samchain/econo-pairs-v1 huggingface dataset:
Usually, small and simple loans are provided at branch office level, but larger and complicated loans are provided at successively higher levels. Banks have also adopted internal risk evaluation systems in which the individual loans are graded according to their risk. Loan documentation is improved to facilitate monitoring of the loan but also to ensure that the bank can collect on the loan in the event of a judicial process. In Sweden, concentration of credit risk was a major problem during the crises. Some two thirds of the losses were linked to the sharp price declines in real estate. A loan and its collateral must be evaluated separately, something that we had forgotten during the many years of regulation. If the expected returns from the investment made by the loan are uncertain or not adequate the loan should in most cases not be given, irrespective of the collateral. The reason is that the collateral, in a crisis situation, often proves to be worth far less than expected. This is particularly true when it is tied to the borrower - such as when a company has put up its own building as collateral. The linkage between credit risk and foreign exchange risk was large during the Swedish banking crises. This was seen also in the Asian crises in 1998. For example: Swedish borrowers wanted loans in yen and German marks because the interest rates in these currencies were low.

If the effects of these policies are large enough to alter or distort the relationship between asset prices and the underlying fundamentals in our economies, and this seems likely to be the case, then we can take less comfort from traditional relationships between those variables. The fact that official purchases of financial assets are driven by different factors than those driving private investors suggests that we would probably see a somewhat different combination of capital flows, exchange rates and interest rates in the absence of official intervention. This makes the task of assessing the probable trajectory of growth and inflation more complicated. It makes it harder to assess the likely evolution in financial conditions and asset prices. And it makes it harder to assess the effects of the present stance of monetary policy on aggregate demand and inflation. To the extent that these forces act to raise asset prices, lower interest rates and reduce risk premia, it is harder for the markets to assess how much of the very favorable conditions are likely to reflect fundamentals and prove more durable. This can contribute to an increased willingness to raise leverage in the investment community and to take on more exposure to risk.
Everyone here is familiar with the Taylor rule, which has many  2  See Ingves, S. (2007), "Housing and Monetary Policy – a View from an Inflation Targeting Central Bank", at a symposium, Housing, Housing Finance and Monetary Policy, arranged by the Federal Reserve of Kansas City, Jackson Hole, Wyoming, 1 September 2007. 3  The High-Level Group on Financial Supervision in the EU, Chaired by Jacques de Larosière, Report, Brussels, 25 February 2009. BIS Review 41/2009  15  variations. Put briefly, these are short reactive rules to adjust the policy rate in response to changes in both inflation and economic activity. These Taylor rules have become a useful tool in studying and assessing monetary policy without needing to make a more detailed analysis of the supply of and demand for money. As an aside it may be worth mentioning in this context Knut Wicksell’s in many ways pioneering monetary theory, which he presented at the Swedish Economics Association’s meeting on 14 April 1898, that is almost exactly 111 years ago. (4,5) In his theory on the natural interest rate, Wicksell suggested perhaps the simplest of simple reactive monetary policy rules ever: ”If the price rises, the interest rate should be raised; and if the price falls, the interest rate should be cut…”.

5  See also Siven, C-H. (1998) "Penningteori utan pengar – hundra år med Knut Wicksell", Ekonomisk Debatt 1998, year 26, no. 6. 6  Wicksell, 1898 [1936], p. 189. 7  See also Orphanides, A. (2207), "Taylor Rules", Board of Governors of the Federal Reserve System, January 2007. 16  BIS Review 41/2009  lending. In the same way as the policy rate can be expressed as a Taylor rule, it should be possible to express the banks’ capital adequacy requirement as a function of, for instance, the lending gap, or growth in lending in the economy and the output gap. Image 10: A ”Taylor rule” for capital adequacy  (  )  (  c t = c + α L Lt − L* + α Y Yt − Y  )  Here the capital adequacy requirement the banks are subject to depends on the development of total lending in relation to a long-term trend and economic activity. The idea is that the capital adequacy requirement will increase when lending increases too substantially, and will decrease when lending declines. In this way the banking system will be forced to build up capital reserves in good time, which can in turn be used to cover losses when times are hard. One creates a model that evens out cycles rather than reinforcing them. The current capital adequacy rules are sometimes accused of being procyclical.
This will benefit everyone, even Sweden, partly by reducing the risk of global crises and partly by reducing the risk of crises spreading to Sweden and other countries through the links that exist on the financial markets. At the same time, the problems and risks that the international regulatory initiatives aim to deal with correspond to those that Swedish authorities have identified in Sweden. The Basel III framework will therefore also have a direct positive impact on financial stability in Sweden. Let me give you a few concrete examples: •  Stricter risk-based capital requirements will increase the ability of the Swedish banks to cover unexpected losses, in both their Swedish and foreign operations, thereby increasing the banks’ resilience. •  The leverage ratio will provide a complementary picture to the risk-based capital requirement and means that authorities and investors will be better able to assess a bank’s capital situation. Having a quantitative requirement for the leverage ratio sets a limit for a how low the Swedish banks’ capital can fall in relation to their total assets, irrespective of how risky their operations are considered to be. A leverage ratio requirement of, let us say, 3 per cent corresponds to a risk weight for mortgages of approximately 22 per cent for a major Swedish bank with a 12 per cent CET 1 capital requirement. 1  •  Another example is the NSFR.

I also hope that the work that has begun on a number of other important frameworks in the wake of the financial crisis will be finalised this year. This will entail a change in the focus of the Committee’s work. Going forward, the Committee will place more emphasis on monitoring and assessing the application of the frameworks to ensure that the regulations are effective. The international regulatory work is extensive and will affect us directly when the regulations are introduced here in Sweden. Having a global regulatory framework that increases the safety margins in the global financial system will benefit everyone and is therefore important. It is also important to remember that the international discussion on regulations and regulatory frameworks has a lot in common with the discussion underway here in Sweden. In the main, the measures proposed in Basel III aim to reduce risks that also exist in our Swedish banks and that we have been pointing out for a long time. The international regulatory work therefore serves Swedish interests – in other words, it is not a question of introducing regulations that have mainly been drawn up to manage problems that only concern other countries. Moreover, discussions are underway in international forums that are similar to those underway here in Sweden on many other policy issues, but perhaps not as much progress has been made abroad as in Sweden on considering what measures can be introduced. One example of this is the discussion of floors for risk weights.
For decades, ASEAN has used its banking system to manage resource allocation. Banking system worked fine in the past. However, in new and volatile financial environments, ASEAN needs to have both strong banking system as well as well-developed capital and bond markets to better service consumers’ and businesses’ financing needs. Having welldeveloped capital markets can allow financial risks in the economy to be spread out, shared,  BIS Review 134/2008  1  and more efficiently managed. And, the efficient allocation of financial resources would, in turn, allow ASEAN to have better access to capital and for its goods and services to flow in greater quantity. At the centre of building strong ASEAN finance is ensuring its continued systemic stability and ongoing market developments. In this regard, ASEAN central banks have a clear role in safeguarding price stability and financial institutions stability. On price stability, let me just say that ASEAN generally has a good track record of keeping inflation low. As for financial stability, the framework of policy has moved toward risk-based supervision, and to an adherence to international standards. Indeed, many ASEAN countries have significantly advanced efforts in implementing Basel II and FSAP, which have fostered a stronger and more balanced financial system with greater transparency. Maintaining financial stability also means that ASEAN must be able to withstand the ebbs and flows of foreign capital. But, as small open economies, keeping balances over any length of time is easier said than done.

For ASEAN, avoiding capital account crises will become increasingly more important because the more ASEAN trade with each other, the more closely linked our economies are. Hence, the more contagion there will be, and the faster and wider will crises spread. Fortunately, we have already seen a region-wide move toward a more flexible exchange rate regime, with a disciplined framework in the conduct of monetary and fiscal policies. Financial policy becomes more flexible, yet proactive, in dealing with changes in the market conditions and practices. When necessary, a traditional fiscal-monetary policy mix has been augmented by appropriate prudential measures of financial institutions, especially to preempt pockets of asset price bubbles developing in the economy. Ladies and Gentlemen, I turn now to the second part of my talk on the potential scope of regional cooperation as ASEAN faces yet another common challenge on how to manage the global contagion of the US financial crisis. Today’s global financial crisis is the world’s worst since the Great Depression in 1930s with an estimated credit loss of 1.4 trillion US dollars. Trillions of US dollars have been used to provide liquidity and to recapitalize distressed financial institutions. Deposit guarantee has been introduced in a large number of countries to restore investors’ confidence. At this juncture, I doubt if any one can predict with any good accuracy when this episode of financial market turbulence would come to an end. The current global financial crisis reminds us of the lessons we learnt from the Asian financial crisis just one decade back.
Furthermore, the calm that has characterised the foreign exchange market in Europe since the disappearance of national currencies has mitigated speculative pressures on the franc. When the euro was launched, its exchange rate against the Swiss franc was 1.60; now it is only 1-2 cents below this rate – in other words, almost unchanged. On the whole, the euro has stabilised the monetary scene in Europe, and our currency is therefore less volatile than before. To be sure, floating rates still mean volatility, especially in the case of market disruption. At times, the Swiss franc has been pushed up to levels no longer compatible with the economic reality of our country’s fundamentals. However, these episodes have usually lasted for a limited period only. After September 11 and before the outbreak of the war in Iraq, the safe-haven function of the franc triggered a 10% appreciation in our currency against the euro. As a consequence, we pursued a more aggressive interest rate policy than the ECB in order to lower the attractiveness of our currency and give our economy some room for manoeuvre. Also, in the current business cycle, with a rapidly growing Swiss economy, we started lifting interest rates earlier than – and independently of – the ECB. In the last two years, we have already increased interest rates on six occasions.

The first relates to the institutional relationship between the central bank and the government and the second to the multiple objectives assigned to the central banks. All the evidence points to improved long-term inflation performance when monetary policymakers are freed from institutional constraints that hamper their freedom of maneuver and given full operational independence. Such independence is best achieved by enshrining it in an institutional framework that provides for legal independence from the government, with accountability for achieving a clearly defined mandate focused on price stability. Few Asian central banks yet enjoy full legal independence, though most now have greater de facto independence than they once had. Fixed, or partially fixed exchange rate regimes, of course, also constrain the independence of monetary policy. As capital accounts become progressively more open, few countries can sustain over time a commitment to exchange rate stability without risking price stability. Eventually central banks will run up against limits on their capacity to sterilize the effects of exchange market intervention designed to limit the pace and extent of appreciation of the exchange rate. Although measured inflation in emerging Asian economies remains relatively low, the pace of credit growth and the behavior of asset prices provide some evidence of a growing tension among competing objectives. The longer this policy conflict persists, the greater the distortions building up in the economy, the greater the risk of future inflation and the greater the risk of a bumpy future.
In a period of increasing cross-border labour flows, substantial technological advances, changes in competitive conditions and new trade patterns, we may, with our very open economy, have to accept a somewhat greater variability in inflation and deviations from the target, as we have witnessed over the past two to three years. Thank you for your attention! 4  BIS Review 26/2006

Their expertise will surely benefit our audience today. I would also like to thank HSBC, Standard Chartered Bank, Citibank, BOC and BNP Paribas for sharing their experiences with everyone later today. 15. Ladies and gentlemen, I wish you all a fruitful workshop and I look forward to working closely together with the industry to develop green and sustainable banking in Hong Kong. Thank you very much. 2/2  BIS central bankers' speeches
I trust that the topics today help us consider the state of play of financial literacy in Malaysia, what works and how to improve our financial education interventions. I also look forward to the debate on the implications of digitalisation on financial literacy and consumer protection – this can sharpen our appreciation for the difficult trade-offs between the benefits and risks of digitalisation to financial consumers, and consider the role of digital financial literacy in promoting financial well-being in the digital age. Distinguished guests, Neil Armstrong once said that "research is creating new knowledge". As policymakers and practitioners, the research of the sort we will be deliberating today is exciting because it introduces valuable insights into designing and evaluating effective interventions, tailored to the needs of those in our population. There are many ideas out there on promoting better education outcomes – be it by refreshing traditional delivery approaches (like competitions, classes or webinars) or deploying new tools such as edutainment games or those driven by artificial intelligence. However, what matters most is not the novelty of new approaches, but whether or not our efforts work well – and yield a high return in terms of financial literacy and financial well-being. Insights from the research are important to develop targeted interventions that address the financial education needs in our population. It can also give answers to what are the challenges faced by consumers to access or obtain financial education.

In addition, it also had to weigh carefully the advantages of providing lender-of-last-resort assistance to the banking system to avoid a drop in its revenue stream against the risk of lending to an insolvent institution and making a loss that could decrease its capital base and threaten its reputation as the supplier of the ultimate settlement asset. Similarly, central banks had a natural interest in ensuring the ability of the banking sector as a whole to meet the public’s demand for liquidity. The reason for this is that if it allowed a  1  For further details see Stephen Millard and Victoria Saporta (2005): Central banks and payment systems: Past, present, and future. See also Ben Norman, Rachel Shaw and George Speight (2006): The history of interbank settlement arrangements: exploring central banks’ role in payment systems. BIS Review 130/2007  1  solvent commercial bank to fail as a result of a bank run, it would only aggravate the situation and this could ultimately result in a more general run on the banking system and ultimately on itself. As a result, financial stability became a concern for central banks. Moreover, for the central bank as the provider of the ultimate settlement asset, it was also important to maintain monetary stability. In particular, if the central bank printed more and more of its banknotes without a corresponding increase in the demand for them, the notes would fall in value relative to those of other banks.
This high uncertainty has various causes, but we must be clear that the Chilean economy and society will hardly be able to withstand the prolonging or intensification of this uncertainty without more permanent damage to entrepreneurship, investment, and employment. 11  And last but not least, a final challenge will be to enhance the capacity for long-term growth. In this MP Report, trend growth estimates for our economy have not been updated due to difficulties in gathering data for a refined estimate, but it is clear that factors have emerged in recent months that could put downward pressure on it. Higher costs associated with security and human distancing in the provision of services, as well as higher transaction costs in the face of greater uncertainty and deteriorating confidence, point to reduced productivity, while higher hiring costs, low investment and business failures may affect the availability of labor and capital. These are not irreversible phenomena, in the face of which innovation and technological development cannot have a compensatory effect, but the challenge today is certainly greater than it was a year ago. Going through this list should make it clear that these challenges far exceed the mandates and competencies of the Central Bank. Many of the policies needed to create jobs, facilitate the adjustment or reconversion of production and raise productivity are within the realm of the Executive, of the structural reforms being discussed in this Congress or of private initiative.

Thus, we see that the Libor cannot remain at 0.25% indefinitely. However, as our forecast also shows, it would not be advisable to increase the Libor now since the very weak inflation rates expected in 2010 (0.4%) and 2011 (0.3%) indicate that the deflation risk has not completely disappeared. We continue to use an inflation forecast to guide our decisions. In this way, we will ensure that the unconventional measures currently in force do not compromise medium and longterm price stability.
As you may know, as central bankers, we remain neutral as far as the internationalisation of the Euro is concerned. We are neither encouraging, nor discouraging the process. But, as a citizen, I cannot help and feel proud of having one the two main currencies in the world. These achievements are the fruits of a long term process of reforms and credibility building, but they are not carved in marble. Looking at the many challenges we are facing we could even wonder if monetary integration is really sustainable in the long run. My answer is positive and I am strongly optimistic about the future for the Euro, because we have a clear agenda in order to handle these new challenges. A first challenge is related to globalisation that exerts pressure on industrialised countries as the competition of new players in the global market increases. In that context, the rapid and thorough implementation of the Lisbon agenda is essential, since it will pave the way to a knowledge-based economy and hence improve Europe’s competitiveness. A second challenge is related to current account imbalances in some member states: the disconnection between national saving and investment is welcome to the extent that it facilitates a more efficient allocation of capital. But persistent imbalances may reveal competitiveness problems. Since deficit countries can no longer make use of devaluations to improve their competitiveness, as they sometimes did in the past, they need to improve the whole structure of their economies.

Christian Noyer: Building on Euro area achievements to prepare for enlargement Speech by Mr Christian Noyer, Governor of the Bank of France, at the 2007 Annual Conference on Macroeconomic and Economic Policy Issues, Bank of Latvia, Riga, 10 October 2007. *  *  *  Ladies and gentlemen, It is a great pleasure and honour for me to address this conference hosted by the Latvijas Banka. Having just passed the European Union 50th anniversary, it is an appropriate time to reflect upon the essence and future of this extraordinary endeavour. Never before, in the whole history of mankind, have democratic nations pursued and reached, through peaceful cooperation, such a close degree of interdependence, involving, in many crucial areas, deliberate pooling of sovereignty. Of course, the process has not been without difficulties and tensions, many of which are still apparent and acute. Of course, numerous challenges remain. But, for the first time in more than a thousand years, Europe is at peace and prosperous, with democratic regimes everywhere. This is, by historical standards, an exceptional achievement. The whole process of European integration was based on a strong intuition: by sharing the instruments and policies underpinning economic prosperity, European nations would create an irreversible situation of interdependence and solidarity where conflicts and wars of the past would become impossible. The creation of the Euro area is the natural consequence of this original intuition. It results both from a political vision and an economic and financial necessity.