samchain/econo-pairs-v1 huggingface dataset:
12  BIS central bankers’ speeches  Chart 13:  Chart 14:  Corporate financial surplus(a)  Percentage of firms with interest payments greater than profits(a)(b)  Per cent 10  United Kingdom United States Euro area  Per cent 60  Firms with turnover > £ million  8  Firms with turnover < £ million  6  Real estate firms with turnover > £ million  50  4 2 + 0 2  40  4  20  30  6 10  8 10 00  02  04  06  08  10  Source: Thomson Reuters Datastream, ECB and Bank calculations. (a) Per cent of GDP except Euro area which is as a per cent of GVA. 0 90  92  94  96  98  00  02  04  06  08  Sources: Bureau Van Dijk and Bank calculations. (a) Percentage of companies in each category with interest payments greater than their profits before interest. (b) Data include firms reporting turnover, profit and interest paid. These firms may not be representative of the population. Total sample size varies over time, ranging from around 14,000 in 1990 to over 90,000 in 2000. Changes in the composition of the data set may reduce comparability over time. Subsidiaries, as identified from company structures, are excluded. Company accounts are assigned to calendar years according to the statement date.

-3.5 92  94  96  98  00  02  04  06  08  10  Sources: Bank of England, Bloomberg, Chicago Board Options Exchange, Debt Management Office, London Stock Exchange, Bank of America Merrill Lynch, Thomson Reuters Datastream and Bank calculations. (a) 90-day moving average of index. Index represents number of standard deviations from the mean of a range of market liquidity measures, incorporating prices and volumes, normalised on the period 1999–2004. The indicator is more reliable after 1997 as it is based on a greater number of underlying measures. See also Box 1 of the April 2007 Bank of England Financial Stability Report. 10  BIS central bankers’ speeches  Chart 9:  Chart 10:  Major UK banks’ and LCFIs’ leverage ratios(a)(b)  Major UK banks’ and LCFIs’ price to book ratios(a)  Maximum-minimum range Weighted average US LCFIs  European LCFIs  European LCFIs US LCFIs Major UK banks (b)  Ratio 120  Major UK banks (c)  Ratio 4.5 4.0 3.5  100  3.0  80  2.5  60  2.0 40  1.5  Adj. (d)  1.0 0.5  10  09  0 08  10  2007  09  08  11  Q1  2007  Adj.
We could return to a system similar in spirit to that used before the financial crisis, in which the supply of reserves in the banking system was kept relatively scarce, and the interest rate was set by adjusting reserves on a frequent basis through open market operations. Alternatively, we could continue with the system that we’ve been using since the crisis, in which bank reserves are abundant and the federal funds rate target is achieved through adjustments to administered rates. This approach is working very well at controlling interest rates and has proven to be easy to communicate and adaptable to changing market conditions.8 The Fed will be looking closely at these options in the coming months and will subsequently make a decision on the future operating framework. And, as is our standard practice, we will be sure to communicate our thinking and decisions on this issue as soon and as thoroughly as practicable. Global Dimensions of U.S. Monetary Policy So far, I have described the economic and monetary policy outlook from the perspective of the U.S. economy and policy. This should not be surprising given that the Fed’s mandate—as defined by the U.S. Congress—concerns domestic economic conditions. Of course, that does not imply that one can view the U.S. economy and our policy actions in isolation from global economic and financial developments. Far from it. In today’s highly interconnected global economy and financial system, international developments affect the U.S. economy, and our policy actions in turn impact the rest of the world.

We’ll continue to be transparent about our thinking about the economy and monetary policy. But, changing circumstances call for some changes in how the FOMC communicates its policy views. Now that interest rates are well away from zero and the economy is humming along, the case for strong forward guidance about future policy actions is becoming less compelling. For one, the future direction of policy will no longer be as clear as it was during the past few years. When interest rates were extremely low, it was obvious that the direction for rates was upward, toward more normal levels, and our forward guidance reinforced that point. At some point in the future, it will no longer be clear whether interest rates need to go up or down, and explicit forward guidance about the future path of policy will no longer be appropriate. In addition, as we have moved far away from near-zero interest rates, it makes sense to shift away from a focus on normalizing the stance of monetary policy relative to some benchmark “neutral” interest rate, often referred to as “r-star.” Now, I have spent a good deal of my career studying r-star and I find it to be a useful concept for describing the economy’s longer-run behavior. Having said that, at times r-star has actually gotten too much attention in commentary about Fed policy. Back when interest rates were well below neutral, r-star appropriately acted as a pole star for navigation.
Urban Bäckström: The Swedish economy cyclical upswing or a more fundamental improvement? Speech held by Mr Urban Bäckström, Governor of the Sveriges Riksbank and Chairman of the Board of Directors and President of the Bank for International Settlements, at a meeting with Institut International d’Etudes Bancaires, held in Stockholm, on 19 May 2000. *  *  *  The current economic situation in Sweden differs appreciably from the early-1990s, when our country was on the brink of a serious financial crisis, with a currency and banking crisis, sizeable public sector deficits and rapidly rising unemployment. Today the picture is considerably brighter. The question I want to consider here with you is whether the impressive performance in recent years amounts to a conventional cyclical upswing or has to do with a more fundamental improvement in the workings of the Swedish economy. In the three years from 1991 to 1993, the Swedish GDP fell by a total of 5%, employment dropped more than 10%, unemployment shot up from 3 to 8%, the public sector financial deficit grew to 12% of GDP and government debt accumulated rapidly. Meanwhile, the stock of non-performing loans in the banking sector peaked at 10% of GDP or 8% of the total loan portfolio. The fixed exchange rate was questioned, there were sizeable interventions and for some days in the autumn of 1992 Sweden’s central bank raised its instrumental rate to 500%. Various explanations have been put forward for the depth of Sweden’s economic crisis.

The structural problems, high inflation and speculative behaviour all warranted a realignment of economic policy. In time, the necessity of a change was supported more and more widely. The tax system was reformed and so were certain segments of the transfers system. Sweden also applied for membership of the European Union. Our currency was pegged to the ecu and during the wave of international exchange rate speculation in the autumn of 1992 the krona was defended to the bitter end in order to demonstrate the determination to re-establish a credible low inflation regime. The economic policy realignment coincided, however, with the setback that followed the bursting of the bubble from the late-1980s and the Swedish economy descended into a profound crisis. Whether this dramatic downturn could have been managed somewhat differently is a question that will no doubt be analysed in the future. Some things could certainly have been done differently in the late 1980s, as well as in the throes of the crisis. 1  BIS Review 41/2000  However, I believe that the main lesson to draw is that the roots of the deep crisis ran quite a long way back. A realignment of economic policy was essential. The fact that there had been no credible stability oriented policy regime in Sweden for almost twenty years had had far-reaching repercussions that ultimately affected our material prosperity. It was high time to establish a new anchor for monetary and exchange rate policy, wage formation and economic policy in general.
This was the case with “The Modern History of Exchange Rate Arrangements: A Reinterpretation” co-authored with Carmen Reinhart and published in the Quarterly Journal of Economics in 2004. Professor Rogoff has also been at the forefront of modelling efforts in the field of International macroeconomics, particularly with a view of replacing the Mundell-FlemingDornbusch open economy model, previously the workhorse of virtually all policy analysis in international economics both inside and outside central banks. This ground-breaking effort, reflected in the work written jointly with Maurice Obstfeld entitled “Foundations of International Macroeconomics”, gave birth to a new field in “new open economy macroeconomics” and spurred a vast and ever-growing literature. This new approach has allowed both researchers and policymakers to analyse substantive issues, such as current  BIS central bankers’ speeches  1  account and fiscal imbalances, and to provide a welfare-theoretic perspective on global macroeconomic policy. As the IMF’s chief economist between 2001 and 2003, Professor Rogoff launched the development of a large-scale version of his model with Maurice Obstfeld, the Global Economy Model (GEM), one of the first fully-fledged Dynamic Stochastic General Equilibrium (DSGE) models to be used for policy analysis. More recently, he has offered us invaluable insights into financial crises. His 2009 bestselling book with Carmen Reinhart, This Time Is Different, is a landmark work. This tour-deforce, drawing on data for 70 countries over 800 years, provides evidence that financial crises are far more universal, and that there are far more quantitative similarities in their aftermath, than previously believed.

Against the background of this centralised decision-making structure, the role of the 11 national central banks consists mainly of the practical implementation of monetary policy and other tasks of the Eurosystem, such as the issuance of banknotes, the collection of monetary statistics or the operation of the Eurosystem’s payment systems. The fact that these tasks have to be carried out on the basis of agreed rules and specific instructions given by the decision-making bodies of the ECB, however, by no means lessens the importance of the national central banks in the overall set-up of the Eurosystem. *** Another particular characteristic of EMU is that, while Monetary Union has led to the introduction of a single monetary policy, Economic Union has not resulted in the development of other common macroeconomic policies, which instead remain in the hands of the national governments of the Union’s Member States. With a centralised monetary policy and decentralised fiscal and structural policies, the economic and monetary pillars of EMU can appear to be somewhat uneven at first glance. But we should not be fooled by appearances. In fact, the structure of EMU’s economic pillar reflects the need to strike an appropriate balance between providing flexibility and diversity, while - at the same time - ensuring that all of the economic policies of the euro area contribute to the success of EMU. Two factors have to be considered in this regard.
The Consultative Paper represents an evolution in the Committee’s approach to capital adequacy because, in addition to establishing minimum capital requirements, it places increased emphasis on the supervisory review of capital adequacy and the role of market discipline. We refer to these elements - minimum capital standards, supervisory review and market discipline - as the “three pillars”. Together these pillars mutually reinforce safety and soundness by aligning capital relative to risk and by encouraging prudent risk management. This evolution in the Committee’s thinking follows from much of its recent work on risk management and surveys on banks’ disclosure practices. It is also consistent with the broader notion of supervision that has evolved since the original Accord. An important objective of the Consultative Paper was to convey the Committee’s thinking and to solicit the industry’s input. As you may know, the formal consultative period on the proposed capital framework ended just a few days ago, on 31 March. We are very pleased by the response. Comments have been received from a broad range of industry participants including banks of varying sizes, some of which I see represented here today, banking associations, securities firms, central banks and supervisory agencies, as well as rating agencies. It will take some time to thoughtfully and thoroughly review all of the comments received. Still, I thought it would be useful to discuss some of the major themes we’ve been able to identify.

Very early on, the National Bank realised that it could defend its autonomy and strengthen confidence in the Swiss franc by adopting rules of conduct. From the start, it strove to adhere to the rules of the gold standard and maintained this policy until the system of fixed exchange rates collapsed in 1973. With the Swiss franc losing its traditional anchor, the SNB was forced to adopt new rules. This was achieved 18 months later with the publication of annual growth targets for the money supply, a strategy which was pursued until 1999. Since 2000, our interest rate decisions have been based on our medium-term inflation forecast and our definition of price stability, which we consider achieved if annual inflation remains below 2%. The second constant in the National Bank’s activity over the past 100 years has been its adherence to the rules of monetary discipline. This strategy has allowed us, as it did our predecessors, to conduct a coherent monetary policy over all these years while shielding our institution from all kinds of demands, both economic and political. 2  BIS Review 71/2007  Willingness to adapt Given the strong disruptions in the international environment in the past 100 years, pursuing a policy of stability and applying the rules of monetary discipline has not been an easy undertaking. Let us not forget the obstacles we encountered in adhering to the rules of the gold standard and the fixed exchange rate system in times of war or during major international upheavals.
In light of these events, we have learned that the ample reserves framework has worked smoothly with a level of reserves at least as large as we saw during summer and into early September. Although temporary open market operations are doing the trick for the time being, anticipated increases in non-reserve liabilities would cause reserves to decline in coming months without further actions. Based on these considerations, last Friday the FOMC announced that the Fed will be purchasing U.S. Treasury bills at least into the second quarter of next year.7 Specifically, the Desk announced an initial monthly pace of purchases of $ billion. These permanent purchases will, over time, bring the underlying level of reserves—by which I mean absent temporary open market operations—to a level consistent with the ample reserves framework on a sustained basis. In concert with these purchases, the FOMC announced that the Desk will continue temporary overnight and term open market operations at least through January of next year.8 This combination of permanent Treasury bill purchases and ongoing temporary open market operations is designed to provide  effective control of the federal funds rate over the next several months. I should emphasize that all of these actions are aimed at the implementation of monetary policy and do not in any way represent a change in the stance of monetary policy. The goal is to make sure that the federal funds rate stays within the target range set by the FOMC.

And “effective” means that typical temporary movements in the demand or supply of reserves don’t cause large changes in the federal funds rate without active management of reserves. I’ll come back to the challenge of knowing what constitutes “ample” later. The second element consists of the interest rates that the Fed itself sets and that influence the federal funds rate. These “administered” rates, as they are known, include the interest rate paid to banks on their reserve balances and the overnight reverse repo rate that the Fed pays to a wider set of money market participants on a similar, risk-free overnight investment. These first two elements—an ample quantity of reserves and administered interest rates—are meant to do the lion’s share of work to keep the federal funds rate within the target range. But there may be relatively infrequent situations when these two elements are not enough to keep the federal funds rate within the target range. Therefore, the third element is the directive from the FOMC for the New York Fed’s Open Market Trading Desk (the Desk) to conduct open market operations as needed to keep the federal funds rate within the target range. For example, through repurchase agreements of Treasury and agency securities, the Fed can temporarily increase the amount of reserves in the system. To support the economy in the aftermath of the financial crisis, the FOMC increased its long-term securities holdings dramatically. This led to a similarly large increase in reserves, which peaked at about $ trillion in 2014.
I will then highlight the financial risks that go hand-in-hand with the changes underway (II). Finally, I would like to emphasise that a safe move towards a more diversified intermediation model as we see it developing cannot be achieved without further financial integration at European level. To that end, advancing the European regulatory agenda is of prime importance (III). 1. From  bank-centric  financial  intermediation  towards  unbundled  financial  intermediation in the digital era To date, in Europe, we have been accustomed to a bank-centric intermediation model. However, this model is being increasingly challenged by new players emerging in the digital era, the so-called Fintechs and Bigtechs, as well as by the growing weight of the asset management industry. We thus need to prepare to new intermediation models, which can be classified in four categories:  2/9  -  The traditional banking intermediation model for certain financial services, like mortgages;  -  A non-bank financial intermediation model (formerly known as “shadow banking”) performed by the asset management industry, to finance in particular the corporate sector;  -  A re-intermediated model, in which Fintechs and Bigtechs intermediate the banks, on the retail segment in particular;  -  And a fully disintermediated model supported by the blockchain and the peer-to-peer economies. Let me first discuss the new models stemming from the digital era (A) and I’ll come back afterwards to asset management (B).

7/9  Steps towards a more integrated financial system at European level have already been taken since the crisis, with the Banking Union and the Capital Markets Union projects. These projects need to be further developed and implemented. The Banking Union, which was set up to put an end to the link between sovereign risk and banking risk, is now operational. What remains to be done in order to finalise it includes completing the resolution pillar by implementing a backstop and adopting a common framework to enhance the provision of liquidity and putting in place a European deposit insurance scheme. Finalising the Banking Union is of prime importance for the development of pan-European banks, and will make it possible to achieve a better balance of risks, economies of scale, a better allocation of savings towards productive investments and increased competitiveness of European banks at the international level. The other major initiative at the European level to strengthen financial integration is the Capital Markets Union project which aims to boost investment in the EU. Speeding up this Union will not only foster growth but will also enhance risk-sharing across European countries and mitigate the procyclicality of bank financing. We, at the Banque of France, support in particular three initiatives which should have a decisive impact on cross-border investment: First, the harmonisation of the insolvency procedures framework and its implementation by companies to promote investment in equity across Europe.
Less directly related, but just as important, are our Stock Exchange, and our network of asset  1/3  BIS - Central bankers' speeches  managers and professional advisers. They anchor a company, especially its finance function, in Hong Kong and naturally encourage it to tap our financial intermediaries for advice and financing. 7. Turning to policy support, a key source of growth in finance in recent years has been green and sustainable finance. An area where the Government has been active in supporting is Hong Kong's sustainable loan market. 8. It is estimated that 100-150 trillion US dollar in climate finance will be needed in the next three decades to achieve a Paris-aligned scenario of limiting global warming to 1.5° Celsius. In Asia, we will need 66 trillion US dollar; a significant share of this would go to China. 9. With surging demand for green financing, it is important that there are widely recognized standards that market participants can rely on when investing or when tapping the capital markets to meet their financing needs. In this regard, I would like to compliment APLMA for the good work. Its Green Loan Principles, Social Loan Principles and Sustainability-Linked Loan Principles provide useful guidance and benchmarks for the market. 10. Hong Kong as an international finance centre can contribute a great deal to channeling capital and investments and helping the region bridge green financing gaps. In fact, we have one of the Asia's largest sustainable loan markets.

Figure 18: Interest Rates on Commercial Figure 19: Interest Rates on Consumer Loans* Loans* (Percent)  (Percent)  26.0  2.4 Corporate Sector  24.0  Housing Automobile Other  2.2  22.0  2.0  20.0 1.8 18.0  0609  0209  1008  0608  0208  1007  0607  0207  1006  0606  0609  0209  1008  0608  0208  1007  1.0  0607  10.0 0207  1.2 1006  12.0 0606  1.4  0206  14.0  0206  1.6  16.0  *Interest rates on consumer loans and commercial loans are calculated on monthly and annual basis, respectively. Source: CBRT. While the Gross Domestic Product went down by 13.8 percent in the first quarter of 2009 compared to the same period of 2008, seasonally adjusted data indicated that contraction intensified in this period (Figure 20 and 21). Despite the relative soundness of the Turkish financial sector, the contraction in economic activity became more severe. What underlies this consequence is the composition of exports, mainly of products sensitive to foreign conjuncture; susceptibility of production to global credit conditions and Turkey’s high capacity level at the onset of the crisis. During this period, besides the tightness in financial conditions, a sharp contraction in domestic demand was also experienced due to spreading perceptions of uncertainty and increasing precautionary saving tendency. In this context, the downside contribution of aggregate demand conditions to inflation increased evidently.