samchain/econo-pairs-v1 huggingface dataset:
A second – and important – explanation can be seen in the red shaded area of this chart (slide 8). Domestically focused banks have reacted to the decline in liability margins by increasing asset margins by around 50 basis points. Specifically, following the introduction of negative interest, they raised rates for long-term mortgages (shown here in blue), while returns on long-term market investments (illustrated here using the ten-year swap rate in yellow) continued to fall. The banks have since managed to keep asset margins high, notwithstanding the fact that market rates have continued to decline. But there is another, equally important explanation for the limited impact of the low interest rate environment on the profitability of domestically focused banks: these institutions have increased their risk appetite. This applies particularly to affordability risk (typically measured using the loan-to-income ratio) in lending and to interest rate risk from maturity transformation. Let’s take a closer look at the current risk situation with respect to domestically focused banks in Switzerland. Affordability risk refers to cases in which a borrower can no longer afford to make interest and amortisation payments for a loan under unfavourable conditions. 5 A representative quarterly survey conducted by the SNB indicates that a substantial share of new mortgages exhibit high loan-to-income ratios. Moreover, this share has been rising since 2013. 6 Put simply, interest rate risk is the risk that banks will suffer losses as a result of rising interest rates.

The financial crisis showed that the entry of foreign banking groups into a domestic market, besides advantages, it is also associated with elements of risk, which must be addressed duly and timely. Third, the countries in our region have different needs for investments, highlighting those in road infrastructure, energy and health care. Also, demographic developments, including migration, and slowing population growth trend, have brought about increased costs of public pension schemes and other elements of social protection. Therefore, despite fiscal consolidation efforts, budget deficits have been present and steady all the time. During the financial crisis period, public authorities were committed to overcoming the situation. Almost all governments of the countries in the region were committed to implementing fiscal stimulus policies, aimed at increasing the support to the real economy and the financial system. Monetary policy followed an easing trend, cutting the interest rates and satisfying the interbank market needs for liquidity. Back to Albania’s case, I would like to emphasize that our experience in absorbing the impacts of the crisis proved successful. Albania, I think, is one of the countries that:   Did not experience any bank failure or capital injection by the state;    Courageously withstood the crisis of confidence in the banking system, where financial intermediation was never interrupted;    The economy continued to grow in positive terms, albeit at a slower pace;    Inflationary expectations remained anchored throughout all time.
Three different approaches exist: (i) That the policy rate is assumed to remain unchanged during the forecast period, (ii) that the policy rate is assumed to follow market expectations, or (iii) that the policy rate is assumed to follow a path that the central bank itself considers to reflect a reasonable future development. 3 Regardless of which of these three interest rate assumptions is used to produce the inflation forecast, the monetary policy decisions made by the central banks always refer only to the current level of the policy rate, that is, the level that is to apply until the next decision-making point. 4 However, the monetary policy discussion and communication differ slightly, depending on which interest rate assumption is used. 1  See the minutes of the Executive Board meeting on 16 January 2007. 2  See, for instance, Eijffinger, S. and P., Geerats, (2006), as well as van der Cruijsen, C. and M., Demertzis (2005). 3  See, for instance, Blinder, A., (2006), and Kontulainen, J., D., Mayes and J., Tarkka, (2004). 4  There are special exceptions to this normal procedure. For example, during the deflation crisis in Japan, the Japanese central bank undertook to maintain its policy rate at a low level during a certain period. For another exception, see the statement in a press release from the Federal Reserve, Board of Governors, 12 August 2003, in connection with fears that inflation would be too low.

13 Just as when we based our forecasts on market expectations, publishing our own interest rate forecast does not involve any commitment from the Riksbank that the repo rate will then actually follow this path. It is important to bear this in mind. A further argument that has been put forward against publishing a forecast for the development of the repo rate is that the financial markets, if given access to the central bank’s views on the interest rate level in the slightly longer term, would stop trying to find other information that is significant for longterm interest rates. The central bank would then lose an important source of information, namely how market prices reflect the markets’ views on economic prospects in the longer term. Neither do I find this argument particularly convincing. The financial market agents know that we live in an uncertain world and will continue to look for other sources of information on long-term developments via other channels than the central bank and make independent assessments. What defines a good interest rate path? When we make our forecasts of the repo rate, we must of course consider what would be a wellbalanced monetary policy given the developments we foresee. What is meant by a well-balanced monetary policy? Let me answer this by briefly summarising how we describe our monetary policy strategy in the special document on monetary policy published in May 2006. 14 Our new assumption for the interest rate does not change the way we conduct monetary policy.
As for the boards of directors, I am hopeful that the independent non-executive directors will play an increasingly important role in instituting and monitoring proper governance and internal control systems within banks, provided they are suitably empowered and supported by the shareholders and regulators. As for the management and staff of banks, desired behavioural changes will come if the owners and boards show the way and institute the right values, controls and compensation arrangements., Conclusion: a matter of choice 23. Ladies and gentleman, I am not entirely sure whether, in making this speech today, I will make myself any more or less popular amongst bankers. But this is not relevant at all. The important thing is that I am very pleased to be given this precious opportunity to share with you my heartfelt thoughts on why bankers have lost a great deal of public trust and respect and how they might regain these sentiments. Bankers clearly have a choice on what to do and where they want to go. By the same token, regulators also have a choice on what to do, but that choice depends crucially on what the bankers themselves elect to do or not to do. I sincerely hope that the public sector and the bankers can work together to ensure the sustainable and healthy development of the banking industry. At the end of the day, the society also has a choice. After all, no profession or industry can evolve or develop independently from or against the wishes and expectations of the society.

“October 2020 Bank Lending Survey in Spain”, Analytical Articles, Economic Bulletin, 4/2020, Banco de España. 20
But if such a rule were followed, the results would depend on the inflation target and the GDP growth target. If the inflation target is perhaps 2½% and potential output growth in the 2½–3% range, it would be around 5–6%. In Chart 7, we can see that the countries fall into three categories. First are the countries significantly below this level. All of them have relatively low policy rates in accordance with the rule. Then we have the countries that are more or less on the right track and, finally, three countries above that. Iceland is in this last group, and the other two are emerging countries with much more GDP growth potential than developed industrialised economies have. It is interesting to note that Iceland is in third place as regards nominal GDP growth and in fifth place as regards the policy rate. All of this comparison points in the same direction. It simply cannot be argued that Iceland is out of sync with other countries because of excessive monetary restraint. Quite the contrary: some indicators suggest the reverse. I know that I am not addressing all possible criticism with these points, but I hope that those listening to me will begin to ponder whether some of that criticism has perhaps been somewhat unbalanced. Some criticism of monetary policy is more pertinent, however, and I would like to address three points. It has been asked why the Monetary Policy Committee raised interest rates when the Bank has forecast that inflation will subside markedly next year.

This is a challenging judgment for an organisation specialising in tail risk insurance, and with a broad policy remit – but initially we have focused on the public commitments to provide market-wide and firm-specific liquidity insurance through the Bank’s current set of facilities and operations. The scenarios we have so far explored are also consistent with this scope, and include examples of both domestic and international shocks, affecting banks, non-banks and capital markets. Wherever possible these are based on the scenarios used by the Bank’s supervisors in their work with industry, but with typically higher severity: consistent with the assumption that firms should be capable of surviving supervisory stress tests using their own resources. It is only when firms’ liquidity needs go beyond the level that could reasonably be covered by their own resources that the central bank is called upon to act in size: the image of the firefighter in action once again. So what do we do with the results of this work? In the private sector, of course, stress tests are used to inform desired capital levels, and that is certainly something we consider too. But they can also have a wider influence, as we found last year when we ran an exercise to evaluate the potential implications of uncertainty surround different possible outcomes of the UK referendum on membership of the European Union. The results of that work helped to inform judgments on collateral pre-positioning and haircuts, engagement with fellow central banks, and our own supervisory actions and conversations.
But one of them pays interest of 5% a year, the other one only 2%. [9] Let’s  Page 7  also imagine that you can put funds somewhere without any risk and earn interest of 1%, and that the Solvency II rules say that for assets with the credit rating of these bonds we have to allow 0.5% per year to cover the risk of things going wrong. Now under the existing rules, for the bond paying 2% the insurer treats 0.5% as the MA – this is the 2% interest on the bond, less the 1% risk-free rate and the 0.5% allowance for things going wrong. The insurer will bring all of that interest due in the future, so 0.5% for each year, forward to today and count it as shareholders’ capital. For the 5% bond, the insurer does exactly the same: although the bond pays so much more interest than the 2% bond, the insurer uses the same riskfree rate (1%) and allowance for things going wrong (0.5%). As a result the insurer books as capital up-front the entirety of the 3.5% (5% less 1.5%), so a much bigger amount than for the 2% bond. Some stakeholders think we shouldn’t allow this at all, even for the 2% bond. We don’t agree with that position, but we do think we need to ask: are we entirely confident that all of that extra return on the 5% bond can safely be considered risk-free and banked as capital up-front?

In other words, Icelandic banks had only limited access to ECB liquidity (although there was some access through subsidiaries in Luxembourg), which proved fatal during the global run on crossborder liabilities of banks that immediately followed the collapse of Lehman Brothers. But there is always a silver lining. The lack of an adequate safety net and the absence of international or regional co-operation at the peak of the panic forced Iceland to adopt a radical solution in order to ring-fence the sovereign from the collapsing banks. These were private banks, and a bail-out by the Icelandic sovereign would have bankrupted the country. The banks were split overnight into domestic and international banks without disruption in the public’s access to banking services, and the international part went into resolution. The result was a drastic cut in the leverage ratio of the remaining banking system, from over 30 to around 5. Yes, Iceland had to introduce capital controls, which are still in place. But those controls did not take the form of limiting deposit withdrawals from banks, as was done in Cyprus, and current account transactions have been mostly unrestricted. History and further research will tell whether this cold turkey response turns out to be better than more gradual approaches that sometimes turn into “death by a thousand cuts”.
However, the lek loan price has not fully reflected our monetary policy, indicating the presence of high risk premia and containing the monetary stimulus transmission to the economy. These risk premia are also reflected in other lending terms, unrelated to the loan price, and appear tighter as compared to their historical performance. *** Under the Bank of Albania's baseline scenario, the economy will improve slightly during the current year. Increase in exports and a better performance of consumption and investments will continue to support the aggregate demand. The monetary policy will support the domestic demand, by maintaining macroeconomic stability and ongoing injection of monetary stimulus in the economy. Also, payment of arrears will help improve the balance sheets of firms and the private sector, and is expected to improve business borrowing. Excluding the payment of arrears, the 2014 budget has projected a fiscal adjustment needed against the backdrop of a rapidly increased public debt. Reflecting the weak economic and monetary dynamics in the country, inflationary pressures are expected to be weak. After four quarters, inflation is expected to vary 0.7%–3.8%, with a 90% probability of occurrence. This will require maintaining a stimulating monetary policy even in the medium term. *** At the end of discussions, the Supervisory Council decided to keep the key interest rate unchanged, at 3.0%. Given the expected inflation developments, the Supervisory Council deems that the monetary policy will remain stimulating in the medium term.

The monetary stimulus intensity may increase further over the periods ahead, in the event the economic and monetary developments continue to shift the balance of the downside inflation risks. In any case, the Bank of Albania remains determined to ensure price stability, in accordance with its inflation target. The Bank of Albania deems that 2014 will be a turning point for the Albanian economy. Maintaining financial and economic stability, improving external environment, pursuing stimulating macroeconomic policies and continuing structural reforms would open the way to Albania's stable and long-term development. BIS central bankers’ speeches  3
Our output and demand outlook is fairly unchanged. There are still risks in our external scenario, even if its recent evolution surprised us for the better. Allow me some final reflections. Final reflections I will end with some thoughts on the capacity of monetary and fiscal policy to address the economic cycle. I think we must because, after years of slow growth and within a context of increasing social demands, pressures on both have become stronger and the way we decide to confront them will be crucial in the future of our economy and our country. I see three main challenges: First, it is obvious that neither monetary nor fiscal policy can flatten out the business cycle, much less affect the economy’s trend growth. But they certainly can smooth the cycle and help the economy make sound adjustments when suffering a domestic or external shock. Anyway, the capacity to smooth the cycle is proportional to the medium-term sustainability of these policies. Why? It is very simple: economic decisions —think of investment, for example— depend not only on such policies’ immediate effects, but also on how the various economic agents expect them to continue to affect the economy in the future. Thus, even if we believe that the effects of some policy action can be very powerful, if the agents consider that implementing that policy will be inconsistent with the macroeconomic equilibria, its effects will be diminished and may even be counterproductive.

Let me now present in more detail the macroeconomic scenario we believe to be the most likely in the quarters to come and its associated risks. Macroeconomic scenario In July, annual inflation returned to the tolerance range. As I said, the behavior of the exchange rate has played a key role in this process, as it allowed us to leave behind the upward effects of the sharp depreciation the peso experienced in 2013–2015. Considering the average of the ten days prior to the statistical cutoff, the dollar was trading at somewhat less than 670 pesos, equivalent to a nominal appreciation of the peso of around 4% with respect to the close of the previous Report (figure 1). The evolution of the exchange rate has had visible effects on the goods component of core inflation (i.e., the CPIEFE, or CPI excluding foods and energy). In annual terms, it went from around 5% early the year, to 3.7% in its latest measurement. Inflation of the services component of the CPIEFE has made a smoother adjustment, from 5% to 4.5% annually in the same time span, reflecting its indexation to past inflation and output gaps that have not widened much. Accordingly, and as expected, the total CPIEFE has seen a reduction in its annual expansion rate. The more volatile items in the basket showed dissimilar movements in the past three months: while annual food inflation rose, energy inflation fell (figure 2).
Ensuring Stability in Turbulent Times1  Your Excellencies, Distinguished Guests, Sabah-al-khair and a very good morning. I am very delighted to be here today and I am grateful to H.E. Dr. Abdulrahman A. Al Hamidy for inviting me to speak before this august gathering. Thanks to the active collaboration of the Basel Committee on Banking Supervision, Financial Stability Institute, and the Arab Monetary Fund, these high-level meetings provide a valuable forum for exchange of views for the regulators and supervisors in the region. The agenda of this conference adequately captures key developments, issues, and challenges that we need to focus our attention on. Today, I would like to touch upon two major forces that have swept across the financial world. First is the tech-driven revolution, which has brought its own set of risks and rewards. Second is the wide range of measures that have been introduced to strengthen the resilience of our banking systems. Let me start with innovations first. Innovation; opportunities and risks Tech-driven innovations have unleashed drastic changes in the way we conduct business, interact with each other, or consume various products and services. Financial sector, essentially an ‘information industry’, is experiencing a major transformation, fueled by advances in technology. Though the imprint of modern technologies is now ubiquitous, let me briefly highlight a few areas of finance where the developments are particularly significant.

While undoubtedly exciting, these developments bring in their own unique risks and challenges. I would like to flag a few of them, particularly from the standpoint of financial stability. First, cyber security risk is becoming an increasingly major part of banks’ operational risk landscape. As various hacking episodes illustrate, now fraud can be perpetrated swiftly, remotely, and on a massive scale. Though such occurrences are still uncommon, the impact is substantial, given the high degree of interconnectivity of our systems and markets. Second, fintechs are unbundling parts of the finance value chain, offering financial services directly to customers. Apart from increasing competition, and squeezing banks’ profits, fintechs are moving part of the banking business to shadow banking which remains lightly regulated, if at all. Likewise, tech-enabled peer-to-peer lending and crowdfunding can further  2  expand the scale of shadow banking, and may also exacerbate procyclicality. As this discussion indicates, innovations are by nature a disruptive force, causing a considerable degree of instability. Therefore, regulators face a daunting task of keeping financial systems safe and stable while continuing to ensure the convenience and efficiency that modern technologies offer. To ensure that, we must strengthen our own capacity to identify, monitor, and mitigate the risks from technological innovations. This would require closer cooperation with the banking industry as well as among regulators, both within a country and across the borders. Yet that is not enough; we also need to leave our comfort zone and engage with other stakeholders, primarily the tech firms themselves.