samchain/econo-pairs-v1 huggingface dataset:
This double whammy effect, attributed to the narrowness of the Swiss franc market, was highly penalizing for our export sector. Since the introduction of the euro however, this pattern is no longer observed. Thus, the evolution of the Swiss franc sticks closer to our economic fundamentals. I will address this issue more extensively later on and argue that this trend can be generalized to apply to other currencies as well. b)  The euro as a means of payment  Those who thought that the euro would make the Swiss franc obsolete as a means of payment were also mistaken. True, our ATM machines have been adapted to provide euro banknotes, so that it is now possible to pay in euro almost everywhere in Switzerland. Yet, despite these efforts, the demand for euro notes is still weak and those notes do not circulate any more extensively than French francs, Italian lira and German marks used to. In stores and restaurants, prices denominated in euros are usually not very attractive. Obviously, small shop and café owners are not thrilled by the idea of  2  BIS Review 70/2004  accepting cash payments in euros. Anyway, they cannot offer as good financial services as commercial banks or credit card companies! c)  Monetary autonomy  The last fear we had was related to the potential loss of monetary autonomy. Could Switzerland, a country completely surrounded by the euro zone, possibly hope to implement an interest rate policy different from the one of the European Central Bank?

Jean-Pierre Roth: Swiss franc and euro - two sister currencies? Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the Swiss-Brazilian Chamber of Commerce, Sao Paulo, 19 November 2004. *  *  *  It is a great pleasure for me to talk to you today about the Swiss franc and the euro after six years of monetary integration in Europe. Looking at the map, you might wonder whether Switzerland, a small spot in the middle of Euroland could still follow an autonomous monetary policy. What are the consequences of the introduction of the euro on the Swiss franc and on the effectiveness of Swiss monetary policy? And what are the effects of this new international monetary order on countries outside the dollar-euro block more generally? I will try to provide some insights on these questions today. First, I will present the change in our monetary framework due to the creation of the euro. Then I will enumerate the main fears that we originally had regarding the effects of that transformation, and our experience with the new environment. Finally, I will share some lessons on the influence of the introduction of the euro for the international monetary system and for the autonomy of Switzerland’s monetary policy. 1. A new international framework  January 1, 1999, constituted a true revolution for Europe. Many observers argue that the introduction of the euro represents the major postwar stage in European integration. They are right.
One explanation could be that when property owners sell rental properties for conversion to tenant-owner associations, they take a larger part of the price difference between the two property types. While the utility value principle has certainly contributed to an evening out of rent levels over the economic cycle, it has also contributed to making it more profitable to allow apartment blocks of rented apartments to be converted to tenant-owner apartments than to sell them to another owner and continue to run them as rental properties. The second problem is that the regulation of rents, in connection with a number of other institutional factors, is holding back new production of rental properties where there is a demand for housing. The way prices on apartment blocks develop in future will depend on the supply and demand situation, as well as on regulations. The total growth in demand is steered mainly by population growth, while the distribution of demand around the country is steered by where growth occurs. In general, housing construction has been much lower during the 1990s than in previous decades. According to the National Board of Housing, Building and Planning’s most recent nation-wide forecast for the number of apartments in apartment blocks where construction has begun, just under 11,000 apartments had been started last year and just under 13,000 will be started this year, from a level of just over 9,000 in 2000. This can be compared with almost 42,000 new apartments in apartment blocks begun in 1990, immediately prior to the property crisis.

Second, leverage can evolve greatly over a short period of time. Third, and perhaps most importantly, there are different forms of leverage, some of which are unlikely to be captured reliably by any aggregate industry data. The most basic form of leverage pertains to financial intermediaries such as global investment banks extending credit facilities to hedge funds to allow them to invest funds in excess of their own capital base. Such credit facilities are usually at the root of industry-wide or strategy-specific estimates of leverage in the hedge fund industry. Following the collapse of LTCM, much of the regulatory discussion focused on this type of leverage by attempting to strengthen the relationship between financial intermediaries and hedge funds to improve counterparty risk management. A second, more recent form of leverage in the hedge fund industry is related to the rapidly growing fund of funds industry. A number of fund of funds managers have begun to leverage their products by either using their own balance sheet or, alternatively, borrow credit facilities from other financial firms with large balance sheets. 2:1 leverage ratios are typical. In some cases, leverage ratios can be as  BIS Review 8/2005  3  high as 4:1. This form of leverage, though probably still limited, is unlikely to be captured by any industry leverage figures. Finally, the most complex form of leverage that hedge funds employ is what I would refer to as instrument leverage. This type of leverage is embedded in the use of most kinds of derivative instruments.
Thus, euro area GDP is projected to grow at 0.5% in 2023 (3.4% in 2022), rising to rates close to 2% in 2024 and 2025. In tandem, the inflation projections have been successively revised upwards. After average inflation of 8.4% in 2022, the December 2022 Eurosystem projections forecast a much higher rate for 2023 (6.3%) than expected in September (5.5%) and June (3.5%). Inflation is then expected to fall gradually to an average of 3.4% in 2024 (compared with the September forecast of 2.3%) and of 2.3% in 2025. The upward revision to inflation for 2023 and 2024 is the result of recent inflation data reflecting, as I mentioned earlier, a stronger and more persistent inflationary episode than expected, the fiscal measures adopted to soften the impact of inflation on households and firms (which reduce inflation in the short term but increase it when they are rolled back) and the expectations, in line with the latest information, for stronger wage growth. The aforementioned macroeconomic context has also triggered a deterioration in financial stability. The combination of higher inflation and lower-than-expected economic growth, together with rising interest rates, is adversely affecting households' and firms' ability to pay, especially among the most vulnerable segments, which are characterised by low income levels, dependence on energy and food products and, in some cases, high indebtedness.

Since the last ECB Governing Council meeting the maximum interest rate level expected by the market has actually increased by roughly 25 bp, to around 3.4%. We  4/8  BIS - Central bankers' speeches  must bear in mind, however, that these market rates incorporate a positive term premium. Accordingly, the genuine market expectations for the maximum deposit facility rate would be somewhat lower than this figure. In any event, I would like to once again underscore the importance of considering the current setting's extraordinary uncertainty, which leads us to continue stressing that our future interest rate decisions will continue to be data-dependent and follow a meeting-by-meeting approach. I would now like to touch on the risks to financial stability I mentioned earlier. Overall, the euro area banking system is in a good position to deal with the current situation. This is in part due to the regulatory and prudential policy reforms undertaken over the last decade. However, while banking sector profitability has risen in the last year, there are signs that asset quality is deteriorating. How much will depend on the materialisation of the risks to economic growth. Given this situation, banks need to use this short-term increase in profits to bolster their resilience. In addition, banks must maintain a prudent strategy in their provisioning and capital planning policies, and closely monitor macroeconomic developments to enable a swift response should the risks envisaged ultimately materialise.
Our working assumption is that banks and others active in the wholesale financial markets will in fact choose to transact most of their wholesale business in the euro-denomination more or less from the start. And we assume that they will wish to offer euro-denominated facilities to major business customers that wished to use them. So, for example, non-financial companies, including large retailing companies, with an active business in other euro-area countries may wish to be able to quote prices or undertake transactions in euros from an early stage, although they would certainly still need to transact most of their local business in national currencies for some considerable period. On the other hand, we would not expect there to be much demand for banking facilities denominated in euros either for individuals or for the vast majority of smaller local businesses much before euro banknotes and coins become available in late 2001 or early 2002. At that point, the conversion of retail facilities into euros might proceed quite rapidly during the subsequent six-month period when national currency notes and coin are to be withdrawn - but again the principle of no compulsion and no prohibition would apply. Retail conversion is of course a massive undertaking. But the timetable does at least provide some 4-5 years from now for people to prepare.

(a) UK Banks are: Barclays, HSBC, LBG, Nationwide, RBS and Santander UK. Table 2 Drivers of UK banks’ lower ROE Total reduction in post-tax return on equity, 2006-H1 2015(a)  -11  Due to reduction in leverage  -4  Due to fall in return on assets  -7  of which:  Net interest income  -4  Trading income and fees  -6  Misconduct costs  -3  Other income and expenses  -4  Impairments  3  Operating expenses  7  Increases due to  Sources: Published accounts, bank data submissions and Bank calculations. (a) UK banks are Barclays, Cooperative Bank, HSBC, Lloyds Banking Group, Nationwide, RBS and Santander UK. More fundamentally, banks are out of favour because of a new-found exasperation with their returns rather than due to old concerns about their resilience. UK banks, for example, have seen a sharp decline in profitability since the crisis, with average group-level post-tax returns on equity falling from 17% in 2006 to 6% in the first half of 2015 (Chart 6). Of course, with hindsight, a substantial proportion of the pre-crisis return  6  BIS central bankers’ speeches  was ephemeral, reliant on short-term funding, capital-light balance sheets and massive synthetic leverage.
Moreover, new products emerged which also supported the transfer, hedging and dispersion of risks, such as credit derivatives. And the use of these instruments strengthened the inter-relationships between financial market participants across the globe: greater integration of markets went hand in hand with the acceleration of financial innovation and rapid growth of market activity. These developments helped stimulate important changes in banks’ business models. Constraints on growth were eased as funding sources widened. Many banks took advantage of new sources of wholesale funding available from securitisation – the packaging of loans into instruments which could be sold on in financial markets. In many cases, assets were routinely transferred into off-balance sheet vehicles which funded themselves through assetbacked commercial paper, with the sponsoring bank providing a back-up liquidity line. By applying this “originate and distribute” model, banks tapped a new source of funding on a large scale. More traditional and stable sources of funding, such as retail deposits, declined in importance (Chart 1). In addition, many banks saw opportunities to generate new sources of revenue and fee income by developing and deepening their activities in international capital markets. Innovation has provided banks with greater opportunities to hedge and diversify risks. For example, a regionally-based bank in country A can easily lower its geographical concentration, for example by selling credit risk to other investors who had not previously been able to access such exposures, and/or by purchasing exposure to credit risk elsewhere.

It will be the safest asset as it will have legal tender statusiv and it will be accepted everywhere throughout the euro area. Its basic functionalities will be free for individualsv and it should not be remunerated. But "Cash+" will also provide additional advantages over banknotes: it will allow everyone to use central bank money in e-commerce, for peer-to-peer payments as well as for conditional or "programmable" payments. These considerations have led the Eurosystem – under the auspices of Christine Lagarde and my colleague Fabio Panetta - to launch an investigation phase focused on a digital euro, which should culminate in a preparatory phase by the end of 2023, subject to the agreement of the Governing Council. Based on these preparations, we could then decide on a gradual launch, beginning in 2027 or 2028. Last Wednesday, the European Commission published a draft directive to enable the issue of a digital euro. This legislative proposal is clearly a very good step in the right direction: it ensures that the digital euro will indeed be equivalent to a “digital banknote”, providing a high level of confidentiality, while guaranteeing that it is properly integrated into the financial and payments ecosystem. Let us be clear here: I consider it our duty to develop this possibility for our citizens, however, they themselves will be free to use it or not.
The infrastructure in a wide sense in the metropolitan areas, perhaps in the Stockholm area in particular, may affect the possibilities of continuing to benefit from the existing demand. The rapid price rise for houses and tenant-owned flats in the Stockholm area is a clear illustration of certain supply-side problems. Another sign is the shortage of rented dwellings, or rather the lack of mobility in this market. Thus it is not only labour demand that will determine the future development of unemployment. A growing part will be played by supply-side factors in the form of occupational and geographical mobility. So while it can be concluded that in the near future the Swedish economy’s growth rate may be capable of topping the potential level of - as I just indicated - between 2 and 2.5%, this applies only for as long as there is a supply of labour with the appropriate training and occupational experience and the possibility of being geographically available. According to the most recent national accounts, published just before Christmas, GDP growth in the first three quarters of 1999 was over 3.5%. The fourth quarter outcome is still difficult to estimate precisely but demand growth seems, if anything, to have accelerated. An unusually good Christmas season appears to have resulted in a strong trend for private consumption, for example. A continuation of the strong development is suggested, moreover, by such leading indicators as household confidence, a high increase in the money supply and rapidly rising asset prices.

There is still a risk that the economic upswing in our country may be short-lived. A delay in the global economic recovery in the next few quarters, an unfavourable development in the financial markets or growing geopolitical tensions could jeopardise the economic pickup in Switzerland. Overall, however, the cyclical risks today are significantly more balanced than even a few months ago. It can thus not be ruled out that the recovery will set in faster than we expect. Inflation forecast I shall now turn to the latest development in inflation and our new inflation forecast. Annual inflation (inflation rate compared with previous year) measured by the national consumer price index has shown extremely stable development for some time. In August, it rose by 0.2 percentage points to 0.5%, where it remained until November. This stability is attributable to the evenly spread price increases for domestic goods. Inflation on imported goods has been distinctly more volatile in the wake of fluctuating oil prices. The core inflation rate calculated by the National Bank currently amounts to 0.6%. BIS Review 58/2003  1  The graph shows our inflation forecast of September 2003 (the dash-dotted green curve in the graph) as well as the new forecast of December 2003 (dashed red curve). The assumptions on which the new forecast rests differ in various respects from those in September. For one thing, growth in the United States will be markedly higher in the current year than anticipated three months ago.
It also enables us to follow how debts develop over time and thus also provides some information on the households’ amortisation behaviour. The Riksbank’s credit data is therefore an important piece of the household-debt puzzle. The Riksbank’s credit data confirms our concern Let me now say something about what our data shows and also in some cases place the data in relation to other results that have been presented to us in various contexts. It is of course not my intention to give the impression that other results are incorrect in some way. It is rather the case that data is used in different ways depending on one’s perspective and focus, and this is reflected in the results. The Riksbank’s particular focus is on the risks that household indebtedness may pose to the real economy and financial stability. The aggregate debt ratio underestimates debts among borrowers As I mentioned earlier, the aggregate debt ratio is 174 per cent. However, as this figure is based on the entire Swedish household sector it also includes individuals who have no debts but have an income. Now that it is possible, it therefore seems more relevant to examine the debt ratio for those who actually have debts, that is almost four million Swedes over the age of 17. If the debt ratio is calculated only for indebted households, the figure arrived at is 263 per cent.

In some ways it is a good thing if the stress-testing part of our regime 3  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  3  (Pillar 2) takes more of the strain, because it results in buffer requirements which should be more useable in a stress than Pillar 1 minima. And our Pillar 2A regime should capture concentration risk and any other aspects not captured by Pillar 1. But we should test ourselves on this, not least given that firms’ published CET1 ratios derive from Pillar 1 requirements. One way to do this is to compare the risk-weight level to some other crude benchmarks – such comparisons do not raise major worries, but nor do they suggest that risk-weights should be any lower (see Chart 7). Another way is to explore more sensitivities in our stress-testing, and in particular to examine where non-linearities arise for higher levels of house price falls than those we assume in our main scenarios. A number of safeguards exist in this area: our moving of firms away from ‘Point in Time’ modelling approaches; the leverage ratio; and (further down the track) the Basel 3.1 output floor. But despite this, we should be very cautious about any significant further moves down in Pillar 1 risk-weights for UK mortgages – in part because this exacerbates level-playing field issues given standardised risk-weights do not move in the same way, a point which will not be lost on the vast majority of the BSA’s members.
In principle, banks should allocate capital to individual business units based on the marginal capital requirements of those activities to the bank as a whole – so if a bank overall is constrained by risk-weighted capital requirements, it will allocate capital based on risk-weighted assets even to business units for which the leverage ratio or stress test is binding on an individual basis. But as banks move closer to the critical point at which the leverage ratio rather than the risk-weighted ratio becomes binding – an average risk weight of 35% based on a Tier 1 leverage ratio requirement of 3% and risk-weighted requirements and buffers of 8.5%3 – they will need to be increasingly mindful of both constraints. The banking system will be substantially better capitalised in future than it was pre-crisis. But regulators will need to follow closely how banks are adapting to tougher bank capital standards and identify any adverse unintended consequences. Those might take the form, for example, of loopholes that provide an opportunity for regulatory arbitrage, an unexpectedly significant impact on financial markets or a conflict with other regulatory priorities, such as shifting derivatives markets towards central clearing. Where appropriate, we will need a snagging process to review and adjust through the international regulatory bodies. Securities financing transactions One example of a market where tougher regulation was both needed but might have wider consequences is securities financing.

The pandemic has shown how important it is for countries to keep markets open, trade flows smooth, and supply lines intact. But each country will do this only if it has an assurance that others will do the same. We must therefore make a renewed commitment to keeping supply chains open. We must coordinate our actions to minimise disruption and enhance recovery. We must agree on common protocols for re-opening our borders in a safe manner, lifting travel and trade restrictions, and restoring air and shipping routes. We cannot wait for global leadership or multilateral agreements to do this. Like-minded countries must come together, make things happen, and blaze a trail for others to come along. Singapore has been part of such efforts to keep global supply chains open. Together with Australia, Brunei Darussalam, Canada, Chile, Laos, Myanmar, Nauru, New Zealand, the United Arab Emirates, and Uruguay, Singapore issued last month a joint ministerial statement to underline our commitment to maintain open supply chains during the ongoing Covid-19 pandemic. Importantly, it contains a commitment to refrain from export controls, tariffs and nontariff barriers, and remove any trade restrictive measures on essential goods. Singapore is also in active discussion with various countries to develop bilateral arrangements for safe travel between them. We are pleased that our first ‘fast lane’ arrangement has been launched with China -to facilitate essential business and official travel between our two countries.