samchain/econo-pairs-v1 huggingface dataset:
On the banking, as opposed to trading book side of the assets of major banks, the search for yield often took the form of loans which included too much equity-like  2  BIS central bankers’ speeches  risk because the equity stakes of the owners of the companies were too small. This was not equities themselves, but rather equity components embedded in loans. Commercial property lending in the UK is a good example, as it was in Ireland. Commercial property prices in the UK have over time tended to vary more than, say, prime residential house prices and that points to a need for larger equity-like component of funding to absorb losses from that variability. The search for yield however meant that banks were more happy to lend against equity risk of this sort. Since the crisis in the UK we have seen a shift in commercial property finance towards a larger share coming from funds which explicitly take this equity-like risk. This strikes me as a good thing in terms of reducing the exposure to such risks of banks, whose liabilities tend more to be in the form of deposits. I sometimes hear comments that banks are losing the race to new innovations such as peerto-peer lending for the supply of what I would describe as finance with a heavy equity component.

Let me stop the story of the past for a moment and draw out one message: when we hear people say things like, “credit isn’t back to pre-crisis growth rates”, “there is a gap in the stock of credit to the economy relative to the pre-crisis trend”, “the level of national output is this much lower than it would have been had the crisis not intervened”, “banks’ so-called market making in financial assets is much less than it was immediately pre-crisis”, just pause and consider that all of these statements imply that the pre-crisis years were sustainable. They were not. Let’s turn to the balance sheet of banks in a little more detail, starting with the liabilities side. In this respect, banks are different from other firms because they provide deposit contracts. A deposit is a very particular form of debt contract. For all of us the essential feature of a deposit contract is simple – we put our money (our asset) on deposit at a bank, and we expect all of it back, with whatever rate of return is agreed, and we expect to have access to it, in part or whole, in line with the terms of the contract. Some deposit contracts provide for more ready availability than others, and this affects the return on the deposit. Of course, there is also insurance on a deposit contract up to a well publicised level. Let’s contrast that with non-deposit debt (bonds) and equity contracts.
If they are not satisfied with the response received, they may then apply to the claims departments of the financial supervisors – the Banco de España, the National Securities Market Commission (CNMV) or the Directorate General of Insurance and Pension Funds (DGSFP), according to the subject-matter of the claim – which will issue a non-binding opinion. This system has several problems. On the one hand, it is not sufficiently flexible to provide customers improperly treated with due satisfaction in a reasonable period of time. And on the other, there is no arrangement in place for a third party to issue an opinion that is binding on banks if they are unable to reach an agreement with their customers. Accordingly, consumers are all too often obliged to go to the courts to obtain due reparation. Certain regulations recently passed in Spain, such as Law 10/2014 of 26 June 2014 on the regulation, supervision and solvency of credit institutions, and Law 5/2015 of 27 April 2015 on the promotion of business financing, include provisions designed to foment improvements in the existing institutional arrangements for customer protection. In any event, irrespective of any present or future legislative changes in this respect, I believe that banks have the capacity to drive improvements in the short term. For the moment, they appear to be readier to comply with the non-binding opinions issued by the Banco de España’s claims system.

Thus, while each policy must act on the basis of its individual objectives, the consequences each has for the other should be taken into account. Macroprudential policy in practice identification and monitoring of systemic risk Timely activation of macroprudential tools calls for indicators that enable the risks arising in the financial system to be monitored and which, in parallel, allow the use of the instruments and their effects to be calibrated. 12  In particular, these indicators should be capable of capturing the financial cycle. The literature has identified various indicators that can play this role. For example, Terrones et al. (2011) consider three main variables on the basis of which these indicators can be calculated: credit to the non-financial private sector, house prices and stock market prices. Thus, in the case of the CCyB, current regulations give a special role to the credit-to-GDP gap (also known as the “Basel gap”). This indicator measures the difference between financing received by the non-financial private sector as a percentage of GDP and its longrun equilibrium trend, estimated using statistical procedures. Positive credit-to-GDP gap values would indicate that we are in the expansionary phase of the financial cycle, since the volume of credit, once the economy’s level of income is taken into account, stands above its equilibrium level. Consequently, activating the CCyB or increasing it might be considered. Negative values would denote a contractionary phase in the financial cycle, whereby the CCyB should be deactivated under normal conditions.
In reality, the problem is further complicated by the fact that inflation must be stabilised. Here I assumed for the sake of simplicity that inflation would entirely follow the business cycle. As the credit cycle and the business cycle develop in different ways, a change in the repo rate intended to affect one cycle will sometimes have an undesired effect on the other. Although a stable credit cycle – one that does not “go wrong” – is ultimately necessary for a stable business cycle, in the short term it may be necessary to make a trade-off between them. This is not without its problems. An ambition to hold the credit cycle in balance may require a slightly higher policy rate. This would also dampen the economic cycle and inflation could undershoot the target. This can be regarded as normal and acceptable for a period of time. But if the period becomes prolonged, it may sooner or later become difficult to gain understanding and support for this policy – despite its purpose being to prevent a much worse development further ahead. This could be a dilemma. 8  One of many examples is Petterson and Hållö (2013). 9  It is not entirely clear how inflation will develop in connection with a recession. One possibility is that the krona would weaken substantially and that imported products would thereby become so much more expensive that one had a higher inflation rate in the short term.

When it became apparent that impaired loans were in circulation but that no one really knew where they were and to what extent, confidence in the banks disappeared. The market participants stopped lending to the banks. The banks also stopped lending to each other and when it also became impossible to sell previously liquid assets or to use them as collateral for loans the liquidity crisis had definitely arrived. One lesson that we have learned from this is how quickly liquid markets can become illiquid. We also know that the participants and the authorities underestimated how seriously the markets would be affected by the crisis. But, when the price of an asset falls it is no longer possible to borrow as much money on this asset. Participants are then forced to sell the asset to acquire liquidity. If many small – or a few large – participants sell at the same time then prices fall even further. From the point of view of an individual participant it is rational to decide to lend less or to sell the asset. However, the collapse in market prices that is a consequence of these decisions affects everybody. The impact this has on the market is, in other words, a negative external effect. Selling assets at “bargain-basement” prices should normally attract buyers. But exactly the opposite happened. There was uncertainty about the actual value of some complex and untransparent assets, which explains why the buyers disappeared.
Global adjustments are characterised by synchronous, large capital inflows in a great number of countries, followed by their relative reduction for the entire group. Usually, the number of countries facing large capital inflows simultaneously is relatively small. However, from time to time, simultaneous episodes of massive capital inflows occur in a relatively great deal of countries. Over the past few years, very many countries, Romania included, were faced with the capital inflows problem. For this reason, I will refer to synchronous, large capital inflows. As recently pointed out by Reinhart and Reinhart (2008), there may be a relationship between these synchronous, large capital inflows and external sovereign defaults, currency crashes, inflation crises and banking crises. The authors defined the crises for each of the  BIS Review 5/2010  1  above-mentioned components and constructed specific probabilities of crisis emergence for the 1960–2007 period in 66 countries. The probabilities were defined both conditional and unconditional on the episodes of heavy capital inflows. The final outcome is that, for low- or middle-income countries, the conditional probabilities for a crisis to emerge are significantly higher than unconditional ones. In other words, the number of crises is higher around the episodes of large capital inflows. One may conclude, in practice, the ensuing magnitude of adjustments and financings is different from that seen in quasi-individual episodes of substantial capital inflows for a given period, followed by their reduction.

Foreign demand continued to contribute to the expansion of the economy in the first quarter of 2012, albeit to a markedly lower extent. The sluggish increase in exports remains a concern as long as it affects the performance of the economy during 2012. It also provides evidence for Albania’s strong reliance on certain geographical markets or products. The analysis of monetary data suggests that the performance of monetary indicators was in line with the developments in the real economy. Money supply maintained the growth rate of end-2011, recording in March an annualized growth of 8.8%. Our analyses suggest that its growth is in line with the demand of the economy for real money, signalling contained monetary inflationary pressures in the medium run. Lending to the private sector recorded an annual growth of 9.0% in March. Its performance, particularly in the recent months, was determined by the low private sector demand for credit and the cautious bank lending behaviour. Financial markets were liquid and stable. Interbank market rates dropped significantly in April and the trading volume in this market increased. The pass-through of easing monetary policy signals persisted in the lek deposit market as well, as reflected by the lower interest rates. Government security yields in the primary market remained at similar levels to the previous month. Their increase in the first quarter of 2012 reflects the developments in supply and demand-side structural factors, hence signalling no added inflation premiums.
BIS Review 37/1998  ˝

Plus high investment levels that will help us sustain this growth trend into the future. Still, there are big challenges ahead. Risks are present and the policies we need to adopt to confront them are not always evident. So it is essential that we keep the road clear and take good care of that which has taken so much effort to achieve. Let me say again what I said at the beginning: self complacency is one of the worst mistakes the entities responsible for our country’s economic policies can make. Thus we must pay close attention to events. As a central bank our focus is on ensuring the stability of prices and the financial system. This is the best contribution we can make to the well-being of our population. Thank you. 6  BIS central bankers’ speeches  Figure 1 GDP and demand (annual change, percent) 18  18  12  12  6  6  0  0  -6  -6  -12  -12 09  10 GDP  11  GDP minus natural resources  12 Domestic demand  Source: Central Bank of Chile.
Saudi banks have benefited greatly from the Universal Banking Model permitted by SAMA and offer a range of financial services including investment management, mutual funds, brokerage, and other services. During the past decade, the volume of business of Saudi banks has grown at a phenomenal rate. In the ten years period 1996-2005, the banks’ assets grew by 213 per cent, deposits by 224 per cent and capital and reserves by 248 per cent. During this period the profits for the banking system showed strong growth and the return on equity averaged well over 20% and return on assets was over 2%. The strength of Saudi banks is further underlined by their average risk-based capital adequacy, which has been high according to Basel capital adequacy standard, and averaged 18% during the past decade. If we review our long history of foreign investment in the financial sector since early 1950, a number of foreign banks were granted licenses to open branches in the Kingdom. In 1976, there were 12 banks in the Kingdom including 10 foreign banks. To Saudize the banking system and benefit from foreign expertise of the banks operating in the Kingdom, the government invited foreign banks to convert their branches into Saudi-foreign joint stock companies with an equity share of 40% for the foreign partner. Technical Management Agreements were also entered into to manage the new banks by the foreign partners.

For this reason, the SNB welcomes the Federal Department of Finance’s decision to set up a commission of experts to draw up proposals on macroprudential oversight and to determine the associated institutional responsibilities. 1  SNB’s comment on the recommendations made by the business audit commission of the National Council and the Council of States. 2  IMF Country Report No. 11/115 within the framework of the Article IV Consultation of May 2011. BIS central bankers’ speeches  3
Harmonization of standards and codes to international best practice must be done. Hedging markets must be available for both currency risk and interest rate risk, and this may mean a rethink on capital controls. Perhaps a gradual step-by-step relaxation in needed. 2  BIS Review 28/2003  Transparency is also required both in price discovery and the management of both the macroeconomy and the individual corporates. The legal system must respect creditors’ rights, and for investment products to be available for sale across Asian countries, a uniform single passport of consumer production by the SEC’s must be made. Now comes the final question. What is the purpose of the Asian Bond Fund? You may recall that the Asian Bond Fund was announced on 2 June 2003 at US $ billion by 11 central banks in East Asia and Pacific countries. Initially it will invest in sovereign and quasi-sovereign bonds issued by Asian governments in the international markets. This by itself already sparked a keen interest in Asian bonds. I know of at least one Asian central bank that had not invested in Asian bonds before, other than in JGB’s, but has now started buying directly in addition to investment in the Asian Bond Fund. Thailand is now looking at doing this also. I am sure there will be more central banks both in Asia and outside looking at Asian bonds at the international level because of this initiative.

I am sure there will be very interesting and fruitful exchange of views and ideas on the major financial stability issues, including those that I have mentioned earlier. Once again, thank you all for being with us today. BIS central bankers’ speeches  1
The resolution authority could, in turn, better take into account certain strategies, and thereby accept a certain level of risk. A likely effect of recovery options or transfer tools is that the structure of the remaining group might become less complex and therefore carry less risk. Besides, the stance on waivers of internal requirements for entities located in the same Member State (or even in the same Banking Union) has proven overly conservative. We need pragmatism, and consistency between the SRB and the SSM: when an entity has been waived from capital requirements, or is simply not subject to capital requirements, the resolution authority could apply the same on MREL. Proportionality to risk could entail other changes, such as the calculation of banks’ contribution to the SRF. As of today, the size of institutions has an overwhelming importance in the determination of these contributions. This is more than questionable: size does matter in order to bring an institution under the scope of resolution, but size and risk are two different notions and they should be more clearly differentiated in technical implementation. In order to ensure the fairness of contributions, and greater adherence to the SRM overall, it is necessary to adapt formulae accordingly. Beyond fairness, penalising the largest banks or groups prevents the emergence of pan-European groups, which is one of the Banking Unions’ objectives. Here let us acknowledge that  Page 5 sur 5 we have collectively failed so far; we have a Banking Union without really crossborders European banks. This is a major weakness.

Finally, some efforts should be made  Page 3 sur 5 to harmonise the main features of national insolvency proceedings, such as creditors’ hierarchy, rather than creating parallel crisis management paths which would simply duplicate the existing resolution tools while triggering significant level playing field issues. Once these steps are taken, the probability of recourse to the Single Resolution Fund (SRF) could increase. However, while the initial objective was to reach 1% of the covered deposits, such a goal being evaluated at an amount of EUR 55 billion, this amount has been constantly revised, and the SRF represents today EUR 66 billion and will reach around EUR 80 billion next year. This sharp increase can be mechanically explained by the surge in deposits in the wake of the Covid crisis and “forced” savings. The fact remains that this very high amount has never been used so far: we cannot completely ignore this question. It can be discussed whether this amount is disproportionate compared with European banks’ level of risk. If the answer is yes, then we should contemplate introducing a ceiling in absolute terms – the level of which would have to be determined. We should also use the flexibility offered by the current regulation to alleviate the burden of the contributions for banks, so that irrevocable payments commitments can represent up to 30%. All these questions need to be examined. II.
People who lack good health or healthcare often struggle to participate fully in the economy. On top of that, social determinants of health—economic stability, housing, and education—can be barriers to employment and affect the kinds of jobs people get. Of course, we at the Federal Reserve are neither healthcare workers nor healthcare policymakers. But a major part of our core mission is to foster a strong economy and promote maximum employment. And to put it simply, we need healthy people to have a healthy economy and workforce. That’s why understanding the nexus of race, health, and the economy is central to achieving our goals. We are deeply committed to doing so, both in this series and beyond. The pandemic demonstrated just how acute many of the connections are between physical and economic health for individuals and communities. And it exposed just how dramatic racial disparities can be, especially in accessing healthcare and other critical resources. The convergence of a health crisis, business closures, and job losses created tremendous hardships for many Americans, and was especially devastating for communities of color. We know that people of color, and Black people in particular, experienced higher rates of illness and death.1 Significant representation in essential services work—jobs that required close contact with others—contributed in part to these tragic outcomes.2 Over the past 18 months, we learned how these issues played out for families through regular conversations with community leaders in our district and beyond. Separately, our research shone a spotlight on many of these painful realities.

The business representatives surveyed by our delegates are also confident about 2019. Risks remain to the downside, as is the case with the global economy. In particular, a sharp slowdown internationally would quickly spread to Switzerland. Exchange rates, inflation expectations and interest rates  Let me now move on to address the monetary conditions – that is to say, exchange rates and interest rates – as well as inflation expectations. As I mentioned at the start, the Swiss franc depreciated slightly in the third quarter. Overall in 2018, however, it has appreciated by 3.5% against the currencies of our trading partners, largely driven by a weaker euro. Analysis of the exchange rate situation as a whole indicates that the Swiss franc remains highly valued. The real trade-weighted exchange rate, which is relevant for the economy, is still high. Given the economic and political uncertainties, there is also the risk of major and sudden movements in the exchange rate, which would significantly alter monetary conditions. We therefore continue to regard the situation on the foreign exchange market as fragile. This leads me to our inflation expectations, as derived from surveys of households, companies and forecasting institutions. It is our mandate to ensure price stability while taking due account of economic developments. We equate price stability with a rise in consumer prices Page 3/4  Berne, 13 December 2018 Thomas Jordan  News conference  of less than 2% per annum.