samchain/econo-pairs-v1 huggingface dataset:
Indeed, for European banks affected by big operational events, this deterioration has stood at over 1.25 pp of CET1 in the past five years, with a rise to 2.1 pp in 2018. In Spain’s case, the potential materialisation of costs associated with legal risks continues to contribute to deposit institutions’ operational risk. The processes linked to past litigation such as that of the floor clauses have had an estimated cost for the sector  7/10  of over € billion to June 2019. Moreover, there are other significant legal processes still pending resolution. In any event, legal risk and certain other factors relating to banks’ conduct have had a considerable impact on the reputation of the banking sector, and not only in Spain. It is worth recalling here that reputation and customer confidence are fundamental to the banking business. Therefore, institutions should strive to reverse this tendency by providing their customers with financial products and services suited to their needs and capabilities, and they should likewise supply the relevant information clearly and transparently. Lastly, in relation to the systematic assessment of the balance of risks to financial stability that we regularly make at the Banco de España, we are including other elements, whose materialisation could occur over a longer horizon. I refer here to the potential changes technological innovation may entail for the market structure of the financial sector, and those arising from climate change. The importance banks give to these changes will have to increase accordingly.

Over the past six months, corporate profitability has remained very low and leverage ratios have generally increased, intensifying the balance sheet vulnerabilities of the non-financial corporate sector. In addition, banks have continued to apply conservative lending standards, albeit at a moderating degree. Improvements in financial market conditions have allowed larger firms to partly substitute bank loans with market-based debt or equity. Looking forward over the next few months, the overall balance sheet conditions are expected to remain challenging, as firms’ access to external finance is not likely to improve significantly in the coming months, while profitability is likely to remain low. Low profitability and high leverage are putting a severe strain on firms, making them less resilient to adverse shocks. As a consequence, some measures of corporate credit risk, such as unconditional expected default frequencies, remain high for most industries although they had declined recently for most sectors. (See Chart 5). Conditions in the euro area commercial property markets have deteriorated further during the past six months and continue to be a potential source of risk to many financial institutions. Capital values – i.e. commercial property prices adjusted for capital expenditure, maintenance and depreciation – for prime property had declined by an average of 12% (year-on-year) in the third quarter of 2009. All euro area countries had recorded declining capital values compared with the third quarter of 2008.
2  BIS Review 8/2010  Other challenges ahead for the global Islamic financial system The Islamic banking and finance industry is still relatively young and to a certain extent, is functioning at the experimental stage of development. At this stage, it requires an enabling and conducive environment to innovate new products and try out the various Shariah concepts in Islamic finance. However, going forward, there are some challenges that may impede our efforts in developing the Islamic financial system. A rigorous and well developed Shariah framework is needed to govern market practices of the Islamic financial institutions. To achieve consistency in the development of Islamic finance, all stakeholders involved in Islamic finance must work in a concerted manner on interpretation issues. Nonetheless, there has to be a check and balance between the need to have innovative and advanced products and the need to uphold the Shariah requirements. Efforts, time and resources must be pooled among the Islamic finance community to expand the industry and compete healthily with the larger conventional finance markets. As such, mutual recognition and understanding of different practices are essential in allowing Islamic finance to grow. For instance, Bursa Suq Al-Sila’ could also be used as a unifying application of Tawarruq practices by adopting acceptable best market practices for the Islamic financial institutions and at the same time observe the Shariah principles. In Malaysia, we adopt a stance of mutually recognising the various Shariah interpretations.

Bahrain and Malaysia has one of the strongest relationships among the countries in the Middle East. It was further cemented with the signing of a Memorandum of Understanding between the Central Bank of Bahrain and the Central Bank of Malaysia in 2001 to jointly develop Islamic finance internationally. In fact, an 80-strong Malaysian delegation led by HRH Raja Dr. Nazrin Shah, Crown Prince of the State of Perak and Malaysia’s financial ambassador, visited Bahrain in October 2009 to forge greater financial ties with the Bahraini Islamic financial community. It is heartening to note that common grounds have been reached on the standard contracts that the Association of Islamic Banking Institutions Malaysia or AIBIM, and the International Islamic Financial Market, or IIFM, have produced. This is invariably a reflection of the growing cross border harmonisation of interpretations of concepts and agreements. Furthermore, AIBIM’s interbank Murabahah master agreement (IMMA) and the corporate Murabahah master agreement (CMMA), recently launched in Malaysia, would further unlock the potential of the Malaysian Islamic money market, which saw around $ billion worth of transactions daily last year. In the global scene, it is estimated that the global commodity murabahah market is valued at more than $ trillion, giving rise to a huge business potential. I would encourage you to focus more resources here as it is one of the key areas that we can jointly promote in our regions.
Rather than simply resetting the quantitative standards, we sought a framework that would be better able to evolve with, and indeed encourage, future improvements in the measurement and management of risk, and one that would be well-anchored on a solid corporate governance structure and a sound risk culture. On a grand scale, we sought a capital framework that would promote greater financial stability, a public good that benefits consumers, businesses and banks alike. Comprehensive approach The new capital framework is much more comprehensive than the 1988 Accord for many reasons: it applies to a wider scope of entities within banking groups; it offers a menu of different alternatives to fit different circumstances; it encompasses additional risks, in particular operational risk; it widens the recognition of credit risk mitigation techniques; it sets out a thorough framework for securitisation transactions; and, most importantly, it is based on three mutually reinforcing pillars. As you may know, the first pillar refines the measures of minimum capital requirements. It aligns capital charges more closely and comprehensively to the actual economic risks a bank faces, and creates explicit incentives for banks to improve their internal measures and approaches to risk. Let me just add that this better alignment of capital to risk is a principle that we supervisors hold dear. It can sometimes be tempting to vary the capital rules in favour of particular sectors, but in my view this divorces capital requirements from risk, which ultimately benefits no one.

Also from a European perspective, I believe that the EU should seek to implement the trading book changes at the same time as other major countries. Moving now to the second initiative, the Basel Committee has long intended to conduct work to re-confirm that the new framework meets our objective to broadly maintain the aggregate level of capital requirements, while keeping incentives to adopt the more advanced approaches that are offered. In order to establish a common data set on which to base this review, the Committee has decided to begin a recalibration exercise in autumn this year, some months earlier than anticipated. As I said earlier, I don’t believe that this will imply a significant change to the framework. We are already satisfied that the new capital framework clearly differentiates the degree of risk in particular transactions on a relative basis. What we need to confirm is that the absolute requirements are right and that the appropriate incentive structure is maintained. 5. Conclusion  In my testimony today, I have sought to outline the reasons why Basel II matters so much and how it will support the continued safety and soundness of the banking system. When we motivate banks to improve their understanding and approaches to risk, I believe that banks will become less sensitive to the ups and downs of the business cycle, better able to weather periods of distress and better able to serve as a source of credit and growth to the economy.
The decline in traditional exports will then persist. Sooner or later, the oil market will also feel the effects of the downturn and oil prices will decline. If the world economy experiences prolonged stagnation and the krone remains firm, a markedly lower interest rate will contribute to a weakening of the krone and mitigate the effects for Norway. On the other hand, any fiscal slippage will contribute to maintaining a strong krone. A precondition for countering a possible downturn by means of monetary policy easing is slower growth in labour costs. Monetary policy cannot prevent an increase in unemployment that is caused by a significantly higher rate of growth in labour costs in Norway compared with other countries. A stagnating global economy has changed the domestic inflation outlook in recent months. World stock markets have continued to decline. It does not appear that interest rates in the US and Europe will increase in the near future. They may even be reduced further before the recovery starts. In Norway, the interest rate has also been reduced. At the same time, fiscal policy is stimulating activity, partly through tax reductions and growth in government allocations. In addition, state finances weaken when the economy shows little growth and unemployment rises. As a result of the strong krone, however, overall economic policy is tight. With an equally tight policy ahead, inflation would probably have been lower than the inflation target. A gradual easing of monetary policy would thus seem appropriate. Does the inflation target promote stability?

The central bank alone cannot, with the instruments at its disposal, steer the exchange rate. During the years when a fixed or stable exchange rate was the objective of monetary policy, fiscal policy was responsible for smoothing fluctuations in the economy. At the same time, incomes policy’s role was to keep wage growth in line with wage growth abroad. The objective of exchange rate stability therefore provided a framework for economic policy. When foreign interest rates moved up, the interest rate in Norway also had to be raised in order to prevent a weakening of the krone. Conversely, interest rates in Norway were often reduced following a reduction in interest rates abroad. One can imagine how this division of responsibility would have been implemented in the face of the disturbances to the Norwegian economy which occurred in 2001 and 2002. The upward tendency of the krone would have led to reductions in the interest rate down to the international level. As a result, interest rates would also have reached a historical low in Norway. Low interest rates would have fuelled lending growth, pushed up house prices and intensified the shortage of labour. In order to prevent another bubble of this type in the Norwegian economy, substantial fiscal policy tightening would have been required in 2001, 2002 and 2003. The fiscal rule stipulates that the central government budget deficit shall over time be equivalent to the expected real return on the Government Petroleum Fund.
It must be frequently adjusted in response to various changes and new information so as to enable the stability goal to be reached. Against the background of our knowledge of the monetary policy transmission process and its lag structure, it is obvious that it is hardly the level of money market rates that is decisive, but rather the interest rate path optimised over time in uncertain circumstances. The condition for success of the policy is not that the three-month Libor rate is exactly right today; rather, it must be possible to constantly optimise the interest rate path - which leads to the set goal - in a way that the deviations of the ideal line, which can only be defined ex post, will be as small as possible and easy to correct. Interest rate steering will therefore often follow a fairly gradualistic pattern. This has nothing to do with macroeconomic activism, quite the contrary. The macroeconomic fine-tuning activists have lost their case because they have assumed totally unrealistic information conditions and underestimated the uncertainty of political decision-making. With interest rate steering, the situation is exactly the opposite. Precisely where there is considerable uncertainty and false steps are liable to occur, there are good reasons for implementing a policy of small steps. The danger of slipping is smaller, and a false step is easier to correct. But there are also valid grounds for fairly substantial interest rate adjustments.

Sound and robust risk data aggregation capabilities and risk reporting practices have become even more important since the global financial crisis, which demonstrated that an institution’s ability to manage risk-related data has a significant impact on its overall risk profile and the sustainability of its business model, especially under stress conditions. The presence of board members with IT expertise has increased significantly in banks, allowing them to be more aware of this shortcoming and to make better-informed decisions to implement an effective RDAR framework across the institution. Additionally, some institutions have invested in strengthening their processes, by including dynamic dashboards in risk reports, which allow for a deeper dive into several types of risk. In conclusion, although it has been in the supervisory spotlight for several years, awareness of the benefits of good risk data management has shown limited progress in institutions. Thus, the accuracy and timeliness of internal reporting still needs to be improved, as not doing so will limit management bodies’ ability to make the right strategic decisions. Conclusion The board’s oversight role is one of the core elements of good governance. Adequate skills, challenge and independence are three factors that ensure good governance of our institutions, and it is therefore helpful if both their business model and their risk management are geared towards making them robust and profitable. 5
Grill, M, Hannes Lang, J and Smith, J (2015), “The leverage ratio, risk-taking and bank stability”, preliminary version; www.eba.europa.eu/documents/10180/1018121/Grill,%20 Lang,%20Smith+-+The+Leverage+Ratio,%20Risk-Taking+and+Bank+Stability+-+Paper.pdf. Haldane, A and Madouros, V (2012), ‘The dog and the frisbee’, www.bankofengland.co.uk/ archive/Documents/historicpubs/speeches/2012/speech596.pdf. IMF (2009), Global Financial Stability Report, April. Laeven, L and Valencia, F (2010), “Resolution of Banking Crises: The Good, the Bad and the Ugly”, IMF working paper, 10/146. Pozsar, Z (2016), “Money Markets after QE and Basel III,” Credit Suisse June 2016. 6  BIS central bankers’ speeches  BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches

The interplay between the Riksbank and the market is of central significance for monetary policy. It is a question of mutual dependence. For example, the Riksbank is to supply an efficient payment system – a financial infrastructure. We also oversee the stability of the system. Moreover, we are responsible for providing Swedish banknotes and coins. However, at the same time we are dependent on the financial markets to implement monetary policy measures. The game rules for our interaction with the financial markets have changed quite a lot over the past 25 years. The most dramatic changes took place in connection with the deregulation of the credit and foreign exchange markets that begin in the 1980s. The deregulation has contributed to more efficient pricing which better reflects demand and supply conditions. The efficiency of the financial markets has considerable importance for the impact of monetary policy via the transmission mechanism. The impact of our policy also depends on how well we succeed in communicating our intentions to the market. The more open and clear we are, the better chance we have of influencing interest rate setting in the way we want, not just in the short term, but also over a part of the so-called yield curve. This makes some demands of our actions. BIS Review 40/2007  1  The other aspect – that we are a public authority with responsibility towards the general public and their elected representatives – also makes a number of demands of us.
Jarle Bergo: Projections, uncertainty and choice of interest rate assumption in monetary policy Speech by Mr Jarle Bergo, Deputy Governor of Norges Bank (Central Bank of Norway), at the Foreign Exchange Seminar of the Association of Norwegian Economists, Sanderstølen, 27 January 2006. The  Charts in pdf-format can be found on the Norges Bank’s website. Please note that the text below may differ slightly from the actual presentation. The speech does not contain new assessments of the economic situation or of current interest rate setting. *  *  *  Introduction First of all, I would like to thank you for inviting me to this seminar. Participants at this and other seminars have occasionally shown some interest in Norges Bank’s views on future interest rate developments. For a long period, our analyses were based on the assumption that the interest rate would move in line with market expectations, and the discussion was usually about whether the bank agreed with this interest rate outlook or had a different interest rate path in mind. In Inflation Report 3/05, projections were based on the Bank’s own projected path for future interest rates for the first time. In other words, from using technical assumptions and others’ assessments of our future monetary stance, we have now in a sense “assumed ownership” ourselves of the interest rate path in our projections. This seminar would therefore seem to give me an appropriate opportunity to provide some background on this issue and on the assessments underlying our forecasting.

The reverse side of that same coin is that as more payments are carried out outside of the banking system, they also start to fall outside of typical central bank oversight like the ACH and RTGS. As it stands today, the portion of digital payments is still a small fraction of 9.  total payments. Even in China, where mobile payments have sky rocketed, the total volume of mobile payment transactions in 2016 stood at CNY 208 trillion7, a fraction of the CNY 3600 trillion8 processed by China’s High-Value Payment System. However, as more payments go through these e-wallets and as more consumer monies are held by non-banks, it is important for us to consider the risks that we typically look out for: a. As individual e-wallets, how do we keep them safe to use? b. Collectively, how do we manage risks that e-wallets may pose to the financial system? 2/6  BIS central bankers' speeches  c. As a market, how do we ensure that e-payments function smoothly with each other and with the financial system? 1 0 . Let me run through these three questions, and share how MAS is addressing these through the proposed Payment Services Bill (PSB) – striking a balance between innovation and sound regulation – as well as industry collaboration. The proposed PSB also follows an activity based framework which calibrates regulation according to the risks that the specific payment activity poses, rather than applying a fixed set of regulations to all payment service providers.
When China, India and Eastern Europe joined the global market economy, the labour force of countries participating in world trade doubled.9  Norges Bank Economic perspectives 15 february 2018  The result is that workers in advanced economies face competition from new groups, which pushes down wage growth and affects the income distribution between labour and capital. Lower unionisation levels have also weakened workers’ bargaining power. Since 1980, unionisation in the OECD area has fallen from around 35 percent to below 20 percent. Low wage growth feeds through to prices for goods and services. Many firms also face competition from firms that have relocated production to lower-cost countries. In addition, online shopping reduces the advantage of physical proximity to customers, narrowing the scope for passing on higher costs to prices. Globalisation thus restrains the general rise in prices. Cheap imports from low-cost countries have long been an important source of low inflation in advanced economies. In Norway, prices for clothing and footwear have fallen by almost half over the past 20 years. The price effects of globalisation have not been exhausted. A rising number of low-cost countries are competing on the global stage. So far, global competition has had less influence on services prices than on goods prices (Chart 8). However, global trade in services has increased recently. This may lead to renewed downward pressure on prices. Chart 8 Goods and services inflation. Average annual change 2000 – 2017.

At the same time, in a highly interlinked global economy consensus-building concerning the transmission of spillovers is crucial for dealing with shocks that affect substantial parts of the global economy. Moreover, the IMS should also provide incentives to foster appropriate preventive action that renders economies more resilient to shocks, and provide the necessary standards and infrastructures to make global markets work better as well as make coordination possible when warranted. This is already a robust policy agenda. 6  BIS central bankers’ speeches