samchain/econo-pairs-v1 huggingface dataset:
In Europe, we have gone further with our second Directive on DGS (Directive 2014/49/EU) that harmonises the reimbursement of covered deposits within 7 working days and with the ongoing negotiations for the establishment of a Single DGS for European Member States participating in the Banking Union. Is a single DGS a prerequisite for a genuine Banking Union or is it the final stage to be implemented when everything else has been harmonised? In all events, the European stance will be prudent, favouring the establishment a European Scheme based on a re-insurance approach. It is not only standards that matter but practices too Common standards alone are not sufficient because day-to-day work on financial stability requires practical solutions that cannot be implemented in isolation by a single jurisdiction. This does not mean that everything must be unified but bridges must be built between stakeholders, in accordance with their legal remits and constraints. At the European level, we pushed forward this approach through European agencies such as the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) to help implement the standards consistently and ultimately by the creation of the Banking Union. The latter is wholly dedicated to the practical exercise of supervision, resolution and, at a later stage, deposit insurance. More specifically, we welcome the completion of the cooperation agreement guidelines prepared by the EBA and mentioned in the last panel today.

Practice and model diversity is a challenge, but not an obstacle for implementing efficient resolution strategies We have heard today that DGSs may still be very diverse in terms of their status, functions, design, size, etc. This is also the case for supervisory and resolution regimes even though the international standards-setters have made considerable progress in terms of harmonisation. Let me take the example of banking resolution: one of the (many) remaining challenges is to make sure that the adopted resolution strategies will be recognised and applied cross-border. Under the aegis of the FSB, several initiatives have been taken (e.g. ISDA protocol for financial contracts) but this is not the end of the story and many further discussions will be necessary to remove all the obstacles to implementing, inter alia, a single point of entry resolution of a GSIB. In the EU we have now a common legal resolution regime and even a common resolution authority for the Banking Union but resolution measures continue to be implemented at the national level because insolvency regimes within Europe are not unified. Being optimistic, I would say that these difficulties are not an impediment to resolution, because the most important thing is to be mindful of such a difficulty and to deal with it.
Second-quarter figures show that, although the affected zones are still enduring a hard situation, especially in the housing conditions of affected areas, the disruptions of the productive process have quickly dissipated (figure 5). With respect to firms, our estimates suggest that the effects of the earthquake and tsunami on their financial situation was not severe. Estimates of the impact of the catastrophe on their payment capacity reveal focalized effects on small and medium firms of the hardest hit regions. Larger firms have relied on insurance that cushion the effects of the earthquake on their solvency, but delays in the payment of claims might generate liquidity pressures. Accordingly, output will be similar to March projections, while domestic demand will continue to grow very strongly. In the baseline scenario, the expansion of demand will begin to diminish over the course of the second half of this year, mainly because part of its current strength is temporary, related to the consumption of durable goods, investment in machinery and equipment and inventory replacement. The Board foresees that in 2010 y-o-y GDP growth will between 4% and 5%. This range is slightly lower than March estimates, due to slower effective growth in the first quarter. Domestic demand will approach a growth rate of 15% in 2010, determined by the foreseen increase in gross fixed capital formation and private consumption (table 2). The scenario for domestic demand is also based on the substantial impulse of macroeconomic policies in the past several quarters, boosted by the progressive normalization of internal financial conditions.

Inflation and interest rates should be low and in line with those in the other participating countries. The exchange rate should be stable. Last, but certainly not least, the budget deficit should be under control and the level of official debt sustainable. Over the last five to ten years, most member states of the EU have come a long way towards fulfilling these criteria. Inflation rates are at or close to historical lows in various countries. The same is true for interest rates, where differentials have diminished considerably. Much less successful was the quest for fiscal stability. Budget deficits in most countries are still too high and debt levels have often, instead of falling, risen over the last years. Without any doubt, the pursuit of the convergence criteria with a view to joining the EMU has been instrumental in improving economic policies in various member states of the EU. Who, for instance, would have thought ten years ago that Italy would today post an inflation rate lower than the one in Germany? Yet, despite the progress achieved over the last decade, two problems remain: First, convergence in important areas is still far from being satisfactory. Second, the convergence criteria require the aspiring members of the EMU to achieve certain goals by spring 1998. But what about their future policies? There is a widespread belief in the economics profession that nominal convergence -- as expressed by the convergence criteria -- is less important for a successful monetary union than real convergence.
I have noticed that although real growth is evident in the region, it is accompanied by some important risks and vulnerabilities. One of the challenges attached is related to the sustainability of this growth. The National Bank of Romania shares your 1/2  BIS central bankers' speeches  view. We should not forget the saying “easy come, easy go”. Loose economic policies, unbalanced budgets and wage-price spirals could cost us much when the economic downturn check is due. This problem hit us severely in the recent past, but we have hardly learned the lesson. Because I have mentioned the economic laws, I will turn now to the legal environment: the report covers extensively the rule of law, the role of institutions and the judiciary. In the report, Central and Eastern Europe is presented as an example of effective measures and progress in this respect, which is of no small importance. Romania finds itself in an upright moment when economic performance is associated with strong achievements in the reform of institutions. We should not waste this moment. In the long run, the economy’s, the institutions’ and the society’s progress goes hand-in-hand, and, conversely, so does their regress. Therefore, we have to be careful not to reverse the current trend. Banks in Europe seem to ride better on the economic tide, also thanks to wide-ranging reforms brought by the Banking and Capital markets Union. Credit is still below its potential and the needs of the economy.

Mugur Isărescu: Regional economic outlook - Europe Opening speech by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the conference "Regional Economic Outlook - Europe", Bucharest, 17 November 2017. * * * Your Excellences, Ambassadors, Members of the diplomatic corps, Ladies and gentlemen, Distinguished guests, It is my pleasure to welcome you to the National Bank of Romania. The Board and I are honored to host the presentation of an important IMF document, one of their flagship reports, namely “2017 Regional Economic Outlook Report”. It is a tradition for the National Bank of Romania to host this event and we are pleased to greet the presence of many foreign diplomats – this is a clear testimony of its importance. Allow me to extend a warm welcome to Mr. Jeffrey Franks, who has been a long-standing friend of Romania. Mr. Franks is a veteran of the Fund, who – over the last 25 years – has managed challenging assignments, including the resident offices in Ukraine and Ecuador, and has led teams in Pakistan, Romania, France, Belgium, and Paraguay. He was the IMF Mission Chief for Romania for almost 3 years, from 2009 till 2012. As many of you may remember, during his mandate as mission chief, Romania overcame a very difficult period, with the support of the IMF, WB and EC.
The combination of the size and liquidity of the market and the risk-free credit status of the instruments made Treasury securities extremely appealing at the height of the financial turmoil. Treasury bill yields actually went negative for a time after the Lehman bankruptcy, as investors were willing to pay for the opportunity to hold this instrument. Longer-term Treasury yields also declined sharply, with the ten-year yield falling to nearly 2 percent at one point. BIS Review 40/2010  1  While government securities around the world benefitted from safe-haven flows during the crisis, there are several features of Treasury securities that made them stand out even relative to other sovereign markets. At more than $ trillion, the size of the Treasury market provides investors with a homogenous asset class in which they can place large amounts of funds. Moreover, Treasury liquidity seems to compare favorably to the liquidity of other sovereign debt markets, whether measured by average daily trading volumes, turnover ratios or other metrics. The Treasury market is supported by a sound and extensive infrastructure for trading, deep financing markets, sizable derivative markets and an active dealer community. This is not to say that Treasury market liquidity was not tested during the crisis. Liquidity did suffer some in the face of greater volatility, strong investor flows and deleveraging by primary dealers. Despite these strains, however, investors were able to continue to trade Treasury securities in decent size at reasonable cost and with transparent pricing throughout the crisis.

There were signs of strain in particular segments of these markets, such as dislocations in forward exchange rates and a notable decline in the liquidity of currency swaps. However, market participants were generally able to execute trades and manage currency exposures in these markets on an uninterrupted basis. The resilience of foreign exchange markets owed in part to the availability of CLS Bank for  2  BIS Review 40/2010  eliminating time gaps in the settlement of different currencies, to the efficient collateral exchange achieved through credit support annexes and to the standardization of trade documentation. Credit intermediation and market disruption While those capital markets demonstrated meaningful resilience to financial stress, that was not the case for other parts of the financial system – namely, those involved in more complicated forms of credit intermediation. Many of the most acute problems were driven by a build-up in leverage in which large amounts of opaque, illiquid, long-term assets were financed by short-term liabilities. These activities took place both in traditional financial intermediaries and in what is often referred to as the shadow banking system. The shadow banking system performs a function similar to that carried out by banks and other financial institutions. In particular, it takes the short-term, highly liquid investments that households and other investors want to hold, and it uses them to fund the longer-term, relatively illiquid loans that businesses and households demand to finance their economic activity.
The international community may in future need to provide stronger incentives to countries to improve debt structures, be it through GDP-linked bonds, CoCos or CACs. Linking the availability or terms of IMF financing more explicitly to debt structures might be one way of doing so. (c)  Enhanced macro-prudential and capital flow management policies  Significant progress has been made over the past decade in the design and implementation of macro-prudential regimes and capital flow management policies. The shift in the prevailing orthodoxy, analytically and operationally, has been remarkable. 8  BIS central bankers’ speeches  A decade ago, policies to manage actively inflows and outflows of capital were frowned upon by the IMF and the international community. Yet today these measures have been largely accepted as part of the toolkit for protecting countries from boom and bust cycles in capital flows (IMF (2012)). Perhaps most significantly of all, more than 40 countries have already deployed these measures since 2009. A great many analytical and operational issues remain open. What are appropriate states of the world for introducing and releasing capital flow management measures – a first or last resort? Which policy measures are likely to be most effective – outflow versus inflow, price versus quantity controls? And how do these policies operate alongside other arms of policy – monetary, macro-prudential and micro-prudential? At present, we have neither the theory nor the experience to answer these questions definitively.

To be clear, this is not the same as saying that the growth rate of the supply potential of our economy has been permanently scarred by the financial crisis. But rather over the next two or three years – which is the horizon which matters for monetary policy – we shouldn’t automatically assume that underlying productivity will necessary grow at the sorts of rates to which we have become accustomed to in the past. Policymakers need to think about supply as well as demand when responding to weak output growth. Recent policy developments Let me conclude with some brief comments about the current policy outlook. You may know that between February and August of this year, I was one of the members of the MPC that had been voting to raise Bank Rate. As I mentioned at the time, my vote was not based on the nice reasons that the economic recovery looked firmly entrenched and the exceptional monetary easing implemented at the height of the crisis was no longer required. Rather, it was driven by nasty reasons. I wasn’t confident about the strength of the recovery and I was worried about the downside risks to growth. But I was even more worried about the outlook for inflation. In particular, the risks from continuing global price pressures, and the risk that the prolonged period of high inflation would affect the credibility of monetary policy.
In view of the direct and indirect effects of these developments, we revised the end-2015 inflation forecast down by 0.6 percentage points compared to the previous reporting period. In food prices, we left the end-2015 inflation forecast unchanged at 9 percent. Our medium-term projections are based on the assumption that tax adjustments and administered prices are consistent with inflation targets and automatic pricing mechanisms. The medium-term fiscal policy stance is based on the Medium Term Program projections covering the 2015–2017 period. Accordingly, we assume that a tight fiscal stance will be implemented and the primary expenditures to the GDP ratio will decrease gradually. 3. Inflation and the monetary policy outlook  Now, I would like to present our inflation and output gap forecasts based on the outlook I have described so far. Our medium-term forecasts are based on a framework that we will adopt a cautious approach to make the improvement in inflation outlook permanent and maintain the tight monetary policy stance by keeping the yield curve flat. Moreover, we assess that the annual loan growth rate will stabilize around the recent reasonable levels, also thanks to the macroprudential measures. Accordingly, we expect inflation to be, with 70 percent probability, between 4.1 percent and 6.9 percent (with a mid-point of 5.5 percent) at end2015 and between 3.2 percent and 6.8 percent (with a mid-point of 5 percent) at end-2016. We project inflation to stabilize around 5 percent in the medium term (Chart 18).

According to the current financial conditions and the results of the Loan Tendency Survey, there has not been any noticeable change in demand and supply conditions in commercial and consumer loans in the first quarter of 2015. Accordingly, we envisage that credit growth will maintain its current trend in the upcoming period. These reasonable levels in credit growth are expected to continue to limit medium-term inflation pressures on the one hand, and support the improvement in the current accounts balance on the other. 2  BIS central bankers’ speeches  2. Macroeconomic developments and main assumptions  Now, I will talk about the macroeconomic outlook and our assumptions on which our forecasts are based. First, I will summarize the recent inflation developments, and then continue with the domestic and foreign demand outlook. In the fourth quarter of 2014, annual consumer inflation posted a quarter-on-quarter decline by 0.7 points and stood at 8.17 percent remaining below the forecasts of the October Inflation Report (Charts 9 and 10). Annual inflation decreased across sub-groups in this period, the most remarkable slowdown being in the energy group, which was led by the plunge in international oil prices. The food group remained as the largest contributor to inflation. Core goods registered a slight fall in annual inflation, while the improvement in the underlying trend, which continued from the second quarter on, halted. Meanwhile, we witnessed the considerable effect of the fall in oil prices on fuel-related services and saw a notable improvement in the underlying trend of services.
Second, credit conditions loosened substantially, supported by a sharp compression in perceived long-term risk-free rates, which was only unwound when markets began re-pricing in the risk of bank and sovereign default in the periphery (Chart 5). The decline in interest rates in the periphery in the pre-crisis period suggests that it was a case of capital being pushed into the periphery, rather than it being sucked in by a high rate of return as conventional analysis would suggest. The consequence of all this was an increase in demand in the periphery, much of it in construction, financed by borrowing from the core. This is illustrated in the contrasting experiences of Spain and Germany. Domestic demand in Spain consistently outstripped output growth pre-crisis, while the opposite was true in Germany (Chart 6). These growing external imbalances were accompanied by increasing internal imbalances, as the non-tradable sector in Spain expanded at the expense of the tradable sector, driving up unit labour costs in the former relative to the latter (Chart 7). That was not the case in Germany. 2 Restoring the euro area to strong and balanced growth requires dealing not only with the accumulated financial imbalances – the excessive banking and sovereign debts in the periphery – but also restoring competitiveness and rebalancing the structure of demand and production. On the face of it, that rebalancing is under way, with a narrowing in the current account deficits of the periphery.

These include exposures subject to double default effects, or the likelihood that both a borrower and a guarantor will default at the same time. Likewise, supervisors and bankers have long understood that we needed to address a small number of issues closely related to trading activities to avoid inconsistencies. The Basel Committee wanted to ensure that our approaches to double default and selected trading-related exposures were sound and balanced. As a result, we have been very pleased to work closely with the International Organization of Securities Commissions to engage both banks and securities firms in our review of these special matters. The Basel Committee and IOSCO are very close to reaching agreement on a paper that will outline the structure of these proposals. We intend to publish the paper in a few days, for a fast-track consultation with the industry. The paper will address five topics in particular, namely, •  First, the treatment of counterparty credit risk for over-the-counter derivatives, repo-style and securities financing transactions;  •  Second, the treatment of double-default effects for hedged transactions, in relation to trading book, but also banking book, exposures;  BIS Review 23/2005  1  •  Third, the short-term maturity adjustment, under the internal ratings-based approach, for some trading book-related items;  •  Fourth, a limited number of improvements to the current trading book regime, especially with respect to the treatment of specific risk; and  •  Fifth, the design of a specific capital treatment for unsettled and failed transactions.
And if debtors recognise that risks in contracts will not be enforced, they will no longer have incentives to price risk and exercise discipline themselves. So it has been for well over a century. There are many examples of time-inconsistencies in the private debt contracts issued by banks. Uncalled capital and reserve liability were banks’ loss-absorbing contract of choice in the late 19th and early 20th centuries. They ultimately proved ineffective and were abolished. Why? Because managers feared that invoking these instruments, at precisely the time they were most needed, might make a bad situation worse. This is time-inconsistency writ large. BIS central bankers’ speeches  7  A century on, hybrid bank debt instruments fell into the same trap. They gave bank management the option to rollover debt automatically in the event of stress. In principle, this option had insurance value in a situation of liquidity stress. In practice, facing the liquidity crunch of 2008, banks failed to exercise this option at just the point it was most valuable. Why? Because they too feared scaring creditors and making a bad liquidity situation worse. Hybrid debt, too, was time-inconsistent. Time-inconsistencies in public policies regarding bank debt have been every bit as acute. Both liquidity and deposit insurance have a long and revealing history. Liquidity insurance by the central bank was firmly established in the UK by the end of the 19th century and spread to all major central banks during the course of the 20th century.

(b) From 1940–1974 the total assets of the 3 largest clearing banks are used from the Bankers’ Magazine and banks’ published accounts. Bank observations are linearly interpolated between observations. (c) Total UK assets of the three largest UK owned banks are used after 1974 from Bank of England data. Chart 8: Holding periods in bank equities  Source: Bloomberg and Bank calculations. Notes: Average holding period of equities for a sample of 30 banks. BIS central bankers’ speeches  23  Chart 9: Market-based measures of capital ratios(a)(b)(c)(d)  Sources: Capital IQ and Bank calculations (a) “Crisis” banks are a set of major financial institutions which in autumn 2008 either failed, required government capital or were taken over in distressed circumstances. These are RBS, HBOS, Lloyds TSB, Bradford & Bingley, Alliance & Leicester, Citigroup, Washington Mutual, Wachovia, Merrill Lynch, Freddie Mac, Fannie Mae, Goldman Sachs, ING Group, Dexia and Commerzbank. The chart shows an unweighted average for those institutions in the sample for which data are available on the given day. (b) The “no crisis” institutions are HSBC, Barclays, Wells Fargo, JP Morgan, Santander, BNP Paribas, Deutsche Bank, Crédit Agricole, Société Générale, BBVA, Banco Popular, Banco Sabadell, Unicredit, Banca Popolare di Milano, Royal Bank of Canada, National Australia Bank, Commonwealth Bank of Australia and ANZ Banking Group. The chart shows an unweighted average for those banks in the sample for which data are available on the given day.