samchain/econo-pairs-v1 huggingface dataset:
BIS Review 101/2009  9  Asset Relief Program (see Taylor, 2009), raised the possibility in investors’ minds of the failure of a whole range of institutions that had previously been considered safe. That is evidenced in the simultaneous sharp spike upwards in the CDS spreads of a number of financial institutions after the collapse of Lehman’s (see Fig. 12). Moreover, the prospect of having to make significant default pay outs called into question the solvency of a key provider of that insurance, AIG. The bottom line of all this is that the information requirements for managing risk escalated rapidly at the same time as investors were waking up to the realisation that the distribution of prospective returns on a range of asset-backed securities was a great deal worse than they thought. Not surprisingly, there was a rush for the exits and a drying up of wholesale funding to institutions that were thought to be at all vulnerable. Moreover, attempts to cope with that by selling off assets ran into an adverse selection problem: if someone is selling an asset, then perhaps that indicates that they know it’s a “lemon”. And even the revelation of central bank support in its role as Lender of Last Resort, far from solving the problem, could be interpreted as a negative signal about an institution, as was so in the case of Northern Rock, for example.

Both commercial property prices and housing prices have risen substantially for many years and although we have been able to see that the rates of increase have slowed down slightly in recent months, they are still high. I believe that property prices may well continue rising at a fairly high rate over the coming period. But in the slightly longer term such a rapid increase is not sustainable. Why is the Riksbank interested in the property market? The fact that the Riksbank is interested in what is happening in the property market is based on the tasks we have been given by the Swedish Parliament. One is that we shall ensure that inflation is kept at a reasonable level, more precisely at two per cent a year. The other is that we shall safeguard the stability of the financial system. The way the property market develops can have significance for both of these tasks. Property often functions as collateral for the loans the banks grant to households and companies. If the properties are not reasonably valued; if prices have been pushed up through exaggerated optimism or speculation, there is a risk of a heavy price fall. During the crisis of the 1990s it was falling property prices, particularly office premises, that were the cause of major losses for the Swedish banks. Developments in the property market can also affect activity in the real economy. For instance, rising house prices reduce households’ loans in relation to the value of their assets.
This type of fundamental question of principle is central to monetary policy and, given that the current framework for inflation-targeting has worked well over a long time, any changes should be made slowly and cautiously – and are hardly in the pipeline in the near term. Quite simply, we will have to see what takes shape after the international discussions. In the Swedish debate we need to begin by taking a stance on the conclusions of the external evaluation of the Riksbank’s monetary policy that is published next year. 19 But even if the experiences of the past eight years have had limited impact on monetary policy strategies so far, the financial crisis has nevertheless had clear effects on the work of the central banks. If I use the Riksbank as a starting point, for instance, the significance of the financial conditions for macroeconomic developments and for monetary policy have come under much greater focus than before, as have financial and banking questions in general. One can see this in the research conducted in the bank, where these areas are currently of central importance. The changes we recently made to our Monetary Policy Report are also marked by the need to better highlight the links between financial conditions, the macroeconomy and monetary policy.

21.10.2020  Opening remarks XIX Germán Bernácer Prize Ceremony at the Banco de España Pablo Hernández de Cos Governor  Ladies and Gentlemen, It is a great pleasure for me to welcome you all, and to introduce this Award Ceremony for the 19th Germán Bernácer Prize. I would like to start by thanking Luis de Guindos, Vice-President of the European Central Bank and Chairman of the Selection Committee of this award, for his contribution to this initiative. Luis, we are greatly honoured by your presence at this ceremony. Let me also thank The Observatory of the European Central Bank – chaired by Guillermo de la Dehesa – and the sponsors, represented here by Luis Isasi, President of Banco Santander España. As you know, the prize is named after Germán Bernácer, a prominent Spanish macroeconomist with deep knowledge of monetary theory, who became Head of the Servicio de Estudios of the Banco de España in 1930. The Bernácer prize recognises outstanding scientific research by young economists under 40 from the euro zone, and our institution has been a strong supporter of this award since its inception in 2001. On this occasion, I am glad to congratulate the winner of the 19th Prize edition, Mr. Loukas Karabarbounis. He is a Professor of Economics at the University of Minnesota, a Consultant at the Federal Reserve Bank of Minneapolis and a Research Associate at the National Bureau of Economic Research.
It would boost the incomes of those in employment and is an essential part of improving the UK’s competitiveness. Moreover, in such a scenario, you would know to expect interest rates to stay lower for longer, encouraging household spending and business investment. Our forward guidance is a stabiliser – securing the scale and duration of recovery that is needed to bring unemployment down. The prospect that interest rates might stay at their low level for longer will not be welcome for savers. I have tremendous sympathy for them – after all they have done the right thing, set money aside, and now they are earning returns that are substantially below what they would have expected. But raising interest rates now is not the answer – instead what savers need is a stronger economy. That will mean higher asset prices, and will allow interest rates to return to normal levels in a sustainable way. A strong economy is in all of our interests, as it will deliver better job prospects for our friends, neighbours, children and grandchildren. The last thing savers want is for the UK to follow Japan by raising interest rates before recovery is secured, only to find that we are condemned to decades more of low interest rates and lost opportunities. Our forward guidance is about setting the path of inflation to return to target Let me reassure you that our mandate to deliver price stability has not changed. Our inflation target of 2% was reconfirmed in our remit from the Chancellor in March.

As we explained at the time of the forward guidance announcement, a rise in the yields on long term bonds is consistent with our commitment to price stability and supporting the recovery. Market interest rates at terms of 2–5 years have also risen recently. The date at which the markets expect the first increase in Bank Rate has moved in from the end of 2015 to mid2015. One possible explanation is that markets think that unemployment will come down to 7% more quickly than we do. Since the aim of our policy is to secure recovery as quickly as possible, that would be welcome. But policy is built not on hope, but on expectation. And we estimate there is only a 1 in 3 chance of unemployment coming down that quickly (Chart 1).4 Furthermore, thinking unemployment will come down faster than we expect isn’t enough to believe interest rates will rise soon. As I said earlier, the 7% threshold is a staging post to assess the economy. Nobody should assume that it is a trigger for raising rates. Another possible explanation is that the increase in shorter-term yields, like the move in long yields, reflects changing expectations of US monetary policy. But the US recovery is much further advanced than that in the UK.
Opinions may differ about what were the most important “triggers” of the acute crises we are discussing today. Again, I see both differences and similarities between Sweden and the Asian countries. In our case, a policy shift to the low-inflation regime in the rest of Europe, combined with structural changes and a more hostile international environment (with higher interest rates and lower growth, as I mentioned before), made the existing situation unsustainable and triggered the crisis. In the early 1990s the government refrained from accommodating the high costs and inflationary pressures that had been building up in the 1980s. Under similar circumstances earlier in the 1970s and 1980s we had devalued several times. Now there was broad agreement that we should stick to the fixed exchange rate in order to bring inflation down; in this respect, the policy was indeed successful: inflation fell from 8-10 per cent to 2-3 per cent in less than two years. One effect of this, however, was that real interest rates shot up. Structural reforms were also implemented, particularly in the tax system but also in housing and other areas. One aim of these reforms was to create more market-related incentives for savings and to reduce subsidies. While these changes were long overdue, they now came at the worst possible time from a macroeconomic point of view. In this context, it is relevant to mention the importance of the sequencing of policy changes.

•  The People’s Bank of China announced in February a widening of the access to the China Interbank Bond Market to a broad range of foreign financial institutions without any quota restrictions. •  And, earlier this month, the Bank announced that it would extend nationwide the pilot measure for cross-border financing by Mainland corporates and financial institutions, with the result that case-by-case pre-approval is no longer required. 12. These initiatives demonstrate the central government’s commitment to liberalising the Mainland’s capital accounts. They also present CFOs and treasurers with new opportunities to meet their business and investment needs. And, there will be more to come. Premier Li Keqiang has said the Shenzhen-Hong Kong Stock Connect will be launched later this year. 13. Secondly, the “China connection” is growing rapidly. Let me briefly explain what I mean by this: in 2014, China’s ODI amounted to $ billion, 10 times the amount in 2005. This number will be even bigger in the years to come as Chinese corporates go global, and as the implementation of the “Belt and Road” strategy helps more Chinese corporates to invest in these countries. At the same time, multinational corporates are paying more and more business attention to China. In 2015, FDI into China reached $ billion, compared to $ billion in 2005. The point here is that with more business opportunities, either because Chinese corporates are “going out” or multinational corporates are expanding into China, comes the need for more sophisticated treasury management. 14.
Sub-prime borrowers defaulted because they were living beyond their means: their stock of debt exceeded their ability to repay. The shattered camels were bank (and shadow bank) balance sheets around the world. Government balance sheets buckled next as they sought to sustain demand and employment. What should financial policy and monetary policy be doing right now? With credit conditions so tight, it has been asked whether the Financial Policy Committee should be employing macroprudential tools to ease regulatory constraints on banks, with the aim of encouraging them to loosen lending conditions, helping recovery and so reducing threats to stability from default risk. The FPC concluded at its September 2011 meeting that such a step would in fact be counterproductive, endangering stability and jeopardizing recovery. Given their precarious starting position when the crisis broke, the capital adequacy of UK banks is still being rebuilt. Worse still, the lingering threat of a severe crisis in the euro area leaves banks operating in an extraordinarily risky environment. While in other circumstances it might have been possible to relax capital requirements if the worst had passed, it is not a sensible course when the worst might still lie ahead. In current circumstances, gradually building resilience through retained earnings is best for stability and recovery, because it helps preserve the capacity to lend “the day after tomorrow”. This leaves monetary policy with its classic role of underpinning demand. Here and elsewhere, central banks have injected extraordinary monetary stimulus.

Paul Tucker: National balance sheets and macro policy: lessons from the past Speech by Mr Paul Tucker, Deputy Governor for Financial Stability at the Bank of England, at the Society of Business Economists’ Annual Dinner, London, 28 February 2012. *  *  *  The spectre hanging over the world economy these past years – the drag on our recovery – has been deleveraging. Around the world, households, some firms, banks, governments, whole economies are acting to reduce their debt overhang. By selling assets, cutting spending, deferring investment. What gets delevered – as the ugly phrase goes – is a balance sheet. Balance sheets became stretched. Sectorally. Nationally. Through much of the industrialised West. The idea of over-borrowing, of overstretched balance sheets, is hardly novel. Economists are taught about the importance of stocks of debt; about “budget constraints”, beyond which a borrower’s expected future income, their wealth, is insufficient to service and repay their accumulated debts. But, by and large, economic commentary focuses on flows – the path of output, consumption, and investment and the current account balance. I exaggerate, of course – not least because cumulative flows create stocks. Nevertheless, it is salutary to remind ourselves that less than a decade before our crisis broke, we – the West – had been preaching to emerging market economies (EMEs) the necessity of monitoring, and even managing, the national balance sheet. That was in the wake of the Asian and Latin American financial crises of the 1990s.
•  Some investors, such as pension funds and insurance companies, have to invest funds in order to enable their customers to build up wealth over the medium and long term, notably in  BIS Review 41/2001  5  preparation for retirement. Consequently, this type of investor are supposed to behave differently from traders and short-term investors, who are working on a very different time horizon. But at times it seems that they are all pushed to behave in much the same way, on the basis of a very short-term horizon. •  To preserve, and even restore, their specific investment approach, these investors might be more shielded from excessive short-term pressures. This objective raises considerable difficulties, because it touches on the way in which the performances of medium and longterm funds and life insurance companies are assessed. In other words, this objective concerns the accounting standards and practices they use. It might imply that some rules and standards would be adapted to the medium and long-term horizon used by these entities. Third possible avenue: Diversify the risk management tools of financial institutions: •  As I mentioned earlier, even the best techniques can have adverse effects when used by too many participants. To some degree, this is perhaps what has happened to value-at-risk based techniques, which have been massively adopted by the financial industry.

This debt tends to increase over the periods of economic slowdown, in response to fiscal counter-cyclical policies and the impact of automatic stabilisers. However, given the essential role of fiscal sustainability in the overall economic and financial stability, and the high level of Albania’s public debt, the Bank of Albania has requested and supported the taking of measures to control and reduce this debt in the medium term. In this context, we reiterate our message for anchoring this process to a fiscal rule, which will orient the fiscal policy in the long term, and will be reliable and transparent for all Albanian and foreign economic agents. Developments in the external sector of the economy signalled a sluggish foreign demand in the third quarter of the year. Though trade deficit dropped, the external sector impacted negatively on the economic growth due to lower tourism revenues. In October and November, the external trade data show ongoing annual nominal contraction of the trade deficit, at 11.9%. This contraction was due to increase in exports by 12.0% and decrease in imports by 2.0%, over this period. The Albanian economy's capacity to maintain and speed up the positive export growth rates will determine the country's medium-term and long-term economic growth. In the medium term, increasing exports helps offset the domestic demand sluggishness, while in the long term, increasing competitiveness of the Albanian economy in the world markets should be to the core of Albania's new economic growth model.
10  In countries where supervisory competences lie with an institution other than the central bank, a representative of the latter can also attend meetings, although only one vote per country is counted. 11  To prevent conflicts of interest between monetary policy and supervisory powers, the ECB ensures a separation of objectives, decision-making, processes and tasks. This includes strict separation of the Governing Council’s meetings. 12  This procedure does not apply to ECB decisions relating to its general framework, which are adopted by the Governing Council in accordance with the ECB’s standard procedures, following a proposal of the Executive Board. Nor does it apply to macroprudential decisions, which are proposed by the Supervisory Board and may be approved, rejected or amended by the Governing Council. 5  draft decision (which has not yet been the case), it is returned to the Supervisory Board, which will examine the Governing Council’s reasons and submit a new draft decision. To resolve any differences of views expressed in this interaction, the SSM Regulation provides for the creation of a Mediation Panel, on which each Member State has a representative chosen from among the members of the Governing Council and the Supervisory Board. This mediation process is activated at the request of one or more NCAs, when they fail to agree with the rationale for the objection raised by the Governing Council.

But the fundamental solution does not lie in diluting regulatory requirements. Policymakers should also focus on ways to develop sustainable alternative sources of long-term finance. At the same time, we must recognise that the immediate constraint on infrastructure development in Asia is not financing per se but the supply of bankable projects with an acceptable risk-return profile to attract banks or investors. We need integrated solutions that involve risk-sharing arrangements and bring together bank and non-bank capital. In Singapore, we are working in partnership with a diverse group of stakeholders, to help build such an ecosystem to support long-term financing and unlock the supply of bankable projects. •  Multilateral agencies and well-rated public sector entities could provide guarantees or credit wraps that would allow banks to reduce their risk exposures to such longterm projects, thereby encouraging them to originate such loans. •  Bank loans could be structured in ways that facilitate their seamless migration from banks to capital markets. •  Institutional investors such as pension funds, insurance companies, and sovereign wealth funds could invest in project bonds, infrastructure debt funds, and securitised project loans, taking the risks off banks’ balance sheets. Conclusion Let me conclude. We have made reasonable progress in making global finance safer. The regulatory reforms since the crisis have helped to strengthen the resilience of the financial system. But the work is far from complete. We must not forget that regulation must be complemented by rigorous supervision and sound risk management.
But when you are part of a monetary union, the most valuable economic policy instrument is, as our own experience indicates, the deepening of reforms in order to increase the responsiveness of supply and the adaptability of the business and productive sectors to the major changes the economy is undergoing, such as globalisation and population growth. 4  BIS Review 67/2007  Specifically, the dynamism and flexibility injected into the labour market by the aforementioned phenomena of immigration and growing female participation need to be accompanied by the development of a more appropriate institutional framework, without forgoing the unquestionable achievement of good industrial relations. Despite the progress achieved by labour market reforms in recent years, the need remains to better tailor collective bargaining arrangements to the different industry- and firm-level requirements and to reduce the costs associated with permanent contracts. These measures should be complemented by others aimed at improving the quality of the labour factor, by giving greater priority to educational policy in order to redress the secondary education deficit, adapt university courses to new demands and promote effective continuous training for workers. Improving the efficiency of the economy likewise requires increasing investment in physical and technological capital, fostering innovation, pushing through privatisation where appropriate and stepping up the pace of the processes undertaken in recent years to heighten competition. The infusion of competition is particularly relevant in industries pivotal to spreading gains in efficiency to the rest of the economy, such as the network industries, the telecommunications market, the energy sector and rail transport.

There were, I think, times when the pessimists among us wondered whether there would be the resources, and the will, for this initiative to get off the ground. But, thanks to the enormous effort and co-operation among those involved, implementation, over the course of the next few years, appears now to be very much a certainty. Over the past few months, regulators around the world, including those in this region, have been setting out the approaches they intend to adopt in implementing Basel II, and banks have been preparing themselves energetically for implementation. Approaches vary from one jurisdiction to another: one of the key features of Basel II is its flexibility. In Hong Kong, our aim is to switch over to Basel II at the start of 2007, in line with the approach being adopted in other major international financial centres, and of the Basel Committee members themselves. We see value in being among the first in adopting Basel II, not only because of the intrinsic merits of the New Accord, but also because this city has one of the highest concentrations of banking institutions in the world, with a strong presence of international banking groups. Many people all over the world have been involved in Basel II. But there is no-one more qualified to speak on the subject than our guest today. Governor Caruana is the current Chairman of the Basel Committee on Banking Supervision.