samchain/econo-pairs-v1 huggingface dataset:
If I refer more specifically to what has been observed in the past in France, an economic strategy, based on a moderate increase in unit costs of production, gave us an important edge: the considerable improvement in the cost competitiveness of the French industrial sector from the mid-1980s has contributed extensively to boosting growth. The French economy grew faster than major euro area economies from 1997 to 2001 (+ 15,4 % in France compared to + 13,4 % in the euro area), while repeatedly recording a large current account surplus. This improvement in our overall cost-competitive situation has progressively materialised into growth, job creations and solid external accounts. Competitiveness is also linked to European harmonisation in other fields, for example in the service industries. Most of the barriers to trade in services appear to be due to national regulations and should be abolished or alleviated. While the Eurosystem acts mainly as a stimulus in the process of structural reforms, it also plays a leading role in ensuring financial stability. This brings me to the second challenge that EMU will have to take up. Financial stability Like any independent central bank, the Eurosystem has to fulfil two main functions: firstly, ensuring price stability, which is a key condition for sustained growth, and secondly, preserving financial stability, which has become a critical challenge in a globalized world economy. I insist on the highly complementary nature of these two objectives, as price stability is the foundation on which financial stability is built.

And I would like to share with you that some banks have launched what we may call a “pre-vetting” process for account opening. This means an applicant may request to first submit the documentation and information required for opening an account to the bank by mail, fax or email, and the bank will “pre-screen” or “pre-vet” them before arranging the applicant to have a face-to-face meeting in Hong Kong. I trust this change in process flow would be welcome by customers based overseas. 8. We are also working closely with the industry to explore the use of technology to enhance the efficiency of account opening processes, such as KYC Utilities (“KYCU”) and technology to allow remote account opening. You may have heard about KYCU, which are third-party platforms that aim to manage data as a strategic asset across banks to reduce duplication and cost and assist banks in making decisions, on all types of risks, including but not limited to AML, and as a result to make smarter business decisions. For example, a single source of customer data or documents would remove the need of a customer to provide KYC documentation to every bank, and may shorten the turnaround time for new account opening. We have had a number of discussions with major banks and relevant technology providers and steps have already been taken by both the HKMA and some major banks to take this work forward.
It is broader and also has positive aspects that are too often overlooked: lower financing costs; a lower cost of risk due to borrowers’ improved solvency. Furthermore, in September, we decided – and I had advocated this – to set up a mitigation mechanism, known as tiering, which exempts some of your excess reserves from the negative rate. Germany is the euro area country whose banks have the largest liquidity surplus: tiering will therefore first benefit German banks, for several hundred million euros. This is good news; it hasn’t been much talked about and this is why I am particularly keen to welcome it with you. I also note that a number of countries – such as Denmark, Sweden and even the Netherlands in the euro area – display negative interest rates, but significantly higher bank profitability ratios than those of euro area banks – an RoE of 9-11%, compared to 6% in the euro area. Negative rates are not the only problem. More structural problems must also be solved. This brings me to the digital challenge. The digital transition is an important strategy for reducing costs. Financial institutions can unleash productivity gains  Page 6 sur 7 by exploring even further the possibilities of automation and artificial intelligence. However, in the short term, IT investment costs are significant, while potential profitability gains can only be generated in the medium and long term. This challenge is even more complex for medium-sized banks, and those that do not have sufficient financial capacity.

You may not like low rates; indeed the markets anticipate, reasonably in my view, that short-term rates are close to bottoming out. But there can be no doubt about two very real facts that unite us on the Governing Council. Our decisions are guided solely by our mandate of price stability, in the face of inflation that is currently too low at less than 1%. Given the recent slowdown in economic activity – starting with Germany – these low short-term rates must and will remain in place: it would undeniably be a mistake to raise ECB rates now. We are all realists here, so we should focus on two issues: -  The first is clarifying the definition of the ECB’s inflation target, and above all sharing it better with economic agents – businesses and households. This is crucial to allow them to better adjust their inflation expectations; that is precisely the aim of the strategic focus we are going to launch with Christine Lagarde. -  The second issue is limiting the negative effects of low rates on financial stability, and in particular on banks and insurers. We do not lack the tools to do this – you with your strategic adaptation, and us with our “macroprudential” policies. But this brings me to my second part. II. Meeting three major challenges to strengthen euro area banks. I would like to share with you a strong belief: Europe needs strong banks.
At the end of last year, however, resource utilisation in the Swedish economy was beginning to be strained and inflation was estimated to rise to the extent that it would exceed the target level two years’ ahead. The Riksbank therefore raised the repo rate by a quarter of a percentage point to 4.25 per cent. The assessment of the risk spectrum indicated at the same time that a weaker economy in the USA could dampen growth in Sweden. As we now know, this is what happened. Developments during the spring During the first half of the year, the economic climate continued to weaken both in Sweden and other countries, but the signals regarding the strength of the downturn were mixed. The weakening in the economic climate was concentrated to the manufacturing industry, while household confidence remained strong, despite an undermining of household wealth in the form of falling share prices. Property prices were not affected in the same way as share prices, which probably contributed to keeping household’s confidence in the future strong. This applied both to the Swedish economy and the US economy. In the USA the Federal Reserve lowered interest rates gradually by 2.75 percentage points during the first half of the year, while tax reductions provided stimulation for households. For the Riksbank the picture was complicated by the fact that import prices rose unexpectedly rapidly in May. Later, the statistics showed that consumer prices had also risen more rapidly than expected.

I would therefore like to share with you after a brief description of what preceded the economic slowdown we have now entered – my view of what are the core issues for assessing growth and inflation prospects for the near future, both in the USA and in Sweden. The driving forces behind the economic upturn in the USA The very optimistic expectations regarding long-term growth comprised an important driving force behind the sustained rise in the US economy. It was the rapid developments in information technology and the telecom sector in particular that were assumed to have such spread effects to the rest of the economy that production was expected to continue increasing at a more rapid rate than before, even in the long term. Investments therefore rose strongly, particularly in the IT sector. There were also many people who claimed that future fluctuations in the business sector would be less pronounced than before. Efficient stock management and trimmed production processes were assumed to be factors that would reduce the risk of major fluctuations in growth. The USA had taken the step into a “new economy”. And developments on the stock market reflected the belief that “this time it’s really different”. At the same time, the fact that demand could increase so strongly and over such a long period of time without inflation accelerating in the USA was regarded by many as the revenue from breaking earlier economic ties.
In view of the interest rate risks taken and the now extremely low provisions in the Swiss banking sector, the negative consequences of an unexpectedly sharp interest rate increase could be relatively far-reaching. The Swiss banking sector should nevertheless have sufficient capital to bear up, even under such circumstances. Hedge funds might pose an indirect threat to stability in that their failure affects systemically important banks. In our opinion, this is an unlikely scenario, however. Hedge fund risk management at Swiss big banks is adequate. The SFBC supervises the big banks’ hedge fund activities. Their exposure to hedge funds must be backed by capital as in the case of any other market and credit risks. It is, however, undisputable that, given the rapid developments in the hedge fund industry, activities must be monitored closely. System oversight In December, we reported on the situation with regard to the oversight of systemically important payment and securities settlement systems. In the meantime, the “systemically important” classifications of the interbank payment system Swiss Interbank Clearing (SIC), the securities settlement system SECOM, the central counterparty SIS x-clear and the multi-currency payment system Continuous Linked Settlement (CLS) have become definitive, and the preparations for the oversight measures stipulated in the National Bank Ordinance are going ahead as scheduled. In particular, detailed guidelines were drawn up in order to examine whether or not the regulatory minimum requirements are complied with.

Firstly, the Swiss banking industry found itself in a predominantly positive environment: economic activity and the stock markets exhibited favourable development, interest rates remained low, and the credit standing of borrowers tended to improve. Consequently, profits in the banking sector not only remained high, but in most cases had increased over the previous period. While the satisfactory results achieved already in 2003 were mainly due to cost-cutting measures, the figures during the period under review can be ascribed to higher operative earnings. Secondly, the banks’ reinforced capital resources improved the sector’s resilience. The majority of banks took advantage of the favourable environment to strengthen their capital base. Excess capital at the end of 2004 significantly exceeded the historical average. One exception, however, are the big banks, which – despite better profits – hardly increased their capital base at all. The risk-weighted capital ratio is relevant for regulation. The big banks are quite well placed by international standards in this regard. However, if the unweighted capital ratio is used as a benchmark (in Switzerland, it is not subject to any minimum requirements), the capital levels of the big banks are more modest when viewed internationally. The reasons for this discrepancy are the comparatively low proportion of off-balance-sheet business at the Swiss big banks on the one hand, and the low average weighting of trading and loan books on the other hand.
23  Mahadeva L., Sterne G. (ed.) Monetary Policy Frameworks in a Global Context, Routledge, 2000. 24  The improvement of monetary policy transparency in Poland is documented in Łyziak et al. “Central bank credibility and transparency – the case of Poland”, mimeo, 2005. 25  Rozkrut M., Rybinski K., Sztaba L., Szwaja R. „Quest for Central Bank Communication. Does It Pay To Be “Talkative?””, mimeo, April 2006. 26  “According to Debelle (1997) and Mason et al. (1997), one of the key prerequisites for the successful adoption of inflation targeting is that the central bank must have an adequate ability to produce inflation forecasts and to assess the impact of changes in monetary instruments on inflation (the magnitude of the effects, their lags etc. ).” In Poland until 1998 (IT was introduced in 1999) there was no clear statistical linkage between changes in the short-term policy interest rates and changes in inflation - Christoffersen P., Wescott R. ”Is Poland ready for inflation targeting?”, IMF Working Paper, 1999. 27  IMF, op. cit. 4  BIS Review 42/2006  Thank you. BIS Review 42/2006  5

Another important question is whether the Riksbank should issue e-krona directly to the general public or go via the banks, as we do now with banknotes and coins. If we were to use the tried and tested model, the banks would buy e-krona from the Riksbank and then give their customers access to them. If we were instead to turn directly to the general public, it would mean in practice that households and companies could open accounts, or something similar to accounts, in the Riksbank. It would in this case be something entirely new for the Riksbank, which would need to take a stance on how this could affect the banks’ operations and how the Riksbank could best manage all of the new customer relations that arise. Should e-krona generate interest? Other examples of strategic questions are whether the Riksbank should issue unlimited amounts of e-krona if there was a high demand on the market, and whether ekrona should generate interest. These two questions concern both monetary policy and the financial stability of the banking sector. From a monetary policy perspective, an unlimited issue could be expected to increase the Riksbank's possibilities to steer the money supply, that is, issuing could in some situation function as a monetary policy tool. Some economists advocate that the central bank should replace cash with a digital currency that can be given a negative interest rate, for instance by reducing the balances on e-krona accounts or not redeeming e-krona at their full value.
From an investor protection standpoint, one may have drawn a sigh of relief, as any potential issues about misrepresented risk profile disappeared, but from a financial stability perspective, it was obviously disturbing. In a short space of time, billions of assets showed up on already over-extended bank balance sheets. One may think it somewhat surprising that (almost) all the banks decided to absorb their SIVs, especially since it must have seemed likely that the SIV structure would not come back any time quickly as a viable funding structure. We believe that the main reason for doing this was that not doing so would have sent a distress signal to the market. In other words, if a bank chose not to absorb this problem, the perception would be that they simply could not afford to do it, thus telling the market that they were in even worse shape than previously feared. There may also have been an element of “repeat game”. If one lets one’s investors take the pain, then they may not return for future transactions. It seems plausible that if the SIV crisis had transpired during a time when most other markets had remained functioning, the decision making process might have been very different. “Signalling” is at its most powerful when the level of uncertainty in the system is highest.11  10  The one notable exception was Standard Chartered, which let its “Whistlejacket” SIV unwind. 11  The issues arising from ABCP conduits were similar, although the structures were slightly different.

In case of massive shocks, these investors could be better suited to absorb the losses, as there is limited leverage to trigger further spillovers through defaults or  6  This caveat might seem an important element of hindsight. But one reason why the complexities were not addressed was the assumption – based on local correlations – that the fundamental risk was negligible. 7  A general idea explored by Viral Acharya, 2009, “A Theory of Systemic Risk and Design of Prudential Bank Regulation”, Journal of Financial Stability, 5(3), in a somewhat different context. See Also Haldane, 2009, Op Cit and Nier, Yang, Yorulmazer and Alentorn, 2008, “Network models and financial stability”, Bank of England Working Paper No 346. 4  BIS central bankers’ speeches  panic driven asset sales. Many of these investor groups are, however, subject to an extensive regulatory framework, making them unable to hold such risks in their portfolios, in many cases even as a very small fraction of total assets. There is a potentially difficult tradeoff here between public policy objectives of appropriate investor protection and systemic stability considerations. That probably deserves to be debated more fully. It is clear, however, that highly leveraged institutions such as banks and hedge funds are not really suited to be the ultimate repositories of extreme tail risk8. What does all of the above tell us?
Financial cooperation Financial cooperation is a critical component of this effort. Financial services is a significant part of our (6-7%) regional economy, and is a growing sector. But it is not just the size of the market that makes financial services important. The Asian Crisis has demonstrated that with globalisation and greater ease in transferring funds around the world, it is more critical than ever that our financial sectors be sound, and our economies not be weakened by excesses. In recognition of the importance of the financial sector, the ASEAN Finance Ministers started to meet in February 1997. We have introduced important co-operation initiatives, such as the ASEAN Surveillance Process to keep track of economic and financial trends and to provide early warning of economic vulnerabilities, and the ASEAN Finance Work Program to improve financial procedures, standards and corporate governance within member countries. These are important mechanisms to guard against a repeat of the Asian Crisis. To further liberalise and integrate our markets, the Finance Ministers last year endorsed a roadmap for regional financial integration. This will guide us towards greater liberalisation and integration of our markets. To keep ASEAN on the radar screens of international investors, Finance Ministers are planning to organise joint road-shows to Europe and the US to promote the investment opportunities in ASEAN. One possible area for collaboration is in the capital markets.

At the same, we are seeing signs of a cooling housing market. House prices fell more than we had expected in September, and the number of unsold homes has increased. According to Statistics Norway's business sentiment survey, the prospects for manufacturing have weakened. The labour market is tight, and the employment ratio is high. The number of employed appears to be slightly higher than expected, while the number of unemployed has been a little lower. The number of job vacancies is high, but the number of new vacancies has decreased slightly. Chart 4: Inflation is high Inflation has continued to edge higher and is markedly above our target of 2 percent. In the year to September 2022, consumer prices rose by almost 7 percent. Energy prices were a main driver, but prices are also rising rapidly for a range of other goods and services, both for domestically produced and imported goods and services. In September inflation was higher than we had expected, with a surprisingly sharp rise in transport prices, which tend to vary widely. The Committee judges that a higher policy rate is needed to bring inflation down towards the target. Inflation has increased more than projected, and the labour market appears to be a little tighter than previously anticipated. These developments could suggest raising the policy rate by more than 0.25 percentage point at this meeting. On the other hand, there are signs that some areas of the economy are cooling down, and prospects for lower-than-expected freight and energy prices may curb inflation ahead.
The sector, in the banking and insurance industries, now provides employment to more than 123,000 Malaysians. Despite conditions that have remained challenging for a large part of the decade, the banking system remained consistently on solid financial ground with a risk-weighted capital ratio of over 13%, low NPL ratios, and continued profitability for eight consecutive years. Substantial progress has been made towards consumer retail finance and access to banking services. Such consumer lending has increased from RM134 billion to RM343 billion while loans disbursed to small and medium enterprises have increased from RM71 billion in 2000 to RM108 billion in 2007. Domestic banking institutions are also building on their strong domestic performance to expand beyond Malaysian borders. Today, six domestic banks have presence in 10 countries around the region. The current encouraging state of the banking system, however, should not make us complacent on the need to continually transform and reinvent. The road in front of us is likely to be significantly different from the one we have traveled on. As our previous experience has shown, we need to constantly recognize that strategies that serve well in today's environment would not necessarily be a formula for success in tomorrow's environment.

Is that a good outcome? Responding to this, the Riksbank has decided to analyse a “possible do”. Should we issue an electronic currency? An e-krona? We have given ourselves about two years to come up with an initial answer to this question. One possible outcome is that we as central bank in some sense will ourselves become an innovator. Moreover, what we eventually decide to do is likely to affect the possibilities and business cases for different financial innovations in more general terms and have possible repercussions on many other aspects of central banking, such as monetary policy and financial stability. To conclude, I believe that a central bank has an important role to play. What we do, and what we do not do, will affect the pace and the substance of innovation in the financial system. I believe this to also apply to the regulatory community in general. We can talk about the promise of innovation, but we also need to walk the talk – that is to make decisions that balance innovation, stability and growth. That will by necessity involve deciding upon a suitable degree of public and regulatory intervention. There will be winners and losers from these decisions. Making the decisions, and finding that balance, is a major challenge, but it is also an unavoidable challenge. 4 [4]