samchain/econo-pairs-v1 huggingface dataset:
The provision of Emergency Liquidity Assistance (ELA) by the national central bank is aimed at supporting solvent banks facing liquidity problems. Without a credible recapitalisation perspective, the two largest and weakest Cypriot banks could not have been considered solvent any longer. Further providing ELA to these banks would not have been in line with the rules of the Eurosystem and, ultimately, with the Treaty provisions. Therefore, the ECB decided on 21 March that ELA would be continued if and only if a programme was in place that would ensure the solvency of the banks concerned. After the Eurogroup agreement on 25 March, the ECB did not object to the request for the provision of ELA by the Central Bank of Cyprus. On both occasions, the ECB acted strictly in line with its Statute. It implemented the existing rules. Nothing more, nothing less. The finally agreed EU/IMF programme reflects the three objectives I mentioned earlier. In particular, it was decided to cover the capital needs of the two largest banks exclusively through the own contributions of uninsured depositors and senior and junior debt holders. The creditors of the two banks would not be made worse-off than they would have been in the case of liquidation, which would have been the alternative to the programme. This is necessary to guarantee the sustainability of public debt. It will also contribute to restoring the conditions for sustainable and balanced growth.

In addition, the EU/IMF programme foresees a rapid and substantial downsizing of the domestic banking sector, from about 550% to about 350% of GDP at the beginning of the programme. This is indispensable to reduce future contingent liabilities from the banks to the sovereign. The EU/IMF programme also foresees the full protection of deposits below 100,000 euros which will not suffer any loss from the resolution strategy. Despite the unprecedented steps taken so far, the banking sector has not yet been stabilised. The burden sharing arrangement negatively affected depositor confidence and required the introduction of temporary and proportionate capital controls and restrictions on deposit withdrawals. Short term risks are high, as the deep recession is expected to take a toll on banks’ balance sheets. The reliance of the largest bank on ELA continues to be exceptionally high. Hence, firm steps are needed to complete the financial sector reform so as to rebuild confidence in the viability of the banking system. 2  BIS central bankers’ speeches  Let me now turn to the lessons which we can draw from the experience in Cyprus. Lessons from the Cypriot experience  The Cypriot case has been a salutary reminder of the importance of establishing banking union as swiftly as possible. Only then we will be able to break the negative interaction between sovereigns and their banking systems. First, it has shown that the speedy entry into force and implementation of the single supervisory mechanism (SSM) is essential.
But now that the economy has undergone a period of deep crisis and it is difficult to assess what structural changes the crisis may lead to, the process becomes even more complex. One illustration of this is how one should assess future developments in the labour market. So far employment has not fallen as much as might be justified given the historical relationship between unemployment and GDP, and the large fall in GDP. This has come as a surprise to us and to other forecasters. But what conclusions should one draw with regard to the effects in the slightly longer term when the economy recovers? Employment and the number of hours worked are now beginning to increase. Normally, one might have expected a greater adjustment in the number of hours worked than we have seen in this economic downturn. The fact that the  6  For further information on resource utilisation, see Jonsson, M., Nilsson, C. and Palmqvist, S., 2008, “Should monetary policy stabilise resource utilisation?” Economic Commentary, www.riksbank.se or Öberg, S. “Monetary policy and the elusive resource utilisation”, speech published on 25 May 2009, www.riksbank.se. 4  BIS Review 58/2010  adjustment has not corresponded to the fall in production means that productivity has been very weak. But as we observe in our most recent Monetary Policy Update, which was published last week, we expect productivity to improve in the future, which also means that the number of hours worked and the number of employed will grow slowly.

The pandemic has shown how important it is for countries to keep markets open, trade flows smooth, and supply lines intact. But each country will do this only if it has an assurance that others will do the same. We must therefore make a renewed commitment to keeping supply chains open. We must coordinate our actions to minimise disruption and enhance recovery. We must agree on common protocols for re-opening our borders in a safe manner, lifting travel and trade restrictions, and restoring air and shipping routes. We cannot wait for global leadership or multilateral agreements to do this. Like-minded countries must come together, make things happen, and blaze a trail for others to come along. Singapore has been part of such efforts to keep global supply chains open. Together with Australia, Brunei Darussalam, Canada, Chile, Laos, Myanmar, Nauru, New Zealand, the United Arab Emirates, and Uruguay, Singapore issued last month a joint ministerial statement to underline our commitment to maintain open supply chains during the ongoing Covid-19 pandemic. Importantly, it contains a commitment to refrain from export controls, tariffs and nontariff barriers, and remove any trade restrictive measures on essential goods. Singapore is also in active discussion with various countries to develop bilateral arrangements for safe travel between them. We are pleased that our first ‘fast lane’ arrangement has been launched with China -to facilitate essential business and official travel between our two countries.
There is a generally-accepted principle that looking a few years ahead, CPIF inflation is the relevant operational measure of inflation. The reason for this is that in the short term, CPI inflation is affected directly by the Riksbank’s own repo-rate adjustments and monetary policy should not react to these temporary effects. CPIF inflation does not include these effects. In the longer run, these effects largely cancel one another out, and then it is CPI inflation that is relevant. 4 The point of using CPIF inflation as the operational measure is thus to best stabilise CPI inflation in the longer run. In the longer run, monetary policy should therefore be assessed with regard to how well it stabilises CPI inflation around the target and unemployment around a long-run sustainable rate. 3  The employment gap is equal to the labour-force gap (the “participation” gap) minus the unemployment gap, where the “gap” refers to the difference between the actual rate and the long-run sustainable rate. If the labour force gap is not so small that it can be ignored, the employment gap can be stabilised by more precisely stabilising unemployment around the sustainable unemployment rate minus the labour force gap. 4  This is entirely in line with the recommendations in the assessment made by Goodhart and Rochet (2011), and which the Riksbank agreed with in its consultation response.

It has also become necessary to evaluate whether the exercise of parate powers by commercial banks has achieved its objectives. According to banks and financial institutions, the very threat of parate action and publicity prompt defaulters to pay the debt. After fourteen years of the application of the debt recovery laws, it is therefore, fitting that an objective assessment be made to the recovery of debts through this legislation. The moderate development in the Sri Lankan economy in the past decade, saw a heavy demand for credit and the expansion of loan portfolios of banks. As banking is known to be a risky business, the monies placed on trust by depositors have to be prudently invested, but with a firm commitment to return funds to depositors when they call for it. In the circumstances, banks are duty bound to ensure the safety and soundness of their institutions by prudently deploying funds they mobilize. Loan defaults and non-performing advances are quite common in our part of the world. They have contributed to the maintenance of high interest spreads which in turn translate into high lending rates as banks tend to cover the cost of carrying large volumes of non-performing loans in their balance sheets. The cost of non-performing advances is therefore a charge on profits by way of provision to be made for these losses. Banks lose out on interest income that is rightfully theirs. Effectively therefore, the good borrowers pay the price for defaulting borrowers.
On the other hand, the benefit appears small, quite simply because the effect on indebtedness appears small. 13  8  See Svensson (2013a). BIS central bankers’ speeches  Risks linked to household indebtedness should instead be managed by means of measures taken in other areas. The mortgage cap probably already has some impact. Finansinspektionen has also introduced a risk weight floor for mortgages and notified that it intends to raise this, which in practice will increase the banks’ costs for mortgages. The Swedish Bankers’ Association’s recommendation to draw up amortisation plans in line with Finansinspektionen’s notified requirement may also have an effect.14 Nor is there any shortage of ideas for further measures, including the introduction of countercyclical capital buffers, which they now use in Norway. Underneath all this is a problem of a more structural nature, namely a supply of housing that has grown slowly and a housing market that is not functioning efficiently. This has most likely contributed to pushing up the price of housing and consequently indebtedness. Neither monetary policy nor measures in the field of macroprudential policy can resolve this type of structural problem; they must be managed with entirely different measures. Do marginal differences in the repo rate play a role? In the same way as one can question whether a repo rate that is a few tenths of a percentage point higher or lower plays any role with regard to risks linked to household indebtedness, one can also question whether it has any significance for inflation and unemployment.

With low resource utilisation one can expect that inflation will be pushed down as the pressure on wage and price increases will be low. The weak international demand is of course one factor that is beyond the Riksbank’s control and in this sense monetary policy  housing market. In the case of Australia, there are no clear signs that they have faced this kind of trade-off during the period following the financial crisis. This is clearer for the period 2002–2004, but then inflation stayed within the target interval of 2–3 per cent and was only close to the lower interval limit for one quarter. 6  See Sveriges Riksbank (2014a). 7  See Sveriges Riksbank (2014a). 8  See Nekarda and Ramey (2013). BIS central bankers’ speeches  3  cannot be blamed for the low inflationary pressure. At the same time, it is the role of monetary policy to counteract this type of downward pressure to stabilise inflation around the target. Monetary policy may have contributed in different ways Personally, I believe that the monetary policy conducted is an important contributory factor to the fall in inflation. The fact that household indebtedness is taken into account in the monetary policy decisions – and the repo rate is thus held somewhat higher than the prospects for inflation and resource utilisation have justified – has probably made the krona stronger than it would otherwise have been and also held back domestic demand.
But equally, the need for management of risks, and for comparison of values across all sectors with a mark to market capability, is how business is actually managed and conducted. That is why I have for some time argued that a resolution of the conflict is important. The lack of consensus makes this a difficult process, needing consideration of the governance and control process of accounting, quite apart from the standards themselves. In this respect I recommend a recent report by the G303 as outlining a possible way forward. 3  The Group of Thirty, “Enhancing Public Confidence in Financial Reporting” (2003). BIS Review 5/2004  3  Paradoxically the existence of standards of risk management, or prudential control, themselves can lead to unintended consequences. For example, if banks all have similar approaches to risk management or all use similar models, or if rules require them all to provide more capital at times of economic downturn, then they may all react similarly to a given shock. This could itself amplify market movements and trigger liquidity difficulties, despite the best intentions. There is also the question of legal certainty. If counterparties doubt an institution’s strength or solvency, their behaviour may be influenced if they feel that complex and untested types of contract may not “close out”, particularly in adversity. Such concerns lay behind the LTCM crisis in 1998. Counterparties feared LTCM might be insolvent. They could sense a drain of liquidity from LTCM which might precipitate collapse.

In the short term, the most significant cause for concern in the US economy is that employment is still weak. Of course, the combination of rapid growth in GDP and a weak labour market mean that productivity growth is good, but the dismal labour market situation could nevertheless create uncertainty among households and contribute to subduing consumption. However, it is difficult to believe that it would put an end to the upturn we are seeing now. There are also signs of an upturn in the euro area now, although the picture is not as clear-cut as in the United States. Business tendency surveys for industry show an increased optimism, while industrial production is slowly beginning to rise. Developments in Asia, central and eastern Europe also appear to be slightly stronger than was previously assumed. However, the stronger euro may lead to a slightly slower upturn in the euro area. All in all, the picture of international economic activity now looks somewhat brighter than we anticipated in December. The upturn in economic activity appears to be proceeding roughly as we had anticipated it would. The Swedish economy has also turned We assumed in the December Inflation Report that growth in Sweden would gradually increase during the course of 2003 and would amount to 1.5 per cent for the whole year. During 2004 and 2005 growth was expected to be around 2.5 per cent, which is in total a slightly more rapid rate than the Riksbank considers sustainable in the long-term without inflation rising.
We realize that if one finance company were to have difficulties, that it can have harmful effects on the others as well. That is why we issue directions and circulars. That is why we have teams who are well trained to supervise, monitor and regulate. We want to be regulators who will be able to understand you, and work with you in order to preserve the financial system stability of this country. Occasionally, we place advertisements in the newspapers saying that such and such banks, finance companies and leasing companies are regulated by the Central Bank. Do you know that immediately after our advertisements, we get many calls? The callers say, “we have deposited our money in such and such institution. But, we don’t see its name in your list. Is that institute regulated?” When we say that such organization is not regulated, many get frightened. So you see, people take regulation seriously. People believe that if something is regulated, then there is some element of order that is brought into that system. We are well aware of this and therefore we take a lot of pains to fulfil the regulating task. We have a Deputy Governor in-charge who looks into all these aspects. We have the Department of Supervision of Non-Bank Financial Institutions that supervises finance companies. They take their jobs seriously. That is why they are organizing a seminar of this nature. Today, the business world is continuously looking at risk and trying to figure out how to manage risk and hedge against risk.

But, if the athlete cannot breathe for some reason, he will soon be dead notwithstanding his fitness. Your liquidity, or your cash inflows and cash outflows is also like breathing in and out. These cash flows have to be monitored very carefully. Liquidity management has to be practised diligently. The board members of finance companies must also learn and appreciate the principle of liquidity management. Don't think that it can only be left to the executives of the company. In the final analysis, the executives may not even be responsible in a legal sense. The legal responsibility will rest with you! BIS Review 55/2008  3  I am sure the other speakers will expand on all these aspects that I touched upon. So, I will now conclude with a few overall thoughts. My dear friends, take your responsibilities as Directors very seriously. Keep abreast of what is happening. Keep abreast of the markets. Keep abreast of the risks that are taking place, both globally and locally. Watch the world and environment carefully. Be alive to new techniques. Take the interest to do all that, because if you do, then we can all have a healthy market. That is what we at the Central Bank, are hoping you would discharge your responsibilities diligently. The last thing we would like to do is to call you up and to say that your business is not run properly. We don’t want to do that.
That there are problems cannot, however, be denied. They have to do, for instance, with the prevailing conditions for world trade and how the resultant gains are to be distributed. Another issue is the free movement of capital, which played an important part in the positive economic trend in the 1990s but has also contributed to a situation where economic unrest spreads more quickly from country to country and is sometimes a major ingredient of financial crises in developing countries. Then there is the question of how the international financial organisations have functioned and the problem of debt in certain poor countries. These are some of the issues I shall now discuss. The globalisation debate Trade is crucial The first issue is about trade. The critics argue that the expansion of world trade to include more countries as well as additional goods and services leads to the poorest countries being marginalised — developing countries are unable to compete with the wealthy nations in this process. Some consider it would be better for the poorest countries to close their borders and build up their own industries. They would then be in a stronger position when perhaps they are ultimately incorporated in the world economy. A similar policy was advocated by some in the 1960s and ’70s and it was implemented in various guises in many countries, for instance in Latin America. But the subsequent course of events provides strong arguments against such an approach; isolationism has not been a good way of generating prosperity.

[24] The same protections do not exist at the global level or are much weaker in other regional trading blocs such as NAFTA. The history of the United States itself illustrates the difficulty of aligning the approaches of individual states to improve working conditions. In the early 20th century, there was a growing concern in several US states about the lack of a social safety net, especially for the elderly. But individual states feared that providing social security would impose, in the words of the time, “a heavy tax burden on the industries of the state that would put them at a disadvantage in competition with neighboring states unburdened by a pension system.”[25] The lack of coordination created a severe underprovision of social security, which was exacerbated by the Great Depression. In 1934, half of the population over 65 were in poverty. [26] This was only resolved through the passing of the federal Social Security Act in 1935, which enabled states to coordinate in providing social security. In a similar way, the EU provides a powerful coordination function that allows countries to achieve goals that they could not realise alone. And the EU is able in turn to export some of its 4 / 10  BIS central bankers' speeches  standards globally. The EU is the top trading partner of 80 countries, compared with just over 20 for the United States. [27] That allows the EU to insist on higher labour and product standards abroad via trade agreements,[28]as well as protecting local producers at home.
Relevant considerations are likely to include the length of the lags in the monetary transmission mechanism, the impact on private sector inflation expectations of the period taken to bring inflation back to target and the expected impact on the volatility of output. Commenting on some Bank of England work on optimal policy horizons, Goodhart (2001) suggested that: “the…selection of monetary policy horizons is so model/context  BIS Review 27/2010  5  specific that little advance can be made unless such studies can be brought to apply to the specific model/context under consideration as used in practice by the MPC.” Inevitably there is uncertainty about all of these factors. But it is worth considering whether, in present circumstances, there might be a case for considering a longer-term policy horizon. One reason for this is that quantitative easing might have longer lags before it reaches maximum effect than do changes in Bank Rate – part of the reason for focusing around two years ahead is that is judged to be the point at which policy has its maximum effect. This would reflect the early indications that one of the key channels through which this policy takes effect has proved to be an increase in asset prices, whereas for Bank Rate changes in the distribution of income plays a larger role. In addition, in the past three years CPI inflation has been above target for 27 out of 36 months, is now 3.5% and likely to remain above target for the first half of 2010.

Kate Barker: Monetary policy – from stability to financial crisis and back? Speech by Ms Kate Barker, Member of the Monetary Policy Committee, Bank of England, at the National Institute of Economic and Social Research, London, 8 March 2010. *  *  *  I would like to thank Matthew Corder and Jake Horwood for research assistance and I am also grateful for helpful comments from other colleagues. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. It is a particular pleasure for me to have the opportunity to return to NIESR, where I worked in the early 1980s in the aftermath of a previous recession, to talk in my present role as a policy-maker. At that time, one of my responsibilities was to monitor and project world trade – I am very thankful that I didn’t have to deal with the analysis of a fall in trade of the magnitude seen in this recession, when world trade 1 fell by a cumulative 18% over the fourth quarter of 2008 and the first quarter of 2009, before starting to recover – up 11% on the low point by the end of 2009.