samchain/econo-pairs-v1 huggingface dataset:
But even excluding those price increases, inflation had moved up on account of, for example, a growing tendency for wage costs to rise too rapidly. With a quick global economic recovery, there was a risk of the Swedish economy becoming excessively strained too soon in the upward phase, so that inflation would start rising again. During the summer, however, the perspective has changed and it looks as though the recovery in the world economy has recently slowed. Probable explanations for this are the widespread financial turbulence and the concern about the mounting security policy risks. Most of the evidence therefore points at present to the international economic upturn being slower and more protracted. The Swedish economy, which, as I said, has coped fairly well to date, cannot of course ultimately remain immune to developments in the rest of the world. Pronounced stock market fall Thus, the developments in financial markets have heightened the uncertainty about the future paths of consumption and investment, both in the rest of the world and in Sweden. If the international stock  BIS Review 59/2002  1  exchanges were to go on falling or the effects of the decline to date turn out to be more extensive, the scenario for the Swedish economy could become considerably less favourable. A closer look at stock markets shows that since the high in spring 2000 there has been a major fall around the world.

The fact that the financial system has been comparatively stable in the present situation has a variety of explanations. One is more highly developed methods for risk management. Another is that the sophisticated markets for derivatives have made it possible to spread risks more efficiently to those who are better equipped to carry them. A third is that banks, financial institutions, legislators and supervisors have drawn important lessons from the periods of turbulence in the 1990s. A fourth, more direct explanation is that the highly inflated share values have not been used to any sizeable extent as collateral for bank loans. The interim reports from Swedish banks have also confirmed that the Swedish financial system is developing in a stable manner with good profitability. The major stock market fall around the world has, however, drawn attention to the life assurance companies and the diminishing value of their share portfolios. It has been asked how pensions are affected, whether life assurance companies can encounter problems with solvency and whether this can have repercussions in the stock market in that these companies are forced to sell shares. A further question is whether Swedish banks that own life assurance companies can be hit by developments. These matters are considered in the Inflation Report we are publishing today. Our overall conclusion is that the problems for life assurance companies are unlikely to be seriously harmful for the Swedish economy.
BIS Review 66/2002  7  Despite these positive results, Norges Bank has decided to modernise the current settlement system because the existing system is complicated and tightly interwoven with other systems. This makes the settlement system vulnerable. Operation and maintenance of the current system also require relatively extensive resources. Following discussions with the banking industry about the division of responsibility and organisation of the Norwegian clearing and settlement system, it has been decided that the current division of responsibility will remain virtually unchanged. Banks will be responsible for gathering transactions and for netting and Norges Bank will be responsible for settlement. Norges Bank has decided to outsource the operational activities of settlement. We are currently preparing an invitation to tender for prospective partners. We will devote considerable attention to these issues in the future. We assume that we will have a definite plan for the site of our settlement operations by summer 2003, with implementation next autumn. International recommendations and work The Committee on Payment and Settlement Systems (CPSS) in the Bank for International Settlements (BIS) has established a separate Working Group on Retail Payment Systems. In September this year, the working group submitted a report on “Policy issues for central banks in retail payments”. 11.

In addition, a monopolist may have few incentives to engage in product development. In most cases, therefore, efficiency will be higher with several competing producers of payment services. A genuine possibility that new participants may enter the market may prevent monopolists from taking out a monopoly profit. This may also encourage the producer to maintain a high level of operating reliability and to further develop the services. Strong customers may also contribute to reducing the power of the large producers. Customers’ bargaining power normally depends on their size, and small banks can collaborate and form alliances to increase their bargaining power as buyers. However, the majority of the banks’ customers will not have bargaining power vis-à-vis banks, so it is important that there are many banks competing to supply payment services to customers. Efficiency in the Norwegian system Overall, the Norwegian system for retail payment services is fast, reasonably priced and safe. 3. Productivity gains in the 1990s Per cent  20  15  10  20  Financial services  15  Financial services, average  Mainland Norway  10  -5  0 '0  98  96  94  0  92  0  90  5  88  5  -5  Retail payments are settled in Norges Bank twice a day. Depending on the time of day that the payment is made, the funds will be available in the payee's account on the same day that payment is made or the next working day.
The financial crisis of 1825 brought an end to this rapid growth. The crisis itself was interesting for its parallels with today. It was sourced in sub-prime lending in (in this case South) America. As fears of loan losses rose, runs began on banks throughout England, with more than a dozen institutions failing in Yorkshire alone. The crisis brought reform of the banking industry in the form of the Joint Stock Banking Act of 1826. This removed the Bank of England’s monopoly on joint stock banking. This had long been a bone of contention among country banks, not least in Yorkshire. The Bank of England itself opened its first branch in Yorkshire – here in Leeds, in fact – the following year in 1827. This was acknowledgement of Leeds’ emerging importance as a financial centre. Yet the reception it received was, to say the least, somewhat mixed. Local newspapers and businessmen attacked the Bank’s attempt to spread its “pestilential branches” into the regions.2 Bank of England notes were shunned by local shopkeepers. The landlady of the Esk Inn near Whitby did so with the words: “I’ll ha’ nought to do with them things, I know nought about them; now if it had been a Simpson I would ha’ changed it with pleasure”3  1  W.C.E Hartley (1975), “Banking in Yorkshire”, Dalesman Books. The author completed this work while a Houblon-Norman fellow at the Bank of England.

The mutual or building society sector’s roots in Yorkshire are just as deep.4 Although the first societies appeared in the Midlands in around 1775, within a decade Yorkshire had established its first society, the Hill House Bank Building Club in 1785. By the end of the century, numbers had swelled to around 50, mostly in the Midlands, Lancashire and Yorkshire. The early mutuals pooled savings to buy property for members and terminated once all members’ housing needs were satisfied – so-called “terminating societies”. In 1844, “permanent societies” were permitted, which allowed for a revolving set of both savers and borrowers. But the mutuality principle remained – “to enable a working man to secure himself in the course of a few years a dwelling-house as his own freehold property, as a home for himself and family.”5 Numbers of mutuals grew rapidly during the 19th century, reaching around 850 by 1850 and over 1500 by 1875, with almost 100 in Yorkshire alone. Here in Leeds, the Leeds and Holbeck Permanent Building Society was founded in 1875 and, having been renamed Leeds Building Society in 2005, it remains in the top 10 building societies by size nationally. Consolidation and, latterly, demutualization have reduced numbers over the past few decades. Today, there are only a handful of independent, indigenous mutuals in the region. But they remain some of the strongest in the country. The success of Yorkshire’s financial sector over this lengthy period is no fluke. A reading of history reveals the same successful recipe being repeated.
In fact, it’s been more than 15 years since the Basel II capital accord included a capital charge for operational risk. 2/6  15 years later, I believe we can draw two conclusions. First, measuring these risks is still challenging. Second, their importance for the banking business has not diminished a bit. On the contrary, it has become more relevant for banks and, certainly, supervisors. Indeed, looking at the 2020 priorities, released by supervisors worldwide, it is clear that nonfinancial risks are on the top of the list. Let me give you a few illustrative examples: the importance of IT has soared, since it has become a key component of any viable Business Model, which makes cyber risk an even greater source of concern. Second, considering recent scandals across the EU I believe I don´t need to emphasize that Anti-MoneyLaundering is more relevant than ever. Finally, it is also clear that the nature of retail banking business means that conduct risk is a major source of concern. In this regard, it is not easy to compile all the losses stemming from the wave of fines and lawsuits that has swept through the financial industry during the crisis and its aftermath. According to a report from the ESRB1, the cumulative losses to December 2014 stemming solely from misconduct exceeded 200 bn € worldwide, with more than 50 bn € affecting EU banks. But, despite the size of these losses, the direct financial consequences are not the only source of concern.

First, maintain your fundamentals and keep on improving your three lines of defense; make sure that accountability and 5/6  ownership for each risk is defined and well-understood within your institution. Second, remember that improving essential risk management and controls, including data quality, should not be seen as a cost, but as an investment for the future. Finally, keep on working towards appropriate balances between risk and reward, making this sustainable over the cycle. I believe it is revealing that the title of the conference refers to the management of nonfinancial risk as ‘the next big challenge’. As I have noted today, these risks have been in the spotlight of banks and supervisors at least since Basel II, so an observer may question whether they can still be characterised as the ‘next big challenge’. I actually agree with the statement made in the title. The pervasive and ever-changing nature of non-financial risk turns it into a permanent challenge for banks and supervisors. The most recent and obvious example would be the emergence of environmental risk as a source of concern for all of us. Indeed, there is still a lot of catching up to do, so I look forward to today’s discussions. I wish you a very successful conference. Thank you very much. 6/6
By far the most effective way of helping SMEs quickly would be to provide incentives for lending by existing banks because they can assess credit risk in a way that no other institution could do in the immediate future. Bank and Treasury officials are working together on such ideas. In the end, however, the shape and parameters of any scheme will be, and properly so, determined by the Government. Let me sum up. From the very beginning of the global crisis there has been a reluctance by governments to face up to the underlying solvency problems generated by apparently unending trade deficits with no mechanism, whether flexible exchange rates or some other means, for correcting these disequilibria. Those solvency problems have shown up on country and bank balance sheets. The initial reaction has always been to provide liquidity: through central banks or an extension of official lending by governments. Providing liquidity to buy time to devise and put in place a coherent response to the underlying problem can be not only valuable but necessary. But liquidity can never be the answer in itself. And if the time bought is not used then the size of the debt problem becomes larger and its cost is gradually transferred from private sector creditors to taxpayers. The main impediment to the strategy of rebalancing our economy is markedly slower growth in our major export markets, especially in the rest of Europe.

If we were too hasty and mistaken in  concluding that supply shocks have durably depressed potential output, we may subject the economy to excessive tightening. If not corrected quickly, this could result in a permanent loss of output as productive capacity adjusts to significantly and persistently lower demand. [4] And that scar may prove difficult to heal. Being prudent does not rule out the possibility of us having to move from withdrawing accommodation to restricting demand. But in the absence of clear second-round effects, we would need convincing evidence that the current shocks are likely to keep having a more adverse effect on supply than on demand. This balancing act – weighing the various factors at play in a forward-looking way – is the ultimate purpose of projections and policy judgement alike. Models and measurements should be challenged and improved – indeed, this is what this conference is about – but selective anecdotal evidence is certainly not a better guide. Our policy decisions should continue to be informed by comprehensive analysis of the data; there is simply no substitute for that. The origin of the shocks The origin of the shocks – that is, whether they originate more on the demand side or on the supply side – matters considerably for monetary policy. A central bank would typically want to adjust policy gradually in the face of supply shocks. [5] But it should react immediately to demand shocks that risk bringing mediumterm inflation above target.
Notably, on the supply capacity of the economy and its prospective rate of growth; on the rate of unemployment below which inflation is liable to increase; on the natural (or neutral) real interest rate. Those judgments are, in truth, formidably difficult to make, because they need to be regularly updated given structural change in the economy; and because each of the variables is unobservable! Perhaps understandably, that leads some policymakers 8 to the conclusion that these concepts may be useful as just that – concepts – but not at all in practical decision taking. Whilst not wanting to deny their unobservability, I do not take quite that view. For example, the natural real rate may be unobservable, but there is no ducking the fact that a policymaker needs to form a view on whether its policy stance is stimulating or restraining demand, which amounts to broadly the same thing. Against that background, I can return to a central bank’s objectives. To maintain inflation in line with a target over the medium term. And, typically with less priority, to stabilise the path of output in the face of cyclical shocks; in the UK Government’s mandate to the Bank of England 9 , that is expressed in terms of, inter alia, the MPC avoiding ‘undesirable volatility in output’. I shall say something about both, before going on to discuss some issues concerning monetary policy strategy that have featured in recent academic commentary.

We try to discipline ourselves not to claim too much credit for stable growth. And in forecasting, we have to attend to the uncertainties around our projections of the central outlook. Some numbers may serve to underline that. The MPC’s projections are published as fan charts. The fan-chart standard deviation of output growth at around one year is a little under one percentage point; and of inflation at around two years, roughly 0.5 percentage points. This is not a world in which one should get carried away by fine judgments that alter the central projection for demand by 0.1 or 0.2 percentage points. Yet, as the Bank has documented, 15 assuming that credibility is maintained, the effect of a surprise change in the official interest rate, is judged to be small; maybe less than 0.1 percentage point on the annual rate of inflation two years after a 25bp surprise change maintained for one year. Of course, we are not in fact in the business of aiming to make surprise changes in our policy rate. Against a background of credibility, a lot of practical monetary policy making is not about forestalling major lurches in the economy and inflation via large, abrupt changes in the policy rate. Instead, it has to involve careful analysis of the conjuncture, with transparency to the market. But these numbers do perhaps illustrate the importance of our not getting drawn into absurd degrees of detail, and the risk of signalling that we think we can precisely fine tune demand conditions.
I should like to underline – once again – that these two responsibilities are clearly distinct and should not be mixed. Since early August last year, tensions have been observed in money markets and during the last months banks expressed particular concerns about their liquidity needs over the yearend. The year-end period is traditionally a period of scarce liquidity, as market activity is subdued and banks are preparing their year-end balance sheets. In its open market operations, the ECB therefore pursued its endeavour to contribute to the smooth functioning of the euro money market. In early August, we responded to the sudden  2  BIS Review 3/2008  upward pressures on the overnight interest rate by lending significant amounts of liquidity through overnight fine-tuning operations. We also carried out, and later renewed, two supplementary longer-term refinancing operations in order to reduce banks’ concerns over their longer-term funding during a period when the longer-term repo and deposit markets turned illiquid. In the main refinancing operations the ECB has allotted larger amounts of liquidity than under normal circumstances with an aim to limit the volatility of very short term rates around the ECB’s minimum bid rate. These large amounts of liquidity have always been absorbed later on during the maintenance period, so that the ECB has only provided banks with the liquidity needed for the fulfilment of their reserve requirements on average over the maintenance periods. Let me also underline that we only provide such operations against solid collateral, as always.

The important thing to recognise is that we now have tools other than interest rates that can be used to contain risks in the property and financial sectors. These so-called macroprudential tools were not available to us before the crisis and we are now fully prepared to deploy them if that were needed. The Bank of England is now in a position, for example, to supervise lending to specific sectors more intensively, to make recommendations to banks and building societies to restrict the terms on which new credit is provided, or even to raise capital requirements on mortgage or other types of lending. 6  In June 2013 the Financial Policy Committee concluded that there was scope for banks to reduce their holdings of liquid assets in the near term, and recommended a relaxation in liquidity requirements in order to strike the appropriate balance between achieving resilience and reducing possible impediments to the supply of credit to the economy. That relaxation was subject both to banks meeting the minimum capital threshold, and to additional firm-specific considerations. Today the Prudential Regulation Authority (PRA) has agreed with that recommendation, and is announcing how it will be implemented. The PRA will be making a more detailed statement today and writing to individual firms in due course. 6  BIS central bankers’ speeches  Having these in our toolkit – and if necessary using them – will help us to keep interest rates low to secure recovery without creating risks that make that recovery ultimately unsustainable.
Therefore, such labour market reforms can help with containing the level of private and public debt by increasing household incomes via enhanced job creation owing to better matching of job seekers with vacancies. Third: An acceleration of fiscal policy reforms such as the enactment of a fiscal responsibility and budgets systems law, so as to ensure medium and long term fiscal sustainability. These stipulate a medium-term orientation as regards budget formulation and provide for binding expenditure ceilings. For example, the annual growth rate in total public expenditure must not exceed the growth rate of potential GDP, unless corrective measures on the revenue side are introduced to compensate the higher growth rate of expenditure. In this respect, such policy frameworks can directly tackle the level of public debt by promoting lower public deficits. I will not leave out the banking sector reforms: having effective foreclosure and insolvency frameworks and actively and efficiently managing Non Performing Loans should be encouraged in order to tackle elevated risks related to high levels of private debt. However, the adoption of an improved insolvency framework will not be in a position to achieve its full potential if its application is impaired by inefficiencies in the judicial system. 3/5  BIS - Central bankers' speeches  Let me now give some remarks on the situation in Cyprus. Public debt increased rapidly during the economic crisis of 2012-2013, going from 65.8% of GDP at the end of 2011 to 112% in June 2014.

As we all know, the choice of exchange rate regime is of critical importance for a central bank. The empirical findings show that in economies with serious balance sheet mismatches, the policy makers prefer fixed or controlled exchange rate regimes 5 ..  2  Eichengreen, B.; Hausmann, R. (1999); “Exchange rates and Financial Fragility”; NBER Working Paper No:7418. 3  De Nicolo, G.; Honohan, P.; Ize, A. (2003); “Dollarization of the Banking System: Good or Bad?”; IMF Working Paper; WP/03/146. 4  Galindo A.; Leiderman L. (2003); ”Living with Dollarization and the Route to Dedollarization”; Inter-American Development Bank; Working Paper; 526; p. 14. 5  Choi, W.; Cook, D. (2004); "Liability dollarization and the bank balance sheet channel"; Journal of International Economics; Vol. 64(2), p. 247-275. 2  BIS Review 124/2006  On the other hand, flexible exchange rate regimes provide more room for monetary policy that enables to respond to external shocks freely. It has also been found by using cross-country data for the banking sector that more volatile exchange rates reduce the share of the foreign currency denominated loans and deposits 6 , thus contributes to prevent dollarization. However, even if a flexible exchange rate regime is chosen de jure, dollarization and high pass through effect from exchange rates to inflation may cause “fear of floating”, thus monetary authorities are put under pressure to intervene in fluctuations in exchange rates at all costs.