samchain/econo-pairs-v1 huggingface dataset:
The strategy is now published as soon as it is adopted and prior to the relevant strategy period. The interest rate affects the economy with a lag The objective of monetary policy is low and stable inflation. The instrument is the interest rate. The interest rates influences inflation with a lag and with varying intensity. As interest rates fall, household and local government consumption and investment will tend to accelerate. Higher demand leads to higher output and employment. Wage growth may pick up. Higher wage growth combined with higher profit margins will result in higher inflation. Lower interest rates will normally lead to a depreciation of the krone. Imported goods will then become more expensive and inflation will accelerate. Expectations play a key role in price and wage formation, and they are influenced by the interest rate. Expectations concerning future inflation and economic stability have considerable impact, not least in the foreign exchange market. More stable inflation Current inflation is low, but our recent history shows that without a nominal anchor inflation becomes high and variable with substantial effects on output and employment. In the 1970s and 1980s, average annual inflation in Norway was over eight per cent. The fixed exchange rate regime, which was introduced in 1986, reinstated monetary policy as an instrument of economic policy in Norway and laid the foundation for lower inflation and more stable economic developments. Like other small, open commodity economies, Norway also experienced that it was not possible to maintain a stable exchange rate as a nominal anchor.

Mr. Singer said that while the central bank remains worried about the possibility of another “hiccup” in the eurozone, he is less concerned than he was before the ECB first indicated in May that it was preparing to take action. “The outcome was more positive than I would have expected five months ago, and things look less gloomy than they appeared before they (ECB policy makers) found some consensus,” he said. The eurozone’s persistent economic weakness has been the main concern for policy makers gathered here over recent days. Those concerns were heightened by a run of very weak data from Germany that indicated the economy may have contracted for a second straight quarter in the three months to September. Mr. Singer believes those figures from August that recorded large falls in industrial production, manufacturing orders and exports are not reflective of the underlying state of the German economy, but instead the fact that there was a larger number of holidays than usual taken during that month. He said the Czech economy, which has a similar focus on industry rather than services, had experienced similar volatility in output over the summer months. “I would be unpleasantly surprised if the weakness in Germany continues,” he said. With its benchmark interest rate already at 0.05%, the Czech central bank last November pledged to maintain the koruna’s exchange rate at above 27 to the euro, effectively setting the firmest acceptable level for the currency.
Indeed as far back as the middle ages Nicolaus Oresme has argued in favour of stable money as a principle of natural law and has denounced the debasing of currency by the state as worse than usury and equivalent to robbery and exploitation. In our times another bishop, Karl Lehmann, the current chair of the German Conference of Bishops, has stressed a moral and ethical justification of price stability. In line with recent documents of catholic social teaching he emphasises the fact that inflation tends to hit the weakest segments of the population hardest and that it has contributed to impoverishment in particular in developing countries. On the whole, however, the world of faith and the world of money eye each other with a good measure of distrust and suspicion. Men of faith have often regarded money as the symbol of greed, sin and evil rather than as an instrument for mutually beneficial exchange and a foundation of prosperity. The Christian ethical tradition has in particular expressed moral reservations against the trading or lending of money against an interest charge. This sceptical attitude towards money and interest rates, which to an economist is simply the intertemporal price of money, was well-entrenched in the Scholastic tradition and goes back to Aristotle’s view that to “make money out of money” would go against natural law. Interestingly such moral scruples on lending against interest are also found in other religions and this form of lending is banned to this day in the Islamic world.

One is hard pressed to find examples in history, where sovereign nation states voluntarily chose to cede or share sovereignty in the monetary field. It is therefore clear that European Economic and Monetary Union has been and will continue to be part of the wider economic and political project that the process of European integration process has represented from the very start. Monetary union is certainly not only about money. It is an important element in the very successful quest for lasting peace, stability and prosperity in Europe. This quest involves the building of trust and the sharing of sovereignty among European partners and the building of common institutions, in cases where this is desirable for the benefit of all. Europe is more than a collection of nation states, but it also stops far short of becoming a single federal entity. I do not believe that a stable monetary regime necessarily must have its root at the level of the nation state. Going back in history the international gold standard coincided with an era of stability. It was a system that was fundamentally based on rules and which transcended the nation state. Nevertheless, as a currency that is new and not linked in the traditional way to the nation state the euro does face particular challenges in winning the trust and the hearts of the people. Money is clearly regarded as more than simply a medium of exchange or a unit of account.
The policy frameworks guiding its two founding objectives – monetary and financial stability – have undergone a revolution. So too has the Bank’s degree of external transparency and engagement. The Bank is unrecognisably better than the institution I joined. As a public servant, I consider myself fortunate to have worked on the signature monetary and financial stability issues of the past 30 years, riding the waves of crisis that mark history and make careers. Like those new Bank graduates, this old one could not have wished for a better endowment. It has been an 23  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  23  education to do so alongside several generations of incredible Bank colleagues, including five exceptional Governors in Robin Leigh-Pemberton, Eddie George, Mervyn King, Mark Carney and Andrew Bailey. As ever, there are challenges aplenty for the Bank today – I have touched on one or two of them. But its strong institutional foundations, and quite brilliant Staff, mean I have never had more faith in the Bank rising to them. I leave with the UK economy surfing as high a wave as any in its history. Inflation is bang in line with its target and the economy is growing at an annualised rate of over 20%. I wish Bank colleagues the best of luck in maintaining this performance after I have gone. Eyebrows will be raised if not.

While I still doubt big banks can fail safely, they are far less likely to inflict collateral damage on depositors and the wider financial system. In all of these respects, the regulatory reform agenda of the past decade has been strikingly successful. And the benefits of this have already been felt. During the Covid crisis, the global banking system has lived up to the expectations set for them by Mark Carney at its start: they have been part of the solution, not the problem.25 That is far from saying, however, that the financial stability job is done. In a complex, adaptive web, it can never be done. So from a potentially long list, let me discuss two areas of unfinished business: lending to small and medium-sized enterprises (SMEs) and the future of payments. 23  Haldane (2020). Aikman et al (2018). 25 Giese and Haldane (2020) 24  15  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  15  In 1929, Hugh Macmillan led a Government Commission into lending to SMEs in the UK. It included in its ranks John Maynard Keynes and Ernest Bevin.26 It concluded that many UK SMEs were unable to access adequate finance, restraining growth and job creation. The “Macmillan Gaps” were born. In the period since, there are few signs these gaps have closed. Indeed, with the retreat by UK banks from business lending and many high-streets, there are reasons to think the Macmillan gaps may have widened.
Another way to consider the graveyard question is to look at the returns of the insurance firms that we oversee and ask whether or not they resemble tombstones. Empirically, returns on equity can be volatile thanks to things like competitive pricing pressures, catastrophe risk losses and asset market volatility, but they have remained healthy in recent years. Since the introduction of Solvency II, returns have been in ranges of about 8 to 10% in general insurance, and 10% to 15% in the life sector. Our insurance sector is clearly alive and kicking. Moreover, the PRA does not aspire to a zero failure regime – more than fifty insurers regulated by the PRA are currently in some form of run off, for example – and even our primary objective of safety and soundness is in some ways just a means to end. Policyholders are not well served by firms that are so safe and cautious that they might apparently be able to live forever, but never grow or change. Such firms are more likely to be broken by a storm than to bend with it. On the contrary, policyholders are better protected by firms that: first, are sufficiently profitable and attractive to external capital to be able to change and grow in response to the changing external environment; and second, are able, if their business models do fail, to exit the market in an orderly fashion, paying their remaining liabilities as they fall due. What we do have a very low appetite for is disorderly failure.

First, globally it is not normal for prudential regulators to have an actual competitiveness objective – to my knowledge there is only one example amongst 3/5  BIS central bankers' speeches  the main prudential regulators. I worry therefore that having such an objective might be seen by others as an intention to weaken regulation in the UK, and thus undercut our authority in international bodies. I also think it’s a bit of a red herring. A robust prudential regime focussed on objectives of safety and soundness and policyholder protection is part of the national infrastructure that underpins the attractiveness of UK firms as counterparties. Second, it is wise not to give regulators too many objectives and have regards. Loading something up with ever more objects is an excellent way to decorate your Christmas tree but it’s not the best way to create an effective regulator. Solvency II Review So much for theory. What about practice? In particular the main event of this year: you may think it is defeating Covid, but of course it is in fact the review of Solvency II. I don’t want to bore this audience (any more than I have already) with a discussion of detailed measures. But I have a few brief points to make about the review itself. Perhaps most importantly, the review will stay true to the basic principles of Solvency II.
So, the fact that we disagree should be seen as a sign that everything is working the way it is supposed to. It would in fact be surprising if the entire Board supported every interest rate decision made. Unusually difficult to assess the situation The third thing I would like to point out is perhaps the most important. This is that the even vote is of course more than anything else a sign that it is unusually difficult to assess the current situation – there is a fine balance to be drawn. I think that it is important to say this as this is not really the picture that has emerged from the debate. Instead, an unchanged repo rate has most often been portrayed as the only reasonable and self-evident alternative. Even though I myself eventually came to the conclusion that the interest rate should remain unchanged, I must say that I did not feel that this was an entirely self-evident decision. The Executive Board thus decided by the smallest possible margin to increase the interest rate by 0.25 percentage points. Three main reasons were given for this. First, inflation has continued to increase. In July it reached the highest level measured since the mid-1990s and was far above the inflation target. The much-publicised revision of the CPI by Statistics Sweden last week does not significantly alter this picture, by the way, even though the figure for June is now higher than that for July. Secondly, inflation expectations are also still high.

With attention focused on money markets, the spotlight also fell upon central banks who implement their monetary policy in money markets by influencing the level of interest, via the supply of liquidity. Moreover, the central banks are the only market participants who are in a position to create the liquidity used in the interbank payment systems. The kind of upheaval observed in the international money markets over the past few months has never been witnessed in living history. Rumours and reports of substantial sub-prime positions at banks led to a sudden loss of confidence in international financial institutions. Moreover, these banks are, to some extent, uncertain about their own future liquidity situation. Consequently, banks subsequently began hoarding liquidity and became extremely cautious when granting credit to each another. The market for unsecured interbank loans over longer terms collapsed and at times the market for foreign exchange swaps dried up. Since then, banks have been unable to obtain unsecured funds for terms of more than a few days or weeks – or have been able to do so only by paying substantial interest premiums. There were three factors that exacerbated the money market disruptions. First, bank securities holdings that had supposedly been first class and liquid proved to be illiquid, thereby failing to serve as a source of supplementary liquidity. Second, other participants in the financial markets also faltered in their supply of liquidity to the banks. Their confidence in banks suffered because money market investments that had been considered safe suddenly turned out to be risky.
David Carse: Documentation risk, operational risk and the New Capital Accord Speech by Mr David Carse, Deputy Chief Executive of the Hong Kong Monetary Authority, at the Asia Pacific Loan Market Association Documentation Launch, Hong Kong, 24 May 2002. *  *  *  Ladies and Gentlemen, I am very pleased to be able to speak at this special luncheon to launch the APLMA Standard Documentation. I am told that there has been an unprecedented demand to attend this event. I would like to think that this reflects my own attractions as a speaker. But I am realistic enough to recognise that the real star of the show is the documentation itself; and your attendance here today reflects the level of interest in the outcome of the Association’s hard work in bringing the first phase of this project to fruition. My purpose today is to stress the importance of good documentation and to place it in the more general context of the increased regulatory focus on operational risk that is a feature of the Basel Committee’s proposed New Capital Accord. I will also briefly describe the latest developments in the New Accord and bring you up to date on the revised timetable. The work of the Association It is over three years since I spoke at the inaugural luncheon of the Association in Hong Kong. I said on that occasion that the Association promised to become a vital part of the market infrastructure in Hong Kong.

I would therefore encourage as many market participants as possible to begin to use the Association’s new documentation. This should help to boost the liquidity of the primary market in syndicated loans, but it should also serve to increase turnover in the secondary market which is still relatively underdeveloped in Hong Kong. It is easier to trade a product whose terms and conditions are homogeneous. The Association’s intention to move on in the second phase of its project to develop standardised documentation for secondary loan trading will give further impetus to this market. This is something that the HKMA would particularly welcome since it would give banks greater flexibility to manage their loan portfolios and adjust their liquidity. Apart from its impact on the market as a whole, standardised documentation has clear benefits at the level of the individual firm. Lending banks are better protected against the risk that contracts will turn out to be unenforceable, and that they will be left with a credit exposure that they did not anticipate. Moreover, the whole process of negotiating loans becomes more streamlined. There should not be a need to haggle over the standard “boilerplate” of the loan agreement, so that resources can be freed up to concentrate on the issues that are unique to the particular transaction. The reduction in the number of idiosyncratic terms and conditions also means that the loan should be easier and safer to administer after the loan agreement is signed. Operational risk is therefore reduced. Nor are the benefits one-sided.
This would make it more difficult for monetary policy to counteract recessions in the future. If average inflation is low, the nominal average interest rate will also be low. And the lower the interest rate is in normal conditions, the less scope there is to lower it before it reaches its lower bound. A more general problem is that the inflation target acts as a benchmark for price and wage formation – it forms what is usually called a nominal anchor in the economy. When economic agents have a collective picture of how prices will develop in the future, it becomes easier to plan for the long term. The absence of a nominal anchor could also lead to not just inflation varying more, but also output and  16 See, for example, Duy (2017) and Summers (2017). 11 [20]  employment. Assume that a negative shock impacts demand in the economy, causing inflation to fall. If there is uncertainty about the inflation target, inflation expectations may also fall in the slightly longer term. This will cause a rise in the real interest rate, i.e. the interest rate corrected for inflation expectations, if the nominal interest rate remains unchanged. The higher real interest rate amplifies the effect of the original negative shock on demand and weakens the economy even more, as it is the real interest rate that affects companies’ and households’ investment and consumption decisions. In a corresponding way, a positive shock to demand can make inflation and inflation expectations rise.

Rajan, Raghuram G. (2005), “Has financial development made the world riskier?” Paper presented at The Greenspan Era: Lessons for the Future—A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 25–27. Scholes, Myron and Ash Alankar (2017), “What investors can teach central banks about inflation”, Opinion Markets Insight, Financial Times, 1 November. Summers, L. H. (2017), ”5 reasons why the Fed may be making a mistake”, blog post, 14 June, http://larrysummers.com/2017/06/14/5-reasons-why-the-fed-maybe-making-a-mistake/ Svensson, Lars E. O. (2017), ”Cost-benefit analysis of leaning against the wind”, Journal of Monetary Economics, vol. 90, pp. 193-213. The Economist (2017), “The Phillips curve may be broken for good”, Daily Chart, 1 November. White, William R. (2006): “Is price stability enough?”, BIS Working Papers, no 205, April. Wolf, Martin (2017), “Central banks alone cannot deliver stable finance”, Opinion Central Banks, Financial Times, 24 October. Yellen, Janet L. (2017a), Transcript of Chair Yellen’s Press Conference, 20 September. Yellen, Janet L. (2017b), “Inflation, uncertainty, and monetary policy”, speech at “Prospects for growth: Reassessing the fundamentals”, 59th Annual Meeting of the National Association for Business Economics, Cleveland, Ohio, 26 September. 16 [20]  Figure 1. Swedish inflation ’ahead of the international cycle’ Annual percentage change  Note. Inflation for Sweden is measured as the CPIF, for the US as ‘core PCE’ and for the euro area as the HICP. Sources: Bureau of Labor Statistics, U.S. Department of Labor, European Commission (Eurostat) and Statistics Sweden  17 [20]  Figure 2.
In this asset restructuring drive, the Banco de España has considered it essential that the recognition of losses should not be deferred, in particular when real estate is acquired or accepted in payment of debts. These are not improper practices. They may be perfectly correct. But their use cannot lead to real estate assets becoming locked indefinitely into balance sheets. Accordingly, the approach followed by the Banco de España combines the detailed supervision of these operations with changes in provisioning regulations, so that the assets are valued at prices close to market, and are available for disposal at the best opportunity. These efforts must be fully and properly communicated. The Banco de España is going to require additional efforts from the banking sector in terms of transparency when the annual accounts are released and in the quarterly estimates the sector offers to analysts. Banks and savings banks will offer standardised supplementary information on the real estate development and construction portfolio and on the residential mortgage portfolio, detailing the corresponding collateral, the related loan-to-value data, their payment status and the coverage set aside for their potential impairment. The central bank, in coordination with the accounting authorities – ICAC and CNMV – is going to convene a meeting of the representative banking associations to agree on the technical formats for this information which, in any event, should be available by late March next year, when the consolidated financial statements of the new groups resulting from the mergers processes are released.

This is so not only now, when the doubtful assets ratio for deposit institutions as a whole stands at 2.5%, approximately 3.5 pp below that of credit to the private sector, but also in the past. For instance, in 1993, when the unemployment rate amply exceeded 20% and interest rates were substantially higher than at present, the doubtful assets ratio for house purchase loans was approximately 4.5 pp lower than that for total credit to the private sector. The retail mortgage business in Spain is characterised by its simplicity, by having avoided innovations that tend to lower banks’ incentives to manage borrowers properly, and by the incentives to build relationships with customers, not only because the asset being financed is so important to them, but also because of the guarantees supplementing the mortgaged asset. Furthermore, the ratio between the loan value and the appraisal value is low, at 62% on average, and is similar across the various deposit institutions. That said, I should emphasise that the protracted growth of activity resulted in redundant capacity. Under a traditional retail banking model, in which knowledge of customers and proximity to them are defining characteristics, it is natural to increase capacity in an upturn, for example, by opening more customer service points. It seems obvious, however, that the size attained by the branch network and central services at their peak did not match foreseeable developments in the banking business. On the liabilities side, there were also imbalances.