samchain/econo-pairs-v1 huggingface dataset:
Stefan Ingves: Financial stability – where are we heading? Speech by Mr Stefan Ingves, Governor of the Sveriges Riksbank, to the Swedish Bankers’ Association, Stockholm, 19 November 2009. *  *  *  The title of my speech today is “Financial stability – where are we heading?” Some people would no doubt answer this question, and perhaps with a certain amount of justification, by saying that we are moving backwards – back to a world in which the financial system in general and the banks in particular are constrained by additional regulations and restrictions. Those of us who have been around for a while have seen that there is a movement, a pendulum that swings backwards and forwards between more and less regulation, and right now the pendulum is swinging towards increased regulation. However, we are not moving back to the world we were in before the deregulation programmes of the 1980s. In this respect we are moving forward towards something new. Hopefully, we are heading for a more stable – and efficient – financial system. Today I will discuss a number of proposals for changes in the international regulation of banks. It is not yet clear which of these proposals will actually be implemented. It is therefore important that legislators and authorities now conduct a thorough analysis of the proposals that are under discussion in the international debate before we can decide which of them really need to be implemented.

In 95% of cases, the massive fluctuations in our income can be attributed to the fluctuating values in gold and foreign exchange positions. Experience has shown that valuation gains and losses on financial investments tend to level out again in the long term. Based on these conditions, we thus estimate the earnings potential of our assets to be between 2% and 3%, which translates into an income of between CHF 1.7 and CHF 2.5 billion per annum on the total assets of CHF 85 billion. Given the fluctuations in the exchange rate and gold price, however, the earnings generated can deviate greatly from this amount. For instance, the marked increase in the gold price this year has resulted in valuation gains of roughly CHF 8 billion to date. Should the gold price drop back next year to its end-2003 level, however, this would lead to a valuation loss of over CHF 7 billion. Long-term income estimates should not be based on such unusual gains and losses. Some of the income is allocated to provisions, thereby ensuring the growth of the currency reserves necessary for monetary policy. This allocation (currently approximately CHF 1 billion per annum) should be made in proportion to nominal GDP growth. After deduction of the SNB’s operating expenses of currently CHF 250 million, roughly CHF 1 billion remains for distribution to the Confederation and cantons. Based on the assumptions regarding the earnings potential of our assets, we can expect a distributable annual profit to be somewhere in this region in the foreseeable future.
The right prescription now is a programme that complements monetary stimulus with measures to promote the necessary long-run rebalancing of the economy, enabling us to return eventually to more normal levels of interest rates. Only then can we return to a sustainable growth path. We must not be inactive, but we must be selective in order to be effective. What are those other policies? They come under three headings: restoring confidence in our banks, reforms to raise the future potential supply of our economy, and changes in the world economy and exchange rates. Much has already been done to fix the banking system in this country. And there has been a real improvement in the position of UK banks. Capital ratios have risen, leverage has fallen, liquidity has improved, and bank funding costs have fallen sharply, especially since the announcement of the Funding for Lending Scheme last summer and an improvement in market sentiment towards the euro area. Banks are now overflowing with liquidity, largely as a result of the enormous increase in central bank reserves held by commercial banks. Yet there remains anxiety in markets about the resilience of UK banks. That is affecting the terms on which banks can obtain funding and so their ability to lend to the rest of the economy. Some argue that UK banks’ capital ratios compare favourably with many of their continental counterparts. They do, and we should welcome that. But there is only one simple test of whether UK banks now have sufficient capital.

Dimitar Bogov: Policy nexus and the global environment – a new consensus emerging from the crisis? Address by Mr Dimitar Bogov, Governor of the National Bank of the Republic of Macedonia, at the 2nd Research Conference “Policy nexus and the global environment – a new consensus emerging from the crisis?”, Skopje, 26 April 2013. *  *  *  Ladies and Gentlemen, Dear guests, Let me wish you welcome on our second Research Conference that we usually organize on the day of the monetary independence anniversary of the Republic of Macedonia. The subject of this year’s conference we believe is highly topical, in line with the ongoing lively discussions among central bankers, research and academic institutions worldwide. The global economy in the last couple of years undergone remarkable changes, both from institutional and policy design setup. We witnessed financial market turbulences, banks failures and sovereign debt crisis with strong contagion around the world economy that was almost unique by its size, and the global economy is still struggling to recover. After five years of global crisis we could say that we experienced a lot, and hopefully, we learnt a lot. One of the main lessons of the crisis was exactly related to the topic of the conference – the need of policy nexus as a kind of a consensus emerging from the crisis. What is the policy nexus about?
Svein Gjedrem: Economic perspectives Address by Mr Svein Gjedrem, Governor of Norges Bank (Central Bank of Norway), at the meeting of the Supervisory Council of Norges Bank, Oslo, 12 February 2009. *  *  *  Introduction The poet Øyvind Rimbereid from Stavanger – his works already awarded a place in the Norwegian literary canon 1 – has been nominated for this year’s Nordic Council Literature Prize for the collection of poems entitled Herbarium. The poem “Tulip” starts with the tulip bulb market bubble in the 1600s. A futures market for tulip bulbs had emerged in Holland when growers discovered that infecting the tulip with a virus could produce stripes and beautiful colours. In a short time, bulbs were trading at 25 times the normal value before the market collapsed. A hundred years later, a tulip bulb cost less than one per cent of the price before the collapse. 2 In the words of Rimbereid: “ The year 1635 and on pollen-yellow paper flutter tulip bulbs grown in places unknown to most. Or grown only in the signature on the bill of exchange of a seller who himself has bought a signature from a seller with money that itself exists only as a signature.” 3 Downturn in the global economy In September 2008, the turbulence in financial markets erupted into a full-blown global crisis. Just before, it had appeared that the US government rescue of the mortgage corporations Fannie Mae and Freddie Mac would calm the markets.

Then on 15 September, a major US investment bank, Lehman Brothers, with extensive operations in Europe and Asia as well as the US, filed for bankruptcy. The next day, money markets seized up. Confidence between banks evaporated. Liquidity dried up, interest rates rose sharply and equity prices fell. Exchange rate volatility – the daily fluctuations in the exchange rate – showed a marked rise. On 25 September, a major US savings bank, Washington Mutual, was placed into receivership and its creditors incurred losses. Bond markets in turn shut down. In the days and weeks that followed, banks tightened credit standards on new loans to households and enterprises. 1  Stig Sæterbakken and Janike Kampevold Larsen (Ed.) (2008): “Norsk Litterær Kanon (Norwegian literary canon)”, Cappelen DAMM. 2  For a further account of the tulip bubble in Holland, see NOU 1999:29 “Commodity derivatives”, p 53. 3  Øyvind Rimbereid (2008): Herbarium, Gyldendal Norsk Forlag, p.38. (Unofficial translation by Norges Bank’s translators). BIS Review 16/2009  1  Global economic growth was already slowing, but the situation deteriorated in the last few months of 2008. The turnaround hit hard, with synchronised effects on virtually all financial and goods and services markets, not only in the US but also in Europe, Asia, Latin America and Oceania. Iceland was more vulnerable than most. There were wide swings in inflation and inflation expectations were not well anchored. As a result, the impact on the Icelandic krona was also considerable.
The minutes also described asset sales as part of the strategy, indicating that this step would likely occur relatively late in the normalization process. From the perspective of the balance sheet and the stance of monetary policy, sales accomplish the same thing as redemptions, as they also shrink the balance sheet over time. The minutes indicated that such sales are likely to be gradual and predictable, which makes them even more similar in nature to redemptions. Together, the combination of asset redemptions and asset sales, once underway, should put the size of the portfolio on a path to a more normal level over several years. Thus, they represent an important part of the normalization of the policy stance. However, if the approach follows the gradual and predictable path described by the minutes, one can think of this adjustment as a relatively passive part of the policy tightening. In these circumstances, adjustments to the federal funds rate would generally be the active policy instrument, responding as needed to economic developments. 10 The sequence of policy steps described in the minutes indicates how the size of the SOMA portfolio is likely to be normalized. However, simply reducing the size of the portfolio would still leave its duration at historically elevated levels. The FOMC might decide it was happy with this outcome, or it could decide at some stage to renormalize the duration of the portfolio as well.

These changes likely supported economic growth and the creation of employment relative to what would have been realized in the absence of the program. 4 Second, the LSAP2 program appears to have raised inflation expectations from unusually low levels and reduced the threat of deflation. The downside risks to inflation had become quite threatening by last summer. Breakeven inflation rates had moved to levels that were well below those consistent with the FOMC’s mandate, even for forward measures covering periods beginning several years ahead. In addition, the pricing of deflation risk, as computed by looking at Treasury inflation-protected securities with different amounts of accrued inflation, reflecting fairly substantial odds of deflation over the next several years. 5 Since that  1  Estimates of the contribution of additional risk coming from the increased size of the portfolio range from 60 percent to 80 percent, while estimates of the impact of its longer duration range from 20 percent to 40 percent. 2  See, for example, Chairman Ben S. Bernanke (2010), “The Economic Outlook and Monetary Policy”, remarks at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, August 27. 3  One would expect market prices to incorporate nearly all of the effects of the programs in advance rather than during the actual implementation of the program. Thus, the period before the November implementation is the most relevant period for assessing the program’s effects.
As a consequence, at times, we must be willing to intervene to restrain financial booms in order to temper the busts.   Reform should be undertaken in ways that better align the economic incentives of participants in the financial system with the goal of financial stability.   We should strive to achieve a degree of transparency in the financial system that would enable market participants to make informed judgments about their financial market risks and exposures.   The core of the financial system – the major banks, non-bank financial intermediaries, and financial market infrastructures – must be made more resilient to adverse shocks and less susceptible to runs. BIS central bankers’ speeches  1    Recovery and resolution regimes must be effective in limiting the contagion to the broader financial system when major financial intermediaries or financial market infrastructures come under stress.   We must pay close attention to how all the components of the financial system interact. It can’t just be about particular institutions and infrastructures. Market processes and practices are also very important. Turning first to the issue of financial booms and busts, empirical observation makes it clear that financial markets are inherently unstable. Throughout history we have seen numerous sizable booms and damaging busts. The notion that financial markets are dynamically unstable is also supported by controlled experiments conducted by behavioral economists. Now I accept the notion that some minimum degree of instability is unavoidable.

Institutions are better able to aggregate and assess their risk exposures within short time periods and stress testing means that there is a better understanding of how these exposures might perform in adverse environments. But our task remains unfinished. While progress on reforming compensation practices is welcome, I recognize that there is still much to be done before we can truly say that incentives are lined up in a way that fully supports financial stability objectives. We have work to do on the information front too. Consider the issue of international regulatory access to data. Currently U.S. bank regulators do not have access to the consolidated global balance-sheet information of the foreign banks that operate in the United States (or vice versa for that matter). Our examiners see data associated with the foreign firms’ U.S. operations, but not how that fits in with their operations abroad. Without certain specific types of consolidated global information, it is difficult to place the U.S. operations of a foreign firm in their global context, and make informed judgments about the adequacy of such firms’ capital and liquidity buffers. For example, liquidity is often managed on a global basis, and key business lines are frequently managed globally, even if they reside in multiple legal entities located in different jurisdictions. Making progress in establishing protocols that would enable bank regulators to share more relevant confidential supervisory information on a cross-border basis would be a significant advancement.
Paul Fisher: Why is CPI inflation so high? Remarks by Mr Paul Fisher, Executive Director, Markets, and Member of the Monetary Policy Committee of the Bank of England, based on a talk to Merseyside Young Professionals, Liverpool, 14 June 2010. *  *  *  Annual CPI Inflation reached 3.7% in April (Chart 1). Given the Monetary Policy Committee’s remit to target CPI inflation of 2%, you might well want to ask “how has inflation got so high and what is the MPC going to do about it?” 1 I intend to tackle those questions head on this morning and, in the process, illustrate some of the challenges the Committee faces in setting monetary policy. First we should note that inflation has become more volatile in the past few years than it has been at any time since the early nineties (Chart 2). CPI inflation had previously risen as high as 5.2%pa in September 2008 before falling back to just over 1%pa in the autumn of 2009 and then rising to its recent peak. But historical data suggest that it was the stability of price inflation between 1993 and 2007 that was unusual, not the recent volatility which has been quite mild compared with the pre-nineties experience. The rise in inflation since mid-2009 was surprising given that it happened against the background of a deep recession which generated the biggest fall in output in the UK economy since at least the Second World War (Chart 3).

The fall in output from peak to trough was around 6% (Chart 4). And output is some 10% below where it would have been, had it continued to grow at its pre-recession trend (about 2 ¾ % between 1998–2008). 1  May CPI data were published after the date of this talk: inflation fell back to 3.4%. BIS Review 91/2010  1  One might have expected a recession of this depth to exert considerable downwards pressure on inflation – such that the current CPI inflation rate could easily have been negative. The recovery in inflation seems to reflect two factors. First, given the scale of the fall in demand, the downwards pressure from the recession doesn’t appear to have been as strong as it might have been. Second, there have been a number of temporary factors pushing upwards. Taking the impact of the recession first, the UK economy appears to have behaved differently during this downturn than in previous recessions. The number of company bankruptcies has been fewer than in the early nineties (Chart 5) – despite the fall in output being twice as big, and despite there being more than twice as many companies in existence now. And even though there are over 850,000 extra people out of work following the recession, and the unemployment rate has reached 8%, (Chart 6) a 6% fall in output could have been expected to generate much more unemployment than it has.
Firms need a culture that allows change and is resilient to these trends. In discussions of the impact of technology on financial services, for example, one extreme view is that new fintech entrants—either smaller start-ups or big-tech firms—will leverage technology and a customer-centric approach to disrupt the industry and outcompete stagnant incumbents, fundamentally transforming the industrial organization of financial services. An alternative, equally extreme view, is that incumbent financial firms with established customer bases, scale, vast quantities of data, and experience working in a regulated environment will “disrupt themselves” and maintain their central position in finance. The most likely outcome, as is typically the case, is somewhere in the middle, but change seems inevitable. If all firms face a strategic imperative to innovate and adapt, a relevant question is what types of firm-specific factors will determine success? Clearly, things like business model, technological expertise, and resources will matter. I think that firm culture will also matter. 5 And by culture, I mean the values and shared norms within a group that influence individual behavior, collective decision-making and outcomes. As firms innovate and transform how financial services are provided, I expect we’ll see the value of leadership from senior managers and boards as they outline the strategic case for change and exhibit the critical behaviors that promote it. I expect we’ll see the value of innovative environments where employees speak up, both raising new ideas and questioning assumptions.

The Central Bank developed new tools and introduced new policies to facilitate a stable course in both exchange rates and credit growth and hence, helped the rapid recovery of our country from the deepening of the global financial crisis during 2008–2009; and enabled it to weather the European sovereign debt crisis of 2011–2012 with minimum damage. 1  Barro, Robert J. (1995). “Inflation and Economic Growth.” NBER Working Paper Series, No: 5326. 2  Reinhart, Carmen M., and Kenneth S. Rogoff. (2009). This Time is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton Press. ; Taylor, A. (2012). “The Great Leveraging,” NBER Working Papers, No. 18290. BIS central bankers’ speeches  1  Loans and exchange rates are the two main variables, which are significant for not only price stability, but also financial stability. Therefore, decreasing excessive volatility in the credit growth rate and exchange rates underpins financial stability. Distinguished Participants, Now I would like to touch upon the contributions of Turkey to global financial stability. Turkey became a member of the Financial Stability Board (FSB) in 2009. It will take part in G20 Troika in 2014 and assume the Annual Presidency of the G20 in 2015. Moreover, Turkey’s representative from the Under secretariat of Treasury will be assigned to the FSB Steering Committee during the 2014–2016 period when Turkey will be in G20 Troika. Moreover, Turkey became a member of the Basel Committee on Banking Supervision (BCBS) and the Group of Governors and Heads of Supervision (GHOS) in 2009.
BIS Review 4/2006  11  The Eurosystem’s predictability Figure 5  Interest rate cuts 10  basis points  0 -10 -20 -30 -40 -50 -14 -13 -12 -11 -10  -9  -8  -7  -6  -5  -4  -3  -2  -1  0  1  2  days ECB minimal bid rate  EURIBOR 1m  EURIBOR 6m  EURIBOR 9m  EURIBOR 3m  Figure 6:  Interest rate hikes 50  Basis points  40 30 20 10 0 -10 -14 -13 -12 -11 -10  -9  -8  -7  -6  -5  -4  -3  -2  -1  0  1  2  days ECB minimal bid rate  EURIBOR 1m  EURIBOR 6m  EURIBOR 9m  EURIBOR 3m  Source: Banque de France – Production : Banque de France  12  BIS Review 4/2006

They enhance the public’s understanding of what central banks do and why they do it. Sovereign wealth fund The SNB’s balance sheet has expanded sharply since 2008. It is this growth that inspired the idea to set up a sovereign wealth fund to manage the SNB’s foreign exchange reserves. A number of different options are being proposed for the structure of the sovereign wealth fund. Although proponents’ goals differ quite considerably, they all draw parallels with the sovereign wealth funds of countries such as Norway. However, comparisons with Norway are misleading, since this country supplies its sovereign wealth fund with tax revenues, licence fees and dividends from the oil sector. When companies in a country discover new natural resources, the country becomes richer as a result of the revenue generated and its wealth increases. By contrast, the exceptional growth in the SNB’s balance sheet since 2008 is primarily attributable to foreign currency purchases based on monetary policy considerations. We bought foreign currency in order to limit the appreciation of our own currency, thereby putting more Swiss francs into circulation. Such an expansion of the money supply, however, does not create any real value. This difference between oil revenues and foreign exchange reserves is important when contemplating setting up a sovereign wealth fund. Norway is able to transfer oil-sector tax revenue and other receipts into its sovereign wealth fund, because they constitute profit for the country as a whole. The SNB’s foreign exchange reserves, however, do not represent profit.