samchain/econo-pairs-v1 huggingface dataset:
And central bank facilities such as the Bank of England’s Term Funding Scheme have offered a cost effective source of funding to support additional lending to the real economy, providing insurance against adverse conditions in bank funding markets. These changes have led many banks to choose simply not to borrow in unsecured markets as the costs increase. Overall, this leaves Libor rates capturing (at best) only a tiny fraction of overall funding costs even in benign market conditions. As transactions become scarce during periods of stress, this reduces yet further. For example, during March and April Libor rates were impacted by liquidity mismatches in money market activity. Money Market Funds, that are important investors in unsecured bank funding markets, experienced large outflows, the so called ‘dash for cash’. This meant Libor linked borrowers were immediately exposed to a sharp increase in rates driven by these more esoteric liquidity factors in addition to any perceived changes in bank credit risk. When the banks that provide the data on which the Libor rates are based can’t reference actual transactions that they have undertaken, they are asked to provide Libor’s administrator with a submission based on transactions in other markets, where they are able. More commonly though, those data aren’t available either, so they have to rely on ‘expert judgement’ which is an estimate of the rates that the firm would expect to pay in those wholesale unsecured funding markets.

We remain committed about both the need for the market to continue to drive transition forward moving new 7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  issuance onto alternative rates and converting legacy exposure where possible; and also to ensuring there is a solution for those contracts that legitimately cannot be converted from Libor. That is why the UK government announced last month its intention to legislate to provide the FCA with increased powers to deliver an orderly wind-down of critical benchmarks, such as Libor. 7 It remains in the interests of financial markets and their customers that the pool of contracts referencing LIBOR is shrunk to an irreducible minimum ahead of LIBOR’s expected cessation, leaving behind only those contracts that genuinely have no or inappropriate alternatives and no realistic ability to be renegotiated or amended. Those that decide to rely on regulatory action, enabled by the legislation the UK Government plans to bring forward, will not have control over the economic terms of that action.
When the foreign exchange market was established in May 1993, a central exchange rate was set with deviation bands of 2¼% in either direction. In September 1995 these were extended to ±6%. In February last year the bands were extended once again, to ±9%. Last year's fluctuations in the króna used up all the scope allowed by exchange rate policy before the last extension of the fluctuation bands. The króna depreciated considerably after the middle of last year. The Central Bank has stated before that it does not identify a high real exchange rate as the root cause of the current account deficit. As pointed out earlier, the real exchange rate has now fallen below its average for the past twenty years. Any further depreciation is unlikely to lead to a sudden improvement in the current account balance. 4  BIS Review 27/2001  On the contrary, a depreciation of the króna would entail risks for domestic companies with foreigndenominated liabilities, especially those with no foreign revenues to match them. Thus it is very much in the interest of these companies – and the credit institutions which have acted as intermediaries in procuring foreign borrowing – that the króna does not depreciate to any extent. These viewpoints, among others, have been borne in mind in the Bank's monetary policy.

Heavy lending by commercial banks swells their balance sheets and weakens their equity positions by the same token. The combined equity ratio of the three commercial banks was 10.21% at the end of 1999, but was down to 9.35% at the end of 2000. The mandatory minimum equity ratio is 8%. In part the equity position is maintained with subordinated loans, as authorised by law; excluding these, the equity ratio was 7.93% at the end of 1999 and went down to 6.28% at the end of last year. This is a cause for concern, as the Central Bank has repeatedly pointed out. It leaves the commercial banks worse equipped to tackle tougher economic times than would otherwise be the case. Inflation Overheating of the economy generated inflationary pressures after spring 1999. Inflation gradually climbed in 1999 and until spring last year, when the twelve-month rate of increase measured 6%. It slowed down again as the year wore on and measured 3.5% from the beginning to the end of the year. Over the twelve months until the beginning of March this year, inflation was 3.9%. Both domestic overheating and external conditions contributed to the high inflation figure shown last year. Three main factors were at work. Housing prices led to a 1.25% increase in the Consumer Price Index. Petrol prices pushed the CPI up by just under 0.25%, compared with almost 1% the previous year. Finally, market services, i.e.
In addition, slightly stronger wage growth is expected, in the context of a robust labour market, higher minimum wages in some countries and the delayed effects of past high inflation rates. These factors more than offset the negative impact on inflation of the weaker growth outlook. In consequence, in the latest ECB staff projections, inflation forecasts have been revised up significantly throughout the projection horizon. As the present inflation determinants gradually disappear, and the normalisation of our monetary policy passes through to the economy and to prices, inflation will decline. The ECB’s September projections place inflation at 8.1% in 2022, 5.5% in 2023 and 2.3% in 2024, an upward revision of 1.3 pp, 2 pp and 0.2 pp, respectively, on the June projections. These macroeconomic projections are surrounded by great uncertainty, with downside risks for activity and upside risks for inflation In the near term, inflation depends to a great extent on developments in energy commodity prices, specifically gas and electricity prices. In addition, possible interruptions in energy supplies and harsh winter weather are both risks to the outlook for the euro area, as they could bring about further increases in energy prices and more severe production cuts than expected in the baseline scenario. To reflect these risks, the ECB’s latest projections once again include a downside scenario that envisages slightly lower growth in 2022 and, in particular, a contraction in GDP of 0.9% in 2023, while maintaining the expected increase of 1.9% in 2024.

I do not underestimate any of the difficulties involved: we must first manage today's threats. We must involve and convince the citizens, who too often fear that more economic integration threatens their European social model, when conversely it would strengthen it: we should state much more clearly our commitment to these common "fundamentals". Finally, we must have the courage to assert our values openly. But I will conclude with a former student of Sciences-Po, and one of the greatest, Simone Veil: “Setting itself high ambitions, Europe will be able to make its  Page 10 of 10  voice heard and defend strong values: peace, the defence of human rights, and more solidarity between rich and poor.” xxvi This fight is worth fighting; it is mine, and I believe above all that it is the fight of your generation. I wish each and every one of you, good luck. References: i Communication on the future path of policy rates. ii Stefan Zweig, Erasmus, Grandeur and Decadence of an Idea. iii IMF (2019), World Economic Outlook, updated on 23 July. iv IMF (2019, 2018), World Economic Outlook, July 2018 and July 2019. v Nominal ICT capital as a percentage of nominal GDP, entire economy. Source: Gilbert Cette and Ombeline Jullien de Pommerol, “Have the growth gains from ICT been exhausted? Banque de France blog, 18 October 2018; updated figures. vi Conclusions of the meeting in Chantilly on 17 and 18 July 2019 vii Marie-Laure Djelic (2002) “Exporting the American Model: Historical Roots of Globalization”.
In particular, the creation of a fully mutualised European deposit insurance scheme would boost both public and market confidence. It would also contribute to greater risk-sharing in the euro area, and thus help reduce potential fragmentation episodes. 15  From highs of 119.9% and 85.6% of GDP, respectively, in 2010, to 72% and 53% at end-2022. 16  The 3-month EURIBOR is the main benchmark rate for non-financial corporations’ funding costs. 17  These figures are obtained drawing on different hypotheses as to the percentage of debt expiring and renewed in the short term. The top-end figure (6.8 pp) is the effect of all debt expiring in the short term being renewed. 18  A firm is considered to be under high financial pressure when the ratio of (gross operating profit + financial revenue) to financial costs is less than one. 19  The 12-month EURIBOR is the main benchmark rate for households’ funding costs. 20  The net interest burden is considered to be high when the ratio of (debt service expenses - interest income from deposits) to household income is over 40%. 7  On a global scale, an in-depth analysis is also needed of the recent banking turmoil from a regulatory and supervisory standpoint. The Federal Reserve System has now published an assessment of the reasons for the recent events in the United States. On the Financial Stability Committee and the Basel Committee on Banking Supervision, we have embarked on an analysis of the recent developments, to enable lessons to be drawn.

Softening price pressures and a potentially faster roll-out of projects under the Recovery and Resilience Facility, among other factors, should help sustain activity growth over the rest of the year. Similar growth rates are projected for 2024 (2.2%) and 2025 (2.1%), albeit underpinned by the recovery in private consumption and less so by the contribution of net external demand, which was the main growth driver in 2023. 2  Compared with those published in March, these projections revise GDP growth for 2023 up by 0.7 pp, essentially due to stronger output growth in the year to date and the revision to the data for 2022. The growth projected for 2024 is revised down slightly (by 0.1 pp), while that for 2025 remains unchanged. Inflation stood at 2.9% in May 2023, 7.8 pp off its July 2022 peak. This correction has essentially been driven by the drop in the energy component. However, in the second quarter there has also been a slowdown in both food prices (particularly those of oil, bread and cereals, and dairy products) and underlying inflation, which has fallen by 1.4 pp from its peak in February. Within underlying inflation, there has been notable easing in, for instance, transport and, more recently, housing, recreation, hospitality and tourism. According to our projections, headline inflation will average 3.2% this year and increase to 3.6% in 2024, mainly as a result of the expected withdrawal of the measures deployed to combat the effects of inflation. It will then decline in 2025, falling to 1.8%.
This year, the squeeze on real income growth is likely to mean that both house prices and consumer spending weaken together. The housing market leads me to the second recent development – the reassessment and repricing of risk in the financial sector. It is clear that the housing market is being severely affected by the reluctance of the banking system to expand its balance sheet further. Banks are adjusting to the fact that many asset markets are unlikely to re-open in their old form and, as they do so, the supply of mortgage finance is being restricted. Once the adjustment in the financial sector is complete, banks will be able to resume lending. But the era of cheap mortgage finance that underpinned the housing market in 2006 and the first half of 2007 is over and, as a result, it is reasonable to expect the ratio of house prices to incomes to fall back, though with real interest rates still low by the standards of the past fifty years, not to previous averages. 2  BIS Review 79/2008  These changes to our spending power and to the housing market are “real” shifts that, although not easy to accept, we cannot side-step. Lord Mayor, we face the most difficult economic challenge for two decades. But I am confident that we can meet it. Inflation will fall back and growth will recover. But the cost of the necessary adjustment will depend on the credibility of the framework for monetary stability.

In this regard, payment systems researchers warn that if left unattended or unresolved these challenges could eventually overwhelm us and hinder the effectiveness of payment systems and hence commerce. Ladies and Gentlemen, I would therefore like to salute the SADC Payment Systems Project Team for showing good leadership. This has ensured that the basis of the evolution of payment systems in the region is collaborative and consultative, which is critical to the overarching objective of regional economic co-operation and integration. In this regard, not only have most SADC member country implemented real time settlement systems, but these developments have also been anchored on common and jointly developed business and technical specifications. Other developments include the introduction of automated clearing houses. This particular development has positively contributed to improving the processing efficiency and reducing risks associated with cheque transactions. Most importantly, perhaps, is that this development has enabled the introduction of systems such as direct deposits (or credits) and direct payments (or debits) which are truly convenient mechanisms for handling the direct deposits of salaries and wages of workers amongst others. These direct-credit and direct-debit systems are also used to handle regular monthly bills for utilities and could potentially be used in administering pensions and many other government benefits. It is also instructive to note that these developments are supported by sound legal bases that ensure that payment systems in the region are safe, practical and meet international best practice. Ladies and Gentlemen, payment instruments and mechanisms are not new in this region.
All this, combined with pillar II capital requirements, could lead to over-calibration: each individual decision may be warranted; but 3/4  BIS central bankers' speeches  their somewhat disorderly accumulation is not. And obviously, we must not jeopardise the level playing field between euro area banks and their international competitors. Third, in the interaction between authorities, which should be improved: the case of Banco Popular, although it was a success, has also demonstrated the importance of swift and close cooperation between supervisory and resolution authorities, both at European and national levels. In this respect, there is still a need to better coordinate the roles of the different European authorities – SSM and ECB, SRM, Commission, and EBA – in order to have a clearer “pilot in the plane” in crisis management. At a later stage, we could even consider establishing a single banking authority for our single Banking Union, acting to bolster the robustness of the European banking sector. The second challenge is to support cross-border bank consolidations in the euro area. The head of the SSM too, Danièle Nouy, insisted on this point a couple of days ago. We still lag far behind the American market in this respect: the market share in the United States of the top five banks is more than 40% whereas the market share in the euro area of the top five banks is less than 20%.

A significant step forward came last month when our respective Trade Ministers announced a target for bilateral trade of USD30 billion in the coming years. This is a doubling of USD13.8 billion recorded in 2016. I strongly believe that this target is very much achievable and with the closer banking relationship our trade will further flourish. Reflecting on our journey towards ASEAN integration Our partnership in ASEAN marks another integral part of our long standing and deep relationship. There is always the risk that many may take ASEAN integration for granted. If we reflect closely on our journey and how far we have come, is not by mere coincidence. It is a culmination of the collective vision, commitment and conviction to realise the benefits from deeper integration. Where we stand today is the true embodiment of the spirit of ASEAN of mutual trust and close cooperation. We continue to believe that this is the path forward for our region, and one that requires us to further deepen our strong ties to meet the challenges of the future. This occasion is also a testament to the leadership of Indonesia and Malaysia and the excellent working relationship between the two countries. It gives me great pleasure and satisfaction to see many familiar faces today who have been instrumental in realising this efforts, especially Pak Muliaman and Pak Wimboh. For those who are not aware, we go back a long way.
Low oil prices amplified the fall in investment in the petroleum sector. At the beginning of 1999, the outlook for the Norwegian economy seemed fairly bleak. In this situation, the possibility that Norway would enter a recession of a type that would further reduce confidence in the krone was considered a definite risk. This is why Norges Bank decided at the beginning of 1999 to reduce interest rates. Owing to the uncertainty associated with economic developments and the effects of interest rate changes, Norges Bank adopts a gradual approach to the setting of interest rates. Interest rates were therefore reduced in five steps by a total of 2.50 percentage points in the period from 28 January to 23 September 1999. The lowering of interest rates contributed to strengthening the krone. 6  BIS Review 7/2001  In mid-1999, Norges Bank considered the risk of a recession of a type that would reduce confidence in the krone to be substantially reduced. In addition to the reduction in interest rates, this was partly due to brighter prospects for international growth and higher commodity prices. However, we still envisaged a growth pause in the Norwegian economy. The projections for price and cost inflation in the next few years were then in accord with the corresponding aim for inflation for the ECB.

At the same time, growth in the economy was so strong that a higher interest rate would not increase the risk of a deflationary recession to any significant extent. The interest rate increase of 0.25 percentage point was in itself modest. We did indicate, however, that it was more likely that the next change in interest rates would be an increase. Growing evidence of continued pressures in the economy emerged during the summer of 2000. The wage settlement resulted in an increase in labour costs of about 5 per cent in both 2000 and 2001. The projections for price and cost inflation in the years ahead were revised up as a result of the higher rise in labour costs, a weaker effective krone exchange rate and stronger external inflationary impulses. It appeared that the growth pause in the Norwegian economy would be shorter than expected. Against the background of an upward revision of the projections for price and cost inflation in the next few years, Norges Bank decided on 14 June to raise the interest rate by 0.50 percentage point. This was followed by another increase of 0.50 percentage point on 9 August. We then indicated that it was more likely that the next change in interest rates would be an increase, but also stated that substantial steps had been taken in the adjustment of the interest rate that was appropriate on the basis of our analyses.
One of our colleagues did not meet these high standards recently. Our newly appointed Deputy Governor for Markets and Banking, Charlotte Hogg had previously not disclosed a relevant family relationship, as was required under our staff Code of Conduct. For those who have questioned whether we “get it”, we do. We know this honest mistake was also a serious mistake – one that was compounded by the fact that Charlotte Hogg had overseen the development of our new Code. We were clear upfront that there must be consequences for both her and the Bank. Our minimum response would obviously be what we would expect to see in the firms that we supervise. Let’s be absolutely clear about this baseline. In analogous situations in the private sector, we expect:   Evidence that the firm is taking the matter seriously;    Proportionate consequences for the individual, including some form of disciplinary warning and possibly some impact on remuneration; and    A wider review of lessons learned if there was any evidence that there was a systemic problem. 9  See page 16, Financial Reporting Council (FRC), “Corporate Culture and the Role of Boards: Report of observations”, July 2016. See Footnote 7 for details. With appropriate modifications to reflect the fact that it has a very different range of functions to a commercial bank and is accountable to a different range of stakeholders, including Parliament.

In the UK a significant proportion of variable compensation now must be deferred for a period of seven years. This ensures that it can be clawed back over the time scales it generally takes for conduct issues to come to light. To address the “rolling bad apples” problem, mechanisms are now in place in the UK to ensure that when 6  individuals move on their history will be known to those who consider hiring them. The FSB is now considering whether to adopt such an approach more broadly. 7  5  The UK’s Fair and Effective Markets Review (FEMR) recommended that the EU’s market abuse regulation should be extended to cover every major fixed income and currency market, that criminal sanctions be updated, and maximum prison terms extended. See: http://www.bankofengland.co.uk/markets/Pages/fmreview.aspx 6 The PRA has introduced requirements for regulated firms to provide employment references to one another in a mandatory template when hiring Senior Managers. This includes information on an individual’s conduct record, and their fitness and propriety. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  This is all constructive but insufficient. That’s why we have emphasised measures to ensure firms and their employees take responsibility – individually and collectively – for their own conduct. These range from securing compliance with minimum standards to a common and dynamic understanding of good practice that is widely understood and collectively enforced.