samchain/econo-pairs-v1 huggingface dataset:
4 But household indebtedness has continued to grow faster  1  During the crisis, the Riksbank provided extra liquidity to the Swedish banking sector through a number of long-term loans in SEK and USD. 2  However, we expect that some banks will need to raise their liquidity buffers to meet the new Basel III liquidity rules. 3  See Finansinspektionen, “The Swedish mortgage market and bank lending”, February 2010, and Sveriges Riksbank, “Financial Stability Report 2009:2”. 4  Finansinspektionen (2009), “Utvecklingen på bolånemarknaden 2008”, 2009:7. (Only available in Swedish.) 2  BIS central bankers’ speeches  than income (see figure 3), loan-to-value ratios have increased, and a large proportion of mortgages are variable-rate loans. These vulnerabilities could impair the financial system by increasing loan losses if the current economic recovery were to stall, or by impairing Swedish banks’ ability to finance mortgages if investors’ confidence in Swedish covered bonds were to fall. Figure 3: Swedish household debt and post-tax interest expenditure  Per cent of disposable income. Sources: Statistics Sweden and the Riksbank. (The Riksbank’s Financial stability report 2010:2)  It is too early to establish whether recent repo rate increases and the introduction of a maximum permitted loan-to-value ratio of 85% for residential mortgages by Finansinspektionen (the Swedish Financial Supervisory Authority) have had a discernable effect on credit growth. In any case, house prices are continuing to grow (see figure 4).

I would expect that these same techniques could be used to assess sovereign debt but, to my knowledge, I believe it is not done. An analogy can also be drawn between the macroprudential tools the Riksbank is considering for household debt and the Stability and Growth Pact for countries in the eurozone. The Stability and Growth Pact is designed to facilitate the stability of the Economic and Monetary Union (EMU) by placing upper limits on member countries’ national debt (60% of GDP) and annual deficit (3% of GDP). These are somewhat similar to maximum loan-tovalue ratios and debt-to-income ratios for households. The Stability and Growth Pact was reformed in 2005, making it more enforceable by relaxing the rules to reflect the difficulty of adhering to limits throughout the economic cycle as the burden on public debt increases during a recession due to automatic stabilisers (such as increased social security payments). A number of measures were introduced in the eurozone during the crisis to protect the EMU, such as the creation of the European Financial Stability Facility. The debate about longerterm reforms is currently ongoing. Calibrating these rules and national macroprudential instruments, such as a maximum household debt-to-income ratio, is difficult because we lack complete understanding of how risks to the financial system develop and how macroprudential instruments act on those risks. As a result, decisions cannot be fully guided by theory; instead, policy makers are required to make genuine policy judgments.
One can express this as, if many imperfections impact at the same time, it could lead to substantial financial imbalances. Empirical research confirms that asset prices and loans can increase substantially over a long period of time and my impression is that the mechanisms I have indicated have contributed to this. While debt and asset price levels have built up slowly over a number of years, price corrections have occurred quickly. The entire cycle from start to finish, from asset price and credit expansion until the repercussions of price falls and debt reductions have waned can take up to a decade. The IMF, for instance, reports in a study that the repercussions alone from a share price crash take on average two years to wane, while it takes approximately four years for the effects of a house price crash to fade. Can and should monetary policy subdue the growth of bubbles? Even if we as monetary policy decision-makers assess that there is reason to feel concern that debts and asset prices have been pushed up by over-optimistic households and companies, it is not selfevident whether and how this will affect the decisions. There is always some uncertainty as to whether it really is a question of an imbalance. And, as I have said, it is not easy to quantify a risk scenario, both with regard to the probability that it will occur and the effects it can have for inflation and demand.

As in previous months, annual growth in M3 was mainly supported by its most liquid components, with the narrow monetary aggregate M1 expanding at an annual rate of 9.1% in May, after 9.7% in April. Loan dynamics followed the path of gradual recovery observed since the beginning of 2014. The annual rate of change of loans to non-financial corporations (adjusted for loan sales and securitisation) increased to 1.4% in May 2016, compared with 1.2% in April. Developments in loans to enterprises continue to reflect the lagged relationship with the business cycle, credit risk and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households (adjusted for loan sales and securitisation) remained broadly stable at 1.6% in May, after 1.5% in April. The euro area bank lending survey for the second quarter of 2016 indicates further improvements in loan supply conditions for loans to enterprises and households and a continued increase in loan demand across all loan categories. Furthermore, banks continued to report that the targeted longer-term refinancing operations had contributed to more favourable terms and conditions on loans. The monetary policy measures in place since June 2014 have significantly improved borrowing conditions for firms and households, as well as credit flows across the euro area. The comprehensive package of new monetary policy measures adopted in March this year underpins the ongoing upturn in loan growth, thereby supporting the recovery of the real economy.
My heartfelt advice to you is to work as hard on expanding your EQ as you have on harnessing your IQ. You all have great futures ahead of you. You will get there just as fast, and enjoy it much more, if you remember that a sound mind resides most comfortably in a sound, well-rounded person and that a sound, well-rounded person has more than a superior education and brain. The whole person is as important an achievement for those few who have been admitted to the “society of educated men and women” as is the achievement of intellectual excellence. As a former midshipman, I have always been inspired by the creed of the father of the Navy, John Paul Jones, as written by his biographer Augustus Buell. “It is by no means enough that an officer of the Navy should be a capable mariner. He must be that, of course, but also a great deal more. He should be as well a gentleman of liberal education, refined manners, punctilious courtesy, and the nicest sense of personal honor. He should be the soul of tact, patience, justice, firmness, and charity. … Every commander should keep constantly before him the great truth, that to be well obeyed, he must be perfectly esteemed.” I would say that Jones (or Buell) nailed it.

Take the naval reference and the gender bias out, and you have the ultimate guide for all of you who depart Bryant today aspiring to lead: You must be more than smart and have more than a mighty intellect; you must develop the whole woman, the whole man to be a leader in whatever field you chose. A smattering of Latin Which brings me to the last requirement for most all commencement orations – a smattering of Latin. Commencement speakers at great schools seem to delight in showing off their command of an ancient tongue. Many a commencement speaker might have concluded this afternoon’s remarks with labor omnia vincit – a stern reminder that labor conquers all things. It is true, indeed, that you can’t rest on your laurels or your good family name or a Bryant education or just plain good luck. You have to work hard and sweat to succeed. And in doing so, you have to remember mens sana in corpore sano – a sound mind resides best in a sound body. But that is way too ponderous. This is, after all, a festive day!
The latter system provided the economy and prices with a fixed nominal anchor. Inflation was determined by growth in output on the one hand the supply of gold on the other. This was a system we had in common with our trading partners. Furthermore, we participated in the Scandinavian currency union as from 1875. The gold standard was suspended during World War I when the British government largely financed the war by printing money. Parity policy in the interwar years was unsuccessful in many countries. After World War II, countries made a joint effort to stabilise price  BIS Review 102/2007  1  developments by establishing the Bretton Woods system. The US dollar was pegged to gold and the other currencies to the dollar. In this way, we chose – with the value of gold as the basis – a fixed exchange rate and indirect inflation in other countries as our nominal anchor. The Bretton Woods system collapsed in 1971. In the absence of gold as an anchor, the real value of banknotes and coins and bank deposits was now dependent on confidence that the central banks would not inject so much cash into the economic system that the value of money declined. The various countries chose different solutions. In Norway, we looked to other countries for both confidence and our inflation level, by tying our exchange rate in various ways to other countries’ currencies. In the ten years from 1976 to 1986, confidence in this policy was severely eroded.

In addition to these savings bank merger/SIP operations, it should be mentioned that in the three years of international financial crisis, only two savings banks saw their solvency deteriorate to such an extent as to require the application of precautionary special measures. First, the directors of Caja Castilla-La Mancha were replaced by the Banco de España in March 2009 (before the FROB was set up). It received aid from the DGF totalling € billion, of which € billion consisted of preference shares and € billion were in the form of guarantees of asset value, as well as € million of bridge financing. This savings bank, following the agreements reached by it with Cajastur, has joined one of the 12 merger/SIP processes under way. Second, CajaSur was subjected to compulsory restructuring due to lack of solvency and viability, following its failure to approve a merger with Unicaja, a sound and solvent project in which the two savings banks had agreed on a private solution for the failed institution. The FROB granted temporary aid through the subscription of € million of non-voting equity units and € billion in liquidity support, which so far it has not been necessary to use. Definitive arrangements are being worked out for this savings bank through a competitive process in which the aid finally granted will be defined. At present, the provisional amount of the aid to be received by Spanish savings banks in this process is as follows. The FROB will furnish around € billion to strengthen own funds in merger/SIP processes.
The acquiescence of the UK labour force in accepting lower real wages is quite remarkable for those of us who grew up during the wage-price spirals of the 1970s and 80s. It explains in part why unemployment has stayed much lower than we would have expected, given the weakness of output growth. Much of the labour force has priced itself into work. The public sector has also been addressing its finances. There was clearly a greater structural deficit in the fiscal position than anyone thought pre-crisis and the Government are trying to reduce public expenditure and raise income to get back onto a sustainable footing. I should note that no consolidation at all would have been unsustainable and was never an option. Nevertheless, as the May Inflation Report noted, it is likely that the consolidation has weighed on output over the past three years and will continue to do so. The financial sector also has its balance sheet problems. The major banks in particular have been re-structuring, reducing wholesale market borrowing, improving their liquidity positions and building up capital. I believe every large UK lender has at least one non-core portfolio they are running down, and commercial property lending is typically a common factor. Finally, the corporate sector. In aggregate, UK businesses continue to save rather than invest, running up a significant and on-going corporate surplus. But like the household sector, there are different sub-groups. Some, especially large companies, are cash rich and profitable but not investing as much as they perhaps could.

Unlike a normal firm, part of the value of a bank does depend upon its capital structure. There is also a deeper point here about the wider benefits to the economy of the maturitytransformation services delivered by banks financing their longer-term loans with monetary  2  Basel 2 in effect required a minimum equity capital ratio of 2 percent. But under Basel 3 there is a greater focus on the equity that is truly free to absorb losses. As such, almost all regulatory deductions from capital are to be made from equity rather than being split across tier 1 and so-called tier 2 “capital” or made from total “capital”. Also, some risk-weights are increased; for example, on counterparty credit risk exposures. Together those changes mean that an old Basel 2 core tier 1 minimum risk-weighted asset ratio of 2% is equivalent to around 1% on a Basel 3 basis. Taking into account the capital conservation buffer and the surcharge for systemically important financial institutions, for the largest banks the Basel 3 equity minimum comes to around 10% (plus any Pillar 2 buffers). 3  For the original paper, see Modigliani and Miller (1958), “The Cost of Capital, Corporate Finance and the Theory of Investment”, American Economic Review, 48, 261–97. Later papers by the same authors addressed the implications for their result of tax, bankruptcy costs etc. 4  This assumes a bank’s post-tax return on equity is determined, given the riskiness of the bank’s business, in competitive global capital markets, with excess returns competed away.
Indeed, there is some risk that market participants could overreact even before normalization begins, when the pace of purchases is adjusted but the level of accommodation is still increasing month by month.11 Not only could such responses threaten financial stability, but also they might make it harder to calibrate monetary policy appropriately to the economic situation. We will need to think long and hard about how best to develop policy in a way that enables us to respond flexibly to a changing economic outlook, but in a way that is not disruptive to the economy.12 Based on what we have learned to date at the zero bound, I believe that it will be important for us to anchor all our communication around the core principle: The path of the policy rate and the size and composition of the balance sheet over time will be driven by our unbending commitment to our dual mandate objectives of maximum sustainable employment in the context of price stability. As you can see, there will be much more to learn as we go. Thank you for your kind attention. I would be happy to take a few questions. 11  The move to economic thresholds-based guidance for the federal funds rate should help in this regard. While the thresholds are certainly not triggers, they should help market participants adjust expectations about the likely timing of lift-off in a relatively continuous manner and guard against these expectations being pulled further forward in time than is warranted by changes in the economic outlook.

We applied what we understood to be the lessons from Japan, though with hindsight, perhaps not in every respect as completely as we could have. In particular, Japan’s experience reinforced the lessons of the Great Depression here in the U.S. and made us sensitive to the disinflationary force of an asset price bust and financial  4  However, research suggests that the purchases did reinforce the forward commitment. See, for example, “Policy commitment and expectation formation: Japan’s experience under zero interest rates” Kunio Okina and Shigenori Shiratsuka North American Journal of Economics and Finance, Vol 15, No 1, pp 75–100. 5  See, for example, “Deleveraging and Monetary Policy: Japan Since the 1990s and the United States Since 2007”, Kazuo Ueda, Journal of Economic Perspectives, Vol 26, No 3, Summer 2012, pp 177–202. 6  Some commentators prefer the term “North Atlantic financial crisis” as the failure and near-failure of financial institutions was concentrated in the U.S. and Europe. However, the crisis was global in the sense that financial markets transmitted the shock throughout the world and this resulted in a severe global economic downturn. BIS central bankers’ speeches  3  crisis. We recognized that we had to be very aggressive to prevent deflation and deflation expectations from becoming well entrenched. The Federal Reserve reduced short-term interest rates to nearly zero by late 2008 – a little over a year and a half after the initial shock hit in August 2007.
Nevertheless, there is much that the government can do to facilitate financial-market development by clearing the way, particularly where this involves markets of a regional nature. Three areas of work in which the HKMA – with various partners – is taking an active role are worth citing here. The first involves the gradual introduction and expansion of renminbi business within Hong Kong, which requires primarily co-operation between the Mainland and Hong Kong authorities at various levels, including both political and technical. The second example is our collaboration with other central banks in the region, under the auspices of EMEAP, on the Asian Bond Fund, which is intended not just to encourage business in the debt market, but also to stimulate regulatory reforms in economies in the region. The third example is our work in encouraging the development of Islamic finance in Hong Kong, through ensuring a level playing field, stimulating interest in Hong Kong among Islamic countries, encouraging product development, and raising market awareness within Hong Kong, particularly through the educational work of the Treasury Markets Association. All of this work looks both to the past and to the future for inspiration. Looking to the past, we have the still-recent experience of the Asian financial crisis, one element of which was the undeveloped state of some of our financial markets, in particular the debt market. Many of the market-development initiatives on which we have been working have been intended to address these deficiencies.

They make use of technology at many different levels: from traditional cross-harbour ferry and metallic coins to advanced transcontinental passenger planes and real-time electronic clearing. And usually both transport systems and financial infrastructure receive attention only when something goes wrong. Financial infrastructure suffers the further handicap that it is largely invisible – a matter of wires and electronic pulses – with none of the glamour or nostalgia that physical transport can sometimes evoke. So, quite understandably, the general public take it for granted – indeed may not even be aware – that Hong Kong has for some time had some of the most advanced, efficient and secure payment, clearing and settlement systems of any financial centre in the world. One of the responsibilities of the HKMA is to promote the development of these systems in collaboration with dedicated service-providers and the financial industry generally. In addition to its responsibility for Hong Kong's domestic systems, the HKMA also has a specific responsibility for promoting the development of systems in Hong Kong that facilitate the safe and efficient conduct of international and cross-border financial activities. We have been paying special attention to this aspect of our work in recent years in a way that has a very direct bearing on the development of financial markets in the region.
For this reason, Madam President, I would like to suggest dealing with this topic in greater depth in a session of the Commission especially designed for this purpose, which would allow us to deepen the background information compiled for this Report’s box and identify priorities for future follow-up. Nature and relevance of uncertainty in the current scenario The second topic I would like to address is that of uncertainty. As you will have noticed, this term is mentioned several times in this Report when characterizing the economy’s current situation and its outlook. It is appropriate to go deeper into the meaning of this concept because it is too often used or interpreted in different ways, some of them as a synonym for risk and/or threat to the economy. According to its formal definition, uncertainty refers to the lack of certainty, that is, the degree of randomness in variables of interest such as, for example, economic variables that affect welfare. Other definitions point to a diversity of plausible states, to which it is not possible to assign a probability of occurrence. These definitions mark a difference with the concept of risk, because the latter refers to the real possibility of occurrence of certain adverse events. Thus, uncertainty is a broader concept that is not necessarily related to adverse events or even to concrete possibilities.

This would enable us to also seize opportunities to tackle these “twin challenges” in an integrated manner. It is my sincere hope that today’s event, along with the release of the report, will encourage broader dialogue and increase awareness around nature-related risks and opportunities, in turn paving the way for concrete action on this important front. I would like to thank the World Bank for this fruitful collaboration, and the esteemed speakers joining us today. I look forward to the engaging sessions ahead. Read Report: An Exploration of Nature-related Financial Risks in Malaysia See also: BNM’s Climate Change website 1  IPBES. 2019. “The global assessment report on biodiversity and ecosystem services: summary for policymakers.” [Link to IPBES]  2 World Economic Forum New Nature Economy Series [Link to PDF] 3 2/3  BIS central bankers' speeches  3 UN Biodiversity page [Link] 4 SDG 8. 5 SDG 3. 6 "Life on land” is SDG 15, “Life below water” is SDG 14. 7 Network for Greening the Financial System. 3/3  BIS central bankers' speeches