samchain/econo-pairs-v1 huggingface dataset:
But I do say that it would be unwise - as some have implied - to set monetary policy on the basis of the worst possible outcome, even if one knew what that would actually mean in policy terms. At the time of our last Inflation Report published in November the MPC's collective view of the most likely outcome for the UK, looking over the next two years, was for growth at around trend with inflation close to target. But we were - and we remain - acutely conscious of the uncertainties and risks around that prospect. And we review the position intensively both at our regular monthly policy meetings and in the context of our quarterly forecasting round. And in that context, I give you my assurance that, despite the fact that we have not changed interest rates now for over a year, we stand ready to do so at any time if and when we see the risks to our central expectation beginning to crystallise in either direction. Mr President, let me conclude by suggesting once again this year that yes, we can keep the UK economy moving forward, but I don't pretend that it will be easy. Sadly I am attending this dinner for the last time as Governor this evening, so I will not be accountable to you for how we get on.

8  All speeches are available online at www.bankofengland.co.uk/speeches  8  For the UK the picture is broadly similar. Fast indicators suggest the trough in activity was reached in the middle of April, with a steady recovery thereafter. Chart 8 plots payments-based fast indicators for the UK mapped into four convenient categories of consumer spending. By late-June, these spending components had recovered at least a third, and in some cases all, of their prior fall. They have risen both sooner and materially faster than in the May MPR scenario. Chart 8: Fast indicators for the UK % change from Jan-Feb level  60 40  Staples  20 0 -20  Aggregate  -40 Delayable  -60  Work-related  Social  -80 -100  Mar-20  Apr-20  May-20  Jun-20  Sources: Bank of England and Bank calculations. Notes: Based on the CHAPS payments that a sample of around 90 UK companies receive from their merchant acquirers on a daily basis. These payments reflect the sales that companies make through debit and credit card purchases, which are summed to estimate rolling seven-day revenues. Definitions of the different consumption groups are discussed in the May MPR. Among the negatively-affected components of spending – social, work-related and delayable – the fastest recovery has been in delayable expenditure such as DIY and household goods.11 There has also been a sharp up-tick in the car and housing markets, albeit from stagnant levels.
It includes a proposal to review capital requirement regulations with a provisioning calendar for non-performing loans, a draft directive for the creation of a secondary market in this type of asset and an extrajudicial mechanism to speed the recovery of collateral, and the publication of guidelines supporting the development of asset management companies. For its part, the Single Supervisory Mechanism published guidelines in March 2017 for the management of nonperforming assets and, more recently, it has released an addendum to this in which it sets out explicitly its supervisory expectations on provisioning, both for newly-arising nonperforming assets and for the existing stock, as part of the supervisory review process. Restoring profitability levels is another of the main challenges the Spanish banking industry faces. While the profitability of Spanish banks has returned to positive figures and stands somewhat above average EU levels, it continues to be down on pre-crisis levels and below those observed in the banking systems of other developed economies such as Australia, Canada, the United States and Sweden. The current low level of the average profitability of Spanish banks is particularly apparent in business in Spain, which was the area most affected by the crisis. The international activity of Spanish banks, concentrated in a very small number of institutions, was a major source 4/8  of risk diversification during the crisis since it enabled them to counter the downturn in Spain’s situation with the sound economic progress in other areas.

But the effect of monetary tightening on domestic demand is limited through the processes I have described, where long rates react weakly to the increase in the policy rate. In addition, firms and households increasingly borrow in foreign currency in order to avoid even those limited increases in domestic borrowing costs that take place. This foreign currency borrowing is intermediated by the domestic banking system, where the financing is more short-term than the lending. Thus the banking system has a growing balance sheet in FX, with a maturity mismatch but limited LOLR facilities to backstop it. In short, financial risks are accumulating, both in the financial sector and among firms and households. At the same time, the economy is increasingly in an unsustainable position, with an overvalued currency and big current account deficit. The  2  BIS central bankers’ speeches  whole thing then comes crashing down when foreign financing comes to a sudden stop, heralding a currency crisis and even a banking crisis as well. Before I go further, let me warn you, though, that this is only part of the explanation of the financial crisis in Iceland. The offshore activities of the banks and old-fashioned macroeconomic mismanagement were equally important, if not more so. On this topic, I refer you to other speeches and publications by myself and others. 2 What can and should be done about the problems I have laid out?
In a world with a core of diversified firms that are more similar, for example, cross-firm exams and horizontal analysis increase in value and supervisors might require broader skills. Moving beyond individual firms, there is the potential for microprudential risks to transform into macroprudential ones. If firms expand, diversify and become more similar, each might become safer individually. The industry as a whole, however, might not be any safer or more resilient. If all firms are effectively the same, they could become “systemic as a herd” and susceptible to the same shocks in a way that leaves the aggregate provision of financial services more volatile.9 The propagation mechanisms for an industry with a set of similar firms with a wider range of activities may be very different from one where firm heterogeneity can offset and smooth the impact of shocks. This suggests that supervisors and regulators should be concerned not just with the firm as an entity, but with the industry as a portfolio of firms where aggregate outcomes reflect both each firm’s individual contribution and correlation properties across firms. Finally, supervisors are concerned about the efficient provision of financial services and the ability of the financial industry to support the real economy. If firms’ mix of activities is overly determined by the regulatory environment, firms will have incentives to expand into activities where they do not have a comparative advantage. As a result, the potential gains of specialization would be lost. This could make the provision of financial services less efficient overall.

Judging the cumulative impact of these changes in a comprehensive way that includes an assessment of costs, benefits, and risks is challenging, but seems an important goal for optimal policy design. 4/5  BIS central bankers' speeches  Conclusion A fundamental challenge for effective supervision is that the landscape is constantly evolving and adapting in response to a wide range of regulatory, financial, and technological forces. This type of dynamism is normal and inherently productive for the industry as firms continue to optimize in order to serve customers efficiently and satisfy investors, but it does raise issues that supervisors must consider. As I’ve discussed, one recent type of evolution is the trend toward greater similarity of the largest financial firms in the U.S. In response, supervisors and regulators must continue their focus on taking a broad perspective on supervision and risks. It is not enough to look at individual business lines or products, but we should continue to focus on enterprise risk management that reflects each business and the interdependencies among them. Moreover, supervisors should be dynamic and continue to evolve as the supervised firms do. Finally, supervisors should continue to develop an industrywide, macroprudential perspective to understand the impact of the continuing evolution of the U.S. financial industry.
The analyses in Inflation Report 2/05 are based on a baseline scenario where the key rate shadows forward interest rates up to 2007, and then rises somewhat more rapidly. The krone exchange rate is assumed to shadow the forward exchange rate, which remains broadly unchanged over the next three years. Private consumption accounts for just under 60 per cent of total demand in mainland Norway, and is an important channel through which monetary policy operates. Low real interest rates, solid growth in real disposable income and a continued sharp rise in house prices will result in high growth in private consumption again this year. Higher employment and somewhat higher wage growth will continue to contribute to growth in household demand in the period ahead. Household debt, however, has risen sharply. A gradual normalisation of interest rates will reduce growth in household disposable income. This suggests lower growth in consumption. We assume that households will choose to spread consumption over time, so that the saving ratio will continue to fall even if interest rates rise. Housing investment rose sharply last year. It appears that growth in residential construction will remain high this year, although the rate of growth is expected to slow somewhat through the year. Low interest rates may have contributed to moving forward some housing projects. A gradual normalisation of interest rates implies more moderate growth in housing investment. Developments in underlying demand for housing may also imply that residential construction will stabilise and gradually decline somewhat.

Lars Nyberg: Challenges following the current crisis Keynote address by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at the 12th annual conference of the Central Bank of Chile “Financial stability, monetary policy and central banking”, Santiago, 6 November 2008. Johan Molin, adviser at the Riksbank, represented Mr Nyberg in Chile. *  *  *  In the last couple of months we have seen authorities all around the globe taking massive actions to deal with the current financial crisis. Few countries are spared as the crisis spreads over the world, not even those that have not been directly exposed to the problems that initially triggered the crisis. Never before has a crisis had such a widespread global impact as the one we are now witnessing. This obviously puts governments, central banks and supervisors in a somewhat new position as they have to deal with the challenges that financial globalisation entails. Needless to say, these challenges are huge. Today I will only be able to address some of the issues that we will have to deal with when the crisis is eventually over. I will also try to give my views on what the lessons from the crisis imply for the central banks’ work on analysing financial stability and systemic risks. However, let me first say a few words about the context of the crisis. Context of the crisis When the crisis was triggered it happened in a quite traditional way.
Ultimately, the total volume of assets transferred amounted to USD 38.7 billion, where the purchase price was roughly USD 1 billion below the book value of the assets at UBS at the end of September 2008. In addition, a substantial portion of the amount transferred includes liabilities in the form of derivatives which currently do not need to be financed by the SNB. The initial financing of the StabFund was therefore considerably lower than the purchase price. It comprised the SNB’s loan to the StabFund totalling USD 26.6 billion and UBS’s equity contribution in the value of USD 3.9 billion. The fund’s portfolio contains several thousand positions. Table 1 gives an overview of the portfolio and the different investment segments. The portfolio management concept is based on a long-term risk/return assessment. For assets where the cash flow is expected to exceed the current market price, we are mainly pursuing a hold-to-maturity strategy. For assets where this is not the case, we will sell if the opportunity arises. The objective of our portfolio management is to repay the SNB’s loan in full if at all possible. Market developments to date have impacted strongly on the StabFund’s assets. As it stands, most of the assets do not have to be entered in the balance sheet at market value. Rather, they only have to be written down if the balance sheet value is no longer considered sustainable based on the results of an impairment test.

So it is simplistic to assume that Germany becoming less competitive would automatically help others – it may indeed harm them. The solution to rebalancing is for other countries to become more competitive, not for Germany to become less so. We need to maximise competitive pressures within Europe to achieve higher efficiency, innovation and productivity growth. And thanks to the structural reforms that are taking place, this is actually what we are seeing. For example, since 2011 Portugal’s export market share has increased by 11 percentage points and Spain’s by 8 percentage points. At the same time, I see a vital need for new investment in Germany. Investment is still around 1 percentage point of GDP lower than it was in 2007, and in that year Germany already had the lowest investment ratio in the euro area. To raise investment we need structural reforms in Germany as well – for instance to liberalise the services sector – thus creating a virtuous circle of higher potential growth and better investment opportunities. And by definition, if more German savings were invested at home, the current account surplus would also fall. To conclude, I do not see the current decade in the euro area as “lost” – I think it is being used well. The decade of adjustment we are facing now is to correct the mistakes of the previous decade. But in the process, I trust we are fixing our problems at the root.
It also highlights which channels are explicitly included in the stress tests and which are not, and are consequently priorities for future work. Third, sensitivity analysis can easily be carried out to assess the impact of altering behavioural assumptions – for example, what would happen if write-off rates on corporate exposures were higher than expected? Fourth, the results can be compared to “bottom-up” stress tests calculated by individual firms, which have developed rapidly in recent years, but which may be less focussed on capturing macroeconomic and financial sector feedbacks. 8 The traditional approach to stress testing, nonetheless, suffers from some major limitations. Most strikingly, the current treatment of key financial system interactions and feedback effects is often rudimentary. Given that such effects are crucial in assessing the vulnerability to contagion and system-wide stress, that is a significant drawback. Take the illustrative severe stress scenarios published in the Bank of England Financial Stability Report and shown above in Chart B as a guide. These scenarios are constructed from risk transmission maps for each scenario based on the stylised model in Chart C. In practice, however, there are important gaps, as can be seen from Table 1, where the channels which have been explicitly quantified in the stress scenarios are shown.

the leverage ratio, the Spanish banking system as a whole shows, on the contrary, slightly higher levels than the euro area average. Also, Spanish banks evidence, overall, a sound liquidity position, with their LCR ratio above the European average. Regarding the resolution of institutions, in recent years a number of regulations have been approved in Europe establishing a common framework for the EU, and defining the circumstances in which banks with financial difficulties should enter wind-up or resolution processes. In this setting, a new category of senior non-preferred debt instruments has been created, which ranks below senior debt in the payment priority of insolvency proceedings, with a view to facilitating compliance with the minimum requirements for own funds and eligible loss-absorbing liabilities, known as MREL. The MREL requirements that the Single Resolution Board has started to set for significant European institutions are an added reason for Spanish banks to strengthen their capital in the present environment of recovering profitability and an economy that is growing at a significant pace. More recently, December 2017 saw the completion of the second phase of reforms in the Basel III framework. The reforms include, inter alia, the improvement of the standardised methods for calculating credit and operational risk, restrictions on the use of internal models and changes in the leverage ratio. These changes will be implemented in two phases that will conclude in 2027.
Domestic demand for equipment goods could even turn out to be the most severely affected component of final demand. Developments have been slightly different for the construction sector and its most important component, residential investment. Housing construction has been in decline for the past few years, although the cut in interest rates could now halt this trend. All these factors have brought about a sharp deterioration in business confidence, which should put a damper on job creation in our country. Unemployment will start to rise again. Consumption should continue to grow, but at a considerably slower pace. The household sentiment indicator was sharply down at the beginning of the fourth quarter, reflecting expectations of greater job insecurity. In contrast, the unexpected fall in inflation will contribute to an increase in real income, which will support consumption. For 2009 as a whole, the SNB is forecasting a decline in real GDP. This decline is likely to lie between 0.5% and 1%. Changes in monetary and financial conditions As I mentioned in my opening remarks, the target range for the three-month Libor has already been cut by 175 basis points in three steps since our September assessment. These successive cuts were rendered necessary by a number of factors that contributed to a tightening of monetary conditions, whereas the deteriorating general economic environment  2  BIS Review 157/2008  called for relaxation.

By contrast, the inflation outlook has improved appreciably. This has increased the SNB’s room for manoeuvre. Finally, there is a risk that the financial crisis will cause a deterioration in financing conditions for the economy as a whole. These are the considerations that have prompted today’s decision to cut the three-month Libor target range by another 50 basis points. Given the expected deterioration in the Swiss economy and the imponderables linked to the long and variable monetary policy transmission lags, a further rate cut appears appropriate. With this action we are reducing, to the extent possible, the risk of an even more pronounced economic downturn. Inflation forecast chart How has our inflation forecast been revised? The dashed red curve on the chart represents the new forecast. It covers the period from the fourth quarter of 2008 to the third quarter of 2011, and maps the future development of inflation on the assumption that the three-month Libor remains unchanged at 0.5% over the forecasting period. For purposes of comparison, the dash-dotted green curve shows the inflation forecast of the September monetary assessment, based on a three-month Libor of 2.75%. The new forecast shows a rapid fall in inflation over the next few quarters. It drops back below the 2% mark as from the fourth quarter of this year.
As Chart 2 shows, long-dated corporate borrowing rates have followed much of the downward move in government bond yields over recent years. Whether you believe this is reflective of the prospect of gloomy days to come or the result of some other factors will determine whether you – as corporate treasurers – view very long low yields as a warning or an opportunity. In the rest of my remarks I will cover four possible explanations for the current level of long yields: (i)  lower inflation expectations;  (ii)  the balance of savings and investment intentions;  (iii)  diminished potential output growth; and  1  Bernanke (2005). BIS central bankers’ speeches  1  (iv)  reduced term premia  I will argue that it would be overly pessimistic to believe that the headwinds currently affecting the nominal and real economy will persist for decades to come. But I will also argue that there are other influences on long yields affecting saving and investment decisions (including the persistent-but-not-permanent effects of a balance sheet recession, and greater weight being attached to downside risks) and on term premia (including the impact of central bank asset purchases). 2. Inflation expectations  Let me start with inflation expectations. Because some of the decline in nominal yields over recent years coincided with a marked and unexpected decline in headline inflation in the UK, a natural question to ask is whether or not this was caused by a shift lower in inflation expectations.

However, the improvement in the macroeconomic environment and positive economic growth has resulted in great strides in the development of the financial services and financial sector in general. The Government of the Republic of Zambia through the Ministry of Finance and Bank of Zambia has been putting in place measures to maintain a stable macroeconomic environment which have resulted in low inflation and a decline in interest rates in recent years. Except for the volatility of the Kwacha exchange rate against other currencies experienced in recent months, the exchange rate has been fairly stable over the years. We remain confident that the economy is on a robust footing and the end year inflation target of 6.5 per cent is attainable. The Bank of Zambia will continue to be vigilant and take appropriate measures to support the stability in the macroeconomic environment. 2  BIS central bankers’ speeches  Ladies and Gentlemen, the strong economic performance has culminated in growth in both the number of financial services providers and the financial products in the country. However, the level of financial inclusion still needs to be broadened further. The evidence from the FinScope Demand Surveys revealed that as at 2009 only 37 per cent of the adult Zambian population was financially included. This signified a 3.6 per cent marginal increase from 33.7 per cent in the 2005 survey. The FinScope study further revealed that access to finance for women was relatively poor in relation to their male counterparts.