submitted. With a perfectly elastic supply curve, the bank would, once a certain price threshold is exceeded, be prepared to allocate against all the wider collateral bids.
Accordingly, these considerations are subject to very high uncertainty. In this respect, the social security registrations figures for October would suggest the recovery in this variable had flattened somewhat (in contrast to preceding months, the year-on-year rate of change in registrations did not fall in October and held at -2.3%). Also, the manufacturing PMI for October, published this very week, has shown a slight rise in business confidence in the sector, both in Spain (+1.8 points) and in the euro area as a whole (+1.1 points). There has been a clear downward surprise in inflation in recent months (it dipped to -0.9% in October according to the CPI leading indicator published by the INE last week). This has essentially been due to the behaviour of the prices of services (especially those relating to tourist and leisure activities) and of non-energy industrial goods (weighed down by the relative weakness of demand). This would be consistent with inflation rates in the coming quarters even more modest than those foreseen in the September projections exercise. 1.4  The main conditioning factors of economic activity in the coming quarters: risks and policies  The macroeconomic outlook I have described is subject to extraordinary uncertainty and the underlying risks are tilted to the downside. The key aspect influencing Spanish and global economic developments in the short term is, unquestionably, how the epidemiological situation will evolve. Considerable risks persist as 10  to the future course of the pandemic.

Government has also set a financial access target of 50 percent by the end of 2009 under the Performance Assessment Framework (PAF). The holding of this Conference is therefore, consistent with our aspirations to increase levels of financial access in the country. As earlier alluded, the aim of this Forum was to bring together practitioners and regulators of microfinance to learn from each other in order deepen and broaden financial services provision. In this regard, the forum has a number of eminent persons who will share with us their unique experiences. 2  BIS Review 46/2009  Ladies and Gentlemen: This FIA programme is customized and among the issues that will be addressed include the following: 1. Emerging best practice in microfinance;  2. Self-help group models for microfinance, which may be viable for countries in our region;  3. Microfinance product development knowledge and risk management strategies; and  4. Specific micro-credit practices for agricultural-related businesses, which is relevant for most our countries’ strategies to diversify into agriculture. Distinguished Participants: We consider the timing of this workshop appropriate given the impact of the on-going global financial crises. I therefore, call upon all of you to take advantage of this unique opportunity to learn and share experiences, so that we can come up with efficient and effective ways of advancing financial inclusion in our respective countries.