samchain/econo-pairs-v1 huggingface dataset:
Süreyya Serdengeçti: Financial stability and implications of Basel II Opening speech by Mr Süreyya Serdengeçti, Governor of the Central Bank of the Republic of Turkey, at the conference on “Financial stability and implications of Basel II”, Istanbul, 16 May 2005. *  *  *  Financial stability Minister, Governors, Academicians, Guests etc., I would like to welcome you to Istanbul today and thank you all for your participation in this conference. It is an honor for me to host such distinguished speakers and participants in Istanbul. One of the features of the world economy back in the 90’s was the financial liberalization of economies. The ambitious macroeconomic policies of many countries aiming at liberalizing capital accounts, started in fact with developed countries in the late 70’s and spread to developing countries in the late 80’s and 90’s. Another feature of the world economy in the 90’s was the acceleration of capital movements around the world, which I would say is also an outcome of the financial liberalization policies. The comprehensive technological progress in areas of information, communication and computing also highly promoted this active movement of capital across national borders. This impressive change in the global economic environment since the 80s has resulted in important changes in global financial markets. As the figures indicated, during this period, the global financial sector in general and the banking sector in particular developed much more than the real sector did. New financial instruments that were designed for firms’ financing needs provided new opportunities for companies.

In fact, central banks’ role in times of financial instability is not a new issue for the economic literature. The term “lender of last resort” originated in the writing of Sir Francis Baring in 1797. In his book, “Observations on the Establishment of the Bank of England”, Sir Baring referred to the Bank of  3  Aninat, Eduardo. (2003). Foreword. Challenges to Central Banking from Globalized Financial Systems. IMF. 4  Schuerman T. (2004). Why Were Banks Better off in the 2001 Recession? Current Issues in Economics and Finance. FEDNY. Vol. 10. No: 1. 2  BIS Review 38/2005  England as “the dernier resort” from which all banks could obtain liquidity in times of crises. But the concept of lender of last resort had been described and used in a more comprehensive manner by both Henry Thornton in 1802 and Walter Bagehot in 1873. Distinguished Guests, I will add a point to the discussion that the benefit of having a strong financial system in an economy eliminates the ground for conflict in policies between financial stability and price stability. Since a strong financial system increases the efficiency of monetary policy on one side, it also provides elasticity for the economy to overcome external shocks easier on another. On the other hand, it is almost impossible to attain financial stability in the long run without maintaining price stability. Furthermore, price stability attained through credible monetary policies is an advantage in times of increasing uncertainty in the financial system and financial imbalances.
Mervyn King: Monetary policy developments Extract from a speech by Mr Mervyn King, Governor of the Bank of England, to the Bank of Israel, Jerusalem, 31 March 2008. *  *  *  Central banks, along with the rest of the financial world, have changed markedly over the past 20 years. More open and competitive financial systems have developed hand in hand with a recognition that the prime responsibility of central banks is to maintain price stability. To help them achieve that, more and more central banks around the world have been made independent of Government. The nature and extent of that independence varies from country to country, but in essence it is the freedom of either an individual Governor or a Monetary Policy Committee within the central bank to set interest rates free from political interference. That policy independence needs to be backed by organisational and financial independence which, in the case of the Bank of England, is entrusted to a Court of Directors of the Bank which decides on the budget and other relevant financial matters. For those central banks with a long tradition of independence, their pre-existing frameworks of monetary policy have proved sufficient to enable them to bring inflation down and contribute to what has become known as the Great Stability. But in most of the countries whose central banks have been made independent more recently, policy has been based on an explicit inflation target. Inflation targeting has been the framework of choice for the past 20 years.

It most clearly represents an explicit commitment by the central bank to the objective of price stability. In the United Kingdom, that commitment is in the form of a target for inflation that is defined as 2% a year, as measured by the consumer price index. In the medium term, a central bank can affect only monetary values – the price level. It cannot change the amount of goods and services an economy is able to produce. Over time, there is no trade off between inflation and output, as recent UK history illustrates. Between 1950 and 1997, UK inflation averaged nearly 6%. In contrast, since 1997, inflation has been close to target and much more stable, but annual output growth has averaged a little above its post-World War II average of 2.5%. In the medium term, low and stable inflation does not imply lower output. Moreover, even in the short term, meeting an inflation target is in many cases fully consistent with maintaining steady growth of activity. If demand falls below the supply capacity of the economy, inflation will tend to fall. If demand rises too quickly, putting pressure on capacity, inflation will tend to rise. Inflation-targeting central banks can, however, face an apparent dilemma when inflation moves away from the target not as the result of fluctuations in demand, but in response to commodity price changes. Following increases in gas and electricity bills, consumer price inflation in the UK has risen.
Growth in many advanced economies is now gradually picking up. The US and UK economies in particular are on the road to recovery. But the picture is mixed and in some countries – especially in Europe – economic growth is fragile. The road to recovery may seem long. With several years of low interest rates, investors’ search for yield has become demanding. Demand for risky assets is increasing and risk premiums have reverted to the low levels observed in the years preceding the financial crisis. Low interest rates, reduced risk premiums and higher asset prices are providing easier access to capital for businesses and banks. Households are also benefitting from the low interest rate level. But the combination of cheap and ample liquidity may also be a source of new asset price bubbles. This may pose a challenge as funding costs gradually normalise. Against this background, central banks, researchers and international organisations are now discussing the interaction between monetary policy and financial stability. The basis of the discussion is the lessons learned from the financial crisis. Experience has shown how costly a financial crisis can be. Low and stable inflation was not sufficient to prevent imbalances in the financial system. It is now generally agreed that monetary policy must take into consideration the risk of a build-up of financial imbalances. As the financial crisis clearly demonstrated, the financial system cannot be left to its own devices. The regulatory framework for financial institutions has therefore been changed.

But, we will conduct purchases only to the extent this is necessary and proportionate to fulfil our mandate. In short, the PEPP is a targeted, proportionate and temporary measure in response to the crisis triggered by the COVID-19 pandemic. The legality of the PEPP is ensured for three reasons: First, and as I mentioned earlier, the PEPP falls within the ECB’s mandate in that it pursues monetary policy objectives. As in the Gauweiler case, the measures designed to preserve the monetary policy transmission mechanism may be regarded as seeking to maintain price stability. Let me add that the argument invoking the transmission mechanism cannot be used to ease credit risk premia which are due to the idiosyncratic economic and financial situation of a country. Second, in accordance with the PEPP Decision,“Purchases shall be carried out…to the extent deemed necessary and proportionate”.3 The proportionality assessment of the PEPP must be supported by economic analysis which shows that the measure: (i) is suitable for attaining the monetary policy objective in current and future environments; (ii) does not go beyond what is necessary in order to achieve this objective; and (iii) weighs up the various interests involved to prevent any disadvantages which are manifestly disproportionate to the objectives set.
There is also the fact that in different markets, prices are high by historical standards, which could see abrupt reversals if global financial conditions tighten more than foreseen. Inflation in the developed world continues to draw our attention, as it has remained low despite stronger activity and higher energy prices. In addition, elements of uncertainty persist, in fiscal matters and commercial policy in the United States and political issues in Europe, compounded by growing geopolitical risks in Asia and the Middle East. In any case, we cannot rule out that, given the results of recent quarters, greater global growth may be observed, which could boost trade and trigger a more significant increase in global investment. In the emerging world, like in recent years, the main source of risk remains the Chinese economy. On one hand, it still needs to resolve many imbalances in several crucial markets. 6  In addition, the nation recently began a monetary adjustment that is not free of risks, and there is uncertainty about the direction that the reform agenda will take after the Congress of the Chinese Communist Party and its impact on the economy. In any case, its growth deceleration has been somewhat milder than anticipated, so maybe its dynamism will hold longer. The baseline scenario assumes that the copper price will decline gradually in the coming quarters. However, we do not rule out a sharper reduction because part of the recent increase may be related to financial phenomena.

In short, good governance works and we should all simply try it! In conclusion therefore, I would like on behalf of Bank of Zambia and indeed on my own behalf to commend the Zambian commercial banks, international banks and development finance institutions that have participated in this syndication. This is not only testimony of their confidence in Celtel Zambia plc but confidence in the Zambian people and the economy as well. I thank you. 2  BIS Review 126/2006
Many countries came under the pressure to adjust their debt levels in line with the economic fundamentals that resulted in deleveraging process by households and corporates. The larger was the leverage build up pre crisis, the larger was deleveraging in its aftermath, in general. This particularly holds for the Baltics where private debt downscaled by 42 p.p. of GDP in 2017 from the peak in 2009. In CESEE region, deleveraging was most evident in Hungary and Slovenia, followed by Bulgaria as the most heavily indebted country pre-crisis. Yet, not all higher-debt countries managed to reduce their debt levels. Croatia, whose debt level rose substantially prior to the crisis, has only marginally deleveraged afterwards. There were also countries like Slovakia, North Macedonia, Poland and the Czech Republic, where the debt continued to rise further, yet, mostly from lower levels in the peak of the crisis. 5  Chart 5. Change in private debt to GDP ratios, 2009-2017  Chart 6. Private debt structure, 2017 (in percent of GDP)  (in percentage points)  *Region refers to all the countries in the sample from CEE, SEE and the Baltics. Source: IMF Global debt database. Cross-sector analysis reveals that the pre-crisis increase in private leverage was almost equally driven by corporate and household sector, as the context was conducive for rising debt across the board. Corporate debt on average rose by 25 p.p. of GDP in 2009 compared to 2000, but marked cross – country differences were visible.

I must also mention that the Alternative Reference Rates Committee (ARRC) has done outstanding work in preparing for the move off LIBOR and, equally important, positioning us with a safe and strong foundation for the post-LIBOR world.2 And even as I acknowledge all the progress that has been achieved, it's important to remind everyone that there is still a lot to be done to move off LIBOR by the end of the year. This morning I'm going to talk about key principles that we should keep in mind as we build a successful postLIBOR world. Before I continue, let me give the usual disclaimer that the views I express are mine alone and do not necessarily reflect those of the Federal Open Market Committee or anyone else in the Federal Reserve System. Measure Twice, Cut Once I want to take you back to only a few years ago, when I was in junior high school. At that time, ticktock was the sound coming from the clock on the wall, and a mobile device was a transistor radio. I was a young student—not of economics, but woodworking. With tools and planks in hand, I learned the number one rule of that craft: “measure twice, cut once.” By continuing our site, agree yet to our of aUse and Privacy Statement.But Youas canwe learn more about we use cookies by Fast forward to touse today, andyou I have to Terms pursue career in carpentry. prepare for ahow post-LIBOR world, the same adage runs through my mind.
The lessons of Northern Rock were dramatically underscored a year later by the failure of RBS and Lloyds. Faced again with the choice of insolvency or taxpayer intervention, the government was forced to inject £ into the two banks. The banks were not put into insolvency and it proved impossible fully to write down the existing shareholders or impose losses on the bond holders. The first lesson from this was that constructive ambiguity simply didn’t work. The market had always suspected this to be the case. The implicit subsidy enjoyed by the largest banks before the crisis illustrated the market’s assumption that the state would always intervene to prevent their bankruptcy. And the market was generally proved right. The exception that proved the rule was the Fed’s decision to let Lehman Brothers enter insolvency. The fallout globally from Lehmans demonstrated dramatically, why, for large banks that perform critical functions, insolvency is not a viable option. The second lesson, which follows from the first, was that if we want, when a bank fails, to have better options than a disruptive insolvency or a taxpayer bailout, those options have to be put in place well beforehand. Doing so comes at a cost to banks and to public authorities. But if at the point of failure, there are no better options than were available in 2008, moral hazard cannot be avoided.

Unlike the traditional financial supervision – microprudential policy – which focuses on the risks in individual institutions, the focus of macroprudential policy is on risks in the financial system as a whole. The European Systemic Risk Board, ESRB, began its operations in 2011, with the task of identifying threats to the financial stability of the EU. However, the ESRB has no binding instruments at its disposal; it can instead issue warnings and recommendations. For instance, in January 2012 the ESRB published a recommendation to EU countries regarding national mandates for macroprudential policy. This stated that responsibility for macroprudential policy should rest with an institution or council and that this body should have control over appropriate tools to attain its objectives. The way the framework for macroprudential policy has been set up differs somewhat from country to country. As you know, we have had such a framework in Sweden now for a year, with Finansinspektionen (the Swedish Financial Supervisory Authority) having the main responsibility for the macroprudential policy tools. The new framework also entailed establishing a forum for representatives of the Government, Finansinspektionen, the Swedish National Debt Office and the Riksbank to meet and discuss questions of financial stability, what is known as the Financial Stability Council. To some extent, macroprudential policy involves taking a backward step towards a greater element of regulation in the credit market. As we see here, history has a tendency to repeat itself.
Solvency II will introduce an enhanced system of governance standards – promoting the embedding of a strong risk culture, demonstrable within the day-to-day operations of insurers. The new regulatory regime will not look to fix firms’ business models to be identical, nor to restrict the level of innovation across the market. Rather, Solvency II seeks to promote a better understanding of the risks being taken, allowing insurers to take informed decisions. 2  BIS central bankers’ speeches  It is for firms’ management to decide upon their chosen risk appetite and the precise details of their risk models. What matters to the PRA is that firms hold capital commensurate to such risk exposures, in line with the Directive. The introduction of the Prudent Person Principle is an example of how risk management and strategic decision making will be owned by the insurer and its management. The Prudent Person Principle will require investment decisions to be made as if being decided upon by the objective “prudent man” and represents a shift from quantitative to qualitative rules. Gone are the old investment limits for asset classes. So insurers will have much more freedom in their investment choices. The PRA does not and will not promote one asset class over another.

The tight monetary policy stance coupled with the macroprudential measures continues to improve the core inflation trend (Chart 11). As of the end of 2014, the core inflation trend has receded to 5 percent. The leading recent development, which affected inflation dynamics at most, has been the plunge in oil prices (Chart 12). Amid this decline, annual inflation in the energy group fell remarkably and stood below zero at the year-end. Favorable cost developments driven by plummeting oil prices also contribute to the improvement in the core inflation trend. Briefly, the last quarter of the year was marked by evident effects of the falling oil prices on inflation. A remarkable improvement was witnessed in inflation expectations after a long period and the positive effect of oil prices on the headline inflation spilled over into many subgroups, chiefly the services group. Besides the international price developments that contribute to falling inflation, we envisage that the gradual elimination of cumulative exchange rate effects, the decline in food inflation to past years’ averages and our tight monetary policy stance will support the disinflation process in the upcoming period. Against this background, we project that consumer inflation will register a notable improvement particularly in the first quarter, and inflation will recede to levels consistent with the target in mid-2015. Now, I would like to give a brief account of developments in economic activity and the shortterm outlook on which the inflation forecasts are based.
LTCM – which was gigantic – had at most a capital of around SEK 70 billion. This can be compared, for instance, with the state pension funds in Sweden, which each manage capital amounting to around SEK 150 million. The hedge fund market has also developed rapidly in Sweden. Brummer & Partners were first in Sweden, with their hedge fund Zenit, in summer 1996.Nektar, which operates in the fixed income and foreign exchange market, and originally followed Jones’ ideas completely, came soon after. Since then around 60 more funds have been established and the capital managed has gradually increased. Today, hedge funds account for a good six per cent of the total capital managed in Swedish-registered funds. This percentage has more than doubled over the past ten years and now corresponds to just 2 over SEK 85 billion. The size of the Swedish hedge funds varies substantially. The largest Swedish hedge fund had at the end of June 2005 a market value of a good SEK 26 billion, which is a considerable sum even in an international perspective. The smallest fund at the same time had a negative market value of SEK 5 million. The median fund had a market value of around SEK 225 million. [Figure 1] The hedge funds’ earnings over the past ten years may not appear that fantastic at first glance. One of the largest hedge fund indices, Credit Suisse/Tremont has over the past twelve years had an average increase in value of around 8 per cent, similar to the S&P 500.

Let me take this opportunity to congratulate Governor Gjedrem for the achievements of the Bank under this leadership during his twelve year terms in office. My remarks today will focus on the role of central banks from the perspective of emerging economies and more specifically in the context of central banking in Asia as we confront the challenges in this rapidly changing global economic and financial environment. Central bank mandates While there is no unique blueprint for the design of the institutional arrangements for a central bank, of importance is that it needs to be relevant to our own circumstances. But of importance is that there is clarity on the mandate, the governance framework and the areas of accountability of the central bank. And that needs to be supported by the empowering legislation to ensure that the central bank has at its disposal the capabilities to deliver the mandate. Central banks in emerging economies generally have a broader mandate beyond the traditional mandates of monetary and financial stability. Even within these traditional mandates, the role of central banks have varied considerably. In the mandate of monetary stability, it has ranged from having the narrow mandate of price stability to the mandate where price stability is the primary role of the central bank while due consideration is also given to economic and employment objectives. While for some the mandates are clearly hierarchical, for others, the multiple mandates involve assessments of the trade-offs.