samchain/econo-pairs-v1 huggingface dataset:
This is understandable, given the sheer size of China and, particularly for Asia, where China is now a most important component of an economically integrated region. As I argued earlier, interdependence is synonymous with the transmission of financial shocks, particularly financial contagion. It is therefore in the interests of others  6  BIS Review 66/2004  in Asia to understand China, where the dilemma between pursuing financial openness and the maintenance of financial stability is a most difficult one to resolve. The ability of China to get it right in meeting the many challenges of this task has serious implications for all. And, as I also argued earlier, the dynamics of Asian finance are such that financial crises do not necessarily occur or be most serious at source. The task confronting China is, arguably, a task for others in Asia as well. Whether one adopts the inward-looking attitude of trying to limit possible contagion to the domestic market, or becomes more proactive in contributing, through appropriate assistance and co-operation, to the effective performance of that task in China, or both, is a matter of choice for individual jurisdictions. For Hong Kong Special Administrative Region, which is part of China but operates different banking and monetary systems under the arrangement of “One Country, Two Systems”, we are too close to the Mainland to afford to be inward looking.

But the questions that should be asked are whether they are sufficient; and if not, what is. These are issues that have been occupying our minds post-Asian financial crisis, for I certainly do not wish, in the case of Hong Kong, to mobilise once again, in whatever other form or guise, in the type of high-profile intervention in the stock market we organised in 1998. But there is, as yet, no regional consensus on the need for a long-term solution and what it might possibly be. Meanwhile, it is a fact that there has recently been a discreet drift, or at least temporary diversions, in the smaller emerging markets of Asia away from financial openness. They seem to have become more ready than before to regulate the outflow and inflow of funds, through a variety of formal or informal measures. The measures fall into two categories and are applied, where considered appropriate, selectively, targeting a specific group of market participants, for example non-residents, or activities of a specific purpose, such as those considered speculative. The first of these limits the convertibility of the domestic currency, in either direction, and the second limits the ability of banks to expand their assets or liabilities denominated in the domestic currency. So far these have proven to be  BIS Review 66/2004  3  helpful in maintaining monetary and financial stability after the crisis of 1997-98, and, most important, have not undermined the flow of foreign direct investments.
On the other hand, in line with my comments above, this objective could be made more symmetric, by clarifying that the degree of tolerance of above-target inflation deviations is the same as for below-target deviations.13 Also, in the current low inflation environment, with interest rates close to their lower bound, the inflation target should take into account the need for a sufficiently large buffer above zero, to provide more scope for conventional interest-rate policy. Irrespective of the final outcome, I am sure that the result of this review will strengthen the effectiveness of monetary policy in the euro area and its capacity to achieve its aims in the macroeconomic environment of the coming decade. I should like to conclude with a final reflection on the interaction between monetary and fiscal policy going forward. Experience in recent years suggests that appropriate interaction between these policies may decisively contribute to each of them achieving their objectives more efficiently. As I have attempted to emphasise, the ECB’s monetary policy action in response to the economic consequences of the pandemic has been rapid and decisive. Moreover, we are prepared to add further monetary stimulus, if necessary. Fiscal policy action has also been forceful. It is important that this action be maintained during the recovery, in a more focused way, and, if necessary, even increased.

Admittedly, economic activity is rebounding in the third quarter, following an unprecedented decline in euro area GDP in the second quarter. This still-partial recovery is highly uneven across both regions and sectors of activity. It is moreover fragile, since the lockdown-easing measures are being accompanied by an increase in infections in some countries. That, in turn, has begun to require the re-introduction of measures in some countries that enable the speed of contagion to be curtailed at the cost of setting certain limits on activity. In fact, the latest economic indicators, such as the PMI and the European Commission’s business sentiment index, showed some slowing in activity in August following the rebound in July. As a result, the recovery is subject to enormous uncertainty. All told, activity in the third quarter is expected to recoup in part the heavy loss of output in the second quarter. Overall euro area growth could thus stand at around 8.4%. For the year as a whole, the ECB’s September macroeconomic projections show, in the baseline scenario, an 8% decline in GDP in 2020 (slightly less sharp than what was expected in June). The economy is expected to pick up as from the third quarter of this year, with increases of 5% in 2021 and 3.2% in 2022, although the pre-crisis GDP level would not be attained until the end of the projection period.
BIS central bankers’ speeches  11  Overall, I believe the FLS has successfully shifted the supply of credit to households and businesses over the past year, and is achieving its policy objectives. Loans have been available at lower cost than previously and a range of indicators suggest that credit conditions are steadily improving for households and firms. How much more borrowing there is in total will depend in part on what happens to the demand for credit, and also (crucially) on banks’ assessment of the creditworthiness of borrowers. Bank staff projections for net lending to the real economy, consistent with the MPC’s outlook for growth in the August Inflation Report and with recent improvements in indicators of credit conditions, suggest that overall credit growth is likely to pick up, becoming modestly positive overall during the second half of the year. This is also consistent with the collective views of the FLS participants. Conclusion In conclusion, we have seen some very significant developments over the past year. Financial markets have become less stressed about tail risks in the global economy and more stressed about the outlook for monetary policy, particularly in the US. In the UK we appear to have seen an abrupt resurgence in business and consumer confidence associated with renewed growth, albeit only at around trend rates so far.

Lenders report that loan spreads have fallen for companies of all sizes, and that credit availability has increased, but the improvement has been less marked for small and medium-sized businesses. We have seen banks take different approaches to SME loans: one bank has scrapped some of its arrangement fees, another is offering guaranteed discounted borrowing costs and another offers a cash back scheme. So one can’t capture the impact of the FLS on the cost of borrowing for businesses in a single simple, headline, interest rate measure. Survey evidence from the Federation of Small Businesses suggests that the pricing of loans for small businesses was more favourable in 2013 Q2 than in mid-2012 – but availability was reportedly poor. So it’s a mixed picture overall for SMEs. Going forward, SME credit conditions should be supported by the extension to the FLS announced in April, which provides additional incentives for participants to increase lending to SMEs both this year and in 2014. A large proportion of FLS participants have indicated their intention to participate in the extended Scheme. It is likely that any person or business who has borrowed from a bank since the middle of last year will have done so at a cheaper rate than they would have done in the absence of the Scheme. If so then the FLS will have had a monetary impulse on the economy. We think that the FLS will continue to bear down on lending rates to households and businesses in the rest of this year and beyond.
In the extreme, these incentives could result in “model monoculture,” in which all actors use very closely related models.6 This risk becomes especially acute the more is known about the details of the supervisory models. A lack of modeling diversity would be especially concerning from a macroprudential perspective, since it would mean that the entire industry would be capturing the same risks in the same way —a form of collective blindness to new industry practices and products and emerging risk developments. As important, banks have incentives to optimize around the stress test and other risk models, engaging in strategies that maximize returns while minimizing measured risk exposures. Widespread use of very similar models could mean widespread loading on the same kind of risks and adopting the same hedging or mitigation techniques—increasing systemic risk. A final concern that I want to mention is based less in economic theory and more on the practical realities of implementing and updating regulations. The more stress test models are “hard coded” in regulation, the more difficult it is to change them as modeling practices improve or as new risks emerge. The models and parameters can quickly become stale and inferences from the models inaccurate.

; - Ensuring the full potential of the SEPA project and the strict application of the requirements of Regulation (EU) 260/20125, including the requirements against IBAN  3  Directive 2009/110/ЕC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC 4 Directive 98/26/ЕC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems 5 Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 laying down technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009  2  discrimination (inability to initiate international payment transactions) in the execution of direct debits; - Assessing the possibility for Western Balkan countries to join SEPA, thus deepening their convergence with the EU; - More comprehensive implementation of global international standards, such as ISO 20022, which facilitate the inclusion of richer data in the payment messages by the end of 2022 at the latest. 3. Forthcoming developments in the field of immediate payments Instant credit transfers are the basis on which pan-European payment solutions are expected to be built. Combined with the development of mobile technologies, instant payments have the potential to create affordable, convenient and secure payment solutions in both physical stores and the Internet, with funds being available to the recipient within seconds.
2  BIS central bankers’ speeches  Turning to jobs, data for the second quarter of 2011 indicate that businesses in the region, on balance, expanded employment at a more rapid pace than the nation. Still, the number of jobs being created each month is not enough to sustain a robust recovery. Given the slow recovery of employment across much of the region, unemployment rates have edged up in most places. June’s unemployment rate of 8.0 percent in New York State and 9.5 percent in New Jersey remain unacceptably high. While Puerto Rico’s unemployment rate has fallen sharply in recent months, it is still particularly elevated at 14.9 percent. One factor that remains a drag on overall employment growth in much of the region is the weakness of the public sector. As we have discussed at previous press briefings, our state and local governments continue to cut jobs more sharply than governments elsewhere. The recent exception to this trend is Puerto Rico. While the island sustained deep cuts in government jobs in 2009 and 2010, a recent increase in this sector was a key reason for Puerto Rico’s relatively strong job growth in June. Overall, the weakness of the public sector continues to pose a risk to employment growth throughout our region going forward. Another potentially troubling development for the region is the recent weakness in the financial sector. The finance industry, which had begun to recover late in the cycle, appeared to be showing signs of expansion when we last met.

In the European context, our colleagues from De Nederlandshe Bank and Banco de Portugal, Mr Michiel van Doeveren, Mr Rui Pimentel, Mr Carlo Winder and Mr Richard Derksen will provide relevant information about the ongoing changes in payment systems and services in Europe. Thus, a discussion will be developed about the three main pillars of the Strategic Vision 2020 of the Eurosystem: achieving a consolidated Eurosystem market infrastructure by bringing the two infrastructures TARGET 2 and T2S closer together, harmonization of its own collateralization techniques and procedures and development of pan-European instant payment services. In addition, the latest developments in the legal spectrum regulating payments at European level, with special emphasis on PSD2 Directive, will be elaborated. BIS central bankers’ speeches  1  Also, significant attention will be paid on developments in safe and secure payment services as well as the conceptual and practical issues regarding the oversight on FMIs. On the national level, our efforts are focused on the harmonization of the Macedonian legislation with the EU regulation. The new Law on payment services and systems and related bylaws will implement PSD and part of the provisions from PSD2, Settlement Finality Directive and E-money Directive. Thus, a panel discussion is scheduled where esteemed representatives from the payment service providers, NBRM and experts from Slovenia, Mr Peter Centrih and Bulgarian expert, Mr Antonio Barzashki will elaborate the new package of Macedonian legislative on payments.
And future news about the health crisis and consequent policy measures or about geo-political tension, could well spark another very sharp repricing of economic prospects and financial assets. 1  The Fed has launched multiple facilities aimed at reducing the stress in US dollar funding markets This included purchases of US Treasuries, Mortgage-Backed Securities, and Commercial Paper, amongst other facilities. In addition, the Fed has – alongside other major central banks - enhanced existing and introducing new swap lines to accommodate the heightened demand for dollars 2 My colleague Andrew Hauser’s recent speech, ‘Seven moments in Spring’ gives a vivid and excellent account from the central banking ‘front line’ of this extraordinary period. 3  All speeches are available online at www.bankofengland.co.uk/news/speeches  3  However, the first phase – the initial shock and adjustment to a far more challenging economic outlook in the near term – has passed. While it is fresh in the memory, it is important to ask: how has the financial sector weathered the initial storm? How have the reforms made a great cost and effort since the global financial crisis performed under stress? And, on the basis of what we have seen so far, which, if any, issues are likely to need further attention by the regulatory and supervisory community? We need, of course, to bear in mind throughout the scale of the current shock. We have to go back over 300 years to find a similar sudden decline in economic activity.

Spotting problems and keeping them from mounting up Given the limited time we have, I have given you a very brief overview of what resolving a bank entails. It is a gruesome and complex event, and one which is best avoided, but not at all costs. To avoid failure, banks and supervisors must spot problems early on and address them quickly. Since the crisis, stress tests have become an important tool for helping us to do this. Stress tests basically assess how banks would fare in various hypothetical scenarios involving different future paths for the economy and the financial markets. Usually, there is a baseline scenario, where things develop as expected. And then there is an adverse scenario, where they don’t: inter alia, GDP, unemployment and property prices are stressed two years ahead in this scenario. So you can see that the key idea of a stress test is to assess how banks would cope if the going gets tough; it’s all purely hypothetical, of course. Stress tests allow us to make a consistent assessment. Each bank has to apply the same scenarios and calculate their impact in the same way. This means that the results can be compared across banks. And stress tests provide a glimpse of the bank’s risk management in action. How quickly can it process the scenarios and assess their impact on [the state of] the bank? This is important information about the quality of governance. But the main focus of stress tests is on capital.
It is precisely this behaviour of employment, which continues to be underpinned by considerable demographic dynamism that is the main factor behind the gradualness of the first-half slowdown in residential investment, since also in this case the higher interest rates and the lower expectations of capital gains are making for less vigorous housing investment. The change in monetary and financial conditions also induced a certain moderation in their demand for credit, contributing to a progressive stabilisation of household debt ratios. Corporate investment and borrowing plans are being affected somewhat less perceptibly by the rise in interest rates. Particularly notable is the continued strength of productive investment in a situation of high profitability and favourable business expectations. In fact, it has become the most buoyant component of domestic demand, although moving on a mildly decelerating trend in the second quarter. Also apparent in the last few months is an incipient change in the purpose of loans extended to firms, with a slowdown in those used to finance real estate and construction activities, and an increase in those to industrial firms. Net external demand is helping to mitigate the impact of slower spending on growth, mainly due to the moderation in imports in the first half of this year, probably in response to the mild slowdown in final demand. Meanwhile, exports, after the good results last year, are showing the effect of more contained world – and especially European – growth and perhaps the effect of the euro's appreciation on sales to non-Community countries.

If forceful measures are not taken to deal with the financial crisis and maintain financial stability, there is a risk of the crisis also having major effects on inflation and growth. The fall in output and employment can then be both deep and prolonged and that in turn can worsen the financial crisis. An efficient fixed-income market is a prerequisite for an effective monetary policy In other words, the monetary policy machinery I have described consists of two components. The first thing is to ensure that the repo rate does in fact affect the overnight market. Effects on this shortest rate must then spread to longer rates that are more important for economic activity. An effective monetary policy steering system is not enough by itself. We also need a fixed-income market that functions properly. So what are the fixed-income market’s functions? The fixed-income market caters both for those who need funds for their operations and for those with funds they need to invest for a certain period of time. As investment in the market is not risk-free, one of the market’s primary tasks is to price risk correctly. That in turn leads to an optimal distribution of risks between the markets’ participants. In this way the market contributes to an efficient distribution of economic resources. What a central bank requires of the fixed-income market is therefore not all that different from what society in general requires.
Because banks play a pivotal role in the world economy, the importance of these decisions cannot be overestimated. 1  BIS Review 37/1999  Basle Report Findings and Guidance Introduction Let me turn to the Basle Committee on Banking Supervision, which is composed of bank supervisors from the G-10 countries who develop supervisory policy for internationally active banks. While the Committee does not have formal enforcement powers, its conclusions and recommendations are widely implemented, both in G-10 countries and many other nations. The Committee’s report focuses on the relationship between banks and HLIs. Our goal was to provide a framework for identifying the broader issues raised by the LTCM episode, the policy responses of supervisors, and some key risk management challenges for the banking industry going forward. Because the Basle Committee’s focus is on banking supervision and regulation, its primary emphasis has been on ensuring that major banks prudently manage their risk exposures to HLIs. The best way to achieve this is through the adoption of sound practices by the industry. It is primarily the responsibility of each banking organization to manage its risks. But given the special role that banks play in our economy and the systemic risks that can occur when they do not function properly, banks’ risk management activities are a legitimate public policy concern. Our sound practice standards give banks and their supervisors the tools to measure industry progress toward the goal of effective risk management. The Committee’s report revealed a number of deficiencies in banks’ practices.

In particular, the Committee observed an imbalance among the key elements of the credit risk management process, with too strong a reliance upon collateral to protect against credit losses. This undue emphasis, in turn, caused many banks to neglect other critical elements of effective credit risk management, including in-depth credit analyses of counterparties, effective exposure measurement and management techniques, and the use of stress testing. The Credit Approval Process For a bank to make sound lending decisions, it needs to obtain sufficient information about the borrower. Supervisors routinely emphasize the need for banks to have an effective credit approval process consisting of formal policies and procedures, accompanied by documentation of actual credit decisions. I should note that banks’ credit exposure to LTCM was in two forms: the exposure arising from the trading of financial products with LTCM, and the exposure stemming from loans made to LTCM. Banks’ primary exposure to LTCM was through their trading activities. Loans were not a large factor in the events that transpired last fall. Regardless of whether a bank is a trading counterparty with, or a direct lender to, an HLI, it must obtain comprehensive and timely financial information about that HLI’s risk profile and credit quality, and it must perform ongoing credit analysis of that HLI. In addition, a bank must have a clear understanding of an HLI’s operations and risk management capabilities. The Committee observed weaknesses in each of these areas. Let me give a few examples.