samchain/econo-pairs-v1 huggingface dataset:
On the quantity side, since the notions of internal rating systems and the quantification of credit risks remain relatively new to the industry, some banks may have kept the relevant default and loss data only for recent years. Insufficient data consequently becomes an obstacle to the implementation of the IRB Approach by banks, in particular that the data collected so far may not be long enough to cover a complete business cycle. As such, the stability of an IRB system under different economic conditions cannot be meaningfully evaluated. The problem is especially consequential in Asia, as economic fluctuations in the region have tended to be faster and greater in magnitude than those in more mature banking markets. The third challenge banks in Asia may face in adopting the IRB Approach is the paucity of internal resources necessary for rating system development and validation. Many banks have relied, or intend to rely, on external parties such as consulting firms and model vendors. Employing third-party services can be beneficial in respect of areas like professional expertise, knowledge transfer, the utilisation of a more comprehensive data set and assuring independence in the validation process. However, over-reliance on external parties does carry certain risks. One example is that banks may not have the internal expertise to assess the quality of the rating systems delivered by model vendors. And it is not just the banks that face resource issues, it is the supervisors as well.

The question that arises today is: which systems could become more efficient or offer greater possibilities as a result of technical decentralisation? In the field of regulation and supervision conducted by the ACPR, we applied the same principles. Take the case of Artificial Intelligence (AI). How do we concretely define the conditions for a controlled development of artificial intelligence and define the principles of its control? It is in this spirit that we designed our IA workshops: the ACPR FinTech experts and the Banque de France data scientists met established players to understand their perception of these technologies and assess their level of maturity. In the areas of AML-CFT, internal models and consumer protection, the lessons learned from these meetings and tests under production conditions will provide us with crucial information for building a future framework conducive to controlling the development of Artificial Intelligence. (iii) Aware of the importance of the issues and clairvoyant as to their complexity, ready to change our regulation and the exercise of our missions, we must also be bold, that is to say, innovative. To conclude this speech, I would like to stress two important elements. First, European financial sovereignty does not depend solely on the authorities of its Member States or on the regulations drawn up by the European Commission; it depends first and foremost on the vitality of the European ecosystem and on the innovation effort of all players, be they established or new.
The advent of credit risk modelling techniques such as CreditMetrics allow such an exercise to be attempted. Any results under this sort of approach need to be treated with a fair amount of caution, given the number of assumptions involved. The work we have done at the Bank, experimenting with these models and using different parameters, at least supports the proposition that G10 international banks (the target constituency for the Accord) should have capital on the basis of a one-year default probability that is consistent with an investment grade rating. Assuming that we can somehow identify the current confidence level implicit in the existing capital Accord, we may, as I suggested above, nevertheless want to debate the question of whether the Committee would be right in aiming to replicate this under the new Accord. Is this a reasonable objective? Or are we being too conservative? Clearly there are types of banking exposures for which too much capital is being demanded, such as lending to very high quality corporates. This has led to some exposures being moved outside the banking system, through disintermediation or regulatory arbitrage. This problem is one of the main drivers behind the Basel Committee’s current review of risk measures. However, there are equally transactions for which the Basel minimum is severely inadequate, such as lending to some OECD countries. But the question is really whether on average the regulatory requirement produces the right level of protection.

Jean-Pierre Roth: Economic recovery is continuing in Switzerland Introductory remarks by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 15 December 2005. *  *  *  Ladies and Gentlemen As we have just announced in our press release, the Swiss National Bank is raising its target range for the three-month Libor by 0.25 percentage points to 0.50–1.50%. This change will take effect immediately. The SNB intends to hold the rate in the middle of the target range for the time being. Economic recovery is continuing as expected. It has grown stronger and is more broad-based. The SNB has raised its forecast for economic growth in 2005 and now expects the increase in GDP to reach just over 1.5%. For 2006, it projects growth of a little more than 2%. The National Bank anticipates average inflation for 2005 to remain at 1.2%. On the assumption that the three-month Libor remains unchanged at 1.0%, it forecasts annual inflation of 0.8% in 2006 and 1.2% in 2007. By raising its target range, the Swiss National Bank is adjusting its monetary policy to economic developments, which are proceeding as expected. The SNB thus ensures that the inflation outlook remains favourable. Despite the increase in the interest rate, the monetary policy of the SNB remains expansionary and supports the upswing. As economic recovery progresses, the SNB will continue to gradually adjust its monetary policy.
Who better to speak to us this evening on this topic than Otmar, with his extraordinary talent for communicating with an interested general public? Ladies and gentlemen, please join me in welcoming Otmar Issing with a big round of applause. Page 4/4

Provided there is stable confidence in the policy for price stability, price effects from a weakening of the exchange rate are generally BIS Review 32/1997  -3-  transitory. A depreciation is a problem for monetary policy only when it has a lasting expansionary effect or if inflation expectations rise. The economy’s inflation propensity, which seems to have decreased in recent years, is an important factor to consider when assessing the threat from future inflation. The term inflation propensity stands here for the structure of the inflation process, which is liable to be changed by various factors. If stronger competition, for example, in certain segments of trade results in lower price increases than before when consumption is rising, then the economy has a lower inflation propensity. Examples of factors that may have helped to reduce the inflation propensity are the fall in market expectations of inflation and the higher acceptance of the Riksbank’s inflation target. Another cause of a decreased inflation propensity can be lower inflation as such. Price comparisons are easier for households and firms when inflation is low. Price increases are more visible and producers have more difficulty in raising prices without a relative price shift. The situation in this respect is one of the main issues that the Riksbank will have to evaluate. We shall be returning to this later in the year. All in all, the picture that emerges of the Swedish economy suggests that the monetary stance is well balanced.
The SNB’s forecasts also show that inflation will begin to increase again from the beginning of 2011, to reach 2% in the first half of 2012. III. Policy challenges for the future  1. Exit strategies  For the SNB, the return to normality does not pose any difficult conceptual problem. The unconventional measures developed to combat the current crisis have in part modified the nature of the liquidity created. Liquidity resulting from repos and currency swaps is temporary: it flows back automatically when transactions are not renewed. Liquidity created by acquiring foreign exchange and Swiss franc bonds is more permanent. The issuance of SNB Bills routinely practiced since October 2008 has given the SNB a tool that can play a central role in liquidity absorption. The next speaker, my colleague Dewet Moser, will concentrate on the more technical aspects of the exit strategy. Suffice it to say that the toolbox is available. It is not a question of how, only of when. On the timing issue, because of the long and variable lags between monetary policy decisions and their impact on inflation, the decision to start tightening is a difficult one. It is necessary to balance the risk of moving too soon, when the economy may not yet be fully able to withstand the move, against tightening too late and giving too much room to potential inflationary pressures. There is no magic recipe. All the more so because we are reasoning at the level of the aggregate economy, that is, in terms of an average.

Today, viewed from an international perspective, the Swiss economy is in a relatively favourable position. GDP has been growing for two consecutive quarters. Inflation is back in positive territory but without excessive upward pressure. Fears of deflation, which constituted one of the major risks of the past year, have not yet disappeared but are receding. Employment is no longer falling and unemployment may be stabilising. The Swiss export sector was strongly hit by the crisis and is still fragile. Economic activity has been sustained by domestic consumption (both private and public) and by construction activity. Last year’s GDP growth, at –1.5%, constituted the worst performance for the Swiss economy since 1975. Yet this figure is considerably better than the corresponding figure for most developed economies. Let us spend a moment examining the remarkable fact that private consumption growth in Switzerland has remained positive throughout practically all stages of the downturn. Immigration and precaution are the two key words that explain this exceptional result (with a third contributing factor being the fact that disposable incomes have stayed high in real terms, owing to a strong pre-crisis growth performance and a job market more robust than might have been feared). The recent immigration has been a positive contribution to consumption. But even the per capita figure for consumption has not decreased during the crisis. This has been possible because, very much in a textbook fashion, Swiss consumers have been able, during times of crisis, to draw on savings that had been comfortably replenished before the storm arrived.
Cecchetti, Stephen, Hans Genberg, and Sushil Wadhwani (2002). “Asset Prices in a Flexible Inflation Targeting Framework”, in William Hunter, George Kaufman and Michael Pomerleano, eds., Asset Price Bubbles: The Implications for Monetary, Regulatory and International Policies, 427–444. MIT Press: Cambridge, MA. Coenen, Günter, Athanasios Orphanides and Volker Wieland (2004). “Price Stability and Monetary Policy Effectiveness when Nominal Interest Rates are Bounded at Zero”, Advances in Macroeconomics, 4(1). Cúrdia, Vasco, and Michael Woodford (2009). “Credit Spreads and Monetary Policy”, NBER Working Paper 15289. Cúrdia, Vasco, and Michael Woodford (2010). “The Central Bank Balance Sheet as an Instrument of Monetary Policy”, paper prepared for Carnegie-Rochester Conference on Public Policy, “The Future of Central Banking,” April 16–17. Eggertsson, Gauti B., and Michael Woodford (2003). “The Zero Bound on Interest Rates and Optimal Monetary Policy”, Brookings Papers on Economic Activity, 1, 139–211. Edge, Rochelle M. (2003). “A Utility-Based Welfare Criterion in a Model with Endogenous Capital Accumulation”, Board of Governors of the Federal Reserve System, Finance and Economics Discussion Series, No.2003-66. Gagnon, Joseph, Matthew Raskin, Julie Remache, and Brian Sack (2010). “Large-scale Asset Purchases by the Federal Reserve: Did They Work?” Federal Reserve Bank of New York, Staff Report No.441. Gertler, Mark, and Peter Karadi (2009). “A Model of Unconventional Monetary Policy”, mimeo, New York University. Greenspan, Alan (2002) “Opening Remarks” in Rethinking Stabilization Policy, 1–10. Federal Reserve Bank of Kansas: Kansas City. Gruen, David, Michael Plumb and Andrew Stone (2003).

Similarly, “Credit market shocks” is the net impact of the credit demand and credit supply shocks. 34  BIS Review 111/2010  Chart 4b Historical Decompositions: United Kingdom Real credit growth (ann %)  Real house price inflation (ann %) 40  25 20  30  15 10  20  5  10  0 ‐5  0  ‐10  ‐10  ‐15  ‐20  ‐20 ‐25 ‐30 1970  1974  1978  1982  1986  1990  1994  1998  2002  2006  ‐30 1970  1974  1978  1982  1986  1990  1994  1998  2002  2006  2010  2010  Bank Rate (%)  GDP growth (ann %) 12  20 15  8 10 4  5 0  0  ‐5 ‐4 ‐10 ‐15 1970  1974  1978  1982  1986  1990  1994  1998  2002  2006  2010  ‐8 1970  1974  1978  1982  1986  1990  1994  1998  2002  2006  2010  Legend: Trend Aggregate demand and supply shocks Credit market shocks  BIS Review 111/2010  Macro volatility shock Monetary policy shock House price shock  35  Chart 5 Central Bank Assets (LHS) and Liabilities (RHS) United States  Euro Area  36  BIS Review 111/2010  Chart 5 (cont.)
Finally, I would like to draw your attention to another topic. It concerns the future, - the development of financial technologies - and it is a topic today beingdiscussed widely. The development of financial technologies has become a point of regular discussion in the partnership of financial institutions and banks with the regulator. We are aware that growth of such technologies allows banks and other financial institutions to improve their efficiency, enter new market segments, and develop customer products and services. However, there is another reason to take a closer look at fintech - for it is these technologies that may rapidly alter the banking environment and all of you need to take it into account that new technologies are developing very quickly and may impact on your business. We should be prepared for such an alteration. Otherwise new actors may oust conventional banks from the market. We are interested in developing financial technologies because they are convenient for people and for businesses, but at the same time we do not want the explosive growth in technologies to result in an increase in cyberattacks and cyberfraud. The Bank of Russia is focused on this issue. We have established both a centre for the development of financial technology and a centre for monitoring and response to cyberattacks in the financial sector.

What implications does this have for the competitive environment? There are banks on the market which operate fairly, comply with regulations, do not accumulate risks, act prudently, and develop business with the target of long-term sustainability. This is the principle governing what they offer to their customers. At the same time, nothing restricts a fraudulent bank unconcerned about risk management, instead simply ‘hoovering up’ depositors’ money. Certainly, to customers looking in from the outside it will seem like the bank with the most appealing offer. If we fail to expose such banks and withdraw them from the market promptly, decent and fair banks will continue to lose in terms of competitiveness. Therefore, I find it strange that the ARB consistently urges the Bank of Russia not to revoke licences. We believe it to be totally against the interests of responsible banks, which - I am convinced - constitute the majority in the Association and in this room. We are very much concerned that the ARB, though emphasising the importance of competition, nevertheless tolerates misreporting, fraud and the violation of laws. The Association neither condemns dubious operations nor seeks to develop good standards of practice. Furthermore, they demand that we turn a blind eye to problems arising in banks. This is exactly what the ARB means when it insists that we ‘not revoke so many licences’. However, we abide by the law and take measures stipulated by the law. Managers of those banks from whom licences were revoked used to be members of the ARB Board, i.e.
In such a crisis, however, prompt action is vitally important. The central bank initiative contributed to this. Lessons Swedish banks were never directly involved in these problems, though they did feel certain effects of the developments in U.S. financial markets. Even the Swedish market became less liquid. However, the involvement of Swedish banks might have been greater and that is why the Riksbank needs to analyse the origins of such problems. Our function of promoting a safe and efficient payment system cannot be performed properly without a good capability for analysing and understanding the implications of the crises that occur around the world. The results can lead to conclusions that underpin the stability of Sweden’s financial system. The Riksbank has in fact been working on these matters for a long time; risks of the type that caused problems last autumn were considered in the Financial Market Report that was published in November. In the case of LTCM, the threat of a systemic crisis came from the combination of extensive counterparty risks and a high risk concentration. Counterparty risks occur when there is uncertainty about the ability of counterparties to meet their commitments. One of the problems was the large number of banks that had provided loans to LTCM. This gave a concentration of risks to a particular counterparty, which had large positions of its own. Such a concentration can have several causes. The high profits—probably also the reputable status of executives—no doubt made the fund attractive as a counterparty.

Although the appreciation of the dollar is likely to cause some further softness in import prices, the continued decline in resource slack as the economy expands should push in the opposite direction. In addition, longer-term household inflation expectations have been well maintained through this period of very low inflation, as indicated by our Survey of Consumer Expectations. The combination of stable expectations and declining slack should push inflation slowly back towards the FOMC’s objective. Monetary policy As the FOMC has consistently communicated, the timing of lift-off will depend on how the economic outlook evolves. As I have discussed, the labor market has improved substantially and I expect to see inflation begin to firm later this year. If this labor market improvement continues and the FOMC is reasonably confident that inflation will move back to our 2 percent objective over the medium-term, then it would be appropriate to begin to normalize interest rates. At the March meeting, the FOMC removed language from the statement that indicated that we would be patient in beginning the process of normalizing monetary policy. But, as Chair Yellen remarked in her most recent press conference, removal of “patient” from the statement does not indicate that we will be “impatient” to begin to normalize monetary policy. Rather, the timing of normalization will be data dependent and remains uncertain because the future evolution of the economy cannot be fully anticipated. Whenever the data support a decision to lift off, I think it is important to recognize what this would signify.
Similarly, the changes in the composition of labour contracts that I mentioned earlier are likely to imply that inflationary pressures might take longer than usual to build up. We need to factor this information into our policy deliberations. At the same time, we need to monitor carefully developments in long-term unemployment, labour force participation rates and hours worked with a view to informing our assessment on the likely evolution of structural unemployment. Should the share of long-term unemployed stabilise at one point, with no convincing signs of further likely downward adjustments, the risks of inflationary pressures starting to emerge at higher levels of unemployment would increase. At this point – when scratches indeed become scars – the level of slack relevant for determining medium-term price stability would decline. Policymakers would therefore need to start tightening policy earlier to remain faithful to their primary mandate. As I mentioned in my introduction, however, there are some who argue that such a response would be premature, since if hysteresis effects can be caused by lack of demand, then they can equally be reversed by excess demand. In a high-pressure economy, for example, firms might be encouraged to dig deeper into the labour market to find recruits, thereby reactivating and retraining some of those workers who were previously thought to be unemployable. Glenn Rudebusch and John Williams therefore conclude that optimal monetary policy would allow inflation to overshoot its target.13 I have some doubts about this view, mainly for two reasons.

Indeed, already 20 years ago Staiger, Stock and Watson 9 pointed out that the most striking feature of NAIRU-based inflation estimates is their lack of precision, not to mention model uncertainty as evidenced by the righthand chart on slide 3. So what, then, is causing the sluggish performance of inflation? Here I want to argue that there are more subtle forms of hysteresis in the economy that are altering how we typically understand labour market slack. These are the scratches rather than the scars. 3/9  BIS central bankers' speeches  A different perspective on labour market slack One of the features of the recent employment recovery is that many new jobs have been of a lower “quality” compared with those seen before the crisis. While employment ratios have rebounded strongly, employment of full-time workers with permanent contracts has in fact declined. The latest EU Labour Force Survey (LFS) data suggest that “core” employment – that is, full-time positions on open-ended permanent contracts – now account for just over two thirds of all employees. You can see on slide 4 that this is the lowest share since the survey was first conducted. The LFS also suggests that of the net employment created since the crisis, around a third has been for workers on temporary contracts, and around a quarter part-time. Of course, a fraction of those seeking part-time employment do so as a way to balance work and other commitments. But, for others, the choice for part-time work is involuntary.