samchain/econo-pairs-v1 huggingface dataset:
However, the implementation had to be postponed with the onset of the crisis. The seminar today represents an effort to catch up with the international standards. With the implementation of the '96 Accord on Market Risk, we would be one step closer to being able to adopt the New Accord in the future. Ladies and gentlemen, I would like to take this opportunity to share with you the Bank of Thailand's stance on how we would like to see the industry go forward. It is our intention to actively promote the development of the strong competency and practice for risk management within the Thai financial institutions. However, we will not expect nor require the financial institutions to develop risk management systems that are more complex and inappropriate for their respective needs. At the same time, the turbulence ahead cannot be underestimated. The Thai financial system and the real economy should be prepared to face increasing risks, and we have a duty to prevent the history of 1997 from repeating itself. Since capacity building for risk management is a long-term process, therefore I must insist that the Thai financial industry step up its already tremendous effort even more, today and in the future. 2  BIS Review 87/2001  Our goal is to adopt the '96 Accord on Market Risk. Timing of its implementation has to be appropriate, however I would look to implementing risk assessment process in 2002, and to require capital charge by a later date, tentatively 2003.

M R Pridiyathorn Devakula: Risk management - Challenge for the Thai financial institutions and regulator Opening remark by Mr M R Pridiyathorn Devakula, Governor of the Bank of Thailand, at the Market Risk Management Techniques for the BIS Capital Regime Seminar, held in Bangkok, 12 October 2001. *  *  *  Distinguished guests, Ladies and gentlemen, I would like to personally extend a warm welcome and to express our deep appreciation to all of our distinguished speakers and panelists who have agreed to come to Bangkok at this difficult time. I would also like to thank our co-host, the World Bank, in the efforts and interest which they have shown to make this important seminar possible. It is also important to convey my appreciation to the members of the financial industry for your interest and enthusiastic participation in this seminar. As we all know, the New Accord Proposal is scheduled to be finalized early next year, with its implementation scheduled for 2005. Countries that have not yet implemented the consolidated supervision will have until 2008 to comply with the New Accord. Thailand is in this second category since we have yet to be empowered by law to carry out consolidated supervision. The new Banking Act with such a provision is expected to take effect next year. Even with such a relatively long grace period toward compliance, Thai financial institutions have already taken the first step of the journey toward that direction.
More specifically, I am referring to the fact that EU accession benefits were not evenly distributed across the economy, as reflected for instance by rising regional divergence. Bucharest, alongside other important cities, as well as areas either in the proximity of the Western border or in which industrial clusters appeared, did much better than other areas, particularly those in the North-East, which are lagging behind. The North-East of the country could constitute an attractive investment destination. As there are other regions where the gap between demand and supply of skilled labour is becoming more evident, firms have often encountered difficulties in overcoming the challenges posed by poor transport infrastructure – the one that makes us sigh. Because of the lack of investments, administrative units do not have an economic core and people have little choice but to move to a larger city or to another country. This is perhaps the most important challenge Romania is facing right now and I see only one way of overcoming this: continuing to increase our competitiveness and productivity in such a way as to preserve macroeconomic balances and reduce inequality. No country can obtain sustainable economic growth by boosting consumption and undermining contractual discipline, but by implementing structural reforms leading to productivity gains. As Paul Krugman said “productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker”.

The indicator, expressed as a ratio to the EU28 average (the UK still included), currently stands at close to 57 percent (after around 41 percent in 2007 and just over 25 percent in 2000). There is still very much room for progress. I say this having in mind the GDP per capita gap that is still substantial (and larger than those of most regional peers). In a scenario where Romania experiences constant 5 percent growth each year, while the EU grows on average only by 2 percent, it will take us 20 years to achieve full convergence. Under more pessimistic scenarios, I guess you don’t want to hear how long it would take to catch up. At this point, some of you may wonder why would anyone be pessimistic if local output currently grows at over 5 percent, at 6 percent in fact, in the second quarter of 2016, the highest rate in the EU? Well, as the effects of the recent fiscal stimulus wear off, GDP dynamics will come down, while additional stimulus, if implemented, will put even more at risk the already weaker fiscal position. Above all, growth needs to be achieved in a sustainable fashion, backed by productivity and while keeping fiscal and external deficits in check. The lessons taught by the most severe teacher of all, the economic crisis, should not be wasted… When I am talking about much room for progress, I am also referring to developments sometimes overlooked, especially if one has in mind only the aggregate figures.
The fall in equity prices is not expected to have any major effects on growth in China. The Chinese central bank’s decision to devaluate its currency came as a surprise to the market. The motive given for the devaluation was that the yuan had strengthened substantially in recent years. However, another motive may be that the Chinese regime wants to create the conditions for the yuan to eventually become a reserve currency. This is bearing in mind that the guidelines for the daily pricing of the currency were also moved toward a more market-based way of valuing the yuan in connection with the devaluation. However, there is also a possibility that the devaluation is a sign that the Chinese economy is weaker than we previously thought. The fall in the oil price may contribute to lower inflation abroad The oil price has fallen by around 10 dollars a barrel since the beginning of July, see Figure 10. It has thus become lower than we had forecast. Forward pricing also indicates a lower oil price in the coming years than we had expected. International inflation may thus be slightly lower than our earlier assessment. But the lower oil price can also be positive for growth and demand in the oil-importing countries, which could counteract the direct downward effect on inflation.

We have also made extensive purchases of Swedish government bonds. Although it is difficult to distinguish the effects of different measures on the economy, our assessment is that the impact of monetary policy is essentially functioning as expected. The interest rates charged to households and companies on loans with short maturities have fallen more or less in line with the repo rate. Data from the financial markets also imply that the asset purchases have had the intended effect. Our intention with this expansionary monetary policy has been to increase the rate of inflation so it approaches the target of 2 per cent. As I mentioned earlier, underlying inflation has also shown an upward trend for some time now, at the same time as economic activity has strengthened and the situation on the labour market has gradually improved. But although developments are mainly heading in the right direction, there is still considerable uncertainty. Economic activity became stronger in the euro area, but several countries were still being held back by high indebtedness and as yet unresolved structural problems. The course of events in Greece also entails a tangible risk. If the situation deteriorates, unease may spread to other countries in the monetary union. Uncertainty over how the krona will develop is another risk. The relatively strong fluctuations on the foreign exchange market are making it difficult to assess how the exchange rate will continue to develop. A too strong exchange rate would risk halting the upturn in inflation that has begun.
A more gradual change in the interest rate can also be justified by the uncertainty of the forecasts and statistics. Monetary policy is normally aimed at attaining the inflation target within two years. This horizon is justified by the fact that monetary policy's impact comes after a time lag, but also by the desire to contribute to subduing fluctuations in activity in the real economy. By aiming to allow some time before the inflation target is attained, the Riksbank can contribute to stabilising the development of the real economy, but at the same time we must safeguard confidence in the inflation target. Taking into consideration developments in the real economy must not mean that the price stability target is set aside. The two-year horizon provides scope for flexibility but at the same time sets a limit for how large the deviations from target can normally be. The fact that we have chosen to specify an exact target for inflation is an expression of our desire to be clear and open. This is also why we have explicitly stated that inflation will normally be returned to target within two years. Similarly, the deviation interval around the inflation target aims to explain that monetary policy cannot, and does not, attempt to exactly attain the target all of the time. The deviation interval thus also emphasises that there must be scope for temporary deviations from the target, which may be justified with regard to avoid unnecessary fluctuations in growth and employment.

Conclusion Let me say in conclusion that the assessment of monetary policy is an important part of an independent central bank’s endeavour to be open and clear and of the endeavour to attain and maintain confidence in the inflation target. In Sweden, we publish a substantial amount of information that enables the general public to examine our analyses and to understand how monetary policy decisions are made. The developments in the economy in recent years have given rise to many important issues, not only for us decision-makers, but also for those who assess us. We are several central banks who have faced structural, unforeseen factors contributing to keeping down inflation, while monetary policy is expansionary, the economy is showing robust growth, and household borrowing and asset prices are rising rapidly. An inflation rate lower than the target level need not be interpreted in this situation as due to excessively tight monetary policy and as a failure for monetary policy. It is interesting to note that this has not been the conclusion in the most recent assessment of Norges Bank. Developments in recent years have raised issues which are extremely important in the discussion and which require improved analysis. If we were to aim at keeping inflation on target at any cost, without taking into account developments in the real economy, what would the consequences be of trying to stimulate demand further so that inflation comes closer to the target?
This presupposes, however, that the banks have made realistic value adjustments and provisions. We currently assume that this is the case. Moreover, average lending limits for mortgage loans have changed only insignificantly and may be regarded as cautious. For instance, the proportion of low-risk first mortgages – i.e. those mortgages with the lowest lending limit – is over 90%. The criteria used in extending loans can also be rated as conservative. As a rule, assessments of a debtor’s future solvency are based on considerably higher interest rates than the current ones. Mortgage debtors should therefore be able to meet their liabilities even if there is a marked increase in the interest rate level. Our analysis focuses on system-relevant banks and on different groups of banks. We rely on aggregated data and on a random sampling of banks or groups of banks. Problems with individual institutions cannot be excluded but should not threaten system stability. Increase in interest rate risks These assessments, which have so far been positive, are becoming slightly clouded because of higher interest rate risks. Smaller banks in particular have seen a relatively strong increase in direct interest rate risks. A sharp rise in the interest rate level could affect the valuation of assets and liabilities of such banks to such an extent that their capital resources would in some cases be reduced considerably. While such losses could still be absorbed, we would, however, consider a further rise in interest rate risks as critical.

The MOU implicitly recognises the inter-relationship between monetary and broader financial stability, which is fundamentally important: just as we could not hope to deliver monetary stability if the financial system was crashing around our ears, so, too, monetary stability is a very necessary though in itself still insufficient - condition for stability of the financial system. Specifically the MOU recognises the Bank’s role - as the bankers’ bank - at the heart of the payments system; and it recognises our capacity, in exceptional situations and subject to override by the Chancellor, to act as lender of last resort in order to limit systemic damage. The MOU acknowledges more broadly the Bank’s oversight role which enables us to advise on the financial stability implications of 1  BIS Review 49/2000  developments in domestic and international markets and payments systems; and it acknowledges finally also our role in promoting the efficiency and effectiveness of the financial sector, with particular regard to international competitiveness, but which can also contribute to the robustness of the financial system.
As part of last week’s announcement on the Bank of England and Financial Services Bill, the Government put forward an important change to the senior managers regime for banks, by removing the “presumption of responsibility” and replacing it with a “duty of responsibility”. I can tell you from my postbox in all its many forms, that the “presumption” is the most controversial element of the new regime. On its own that is not a good reason for change. I want therefore to explain why the change does make sense, and why the new regime should create the right incentives. In the current Approved Persons regime, the PRA and FCA can take formal action for misconduct against an approved person either if that person has failed to comply with the statements of principle (which will become in the new regime common rules of professional conduct) or they have been knowingly concerned in a breach of a regulatory requirement by the firm. The burden of proof in an enforcement action falls on the regulator. The Banking Reform Act adds a third reason to take enforcement action against senior managers (not others) in these firms if: the firm (and I emphasise here the firm – going beyond the individual) has breached regulatory requirements; and the senior manager is responsible for the area of the firm in which the breach occurred.

The PRA has authorised ten banks in the last two years, and currently we have a substantial pipeline of interested parties. We are thinking about competition in our domestic work, but also about how we approach international policy issues. For instance, this week our response to the European Commission’s consultation on the impact of the new capital regime has been published. It is quite often said that aspects of the capital regime discriminate against smaller banks and building societies that use the so-called standardised capital approach versus larger banks that use their own models. The consequence of this is that smaller banks and building societies cannot compete effectively in lower risk asset markets such as prime mortgages because the capital requirements are too far apart and in favour of large banks. This forces them into riskier assets and undermines their position. This is an area where the leverage ratio acts to counterbalance the difference, a point that is not well enough understood. But in our response to the European Commission we said that while the financial stability benefits from regulation of large, internationally-active banks mean these firms should meet global standards, a differentiated approach for smaller firms would recognise the high costs and smaller benefits of applying global standards to them, and should enable us to find ways to create a regime which is more simple and which reduces their reporting burden. This would help to foster competition and would be good for the European Single Market.
5  situation because, in many cases, the level of profits in 2020 is not representative of expected future profits. The increase in debt and the decline in revenues affect some firms’ debt repayment capacity. But the extension of maturities and the lower interest rates on new loans granted during the crisis compared with pre-existing loans are substantial mitigating factors, contributing to lessening the financial burden on firms. Looking ahead, debt repayment capacity will depend mainly on the scale of the economic recovery. Economic policies to address future challenges Currently, the economy is experiencing a recovery that is incomplete, uneven and subject to a high degree of uncertainty, caused mainly by pandemic-related developments. This means that the risks to the business sector will continue to be significant until the pandemic is under control, especially for the firms most affected by the shock. Allow me now to summarise the courses of action which, in my view, should be followed in the current macroeconomic environment. First, economic policies should continue providing support to the economy. In particular, we should avoid a premature withdrawal of the support measures and economic policymakers should monitor risks and stand ready to introduce further stimuli if the macroeconomic outlook continues to worsen. In the specific case of micro- and macroprudential policies, and as the Basel Committee on Banking Supervision has reiterated, banks should use during this crisis the capital and liquidity buffers introduced by Basel III.

Debt restructuring mechanisms need to be more efficient, so as to promptly resolve the insolvency problems some firms are experiencing. Other structural policies could also contribute to shoring up the composition of firms’ debt in order to assign a greater weight to capital. These policies might include the elimination of the preferential tax treatment of debt as opposed to equity and headway in developing equity markets in Europe. Finally, as mentioned on various occasions, all these measures must form part of an ambitious reform agenda aimed at tackling our economy’s structural problems. These include most notably high unemployment, labour market duality and the low productivity of our firms. And, in parallel, we must design a credible strategy for reducing, in a gradual but sustained fashion, our fiscal imbalances. Such a strategy may be implemented once the pandemic is behind us and the economic recovery is firmly entrenched. It would entail significant benefits, by increasing the economy’s reform-led potential growth and by enhancing the credibility surrounding the sustainability of public finances in the medium term. That, in turn, would increase the existing fiscal space available and would boost the expansionary effects of the current fiscal measures. In short, so we may have the fiscal leeway needed to be able to increase support measures to the economy should pandemic-related developments so require, we must resolutely implement the reform agenda, plan the fiscal consolidation process and reform support instruments to make them more flexible and targeted. Thank you very much. 9
Among other things, the reports have presented assessments of whether the banks’ credit risk exposures, for instance to households in Sweden, could threaten financial stability. The assessments of inflation normally presuppose that no major problems will arise in the financial system ― credit supply, payment mediation and risk sharing are assumed to function normally. If financial stability were to be threatened, that would of course have to be taken into account when deciding on monetary policy. Our assessments  Households are not a direct threat to financial stability In the latest Financial Stability Report, published in June, the Riksbank stated that the risk of households incurring large loan losses for Swedish banks is very small. So the rapid growth we have seen in lending to households does not constitute a threat to financial stability. Although indebtedness has increased markedly in the past decade, low interest rates have lightened the burden of servicing debt. In aggregated terms, interest expenditure adds up to little more than 3 per cent of household income, which can be compared with over 10 per cent in the early 1990s. The debt-servicing burden of indebted households is low. Micro studies also show that indebted households in general have comfortable margins and would therefore cope with interest expenditure even with interest rates that are considerably higher than at present. Approximately 70 per cent of the loans have been obtained from mortgage institutions with the residential property as collateral.

Provided households’ borrowing decisions have a rational basis and accordingly include realistic assumptions about future interest expenditure, there is nothing to suggest that higher interest rates will have drastic consequences. This applies to the effects of increased interest expenditure on house prices as well as on consumption. Still, one cannot disregard the risk that some households have been over-optimistic about their future incomes and the future level of interest rates. More than 70 per cent of new lending is currently arranged at a variable interest rate. Moreover, the present level of interest rates is considerably below what the financial markets assume it will be in time. So the households that choose to stick to a variable rate must count on considerably increased interest expenditure further ahead, if interest rates develop in line with market expectations. Furthermore, during the past year the credit spread between a risk-free government bond and a housing bond has been virtually nil. All in all, mortgage institu-tions have therefore been able to offer very low rates even for fixed-interest loans. The combination of high house prices and low interest rates has meant that many households have acquired very large liabilities. In that interest rates have been pushed down by a large variety of partly temporary factors, it is not inconceivable that their level will double. That may entail a heavy burden for many households and one cannot be sure they realised this when they decided to borrow so much.