samchain/econo-pairs-v1 huggingface dataset:
In particular, the current recession differs from past episodes in that its origin is not economic, so the fall in activity is not caused by problems in specific sectors or markets, but rather by the interruption of the normal functioning of businesses and activities to combat the spread of Covid-19. This implies that the economic measures adopted should seek to ensure that companies and individuals survive this period of confinement, avoiding more permanent damage. The key to mitigating the effects of the pandemic is to get credit flowing to businesses and allow them to cushion the major drops in their cash flows. Several measures have been implemented with this in mind, with some elements in common. First, central banks, along with lowering their benchmark rate to its lowest possible, have established special bank financing programs, conditional on their increased lending. Some examples are the programs of the Bank of England (Term Funding Scheme with additional incentives for SMEs, TFSME), the European Central Bank (Targeted Longer-term Refinancing Operations, TLTRO), and the Central Bank of Chile (FCIC). Second, governments have committed resources that serve as guarantees for loans, which in the Chilean case are the FOGAPE 1 guarantees (Table 1). In Chile, the sum of both programs is equivalent to just over 15% of GDP, comparable to the resources that have been committed in Brazil, but far above what has been done in other Latin American countries, such as Peru, Colombia, and Mexico.

All of this can be summed up with two observations and one implication. The first observation is that the resolution strategy will govern decisions on MREL. The second is that TLAC can and will be applied for G-SIBs through the setting of MREL requirements. In other words TLAC is just one particular expression of how we will set MREL for firms where, as authorities, we are likely to face no choice other than bail-in in order to continue the firm’s economic functions. The implication is that there needs to be some level of disclosure about resolution strategies and liability structures at the legal entity level. Otherwise investors will not be able to price the risks they are exposed to. The Basel Committee intends to consult on new Pillar 3 standards for this purpose by the end of this year. This is welcome. But it is welcome too that banks are starting to do more to provide this kind of information to investors. 2  2  Bail-in is used here to cover imposing losses on creditors either through use of a bail-in tool or through a bridge transaction. BIS central bankers’ speeches  Let me turn to my second theme – the relationship between setting MREL and TLAC and resolution planning. The TLAC standard describes an end-point. Beyond proposing a conformance date of 2019 at the earliest, it does not describe how the standard will be implemented and what will happen in transition.
This will be more in the nature of a gradual evolution than a “big bang”. There are really two main strands. The first will be a more systematic identification of risk, and covering a wider range of risks. The second will be the increased use of quantitative techniques, including modelling and stress-testing. Let me talk a little bit about each of these in turn. First is the more systematic identification of risk, covering a wider range of risks. This is something on which I would say that Hong Kong is already in many respects quite well advanced. For several years now the HKMA has adopted what we term a “risk-based supervisory approach”. This involves a number of steps. First, the inherent risks being run by an institution in each of its business lines are identified. Eight inherent risks are focused on - credit risk, market risk, interest rate risk, liquidity risk, operational risk, legal risk, reputation risk and strategic risk. These risks are then classified as either “high”, “moderate” or “low”, taking into account the current position and likely future developments. The risk control practices to manage these inherent risks are then evaluated, and classified as “strong”, “acceptable” or “weak”. This evaluation takes account of such factors as management oversight, policies and procedures, risk measurement and internal controls. The final step is to combine the assessments so as to determine whether, for each business line, the risk controls are adequate given the level and direction of risk.

Simon Topping: Basel II - implications for Hong Kong Speech by Mr Simon Topping, Executive Director (Banking Policy) of the Hong Kong Monetary Authority, at the City University of Hong Kong/Oracle Systems Hong Kong Limited “Basel II: Implications for Hong Kong” Seminar, 5 July, Hong Kong. *  *  *  I’d like to start by thanking the City University and Oracle Systems for organising today’s Seminar and for giving me this opportunity to share with you some thoughts on Basel II, and in particular on the implications for Hong Kong. The process of devising a New Capital Accord has now been going on for more than four years and it is still another three and a half years until countries start implementing it. It’s clear from this timescale that what we are talking about here is a very major project indeed, and one which has important implications for the banking industry. It’s very welcome, therefore, to have occasions like this to help spread the word on what it’s all about. But why such a big deal? What’s so wrong with the existing Capital Accord? The answer is simply that, in the 15 years since it was introduced, things have moved on. The nature of banks’ business and the risks they are running have changed dramatically, and the existing Accord no longer comes up to scratch - it no longer functions as a mechanism for ensuring that banks hold an amount of capital that is broadly commensurate with the risks they run.
In the past 20 years, inflation has been consistently low and stable. Economic growth has been just as high, if not higher, since inflation came down to a low level, compared with the years when inflation was high and at times at double-digit levels. For the model to be relevant it should build on long-term relationships that we believe to be valid and it should be consistent with data. For example, the model’s relationships should describe how the interest rate works, in line with relevant empirical observations of the Norwegian economy. It is also of considerable importance to us that the economic mechanisms in the model should be understandable and easy to communicate. The model apparatus is to function as a useful tool, both in the internal process ahead of the monetary policy meetings and in Norges Bank’s external communication. BIS central bankers’ speeches  5  A model will never be able to provide an exhaustive description of reality. In 1979, the British statistician George Box stated: “Essentially, all models are wrong, but some are useful”. Models can help to identify key driving forces and ensure a valid line of reasoning and consistency over time. This will enable the model to play an important role in the analytical basis for interest rate setting. At the same time, we must use common sense and experience when evaluating the model-based results and supplement these results with our own professional judgement. In this respect, the Bank has a pragmatic attitude regarding the use of models.

12  Slagstad, Rune (1998), “De nasjonale strateger” (National strategists), Pax  BIS central bankers’ speeches  15
It is clearly the will of the European people. Only to give you an example of the support of the public opinion for a reliable euro: according to a French poll, 95% of the population was in favour of a euro at least as solid, reliable and strong as our previous “franc fort” national currency;  í  thirdly, the process of economic and financial globalisation, the trend of increase in international trade calls in the long run for increased demand worldwide for official reserves and for highly reliable monetary and financial instruments. This explains why the progressive internationalisation of the euro will, in my eyes, be totally non-confrontational but cooperative. The exchange rate relationships of the euro area vis-à-vis key global currencies As regards the exchange rate relationship vis-à-vis major currencies, I think the best for me would be to reiterate the position of the Eurosystem which has been expressed by Wim Duisenberg in the name of the full body of the Council of Governors of the Eurosystem: “In the view of the Governing Council the major economic factor behind the short-term developments observed in the exchange markets is constituted by cyclical differences between the euro area and the United States, which are expected to diminish over the course of this year and thereafter.

Mr Trichet gives an address on the risks and challenges of the international financial scene Text of the Third Hong Kong Monetary Authority Distinguished Lecture delivered by Mr Jean-Claude Trichet, Governor of the Banque de France, the central bank of France, in Hong Kong on 8 July 1999. It is a great pleasure to be here in Hong Kong and I am greatly honoured to have been invited to deliver the Third Hong Kong Monetary Authority Distinguished Lecture. So I would like to thank you for giving me the opportunity to express my views on the challenges and opportunities of the international financial scene. The international financial scene has been faced with two major changes over the last quarters: í  the recurrence of financial crises, originating generally in emerging or transition economies, which has emphasised the need to reform the architecture of the international financial system;  í  the introduction of a new currency, the euro, which should contribute to a balanced international monetary system. FINANCIAL CRISES AND THE REFORM OF THE ARCHITECTURE OF THE INTERNATIONAL FINANCIAL SYSTEM Two major explanations of the recent financial crises have been put forward: í  one which can be called the “fundamentalist” view argues that Asia’s healthy macroeconomic indicators – low inflation, fiscal balance, low government debt, high rates of savings and investment – offered a misleading picture. This view points out that many Asian governments provided implicit guarantees to the banking sector, which often engaged in borrowing abroad and in reckless lending to unqualified borrowers.
7 But then the financial crisis arrived and the transmission mechanism broke down. The expression ‘pushing on a string’ was coined, meaning that policy rate adjustments from the central bank did not spread to other interest rates as expected, if at all. An established approach became significantly less useful in that it said nothing about what should be done if the transmission mechanism stopped working. This required another kind of analysis, based on the understanding that the financial markets were not functioning without friction or normally, and that was able to use this diagnosis as a starting point to suggest appropriate measures. I will come back to this later. Preparedness and flexibility – a new, yet familiar, way of thinking The last decade has been turbulent and the Riksbank and other central banks have several times had to act in situations where uncertainty is considerable. When the transmission mechanism broke down during the financial crisis, the central banks took measures to maintain the functioning of the financial system. And now, during the coronavirus pandemic, the Riksbank has taken a number of different measures to ensure that there is no doubt that there is plenty of liquidity in the economy. Thanks to measures by central banks and governments around the world, the pandemic has not turned into a financial crisis. As I mentioned earlier, these measures entail a different way of conducting monetary policy compared to the one that was part of the prevalent approach from the time before the financial crisis.

I therefore do not intend to discuss this specific issue today, but refer to the comprehensive academic literature. 2 Many analysts would argue that both of these changes, at least partly, share a basis, namely higher global saving, which, in turn, is a result of the world having become richer. 3 But I would like to separate them, as the discussion has primarily come to focus on the lower level of interest rates. The fact that the financial sector has also changed in several respects is something that needs to be given more attention, considering that the conditions on the financial markets steer how monetary policy is designed and acts. Allow me, therefore, to make a brief digression on the subject. In the 1970s and 1980s, the world's capital markets were gradually deregulated. This, combined with good global growth, which is to say a richer world, and the development of information technology, led to strong development on the global financial markets in terms of outstanding volumes, turnover and new instruments. The development had major advantages. With less regulation, the financial sector’s basic functions – executing payments, allocating savings to investments and managing risk – could be better managed, at the same time as the strong growth on the financial markets contributed to the strong growth in the global economy. But a larger financial sector has also led to greater potential risks, as exemplified by the financial crisis twelve years ago.
And will that mean that they can no longer be described as the most hazardous economic institutions known to man? This development has come further in the United States, where market financing is considerably more important than in Sweden or the rest of Europe. So what would a similar trend, where the current predominantly relation-based lending is replaced by market funding, imply for the cyclical supply of credit in Sweden? Stronger focus on aspects of efficiency A third driving-force that most clearly affects the financial system is the stronger focus on aspects of efficiency. Permit me to touch on this briefly. Improvements to the financial infrastructure in recent years have made this safer and more robust in various ways. For example, the settlement routines used by both BGC and VPC are considerably more secure that before. Every component of the infrastructure now has better solutions for continuity, which means that operations can be ensured even in connection with more extreme events. Now that the most serious shortcomings have been rectified, the focus has shifted to enhancing efficiency in the given framework for safety. Considerable social gains are to be had by making the infrastructure more efficient. This applies to the central settlement systems and perhaps even more to the different payment instruments. Increased automation and a greater use of electronic payments instead of paper-based instruments and cash can generate large savings for society in general.

Real GDP expanded at a 3.0 percent annual rate in the fourth quarter of 2011, the fastest growth since the first half of 2010. The average monthly job gain was 212,000 in the first quarter of 2012, up from 164,000 in the fourth quarter. Sales of light-weight motor vehicles were about 14 ½ million at an annual rate in the first quarter, the best quarter in four years. Survey measures of business activity have rebounded from their dips in the middle of last year and are now at levels that typically indicate solid overall growth. Even housing starts have firmed somewhat in the last few months, although they remain at depressed levels. While these developments are certainly encouraging, it is still too soon to conclude that we are out of the woods, as underlined by the March labor market release. To begin with, the economic data looked brighter at this point in 2010 and again in 2011, only to fade later in those years. Moreover, the United States experienced unusually mild weather over the first quarter, with the number of heating degree days more than 20 percent below the average of the preceding five years, which may have pulled forward some economic activity and hiring. In this regard, the somewhat softer March labor market report that was released last Friday may reflect the earlier positive influence of the mild weather on job creation in January and February, although other less sanguine interpretations are also plausible.
Unusually during an expansion, business investment has contracted in four out of the past seven quarters and is currently estimated to be just 1½% higher than at the time of the referendum, with cumulative growth more than 20 percentage points less than forecast in the MPC’s May 2016 projections. Household spending growth has remained more resilient, supported by strength in employment and pay, but over the past year it too has slowed as uncertainty about the overall economic outlook has become more entrenched. 18  All speeches are available online at www.bankofengland.co.uk/news/speeches  18  Chart 12: More recent deterioration in global and domestic growth a) Global GDP growth Percentage changes on a year earlier 4  EU referendum  3.5 PPP-weighted world GDP 3 2.5 2  UK- weighted world GDP  1.5 2014  2015  2016  2017  2018  2019  Sources: Datastream from Refinitiv, IMF October 2019 WEO and Bank calculations. b) UK GDP growth Quarterly growth (%) 0.5 GDP growth  Potential GDP growth  0.4 0.3 0.2 0.1 0.0  2017-18 average  2019 average  In the MPC’s most recent projections, we expected these negative trends to reverse. Overall, UK GDP growth was projected to pick up from current below-potential rates, supported by the reduction of Brexitrelated uncertainties, an easing of fiscal policy and a modest recovery in global growth. This rebound is not, of course, assured. The economy has been sluggish, slack has been growing, and inflation is below target.

During exceptional circumstances such as Brexit, the MPC has been required by its remit since 2013 to balance such trade-offs.16 Consistent with that requirement, in August 2016, the MPC judged that it was appropriate to set policy after the referendum so that inflation returned to its target over a longer period than the conventional horizon of 18-24 months in order to support jobs and activity at a time when uncertainty was elevated and the economy was slowing. Chart 10 illustrates the MPC’s framework for setting policy to manage this trade-off. The red lines represent the potential trade-offs that the Committee could strike: mapping the size of the inflation overshoot that it could be prepared to tolerate for a given amount of spare capacity, and vice versa. The flatter the line, the less weight the Committee places on output stabilisation and the more it is willing to tolerate large output gaps in order to eliminate small overshoots in inflation. To be clear, the precise trade-off that the MPC pursues is not determined by the preferences of its members. Rather, it is grounded in society’s choice of the desired end, as captured by the statutory objectives and the remit the Committee is given by government.
This type of stress testing also accounts for what implications banks’ reactions would have for the real economy. In other words, macroprudential stress tests consider the adverse credit supply shock that may lead to an amplification of the macroeconomic effects of the global shock, which, in turn, could further damage banks’ balance sheets. By modelling the negative feedback loop between the banking sector and the real economy beyond the first round of shocks, we believe the exercise becomes more realistic. A macroprudential stress test of banks directly supervised by the ECB, using the baseline and adverse scenarios of the recent EBA stress test, confirmed the general resilience of the euro area banking system. Results, however, point to an additional fall in GDP of 1.6% across the euro area, on top of the GDP shocks of the adverse scenario over the three-year horizon. This stress-testing framework can also inform the calibration of macroprudential policies with the 3/6  BIS central bankers' speeches  aim of limiting unintended spillovers to other parts of the financial system or the real economy. In the spirit of pre-emptive macroprudential policy, these exercises can emphasise the need for the timely build-up of capital buffers, which can then be used to absorb losses when risks materialise, before they affect growth and employment. Finally, the stress-testing framework can be used to analyse the spillover effects of the macroprudential policies themselves.9 For instance, another finding of the framework is that capital-constrained banks are more likely to reduce their foreign exposures than their domestic ones.

Furthermore, our analysis6 shows that there are only limited spillovers from the monetary policy of the Federal Reserve to euro area inflation and output. This suggests that ECB monetary policy actions are, by and large, able to shield the euro area economy from spillovers from US monetary policy. But undoubtedly, there is evidence that US monetary policy is a driver of a “global financial cycle”.7 In step with such a financial cycle the risks to euro area financial stability can change as well. Current financial stability concerns in the euro area As you know, our characterisation of the main risks to euro area financial stability has remained broadly unchanged over the recent years. We see four main risks: The most prominent risk stems from the possibility of a disorderly increase of global risk premia. The second risk is related to renewed debt sustainability concerns, for sovereign debt in particular. The third risk is that banks’ intermediation capacity may be hampered by their continued low profitability. Finally, we are of the opinion that possible liquidity strains in the investment fund sector constitute a growing risk. All four risks are intertwined and would have, if they were to materialise, the potential to be mutually reinforcing. In 2018, a growing economy and improved banking sector resilience were important positive factors supporting financial stability. Now, however, the assessment is affected by a weakening economic growth outlook for the euro area.