samchain/econo-pairs-v1 huggingface dataset:
It is also necessary to develop further the analysis of asset prices and how the financial markets can be better integrated into our models and forecasts. This applies both with regard to the work on financial stability and the work on monetary policy. The supervision map is being redrawn A further area for reform concerns the supervision of the financial system as a whole, and the possibility to take measures when risks to the stability of the system are detected. The central banks often have both the responsibility and the best resources to analyse such systemic risks, as they are called. But they usually do not have particularly sharp tools for dealing with them. In most cases the central banks must rely on being able to affect unsatisfactory states of things by providing information and warning of risks. But when times are “good” on the financial markets, it may be difficult to get anyone to listen to this type of warning. Before the crisis broke out, for instance, the Riksbank warned in several speeches and reports that there were risks regarding developments in the Baltic and risks connected with low compensation for risk in the financial markets. And we were not the only ones to point out these risks. But the market participants did not pay sufficient heed to the warnings. The crisis has shown that there must be an opportunity to put greater force behind the words if warnings are to have any effect.

In the very turbulent and uncertain situation prevailing at that time, the main focus was on quickly making a diagnosis and implementing more or less acute measures – “intensive care” if you like. It was necessary to take rapid and forceful action to safeguard financial stability and to minimise the negative effects of the crisis on economic developments in general. For the Riksbank and many other central banks the "normal” tools have not been sufficient to achieve this. But we have adapted quickly, taken out a whole range of complementary tools from our workboxes, and even constructed some new ones! Now, one year later, the most acute phase of the financial crisis is now hopefully behind us. Although we have not yet climbed out of the trough that turned out to be the worst economic downturn since the war. But there are many indications that we have passed the turning point. In my speech today I intend to provide a brief status report of where we stand today and how we should to proceed. Are we about to land on our feet? How does the economic situation look today from a monetary policy perspective and what lies ahead of us? What is the outlook for the financial system? Have the “extraordinary” measures taken had an effect and how should they be phased out? Even after we have landed properly it will be necessary to keep our balance. But the road ahead may be difficult to negotiate.
As a result, banks in Asia were not as prone to the problem of massive over-leveraging, undercapitalization, or under pricing of risk of complex derivatives. So from this perspective, the significant improvement of Basel III over Basel II is in addressing the problem of procyclicality and adoption of macroprudential approach in our policy framework. This is a major contribution of Basel III going forward. The key emphasis of Basel III is to strengthen capital base. While this is important, I regard this as only a second line of defense. The first line of defense is a good risk management system, and strong governance. Asia’s simpler banking model, and reforms to strengthen bank risk management and risk-based supervision, help to foster a strong first line of defense. But as I mentioned earlier, we would risk false sense of security if we believe we can depend just on our simpler banking model. With economic and financial liberalization, especially propelled by the regional economic integration such as ASEAN Economic Community or AEC, that simpler banking model is changing. I will return to this issue later. For now, let me return to Basel III and the potential side-effects for Asia? There are some concerns about unintended consequences from Basel III that bankers and regulators in Asia have voiced to the standard setters. I will, at this time, not comment on those issues which are not concluded such as liquidity rule.

While the basic legal, regulatory and supervisory framework that takes into account the distinctive features of Islamic finance are already in place, there is a need to have a more comprehensive infrastructure to meet the present challenges. Looking beyond the current crisis, there needs to be an integrated crisis management framework as part of this  BIS Review 123/2009  3  infrastructure to ensure that any emerging crisis in the Islamic financial system will be promptly and efficiently managed. More facilitative and modernised legal framework is also required to make business more conducive for Islamic finance. In addition, the boundaries of the regulatory framework for Islamic finance would also have to be regularly adapted to keep pace with the evolution and transformation of the financial system. In the case of Malaysia, the comprehensive legal, regulatory and supervisory framework for Islamic finance is further supported by a financial safety net framework that encompasses the lender of last resort facility and a deposit insurance system. Moving forward, in the aftermath of this global financial crisis there is also a need to have in place the institutional arrangements for resolution of troubled international Islamic financial institutions. In Malaysia, we have also in place a mandated resolution mechanism to provide for expedient, effective and cost efficient resolution of Islamic financial institutions. The current crisis, however, has highlighted the need to have in place a mechanism for cooperation between regulators across jurisdictions for resolution and for containing potential systemic risks beyond the national boundaries.
In terms of the financial account, the resident sectors’ improved terms of access to external funding from 2013 enabled the outflow of funds from the rest of the world at the height of the euro area sovereign debt crisis to be reversed. The progressive normalisation of the euro area’s capital markets, as from the final stretch of 2012, significantly reduced the need for Spanish credit institutions to finance themselves through the central bank. Subsequently, the abundant liquidity resulting from the ECB’s quantitative easing measures has once again given rise to net fund outflows in the Spanish economy. These have, however, come about in a very different way to those resulting from the 2012 balance of payments crisis. Indeed, net fund outflows are not, as was then the case, the outcome of a worsening in economic sentiment regarding the Spanish economy. They are rather the result of a redistribution between institutions and countries of the abundant liquidity injected by the Eurosystem. As to instruments, the funding raised abroad in the most recent phase has preferentially taken the form of stable flows, such as foreign direct investment, equity and investment fund shares, and long-term government debt securities. This composition reveals international investors’ confidence in our economy, to which the structural gains in competitiveness and the recovery in output and domestic demand have been conducive. In the specific case of foreign direct investment in Spain, these flows have accounted for around 2.6% of annual average GDP in the 2013-2019 period.

The low demand for consumption and investment, and the banks' conservative lending policies, have slowed the monetary indicators. The increase in the money supply slowed down to about 2.5% in October and November due to private sector's lower demand for funding. Lending to economy continued to contract and in November, it was 2.4% lower than a year ago. The above monetary and economic dynamics has exerted weak inflationary pressures. The low aggregate demand has expanded the negative output gap. The labour market pressures have been subdued against a setting of unchanged unemployment rate, moderate wages, and partially-used capacities. These developments have affected the control on output costs and profit margins, and are reflected in low core inflation rates over this period. Also, imported inflation has been downward due to lower primary commodity prices in the international market and stable exchange rate. Based on the economic outlook and aiming to encourage aggregate demand, the Bank of Albania lowered the key interest rate by 0.5 percentage points, at 3.0% in the fourth quarter. Also, Bank of Albania's monetary policy decisions are associated with ongoing liquidity injections and orientations toward the future monetary policy stance. This policy has  2  BIS central bankers’ speeches  managed to keep liquidity premia and inflation in check, by contributing to lowering the interest rates in the interbank, government debt security, lek loan and deposit markets.
On this front, Thailand has done remarkably well, registering a substantial increase in net inflow of foreign direct investment in the four years following the crisis despite the overall net capital outflow due to debt repayment within the banking sector. Foreign direct investment (to the non-bank sector) increased from an average around 1.4 billion US dollars during 1992-1996 to 3.4 billion US dollars during 1997-2000. Though much work is required on the corporate sector in the march toward modernization of the Thai economy, the government and the central bank also have vital roles in maintaining stable economic environment and providing the required infrastructures to allow the private sector to drive forward to create wealth and prosperity. Several long-term plans have been made in the past couple years. On the macroeconomic front, the Bank of Thailand has adopted Inflation Targeting as a framework of our monetary policy since May 2000. It may be a little too early to claim our success, but the results thus far have been encouraging. Long-term interest rates of the interpolated 14-year government bonds were reduced from 8.3 percent at the beginning of 2000 to currently at 6.1 percent. Inflation remained subdued and will stay within the target range during the next two years. The maturity of state enterprise debentures offered in the market increased from a maximum of 7-year in 1998 up to 20 years in 2000, reflecting greater confidence on the long-term economic stability.

Lately, the “dark side” of financial integration has increasingly come into focus. The global financial crisis was a vivid demonstration of what happens when the system flips over from stable to instability. And the prescribed treatment has created increasingly serious side-effects ever since. With monetary policy in advanced economies having been kept at ultra loose levels for over 5 years and still further unconventional monetary stimulus being embarked upon in some cases, the repercussions on the rest of the world are testing the limits of macroeconomic management, especially for emerging market countries. Large capital inflows have lowered long-term yields and compressed risk spreads across a wide range of asset classes, contributing to increased risk-taking. The marked rise in the co-movement of asset prices across countries, particularly in bond yields, is making it harder for policies to achieve desired financial conditions domestically. At the same time, upward pressure on exchange rates risks undermining export competitiveness, complicating the trade-offs between macroeconomic stabilization and financial stability. And should inflows reverse abruptly, the resulting asset price and exchange rate swings could induce broad contagion effects that prove disruptive to economic activity. In all this, the underlying concern is that integration has amplified the vulnerability of domestic financial conditions to external shocks, while limiting the effectiveness of the tools that policymakers have for addressing those shocks. This is not solely an emerging market problem. Indeed, the degree of co-movement in bond yields appears to be even stronger for advanced economies.
Put to good use, this transformation can probably create stronger potential growth, lead to higher productivity growth and lower inflation, and benefit employment. The favourable changes that have occurred over a number of years in the Swedish economy since the 1980s suggest that such a development is within our grasp. All forecasts to date about the spread of the Internet have been on the low side. In the United States, it was 38 years before 50 million households had radio sets, while the intervals for television sets and cable television were 13 and 10 years. The Internet, however, had reached 50 million households after only 5 years and according to some estimates the number of users will increase greatly during the next few years. It has been said that whereas conventional telephony in Sweden is growing by 7% a year, traffic on the Internet is currently rising at this rate every week. It is not just that more and more people are subscribing; those who surf on the Internet are doing so more and more. The number of surfers is measured by Sifo Research & Consulting; the figures show that almost 3.5 million people in Sweden surf, which is not quite half of the population aged 12 to 79. Of these, as many as 2 million stated that they surfed on a daily basis. Another noteworthy figure is that in the age group 50-79 years, almost 20% are active users of the Internet. So the Internet is not something that only young people find attractive.

The Swedish economy experienced a fantastic period of growth. After 1970 growth slowed and Sweden fell behind other countries. Annual inflation has averaged around 4% in the 20th century. However, this average conceals relatively sharp fluctuations in the rate of inflation at the beginning of the century and a successively rising trend in the post-war period. This rising trend was first interrupted during the 1990s. In the closing stages of World War One, a remarkable increase of the inflation rate took place. Inflation rate in 1918, for instance, was almost 40%. This inflation period was changed into a period of deflation in the early 1920s when prices fell for three years in a row. Altogether, the price level fell by over 40% between 1921 and 1923. This was truly a period of deflation. 3  BIS Review 137/1999  Figure 4. Inflation in the 20th century  4. Inflation in the 20th century Annual average per decade  12 10 8 6  Average 4%  4 2 0 -2 -4 1900  1910  1920  1930  1940  1950  1960  1970  1980  1990  Swedish price statistics are available from the beginning of the 1830s. They show inflation was relatively stable and averaged just over 0.5% a year between 1830 up to the outbreak of World War One. For the entire period from 1830 up to today, the average rate is around 2.5%, which accords relatively well with our inflation target. Figure 5. Employment in different sectors  5.
What is your view on the current economic situation in France? France, like all of the other European countries, is asked to subject itself to a very sizeable fiscal consolidation exercise. This will help to engender confidence and thus to consolidate the recovery and, in turn, create jobs. Like all euro area countries, France is encouraged to continue to actively implement reforms. The euro area as a whole can and must increase its potential for growth and job creation. The extensive reforms that have been undertaken in all countries, such as the pension reform in France, are needed. They are a step in the direction of fiscal responsibility and the smoother functioning of the European economy, and of the French economy, and will lead to more growth and jobs. BIS Review 154/2010  3

Such cooperation is an excellent opportunity to Bank of Albania employees, who may benefit from valuable skills and expertise for our Museum. It would also contribute to new networking and collaboration in research activities. In light of promoting and furthering cooperation, we are committed to turning our Conference of the Museum of the Bank of Albania into an annual event. Also, in 2017, the Museum of the Bank of Albania will organise a cycle of lectures dubbed as “Nights of the Museum”, which will address a variety of topics, such as numismatics, banking history, economic and financial education, philately, art and architecture. These projects aim at developing another aspect of our work at the Museum, which would focus on social developments vis-a-vis museum objects. Dear participants, The first conference of the Museum of the Bank of Albania coincides with the 25th anniversary of the establishment of the modern central bank of the Republic of Albania and a two-tier banking system. In these 25 years, the Bank of Albania has served to the country’s economic and financial development, supporting successfully the development of an efficient and stable financial system. It will continue to remain an institution with ambitious objectives in the field of European integration and approximation with the European Central Bank. Today, it is undertaking a new challenge: opening to the public, not only to communicate clearly its primary objectives, but also to contribute to helping the public learn about the history of money, art and tradition that it represents.
As you know, on 4 November the first pillar of the Banking Union project, namely the Single Supervisory Mechanism, came into being. The Single Supervisory Mechanism aims to harmonise banking supervision in the euro area so as, among other things, to sever the negative link between confidence in banks and doubts over the sustainability of public finances. 4  BIS central bankers’ speeches  Intense work was needed to implement the new supervisory system. Milestones included the completion of the Single Supervisory Mechanism Regulation in October 2013; the approval of another regulation assigning responsibilities to the European Central Bank and national authorities; and the drafting of a supervisory manual setting out the best supervisory practices of each country and implementing common procedures for all members of the system. One of the main objectives of the new institutional design is to ensure that the ECB’s supervisory functions do not clash with its monetary policy responsibilities. To this end, a new Supervisory Board was set up in the ECB to plan and conduct banking supervision. This Board will be responsible for making proposals on supervision to the Governing Council, which continues to be the highest decision-making body of the ECB in both monetary policy and supervision. The start-up of the SSM constitutes an unprecedented transformation of the responsibilities of the participating national supervisory authorities, which naturally include the Banco de España. The Single Supervisory Mechanism Regulation distinguishes two groups of banks.

The exercise considered minimum capital thresholds which had to be exceeded in each of its parts: the asset quality assessment and the baseline and adverse scenarios of stress tests. Banks not exceeding any of these thresholds had to submit within two weeks a capital plan for remedying their capital shortfall within a period of six to nine months. With the methodology used, 25 of the 130 banks assessed had a capital shortfall, which for the whole of Europe amounted to € billion. It should however be noted that, in anticipation of the exercise, many European credit institutions strengthened their solvency over the past year. Of the aforementioned 25 banks, 12 increased their capital sufficiently in 2014, so only 13 of them, with a capital shortfall of € billion, will have to take additional action to reinforce their solvency. We consider the results of the Spanish banks to be positive. Only one bank was below the threshold in one of the parts of the exercise, specifically in the asset quality review. In this case the estimated shortfall was very small and, during 2014, the bank took measures to strengthen its capital by an amount well in excess of that needed to cover its shortfall. Taking  BIS central bankers’ speeches  5  into account these actions, at present all Spanish banks amply exceed the thresholds set in the exercise.
For example, a study from a few years ago estimated that to comply with Basel III for a midsize European bank would require up to 200 full-time jobs.6 That is not per se a problem, but one has to look at it in the context of the current environment facing banks. If banks are simultaneously aiming to cut costs to restore profitability, while raising the resources they dedicate to compliance, there could be a consequence elsewhere: for instance, IT resources may be diverted away from innovation. That would hinder the process of technological adaptation that is key for their long-term viability. So I would argue that regulators should be mindful of the burden they are placing on banks and the potential unintended consequences. If banks are to adapt effectively to the new regulatory environment, they also need clarity on what it will look like. The risk of a prolonged period of regulatory reform – and remember the current phase has been ongoing since 2009 – is that it creates a moving target, which in turn prevents the industry from settling into sustainable new business models. To give just one example, some banks responded to the crisis by switching to a vision of retail deposit-funded subsidiaries, which was also supported by the initial wave of regulation, for example the Net Stable Funding Ratio. Now, with the introduction of the Total Loss Absorbing Capital rules, they may be forced to reconsider those business models as they will need to issue more unsecured long-term debt.

True, as the recovery gains momentum, and provided this translates into a sustained adjustment by inflation towards its target, the need for monetary policy to support the economy will tend to diminish. The US Federal Reserve has already begun to reduce its balance sheet at a gradual and predictable pace, and the ECB has slowed the pace of increase of its own balance sheet. This reduction in stimuli will extend the monetary policy headroom for acting effectively in the face of possible future crises. The monetary policy normalisation strategy can but be slow and will tend to be applied predictably, with close scrutiny of its impact both on economic growth and inflation and on financial stability. It is worth recalling that, in 2013, the markets rather hastily interpreted some statements by the Federal Reserve, the clarification or correction of which gave rise to a bout of turbulence, owing to the different forecasts as to the speed at which expansionary monetary policy would be abandoned or softened. That episode provided a lesson for all central banks that have applied unconventional policies, in two respects: monetary policy should be corrected very slowly, and the correction should be predictable to the markets. In sum, predictability and a clear communication strategy will be important in preventing adverse market reactions. Financial regulation and supervision The second area I would like to mention concerns the challenges in financial regulation and supervision.