samchain/econo-pairs-v1 huggingface dataset:
The current conjuncture The FPC’s current assessment of the financial cycle is that following a subdued and lowrisk period of post-crisis repair to bank, household and corporate balance sheets, we have now entered a more standard period of risk and credit growth. The stock of private non-financial credit, economy wide, is around 140% of GDP. As I said earlier, the bulk of this is property-related debt. It is growing at broadly the same rate as nominal GDP. In contrast, in the 10 years before the crisis it grew annually at around twice the rate of GDP reaching 177% of GDP in 2009. The stock of household debt relative to income is 135%, down from 155% pre-crisis. In 1992, when Bricks and Mortals was published, it was only 100%. Debt servicing ratios, however, are not stretched at the moment because interest rates are very low – the household debt service ratio is now at 2001 levels of around 8%. But  2  2  For example, Jorda et al (2015) show that a housing bubble combined with a build-up of credit before a recession has more than twice as large an impact on GDP per-capita compared with an equity bubble. BIS central bankers’ speeches  the composition is very different: in 2001 the stock of debt was half the current level and the interest rate twice the current level. There are good reasons why the sustainable level of household debt may have risen over the past 30 years.

I want to briefly mention two possible factors that may be affecting investors’ perceptions of risks and hence of the returns necessary to compensate for them. First, there may be a collective action problem on the part of asset managers. Around half to two-thirds of the shares of the largest UK banks are owned by institutional  BIS central bankers’ speeches  7  investors and managed in-house or by asset managers. 14 These tend to operate to common benchmarks and are subject to rigorous peer comparison. Asset managers, particularly those managing assets on behalf of institutional investors that have fixed liabilities, are currently under great pressure to find returns in a low return environment. Before the crisis, banks made high double-digit returns on equity boosted by very high leverage. There may well be a reluctance among managers of institutional money and investment funds to be the first to drop required returns. This could account for some of the stickiness that we have seen in banks’ return on equity targets. The behaviour of institutional investors may also explain the so-called “low risk” anomaly. In theory, lower risk ought to be matched by lower returns. But some research suggests that this may not be a simple relationship. The “low risk anomaly”, under which lower risk stocks generate no lower – and in some cases higher – returns than higher risk stocks has been identified for banks.
But we also say that those countries with high levels of public debt, and less robust public finances, need to make sure their fiscal position is prudent. What I have just said there doesn’t boil down to any fixed set of demands. In the end, the decisions of government are correctly left with the political system. But in terms of some core principles, it’s to balance prudence in managing the public finances and to make sure that the government policies are promoting sustainable growth: sustainable, long-term, climateconscious, consistent with the carbon transition, consistent with raising productivity. If you read the manifestos of all the parties, they all have different ideas, but I think all share the same principle, which is: the more we can have a sustainable economy that is delivering employment and so on, the better for the future of the Irish economy. Is the Irish economy one of those countries that has more room to stimulate economic activity? Well, as you know, this is a long-running debate. At one level, there has been a lot of progress. All of these difficult years of austerity have led to a big improvement in public finances and the number one uncertainty is about the future of corporation tax revenue, which has been unexpectedly high.

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.
Ravi Menon: Shanghai and Singapore - financial centre partnership Panel remarks (via video conference from Singapore) by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at Lujiazui Forum 2020, 18 June 2020. * * *  China-Singapore Financial Co-operation Let me first congratulate the Shanghai Municipal Government for successfully convening the Lujiazui Forum while the world is still grappling with the Covid-19 pandemic. Singapore is honoured to be the Lujiazui Forum’s Partner City this year. Covid-19 has unleashed not only an economic crisis but also a growing fragmentation of the global economy. This is a threat facing the whole world. But the countries in Asia are well placed to lead the global economic recovery and forge new channels of cooperation and integration. Finance can play a key role in facilitating this economic recovery and integration. China and Singapore can help to blaze a new trail in financial cooperation and innovation in Asia. 2020 marks the 30th anniversary of the China-Singapore bilateral relationship. Financial cooperation has been a highlight of this relationship. We have made good progress in three areas. First, growing the offshore RMB market. Since 2013, with ICBC being appointed as RMB clearing bank in Singapore, this has helped to promote greater use of RMB in the region. Singapore is the largest offshore centre for RMB deposits and RMB trade finance and second largest for RMB foreign exchange trading, outside Greater China. Second, enhancing the links between our capital markets.

As we stimulate our economies to bounce back from the Covid-19 crisis, there is a good opportunity for Shanghai and Singapore to collaborate on promoting green finance in the region. There is strong demand in Asia for green investment. According to a study by the United Nations Environment Programme (UNEP) and DBS Bank, $ billion in green investment is required 2/3  BIS central bankers' speeches  annually until 2030, to support the greening of Asian economies. We already see Chinese and Singapore banks partnering to finance green and sustainable projects. In April last year, ICBC Singapore worked with DBS and other global banks to jointly issue its first Belt and Road green bond, sized at $ billion, and more recently issued its first green loan in Singapore, through a partnership with DBS and OCBC. In September last year, the Singapore branch of the Agricultural Bank of China collaborated with UOB and BNP Paribas to originate a $ million green loan in Singapore. There is scope for our financial centres to deepen our partnership in green finance. One, we could create together frameworks for green and sustainability-linked loans customised for Chinese and Singaporean small and medium-sized enterprises (SMEs). Such frameworks can help promote cross-border syndications in green loans. They can also help to reduce the borrowing costs of SMEs, which will not need to incur expenses for external reviews certifying their activities are green.
The Bank’s Decision Maker Panel (DMP) survey tells us that corporates above the 90th percentile of indebtedness are expecting to reduce their investment by almost 5 percentage points more over the course of this year in response to higher interest rates than firms below it. If firms cut back investment excessively, or if productive firms forego investment opportunities, the  Page 7  effects could be persistent. I’ll talk more about this later when I turn to our secondary objective, but it should be clear that scarring of this kind can affect long-run growth. How resilient is the supply of finance to UK corporates? The future resilience of lenders and borrowers will reflect not only macroeconomic developments and idiosyncratic business factors, but corporates’ ability to access funding too. Sudden or unanticipated disruptions to the supply of credit could amplify stress, particularly for highly indebted companies  , or companies reliant on short-term debt  . Research shows that the credit crunch following the GFC caused direct damage to companies and the real economy over and above the effects of a normal downturn. Back then, banks with weaker capital ratios and those more exposed to the US mortgage market constrained lending activity by more than other lenders as they focused on rebuilding their own balance sheets. This had wide-ranging consequences: as I’ve mentioned before, those directly affected by this credit crunch cut their investment more than unaffected companies. These same companies also experienced weaker productivity growth and were more likely to fail  .

I am particularly delighted that this seminar will address the need to “match products to user needs”. This is indeed key to the success of any service oriented industry and therefore inevitable in meeting the needs of a growing economy such as ours. Without overemphasizing this point, I would like to implore you to ensure that you develop products suitable to your clients as a good and useful product is only one that meets the needs of the market. As I have already noted, on its part the Government is committed to resolving the various constraints identified in the country’s financial system through implemention of the FSDP and related initiatives. Key among the strategies includes the development of appropriate regulations and improving the capital adequacy base for the leasing and finance companies. Adequate capitalization of commercial banks and financial institutions is important if there is to be stability in the financial sector. It is for this reason that the Bank of Zambia, effective January 2007, increased the minimum paid-up capital for commercial banks from K2 billion to K12 billion. In the same vein, the start-up capital for the deposit taking leasing institutions was increased to K1.5 billion from K250 million. I wish to urge all leasing companies to make sure that they take steps to meet the required minimum capital. Let me conclude by paying tribute to the organisers of this seminar, Sapitwa Finance.
12 By doing so, we diversify risk. We are in a period marked by high oil and gas production and high prices. Substantial resources are therefore transferred from the one account to the other. Combined with high returns, the result is that the value of the Government Pension Fund is rising rapidly and may continue to do so in the years ahead. The Fund is now approaching the nominal value of one year’s GDP and may reach two in the course of the next decade. This is based on the assumption that oil prices remain high over the next few years and then fall to about USD 30 per barrel. Experience has shown that forecasts for both oil production and oil prices are highly uncertain. The government bases its withdrawals from the Fund on an average real return of 4 per cent for financing current expenditure. Given this spending rule, the return may come to finance more than 15 per cent of government expenditure in 10 years. We thus reap considerable benefits from managing our petroleum wealth well. The return represents future income that we forego if we draw on this wealth today. But even with this source of income, more than 80 per cent of expenditure must be covered by other sources. Financing the large pension payments that will have to be disbursed after 2012 will be very demanding in any event.

The shift in the division of labour is now influencing – and will continue to do so for a period – real wage growth in industrialised countries. The risk that a business will have to wind up operations or move abroad is dampening costs. In a number of European countries, wage growth is also being influenced by labour inflows from the new EU member states. Increased trade has engendered higher demand for shipping services and favourable freight rates. This has in turn led to a boom in the shipbuilding industry. At the same time, high energy prices are boosting investment in the petroleum and electricity sectors, with considerable impetus to the engineering industry. Growth in Asia is having a favourable impact on aluminium prices. Prices for our imported goods are falling in relation to prices for goods we export. Norway’s terms of trade are improving. The impact of the rise in oil and gas prices is particularly strong, but the terms-oftrade gains for the mainland economy have also been high. The situation in Norway differs from that of its Nordic neighbouring countries. Sales of Swedish and Finnish high-tech products are growing strongly in volume terms, but prices are falling. Denmark has a diversified business sector, which is overall moving on a steady path. As consumers, we are benefiting from falling prices for many imported goods. Clothing prices are an illustration of this.
Even when an imbalance could be identified early enough to do something about it, the increase in interest rates required to choke off the imbalance would have serious side-effects. Much of this will be familiar to all policymakers, no matter what field they work in. It is a “counsel of despair”. Understanding how developments in financial markets pose risks to the system and the wider economy is a formidable task. But it is one we should embrace, rather than shy away from. It is the final leg of the argument that is key: how much higher would interest rates have had to have been in order to have contain the boom in financial markets. Some commentators have made much of the Bank’s decision to cut interest rates by 25 basis points in the summer of 2005. But to pretend that all this could have been avoided had interest rates been 25 basis points higher over the last couple of years seems to me pure wishful thinking. Likewise, the idea that had rates been a little higher at the tail-end of the boom in late 2006 and early 2007 the crash could have been averted is a flight of fancy. Interest rates would have had to have been significantly higher for an extended period of time, perhaps as far back as 2002/3. Growth would have been weaker. Inflation would have undershot the target by even more than it did. Sterling would likely have risen, putting our export sector under particular strain.

That seems to produce a better guide to the real financial strength of banks and to be properly conservative in not recognising profit before it is earned. I am aware that this runs counter to a powerful school of accounting theology but I have been encouraged by proposals circulated recently by Paul Boyle at the FRC for cyclical reserving and I hope that will be pursued. An alternative approach would be to vary regulatory capital floors with the cycle and require banks to hold undistributed reserves in the upswing which could be drawn on in the downswing. This is a second best because the reserves are taken after profit is struck, with all the signals that sends investors and staff. But it could have much the same effect as dynamic provisioning and may be capable of implementation rather earlier. But capital requirements are not the only approach. Counter cyclical limits could be introduced on the liquidity position of a bank. For example, banks might be required to invest a varying proportion of their assets in a war-chest of government bonds and highly liquid assets. Or they could face varying constraints on the extent to which they are allowed to tap short-term wholesale funds. Finally we could introduce restraints on the terms on which banks can lend money to households and companies. Loan to income and loan to value ratios tend to rise in any credit boom as lending standards become lax and asset prices inflate.
In doing so, first, let me start with the current financial crisis and its relation with global financial imbalances and economic integration. Then I will briefly discuss the stage of Asian economic integration and highlight the benefits it rendered in cushioning a number of regional economies from the adverse effects from the crisis. After that, I will draw the lessons from the current crisis that should further help gear our integration towards the path that reaps the most benefits and minimizes potential risks along the way. Ladies and Gentlemen, During 2004-2006, one of the main potential threats to the world economy centred around the global financial imbalances arising from the chronic and rising US current account and fiscal deficits. Although most economists believed that the situation was not sustainable, no one could predict the timing and extent of the unwinding process, nor whether the US would face a hard on soft landing. The current crisis, unfortunately, manifests an abrupt unwinding of the imbalances. The trigger point of the crisis is clearly the subprime lending problem in the US, a new phenomenon. However, most economists would agree that the root cause of the crisis lies beneath excessively accommodative monetary policy that led to excessive credits, and in turn, to asset price bubbles, a repeating cause of past crises. Other important driving factors behind rising credit expansion and bubbles included rising financial innovation and its complexity and lax supervision. The global financial imbalances could not have heightened rapidly since the early 2000s without fast rising global economic integration.

This crisis experience clearly shows that a financial crisis can happen in any markets regardless of the level of market development, size, and region. To date, the economies that have been hard hit by the crisis originated in the US through financial spillover effects include the Euro zone, UK, and some economies in Eastern Europe, Asia, and Latin America. It is confirmed again that, whenever financial imbalances arise, financial  BIS Review 147/2008  3  distress can easily occur and become rampant due to the increasing linkages across the globe. So I believe that the key to our endeavor is to 1) take a careful step of further integration, 2) increase economic and financial resiliency, and 3) be ready to deal with unforeseen risks ahead. We can compare this important decision of embarking on further integration to the situation where we are already in a sea expedition. If we are already in the middle of the ocean, sailing back to the origin or resisting further integration seems likely a bad idea. However, to reach the destination safely and be able to weather the likely stormy sea along the way, we need to plan ahead in navigating the boat and be ready to adjust the speed. Moreover, we need to make sure that the boat is in a good condition. We must therefore be alert and well prepared to deal with the storms and other dangers.
Trade liberalisation, political changes, technological advances, and a sharp reduction in transaction costs have fuelled a globalisation process that seems to have accelerated over the last 15-20 years. As a result, cross-border flows of goods, services and capital are growing at a markedly faster pace than world production. Few countries are benefiting as much as Norway – and losing as little – in the current environment of freer trade and increased cross-border labour mobility. Prices for goods we import are falling in relation to prices for goods we export. Norway’s terms-of-trade are improving. The Norwegian economy has experienced a strong positive income shock. Real national disposable income will increase by 25-30 per cent in the period from 2003 to 2006. The impact of the rise in oil and gas prices is particularly strong, but the terms-of-trade gains for the mainland economy have also been high. The situation in Norway differs from that of our Nordic neighbour countries. Sales of Swedish and Finnish high-tech products are growing strongly in volume terms, but prices are falling. Denmark has a diversified business sector, which is overall moving on a steady path. The terms-of-trade gains partly stem from a sharp rise in prices for oil, gas and other commodities. Strong global economic expansion in combination with rapid production growth in China, India and other newly integrated economies has led to a substantial rise in demand.

High demand for oil combined with limited idle production capacity and uncertain production levels in many oil-producing countries have led to a sharp rise in oil prices and other energy prices. High energy prices are boosting investment in the petroleum and electricity sectors, with considerable impetus to the engineering industry. Increased trade has engendered higher demand for shipping services and favourable freight rates. This has in turn led to a boom in the shipbuilding industry. While oil prices are high, they are still lower than the prices that prevailed after the OPEC II shock in 1979. Norwegian oil production, on the other hand, has increased considerably since then. Price developments have also been favourable for many metals. Prices for fresh farmed salmon have also shown a pronounced rise in recent years. As consumers, we are benefiting from ongoing globalization through falling prices for many imported goods. After a shift towards a higher share of imports from low-cost countries, prices for Norway’s imported consumer goods have fallen virtually every year since the mid-1990s. BIS Review 50/2006  1  The change in clothing prices may serve as an illustration. Prices rose by around 3 per cent annually for a long period, but since 1995 they have been falling by about 6 per cent annually. This kink point coincides with the dismantling of barriers in the textile trade and with a period of rationalisation in retail trade in Norway. The magnitude of the current income shock is best seen in a longer, historical persepective.