samchain/econo-pairs-v1 huggingface dataset:
We have been lending money to the banks since the crisis worsened in September 2008 to ensure they can manage their liquidity. For instance, we have granted loans with a one-year maturity at a variable interest rate. The purpose of granting loans with a one-year maturity at a low and fixed interest rate was to bring down the rates in the interbank market and thus contribute to lower interest rates on loans to companies and households. It was a means of increasing the scope for monetary policy to have the intended effect. Reasons for optimism Although the situation is still serious and requires extraordinary measures, there is beginning to be some cause for optimism. It is now the first time since September last year that our forecasts and those of other analysts no longer need to be substantially revised down between the forecasting rounds. After having revised down the forecasts heavily in four  6  BIS Review 98/2009  reports in a row since September, we made only a small downward revision in July and the most recent information points more to a slightly stronger picture of the real economy than the one we painted then. The IMF has even made an upward revision to the forecasts for the world economy in its July report. My assessment in July was that the risk outlook for economic developments in Sweden is now balanced for the first time since spring 2008.

5 The current economic situation in Sweden In my review of the economic situation in Sweden I will focus on five areas: GDP, the labour market, inflation, the current account and public finances. My experience is that these variables usually provide a good picture of a country’s economic situation. Signs of a turnaround, but the recovery will be weak The Swedish economy has also been hard hit by the international economic downturn. We forecast in the Monetary Policy Report that GDP in Sweden will fall by more than 5 per cent this year (see Figure 12). However, during the spring there were several signs that the deep recession may have bottomed out. The financial markets have begun to function better, which creates opportunities for an economic recovery. World trade, which is very important for the Swedish economy, has also shown signs of stabilising during the spring. At the same time, we believe that the recovery will be weak. This is usually the case following serious financial crises. Our forecast is that GDP will not reach the same levels as prior to the start of the economic downturn in the second quarter of 2008 until 2012. Since the most recent monetary policy meeting there have been further signs to support the view that the worst is now over. The preliminary national accounts published on 31 July indicate that GDP remained unchanged between the first and second quarters of this year after four quarters of falling GDP (calendar-adjusted).
BIS Review 159/2010  7  Recent data suggest that the recovery in domestic demand is slightly stronger than expected and that a more moderate growth process was assumed in the second half of the year. Indicators pertaining to private sector demand indicate that private sector consumption and investments continued to rise rapidly in the third quarter in annual terms (Figure 21). Consumption and investment expenditures are likely to accelerate in the final quarter of the year with the support of the counter-cyclical stance of monetary and fiscal policies as well as strengthening capital inflows. The steady rise in credits confirms continuing recovery in economic activity (Figure 22). Another noteworthy point about this period is that credit expansion continues to extend across a greater part of our economy in terms of both sectors and scale. Low interest rates and easing credit risk indicators suggest that credit growth will be strong, and therefore, the credit channel should continue to underpin domestic demand over the forthcoming period. 8  BIS Review 159/2010  As supply-side constraints have widely subsided, we believe that credit realizations rather reflect the dynamics pertaining to credit demand. The Loans Tendency Survey suggests that the borrowing motivation of firms tends to change in the post-crisis period. Firms used to demand credits to facilitate debt rollover or to finance their working capital during the crisis. However, as the effects of the crisis tapered off, loans for rolling over debts decreased while loans for investment purposes increased (Figure 23).

From our engagement sessions, it was not uncommon for us to hear about stories of anger, resentment and frustration from the migrant workers about the difficulties they had to go through in remitting money to their families. The workers whom we approached in Sapong estate for example, told us that they only had two options to access the remittance service: the closest is in the town of Tenom which is located 8 kilometers away from their estate; or if that is not available, the next option is to go to Keningau which is about 50 kilometers away! We also knew of instances where the workers were robbed on their way to remit money. Some told us that the money that they sent through hawaladars did not reach their families. These aptly sum up why it is crucial for us to promote a remittance service that is safe, affordable and convenient. This is also the primary reason why we decided that Project Greenback 2.0 Kota Kinabalu should be focusing on accelerating usage of digital remittance services.
At the time, the Central Bank’s senior management objected vociferously to this bifurcation, as I mentioned in my speech at last year’s Annual Meeting. If there is any single factor that foreign experts have identified as the main cause of the 2008 collapse, it is the fact that responsibility for and supervision of the financial system were spread across a large number of ministries and institutions, with the result that no single party had an all-encompassing overview, no single party was actually accountable, no single party had adequate power, and no single party had enough muscle to intervene in the course of events. But now, Iceland’s financial supervision and other central bank activities have joined forces again after a separation of 22 years, and the merger has been a successful one. Now we have a single institution that is responsible for financial stability and has all of the necessary information on the financial system and developments in systemic risk within it. The future of monetary policy lies in the expansion of the policy toolbox and the coordination of monetary, macroprudential, and supervisory policy instruments within a single institution. Here lie the opportunities for Iceland’s tiny currency area. The Central Bank will also need to use its balance sheet – such as by intervening in the foreign exchange market – to ensure effective  monetary policy transmission and ward off potential financial side effects. We have been successful in this regard.

It reads as follows: “We have met the enemy and he is us.” These words are a timely reminder of the responsibility we all share towards life on Earth. In response to the severe threat stemming from global heating, the Central Bank has taken important steps, some of which are described the new chapter on sustainability in our Annual Report. But this also has wider applicability. We have made a concerted effort to build up Iceland’s financial defences against external shocks. These defences certainly helped us to respond effectively to the pandemic, and they will help us to weather the economic repercussions of the war in Europe. But no one can rescue us from ourselves – from our own mistakes – except us. Iceland’s worst problems in terms of monetary and economic policy and financial stability – or rather, instability – have been self-imposed. It is therefore critical that we learn from the mistakes of the past, and that we do not repeat them. Because nothing other than our own mistakes can prevent a continuing period of prosperity in Iceland.
And Federal Reserve facilities include the Term Auction Facility, the Term Assert Backed Securities Loan Facility, the Primary Dealer Credit Facility, the Commercial Paper Funding Facility, the Term Securities Lending Facility, the ABCP Money Market Fund Liquidity Facility, the Money Market Investing Funding Facility, and the Term Discount Window Program. BIS central bankers’ speeches  3  in town”. But failure to make clear the limits to monetary policy risks disillusionment with central banks and the inevitable political pressure on them that would follow. Second, at the zero lower bound there is no clear distinction between monetary and fiscal policy. But it is still important to ensure that central banks do not take on to their balance sheets risks to the taxpayer that are properly matters that should be decided by elected politicians. To ensure price stability in the long run it is vital to maintain the operational independence of a central bank. Any decisions that put taxpayers’ money at risk must be made by finance ministries, and central banks must protect their balance sheets by imposing appropriate haircuts on collateral, and avoiding the purchase of risky private-sector assets. Third, and important even when we move away from the zero lower bound, the expansion of central bank responsibilities to include macroprudential policy and, in the case of the Bank of England, responsibility for regulating the banking system, has made independence much harder to define.

The challenge to make the domestic employment of savings both more efficient and more attractive is one which must in part be addressed at the macroeconomic and political level. But it is also be necessary to develop the financial instruments and institutions to facilitate better intermediation within the domestic economy. In scope this might include anything or everything from basic depositbased savings schemes for the small saver, through collective investment instruments, to the development or enhancement of the wholesale stock and bond markets. And, as I have already noted, there is a strong argument that the disposition of funds should be on a voluntary basis and according to market principles. All of this leads me, by what has been an extremely circuitous route, to the point which I would wish to highlight to this audience today. Getting your firm’s name onto the next tombstone for some highprofile international syndication, which may even qualify you for a photograph in one of those glossy monthlies, is all very well. But what about business opportunities to improve domestic intermediation in various countries? Of course, I am yet again exaggerating in order to make the point, for I know that most of you are already involved closely in domestic markets, not least Hong Kong’s; but the  BIS Review 52/1999  2  need for improved domestic intermediation in this region as a whole is being voiced with increasing frequency by officials of governments and international agencies, financiers and academics.
There are two factors which could explain this apparent resilience. The first is the atypical buffers for consumption that households have available in the current environment. They are still benefiting from sizeable fiscal policy support to shield them from rising energy prices, amounting to around € billion in 2022 and 2023, and they still have around € billion in excess savings built up during the pandemic. [9] The second factor is the reduced sensitivity of the labour market to slowing growth, which is supporting labour income and households’ employment expectations. Faced with labour shortages, firms are responding to weaker demand first by hoarding labour – that is, by further reducing hours worked rather than by cutting jobs. And now, with energy prices falling and wages rising, household disposable incomes are set to increase. This was reflected – before the recent financial market tensions arose – in our projections for a stronger  recovery this year. So, for inflationary pressures to ease, it is important that our monetary policy works robustly in the restrictive direction. And that process is only starting to take effect now. The first leg of the monetary transmission process – from policy measures to financing and monetary conditions – is already having a substantial impact. The cost of borrowing is increasing steeply, and loan dynamics look to be contracting faster than during previous hiking cycles. Credit growth to firms has dropped markedly since the third quarter of last year.

The driver of these changes is the increasing use of private bank money rather than publicly issued cash for small payments through cards, the internet and new e money providers. It is difficult to predict how far or how fast this shift will go. Cash remains hugely important for payments in the economy. It is still used to settle nearly half of the transactions in the UK. Although the cost of card and smartphone transactions has come down, cash remains materially the cheapest technology for small transactions. Estimates suggest that cash transactions cost retailers less than 1½ pence per transaction, or 0.15% of the value, compared to over 5 pence per transaction for debit cards 0.24% by value. And, behaviourally, many people in the economy clearly prefer to use it for a variety of reasons. That could change quickly, as it has done in one or two countries, such as Sweden. But in many others the use of cash has proved extremely stable. For example, in Spain and Italy cash is still used for over 80% of transactions at the point of sale. 14  Given our general responsibility for money in the UK, what do these changes in the way money is used as a means of payment mean for the Bank of England? Our responsibility is to ensure that people can use the money of the UK to transact safely and, subject to that, as efficiently as possible and in line with their preferences.
Their solvency ratio remained stable in 2018 at an average of around 240%, but it is true that it declined sharply in the first half of 2019 to 225% [Q2 2019]. This level is still high though, and testament to the resilience of all Europe’s insurers: it gives them the time and capacity they need to make the essential adaptations. The impact of low rates on insurers’ solvency, especially for those companies covering long-term risks, has already been one of the supervisor’s priorities for a number of years. This year the ACPR has again strengthened its supervision of the management of low interest rate risk by ensuring “ongoing close monitoring” of those firms that are most exposed. In this context, I would like to urge insurers to intensify their efforts in two areas: reducing the rates paid to policyholders, and diversifying their products and business model. The reduction in revaluation rates – of around 0.17% or 17 basis points on average per year since 2011 – has to be continued and stepped up after being put on hold last year. For insurers to meet their long-term commitments securely, they have to – and this is imperative – pass on the lower returns on their investments to the remuneration rates on life insurance policies. The  Page 4 of 6  rates currently being paid to existing policyholders are still high: 1.8% on average. In parallel, the only way insurers can meet their long-term return requirements is to diversify their products.

We are entering a consultation period that is absolutely critical and that will lead in June next year to the issuance of an opinion by EIOPA. This opinion, which will be reviewed by the Commission, will form the basis for the negotiations with the Council and Parliament that are scheduled to start in early 2021. Here again, we need to put the challenges posed by Solvency II into perspective. Let me remind you that this is the most ambitious reform ever undertaken in insurance. The new regulatory framework, based on an  Page 5 of 6  approach that takes into account all risks to which insurers are exposed, has undeniably strengthened the resilience of the European insurance market. However, and you yourselves see this every day, the prudential requirements imposed by Solvency II have a number of drawbacks, including being volatile and complex. To remedy this, let’s take advantage of the window of opportunity offered by the directive’s review, and push for four priorities that are essential for financial stability and for the sound financing of the economy: (i)  All things being equal, the revision must not lead to an increase in capital requirements for the European insurance industry. (ii)  It would be counterproductive to artificially lower the capital requirement by stopping equity investments. But despite the advances obtained in 2018, this asset class is still being penalised.
At a modest penalty to the Bank’s policy rate, they can use those facilities in unlimited amounts, and so can turn to them if the rate in the market threatens to be less attractive. Together, this should keep the market rate in line with our policy rate. Indeed, our objectives have been fourfold. First, to stabilise overnight market rates in line with the MPC rate. Second, to improve the efficiency of the framework for banking system liquidity management in normal conditions, and to make it more resilient in stressed conditions. Third, to simplify our method of implementing monetary policy. And fourth, to foster efficient and fair markets. For too long, too many people have been deterred from using the short-term sterling markets as much as they might because it seemed to required special expertise, and therefore a disproportionate commitment of resources. Judging by the ACT’s very positive response to one of the Bank’s early consultation papers, the modernisation of our framework should be helpful to companies, which of course use the money markets to borrow, employ cash balances, and manage risk. At the end of last year, firms’ short-term sterling borrowing in the UK was around £ bn. There are no data on how much of that was at very short maturities, but there is anecdotal evidence of overnight volatility acting as a deterrent.

15  “The G20 Seoul summit leader’s declaration November 11–12, 2010” and IMF Global Financial Stability Report, 2011. BIS central bankers’ speeches  7  Figure 4 Sweden’s current account Percentage of GDP 10  10  8  8  6  6  4  4  2  2  0  0  -2  -2  -4  -4 80  82  84  86  88  90  92  94  96  98  00  02  04  06  08  10  12  Source: The IMF  There are many possible explanations for the large surpluses. As I have already mentioned, the current account surplus is due to the fact that domestic saving is higher than domestic investment. In Sweden, household saving increased following the economic crisis in the early 1990s, which may partly be because the tax reforms implemented at that time made it much more profitable for the households to save. The fiscal policy framework also led to an increase in public sector net lending. The pension reform of 1994 was probably another factor that contributed to the increase in household saving as future pension payments were linked more strongly to how much was paid into the system. Sweden also has an ageing population so one could claim that saving should be high to enable us to cope with increasing pension costs in the future. 16 But this applies to most of our trading partners too.
has sought to overhaul the banking regulatory framework and banking standards in the aftermath of the Global Financial Crisis. Some of the reform measures have been designed to address the problems arising from the misalignment of interest amongst the key stakeholders in banking. While some bankers may think, rightly or wrongly, that these reform measures represent a degree of overkill, the public sector firmly believes that the current regime of “heads you win, tails I lose” must not be allowed to continue. What I mean here is the regime in which bankers pocket huge bonuses in good times (or even in bad times as in the case of AIGFP and Merrill Lynch) and when the banks run into trouble the public sector, for fear of a systemic failure, comes to the rescue with a bailout using public funds. This is clearly unacceptable. So the choice is obvious. New regulations dealing with capital buffers, liquidity management, leverage, bankers’ compensation, ringfencing of deposit-taking business from riskier operations etc. have been introduced. Also notable are the measures specifically designed to mitigate the moral hazard arising from “too-big” or “too complex” to fail situations. Separately, there is a trend of regulators seeking to beef up their efforts to ensure that banks do not constantly place their own commercial interests ahead of those of their customers. Protection of consumers and investors is nothing new but it has recently attracted considerable public support that more is needed. 20. For sure, regulators will continue to pursue further changes in banking.

I was really encouraged by the implicit acceptance, in putting this on the agenda of a banker’s summit, that it is primarily for the industry to seek to regain the moral and ethical highground it once enjoyed. I wholeheartedly agree. This is not something which can, or should, be regarded as a “policing” or “enforcement” matter for the regulator. Getting caught out, taking the fine as a “cost of doing business” and moving on with making money, is just not acceptable as a sustainable banking business model going forward. I do not subscribe to the view that banks’ primary role is to generate maximum shareholder value, leaving the regulator to worry about the safety of deposits and the interests of the banks’ customers. Now, don’t get me wrong I am not thinking of banks as break-even utility operations but, making a reasonable return should be a result of what banks do – to quote Jack Welch when talking to the FT a few years ago “Shareholder value is a result not a strategy”.1 3. Having a licence or franchise to take deposits, which represent the hard earned savings of millions of people, and use these funds for private gain is a privilege conferred by society on a bank, which merits exemplary professional and ethical behaviour. Moral and ethical highground: trust and respect 4. Returning to the theme of the Summit “regaining the moral and ethical highground” – what do we really mean here? I think, in a word, “trust”. With “trust”, comes “respect”. 5.