samchain/econo-pairs-v1 huggingface dataset:
Therefore, perception mismatch among frontline staff about what really represents “good customer outcome” is something that banks must be careful to avoid. 8. Another interesting observation from the exercise is about perception of performance gauges. An area that banks have been putting a lot of emphasis in the past few years is reducing the weight of financial performance in incentive systems. Nevertheless, our review found that the perception of incentive structure differs greatly among different staff levels. More simply put, while senior management and supervisors think that the incentive systems are more balanced among business targets and non-financial factors such as compliance and customer outcomes, frontline staff generally still take financial  performance and business targets as the highest assessment priority. This possibly reflects that some other forces maybe at work, such as social interaction and recognition among bank staff. 9. The HKMA published the final report of this review last month. We highlighted in the report the above observations and a number of other interesting points which, I think, is definitely worth a read. In the report, we also put forward incentive system design principles and useful practices identified from the review. We are in the meantime collating the observations on individual participating banks, and will communicate the useful findings to them individually. I truly hope that banks will make good use of the review outcome to assist in their ongoing risk culture journey. Mandatory Reference Checking Scheme 10.

Pricing in different forward markets currently gives a slightly divided picture of what direction prices will take. The oil price has risen more than expected and forward rates imply that it may remain at a higher level. At the same time, the world market price for certain foods and metals has fallen in recent weeks, for instance, the price of wheat, meat and aluminium. However, the price of some other foods, such as rice, has risen recently. …but we must nevertheless take a stance But regardless of whether the international price impulses are temporary or more lasting, they must not be allowed to push up inflation permanently! In my opinion, the risk of this has increased in that inflation expectations have risen during the autumn. According to Prospera’s survey in April, however, expectations have fallen slightly. The National Institute of Economic Research’s Consumer Tendency Survey also indicates that households’ inflation expectations have been adjusted downwards since the February report. But expectations are still a little too high, particularly in the longer term. And this was one reason why I voted to hold the repo rate unchanged at 4.25 per cent at our most recent meeting. Other important factors behind my stance were that, according to our forecast, inflation will overshoot the target for a good while to come, at the same time as growth remains fairly robust. Weighing together these factors also indicated that the interest rate may need to remain at its current level for some time to come.
BIS central bankers’ speeches  Chart 3:  Chart 4:  Bank estimates of the level of GDP(c)  Output per head in the UK energy extraction industry  Index: 2008 Q1=100 104 Data  Fitted trend  Labour productivity, index 2008=100 180  102 160  100  140 120  98  100  96  80  94 Latest ONS data  60 40  92  20  90 2006  2007  2008  2009  2010  0  2011  1987  1991  1995  1999  2003  2007  2011  Source: ONS and Bank calculations. Source: ONS (including the Labour Force Survey) and Bank calculations. (c) Chained-volume measures. The fan chart depicts an estimated probability distribution for GDP over the past. It can be interpreted in the same way as the fan charts in Section 5 of the August 2011 Inflation Report. (a) Calculated using Workforce Jobs sectoral employment splits scaled to match total LFS employment levels. (b) Trends are calculated over the periods 1987 Q1 to 2005 Q4 and 2006 Q1 to 2011 Q2  Chart 5:  Chart 6:  Measured productivity and an estimate of trend underlying productivity, based on the BCC survey of space capacity within firms in private services (ex. finance). Measured productivity and an estimate of trend underlying productivity, based on the BCC survey of space capacity within firms in manufacturing.

To be clear, this is not the same as saying that the growth rate of the supply potential of our economy has been permanently scarred by the financial crisis. But rather over the next two or three years – which is the horizon which matters for monetary policy – we shouldn’t automatically assume that underlying productivity will necessary grow at the sorts of rates to which we have become accustomed to in the past. Policymakers need to think about supply as well as demand when responding to weak output growth. Recent policy developments Let me conclude with some brief comments about the current policy outlook. You may know that between February and August of this year, I was one of the members of the MPC that had been voting to raise Bank Rate. As I mentioned at the time, my vote was not based on the nice reasons that the economic recovery looked firmly entrenched and the exceptional monetary easing implemented at the height of the crisis was no longer required. Rather, it was driven by nasty reasons. I wasn’t confident about the strength of the recovery and I was worried about the downside risks to growth. But I was even more worried about the outlook for inflation. In particular, the risks from continuing global price pressures, and the risk that the prolonged period of high inflation would affect the credibility of monetary policy.
The headway made in the vaccination process allowed for a gradual easing of social distancing measures and for a recovery in demand, underpinned by the powerful economic policy response. However, the recovery was partially hampered by three factors. The first of these factors was the various waves of the pandemic, although the ensuing disruptions to economic activity became progressively less severe. Conversely, the other two – namely the sharp rises in the prices of certain goods and the global supply chain disruptions (bottlenecks) – have gradually become increasingly important constraining factors. These have proven more persistent and severe than expected and have become even more acute following the outbreak of war in Ukraine and the measures adopted in China to counter the latest outbreak of the pandemic. Although these three factors are global in nature, their impact has been very asymmetrical across countries, given the differences in productive systems, access to vaccines, economic policy response and degree of energy dependence. As a result, the recovery was particularly strong in the United States, where activity in 2021 H1 already exceeded its pre-pandemic levels. This higher buoyancy also led to inflationary pressures emerging sooner and more forcefully. By contrast, the euro area did not return to its pre-pandemic level of activity until late 2021. In 2022 Q1, GDP in the United States and the euro area stood 2.8 and 0.5 percentage points (pp), respectively, above their 2019 Q4 levels.

Should there be a greater fiscal adjustment, for example if the structural primary balance improves by 0.5 pp of potential output each year until reaching equilibrium – a path more consistent with the Stability and Growth Pact rules –, public debt could fall to 82% of GDP by 2040. Were this adjustment also accompanied by an ambitious package of structural reforms, the government debt ratio could be around 79% of GDP by 2040. In short, in order to bolster the sustainability of public finances, a multi-annual fiscal consolidation plan will have to be implemented once the pandemic is over and the adverse economic effects of the war in Ukraine have diminished. Although the necessary fiscal adjustment should be carried out gradually, the definition and early communication of this plan – in which all tiers of general government should participate – would be desirable, as this would help boost confidence and certainty about Spanish economic policies. Such confidence is particularly important amid the current context of monetary policy normalisation and the consequent tightening of financial conditions. As part of this plan, government expenditure policies must be subject to an exhaustive review to increase expenditure efficiency and to optimise the distribution between items in order to promote more robust and equitable economic growth. For instance, the weight of education and public investment expenditure in Spain is below the EU average,18 despite the broad consensus regarding the importance of these items to drive economic growth and mitigate inequality.
In market conditions where initial margin may be low relative to potential future exposure, the selfpreserving behavior of leveraged funds and their counterparties may be more likely to exacerbate rather than mitigate an unexpected deterioration in asset prices and market liquidity. As financial firms demand more collateral, funds are forced to liquidate positions, adding to volatility and pushing down asset prices, leading to more margin calls and efforts by the major firms to reduce their exposure to  BIS Review 85/2006  5  future losses. In the context of the previous discussion of externalities, firms’ incentives to minimize their own exposure can amplify the initial shock and impose on others the negative externality of a broader disruption to market liquidity. The fact that this potential adverse dynamic exists does not mean it will occur. The deviation of prices from their fundamental values in times of stress is likely to create incentives for firms and investors with resources to step in and provide liquidity. In other words, the market may itself have the capacity to self-correct and prevent a disruptive loss of liquidity. A second example is the recent trend to lengthen lock-ups, implement redemption gates that limit withdrawals, and create special side-pocket accounts for particularly illiquid investments by hedge funds. Each of these changes may serve to reduce the liquidity risk of the fund, which should be beneficial and potentially reduce the disruption from the forced liquidation of positions.

Normal competitive pressures can push valuation methods away from the conservative extreme and generate larger exposures to risk. As a result, individual firms and the overall market are more exposed to risk in a stress scenario than would be desirable. Another set of challenges comes with the broader damage to markets that can accompany the failure of a major financial institution. Firms have strong incentives to avoid large financial losses and to reduce the risk of failure, of course, but they do not have the incentive to internalize the potential external consequences of their distress on the financial system, and it is unrealistic for market participants to incorporate these risks into market prices. This “public good” dimension of financial stability means that while the whole economy benefits from a more stable financial system, each individual institution would prefer that others incur the costs associated with its provision. As a result, firms may collectively underinsure against the risk of failure and underinvest in the infrastructure and policies that promote financial stability. And finally, policies designed to reduce the risk of failure in financial markets create moral hazard, dulling the incentive individual firms face to self-insure against potential loss. We apply a set of capital requirements and supervisory constraints to offset the distortion created by the safety net, but these may not fully compensate for the impact on behavior of the broader range of financial intermediaries of the perception that the authorities will act to protect the financial system from systemic risk.
However, one fundamental problem is that it is difficult to see how a relaxation of rules in certain areas could be compensated by a purposeful tightening in others. Relaxing the 3 per cent rule would thereby imply a weakening of the construction as a whole at a time when - as I mentioned earlier - the conduct in some countries suggests that if anything the opposite appears to be required. There is already flexibility in the regulatory framework for different interpretations of the phrase “exceptional circumstances”. To increase this flexibility by allowing for country-specific factors on a general level would lead to risks. In particular, there is a risk that the rules would be interpreted too much ex post and that small countries would be discriminated against even more than is already the case. However, there is room for substantial improvements in the preventive arm of the Pact. The Achilles’ heel of the Pact is not actually the 3 per cent limit but its asymmetry; the pact involves gentle warnings in booms but hard sanctions in slowdowns. This means that the pact lacks credibility when, after impotently highlighting indiscipline during booms, it is expected to force governments into highly painful, 180-degree turns towards austerity during slowdowns. It also risks contributing to procyclical policy. Against this background the Commission has worked hard on improving the preventive arm in recent years. I have sympathy for many of their proposals. Some examples: •  Strengthen incentives in good times. Here, considering the debt level could play a role.

Lars Heikensten: Stability and Growth Pact needs reinforcement Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, at a conference organised by the European Commission, Brussels, 15 December 2004. *  *  *  Thank you, Mr Chairman. I very much appreciate this opportunity to comment on the work of the Commission. Perhaps the invitation is particularly pleasing for me as, unlike the other members on the panel, I do not come from a country that has introduced the euro. I should also immediately say that I very much enjoyed reading the background report and the communication on the Stability and Growth Pact produced by the Commission. Let me begin by characterizing the experiences from the Monetary Union so far. There is no doubt that the regulations on fiscal policy laid down in Maastricht had clearly positive effects up until the euro was launched. They are still having the same impact on those countries that remain outside the single currency and have the ambition of joining in the future. Far-reaching measures were taken, and are also being taken today, to enable entry into the Monetary Union. Noting the progress, some people have even claimed that earlier less well-functioning national economic-political cultures have been replaced by a more stability-oriented common European culture. But since the start of Monetary Union, this momentum has been lost. Several countries have returned to their old behaviour even though there are good examples of the contrary.
The recession was indeed deep, as Iceland lost just over 11% of output during the recession that ended in Q1/2010 and unemployment peaked at 8% in Q4/2010. The shift in the composition of demand was even more dramatic, as is witnessed by the swing in the current account from a deficit 17% of GDP in 2008 to a surplus of 8% in 2009. To a significant degree, this was induced by a drop in the real exchange rate amounting to 44% from the pre-crisis peak to the November 2008 trough. BIS central bankers’ speeches  3  The recovery began as previous imbalances were corrected and the economy found its bottom in the underlying strength of its traditional export sectors, the non-traded goods sector took advantage of the low real exchange rate, and the stabilisation of the economy and later real wage gains rekindled consumption. And then we have had the phenomenal growth in tourism in the recent years, which seems to be due to much more than the historically low real exchange rate. These figures show developments in GDP and employment during the recession and subsequent recovery in Iceland, with predictions extending into 2017 for GDP and 2016 for employment. For comparison, it shows the median and the 1st-3rd quartiles of the distribution of these variables for 30 other European countries, with Ireland and the UK highlighted. It shows that Iceland’s recession was significantly deeper than the median in Europe, and the same goes for Ireland, although to a lesser degree.

It should also be noted that the figures for the twelve-month rise in consumer prices are considerably more volatile in Norway than in other countries. We see from the figures that consumer prices in Norway, even when tax changes and energy products are excluded, are more volatile than indices in other countries where these products are included. Low inflation is not the result of declining demand, activity or employment. In our conduct of monetary policy, we weigh the objective of stabilising inflation close to 2½ per cent over time against the objective of stable growth in output and employment. Since inflation is low, we have chosen to keep the interest rate at a low level and have at times considered an even lower interest rate. However, as the Norwegian economy has shown solid growth since summer 2003, we decided instead to use some time to bring inflation back to target. In a period of increasing cross-border labour flows, substantial technological advances, changes in competitive conditions and new trading patterns, we may, with our very open economy, have to accept a somewhat greater variation in inflation and deviations from the target, as we have witnessed over the past two to three years. BIS Review 17/2006  3
Fahad Bin Abdullah Al-Mubarak: Combatting money laundering and terrorism financing Speech by H E Dr Fahad Bin Abdullah Al-Mubarak, Governor of the Saudi Arabian Monetary Agency and Chairman of Anti-Money Laundering Permanent Committee, to the 51th Plenary Meeting of Middle East & North Africa Financial Action Task Force (MENAFATF), Jeddah, 28 April 2012. *  *  *  Ladies and Gentlemen, I am pleased to welcome you in the Kingdom of Saudi Arabia. It also gives me pleasure to meet you all in this important regional meeting which is the 51th Meeting of MENAFATF. The meeting encompasses many essential and important issues of common interest and ways that would, in turn, promote cooperation to better levels. All peoples count on the unique role played by your Task Force to protect countries of this region against repercussions of money laundering and financing terrorism crimes. I wish your meeting all success and wish you all a good stay in Jeddah. Dear Audience, Increasing attention has been paid to anti-money laundering and counter-terrorism financing systems over the past years. This has been due to the great progress witnessed in financial and banking systems, diversity of communication means, simplicity of money movement and advanced payment systems. However, the speed factor in conducting commercial transactions, existence of indirect financial operations and unreal existence of dealers have led to great risks. Some of these risks are: potential abuse of these developments in performing illegal objectives.

Besides the increase in basic food prices, April’s inflation rate has reflected also the secondround effects, being materialised in higher prices of several services. The Bank of Albania judges that the Albanian economy should find space to face the external supply shocks or international price fluctuations by promoting domestic production in some key sectors. Annual inflation of tradable goods sector resulted 4.9% in April, accounting for about 73% of the headline inflation rate. High inflation rate of this sector of the Consumer Price Index (CPI) basket continued to be affected by high primary commodity prices in global markets, nonoptimistic mid-term anticipations related to them, and depreciated exchange rate pass-  BIS central bankers’ speeches  1  through. On the other hand, the decline in this item’s share to determining the headline inflation was an outcome of entry of domestic agricultural supply into the market. Nontradable goods inflation, reflecting better the domestic inflationary pressures, settled at 2.5% in April, attesting to a slight upward trend. April’s core inflation, which strips out the temporary effects, was close to 3.3%, reaching historical highs. Monthly paces of inflation rise, which are a better signal about inflation expectations trend, however, registered slower paces than in the previous months. Core inflation shows that the economy’s inflation expectations, although reflecting a relatively higher rate, remain well anchored at the Bank of Albania’s target.
They’re unlikely to introduce the same degree of a trade-off between the MPC’s objectives: stronger labour demand narrows the output gap and raises inflation11. And, although it’s possible that these strains too could pass – there’s a chance these frictions are simply the result of the sheer speed of hiring, and will ease of their own accord – there’s also an upside risk to wage costs from currently high inflation. If wage earners’ expectations of future inflation rise in response, of if they seek compensation for the rises in the costs of living that have already occurred, wages could also accelerate further, even without any additional decline in unemployment. The paths of all these things are, of course, extremely uncertain. But that’s always the case, to one degree or another. Precisely because policy decisions take time to work, and because other things can intervene in the meantime, it isn’t possible to control inflation perfectly. What we can do – and what is the best possible approach – is to think at every meeting about the level of interest rates that will maximise our chances, a couple of years from now, of hitting the inflation target exactly. That is what we will continue to do. Thank you. This is a more subtle question than I’ve pretended here. Stronger demand for labour clearly doesn’t introduce a trade-off: it reduces slack and, at the same time, raises inflation. But a deterioration in the supply side of the labour market may do, depending on its nature.

1  2  These global pipes fulfill three functions :   international payments systems enable money to move at the click of a mouse – and incidentally mean that central bankers are no longer at risk of getting their heads blown off trying to effect cross border payments;    international securities settlement enables the ownership of financial assets to change hands quickly and safely, often without the movement or amendment of any physical documentation of ownership; and,    central clearing systems enable participants in international financial markets to manage the counterparty risks in financial contracts that can last for decades. “Clearing” of financial activity has a number of meanings. I am here referring to central clearing, to the central counterparties (CCPs) that manage the risks of financial contracts rather than to the clearing of payments. 3  Three points are worth highlighting about this global plumbing. First, it is true that it is almost entirely private sector built and owned either by their users or as independent profit-maximising companies. 1  Based on Bank of England calculations, using data from 23 jurisdiction. Data from Bank for International Settlements, ‘Statistics on payment, clearing and settlement systems in the CPMI countries: Figures for 2015’. December 2016. http://www.bis.org/cpmi/publ/d155.pdf 2 I have excluded Trade Repositories from this list; the Bank does not supervise Trade Repositories. 3 Financial sector participants in a network will have both claims on each other and liabilities to each other.