samchain/econo-pairs-v1 huggingface dataset:
And the ECB’s transparency, ethics and good governance frameworks have been harmonised, strengthened and extended to all members of the Governing Council and Supervisory Board.3 But it is important to me that our focus on connecting with the people we serve continues and grows stronger – in particular by improving the ways in which we communicate with the general public. And this is why your role in the Parliament is so important: you make sure that the people’s voice is heard by the ECB and the ECB’s voice is heard by the people. Communication is a two way street and it is vitally important for democracy, a founding principle of Europe. It is in this spirit that I will approach this hearing – and those we will have together in the future. The current economic situation and monetary policy Let me start by looking at the current economic situation in the euro area, before moving on to the longer-term questions for monetary policy about which you have enquired. Euro area growth remains weak, with gross domestic product growing by only 0.2%, quarter on quarter, in the third quarter of 2019. This weakness has been mainly due to global factors. The world economy outlook remains sluggish and uncertain. This lowers demand for euro area goods and services and also affects business sentiment and investment. As the sector most directly exposed to these global developments, the manufacturing industry has been suffering the most.

The ECB’s accommodative policy stance has been a key driver of domestic demand during the recovery, and that stance remains in place. As laid out in the ECB’s forward guidance, monetary policy will continue to support the economy and respond to future risks in line with our price stability mandate. And we will continuously monitor the side effects of our policies. As I confirmed to you last time when I was here, the ECB remains resolute in its commitment to deliver on its mandate. This commitment is vital for the stability of the euro area economy and for the welfare of euro area citizens. But you have also asked me to discuss more structural issues facing monetary policy, in 2/5  BIS central bankers' speeches  particular the review of the ECB’s monetary policy strategy, which will start in the near future. Such strategic reviews are relatively common for central banks, although their scope and aims often vary. The US Federal Reserve is currently undertaking such a review; the Bank of Canada has one every five years. In the ECB’s case, the last strategy review was completed in 2003. A lot has changed in the last 16 years. The macroeconomic landscape has been marked by the Great Financial Crisis and the sovereign debt crisis, and more recently by a low inflation environment. At the same time, new challenges have emerged such as demographics, disruptive technology and climate change. Conventional wisdom has been challenged and monetary policy globally has explored unchartered territories.
*** Talking with hindsight, after one year of experience since the successful launch of the euro on 1 January 1999, the most important challenge to the Eurosystem was the definition of the appropriate monetary policy for the euro area as a whole. In this respect, the Eurosystem had to navigate uncharted waters, since it could neither build upon practical experience with policies for the euro area as a whole nor on any reputation of its own, although it could draw upon the reputation and experience of the national central banks. In fact, apart from theoretical considerations and econometric test runs, we had - in that sense - to start right from scratch. The complexity of this challenge can easily be derived from the fact that the Eurosystem has to define a single monetary policy for a quite heterogeneous area that, as mentioned earlier, stretches from Lapland in the north of Europe to Andalusia in the very south. From a US point of view, this might not appear particularly demanding. The Federal Reserve System has always been confronted with the challenge of defining a single monetary policy for an even larger and likewise not fully homogeneous area. However, there seems to be a substantive difference. The US economy has evolved over decades, even centuries, under the conditions of the specific political set-up of the United States.

*** The successful introduction of the euro represents one of the greatest achievements in modern European economic history and, in order to understand how it came to be that 11 European countries decided to relinquish their monetary sovereignty and adopt a common currency, one must first look back, at least briefly, over 50 years of European integration. The first concrete step towards achieving this goal was taken when the continent lay in ruin following the Second World War and six countries signed the Treaty of Paris in 1951 establishing the European Coal and Steel Community (ECSC). This Treaty not only led to the removal of barriers to trade and the creation of a “common market” in coal and steel products, but also transferred powers previously exercised by the Member States in the coal and steel sectors to a newly established and independent High Authority. This showed how economic integration could serve not only as a means of fostering increased trade and improving economic welfare, but also how it could act as a driving force behind greater political integration by increasing the interdependencies between the participating Member States. When, six years later, the same six countries signed the Treaty of Rome establishing the European Economic Community (EEC), the same approach was extended to virtually all sectors of the economy with the explicit aim of creating an ever closer union among the peoples of Europe and a common market within which goods, capital and labour would circulate freely.
4 Provisions had already increased by € billion between June 2019 and June 2020. 5 As a result of its merger with Bankia, in March 2021 CaixaBank recorded positive extraordinary results of € million € million in negative goodwill less € million in extraordinary expenses). 5  increase in profit in the first quarter was essentially explained by a significant reduction in provisioning, which stood at pre-pandemic levels. Fourth, the unfavourable profitability performance in 2020 did not translate into a worsening of the sector’s solvency. Quite the contrary: capital ratios increased. The reasons for this are: i) the aforementioned negative extraordinary factors on profitability affected balance sheet items that have no bearing on prudential solvency (for instance, goodwill); and ii) the authorities implemented various measures to shore up institutions’ CET1 ratio, most notably the European Union’s regulatory reform (“quick fix”) and, again, the public guarantee programme and the recommendation against paying dividends. Despite their heterogeneous initial solvency positions, banks performed favourably across the board in 2020. Moreover, as at December 2020, accounting capital and reserves constituted the main components of Spanish banks’ prudential capital, while deductions for goodwill lost relevance as compared with previous years owing to a significant share of this having been amortised. More recently, in 2021 Q1, Spanish banks’ solvency ratios held stable relative to December 2020. Short and medium-term risks In my view, this positive sector performance must not obscure some of the short, medium and long-term risks that still exist.

In the future, given the uncertainties associated with the impact of the crisis on firms’ and households’ credit quality and with the repercussions of gradually withdrawing the support measures, we must be alert to indications of latent credit risk and ensure an appropriate and timely coverage of such risk, in keeping with supervisory guidance. Ensuring suitable 14  risk coverage, while maintaining a flexible prudential approach, may make it easier to prevent any undue contraction in credit that could hamper growth in the new phase of economic recovery that we are entering. The impact of the pandemic has exacerbated some of the pre-existing structural challenges faced by the banking sector. These notably include the challenges associated with the cost of capital exceeding profitability, digitalisation and climate risk management. To address them, it is essential that banks continue to make efficiency gains, by cutting costs and making intensive more use of new technologies. To afford the European banking sector a greater chance of success in adapting to the longterm challenges, it would be highly desirable for the European Union to fully adopt the Basel III accord, complete the Banking Union and further develop the Capital Markets Union. This would enable the European banking sector to explore the synergies and benefits of diversification associated with potential consolidation processes at continental level. Thank you. 15
Given the balancing of above stated developments, the accelerated growth of exports has provided a positive contribution on the total demand and on the economic growth. Exports climbed by 45.1 percent in annual terms, during the first quarter of 2010, whereas imports recorded an annual drop by about 2.3 percent. Accelerated upsurge of exports and the fall of imports at more moderate paces led to the contraction by about 17.1 percent of trade deficit, pursuing the trend observed even during the second half of 2009. The ratio of imports covering from exports pointed to 35.4 percent, about 11.6 percentage points higher than in the previous year. The above stated developments in the foreign economy sector have established a more sustained balance of the supply and demand for foreign currency, thereby providing a higher stability of the domestic currency value during the last months of year. It is needed this momentum adopts a stability over the medium term, through the accelerated implementation of facilitating supporting policies. Economic background and monetary developments have established an environment with moderate inflationary pressures. Annual Inflation in April pointed to 3.5 percent, thereby recording a drop of 0.4 percentage points relative to March 2010. The return of inflation within the target of the Bank of Albania was an expected development, forecasted previously. Consumer price inflation in Albania, during the last months, owes to a greater extend, to the increase of administered prices, the uprising trend of prices in the world conjuncture and by the subsequent effects of exchange rate depreciation on inflation.

Then the crisis struck, and we decided on the measures that have given us today's portfolio. Time to rethink in the current situation? There are several reasons why one might think differently now in relation to the way we reasoned at the end of 2017. Greater element of private securities A major difference compared with before is that the Riksbank has purchased large amounts of private securities during the coronavirus crisis, like many other central banks. This measure should be regarded in the light of the fact that monetary policy is about influencing the financial situation in such a way that inflation stabilises. In countries where credit is granted via the banks, the central bank naturally aims its measures at them. However, in countries such as Sweden, where credit is also market-based, that is, credit is also provided through debt securities, a broader toolbox is needed for the central bank to be successful in its monetary policy and to stabilise inflation around the target. My conclusion is therefore that QE will be needed from time to time. It is also interesting to note that the monetary policy toolbox, when regarded over a longer period of time has to some extent been cyclical. The fact that the Riksbank owns Swedish securities is nothing new, as my  10 See Sveriges Riksbank (2017).
At the same time, the banking model in Spain is less reliant on developments in financial markets and on investment banking activities. Second, the data mentioned previously show that Spanish institutions’ income statements have been affected by the gradual deterioration of the economic situation. Although it is natural to some extent that, in more adverse conditions, results and profitability have not increased as notably as in recent years, there is a clear and pressing need for resolute action by managers aimed at countering these pressures. I would like to briefly describe the developments in the main income statement captions and then identify the courses of action available. The net interest margin performed well in 2008 and its growth of around 14% over the same period of the previous year was higher than that of activity. This favourable performance, despite representing a slowdown with respect to other years, reflects highly recurrent core income from banking activity, a characteristic of the Spanish banking system. Also, net interest margin growth was favoured by the high percentage of lending granted at variable rates, which allowed institutions to progressively raise interest rates in the first half of 2008. However, financial costs also grew strongly, and may continue to do so in the future. The higher pressure from funding costs has three sources.

Meanwhile, NPL and delinquency have continued to decline, as the ratio of NPL, net of provisions, to total loans has declined further to 2.7 percent as banks attentively monitored their asset quality. Moreover, profit continued to be recorded for nine consecutive years, and the overall capital position of the banking system strengthened further, with BIS ratio at 16.1 percent, of which 12.6 percent is Tier 1 capital. Much of the current strength and resiliency of our banking sector owes a great deal to the reform groundwork laid during the past decade. On prudential supervision, as apart from requiring banks to conform to international best practices on risk-based supervision under Basel I and now Basel II, the Bank of Thailand also moved to strengthen our supervisory function, utilising both on-site and off-site supervision as well as asking banks to carry out stress tests on a regular basis. The key here was to strengthen banks’ own risk management culture and system. Works on strengthening the financial infrastructure were started and are still on-going. In this regard, various initiatives were introduced, including the long-term effort to reshape the financial system, and address inherent structural weaknesses, that was the mission of the Financial Sector Master Plan Phase I. The establishment of the National Credit Bureau to improve credit information, and improvements in financial legislations, including the new Financial Institutions Business Act, the Bank of Thailand Act and the Deposit Protection Agency Act. Today, our banking sector fundamentals continue to be strong, serving as a dependable pillar for our economy.
But achieving this will take political will and the courage to take difficult decisions. Earlier, I discussed the phenomenon of insiders and outsiders on the housing market and the fact that the measures Finansinspektionen has adopted so far to reduce the risks inherent in household indebtedness mainly affect outsiders. The reforms I have discussed today would also affect the conditions for insiders on the housing market. They are in a strong position, which has probably contributed to the desired reforms having failed to materialise so far. These are difficult decisions that must be taken, and they will affect many people. It is therefore important that reforms be implemented in stages, so that insiders gradually have time to adapt to new conditions. Having said this, I consider it important to look at the housing market from a longterm socio-economic perspective. Is it reasonable for today’s housing market, with all its shortcomings, to be preserved so that the social group that owns its own housing can watch its wealth increase at the expense of those groups who are finding it increasingly difficult to buy housing at all? I consider it to be of socioeconomic interest to adopt the necessary measures now, for the sake of coming generations, so that they can have the opportunity to find housing that suits them in their current phase of life. In addition, there will hardly be a better occasion to introduce the various measures, as Swedish households are currently living in an economy with historically low interest rates and low inflation.

Reactivating national demand has taken on a decisive role in the recovery, enabling the rebalancing of the internal and external components of expenditure. This change in the dynamics of domestic expenditure compared with events during the crisis years is in response to a series of factors, including most notably the growing normalisation of financial conditions, headway in the construction of the Banking Union, favourable developments in the labour market and the unquestionable improvement in confidence. Against this backdrop, both private consumption and business investment have regained momentum, underpinned by the improvement in the financial environment. Mention should also be made of the role being played by investment in construction, which might begin to turn around in 2015 or 2016. Recent developments in house prices are along the same lines, although certain caveats should be voiced: for the first time in six years, growth rates in the aggregate domestic indices of real estate prices are close to zero, or slightly positive, although significant differences across regions remain. Since the crisis began, spending by private agents has been constrained by the need to reduce the high levels of debt built up during the expansion that ran to 2008. Recently, there has been progress in private sector deleveraging, while the attendant restrictive effects on spending are being mitigated by a shift in lending flows towards more creditworthy agents and, in particular, towards companies better placed to commit to new investment projects.
And third, a reinterpretation of central banks’ financial stability mandate towards a more active role in crisis prevention is necessary to reduce the need for another round of extensive crisis management in the future. This, in a nutshell, is the main argument of my speech today. In what follows, I will elaborate on the rationale behind the conventional and unconventional measures that central banks have adopted to mitigate the crisis, and explain why central banks need to play an active role in the new regulatory framework which is being implemented in response to the crisis. Central banks may not exactly have a reputation for being big innovators. But just as the Foire du Valais has developed into French-speaking Switzerland’s pre-eminent fair over the past 50 years by successfully combining innovation with its core strengths, central banks have evolved over the past few decades by remaining focused on their core mandate – price stability – while adapting to a changing environment and being open to learn new lessons when they present themselves. The financial crisis was such a moment, and a reinterpretation of central banks’ financial stability mandate is an important lesson to take away from it. Preventing the collapse: conventional monetary policy The economist John Kenneth Galbraith quipped that financial memory is brief and that “there can be few fields of human endeavor in which history counts for so little as in the world of finance”.

It does not make sense to call for an increase in emergency reserves – gold holdings – and simultaneously prohibit the use of these reserves even in emergencies. The SNB’s overriding objection to the gold initiative stems from the danger it poses to the conduct of a successful monetary policy. It would severely impair the SNB’s ability to fulfil its constitutional and legal mandate to ensure price stability while taking due account of economic developments, in the interests of the country as a whole. Drawing the lessons: reinterpreting the financial stability mandate Let me close this digression and return to my main theme. Once the initial shock of the crisis waned, policymakers began to address the root causes. The crisis has revealed two deficiencies of the existing regulatory framework. And because central banks are well placed to address these deficiencies, it has led to a reinterpretation of their financial stability mandate away from managing financial crises and towards preventing them. In this final section of my speech, I will explain in more detail what the deficiencies of the precrisis regulatory framework were, and why central banks are well placed to address them. The first deficiency of the framework was the focus on crisis management. Before the crisis, it was thought best for central banks to act decisively once financial crises had occurred, rather than to try and prevent these crises from happening.
When the Referendum was being held, the global economy was emerging from a long period of financial repair and lacklustre growth. Over the subsequent two years, a widespread and increasingly vigorous global expansion took hold. For the first time since the financial crisis, business investment and foreign trade grew strongly across all major regions. Economic uncertainty diminished, and consumer and business confidence firmed. In economies close to full employment, real wages finally began to grow. A new beginning seemed possible. In the past few quarters, however, these trends have largely reversed. After peaking a year ago around 4%, global momentum is now weakening in all major regions and downside risks have intensified. The proportion of the global economy growing above trend has fallen from four-fifths to one-third. Trade growth has slowed and the export outlook has dimmed. Capital goods orders are stagnating, investment growth has become more tepid, and business confidence is diminished (Chart 1). Chart 1: Global momentum is weakening Index, amplitude adjusted, Long-term average=100 102  Percentage change, 3 months on 12 months ago 20 15  OECD Business confidence 101  10  World trade in goods  5 100  0  US & EA capital goods orders 99 2010  -5 -10  2011  2012  2013  2014  2015  2016  2017  2018  Sources: ECB, Conference Board, CPB, OECD, and Markit Economics and Bank calculations.

And many countries, including the UK, now have a range of macro-prudential tools to cut excesses off at source, before they affect wider economic prospects. On the surface, global debt burdens are alarming. The outstanding stock of debt has almost doubled since the crisis. Public debt burdens across advanced economies have risen above 90% of GDP for the first time since WWII. Public sector debt is important for intergenerational equity, and high levels of public indebtedness tend to result in lower growth over the long run.13 But history suggests that high public debt is generally a chronic not an acute problem. Provided fiscal frameworks remain credible, public debt tends to be less informative for predicting recessions. Research at the Bank of England and elsewhere finds that private sector credit growth is amongst the best early warning indicators of a downturn.14 Over half of recessions are preceded by private sector credit booms. And within advanced economies, two-thirds of private credit booms have also ended in recessions.15 As borrowers take on more debt and devote a greater share of cash flows to servicing it, they become more vulnerable to shocks. And there will always be shocks. Debt may not be the proximate cause of the crisis, but it can be the vulnerability that turns shock into slump. At present, aggregate private financial imbalances in advanced economies do not appear large enough, on their own, to tip global activity from slowing to stalling.