samchain/econo-pairs-v1 huggingface dataset:
When a home falls greatly in price, the household becomes unable to move without realising major losses. Individual households can then find themselves in particularly dire straits. A couple of days ago, Finansinspektionen presented a report on housing loans in Sweden.2 Encouragingly, this report showed that the mortgage ceiling introduced in 2010 may have dampened indebtedness and risk. At the same time, it can be noted, for example, that over half of new loans approved have no amortisation requirements whatsoever. Of the remaining loans, almost half must be amortised over a period of 50 years or longer. A large percentage of the loans being issued at present will remain for a long time. To a certain extent, these entail risks that the banks will also have to manage in several decades’ time. The higher capital adequacy demanded by the Ministry of Finance, Finansinspektionen and the Riksbank for the major Swedish banks should be seen in light of this. The banks need to lend a little more of their own money and slightly less of other people’s. This would mean that they would be able to bear losses more easily and would reduce the risk of future costs for all of us, as citizens. The European Commission is concerned about developments in Sweden The European Commission is also concerned about the high debts accumulating among Swedish households.

Overheating at the end of the 1980s and the resulting financial crisis almost doubled long-term unemployment. And, of course, shocks to the national economy of this kind do not spare us citizens in our role as taxpayers either. Problems in the banking sector impact the country’s citizens in several ways A banking crisis thus impacts individual citizens in several ways. Lower or even negative growth leads us, as employees, to run an increased risk of unemployment and to earn lower wages than would otherwise have been the case. When the growth path falls over the longer term, we also have to count on lower pensions. Bank crises also risk being costly to us in our role as taxpayers. If the government is forced to compensate those who have put money into a bank, or even take over and capitalise a bank on the ropes, there will be less funding left for other purposes. Taxes will be higher or public welfare lower – or both. As almost all citizens are also bank customers, they are also impacted more directly. A crisis in the Swedish banking system would lead to higher funding costs for the banks and thus higher lending rates. Customers in a bank needing to be restructured may also need to change bank and negotiate conditions under circumstances that would probably not be particularly favourable. All of this risks leading to major difficulties for households. And this is something that we saw all too many examples of at the start of the 1990s.
This commitment has been made, for example, in public statements from Governor Andrew Bailey here here and here and Sarah John, the Bank’s Chief Cashier, here  , from myself  . 5. The NPA is a multi-year project which will allow for real-time payments, be able to handle increasing payment volumes. It will include the rules and standards that make up various payment types, allowing the market to create new products and services as well as allowing for the development of new overlay services. 6. Open Banking’s joint regulatory oversight committee consists of the FCA, PSR, CMA and HM Treasury. 7. See for example early stage use-cases of DLT for supply chain finance reported in UCL’s Centre for Blockchain Technologies report ‘DLT in the Supply Chain  ’. 8. As set out in Money creation in the modern economy | Bank of England the majority of money in the modern economy is created by commercial banks making loans. 9. The umbrella term ‘stablecoin’ has been used to describe a range of instruments with quite different characteristics. In particular, they may be backed by a range of financial assets, commodities or unbacked cryptoassets (which in some cases are supported by algorithmic protocols). The robustness of those backing assets and the wider safeguards for guaranteeing stability of value vary significantly across the products labelled as stablecoins. 10. See for example the Libra White Paper and related Diem technical papers 11. As set out in the Regulatory Initiatives Grid  . . 12.

2  In short, I expect the Law on Real Estate Lending, along with the new bank culture in respect of customer relations, to provide for an appropriate framework for the development of the mortgage market. It may thus cast off once and for all the legal uncertainty that has been trailing it. I would like to refer to an essential aspect the Law addresses: the obligation to evaluate in depth the solvency of the potential borrower, surety or guarantor before entering into a loan agreement. As you may well imagine, I fully share the caveats set out in the regulations. We must never forget that the essential element for consideration in granting a loan is not the value of the collateral, but the ability of the borrower to pay. Evidently, when analysis prior to the granting of the exposure is based excessively on the value of the collateral put up, there is no effective, practical restriction on the continuous growth of the loan, at least while the collateral value also continues to rise. The incentive to ease appraisal stringency is greatest when the appraisal value is practically the only parameter justifying the granting of the loan. The law also makes it very clear that the value of the collateral should not be the fundamental factor when it comes to granting financing. This is a factor of protection for the customer since it places all responsibility for analysing ability to pay on the bank.
A temporary phase, which we are in, of low interest rates makes it more likely that we will return to a situation where savers get a better deal. It is a temporary phase, but there is no doubt that there are consequences for those looking to earn income. This is not a situation that is ideal. But we are still in the legacy of the crisis and I think this policy path is correct. We also always say that, in terms of the speed of the recovery, European fiscal policymakers can do more. Those countries which have fiscal space can do more to accelerate the recovery. Some have said that the continued low interest rates and quantitative easing have had benefits for large investment funds, and for the area of property investments in particular these benefits come at the expense of individual prospective house buyers, or indeed people who end up renting. It’s become an issue here as it has in other parts of Europe. How would you respond to that? The low interest rate environment has many benefits. It helps to create jobs. For those with a 1/4  BIS central bankers' speeches  mortgage, it reduces the cost of maintaining that mortgage. For highly indebted governments there is a saving in terms of debt service payments. But there is no doubt about it: it does mean that it raises the purchase price of homes.

Some would say that part of the answer would be to cap particularly retail interest rates charged by banks. Do you see that as part of the answer? This is a long-running debate here. Even though the ECB rate is quite low, when you look across Europe, the mortgage lending rates in Ireland are higher. The ECB has provided a legal opinion on the draft law, and it highlights, in line with the Central Bank of Ireland analysis, that a policy that caps the interest rate runs the risk of having an unintended effect, which is that it will deter entry. The Irish banking system is quite concentrated. Many people would like to see more banks enter to compete and, through competition, lower the rates. If you have a legal approach, where there is a legal regulation capping the interest rate, then the incentive for foreign lenders to come in is less. We have this long-running debate about the contribution of the quite high default risk in Ireland being built into those higher rates. I understand the intent: trying to make housing more affordable is a big issue. But personally, and in terms of the official advice of the ECB, we think capping interest rates is not the advisable way to go. You don’t even see a role for it, say, if you were to consider the housing situation to be an emergency scenario; that it would be a temporary measure given to the central bank? Well, again let me come back to the basics here.
This unusual situation has precedent, for example, in Japan, where inflation expectations have remained stable, while inflation itself has lagged for a prolonged period. Of course, there is a risk, too, that inflation expectations themselves could fall–indeed, I would note that longer-dated TIPS break-evens have recently dropped to the lower end of their post-crisis range. Conclusion As I think about the process of normalizing policy, I conclude that today’s risk-management calculus says we should err on the side of patience in removing highly accommodative policy. We need to solidify our confidence that our ultimate exit from the ZLB will occur smoothly – and that our escape can be sustained. A corollary to this conclusion is that we should not shy away from policy prescriptions that imply forecasts of inflation that moderately overshoot our 2 percent target for a limited time. Such a policy strategy more properly balances expected costs and benefits. And it would leave me with much more confidence that inflation will not stall out below target once we start raising rates. I agree with Atlanta Fed President Dennis Lockhart in thinking that we ought to be “whites of their eyes” inflation fighters. 3 The last thing we want to do is regress back into the ZLB. Indeed, such a relapse would be a sign there was something else going on that was preventing the economy from being as vibrant as we thought possible. To summarize, I am very uncomfortable with calls to raise our policy rate sooner than later.

I favor delaying liftoff until I am more certain that we have sufficient momentum in place toward our policy goals. And I think we should plan for our path of policy rate increases to be shallow in order to be sure that the economy’s momentum is sustainable in the presence of less accommodative financial conditions. I look forward to the day when we can return to business-as-usual monetary policy, but that time has not yet arrived. 3  6  Lockhart (2014). BIS central bankers’ speeches  References Federal Open Market Committee, 2014, Summary of Economic Projections(external-pdf), Washington, DC, September 17. Kocherlakota, Narayana, 2013, “A time of testing,” speech, St. Paul Chamber of Commerce, St. Paul, MN, November 12. Lockhart, Dennis, 2014, “Thoughts on liftoff,” speech, Global Interdependence Center, Sixth Annual Rocky Mountain Economic Summit, Jackson Hole, WY, July 11. BIS central bankers’ speeches  7
I would be equally intolerant of misses relative to 2 percent in both directions, above or below, with my intolerance growing the further we deviated from our 2 percent objective. We will almost certainly never be precisely at our 2 percent objective for any length of time given all the forces – many of which are not under our control – that influence actual inflation outcomes over a business cycle. Thus, with a neutral monetary policy, my goal would be to spend about the same amount of time slightly above as slightly below our 2 percent objective. Turning now to U.S. monetary policy, why did I favor raising the federal funds rate target last month? Basically, my assessment was that our conditions for lift-off had been met. Recall, these two conditions were: 1) further improvement in the labor market that we anticipated would be sustained in 2016, and 2) greater confidence that inflation would begin to move back towards our 2 percent inflation objective over the medium term. The timing of policy normalization involves a balancing of risks. I don’t disagree with our critics that there were risks from lifting off in December versus waiting a little longer. First, the economy might turn out to be more fragile than we anticipate, or economic shocks could push the economy off-course relative to our expectations. In other words, our economic projections might be too optimistic.

Looking at the post-war period, whenever the unemployment rate has increased by more than 0.3 to 0.4 percentage points, the economy has always ended up in a full-blown recession with the unemployment rate rising by at least 1.9 percentage points. This is an outcome to avoid, especially given that in an economic downturn the last to be hired are often the first to be fired. The goal is the maximum sustainable level of employment – in other words, the most job opportunities for the most people over the long run. Some of you may be wondering whether the risk of a recession isn’t already quite high? And, if so, doesn’t this imply a need for special care in adjusting monetary policy? After all, the current economic expansion is more than six years old – a bit long in the tooth by post-war standards. Even so, recession risk did not play a major factor in my thinking. Economic expansions don’t simply die of old age. They primarily end either because monetary policy is kept too loose for too long, thereby necessitating a subsequent sharp tightening in monetary policy to prevent a significant inflation overshoot, or because some large adverse shock hits the economy that the central bank cannot easily offset. Mitigating the first risk of being forced to choke off the expansion argues for getting started with policy normalization now rather than holding off. With respect to the second risk of unanticipated shocks, this is obviously very difficult for the central bank to insulate the economy from.
This, in turn, introduces uncertainty over the behaviour of the incomes of these agents, which means they tend to postpone their consumption and investment decisions. The sharp decline in the consumer confidence indicator in March (the largest decrease in the historic time series, which goes back to July 1986) gives an indication of the magnitude of these effects. This fall suggests that the increase in uncertainty may have begun to adversely affect household spending decisions. The results of the latest edition of the Banco de España Business Activity Survey (EBAE) suggest that the war has begun to worsen the expectations of non-financial corporations regarding their turnover and also the duration of the global supply chain problems, which is now estimated to be longer. Third, the invasion of Ukraine will affect the Spanish economy through the trade channel, the direct impact of which is assumed to be moderate, as bilateral trade flows with the countries at war are relatively limited. In 2019, the last year before the pandemic, Spanish goods exports to Russia and Ukraine represented only 1.6% and 0.3% of the total,  respectively. Russian tourism, meanwhile, accounted for 2.2% of total spending by foreign tourists. However, the indirect effects on Spanish trade flows may be significant. The war will particularly affect central and eastern European countries, which are more exposed to Ukraine and Russia, and, therefore, the growth of Spanish export markets.

26.04.2022  The case for an incomes agreement in Spain? * 50th anniversary of the Faculty of Economics and Business Studies Universidad de Sevilla Pablo Hernández de Cos Governor  *hEnglish translation of the original speech in Spanish. Good morning, I should like to take this opportunity to share with you some reflections on the current economic environment, which, more than two years after the outbreak of the pandemic, is tragically marked by the invasion of Ukraine. The repercussions of this war, albeit difficult to predict, can be expected to be global and extremely severe, for both the geopolitical and the economic situation. In the short term, its adverse effects on activity and inflation will come through a number of channels, the impact of which will be more acute in Europe, given its greater interconnectedness with the countries at war. I will first describe the main features of the current economic situation, which is affected by the consequences of the war. Subsequently, I shall analyse the essential features of the economic policy response to the challenges of the war in Ukraine and its repercussions. In particular, I would like to stress the need for a broad incomes agreement for the coming years in Spain, the possible content of which I will detail later on. This need is justified by the initial description of the current situation and outlook for the Spanish economy, in particular as regards inflation.
Last, but not least, the CBC launched an external evaluation of its performance in the two central areas of monetary policy and financial stability by convening a panel of reputed academics and central bankers, some of whom are here today. We have committed to present the report to the Chilean Senate next September and to take the panel´s recommendations as a guidance to further strengthening reliability, adaptability and transparency of our work in the years to come. Page 7 of 8  Central Bank of Chile July 2019  Closing remarks and acknowledgements In sum, I underscore the importance of public trust as foundation of modern monetary policy and for the legitimacy of independent central banks in performing their broader mandates. This is ingrained in the agenda of our Annual Conference this year: new challenges to central bank independence, the management of central bank credibility, and the designing of the best communication strategies for an effective monetary policy. I would like to thank Ricardo Reis for being the external organizer of this Conference, as well as to Ernesto Pastén and Diego Saravia for being our local counterparts. I also thank all presenters and contributors to our program and the conference volume that will be published thereafter. I also thank to our friends and colleagues from the International Monetary Fund for being here and for organizing the conference further down the week.

In sum, after recognizing credibility as the main asset of a central bank, especially an independent one, we can conclude that drawing on parallel work on trust in institutions may provide a useful Page 6 of 8  Central Bank of Chile July 2019  framework to assess the current situation and to guide action to address existing gaps and vulnerabilities. Trust in the Central Bank of Chile The experience of the Central Bank of Chile can illustrate some of the ideas above. The IMF study on the importance of credibility for monetary policy underscored anchoring of inflation expectations in Chile as key to the effectiveness of its monetary policy and macro resilience in the face of external shocks. Deviations of long-term forecasts of headline inflation from target have been less than 0.1%–being the lowest for a sample of emerging countries, and even lower a benchmark group of advanced economies. This is remarkable considering that inflation volatility in Chile has not been particularly low relative to other emerging economies. Yet we do not see credibility as an immutable attribute, given the dynamism of trust in institutions in the public opinion and market perceptions. We believe that a positive past record helps, but trust can deteriorate in a number of ways, some of them pretty fast, in the face of new standards and developments. Therefore, trust needs to be protected and enhanced in a systematic way with different stakeholders in the different dimensions of activity of the Bank.
If the world’s banks had had larger and better buffers, both of capital and of liquidity, the crisis would hardly have been as serious as it was. But the question is whether the new regulations are sufficient. Even if Basel III is a major step forward, we must not forget that it represents global minimum regulations that are the result of compromises by representatives of 27 countries in which the structures of the financial markets differ considerably. In addition, these regulations will not reach their full effect until 2019. In my speech today, I have shed light on a number of risks that are specific to the Swedish economy, not least the Swedish banks’ dependence on funding from the international capital markets and the households’ increased borrowing. Against this background, I believe that there may be good reasons to consider whether we, the Swedish authorities, ought to adopt extra measures or proceed more quickly than planned in Basel III. There are a number of measures that I believe are worthy of further discussion. One is to bring forward the introduction of the new liquidity standards, a second would be to add  9  The Macroeconomic Assessment Group (MAG) has been assigned to estimate the effects on the interest rate margins, lending volume and GDP during the implementation of the new regulations both as regards capital and liquidity. The MAG report is called “Assessing the macroeconomic impact of the transition to stronger capital and liquidity requirements”, and is available at www.bis.org.

This has enabled the banks to signal to the markets that they will pay off their debts on a certain date even if formally there is no specific date on which the securities fall due. Basel III thus entails a considerable tightening up of the minimum capital requirements. I think this is excellent. I have long advocated clearer and stricter regulations. As equity is expensive in relation to other sources of funding, tighter capital requirements will reduce the banks’ appetite for risk and at the same time increase their ability to manage losses. More and better capital will thus not only soften the effects of future crises but also reduce the likelihood of them occurring at all. A clear and uniform level for Core Tier 1 capital will also reduce the scope for arbitrary interpretations. This in turn will reduce the scope for creating a non-level playing field, which should benefit global competition. BIS central bankers’ speeches  5  Counter-cyclical capital buffer In addition to the new minimum requirements, Basel III comprises a counter-cyclical capital buffer of a maximum of 2.5 percentage points of Core Tier 1 capital. 6 The buffer acts as a dynamic capital requirement, which means that it varies over the economic cycle. The idea is that the banks should build up capital in good times that they can use to deal with losses in bad times.