samchain/econo-pairs-v1 huggingface dataset:
6/9  BIS central bankers' speeches  First, it is only available to solvent banks. Second, it can only be used to cover capital shortfalls which were identified in the adverse scenario of a stress test. And third, it can only be of a precautionary and temporary nature. In other words, it must not be used to cover losses which the bank has already incurred or is likely to incur. I will highlight just one issue here which relates to the role of the ECB. With regard to the first condition, it is up to the ECB to confirm whether the bank in question is solvent. It has some discretion here, as the European legal framework does not offer a specific definition of solvency. So it is crucial that we have a consistent definition of solvency – a definition that not just covers a point in time but takes a forward-looking perspective. Even if a bank is solvent today, it might not be so in the near future. In the end, it is the European Commission that grants or denies permission for precautionary recapitalisation, as state aid rules apply. Among other things, this entails burden-sharing. Shareholders, as well as holders of hybrid and subordinated debt, must contribute to reducing the capital shortfall. This ensures that the burden of failure is still borne by those who took the risk and reaped the return.

Benoît Cœuré: Interview in Corriere della Sera Interview with Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, in Corriere della Sera, conducted by Mr Danilo Taino on 27 January 2015. *  *  *  In the last few days you have said that Tsipras must “continue to pay”. I said that there’s dual responsibility. Greece must continue to abide by the rules of the game: we are a community of purpose. On the other hand, Europe has to accept the democratic change in Athens, even if it is based on policies that are different from the ones before. No renegotiation of Athen’s debt, then. Not even an extension of maturities? Greece’s debt is made up of various components. As regards the government bonds purchased by the ECB as part of the Securities Markets Programme launched in 2010, we cannot grant even an extension of maturities: it would be like granting a loan to the country and that is prohibited by the treaties. As regards loans given to Athens by European countries, that’s not for us to decide. You’re indifferent? No, I’m saying that any decision that is made must have a goal, namely for the reforms in Greece to continue. There will probably be different reforms from the ones expected, given that there’s now a new government. But we have to be consistent: the country still needs reforms. Tspiras says that the troika is now finished in Greece.
These are the type of issues we should discuss now that we actually have a system where stabilisation policy no longer contributes to creating severe economic fluctuations – as it did in the 1970s and 1980s – but instead seems to actually have a stabilising function. How should roles be allocated between fiscal policy and monetary policy? The change in regime in the 1990s involved the introduction of a distinct allocation of roles in Swedish economic policy. The exchange rate remained variable and monetary policy was given the main task of trying to keep inflation at a low, stable level. Fiscal policy, which had often resulted in large deficits under the previous regime of a fixed exchange rate, would now instead be targeted at achieving long-term stability and sustainability in public finances. Corresponding changes in economic policy had been made in many other parts of the world. It is often said in the economic debate that one consequence of the change in system was that “the Riksbank was given responsibility for stabilisation policy”. As it is not always clear what is meant by this exactly – the interpretations appear to vary depending on whom is asked – it may be worth providing a brief summary of the inflation-targeting policy we conduct. The Riksbank’s primary objective is to maintain price stability. This task often goes hand in hand with a stabilisation of the real economy; if demand in the economy develops in line with the long-term potential, it will often contribute to a stable development in inflation.

It thus appears as though the new regime has also had a beneficial effect on the stability of the real economy. Now that it appears as though the more fundamental stabilisation policy problems have been managed, it may seem natural to gradually become more ambitious and wonder if things could function even better. However, it is important to have realistic expectations as to what the stabilisation policy can achieve. It has been easy to gain an impression in the recent debate that there are expectations that the fluctuations in both inflation and the real economy – perhaps especially the latter – can be eliminated entirely. When the heads of the National Labour Market Board make comparisons with a situation where unemployment is always around 4 per cent and then claim that the Riksbank bears the responsibility for the difference, they appear to be expressing this view. It is unavoidable that the economy and inflation undergo rapid changes from time to time that cannot be predicted or fully counterbalanced in the short term. No central bank – or any other economic policy decision-maker – can thus steer inflation and economic activity completely in the long term. In actual fact, experiences show there is a substantial risk that actively fine tuning stabilisation policy can reinforce fluctuations in the economy.
“Faceless” markets are not the only ones looking beyond the immediate present to the future - our fellow citizens are, too. The prospect of self-perpetuating, ever-increasing deficits will not encourage them to spend more. 4. Stronger growth would certainly have a beneficial effect on employment. But it would not eliminate the largest component of unemployment - the structural component. This can be done by means of measures which remedy labour market rigidities and reduce the burden of non-wage labour costs. It is this latter channel that links efforts to create jobs with the task of bringing public expenditure under control. I observe, too, that in those countries where unemployment has fallen substantially, jobs have been created not by existing enterprises - and especially not by large enterprises - but by the setting-up of a large number of new enterprises, which have necessarily been small to begin with. To conclude - allow me, if you will, to be quite blunt. Yes, once inflation has been brought properly under control, monetary policy can and must contribute to supporting balanced growth, but balanced growth will not depend on monetary policy alone. Both the acceleration and the viability of growth will rely on the contribution to be made by other policies. First, on that of a fiscal policy which does not crowd out private investment but, rather, fosters a climate of confidence by implementing a credible process of reforms. Second, on that of a policy which creates a favourable fiscal, financial and regulatory environment for the proliferation of new enterprises.

These thanks would not be complete without expressing publicly what I have already had the opportunity to say in private to the members of the management and staff of the European Monetary Institute: without their personal commitment, their spirit of innovation, their boundless ability to find the happy medium - and not just a practical compromise between the concerns of our central banks - nothing would have been accomplished. What can I say to you know by way of farewell? There is little point in giving you the “final score” at this stage - the match is not over yet ... Recommendations on how to cope with the challenges which are looming on the horizon? You will deal with them effectively, I am convinced, without my advice. But perhaps you will accept some reflections on the ability and the limits - of monetary policy to meet the expectations of our fellow citizens who, while appreciating the confirmation (or renewal) of price stability, are looking for stronger growth and, above all, more jobs. I share their concern unreservedly. The current level of unemployment in the majority of our countries is ethically unacceptable; it is leading to the BIS Review 67/1997  -2-  erosion of the social fabric and, because of the waste it represents, it is a clear signal that the economy is not functioning properly. Reducing unemployment must be the prime objective of action by the authorities. But what should be the role of monetary policy?
Earned principal reduction Investment firms that purchase delinquent mortgages routinely reduce principal in order to maximize value on these loans. It would make sense for Fannie and Freddie to do this as well in order to minimize loss of value on the delinquent loans they guarantee. However, I am uncomfortable with the notion that “underwater” borrowers who owe more on their mortgages than their homes are worth should have to go delinquent before they have a chance of securing a reduction in their mortgage debt. I believe we should also develop a program for earned principal reduction for borrowers who are underwater but keep on making their mortgage payments. Such a program would strengthen the incentives for mortgage holders who are underwater to continue to stay current on their loans, and reduce the likely number of defaults and REO sales. Negative equity is one of the most significant predictors of mortgage default across all types of mortgage products, including when you control for credit scores and level of income documentation. While recent underwater borrowers have not been defaulting at a rapid pace, they are also not prepaying, implying that underwater mortgages remain “at risk” for a prolonged period of time to any adverse shock to the borrower. It is admittedly challenging to predict how underwater borrowers will ultimately perform and this performance will be sensitive to the path of home prices.

However, if households believe that house prices could decline further, the expected capital loss adds to the financing cost of owning a home and prospective buyers will be reluctant to buy even if mortgage rates are low. That said, it should also be recognized that the factors that affect demand and home prices are not immutable. They depend, in part, on policy choices. Consider, for example, the fact that most home purchases are financed with long-term mortgage credit. This means that the demand for housing is highly sensitive to the availability and cost of that credit. Outcomes in housing are also affected by the legal and operational infrastructure of the mortgage market. This apparatus has been wholly inadequate for dealing with a systemic shock to housing and employment, and is amplifying bad outcomes. A flawed resolution regime – very different from the more efficient regime for resolving excess debt in private commercial property – exacerbates the risks of under-shooting. 6  In Las Vegas, for instance, the ratio of house prices to replacement costs is now 0.7, having peaked at about 2.0 during the boom. 7  The supply curve is fixed and vertical at the post-bubble stock of housing so the entire adjustment to changes in demand takes place via prices rather than quantities. BIS central bankers’ speeches  3  Conflicts of interest are embedded in mortgage securitization structures and between first and second lien-holders. There are challenges to how the industry records and transfers interests in these mortgages.
But given Alan Blinder’s definition of price stability - when ordinary people stop talking about inflation and converse instead about more important matters - I hope that the MPC, by remaining focussed on its task of meeting the inflation target, will be more successful in restoring the equally lost art of good conversation. In that way the inflation generation will give way to a new generation able to devote its energies to the wider economic and social policies from which our attention has so often been diverted by the need to control inflation. The lesson of the past ten years is that it is stability - price stability and the broader economic stability which it generates - that is the platform for the deeper satisfaction portrayed so well in Lorenzetti’s frescoes. BIS Review 68/2002  17

Mr Erçel reviews the monetary side of Turkey’s ambitious three-year disinflation program  Speech given by Mr Gazi Erçel, Governor of the Central Bank of Turkey, at the Merchant Taylor’s Hall, in London on 25 January 2000. *  *  *  Turkey’s disinflation program: what we are doing and why Starting this year, Turkey has embarked on an ambitious three-year program to disinflate its economy. I call it ambitious because Turkey has suffered from a high and persistent inflation for the past quarter of a century, and any program that hopes to correct such a long-standing problem needs to be ambitious. I will begin by reviewing this new program, especially the monetary side of it. But first I will give you some snapshots, from the past, of the Turkish economy, which I think will give a clear idea why this was the right time to take action. The history of Turkish inflation shows that for the last quarter century inflation has been gradually increasing, never falling below two digits. The average inflation rate for the whole period was 55%. During the last decade inflation has averaged 72%. Reflecting the uncertainties inflicted on the economy by this chronic inflation, growth has been volatile and at the low end of the range of comparable emerging market economies. Turkey’s average growth rate over the last two decades was 4.2%. Average growth for the emerging markets of Asia, where inflation is not a problem, has been much higher.
On the fiscal front, there has been an intensive drive to correct the budget deficit, as indicated by the significant reduction in the structural general government deficit since 2009. The increased transparency and the strengthening of the fiscal framework further to the approval of the Law on Budgetary Stability and Financial Sustainability in 2012 assist the different tiers of government –central, regional and local – in meeting the budget targets. In turn, the reform of the pensions system is a necessary step for ensuring the sustainability of public finances in the medium term. Despite these achievements, the rising course of the public debt/GDP ratio has not yet been halted and is a reminder of the scale of the fiscal effort still required. There has also been progress in private-sector deleveraging. The sluggishness of household and corporate income is slowing the process, as a result of which the weight of the adjustment is falling on the contraction in lending extended to these sectors. That said, this contraction in credit may be and indeed is proving compatible with its appropriate restructuring. The analysis of the Banco de España suggests that, even in years  BIS central bankers’ speeches  3  as difficult as the past two, the proportion of firms that have not seen a fall-off in their bank loans has been significant, around 30%. And more significantly, those that have not seen their credit decline are, precisely, those firms which, in general, were departing from a sounder position of debt and profitability.

2  BIS central bankers’ speeches  The former include most notably the pick-up in the world economy since last summer. The turnaround has chiefly been based on the better performance of the advanced economies, including the European countries, which remain our main trade partners. Conversely, the emerging economies are losing some of their momentum. Indeed, investors and analysts have shifted their chief concerns in recent months towards this group of economies. The incipient recovery in Spain is also benefiting from the easing of financial tensions in European markets. In particular, measures by the European Central Bank and the headway made in correcting the weaknesses detected in the governance of the euro, and in creating a banking union within the area, have contributed to improving the financing conditions of the Spanish economy. That said, the cost our households and firms still have to pay for their credit remains overly high for the accommodative stance of monetary policy, revealing that it is not yet appropriate to talk about the full normalisation of the single monetary policy transmission process in the euro area. Undoubtedly, however, domestic impulses are playing a decisive role in improving perceptions of the Spanish economy, and in laying the foundations for a sustained path of recovery. These include most notably the progress in correcting imbalances and in adopting reforms in different areas. As regards imbalances, the most visible achievement has been in restoring competitiveness and in correcting the balance of payments deficit.
A full and consistent implementation of the euro area’s existing fiscal and macroeconomic surveillance  2  BIS central bankers’ speeches  framework is key to bringing down high public debt ratios, to raising potential growth and to increasing the euro area’s resilience to shocks. We are now at your disposal for questions. BIS central bankers’ speeches  3

It was not surprising that during those times the financial stability was not of a main concern for the central bank. As the central banks learnt during the second half of eighties to deal more properly with inflationary disturbances, the price stability was broadly achieved again. Consequently, the interest in financial  BIS Review 20/2005  1  stability issue has been increasing during the nineties. In my opinion, there are two main reasons for it. First of all, central banks have learnt one important rule: that their role of the lender of last resort is something the central bank should be ready to fulfil, but in fact it is optimal, never to do it in practice. Second of all, the financial system is in the end completely incomparable to the pre-World-War-II system. Nowadays, we live in a global world and, although we are more capable of minimising the impact of inflationary disturbances, there are other types of shocks arising. To sum up, the main message we can learn from the history is that price stability as the ultimate goal of monetary policy is not in contradiction with the effort to achieve the financial stability. Indeed, on one hand, price stability is a necessary condition to achieve financial stability, as the inflationary disturbances have the potential to cause serious damages to the financial system; on the other hand, a sound financial system enables the monetary policy to smooth its actions in order to achieve price stability. Ladies and gentlemen, thank you for your attention.
Zeti Akhtar Aziz: Key issues confronting the financial sector in Malaysia Keynote address by Mrs Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Financial Industry Conference 2009, Kuala Lumpur, 17 November 2009. *  *  *  It is my great pleasure to welcome you to our financial industry conference for this year. This conference takes place at a time when the global financial landscape is experiencing fundamental change. Even as we meet, events continue to unfold in directions that are likely to fundamentally alter the way in which financial institutions conduct their business. Reforms to strengthen the foundations of financial stability are wide-ranging to improve the supervision and regulation of financial institutions, and the institutional arrangements for coordination and cooperation in the area of surveillance and crisis management within and across jurisdictions. This Conference is organised by Bank Negara Malaysia to engage in constructive dialogue with the industry on developments affecting the international and domestic financial industry, focusing in particular on implications for financial institutions in Malaysia. Economic developments and outlook After a challenging beginning to this year, Malaysia is now gradually moving on a path of recovery supported by strong macroeconomic fundamentals and a sound financial sector. Economic activity has continued to show a marked improvement in the third quarter, with positive growth expected in the fourth quarter.

In November, they described the turnaround as a “heart attack”. Government authorities worldwide have taken comprehensive measures designed to improve banks’ liquidity and solidity, boost demand for goods and services and restore the smooth functioning of credit markets. In several countries, central bank benchmark rates have been set at close to zero. In Norway, a series of measures have also been implemented to mitigate the impact of the financial crisis. Norges Bank has supplied more liquidity to banks and eased the collateral requirements for loans. We have provided liquidity at longer maturities, introduced foreign exchange swaps involving both the US dollar and the euro in order to supply Norwegian krone liquidity, and loaned US dollars to Norwegian banks, which we ourselves procured from the Federal Reserve. Norges Bank’s key policy rate has been reduced by 4.25 percentage points to 1.5 per cent since 15 October 2008. To facilitate banks’ access to funding, the government has provided banks with access to liquid government securities in exchange for covered bonds issued by mortgage companies. Moreover, the government has increased loans and guarantees for Norwegian exports and raised state bank lending quotas. At the same time, Folketrygdfondet has increased its bond purchases. In order to bolster banks’ solidity, the government plans to supply risk capital to Norwegian banks through the Norwegian State Finance Fund. To restrain the decline in activity in the Norwegian economy, central government expenditure will be increased by 10 per cent this year.