samchain/econo-pairs-v1 huggingface dataset:
Additionally, the current ample liquidity available to commercial banks reduces the pressure on them to increase the remuneration of retail deposits. Other factors point to a potentially faster monetary policy transmission compared to past episodes. First, the current hiking cycle comes after the strong negative shock prompted by the pandemic, which adversely impacted firms’ financial situation by increasing their debt levels. This leaves them more vulnerable to interest rate hikes, and their expenditure decisions may be more sensitive to monetary policy changes. Conversely, however, households still have around € billion in excess savings built up during the pandemic and they are benefiting from sizeable fiscal policy support. Second, there has been a shift from bank to bond funding over the last decade, with bond debt increasing from 16% to 24% of non-financial corporations’ total debt.20 This, together with the faster monetary policy pass-through to bond rates than to bank rates, implies faster transmission than in the past. Third, the residential real estate market is a key area to monitor, in particular given that some euro area countries have experienced a significant increase in house prices over the last decade, with signs of overvaluation.21 Housing represents a major part of household wealth and bank assets. Thus, a potential decrease in house prices would weigh negatively on banks’ portfolios, by reducing the value of the collateral provided to banks by households and firms, which might ultimately affect credit developments.

While a small step for mankind, this is a giant one for bank regulators. It is also, inevitably, something of a step into the unknown. What will be the impact of changes to the CCB on credit and growth? Will the two arms of policy (monetary and macroprudential) be better than one? And, if so, what institutional arrangements best deliver those benefits? Policy experience from the recent past and the present can shed light on these questions. The US dotcom bubble As a first case study, consider the behaviour of the US economy after the bursting of the dotcom bubble in 2001. Chart 2 plots US official interest rates in the period just before and after this event. Interest rates fell sharply, from 6.5% at the beginning of 2001 to 1% by the middle of 2003, to cushion the effects of the financial headwinds created by the dotcom bubble popping. Consider now what interest rate path would have been predicted had policy been responding mechanically to deviations of inflation from target and output from potential – in other words, following a standard “Taylor rule” [Taylor, 1993]. As Chart 2 shows, this would have implied a less dramatic fall in interest rates in the US. After the dotcom crash, a gap opened up between actual and Taylor-rule implied US interest rates. This was both sizable (on average, one or two percentage points) and persistent (lasting from early 2001 right up until summer 2008).
This is required to improve crossborder crisis management and to create effective cooperation between authorities even in an emergency. Trust can also be a key factor in preventing a crisis from occurring at all. It is not enough for individual authorities and countries to take action when the banks’ playing field is the entire international arena. The scope of the crisis on this occasion was connected to the financial markets’ national boundaries largely being erased. But the cure in this case concerns, as I see it, meeting globalisation with globalisation. More cross-border cooperation is required, and perhaps using different methods than before. Landing on our feet and keeping our balance in the future Let me conclude by saying that I have every hope that we will land firmly on both feet when this crisis is over. There are many things that have been out of balance around the world. And the longer the imbalances are allowed to continue growing, the larger the fall will be when one finally loses one’s footing. We have been hit by a financial crisis that is without precedent in a global context. We have been hit by the worst recession since the Second World War. The recovery will take time, both with regard to the financial system and the economy in general. But it has begun, even if there is considerable uncertainty over future developments and there are many risks lining the path. Once we have regained our balance we must keep it.

The mechanism is largely the same for the loans in Swedish kronor at longer maturities, which are offered at the repo rate plus a certain premium. By regulating the premium the Riksbank determines how attractive the loans will be compared to the conditions prevailing in the market. The diagnosis that a measure is no longer needed may be difficult to make. Although, for instance, the demand for a particular type of loan may have disappeared, the fact that there is still a possibility to borrow may have a stabilising effect. We will not be in too much of a hurry. And there are at least two items we need to be able to cross off the list before we begin phasing out the measures. We must be able to say with a good degree of certainty that the situation in the financial sector is stable and that it can function normally without support. We must also be in a situation where we expect to be able to attain the inflation target and stimulate the economy sufficiently without the unconventional measures. 8  BIS Review 138/2009  There are other measures that require more active decisions by the Riksbank to be phased out. For instance, the number of counterparties allowed to participate in fine-tuning operations and the list of securities accepted as eligible collateral for credit from the Riksbank. However, it is not self-evident that these measures will actually be phased out.
5/19/2020  Pandemic central banking: the monetary stance, market stabilisation and liquidity  SPEECH  Pandemic central banking: the monetary stance, market stabilisation and liquidity         Remarks by Philip R. Lane, Member of the Executive Board of the ECB, at the Institute for Monetary and Financial Stability Policy Webinar, 19 May 2020 19 May 2020 In my recent blog post, I described the range of scenarios that have been developed by ECB staff to support the analysis of the near-term and medium-term macroeconomic dynamics in the context of the coronavirus (COVID-19) crisis. [1],[2] I also explained the current monetary policy of the ECB and outlined our approach to setting the future course of monetary policy. My remarks today aim to reinforce these points by presenting some additional empirical evidence. Macroeconomic outlook Chart 1 shows the three scenarios developed by ECB staff that were published on 1 May. Since then, the Eurosystem staff have continued to track the incoming information (both the economic data and the public health data): the forthcoming June Eurosystem staff macroeconomic projections will provide an updated assessment of the economic outlook. Still, the 1 May scenarios provide an excellent framework for understanding the environment facing policymakers. In all scenarios, the current quarter represents the trough of the crisis, with a cumulative decline in the range of 10 to 20 percent of GDP since the start of the year.

Economically, high oil prices have given many Middle East countries an unprecedented opportunity to diversify their economies and invest in capacity-building for the future. Indeed the Middle East today stands on the threshold of a new era of unprecedented infrastructural development and economic activities. Asia and the Middle East have concurrently become aware of each other’s dynamism and the mutual benefits of closer ties, frequent interaction and a stronger partnership. Some observers have dubbed the flourishing trade and business linkages between the Middle East and Asia as a “New Silk Road”. But the ties between the two regions will surely become much more multi-dimensional in the years to come. How Singapore is remaking itself How is Singapore responding to these dramatic changes in its external environment? We have used the last 10 years to remake Singapore, strengthen our competitiveness and expand our economic space. We have progressively restructured and diversified our economy. Manufacturing will continue to play a key role but we are also moving into more technology- and knowledge-intensive manufacturing. Fostering cutting edge scientific research and strengthening Singapore’s attractiveness as an R&D (Research and Development) hub is a priority. In the services sector, we have strengthened the key areas of tourism, healthcare, education and financial services. More of Singapore’s growth will come from innovation and knowledge. We are also looking outward towards the rest of Asia and beyond. Singapore is located at the heart of Southeast Asia, with China to the East and India and the Middle East to the West.
10  By searching  for words such as “self-employed”, “flexible hours” and “contractor” in published job ads, we can track trends in the demand for jobs with these characteristics. This suggests all three job classifiers have maintained or increased their shares of vacancies since 2008 (Chart 8). On the face of it, these trends – less union membership, more self-employment, more zero hours contracts, more part-time and temporary work – might suggest work has become more fluid and insecure. But we should be cautious about jumping to that conclusion. Over the past three years, there has been a marked increase in the share of temporary workers reporting they do not want a permanent job. And since 2012, the share of part-time workers reporting that they do not want a full-time job has also been on an upward trajectory. Whether these trends in employment are voluntary or involuntary, good news or bad, an opportunity or a threat, they may still carry implications for wage-setting. That is true even if it is only a (rising) minority of workers being affected by these changes. The marginal worker is much more likely than in the past to be self-employed, to work flexibly and to not be part of a union. And, economics and employers tell us, it is the marginal worker whose pay matters most when determining wage pressures in the economy at large. Implications for Wages  So what does the evidence tell us about the potential effects of these changes in patterns of work on wages?

Of course, there is plenty still left to do with parts of the City still among the poorest in the UK. But compared with when I last visited a few years ago, there is now a real sense of opportunity and optimism in Bradford, lifting the spirits of the businesses operating here and the people living here. Regional visits such as these are the most useful and most interesting part of my job. Over the course of two days, I will speak and listen to over two dozen businesses of all shapes, sizes and sectors. I will speak and listen to a number of charities, not-for-profit enterprises and schools. I will do a walkabout in Sunbridge Wells, an underground parade for retail and leisure and a great example of that civic investment and entrepreneurial spirit operating once again in the City. And I will have with me a film crew, distilling some of the key bits of my visit to a wider audience across the whole of the UK. This is part of a renewed effort by the Bank, under Mark Carney’s leadership, to engage with as wide a cross-section of people, and as broad a range of views, as possible. Events of the past twelve months – indeed, events of the past twelve days – have illustrated just how important it is for policymakers to do so.
I would like to share with you some considerations on various aspects that I believe are relevant in the current context. These considerations concern banks, on the one hand, and supervisors and financial regulators, and economic policy-makers in general, on the other. 1  The use of capital buffers  The first consideration I would like to share relates to the accumulated capital buffers and their use in this crisis. Solvency levels are now significantly higher than before the global financial crisis. This is fundamental to ensure that the banking sector continues to be in a position to perform its function of financing the economy during the present crisis. Naturally, this also increases its capacity to absorb losses. In fact, there is evidence that, in the countries that had the largest capital buffers, the deterioration of “growth at risk”, a concept developed by the International Monetary Fund to capture expected GDP growth in stress situations, has been less severe than in other jurisdictions. Likewise, the empirical evidence available shows that the greater the level of banks’ solvency, the greater their capacity to grant financing. In addition, our latest analysis allows us to conclude that their use of the public guarantee programme has also been determined by their solvency levels. At the start of the crisis, prudential supervisors decided to release many of the macroprudential (countercyclical capital and systemic risk) buffers, although these were not very significant, because in many countries the systemic risk that had built up was not sufficient to require their activation.

26.10.2020  The banking sector and the challenges posed by the pandemic III Foro Banca de El Economista: The present and future of the financial system Pablo Hernández de Cos Governor  *English translation of the original speech in Spanish  Ladies and gentlemen, good morning: I should like to start by thanking the organisers of this event for inviting me to participate in the III Foro Banca. Allow me also to mention in relation to the content of my address that, as a member of the Governing Council of the European Central Bank (ECB), I am required to observe the so-called “quiet period” preceding meetings at which monetary policy decisions are to be taken. Accordingly, my reflections should not be interpreted as indicating the monetary or economic outlook. In the context of the COVID-19 pandemic and its already significant impact on the economy, the specific challenges facing the banking sector, both in Spain and internationally, are particularly relevant, given the role it plays in supplying financing to the productive sectors of the economy and households. It is evident that the crisis generated by the pandemic has intensified the credit, market and operational risks faced by the banking sector. It is also evident that the improvements made by the sector over the last decade, as regards the quality of its balance sheet and its solvency levels, have placed it in a better position to absorb this crisis and to continue supplying the financing that the economy requires.
Capital markets thrive on breadth and depth; and the broadest and deepest markets are those that transcend national boundaries. Companies raising funds seek liquid markets, which attract investors and lower the cost of borrowing. So it is that many Asian companies issue bonds in the Euromarkets, and technology companies worldwide aspire to be listed on NASDAQ. Investors in turn seek liquid markets, because in rapidly changing conditions, the ability to move in and out of markets at minimal cost is critical. BIS Review 50/2001  1  Fourthly, as a result of globalisation, small differences in conditions can translate into large differences in outcomes. Market participants have always placed a premium on sound and responsive regulatory systems. They seek jurisdictions that provide stable and resilient financial systems, and fair and efficient markets, at minimal regulatory cost and impediment to innovation. They prefer conducive business environments which offer good market infrastructure, favourable tax treatment, and stable economic and political conditions. And talent has always preferred attractive living conditions. They value good schools, safe homes, clean environments, vibrant social and cultural activities, and competitive remuneration. In the New Economy, both financial capital and talent have become more mobile. More open financial markets and more liberal regulatory regimes have enabled institutions to choose where to reside and operate. Countries have realised that people are the key success factor in the new economy. They have opened their doors wide to the immigration of talent, and created a single global market for those whose skills are in demand.

As such, it is of utmost importance that we consider the principles of sound and prudent financial management in this undertaking. We cannot in good conscience, overburden and cause anyone to enter into financial difficulty in pursuit of owning a home. This fundamentally goes against the intention of owning a house. Therefore, based on the principles of fairness, justice and prudence, it is necessary for us to be absolutely clear on what ‘affordable’ means. This will influence both the diagnosis of the issue and the solutions to be implemented. We must be fair and just to the needs of the ordinary person. At its core, affordability is a function of two things; the income of the individual and the price of the house. A house is affordable if its price does not overburden the person’s finances and reflects its true value. It is crucial that the percentage of income spent to service the mortgage does not go beyond the person’s financial capacity, and that they are able to pay for other obligations on top of this commitment. To this end, at the individual level, we need to put emphasis on the value of financial literacy and financial education. For example, the Credit Counseling and Debt Management Agency recently launched the “Rumahku” portal to help potential borrowers in Malaysia to understand the financial commitments associated with owning a house. It also helps them to understand their capacity to meet these commitments.
At the same time, it should be followed by an accelerated convergence process of the supervisory and regulatory practices according to the financial centres of influence. Fourth, the current crisis confirmed our concern related to the exposure of the Balkan region to a relatively small group of banking operators of vast regional extension. Shocks affecting parent banks would affect one or several regional countries. A similar risk still persists even in the case when one of the branches in the region is hit by a shock. Similarly, the contagion risk is still present. Fifth, I believe the region should scrutinize carefully lending in foreign currency. It is essential to set a better balance between lending in the national currency and lending in foreign currency. To this aim, the nature of the exchange rate regime and the impracticability of central banks in the region to act as lender of last resort should be taken into account. In this context, we should support a stronger role of the national currency in bank lending, making lending in foreign currency more costly for banks if it is not supported by savings in foreign currency. The strong reliance of banks on foreign currency financial resources to support the rapid lending should be addressed and managed timely. Sixth, I think the current crisis will make the financial funds, which for a long time have rushed in numerous forms across all former communist countries of East Europe, scarcer.

These reforms, including to the timing of SONIA publication, will take effect from March/April next year. Working Group on Sterling Risk-Free Reference Rates Let me now turn to the issue of forging a market consensus on the appropriate risk free rate. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  Here the Bank set up the Risk Free Rate Working Group with the objectives of identifying an RFR and promoting its use as an alternative to sterling Libor. We used our convening power to do this because we recognised that individual market participants, acting alone, cannot overcome network effects. Only coordination and cooperation across a broad spectrum of market participants can create the conditions for change. We also believe that the solution must come from the market – that is why the Group is market-led. As you know, and having considered the merits of two secured benchmarks alongside SONIA, the Group has now reached a decision to recommend SONIA as the RFR. This is welcome progress: the main priority from the Bank’s perspective was for the market to coalesce. We were committed to supporting whatever decision the Group made. That is what having a market-led process means. As it happens we were not surprised by the outcome because the transition path to a secured rate would clearly be much more difficult than it will be for SONIA. A consequence of the Group’s decision is that SONIA will grow in importance.
One latest development is the amendment of the Banking (Capital) Rules last year, which brings the current synthetic securitisation rules fully up-to-date with the Basel rules. These products are commonly found in Europe over the last five or six years. Banks in Asia-Pacific are now starting to take note of them as a useful tool for credit risk mitigation and regulatory capital management without having to transfer their portfolio assets. This feature is extremely useful to help overcome typical constraints such as loan assignment and confidentiality restrictions. Such products can offer an additional investment opportunity for institutional investors. 14. When the new capital rules become effective in June this year, the full spectrum of synthetic securitisation structures will be available for use in Hong Kong. For example, the use of special purpose vehicles (SPVs) as providers of guarantees or credit default swaps, which is a common structure for synthetic securitisation products, will be permitted subject to relevant criteria1. It effectively lifts the headroom for growth of the synthetic securitisation 2/4  BIS central bankers' speeches  market here. 15. Earlier on, I briefly touched on the HKMC, which is a wholly owned subsidiary of the HKMA. I should also elaborate a bit more on its role in promotion of securitisation in Hong Kong. 16. One of the key business mandates of the HKMC is to develop securitisation and other financial products that contribute financial stability and facilitate the development of the local financial markets. 17. Throughout the years, it has been a trailblazer in different areas.

The HKMA’s subsidiary, the Hong Kong Mortgage Corporation (HKMC), which was set up with an objective of buying mortgage loans from banks to supply the markets with additional liquidity, could hardly find any seller in recent years. 4. And our banks are also highly capitalised. Their average Capital Adequacy Ratio is over 20% whereas the average classified loan ratio stays at low levels under 1%. Therefore, they also do not have a strong motivation to issue capital efficient products like synthetic securitisation. 5. However, that does not mean that this will always remain the case, and there is no place for structured credit products here. There are a few factors that can spur the further development of these products in the coming years. 6. First of all, Hong Kong has always excelled as an international financial centre that serves not just the local economy, but also the whole region in the Asian time zone, especially the Mainland of China. Everyone knows the success of the Hong Kong equities market. It is disproportionately large compared to our GDP, but it is still growing at a rapid pace with a strong pipeline of IPOs of companies from the Mainland and elsewhere. 7. In the bond space, there is a fairly common misconception that we do not have a bond market to speak of.