samchain/econo-pairs-v1 huggingface dataset:
In this situation, the Swedish authorities implemented a series of measures:   The Swedish National Debt Office issued extra treasury bills and, in practice, let the banks exchange their mortgage bonds for more liquid government securities.   The government and the Riksdag extended the deposit guarantee and quickly passed laws enabling support to the banking sector.   In addition to the repo rate cuts we implemented, the Riksbank provided liquidity in several ways. We lent money for longer periods, eased the policy for collateral and introduced more counterparties to supply more liquidity to the banking system. We created swap lines with the Federal Reserve and ECB to meet the banking system’s need for foreign currency. We also contributed to crisis management in neighbouring countries by creating swap lines with Iceland, Latvia and Estonia. Finally, we also extended emergency loans to Carnegie and Kaupthing Sverige. 4  BIS central bankers’ speeches  The Riksbank no doubt considers that Sweden’s crisis management was successful. And other analysts have also shared this assessment – including, for example, Goodhart and Rochet in their review of the Riksbank’s work carried out last year.2 Unlike other central banks, we have also been able to phase out our crisis measures. The crisis has cost enormous amounts The crisis entailed huge costs, both for society as a whole and for the tax-funded public sector. Andrew Haldane, Executive Director of Financial Stability at the Bank of England, has shown that the crisis cost UK taxpayers just over 1 per cent of GDP.

In Europe, the banks are more important for the supply of capital to the real economy than they are in the United States. So, on our side of the Atlantic, support was channelled via the banking system to a greater degree. The ECB has increased liquidity, partly by offering loans with longer maturities. In addition, the ECB has supported the markets for both covered bonds and government securities and has thereby supported the banking system of the euro area. It has not been able to prevent European banks from encountering serious problems. Many smaller banks – and a number of major banks – have been forced to close. These liquidations have often been carried out with governmental participation and support. The costs of government capital contributions and guarantees have been comprehensive. These lie behind a large part of the fiscal policy problems currently being faced by many European states, a subject I will return to. The most critical period for Swedish banks was between the autumn of 2008 and the spring of 2009. The liquidity shortage on the financial markets made it difficult for the banks to renew their loans. This was joined by the threat posed by the crisis in the Baltic countries and the Swedish banks’ exposures there. The consequences of this were that the value of Swedish bank securities fell drastically and demand for government securities rose.
However, I think it’s important to clarify a number of points regarding the criticism in which a number of commentators have claimed that the Riksbank’s actions have caused the loss of 20,000 to 75,000 jobs. The first is that we have an entirely symmetric approach to deviations from the target. It is just as bad to undershoot the target as to overshoot it. Sometimes I get the impression that at least some of the criticism is based on the idea that the Riksbank has some kind of “hidden agenda” that is leading us to deliberately try to keep inflation below our set target, or at least that we think it’s less problematic if inflation is below target than above it. I can assure you that we have no such “hidden agenda”. The Riksbank always aims to meet the inflation target. The second is that there is no such simple relationship between interest rate decisions and unemployment, as the criticism suggests. Were the repo rate able to steer developments in the economy so directly, inflation targeting would be much easier, but this is not the case. The economy is exposed to new shocks all the time, and it is difficult to discern their significance and how they can be countered by monetary policy.

There is a residual question about how much of that activity should go via exchanges or via other trading platforms. That’s something which I doubt will be completely resolved this year. I think it will remain part of the G20 and the FSB agenda going into next year. But it is a very important part. Another key element of changing capital markets is much greater transparency around, and much reduced reliance on, credit rating agency ratings. One of the problems in global capital markets has been that too many investors and banks have given up on reaching their own view on borrowers and on instruments, but have effectively subordinated their own judgment to the judgment of credit rating agencies. The FSB is sponsoring and leading work in order to reduce the extent to which credit rating agency ratings are inscribed into, or embedded in the regulatory fabric of our capital markets. 6. Incentives  The sixth thing is incentives. The issue that gets most attention here is compensation or pay, on which the FSB issued a code. The essence of that is that more pay should be deferred. I would add that perhaps part of deferred compensation should be in the form of a debt contract, so that the managers and workers in large firms eventually become creditors of the firm and so they themselves have the same risks as other debt holders. That works only if we can develop resolution regimes leaving debt holders taking risks in our largest firms.
However, for Romania it was still too early, as it was rather unclear whether the new strategy was appropriate for developed economies only or for emerging economies as well. Anyway, at that time, i.e. mid to late nineties, Romania fulfilled none of the inflation targeting prerequisites: the annual inflation rate was still far from single-digit levels, fiscal dominance was strong, central bank credibility was not yet consolidated, while the possibility to forecast inflation two-years ahead was wishful thinking. In the end, as financial innovation and the unstable money velocity weakened the money-inflation relation, monetary aggregates did abandon us. In the case of Romania – and probably in the case of other transition economies, as well – another reason for the monetary aggregates unsuitability as intermediate target may be attributable to the lack of financial discipline which led to the build-up of arrears in the inefficient SOEs (largely, towards the state and among themselves). As the arrears acted as money substitute, the role of monetary aggregates in guiding monetary policy became increasingly irrelevant – restricting money supply often resulted into an accumulation of arrears. Although the arrears ceased to be an issue during the boom years, they emerged again as a problem during the crisis, the build-up being significant in socially-sensitive sectors such as public utilities and healthcare. Coming back to mid-2000s, after several years of preparation, the NBR joined the club of inflation targeters in August 2005.

While financial transparency among Mainland companies is by no means perfect, lenders are now at least better equipped to identify those companies that have sound underlying businesses and good management. The long saga of GDE is now drawing to a close. The banks have, I believe, managed to negotiate the best deal possible, and the last remaining step is for the banks to review and sign the detailed documentation to put the restructuring into effect. I understand that when the documentation is sent to the banks, they will have plenty to read. But I hope that they will try to do this as quickly as possible and that we can avoid any last minute problems and delays. There is unlikely to be any opportunity for renegotiation of the deal, and if it were to collapse at the final stage, the banks would certainly be worse off. So far I have been concentrating on the position of the Japanese banks. Let me now review the more general state of banking in Hong Kong after the Asian crisis. The first point to make is that the local Hong Kong banks have survived the crisis in good shape. Although one or two banks lost money, most banks remained profitable and actually managed to improve their capital ratios during the period as their risk assets declined and their capital base expanded.
In particular, as of September 22, the maximum bid limit per counterparty was raised from $ billion to $ billion, an overall size limit of $ billion per operation was imposed, and an auction process was introduced to determine the interest  13  6  Indeed, even prior to 2008, the range of fed funds trading on a given day could be quite wide, and the effective rate deviated significantly at times from the target rate for a day or two. This did not have any apparent effect on financial conditions or the economy. BIS central bankers’ speeches  rate on the operation and allocate take-up when the sum of bids exceeds the new $ billion limit. 14 The $ billion individual bid limit was informed by evidence on the desired investments of counterparties that had bid at the previous maximum of $ billion, and it took into account the size of assets under management of our counterparties. For almost all counterparties, the $ billion limit is unlikely to be binding in any circumstances. The $ billion overall limit was above total demand observed over the first year of testing, with the exception of the operation conducted at the end of the second quarter of this year. So what are the benefits of moving from a structure with individual caps alone to one with an aggregate cap as well?

More extensive powers to achieve financial stability In the area of financial stability, our new Central Bank Act incorporates an explicit mandate of the Central Bank for financial stability. This mandate is articulated in terms of the risks to financial stability that includes risks that disrupts the financial intermediation process (including the orderly functioning of the financial markets), or which affects public confidence. The Act also provides comprehensive provisions for heightened surveillance, pre-emptive actions and expanded resolution powers to facilitate the swift and orderly resolution of financial crises. The Bank may also take appropriate intervention actions to avert risks that stem from unregulated entities. The Act further acknowledges the importance of coordinated policy measures across different agencies whose actions can affect financial stability. Accordingly, the new Act provides for cooperation arrangements with other supervisory authorities and the ability of the Central Bank to make recommendations to such authorities on measures or safeguards for promoting financial stability. These new powers are complemented by strengthened institutional arrangements in the form of the establishment of a Financial Stability Executive Committee that will be formed to ensure the effective coordination of regulatory authorities in financial resolution. Enhanced governance and accountability framework With these enhanced powers, the governance and accountability framework in the Act has also been strengthened considerably. This relates to the enhanced role of the Board of Directors' in the oversight of the management of the Bank.
In the panic of 1906, the founder of what is now the Bank of America displayed his gold reserves on the street and offered to convert deposits into gold, creating confidence in his bank at a time when many others failed. Forty years ago, the clearing banks in London held around 30% of their assets in short-term liquid instruments. Today that liquid assets ratio is about 1%. For the major UK banks, almost 25% of customer loans are now funded by short-term borrowing in wholesale markets. At the turn of the new century it was close to zero. This was the distinctive feature of the contemporary British model of banking. Distinctive it may have been; sensible it was not. HBoS and RBS paid the price as the availability of this funding dried up, and not one of the building societies that de-mutualised in the 1980s and 1990s in order to expand beyond the constraints of their deposit base has survived as an independent entity. Banks have changed. They have encouraged the expansion of proprietary trading, the funding of long-term assets in short-term wholesale markets, a rapid expansion of balance sheets and a marked rise in leverage. Commercial banks followed the path of investment banks. Balance sheet size and high leverage were seen as the key to obtaining funds at lowest cost. The total assets held by the world’s largest banks roughly doubled in the five years to the end of 2008, and leverage in UK banks rose on average by two-thirds.

It accommodated, if not supported, decisions by its members to calibrate policies designed for a more benign external environment than was realistic and therefore encouraged less self-insurance than was necessary to manage safely. And it was drawn too far into a range of efficiency-improving long-term institutional reforms that necessarily diffused attention from critical vulnerabilities. BIS Review 37/2004  3  To some extent, these criticisms suffer the classic failure of claiming that what seems obvious in hindsight was as clear at the time. Many are unfair in the degree of influence they expect the Fund to be able to exert over a reluctant member - recall the constraints I described at the beginning on the Fund’s powers over its members. And many of the criticisms fail to recognize the difficulty of making definitive judgements about the path of policies consistent with sustainability. Yet elements of this general diagnosis of the Fund’s policy advice to emerging market economies have substantial merit. If the Fund is going to contribute to a process of well-targeted reform, particularly in the more vulnerable countries, it probably needs to raise the bar, to increase the level of ambition of its policy recommendations. Greater policy focus is required on the principal sources of near-term vulnerability, ideally without fully eclipsing longer-term institution building and structural reforms important to raising growth potential. A risk-based framework for determining the hierarchy of policy priorities is important.
Yves Mersch: The European Central Bank and the Federal Reserve – an ocean apart? Speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at Harvard University, Boston, Massachusetts, 12 October 2016. * * * Interest rates on both sides of the Atlantic seem to be trapped near zero. At first glance, looking only at the short term policy rates, one might think that both the Federal Reserve (Fed) and European Central Bank (ECB) are facing very similar circumstances and challenges. Below the surface, however, the differences are pronounced. In the euro area monetary policy continues to be highly accommodative, aiming to steer inflation back to levels in line with our definition of price stability. In the US, which is at a different stage of the business cycle, interest rate normalisation has so far been slower than expected. It is worth taking a closer look at the details to understand the unprecedented actions of central bank on either sides of the ocean in recent years. To do so, it is useful to divide the crisis into three separate phases. The first phase was the global financial crisis after the collapse of Lehman Brothers just over eight years ago. Central banks worldwide faced a largely common challenge to avert a collapse in aggregate demand. The second phase centred on sovereign debt, a problem which only affected the euro area. In the third phase, which is still in place today, stubbornly low global inflation and anaemic growth are compounding domestic challenges.

Indeed, the third major difference between the US and the euro area can be found in the structural flexibility of their respective economies. Many euro area economies entered the crisis with long-standing structural rigidities. In a more flexible economy, output tends to be less affected by shocks as relative prices adjust more quickly, and the recovery in output is faster since the economy can reallocate resources in a 3/7  BIS central bankers' speeches  more efficient way. Unemployment has decreased more slowly in the euro area than in the US, not only due to a weaker demand environment, but also because of labour market rigidities. Indeed, every time since the 1970s that there has been a downturn in economic activity, unemployment in the US has quickly readjusted when the economy picked up, while in euro area it has taken much longer to do so. And once the unemployment rate starts falling it rarely returns to the previous low. The result is that euro area unemployment has risen steadily for 40 years. So in sum, in this second phase of the crisis, monetary policy in the euro area, which works primarily through banks, had to contend with a protracted process of banking sector repair, exacerbated by a sovereign debt crisis and a lack of fiscal space, and compounded by suboptimal institutions to tackle structural issues and support the transmission process. The measures we adopted were specifically aimed at addressing the impairments of the transmission mechanism.
21  Feldstein M., Horioka C. “Domestic Savings and International Capital Flows”, Economic Journal, June 1980. 10  BIS Review 60/2006  work of 1980 estimated the correlation between the national savings rate and the investment rate in the years 1960-1974 at 0.89. This correlation for the years 1990-1997 was estimated at 0.60, and having included South Korea – at 0.76. Despite a pronounced fall, the correlation between the national savings and investment remained high. 22 his constituted a peculiar puzzle, as in the global world of finance there were no good reasons for which investments were to be financed with residents’ savings rather than with loans drawn on the global financial market. As in the case of the “Lucas puzzle”, numerous works have been written to explain this phenomenon. In the most recent work by Martin Feldstein regarding this subject, 23 the newly estimated correlation rate gradually decreased over subsequent decades to reach a mere 0.19 in the decade ending in 2002. The decreases regard mostly smaller countries, but the estimates for large countries also show that the correlation rate fell from 0.92 down to 0.59. Therefore, it seems that over 10 recent years the process of globalization of financial markets exhibited a pronounced deepening. One may wonder why the recent years have witnessed acceleration and deepening of the globalization process, given that some phenomena that are universally deemed the reasons behind globalization, started a few decades ago.

Greek banks have been present in the market since 1996; the German and Italian investment has been present for quite a long time as well, while the latter has grown substantially and has become one of the market’s key actors. Austrian investments may be considered as the most dominant ones. Their ownership has resulted from the acquisition of the largest domestic state-owned bank. The long presence of foreign banks in the Albanian banking system has influenced the establishment of a stable banking system and its stable growth. Despite the financial collapse of 1997 or the panic crisis in 2002, in none of the cases was the system’s performance a source of crisis or instability. Previously, foreign banks were more conservative in terms of expanding their geographical activity; however, the entry of Raiffeisen Bank into the market pushed them to be more active. This fact may be evidenced by the variety of products provided in the market, the growth of lending and the employment of clear strategies to increase or maintain their market share. However, the economic benefits deriving from the presence of foreign banks have not reached the proper levels yet. The enhancement of the quality of information provided to the public at large and to the central bank, the lowering of the intermediation cost, the further improvement of risk management, and the standardization of the accounting and financial reporting systems are not in the desired levels yet.
A framework that takes some signals from market prices could be more forward looking, for example, recognising the market pricing of climate risks, rather than a backwards view of the risks of failure. However, any alternative framework may bring in new risks, potentially in being over risk-sensitive; or for example if provisions are linked to credit spreads, there may be incentives to value assets nearer the top end of the plausible range, understating the credit spread. While this is likely a smaller risk for traded corporate bonds, the shift to less liquid assets brings in greater scope for valuation uncertainty, which may also need to be factored into the FS. Conclusion  I have focussed today on risks inherent in the MA, in particular on risks from less liquid assets stemming from uncertainty about the credit rating, uncertainty around valuations, and uncertainty about the amount of MA benefit that should be taken as a credit to insurers’ balance sheets. These are all risks that insurers’ Boards and senior management need to be across and to understand the vulnerabilities in assumptions that have to be made. The MA is a significant benefit for firms, in bringing forward unrealised profits that are then available to be deployed to grow businesses, or to reward shareholders. However, an addition to the risk-free rate is appropriate for annuities where they are well matched, and the MA is a valuable source of resilience for annuity writers.

As I said earlier, MA portfolios already include many types of debt instrument, and where assets are not MA eligible firms may consider – if appropriate – holding them outside the MA portfolio to back other liabilities. And the PRA has taken, as far as possible, a pragmatic approach to fixity – for example for floating rate bonds and for assets with inadequate modified Spens clauses. Over 2020, we saw very few applications for asset classes not already held in peer MA portfolios, instead seeing firms applying to invest in less liquid asset classes such as ground rents and ERMs. While the asset classes may not be new to us, firms can expect to be challenged when investing in asset classes that are new to them. We have published supervisory expectations in Supervisory Statement 1/20 “Solvency II: Prudent Person Principle”5 and Supervisory Statement 8/18: “Solvency II: Internal models – modelling of the matching adjustment”6. These cover risk management aspects including the consistency of investments with the prudent person principle, the ability to manage the assets – including in stress or in default – and the ability to model the solvency capital requirement appropriately. Next I would like to touch on the future direction for new asset classes in MA portfolios. As Sam Woods, the Deputy Governor for Prudential Regulation, and PRA’s Chief Executive said in his March speech7 at the ABI, we are wary of calls to encourage specific forms of investment with prudential regulatory incentives.