samchain/econo-pairs-v1 huggingface dataset:
2  BIS Review 55/2007  4. Fund managers/dealers/traders  Interbank market The tight monetary policy stance adopted by CBSL and its possible continuation would result in increased reliance by banks on the inter-bank call market. Given the self imposed limits by banks on lending to each other, if a few banks attempt to raise a large volume of funds from the inter-bank market , there could be volatility in interest rates. Banks should not often rely on a potentially volatile call money market as an alternative to mobilizing deposits or exploring other funding sources. The heavy reliance by some banks on the call money market drives short term interest rates and make borrowing costs to investors and business community to very high levels. The volatility in the call market also creates uncertainty among the businesses and that adds to inflationary expectations. Forex market Given the current account imbalances, there is a mismatch in foreign exchange inflows and outflows. Sri Lanka’s foreign exchange market is not deep enough to absorb relatively large transactions, though its size and operations have gradually increased. In such a market, huge speculative trades could be rather disturbing and they could move the exchange rate against economic fundamentals. No doubt, forex market is a key source of foreign exchange income to banks. Its price, which is the exchange rate, is determined according to demand and supply forces.

Ranee Jayamaha: Recent economic developments, challenges and strategies – proactive strategies in reducing inflation Speech by Dr Ranee Jayamaha, Deputy Governor of the Central Bank of Sri Lanka, at the Central Bank of Sri Lanka, Colombo, 25 May 2007. *  *  *  Inflation is a common enemy. Its impact will be felt by every single person in a country. Managing inflation and reducing inflationary expectations cannot be achieved by the Central Bank of Sri Lanka (CBSL) alone. It can only be done collectively and with cooperation from all stakeholders. Who are these critical stakeholders ? CBSL, the government, banks and financial institutions, fund managers/traders/dealers operating in various markets, investors both local and foreign households and consumers. 1. Central Bank of Sri Lanka  Given its prime objective of maintaining price stability, CBSL has been proactive in the conduct of monetary policy, which is the instrument through which this purpose can be achieved. CBSL sets monetary targets taking into consideration growth prospects of the economy, liquidity requirements necessary to facilitate growth and inflation at a desired level. The ultimate aim is to keep inflation at desirable levels and reduce inflationary expectations. CBSL, at its disposal, has a limited number of instruments to conduct monetary policy. The current framework places greater reliance on market-based instruments, such as changes to the policy interest rate and conduct of open market operations. Accordingly, CBSL has announced its monetary policy strategy and targets at the beginning of 2007.
Even more, as the economy is undergoing major structural changes, particularly in the export sector, the regular monitoring of the newcomers provides a very clear vision of their impact on the economy in general. Even more, as some of the aggregate official statistical data, where the weight structure of the different sectors is revised at a predefined time interval, cannot capture the impact of the structural reforms, having satellite individual data on new companies is profoundly beneficial for policy analysis and decision-making. The granularity of the data available helps largely to improve the forecasting process in the Bank, which is the core in the anticipative monetary policymaking. Given the heterogeneity, in the external sector in particular, the probability that different segments behave and will behave differently is large. For that reason, as a complement to the model-based forecasting process, we regularly consult “soft” survey data on business plans of the main exporters and importers. Firm-by-firm data analysis is also used as a tool when screening the data on capital flows (FDI, external debt, portfolio investments where data are available on a security-by security basis), as a complementary to the analysis on the aggregate level. When discussing monetary policy and the data requirements, after the crisis, one of the important areas is of course the implementation of unconventional monetary policy measures. Does the unconventional monetary policy ask for unconventional statistics?

This is why in the more recent period, as a central bank, we strive to gather as much as possible micro information, for the corporate sector in particular. One of the important steps was the launch of the first Survey on Wage and Price Dynamics, similar to the survey conveyed for the euro area, which provided one of the most comprehensive overviews on the behavior of corporates in terms of wage and price adjustments. The results of the survey, and the subsequent research, gave valuable information. It pertains to information on the nominal and real wage rigidities, and the way the corporate sector adjusts  BIS central bankers’ speeches  3  its balance sheet in response to different shocks. All of this supports the understanding of the monetary policy transmission and calibrating economic models that incorporate heterogeneous agents. One of the lessons from the crisis was that not many central banks had enough granular data on the corporate sector. As mentioned, granular data serve as an important analytical tool for assessing the potential vulnerabilities in the economy, and thus as an important input in the monetary and financial analysis of the central bank. We recognized the importance of the corporate sector data quite early, in the context of detected financial stability risks in particular. Aggregate balance sheets of the Macedonian corporate sector have been transmitted from Macedonia’s Central Registry to the central bank since. Yet again, it was recognized that the aggregation loses information, and a more disaggregated approach should be employed.
In the operational aspect, a change of form of our objective in June served to a better orientation of banking system refinancing with liquidity, resulting in a liquidity premium reduction in the system and a better orientation of interest rates in the inter-bank market. Financial markets were more relaxed with their risk premium gradually falling. Interest rate in the primary market continued its dropping tendency since a year ago, as a reflection to the moderate demand of the fiscal sector for funding and the good liquidity situation of the banking system. Moreover, the reduction of the key rate was followed, to a satisfactory degree, by [falling] interest rates in deposits and loans in Lekë, hence enabling a good introduction of monetary policy decisions into the economy. Beyond a better transmission of monetary policy decisions on interest rates of financial markets during the second half, the Bank of Albania deems that their introduction into the real economy remains incomplete. Referring to developments in lending to the economy during the second half, loans to the private sector, on average, increased with same pace as during the first half. Annual lending growth in November amounted to 10.1% almost commensurate with the level at the end of the first half. Slower increase of loans to the private sector gave a low contribution to money supply expansion in the economy, reconfirming controlled inflation pressures by the domestic economy.

2  BIS central bankers’ speeches  Nevertheless, contribution of net foreign demand to the economic growth of the third quarter is considered to be lower compared with the first half of the year. Annual improvement of trade deficit by 10.7% in the third quarter was lower than the one recorded in the first two quarters of 2010. Furthermore, trade of goods in the first two months of the fourth quarter proves a lower contribution of the external economy for the last quarter of 2010. The growing tendency of imports and an expected slowdown of exports growth may halt the process of correcting foreign trade balance and reduce its influence on the economic growth for 2011. In the aspects of macroeconomic policies, these developments suggest that strong stimulating policies for the economy may be buffered by a rapid increase in imports that accompanies the increase in domestic demand. In the structural aspect, these developments reiterate the need to continue with structural reforms, which should orientate the Albanian economy towards a more stable development model and a higher competitiveness in global markets. Among other things, these reforms, should aim at establishing a favourable climate to attract stable capital flows as in foreign direct investments or long-term capital inflow. A further increase of aggregate demand enabled the Albanian economy to move closer to its producing potential, yet remaining clearly under-utilised. Consequently, decreasing pressures on inflation continued to be present even during the second half of the year.
The strategies pursued have involved using the least possible amount of public funds, concentrating on cleaning up bank balance sheets by demanding additional provisions, raising capital requirements, encouraging mergers, transforming savings banks and improving their governance, reducing capacity, increasing efficiency by bolstering the size of banks, making the worst managed banks disappear and minimising the time the State has a presence in banks in which it had to intervene. The results mean we can be encouraged by what we see Spain has been able to do during these difficult years of crisis. As regards cleaning up bank balance sheets, since late 2007 to the end of last year provisions have been increased by € billion. Once this year, thanks to the recent legislation, an additional write-down of € billion is completed, a figure of € billion will have been reached, namely 14% of GDP. As regards capitalisation, deposit institutions have during this period increased their capital both in absolute terms and in relation to their assets, thanks partly to the fact that the legislation passed in 2011 and 2012 has imposed on Spanish banks capital requirements greater than those required by the Basel III calendar. As regards capacity, although the plans are not complete, there have been reductions of 12% in the number of branch offices and 10% in the number of staff, with sharper falls at savings banks (of the order of 16% and 13%, respectively).

More encouraging is the principle of better late than never, and the important thing is that Spain initiated the process of bank restructuring, now nearing completion, in 2009, that significant measures to reduce the budget deficit began to be adopted in May 2010 and that an ambitious labour-market reform was introduced in February this year. Spain has proven itself capable of making adjustments and reforms and this is essential to restore long-lasting upswings and sustainable growth. But this reassurance must not lead to complacency. What we have done so far, despite its huge importance, is not sufficient. And some of us have the thankless task of pointing this out. For example, when each financial reform has been approved it has always been argued that the result will be more credit, but although bank restructuring is certainly an absolutely necessary condition, we have always seen that it is not sufficient by itself to make credit flow again. We have to restructure the financial system so that, as in any process of industrial adjustment, the resulting banks can generate a healthy profit and be sufficiently solid to meet demand when the adjustment process is complete. However, credit will not improve until solvent demand increases. Hence the importance of other economic reforms to boost consumer and investor confidence, such as reducing the budget deficit and reforms, such as the labour-market one, to increase the economy’s growth potential.
I would like to emphasise that the question of if and when we should take action ultimately depends on the risk aversion we have and the subjective assessments we make. One can never know in advance when the time will be right to take measures. It is not possible, for instance, to “calculate” that at exactly this particular level of household debt or of housing prices it will be the time to take action. 2 Different countries have experience problems at rather different levels of debt, both higher and lower than the one we currently have in Sweden. This uncertainty is something we have to live with; we must nevertheless make the best possible assessments and make decisions on the basis of them. Given the uncertainty regarding whether or not the recent slowdown is a break in the trend, what measures do I think are needed? For the sake of clarity, I would like to distinguish here between three types of measure. The first type concerns remedying well-known problems and deficiencies. The second covers slightly more revolutionary changes in the longer run – measures that would improve our management of the type of problems caused by the mortgage market. The third type of measure involves strengthening the banking sector in general, regardless of whether future problems are caused by developments in the mortgage market or by some other market or phenomenon. I will now describe what I consider to be the most important priorities in these three areas.

When I became President of the ECB, I was very happy to see that this initiative had already been launched by my predecessor, Wim Duisenberg. I was determined to give it renewed impetus. The event can be seen from three different angles. From the perspective of the ECB’s staff and the 27 national central banks of the European System of Central Banks, it is a way of celebrating all the national cultures and being proud of them. For Frankfurt and the RhineMain region as a whole, it is a way of appealing to a large, cosmopolitan audience. For Europe as a whole, it is an occasion to celebrate cultural unity and diversity under the auspices of one of its major institutions, the ECB. I should mention that the ECB and the national central bank co-organising the Cultural Days – this year Banca Naţională a  BIS Review 121/2009  1  României – benefit from the remarkable support of the City of Frankfurt and other active sponsors, whom I would like to thank for their contributions. 2  BIS Review 121/2009
(2009), “Back from the Brink”, http://www.whitehouse.gov/administration/eop/cea/BackFromTheBrink, speech given at the Federal Reserve Bank of Chicago, 24 September 2009. BIS Review 159/2009  5

Joseph Yam: Establishment of the Treasury Markets Association Welcoming remarks by Joseph Yam, Chief Executive of the Hong Kong Monetary Authority, at the inaugural ceremony of the Treasury Market Association, Hong Kong, 23 January 2006. *  *  *  Good afternoon, Ladies and Gentlemen, 1. First of all, let me, as President of the Council of the Treasury Markets Association, welcome you all to this inauguration ceremony to celebrate the establishment of the Treasury Markets Association. The establishment of the TMA has the strong support of market participants. I am glad to learn that the Association has already successfully registered about 2,000 market practitioners and over 50 institutions as members. This strong membership provides a solid base for the Association to take forward its strategy and plans. 2. To maintain the status of Hong Kong as an international financial centre, a requirement specified in Article 109 of the Basic Law, I believe that it is important for us to have, among other things, treasury markets that are active, professional and efficient, and that operate in accordance with international standards. The volume of financial business in Hong Kong is enormous.
Basel II builds on long-standing principles of bank safety and soundness, but with greater emphasis on modern tools of financial risk management and differentiation of drivers of risk. And, like the Sagrada Família, the framework for Basel II is firmly in place but much work still remains until the plans are finally executed. As I’m sure you’re aware, with the publication of documents on trading book/double-default and downturn LGDs last year, the Basel Committee has completed its work on Basel II policy development. Our efforts are now firmly focused on the challenging task of implementing the Framework as efficiently and effectively as possible. With that in mind, I would like to now touch on some issues relating to the calibration and implementation of Basel II, as well as work in both the Committee and the industry on complex financial products and risk management  BIS Review 46/2006  1  Calibration One of the Committee’s objectives throughout the development of Basel II has been to maintain the overall level of capital in the banking system. To meet this objective, the Committee introduced a socalled “scaling factor” of 1.06 into the Framework, with the agreement that this would be reviewed prior to final implementation. The Committee has just completed its fifth Quantitative Impact Study, or QIS 5, and I would like to express my gratitude to those of you here today whose banks submitted data as part of this exercise.

Chart 20 illustrates the impact of increasing the long term cost of short term risky strategies, , across the entire system in our simple model. The “low ” and frictionless paths are identical to Chart 2. But if the regulator raises the cost of risky policies, the signalling threshold rises to the green dashed line. In this example, the increase in this threshold is sufficient to prevent risky policies arising at any point over the horizon. In other words, the “high “ (macro-prudential) path replicates the frictionless equilibrium. The large output swings caused by risky lending cycles are reduced significantly. The financial accelerator is defused. BIS Review 168/2010  23  Chart 20 Model simulation high long term cost of short term risky strategies  Source: Bank calculations. Fifth, because credit cycles emerge from a failure to co-ordinate lending decisions, expectations are crucial for the effectiveness of macro-prudential policies. Perhaps even more than in a monetary policy context, macro-prudential policy works by acting on agents’ expectations. For example, raising has a direct effect on lenders’ behaviour, increased incentives to reduce risk. But as importantly, it also has an indirect expectational effect, as all lenders anticipate they will become subject to the same simultaneous squeeze. Anticipating that, lenders will co-ordinate their lending choices today provided policy is credible. These collective action dynamics underscore the importance of the expectations channel for macroprudential policy. This has important implications for the design of a macro-prudential framework.
Also, developing stress-testing frameworks remains a collective challenge about which central banks and supervisors should strengthen their works. At our level, the next stage of our works is to organize work streams with banks in order to specify together the best practices of the sector in terms of governance and to reflect on scenarios and metrics to best assess the vulnerability of banks, liaising with the work carried out with the NGFS. At the end, the release of these surveys and their follow-up signal the willingness of the ACPR / Banque de France to gradually “mainstream” climate changerelated risks. This willingness is also growing among European Institutions as attested by the recent move from the SSM to launch its own internal network combined with an NCA Climate contact group. The ambition is to contribute to European and international fora as well as be in the position to adopt resulting guidelines or requirements (in the EBA case). Nevertheless, at a moment where networks or work streams are burgeoning, especially within European institutions, we should be very careful about the good coordination of these different initiatives to avoid redundancy and duplication. It is also important that the NFGS, which remains a club of the willing, ensure some minimal degree of cooperation and harmonization by issuing high-level recommendations.

It also emphasized the need to collectively think how, as a supervisor and a central bank, we should deal with risks and avoid the build-up of new vulnerabilities (e.g. helping to enhance the financing shift towards low-carbon sectors). Those reflections gave birth to the Network for Greening the Financial System in December 2017. As a continuation of this work and also in the spirit of bringing our contribution to the reflections of the NGFS, the ACPR surveyed both main French banking and insurance  companies in 2018 to take stock of progress they have achieved in dealing with climate change-related financial risks. The main takeaways from both surveys have been published last April 10th 2018 in two reports1. The report dedicated to the banking sector2 includes three main observations:  There is a shift in the governance of climate change-related risks from a “Coporate and Social Responsability-only” perspective towards a two-pronged approach which integrates traditional risk departments. This trend is nevertheless mainly observable in the biggest and most internationally active institutions and the operational implementation could be improved significantly (lack of metrics, specification of strategic orientations at the business-line level…).