samchain/econo-pairs-v1 huggingface dataset:
All of these developments give reasons to be cautiously optimistic about the prospect for crisis-ridden countries’ return to a path of sustainable growth, productive investments and creation of new jobs. However, historical experience suggests that the combination of an economic downturn and a financial crisis is usually associated with a prolonged recession and losses of jobs and welfare. Most structural reforms take time to generate positive effects, and some of the countries in distress are still saddled with rigidities in the markets for goods, services and labour. In order to prevent – and indeed reverse – job losses, the downward adjustment of both prices and wages need to be stronger in those areas where unemployment is still high, and where this adjustment has not taken place to a full extent due to structural or institutional factors. If this goes hand in hand with a continued consolidation of public sector budgets, then the cautious optimists will see their views confirmed through a chain of reduced uncertainty, renewed investor and consumer confidence, better access to funding and a return to robust and sustainable growth. 4.2  Reforms at the European level  Let me now turn to the last and arguably most important topic of my intervention today, namely the reforms which have been introduced in order to make the euro area and the EU stronger in the long haul.

The existence of fiscal rules at the EU level, codified in the Stability and Growth Pact and in the  4  BIS central bankers’ speeches  Treaty Excessive Deficit Procedure, was motivated by the need to ensure fiscal discipline, preserve fiscal space and hence allow automatic stabilisers to play out in full during downturns. More fundamentally, the fiscal rules were supposed to prevent countries from pursuing irresponsible fiscal policies with negative externalities on the rest of the monetary union. However, the previously existing framework did not have sufficient “teeth” and its implementation by Member States within the Eurogroup remain insufficiently strict. As a result, EU fiscal rules did not constrain budgetary policies sufficiently.5 At the beginning of the crisis, it became painfully evident that the euro area was also lacking effective crisis management tools. First, the design of the euro area assumed that stabilisation would take place at the national level and to a large extent automatically. The crisis has shown us, however, that shock absorbers at the national level are insufficient in case of a major financial and economic crisis. Indeed, the scale of the shock after the 2008 financial crisis was unprecedented in a number of countries and it far exceeded their national shock absorption capacity. The euro area had no mechanisms to provide financial support for countries in difficulty, ensure efficient risk sharing and prevent cross-border contagion; notably, there were no area-level institutions to prevent fiscal sustainability from being jeopardised by severe problems in their domestic banking systems.
Such a policy has two goals: the first is to provide the market with reliable information on what the rate of inflation will be so that investment, wage setting, and other market decisions can be made with greater confidence in what the future price level will be. The second is to ensure that the inflation rate is very low in order to improve the quality of price signals. Such a policy might minimize the gap between actual and expected inflation that spill over to the real economy. By removing the inflation bias of discretionary policy, nominal interest rates would be lower, and by diminishing uncertainty over the future price levels, a credible nominal anchor would reduce the inflation risk premium in both nominal and real interest rates. Here, there is a need for clear operational rules to know what short-run stance of policy would be appropriate for the future. The purest examples of such rules are a fixed exchange rate and a fixed rate of growth in a monetary aggregate. Either rule provides a clear anchor for inflation expectations. A credibly fixed exchange rate is the most transparent nominal anchor. A floating exchange rate with a money growth rule as the nominal anchor is also easy to monitor, if somewhat more difficult to achieve. Both anchors suffer, to some extent, from being indirect routes to the real objective of monetary policy, which is price stability.

I think it merits serious consideration for more widespread adoption, irrespective of the accounting and tax treatment such reserves might attract. One key feature of such reserves is that they should be useable. That is, the markets and analysts need to accept that using such reserves to absorb write-offs when losses are high is the natural counterpart of building them up when losses are cyclically low. It is not a sign of  BIS Review 145/2008  5  weakness or of inadequate capitalisation, but of prudent management of the cyclical pattern of losses. From the point of view of market acceptability, separating cyclical reserves from more structural capital requirements seems a valuable idea. The second scheme I want to promote is growth-related capital requirements. Losses tend to be lower in the early stages of a loan’s life than when it is fully seasoned because borrowers are more certain of their own and the economy’s near-term prospects. A loan book which is growing more rapidly than average will be weighted towards such unseasoned loans, and so will appear to be performing better than a balanced portfolio of loans of different vintages. In addition, rapid growth of lending tends itself to be associated with taking on poor business – even if that is not obvious at the time it is written. Typically, rapid growth can only be achieved by drawing in marginal borrowers to the market. That is true of the banking sector as a whole.
It gives market participants the opportunity to make secure profits at even lower interest rates and hence sets a lower bound for how low the interest rate on short-term government securities can fall. 18 It seems reasonable that this price development has been caused by our bond purchases and that the interest rate on government securities with short maturities has been pushed down by at least 0.3 percentage points, and that a similar price effect has also been exerted on government bonds with longer maturities. As the public sector budget is more or less balanced, the government’s total borrowing requirement does not increase over time, but the government must nevertheless take out new loans when older ones mature. In other words, new government bonds and treasury bills need to be issued on a continuous basis. According to the Debt Office’s latest forecast, bond borrowing will amount to about SEK 90 billion a year in 2015-2017 while borrowing via treasury bills is expected to amount to just over SEK 110 billion a year. Government bonds have an effective maturity of just over 7 years while all treasury bills by definition mature within a year. If the Riksbank’s bond purchases push the nominal interest rate down by 0.3 percentage points on average, this produces a total profit in terms of lower interest expenditure of approximately 0.003*(7*90+110)*3 = SEK 7 billion for these three years.

If we hold the bond until it has matured, we know exactly how many Swedish kronor the Riksbank will receive in interest on it. And we also know how much it cost to buy. But we don’t know what the funding cost for the bonds will be. Because the cost depends on how the repo rate develops up until the bond matures. This maturity transformation is actually quite similar to operations pursued by commercial banks to make a profit, i.e. holding long-term assets funded by short-term borrowing. And even if such operations are associated with an interest-rate risk which makes for an uncertain return, one can normally count on making a profit more often than making a loss. This is because short-term rates (such as the repo rate that has a one-week maturity) are usually on average slightly lower than long-term rates (e.g. the rate for five-year government bonds). In economics jargon, this is referred to as term premiums on the financial markets normally being positive. In practice, however, it is very difficult to determine how large these term premiums are at any one particular time. The premiums cannot be directly observed on the financial markets but must either be estimated based on a forecast for future shortterm rates or estimated using statistical methods based on historical connections between interest rates at various maturities and different asset-types. 7 The ECB’s (2012) interpretation of this is that central banks should avoid prolonged periods with negative  equity.
This is not just a case of making sure that those that buy bank debt that can be bailed in realise the risks of the instruments they have purchased. It also means making sure that creditors understand the resolution strategy of the institution to which they have lent money. Unprotected depositors in institutions that have no bail-in debt should be clear that in the event of trouble, they stand next in line after shareholders when it comes to absorbing losses. Conclusion As I’ve tried to show, the question of how to deal with failing banks and who pays is not new. But the answers have changed over time. We no longer think we should rely on a diet of bread and water, unlimited liability, Shakespearian recitals, ordinary depositors or the taxpayer to bear the burden of failed banks. Our success can never be absolute. We can’t expect to insulate fully all institutions from all external shocks, however large.14 We have, however, in my view, put in place the legal, financial and practical arrangements to resolve banks of all sizes. But it will only be true if we implement the new regime on resolution fully. Both regulators and industry have an incentive to do so. If, next time there is a crisis, authorities face the same unenviable choice as in the crisis, if taxpayer bailouts cannot be avoided, then the case for breaking up banks and making them much, much simpler will be very hard to resist.

This is a great strength for the industry and highly beneficial to both banks and consumers. However, we should also acknowledge that it can expose some customers to higher risks arising from investment in complex financial products. I have in mind especially consumers who may be less sophisticated but who may nonetheless have a high level of trust in banks. In that sense, it was not surprising that following the financial crisis, there was greater demand by consumers and consumer groups to better understand the risks of investment products offered by banks. This demand has been amplified by a number of other trends, namely: the greater complexity of financial products; the rapid pace of change in financial standards and regulations; the rising number of high net worth individuals in Asia-Pacific actively looking for investment opportunities; and the recognition that regulation alone is insufficient to protect consumers. Financial education has thus become an important complement to market conduct and prudential regulation. Raising the financial competencies of individuals has become a long-term policy priority for the financial industry. This is particularly crucial in Hong Kong where, as you know, we have a regulatory framework based on disclosure and complementary customer suitability assessments. In that context, it is especially important that consumers understand a product’s features and risks thoroughly when considering their investments. They have to decide whether or not an investment suits their objectives, and whether they have the ability to assume the associated risks.
Thus, banks could have similar benefits by adopting the APIs or the Open Banking concept. The emerging ecosystem of Bank & FinTech partnerships and collaborations i.e. Open Bank has paved the way for the data sharing economy, and a way banks to monetize their digital assets and data. Many open initiatives and government regulations open up access to the customer data banks hold on other businesses. Regulations such as Accessto-Accounts as part of PSD II and Open API (application programming interface) standards are paving the way for an open API ecosystem. Regulators in many other countries are also evaluating feasibility of open APIs with the aim to provide consumers with secure, less expensive, and easy-to-use financial services. PSD2, as the most significant regulation, will arguably make the greatest impact in opening up bank-held customer account data to Account Information Service Providers. The ecosystem of open banking would be influenced by PSD2. Firstly, PSD2 does not mandate the creation of common API standards. This means that individual banks may make their data available through different technical standards. Secondly, PSD2 only opens up access to customer transactional data for specific institutions, which must also be regulated PSPs. Furthermore, the concept of platform is a crucial factor for open banking, whereas regarding financial industry, the phenomenon of platforms has to be further developed. For payments and personal information this is expected to gain traction through the PSD2, as third parties can engage in service provisioning without actually owning bank assets. Open Banking extends this concept further.

Precisely in relation to the recovery in credit flows, I will focus in the rest of my address on the task at the forefront of the Banco de España’s priorities: the reform and strengthening of our banking system. BIS central bankers’ speeches  3  In 2012, in accordance with the regulations approved in the February–May period that year, banks undertook a major provisioning drive; and the Memorandum of Understanding and the financial assistance facility of up to € billion were negotiated with the European authorities. The effort by banks focused, above all, on setting aside provisions to strengthen the coverage of loans to the real estate development and construction sector and of foreclosures. Moreover, in keeping with the Memorandum, banks under restructuring or resolution were obliged to transfer to Sareb, at an agreed price, the assets belonging to the above-mentioned balance sheets segments. As a result of this transfer, and bearing in mind the write-downs made, Spanish banks’ exposure to these risks has been drastically reduced, from € billion as at end-2011 to € billion at end-2012. Alongside the most notable clean-up and provisioning drive, a recapitalisation and restructuring strategy was applied based on the analysis of balance sheets and on the tests based on stressed macroeconomic scenarios which concluded a year ago.
Moreover, the low interest rate environment, which has been particularly pronounced for some years now, is part of the fallout from the global financial and economic crisis. Driven by supply and demand, high savings and weak global investment activity put additional downward pressure on interest rates. Moreover, monetary policy measures – taken by central banks to combat the financial crisis and the low inflation level – have themselves contributed to the decline in interest rates, and continue to do so. This is also true of the measures taken by the SNB. After all, we cannot remain untouched by international developments. Interest rates in Switzerland have traditionally been lower than abroad. This is due to Switzerland’s status as a safe haven: investors are willing to accept comparatively low yield in return for more security. During the financial crisis, the decline in interest rates abroad was generally more marked than in Switzerland. The interest rate differential to other countries narrowed and the Swiss franc became even more attractive. Negative interest helps to restore the interest rate differential between Switzerland and other countries, by making investments in Swiss francs less attractive and thereby reducing the pressure on the Swiss franc exchange rate. We are aware that the costs associated with negative interest are not inconsiderable. Yet without negative interest, the Swiss franc would be even stronger, which would weigh even more heavily on the economy. The SNB is thus faced with difficult trade-offs when making its monetary policy decisions.

Luis M Linde: The changing role of central banks Speech by Mr Luis M Linde, Governor of the Bank of Spain, at the 4th Future of Banking Summit, organised by Economist Conferences, Paris, 26 February 2013. *  *  *  Ladies and Gentlemen, It is an honour, and a pleasure, to address such a distinguished audience as is gathering today in this conference. I would like to thank The Economist for giving me the opportunity to analyse some of the changes affecting central banks policies. I will organize my talk around the two main areas of Central Banking: monetary policy and banking regulation. Firstly, I will address the changing role of central banks in monetary policy, before the crisis and after the crisis. Up until August 2007 – before the global financial crisis –, the general mood prevailing among academics and policymakers was that there existed a well-defined, so to say, “science or model of monetary policy”. There was a kind of consensus among central bankers about most elements of monetary policy strategy; and monetary policy was perceived as being highly successful in developed countries, with low inflation and low variability of inflation and output. According to this consensus, macroeconomic stability was achieved through rule-based monetary policy, delegated to an independent central bank with an implicit or explicit inflation target and with very little role for discretionary fiscal policy.
Smith argued that we “are endowed with not only a desire of being approved of, but with a desire of being what ought to be approved of…”. 7 He talked about an “impartial spectator” whose judgment we imagined and imposed as a constraint on our behaviour. Smith thought the “impartial spectator” fundamental to an orderly and prosperous society. It is what stops the hunter from breaking his  4  Wealth of Nations, I.i. p14. 5  Did Adam Smith ever visit a pin-factory? He was certainly a careful observer of the world around him. As Buchan (2006, p.12) wrote, “He had visited dye-works, pin-makers, brewers and distilleries”. His description in the Wealth of Nations of “a small manufactory … where ten men only were employed” makes clear that Smith did, at some point, visit a pin factory, but there is little evidence as to where that was. And most scholars believe, with good reason, that Smith took the example of a pin-factory from the Encyclopédie, edited by Diderot and d’Alembert and published in France in 1755 – the article on épingle describes in some detail the eighteen operations identified by Smith. I am indebted to Professor Iain McLean of Nuffield College, Oxford, for drawing this entry to my attention. But his example of nailmaking a few pages further on did come from personal experience, since the manufacture of nails took place in the villages of Pathhead and Gallatown which Smith visited on his regular long walks.

The increase in availability of data and information is not without risks. While the wealth of new data has indeed made markets more efficient and has supported better decision making by the private and public sectors, it has also brought about new risks of fraud, theft and invasion of privacy. Therefore, existing confidentiality policies, regulation and data governance need to be reviewed and updated to account for these new risks, so that innovative activities can thrive without threats to individual safety and interests. Additionally, in managing the increase in global interconnectedness, greater international collaboration and coordination in the field of statistics is needed to enhance cross-country data coverage, promote greater standardisation of data and, more importantly, to create a shared understanding of cross-border risks and transmission of shocks. The dynamic nature of the global economy and financial system implies that the relevant set of data needed is a constantly moving target. Therefore, continuous and concerted efforts by both the users and compilers of statistics to close data and information gaps are indeed crucial. Finally is the need for the continued emphasis on capacity building of human capital. From researchers and academicians, to statistical compilers and policymakers, there is an urgent need to ensure that further enhancements in the field of statistical science continue to advance. Policymakers and statisticians today need to be at the forefront of the advances in statistics to identify new linkages and risks in order to calibrate effective policy responses.
The folklore sometimes exaggerated this, so much that some observers attributed every decision of the SES to the mysterious ways of the MAS. But the hidden hand of the regulator was not ideal for developing a mature and dynamic capital market. Now that the SGX has been demutualised and listed, a new set of potential conflicts arises. While profits were never irrelevant to the SES, they are the primary motive for shareholders of the listed SGX. Share values and dividends also give greater transparency to the business performance and prospects of the SGX, providing the management with greater incentive to raise operational efficiency, and seek competitive advantage. This is as it should be, and is indeed a principle benefit of demutualising and listing the SGX. There will however be concern from time to time as to whether the greater drive for commercial success will reduce the commitment and resources deployed by the exchange to fulfill its responsibility to regulate in the public interest. The MAS believes that the interests of the SGX are more aligned than divergent with public interest as represented by users of the exchange. A fair, transparent and efficiently-regulated market is indispensable to the vibrancy and sustained business success of the SGX. Serious investors will not trade on an exchange that does not have internationally acceptable rules of listing, trading and settlement, or does not enforce the rules fairly and effectively. The examples of exchanges that have failed to meet such standards and suffered the consequences of investor shunning their markets are well-known.

Without the interest and liquidity provided by investors, no exchange will find it easy to attract issuers and to build its business. Credibility in regulation is therefore a vital commercial asset for the SGX. The board and management of the SGX recognise this fully. Corporate governance of the SGX is not designed to favour short-term revenue objectives at the expense of long-term gains. Shareholders of SGX themselves have it in their interests to hold the exchange to high standards of market regulation, so as to achieve sustained returns on their investments. MAS-SGX Regulatory Relationship A demutualised, listed exchange however requires an enhanced role for the MAS in some respects, even as the functions of the SGX and the MAS are more clearly delineated than in the past. The Exchanges (Demutualisation and Merger) Act passed in 1999 was drafted to give MAS the power to issue directives to SGX in the interest of ensuring fair and orderly securities and futures markets, and the proper management of systemic risks. The MAS is the backstop. It is in the position to put things right, where any potential conflicts of interest become real. The regulatory relationship between MAS and SGX may be broadly defined as follows. MAS, as the statutory regulator, will administer the corpus of statutory law regulating the capital markets. We also maintain oversight of SGX's regulatory responsibilities and seek to ensure that there are no gaps in the overall regulatory framework.