samchain/econo-pairs-v1 huggingface dataset:
Use of these instruments will probably strengthen the bond market and thereby improve the diversification and management of risk. In recent years, we have seen the development of new instruments that make it possible to sell the credit risk associated with a loan while the actual loan remains on the balance sheet. This makes it easier to diversify and manage risk. A credit default swap is a type of credit insurance contract linked to one or more loans. The purchaser of the contract is guaranteed payment if the loan defaults. The contract issuer must pay. Collateralised debt obligations, or CDOs, are another popular instrument. Simplified, this is often a corporate loan that has been transferred from a bank and split into tranches with varying risk profiles. Debt instruments are issued for the various tranches. If the loan defaults, the first losses will be incurred by the lowest tranche (which has the highest risk). The bank that has transferred the loan often holds this tranche. The tranche that incurs losses last will thus be very secure. The return in the  3/6  various tranches will naturally be related to risk. In this way, it is possible to create many different combinations of risk and return and tailor them to individual investors. Synthetic CDOs involve credit default swaps rather than loans. This makes it even easier to achieve the combination of risk and return the investor is seeking. In the global market, banks are net buyers of risk protection, whereas insurance companies are net sellers.

In order to shed further light on the distribution of debt and assets between households, Norges Bank now analyses data for households included in the income and wealth survey published by Statistics Norway (2003). The data cover 17,000 households, of which 14,000 have debt. The chart on the left presents the relationship between gross income and debt for households with debt. The households with the highest debt and income have been excluded. For approximately 1,400 households, debt is higher than three times their income. For the entire population, this figure would be scarcely 200,000 households. Income is the first line of defence against debt-servicing problems. The next line of defence is financial assets. The chart on the right shows the relationship between debt and financial assets for the same households. Many of the households have very limited financial assets. Households with less than NOK 19,000 in financial assets account for a total of NOK 198 billion in debt. This represents a quarter of the households. 1  See Norges Bank’s Inflation Report 2/05. 5/6  Consequences of developments in household debt The household interest burden, i.e. interest expenses after tax in relation to the sum of interest expenses and disposable income, is low despite strong growth in debt. The interest burden will increase, however, when the interest rate reaches a more normal level. Only 14 per cent of household loans are fixed-rate loans. This is low in relation to other countries and makes households vulnerable to an interest rate increase that is higher than expected.
On this path, coordination between multilateral and regional institutions is also important, insofar as the latter may complement the support measures provided by international financial institutions. In this setting, the EU should play a leading role in seeking to attain reinforced and inclusive multilateralism, and an area of cooperation governed by international rules. The strengthening of the European project as a support for multilateralism Let me conclude these remarks by focusing on the European policy response to the crisis and on the tasks still pending on the European policy and institutional agenda. On this occasion, we have seen a genuinely common European response, in which the ECB’s monetary policy has not been the only game in town. The creation of the NGEU fund stands out as a decisive tool to support the recovery of European economies at the current juncture. This fund incorporates elements of solidarity and allows us to strengthen the possibilities for countries to transform their economies in light of the challenges ahead. Some of these elements, such as the issuance of large-scale European supra-national public debt to finance reforms and investments in the countries most affected by the pandemic, are unprecedented in the history of the EU. However, the NGEU fund is not – and therefore should not be seen as – the stabilisation mechanism that the euro zone needs as a necessary complement to the single monetary policy. A true macroeconomic stabilisation mechanism should be configured as a permanent institution, with sufficient size, authority in tax matters and financing capacity.

3/4  BIS central bankers' speeches  I have no doubt that the quality of the discussions today will allow us to deepen our understanding of these challenges and, hopefully, to draw some useful conclusions on how to address them from central banks, with an eye on serving our society. 4/4  BIS central bankers' speeches
The assessment which guided today's monetary policy decision was that, overall, the prospect has strengthened for inflation to fall below 2% in the course of 2003 and to remain in line with price stability thereafter. Our decision should also help to improve the outlook for the euro area economy by providing a counterweight to some of the existing downside risks to economic growth, thereby supporting confidence. The most likely scenario is that economic growth will gradually recover in the course of 2003 towards rates more in line with potential. Falling inflation should support real disposable income and, together with a reduction in the gap between perceived and actual inflation rates, should underpin private consumption. Moreover, we expect an improvement in world demand. This, and the low level of interest rates, should benefit investment. Let me point out that, with today's decision, the key ECB interest rates have reached a very low level by historical standards. The Governing Council will continue to monitor closely all factors that may affect the prospects for inflation in the euro area. The outlook for the euro area economy will also very much depend on visible progress in other policy areas. Regarding fiscal policies in the euro area, I would like to reiterate that budgetary discipline strengthens the conditions for sustainable growth of GDP and employment. Therefore, sound fiscal positions, as enshrined in the Treaty and further developed in the Stability and Growth Pact, are in the interest of all the Member States.

Financial Stability Board “Progress since the St. Andrews meeting in Implementing the G20 Recommendations for Strengthening Financial Stability”, 19 April 2010. 18. Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies. OJ, l 302, 17.11.2009, p. 1. 19. Proposal for a Regulation of the European Parliament and of the Council establishing a European Securities and Markets Authority. Brussels, 23.09.2009, COM(2009)503 Final. 4  BIS Review 67/2010
Mr. Bernanke’s quote recognises the channel between the stock-market boom and incipient inflationary pressures.7 Mr. Issing focuses attention on financial imbalances on the grounds that strains in the financial system may conflict with price stability in the long run.8 Mr. Heikensten calls attention to the possible repercussions of financial imbalances on the real economy in a situation where the household debt burden is high and interest rates are increasing rapidly.9 Seen from an institutional perspective, flexible inflation targeting is becoming an increasingly common monetary policy regime. With a target horizon that is forward-looking and sufficiently flexible, it is possible to take into account the impact of potential financial imbalances on future inflation and output. However, it is important to keep in mind that the unwinding of financial imbalances may lay many years ahead, well outside the horizon for the inflation target. Some situations may require a careful weighting of the probabilities and costs of not reaching the inflation target within a medium-term horizon against possible economic turbulence further ahead. In the worst case, this turbulence may result in the actuation of a financial crisis. Another interpretation of the role of monetary policy is that it demands that financial instability is taken into account beyond its impact on inflation and output. For instance, structural costs may arise as a result of incorrect decisions by economic agents, based on incorrect information in the period characterised by financial imbalances.

Tukiya Kankasa-Mabula: Stakeholder’s workshop on the draft Bank of Zambia Act Opening remarks by Dr Tukiya Kankasa-Mabula, Deputy Governor of the Bank of Zambia, at the Stakeholder’s Workshop on the Draft Bank of Zambia Act, Lusaka, 21 September 2010. *  *  *  Chief Executive Officers and Representatives of Stakeholder Institutions; Distinguished Invited Guests; Directors and Staff of the Bank of Zambia; Members of the Press; Ladies and Gentlemen. On behalf of the Bank of Zambia, and indeed on my own behalf, I welcome you to this workshop which is entitled “the Stakeholder’s Workshop on the Draft Bank of Zambia Act”. As the name rightly suggests, it is a workshop facilitating the meeting of minds of key stakeholders affected by the Bank of Zambia Act. On the one hand we have those administering the Act, the Bank of Zambia representatives and on the other hand those whose operations stand to be affected by the administration of the Act, the Financial Service Providers. We have also cast the net wide to include other key stakeholders such as Government ministries, other regulatory entities and professional bodies representing lawyers, accountants and economists. The Bank of Zambia is charged with the responsibility of formulating and implementing monetary and supervisory policies that achieve and maintain price stability and promote financial system stability in the Republic of Zambia.
1 On this side of the pond too, the growth of financial markets in the City is attracting more attention. While much of that is favourable, we have seen renewed worries that London’s prominence and the wealth it attracts and generates may be distorting the broader economy possibly adding to social tensions – that it may be more a cuckoo in the nest than a golden goose. So the future of the City is a significant issue not just for Londoners but for the development of the wider British economy. And the development of the financial sector is of particular interest to the Bank not just because it is an important part of the economy itself but because it shapes the way that our monetary policy impacts on the wider economy and because of our responsibility with the FSA and Treasury for maintaining the stability of the financial system. I will be speaking about the impact of the City’s rapid growth on the broader economy in coming months but today I want to focus on what underlies that growth and, therefore, to address the question whether we should expect it to be a passing phase or to continue. Is London just on the crest of a wave or is it swimming with a persistent stream? Putting it into perspective To start with, how important is the City? Is its press profile greater than its real contribution to the economy? The City’s output is hard to measure.

This led to the increase in international reserves from 52 billion US dollars at the end of 2005 to almost 67 billion US dollars by the end of last year. In addition, the forward obligation rose from 3.8 billion US dollars in 2005 to 6.9 billion US dollars in 2006. These FX interventions and exchange rate movements do have implications for our own balance sheet. First, the appreciation resulted in the unrealized loss from FX valuation of the international asset we hold when marked-to-market in baht. Simply put, the value of our international reserves in baht terms has fallen purely due to the falling US dollar and other major currencies vis-à-vis the baht. Second, FX interventions lead to increased domestic liquidity. As a result, monetary sterilization is required to remove the resultant liquidity and safeguard price stability. This is a necessary and justified cost to central banks for preserving price stability, and safeguarding the economy against excessive exchange rate movements. Such losses are an unavoidable consequence of central banking operations under a managed floating exchange rate regime. As regional currencies have sharply strengthened over the past year, most central banks in the region will also be facing a similar challenge. The key point here is that, our foreign assets, measured in foreign currency terms, have not fallen. More importantly, the goal of a central bank is to maintain monetary and financial stability.
Housing construction has long been at a low level for several reasons, including weak competition in the construction sector, a low supply of land to build on and complex planning processes. 3 Neither has the design of the taxation system promoted mobility on the housing market, as it benefits homeowners ahead of renters. This is probably also helping to make the housing market more sluggish: the costs of moving are high at present, as taxation from the sale of a home is high compared with the current taxation of the home. The policy being conducted has distribution policy effects and has created a system of insiders and outsiders on the housing market, which benefits households 1 See Financial Stability Report, Sveriges Riksbank. Ingves, S (2006) and S Ingves (2007). 2 See, among others, European Commission (2019), IMF (2016), OECD (2019) and European Systemic Risk Board  (2016). 3 Emanuelsson, R. (2015). 1 [13]  that own their homes but, simultaneously, disadvantages households who are outside the housing market and have not been able to make corresponding deductions or take advantage of the rising prices. The failure of the housing market to function is not just leading to problems linked to indebtedness and the accumulation of risks this involves. A non-functioning housing market can also form a threat to the healthy development of society and can thereby create conflicts of interest between generations.

Lombardi, M, Madhusudan, M and I Shim (2017),”The real effects of household debt in the short and long run”, BIS Working Papers No 607. Långtidsutredningen (Long-Term Survey of the Swedish Economy) (2003), Fördelningspolitikens mål och medel – Bilaga 8 (Distribution policy’s objectives and means – Annex 8). Långtidsutredningen (Long-Term Survey of the Swedish Economy) (2015), Bostadsmarknaden och den ekonomiska utvecklingen – Bilaga 3 (The housing market and economic development – Annex 3). Mian, A and A Sufi (2018), “Finance and business cycles: The credit-driven household demand channel”, NBER Working Paper No 24322. OECD (2019). OECD Economic Surveys: Sweden, March 2019. Thedéen, E (2017),”Banking capital in times of stress”, speech at UBS Annual Nordic Financial Services Conference. Finansinspektionen. Sveriges Riksbank (2013), The Riksbank and financial stability. Sveriges Riksbank (2019), Monetary Policy Report, July. 13 [13]
In the past few months, a discussion has started about the need for a new risk reduction agenda. But, before discussing such further steps, it is worth recalling that we have already made significant progress – since the beginning of the crisis – in “de-risking” Europe’s financial system. We enhanced and implemented the single rulebook; defined a common resolution framework for banks to protect European taxpayers; established the Single Supervisory Mechanism and Single Resolution Mechanism, and conducted a Comprehensive Assessment of banks to deal with legacy issues before the start of Banking Union. The results are tangible. The Common Equity Tier 1 ratio has risen, on average, from around 9% to 13% since 2012 for significant institutions. Most European banks have managed to meet the fully-loaded capital requirements by now. While a lot has been achieved, there is no room for complacency: too many of our banks are still troubled by the ghosts of the past, legacy assets and NPLs. The ECB as supervisor is actively looking into this and has identified the issue as a priority. So, what is left to be done to mitigate the remaining risks and make the financial system more resilient? It is important to further improve and fine-tune what we have started. First, there is still room for improvement when it comes to establishing a truly level playing field, for example by creating a truly single rulebook.

Today, I will first discuss the monetary policy measures that the ECB has taken to fulfil its mandate and what impact these have had on the real economy. I will then explain how steps to complete banking union and a capital markets union would not only support a strengthened EMU (along with fiscal and economic union, as well as democratic accountability) but also contribute to enhancing financial stability. As European developments need to be put into a wider perspective, I will also say a few words on ongoing discussions in international fora regarding global developments and international financial regulation. Monetary policy and its impact on the real economy 2015 was characterised by a modest economic recovery. However, inflation dynamics were weak and continued to deteriorate throughout the course of the year. Thus, after adopting our credit easing measures in the middle of 2014, we took further decisive action in 2015 to pursue our price stability mandate. Let me remind you that, in January last year, inflation in the euro area had moved into negative territory, the outlook on inflation had worsened significantly and market-based inflation expectations stood at historic lows. In this situation, we judged that our monetary policy measures had to be stepped up in view of our price stability mandate. Therefore, as of March 2015 we expanded our asset purchase programme (limited until then to covered bonds) to public sector securities.
And when the music stops, the process can be reversed as falls in asset values, leverage and liquidity feed on each other. (For Shin, the villain is mark-to-market accounting, although I would not want its virtues in reducing forbearance to be overlooked.) Thirdly, the “twin engines” view may place insufficient weight on banks having remained the principal originators of credit, given that small firms and households cannot issue bonds directly into the capital markets. It has been argued that the growth of markets for securitising loan portfolios made banks less relevant to overall credit conditions, and so to the business cycle, because a bank’s ability to originate credit becomes less intimately bound up with its own financial strength. 8 But if, as currently, the capital markets’ appetite for securitised credit diminishes, a larger proportion of loans will after all remain on the balance sheets of banks. All this brings back into focus the potential macroeconomic relevance of bank lending. Bank lending The economic literature on the “bank lending” channel of the Monetary Transmission Mechanism explores the conditions under which a tightening of monetary policy causes the terms on bank lending to tighten over and above the increase in risk-free short-term real rates.

Judging from a combination of market intelligence, surveys and prices, there is no doubt that credit conditions for both households and firms have tightened materially. The Bank’s new Credit Conditions Survey, published for the first time in September, recorded a clear tightening in availability of credit to corporates over the previous quarter. A month later, a mini-survey unsurprisingly revealed tighter conditions for households too. 20 Spreads on corporate and household credit are already higher across the board; and for risky borrowers, financing costs have risen notwithstanding the fall in risk-free yields. Since August, the MPC has stressed, however, that it will not be sufficient in these circumstances to look solely at the price of credit, as there could be increased quantity rationing. The standard view is that households and small firms are more likely to be adversely affected in such circumstances than large firms, which typically have greater access to capital markets. But as this disturbance affected the wholesale loan markets, we will need to monitor conditions for corporate bond and loan issuance. Indeed, we will need to look at total credit, and carefully across different sectors to track the impact of the tightening. But timely and rich data are available on just bank lending. And interpreting them is not straightforward given the nature of the shock to the system.
10 Like pollution, systemic risk involves externalities, in the sense that each financial intermediary manages its own risks but does not consider its impact on the risk of the system as a whole. The financial crisis contributed considerably to a better understanding of the phenomenon of systemic risk, which is also reflected in aspects of regulatory reforms. In particular, the possibility of aligning capital requirements to a measure of firms’ systemic risk contribution is being contemplated by regulators, e.g. the Basel Committee on Banking Supervision. 11 How could the ESRB then structure its supervisory work on systemic risk? In broad terms, systemic risk analysis can be broken down into two core components: i) surveillance, or risk detection, and ii) risk assessment, each of which I will address in turn. Risk detection Financial stability surveillance concerns risk identification. This kind of surveillance mainly aims to detect potential sources of risk, especially financial vulnerabilities – that is weaknesses which, if unearthed, could lead to a disruption or failure in part of the financial  7  De Bandt, Hartmann and Peydró-Alcalde (2009), “Systemic risk in banking: An update”, forthcoming in the ECB Working Paper series, and Berger, Molyneux and Wilson (eds. ), Oxford Handbook of Banking, Oxford University Press. This paper surveys all the relevant academic research with respect to the three categories and relates them to the present crisis where applicable.

4  See, for example, de Bandt and Hartmann (1998), “What is systemic risk today?”, in Risk Measurement and Systemic Risk, Proceedings of the Second Joint Central Bank Research Conference, hosted by the Bank of Japan, Tokyo, 1997. 5  In this regard some of the ECB outputs (partly in collaboration with academics and researchers from other central banks and international organisations) include: Fell and Schinasi, (2005), “Assessing Financial Stability: Exploring the Boundaries of Analysis”, National Institute Economic Review, Vol. 192, No. 1; de Bandt and Hartmann (2000), “Systemic risk: A survey”, ECB Working Paper, No 35, November; Hartmann, Straetmans and de Vries (2004), “Asset market linkages in crisis periods”, Review of Economics and Statistics, 86(1); Hartmann, Straetmans and de Vries (2005), “Banking system risk: A cross-Atlantic perspective”, NBER Working Paper, No. 11698, October; Cappiello, Engle and Sheppard (2006), “Asymmetric dynamics in the correlation of global equity and bond returns”, Journal of Financial Econometrics, 4(4); Gropp, Lo Duca and Vesala (2009), “Cross-border bank contagion in Europe”, in Shin and Gropp (eds. ), Banking Integration, Bank Stability, and Regulation, special issue of the International Journal Central Banking, 5(1); Iyer and Peydró-Alcalde (forthcoming), “Interbank contagion at work: Evidence from a natural experiment”, Review of Financial Studies. 6  Group of Ten, (2001), “Report on Consolidation in the Financial Sector”, Basel. BIS Review 115/2009  3  Following de Bandt, Hartmann and Peydró-Alcalde (forthcoming), we can distinguish three broad and interrelated ways in which systemic risk can materialise.