samchain/econo-pairs-v1 huggingface dataset:
Because of the additional stress that central bank balance sheets have undergone, in terms of the size and the number and magnitude of new risk factors that must be managed, as I have already mentioned, there is a need to revisit the tools we have used to assess the resilience of our portfolios. To this end, a session will be held to discuss the design of stress tests for balance sheets and how this tool helps institutions to articulate risk tolerance and to assess the capacity of portfolios to deal with different negative scenarios, ensuring that banks maintain the capacity to manage policy measures if necessary. We will also be discussing risk governance, as it is essential to have a solid structure that clearly defines roles and responsibilities. Since the risk management governance structure may differ from one country to another, we want to learn about the construction and implementation of the models, the institutional arrangements within the organization that allow the dissemination of financial risk management objectives and the role played by the lines of communication with the bank authorities in order to specify guidelines and directives to address this issue. Finally, issues related to sustainability and climate change have been incorporated into the balance sheet risk management framework of some central banks. We therefore want to review and understand how central banks' risk is affected by climate change through channels that include the credit risk of their own assets and through their impact on the real economy.

This would move the euro area closer to the type of financial union we see in federations like the U.S. or Switzerland, where banking sector problems are dealt with at the federal level and have no implications on the finances of the federated units. Of course, this must be accompanied by appropriate incentives for banks to limit moral hazard. Policy conditionality should include restructuring plans in line with EU state-aid rules, and principles for orderly resolution of non-viable institutions and for limiting the use of public money. Second, the commitment to establish a single supervisor is critical insofar as it facilitates direct recapitalisation. But it also has positive effects in its own right. Given appropriate powers, a single supervisor would produce greater transparency in national banking sectors and reduce regulatory capture, thereby increasing investor confidence. In addition, it would support financial integration by “Europeanising” supervisory priorities. For example, some supervisory actions we have seen during the crisis that have caused the single market to fragment, like requiring banks to match domestic assets and liabilities, would no longer be anticipated. In terms of design, this supervisory mechanism should have a clear euro area dimension, while remaining fully compatible with the single market and EU-wide supervisory harmonisation. The ECB stands ready to play a role, provided that there is no contamination between monetary policy and financial stability. Of course, extending the remit of the ECB should come with higher standards of democratic accountability.
From the start, the program included five main parts: - Macroeconomic stabilisation policies: a restrictive fiscal and monetary policy to remove the monetary overhang and to reintroduce macroeconomic equilibrium. - Liberalisation of prices: after 40 years of central price fixing, the bulk of prices were freed. - Liberalisation of external trade - and introduction of partial convertibility (for resident firms’ current account transactions). That required initial devaluation toward an exchange rate seen as viable from the point of view of the balance of payments. - Massive and rapid privatisation, including the use of the voucher scheme. - Social safety net to protect people whose standard of living dropped below poverty line. These adverse impacts of economic transformation were to be contained within tolerable limits. The programme aimed at re-establishing the role of prices and markets for an efficient allocation of resources. For the start, rationalisation of price relations implied a rise of the price level, owing to a monetary overhang, and to low downward price elasticity. In a small open economy, it made no sense to free internal prices without opening the economy to external competition and to world price relations. And, there could be no meaningful liberalisation of imports and exports without current account convertibility, introduced at least for resident firms. The short Polish and Hungarian experience showed, however, that free trade and partial convertibility should not be attempted without a preceding macroeconomic stabilisation.

The first year of transformation - 1990 - was practically devoted to the stabilisation goal; further transformation steps taken in 1991 were accompanied by continuing stabilising policy. Measures seeking external stability were an indispensable part of the programme. It was understood that the exchange rate would have to be undervalued in relation to purchasing power parity to sustain the liberalised trade and a partly convertible currency and to function as a stabilisation anchor. Compared to steps such as freeing of prices, freeing of external trade, and introduction of partial convertibility, it was clear that privatisation would be a gradual, more time-consuming process. First, steps were taken to stop state subsidies to firms (as well as to prices), and to let the firms face a hard budget constraint; that included also a stricter credit policy by commercial banks. A shift of property rights to private hands was the only way how to BIS Review 25/1997  -4-  change fundamentally the behaviour of firms, expose them to the pressures of the market, and initiate productivity increase and structural change. In 1989 the private sector was almost non-existent in the former Czechoslovakia, accounting just for 3 per cent of GDP. Domestic capital base was weak and institutions of market economy such as stack exchange and developed financial sector were lacking. Therefore, a combination of standard privatisation methods (that means sales, including sales to foreign investors) with non-standard ones was used to speed up the process.
Using today’s definition, one could say that we in a sense had a negative monetary base in Sweden. This illustrates that the currently used definition of “monetary base” is actually rather strange. The liquidity deficit has thereafter shifted to a surplus. The Riksbank is now draining the surplus liquidity by issuing certificates (and sometimes via finetuning transactions) with one-week maturity at an interest rate which we still call the repo rate. A better term would be the “certificate rate”. 8  See Yu (2016) and Chapter 1 in Walsh (2017) for summaries of studies based on US data. These studies usually investigate the immediate impact on asset prices when news of asset purchases is made public. It is more difficult to study whether the price effects are permanent and here the empirical support is therefore weaker. Altavilla et al. (2015) find that the ECB’s purchasing programme has pushed down interest rates across quite a broad spectrum of European assets, and particularly as regards government bonds in countries with high interest rates (such as Italy and Spain). De Rezende et al. (2015) find that the initial stages of the Riksbank’s purchasing programme contributed to rate falls in about the same way as purchasing programmes in other countries. 9  In a survey of central bank governors and leading researchers, a high percentage in both groups say that the purchasing of government bonds and/or other assets is a tool that should continue to be part of the central bank toolbox even after the crisis (Blinder et al., 2017).

21 I have previously discussed the financial risks that occur on the Riksbank’s balance sheet when we have large bond holdings. 22 These risks in combination with the Riksbank’s weak earning capacity constitute an argument in favour of a smaller balance sheet in the long run. This is the best way of safeguarding the Riksbank’s future capacity to fund its own operations and conduct an independent monetary policy. 23  Reasonable for the Riksbank’s balance sheet to shrink in the long run The Riksbank’s balance sheet has grown rapidly in recent years, partly because we have purchased government bonds for monetary policy purposes, and partly because the foreign exchange reserve has been strengthened. In other countries, arguments have been put forward indicating that central banks should perhaps continue to hold large bond holdings even in the future when monetary policy has been normalised. In my opinion, these arguments are of limited relevance to Sweden and the Riksbank. On the other hand, there are arguments indicating that the Riksbank should mitigate its financial risk by winding down most of its bond holdings when monetary policy is normalized. My assessment is that the best way of winding down the bond holdings with as little market influence as possible is to hold the bonds in the portfolio until they mature. Over the next decade, the Riksbank’s bond holdings will then develop approximately as shown in Figure 6. The repo rate and the rate path will thus be the main monetary policy tools when monetary policy has been normalized.
The expected impact of balance sheet reductions on Treasury yields and agency MBS OAS reflects the FOMC’s gradual and predictable approach to balance sheet normalization, but could also reflect additional factors. Some argue that robust credit extension by the private sector given the strong economic environment helps to offset the yield impact from a declining balance sheet. Furthermore, there are likely some spillover effects across fixed-income markets globally from asset purchase programs abroad that could affect U.S. term premia. The Balance Sheet in the Long Run For many years, the FOMC has indicated its intention that the Federal Reserve will, in the longer run, hold no more securities than necessary to implement monetary policy efficiently and effectively, and that it will hold primarily Treasury securities. 16 Also, in the June 2017 addendum to the Policy Normalization Principles and Plans, the FOMC noted that reducing the Fed’s securities holdings will result in a declining supply of reserve balances, and that it 15 In advance of each FOMC meeting, the Desk surveys primary dealers and active investment decision makers about economic and financial market topics to gain insight into their expectations. See Survey of Primary Dealers and Survey of Market Participants. 16 See the FOMC’s Policy Normalization Principles and Plans, September 16, 2014.

The taxonomy will also pave the way for plans that will be announced soon to mandate the adoption of climate related financial disclosures by financial institutions. In addition, we are supporting efforts by the Government to strengthen the capacity of development finance institutions to enable them to play a more significant role in crowding in sustainable finance from the private sector, supporting the capacity building needs of businesses in transition, and scaling up innovative financing mechanisms. In light of the current challenges faced by businesses and individuals, we see a greater need and significant prospects for new forms of blended finance to support the recovery process and meet transition challenges. To this end, the Bank is engaging with the financial industry, including DFIs, and other key stakeholders on strategies to combine commercial lending with alternative funding sources such as philanthropic funds and social finance instruments. This includes upscaling existing pilot programmes. Such blended finance solutions will be important to reduce debt levels and future risks to growth and financial stability. During this period, the Bank has also established concessionary financing facilities dedicated to help SMEs automate and digitalise their operations. This will enable them to take advantage of new technologies to enhance income streams and build greater resilience. Thirdly, we believe collaborative partnerships will play a larger and more critical role in shaping financial policy going forward.
Otherwise the central bank will be unable to keep its promise. Throughout history, central banks have tried various mechanisms for tying themselves to the mast. Being accountable for their promises in the form reporting and follow-up is one mechanism that ensures that the bank is tied to the mast. Relinquishing the opportunity to break a promise makes that promise more credible. These are matters I touched on in my speech “On the topic of keeping promises” in 2008. Keeping a promise is difficult, because reneging on a promise will often be the tempting or rational choice in the short-term. The legal scholar and economist Michael Woodford has pointed out that in order to keep your word it is not enough to make a promise today and keep your word tomorrow. When making interest rate forecasts, we must also take into consideration the promises made yesterday. Only then can we fully use expectations to stabilise the economy optimally. This is referred to as monetary policy from a timeless perspective (Michael Woodford, 2003: Interest and Prices, Princeton University Press). Today there is general consensus that price stability is [not only] the best contribution that monetary policy can make to economic stability over time, [but perhaps also the only promise the central bank can actually deliver]. In the long term, a stable value of money is the only promise that the central bank has the means to deliver. This promise was previously kept by regulating the supply of money issued. Today, the interest rate is the instrument.

Both as an educationist and as a politician, Steen made key contributions to the creation of the Norwegian comprehensive school. Source: Store Norske Leksikon, http://nbl.snl.no/Johannes_Steen/ utdypning. Internationally, the Society of Jesus is known as the founder of the modern school system, with a curriculum tailored to the child’s age and previous knowledge and schooling characterised by systematic progression. These pedagogical principles evolved gradually through the second half of the 1500s, culminating in 1598 with Ratio Studiorum, the official plan for Jesuit education (see O’Malley, J. W. (1993): The First Jesuits, Harvard University Press, Cambridge, Massachusetts). BIS central bankers’ speeches  3  1889. The result was a comprehensive school system that strengthened our collective identity.12 For Norwegians, it is easy to take inclusive institutions for granted. Throughout human history, however, it is extractive institutions that have been the norm. There were attempts to achieve a balance of power in regimes as disparate as ancient Rome, China and Venice. But they remained attempts. The inclusive institutions were replaced by nepotism and abuse of power. The economists Acemoglu and Robinson point to the Glorious Revolution as a turning point in history.13 The British Parliament permanently curtailed the power of the Crown. The UK did not become a democracy in the modern sense overnight, but checks and balances were introduced. The development of written laws and a judicial system featuring independent courts started. Patent laws were adopted and limited companies saw the light of day.
However, they all have some way left to reach the leverage ratio requirement of 5 per cent that the Riksbank has recommended Finansinspektionen to introduce. How can a floor for risk-weighted assets change the capital requirements? The change now being discussed and which will have the greatest impact on the Swedish banks’ capital requirements is probably the introduction of a floor for riskweighted assets (often called a capital floor). To understand how this may affect the major banks’ future capital requirements, we need to know that more than half of the SEK 510 billion in CET 1 capital requirement that I mentioned earlier is comprised of so-called special national requirements. This means that Finansinspektionen itself or  8 [12]  in consultation with other Swedish and international authorities has determined that the Swedish banks must meet these requirements. This part is thus the specific national Swedish requirement over and above the requirements the Basel Committee has agreed on. An example of these specific national requirements is the risk-weight floor for Swedish mortgages that Finansinspektionen introduced a few years ago. The capital requirements for major Swedish banks in the form of systemic risk buffers that the Riksbank, the Swedish Ministry of Finance and Finansinspektionen agreed on in November 2011 are also part of these special national requirements. The other part, slightly less than half of the current CET 1 capital requirement, is the internationally-agreed minimum requirement from the Basel Committee. Figure 2.

The global financial crisis that erupted in late 2008 had its influence on our economy by stiffening this cooperation. On the one hand, the system found itself in a difficult liquidity situation, while on the other hand businesses found it difficult to access markets. With some additional subjective reasons, the outcome of this was a deterioration of the system’s loan portfolio and companies’ liquidating capacity. Consequently, 2009–2010 marked a slowdown of lending growth to the economy, reflecting the increased prudence, fully justified by the system, and  BIS central bankers’ speeches  1  business inability to earn a meritable new loan. The period coincided with a review of balances and portfolio restructuring, when possible with provisions, directly affecting the system’s financial performance. The Bank of Albania has played a major role as a guardian of the country’s macroeconomic and financial stability. Macroprudence has been the prevalent word in our communication with the market, authorities and the public. We have translated macroprudence as a need for more capital and liquidity, and increased banking system payment capacity. Consequently, the Albanian banking sector did not experience contracting. The Bank of Albania has provided and continues to provide the necessary liquidity to the banking system, to stimulate not only to the market but also to the entire economy. Prudent policies and timely legal regulations guaranteed effective banking supervision and enabled satisfactory businesses’ access to bank loans.
These dimensions of the broader context in which we will be making monetary policy in the years ahead put a very important premium on keeping U.S. monetary policy as close to the frontier of credibility as possible. And this suggests we need to continue to examine the case for a measured further evolution in the U.S. monetary policy framework - evolution in the direction of finding ways to provide more clarity about our long term inflation objective, about the underlying forces shaping the Federal Open Market Committee's forecast, the dimensions of uncertainty that surround that forecast, and the likely implications for monetary policy, to the extent we are aware of them. We have moved a long way in this direction, even in the past 18 months. The FOMC's record over the past 25 years suggests that the state of monetary policy and the state of the Fed is strong. The challenge in thinking about what's next in any further evolution in our regime is about how to ensure that U.S. long-term inflation expectations remain stable at a level close to reasonable definitions of price stability, while retaining the flexibility to act wisely, but with speed and force and creativity in response to changing circumstances. Thank you.

However, the moderate growth in the M3 monetary aggregate indicates that this situation has not changed since the last monetary policy assessment. Thus, the monetary analysis shows that we can continue pursuing our expansionary monetary policy for the time being, without incurring additional risks. Since the first quarter of 2003, the year-on-year growth rate for mortgage loans has exceeded 5%. Mortgage loans to households slowed slightly at the end of 2004, but since then their rate of growth has accelerated to a level higher than that recorded in recent years. Mortgage loans to companies, which had declined over the past five years, have also risen again since the beginning of the year. Prices continue to increase in the real estate market, a development to which, in our view, the low mortgage rates have contributed. Well aware that our monetary policy is still expansionary, we are keeping a close eye on developments in the real estate sector. In view of the above-mentioned developments, we have decided to leave the target range for the three-month Libor rate unchanged at 0.25-1.25%. What were the most important factors that led to this decision? There were three of them. First of all, we needed to downgrade our expectations with respect to the development of the economy. However, there are no signs of any cyclical downturn and the economy continues to recover, even if this recovery is somewhat delayed and muted. Second, the lacklustre economic activity is being accompanied by an improvement in the medium-term outlook for inflation.