samchain/econo-pairs-v1 huggingface dataset:
Our economy may also be exposed to disturbances that both increase domestic activity and strengthen the krone. Interest rates should then not be lowered. In response to the prospect of a downturn in the Norwegian economy, Norges Bank reduced interest rates in the winter of 1999 when the krone was weak against the euro. This contributed to stabilising the Norwegian economy and hence also the krone exchange rate. Along the same lines, a situation may arise with growing pressures in the economy and signs of higher inflation where interest rates will be increased when the krone is strong in relation to the euro. Chart 10  Over the last 15 years, the business cycle in Norway has been desynchronised in relation to cyclical developments in most European countries. The output gap provides a rough indication of capacity utilisation in the economy. The chart shows a specifically Norwegian upturn in the mid-1980s and a subsequent downturn. While the downturn bottomed out in Norway in 1990, other European economies were booming. Subsequently, cyclical developments have remained desynchronised. The cyclical fluctuations in Norway can to some extent be traced back to the disturbances in the Norwegian economy in the 1980s and the economic shock in Europe in the wake of the fall of the Berlin Wall. The cyclical desynchronisation is the main reason behind the inflation differential between Norway and euro area countries. The very low rate of inflation in Europe primarily reflects the downturn in the 9  BIS Review 14/2000  1990s.

Prior to that, they will have to comply with guidelines on internal control and trading book policy, as well as submit call reports on the calculation of the volume of trading book transactions and the calculation of the capital charge against market risk. Ladies and Gentlemen, Another factor which will have crucial implications for the banking sector is the Basel II implementation. With the recent release of the Basel II framework, it is inevitable that we get ourselves ready for this international standard of capital adequacy. We all would agree that the New Capital Accord is for the betterment of banking system soundness for it signifies a move away from the one-size-fits-all approach to credit risk assessment in accommodation of evolving more sophisticated risk management of modern banking. Specifically, under the New Accord, it provides more comprehensive and risk sensitive approach to calculate regulatory capital, augmented by supervisory review process of Pillar II and market discipline enforcement of Pillar III. Despite the novel complexity of capital calculation under Pillar I, if a bank adopts the standardized approach, its calculated regulatory capital is only a proxy of the actual risks. I suspect that standardized approach is the one that most banks in emerging markets will adopt before they can meet the preconditions of IRB, or the internal-rating-based approach, especially in the areas of data quality and risk management practices.
Jean-Pierre Roth: Review of the Swiss economy in 2007 and the outlook for 2008 Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the General Meeting of Shareholders of the Swiss National Bank, Berne, 25 April 2008. *  *  *  Mr President of the Bank Council Dear Shareholders Dear Guests As history has shown, and the President of the Bank Council has reminded us just now, celebrations to mark our various anniversaries have often taken place amid difficult circumstances. Such was the case in 2007, when confidence in the quality of numerous financial products began to fade from August onwards in the wake of the US real estate crisis – subsequently placing a substantial provisioning burden on international banks and leading to a crisis of confidence on the markets. A worsening of the economic outlook and major stock market corrections then ensued. Nevertheless, 2007 as a whole can still be regarded as a successful year in economic terms, with global economic growth settling in at around 5%. This excellent performance is mainly attributable to the continued momentum of the emerging economies, notably in Asia, although favourable financial conditions also played a positive role until the middle of the year. Global economic performance was less homogeneous than in 2006, however.

It has already carried out useful work, in co-operation in particular with the Financial Stability Institute (FSI) of the BIS, on the theoretical aspects and practical application of Basel II. Today, I will start by discussing the practical challenges arising from the effective implementation of Basel II. I will then stress the need to pursue efforts to implement the new Basel II framework in the context of the current financial market turmoil. Lastly, I will try to draw some initial lessons from this turmoil with a view to ensuring that implementation is optimal. 1. The effective implementation of Basel II is demanding and requires on the part of credit institutions and supervisors considerable efforts and significant resources. The first challenge regarding Basel II is indeed of a practical nature, i.e. successfully moving from the planning stage of this capital adequacy reform to that of its implementation. This will be particularly challenging since Basel II is a much more ambitious supervisory framework than Basel I, based on three complementary pillars: –  minimum capital requirements (Pillar I), which can be calculated in accordance with various approaches, from standardised approaches to internal ratings-based approaches (IRB), specifically developed by each credit institution.
BIS Review 37/2004  1  Spain’s relationship - and that of the Banco de España - to the International Monetary Fund is certainly today very different from what it was in 1958, when our country joined the Bretton Woods institutions. In the early years of its participation in the Fund, Spain received financial and, most importantly, technical assistance from this institution, as part of the process of external openness and liberalisation that allowed its economic take-off in that period. The Fund’s excellent technical guidance in this process supported those economic sectors in favor of liberalization, who nevertheless met notable resistance in pushing through their programme of reforms. I believe that Spain, since then, has a considerable debt of gratitude with the International Monetary Fund. Currently, the framework for our relationship to the Fund is very different. As part of the euro area, monetary policy discussions take place in a broader context spanning the whole of the euro area. As a member of the Eurosystem however, the Banco de España remains deeply involved in such discussions. In other realms, relations with the Spanish authorities remain on a bilateral footing, as is notably the case with the close contact each year on the occasion of the analysis of the Spanish economy via the Article IV report. That said, the European dimension is becoming increasingly important.

Beyond the single monetary policy, there are various areas of European co-ordination in IMF-related matters although, as is well known, the different European states are represented on an individual basis in the Bretton Woods institutions. Spain, which adhered to the New Arrangements to Borrow (NAB) as from their creation in 1998, is today an IMF creditor country. And though we continue to benefit from the Fund’s excellent technical advice, we also provide technical assistance, in some cases in collaboration with the Fund, to other countries in the process of implementing systems or procedures in which we have a certain comparative advantage. Moreover, the Spanish authorities and, in particular, the Banco de España, co-operate increasingly closely with the Fund on matters relating to national and international financial stability. As I indicated earlier, this issue is becoming more and more important, and the objectives and the interests of the Fund tend to coincide in this connection with those of the competent national authorities. The reasons why national and international authorities pay greater attention to financial stability can be found in the crises a significant number of countries have undergone in recent years. These have highlighted the complex linkages between the real sector and the financial sector and the risk that the latter may not only be a source of instability, but also amplify the imbalances or shocks generated in other sectors of the economy.
The net effect of particular forms of intervention may enhance the capacity of the private sector to create wealth and employment - I imagine that most people would generally regard public health and education services, for example, in this way, or forms of regulation that enable markets to function more effectively. But even then there are questions of degree. And other forms of intervention may be more likely to reduce the wealth-creating capacity of the private sector by, for example, blunting incentives either to provide or to take up employment. That is not, of course, to say that they are in any sense necessarily wrong, merely to point out that here again choices to be made, the difficulty often being to know where to strike the balance between conflicting objectives. The question of relieving poverty needs to be addressed within this framework. Our social conscience may say that we should lean more towards redistribution in favour of the poorer sectors of our community generally, or in favour of those who are particularly disadvantaged in one way or another and goodness knows there are endless causes that in themselves are worthy of our collective support. 3  BIS Review 110/2000  But it is important to recognise that in doing so, we could reduce the wealth and income generating capacity of the economy as a whole, and so reduce our ability to provide rising living standards to all sectors of society, including rising absolute living standards of the poorer sectors we were seeking to help.

Few people - even in the suffering sectors - argue that we should - not because of insensitivity to the economic and social distress that can result for those communities that are most affected, but because of the more extensive damage that it would be likely to cause to the wider community. I said a moment ago macro-economic stability depends upon keeping overall demand growth continuously broadly in line with the underlying structural, supply-side, capacity of the economy to meet that demand. There is not a lot frankly that macro-economic policy itself can do directly to affect the supply side which is obviously crucial in determining the rate of growth we can sustain. That depends fundamentally on the ability of management and the skills of the workforce, though it can be importantly affected by the whole range of government policies beyond overall fiscal and monetary policy. These policy choices are far more complicated than the more technical choices at the macroeconomic level - and they are way beyond my area of competence. But they are essential to the present debate so let me offer a view, as it were from the sidelines. A key issue in this area concerns the respective roles of government on the one hand and private markets on the other. And there is little doubt that the tide has recently been flowing in favour of private markets - certainly as far as direct government involvement in the processes of production is concerned.
And so, if the reduction of risk starts to impede a more fundamental reason for being, risk management has gone too far. Lawyers have to point out legal risks and other risks to their clients. That is our job. But if all we ever tell our clients is “no,” they will at some point stop asking for our advice. So it is important that lawyers consider why a client is facing a decision, what they want to achieve in the near term and in the long term, and how their decision may affect others. Lawyers serve their clients well by pointing out assumptions, gaps in reasoning, and unforeseen, collateral consequences. We should help our clients see the range of issues confronting them and options available to them. Moreover, how a lawyer gives this advice is often as important as the content of that advice. A lawyer must not only be right, he must also be persuasive. My advice is worthless if no one listens to it. We are judged by our results not how hard we try. Let me share with you, as law students, some advice on how to be heard. Advice to law students First, speak up! This is part of a lawyer’s training in the United States. We are called on in class to explain cases in front of our peers. We participate in appellate and trial advocacy competitions. And we are required to study not only the court opinions that decide a case, but the dissenting opinions that did not.

I mentioned one example earlier. A borrower may not repay a loan. Prudent lending standards—like securing good collateral and identifying credit-worthy borrowers—can help mitigate that risk. Here is another example. A depositor may use a bank account to hold, transfer, or obscure the proceeds of a crime. This is more difficult to determine, especially when deposits are received from half way around the world. Third-party service providers and customers are examples of risks from outside the bank that are unavoidable in the ordinary course of business. These third-party risks are not purely hypothetical. They featured in recent cases of attacks on the global correspondent banking network. My colleague Richard Dzina runs Fedwire®, the payments system that I mentioned earlier. Here is how he described some of the risk that he faces: Historically, and understandably, market infrastructures have operated on the presumption that endpoint security is principally the responsibility of the endpoint, and infrastructure security is principally the responsibility of the operator. Increasingly, reflecting the elevated cyber threat landscape, this distinction is not so clear, especially as endpoint security breaches can potentially have implications for public confidence in the network as a whole, even in circumstances when the operator’s infrastructure, applications, and security perimeter have not been compromised.3 3/7  BIS central bankers' speeches  I also worry that some risk management practices can themselves create risk. Advances in technology have enabled more sophisticated economic modeling, on which many financial institutions rely to assess and manage their risk.
A smooth  Europe, the projected slowdown in the  market based exchange rate would  Chinese economy, as well as economic  prevent highly disruptive adjustments  conditions in Sri Lanka’s major trading  after a period of stable rates artificially  partners, including India, Japan, Russia  maintained by continuous intervention  and the Middle East, will also have a  by the Central Bank, as experienced in  significant influence on the domestic  the 2011-12 period when the currency  economy. depreciated by around 14 per cent after  Central Bank of Sri Lanka – ROAD MAP 2017  16  Trends in oil prices and international  notably agriculture and power  capital flows, following the  generation. normalisation of interest rates in the US are likely to be particularly important. As in the past, it is expected that the government would take timely measures  We also expect that changes to  to counter the adverse supply side  government tax structure and supply  effects on prices, thus mitigating  shortages stemming from weather-  adverse inflation expectations of the  related developments as well as shocks  general public. that could arise due to possible reversal of global commodity prices could cause temporary variations in price levels.

The Hong Kong-based company that operates our container port facilities is expanding its operations into the newly modernising ports of the mainland. In new sectors, such as internet services, Hong Kong companies have been among the first to grasp the opportunities on the mainland. The outlook for Hong Kong investment on the mainland is one of both sectoral and geographical diversification: from the mainly manufacturing activities that grew up in the Pearl River Delta in the 1980s, to a variety of activities spread over a much larger region. And, like the establishment of the Special Economic Zones close to Hong Kong nearly a quarter of a century ago, China’s entry into the WTO will underline the truism that the more China opens to the world, the more Hong Kong benefits. The implications for banking and financial service Physical trade and the less visible trade in services require a financial infrastructure in the same way that new buildings need plumbing and electrical wiring. We expect that the “creation effect” of WTO entry will result in a surge in banking business on the mainland. There are two main elements in this process. The first is the greater demand for banking services, resulting from the growth induced by the effects of WTO accession. The second is the financial deepening, stimulated by more rapid financial liberalisation, greater banking competition, and product innovation induced by the terms of WTO accession.
Third, we have strengthened the regulatory and reporting requirements for banks as regards the due management of credit risk, in accordance with European practices. Fourth, we have intensified the communication with the banks to address the credit portfolio quality, concerning both the treatment of non-performing loan borrowers and loss loan write off. Fifth, the coordinative role of the Bank of Albania has produced results in terms of restructuring borrowers exposed to more than one bank and will continue in this year to prepare an interbank cooperation platform for a solution to common borrowers; the Bank of Albania is drafting it in cooperation with World Bank’s FinSAC project. In our judgement, the steps taken insofar for resolving non-performing loans will contribute to a fruitful environment to boost sustainable and sound lending. This is a major priority, which requires a multidimensional action matrix and a broad cooperation between state authorities and the banking system. In this aspect, the Bank of Albania drafted and promoted the signing of a joint Memorandum of Understanding for the Sound Growth of Credit in Albania1. In the supervisory process, the Bank of Albania has supported the pursuit of pro-active policies 5/8  BIS central bankers' speeches  against potential risks, with regard to both the quality of the risk analysis performed by banks, and the creation of adequate provisions. This new approach, introduced a year ago, has required amending the regulatory framework, as well as internal practices and capacities.

Beyond the COP26 held in Glasgow a few months ago, globally coordinated governmental policies are therefore necessary to anchor concrete and credible commitments, such as the one taken by the European Union in its Fit for 55 programme. And yes, policies to fight climate change should imperatively include an appropriate carbon price. Rest assured that central banks will do everything they can do. The ECB monetary policy strategy review, concluded last summer under President Lagarde’s leadership, sets out an ambitious action plan leading up to 2024. But central banks and financial intermediaries cannot solve everything, and substitute for adequate – and sometimes difficult – public policies. The ecological transition holds risks, including on inflation as the gradual switch to greener energies may entail higher and more volatile prices, at least in the intermediate phase. Central banks are closely monitoring this debate about a possible “greenflation”. So far, the evidence points to a non-negligible but limited direct contribution of climate policy in the recent increase in inflation. For example, the ongoing rise in CO2 prices in the European ETS market, which we are already taking into account in our inflation projections, has a modest positive impact on inflation. And the implementation of a carbon tax in Germany in 2021 has had a discernible impact in 2021: combined with other measures to tackle climate change, the overall impact on German consumer prices was estimated at 0.4 percentage point in 2021.
This past summer alone, for example, the Committee received over 200 public comments on the proposals set out in our third consultative paper, or “CP3” as we call it. The third pillar attracted a degree of controversy among many banks mainly in earlier drafts of the rules, but thanks to the very positive discussions that the Committee had with the industry and with accounting standards-setting bodies, all the pillars of CP3 now enjoy broad support. This brings me to the next part of my address, in which I’ll cover the key concerns that arose during consultations. Proprietary versus public information Certainly, an early concern about the market discipline component of the New Accord was that the required disclosures appeared to go far beyond what banks traditionally reported publicly. In some institutions’ opinion, the Committee was seeking to require the disclosure of information previously considered confidential. While the Committee is mindful of the concern that some information should remain private, we believe that concepts of public versus proprietary information require some reflection. In order to determine whether information should be disclosed, consideration should also be given to end-users’ needs. For example, in order for shareholders, creditors, and counterparties to appreciate the risks of their own exposures to a bank, they must understand that bank’s appetite for risk and its approach to, and methodologies for, managing risk.

Likewise, we have not yet seen evidence that there is a critical mass of banks that would today consistently meet the “use” test spelled out in the New Accord. In the coming years, and we can start very soon, we look forward to continuing this dialogue with banks, banking associations, and researchers to find ways to move Basel in the direction of full credit risk models. Although banks and supervisors have much to do in the years ahead, we are confident that the development of an incentives-based capital framework, accompanied by more consistent and focused supervisory review and a concurrent enhancement of market discipline, will improve the management of risk across the industry, promote broader financial stability and resilience, and ensure that the banking system is better able to promote sustainable growth in the economy. 6  BIS Review 47/2003