samchain/econo-pairs-v1 huggingface dataset:
However, obtaining a positive result in the exercise is only a favourable starting point for assuming the new supervisory regime in a macroeconomic and financial framework which, despite the recent improvement, remains beset by challenges to banks. Accordingly, irrespective of the results of the exercise, banks should continue to focus on implementing measures geared to capital preservation, improved efficiency and the pursuit of rigour in the recording and monitoring of asset quality. Single resolution mechanism and fund The second essential element of banking union is a single resolution mechanism. It has been said on numerous occasions that unified supervision will not suffice to eliminate market fragmentation. Another prerequisite is that similar banking liabilities of banks based in different jurisdictions must receive similar treatment in the event of solvency problems. In order words, the resolution of vulnerable banks has to proceed according to common rules applied on a centralised basis by a single authority. Regarding regulations, the agreement reached to approve the future Bank Recovery and Resolution Directive is a notable step forward because it offers a common framework for orderly bank resolution at a minimum cost to taxpayers. The Directive introduces burden-sharing or bail-in arrangements establishing a minimum amount and clear order of cost assumption by shareholders and creditors. It thus makes for accurate perception of the risk associated with each liability instrument and minimises the bill to be footed by taxpayers for the disorderly winding-up of banks.

Indeed, this is why, despite the EU-IMF programmes proposing a comprehensive approach to reforms, product markets reforms have tended to lag labour market reforms. And the consequence is not only the mismatch between different measures that I just described. It is that reforms have often been perceived as unfair, which in turn undermines popular support for the reform process. So for those that still need to press ahead structural measures, including the large euro area economies, there are two key points to take from this. 12  4  For a more in-depth discussion on the link between wage developments and labour market institutions see the aforementioned speech by Mario Draghi at Jackson Hole. BIS central bankers’ speeches  First, talking vaguely about structural reforms, but not doing them, is the worst of all worlds. It creates uncertainty over the path of real interest rates, without in tandem raising expectations of future growth. Second, while in “normal” times it might be acceptable to reform one sector at a time, in crisis times it is not. Fairness must be a priority. And the best way to align vested interests is to reform them all at once. Why the composition of reforms matters The aim of structural reforms should however be more than internal devaluation. It should above all be to raise productivity growth. As I said earlier, the key to structural reforms having positive short-term effects is firms and households expecting higher permanent income, and altering their behaviour today. And to achieve this, productivity growth is essential.
In particular, attention should be paid to what could be done to capitalize on the recent stabilization in house prices to improve access to mortgage credit and to foster competition in mortgage origination to ensure a more complete pass-through of low secondary mortgage rates to households. Indeed, if balance sheet dynamics are more important and frictions around housing more powerful than we initially understood, then there should be strong payoff to policies that ease them. At the same time, Congress and the White House should take steps that reduce the short-term and long-term uncertainty over fiscal policy. Currently, households and businesses face elevated short-term uncertainty as to what will happen to tax and spending policies in 2013 and how this will affect the economic outlook. I believe this is restraining hiring and investment today. BIS central bankers’ speeches  7  But families and businesses also face long-term uncertainty about how the country’s fiscal challenges will be addressed. Providing greater clarity about the scope and terms of Social Security and Medicare must be helpful, especially in correcting those expectations that are unduly pessimistic. On this score, Social Security is particularly noteworthy.

My conclusion is that the easing of financial conditions resulting from non-traditional policy actions has had a material effect on both nominal and real growth and has demonstrably reduced the risk of particularly adverse outcomes. Nevertheless, I also conclude that, with the benefit of hindsight, monetary policy needed to be still more aggressive. Consequently, it was appropriate to recalibrate our policy stance, which is what happened at the last FOMC meeting. As I argued in a recent speech, simple policy rules, including the most popular versions of the Taylor Rule, understate the degree of monetary support that may be required to achieve a given set of economic objectives in a post-financial crisis world. That is because such rules typically do not adjust for factors such as a time-varying neutral real interest rate, elevated risk spreads, or impaired transmission channels that can undercut the power of monetary policy.2 One reason that monetary policy may have been less powerful than normal is that one of the primary channels through which monetary policy influences the real economy – housing finance – has been partially impaired. This has both quantity and price dimensions. Credit availability to households with lower-rated credit scores remains limited and households with homes that have fallen sharply in value have lost most or all of their home equity and this makes it very difficult for them to refinance these mortgages. 2  Dudley, William C. (2012). “Conducting Monetary Policy: Rules, Learning and Risk Management”.
This type of crude stress test is quite helpful for a sense of how solid the system’s capital buffer might be, but it doesn’t allow you to take into account second and third round effects. If NPLs have risen to 20 percent of total assets, then there are likely to be a lot of other things happening in the economy at the same time, all of which could have additional implications for banks’ financial soundness. As a result, stress testing is moving increasingly in the direction of scenario analysis. This involves economists constructing scenarios for the outlook on GDP, interest rates etc. and tracing through these changes in terms of their impact on the key measures of banking system soundness including profitability and capital adequacy. This approach involves some quite advanced economic modelling techniques and is still in its early days. However, the recent revamp of the Bank of England’s financial stability report that I mentioned earlier was designed to give a larger role to this type of analysis. A final issue that I’d like to discuss is that macro prudential analysis cannot stop with the banking system or at the borders of a particular jurisdiction. In the past it might have been reasonable to think that systemic risk was something that began and ended with the banking system.

The macro prudential pillar takes account of those risks that may affect all, part, or most banks in the system - and not just individual banks. Like most other bank supervisors I’ve spent most of my career looking at banking system soundness mainly from an individual bank perspective. However, as a career central banker, I also have had to spend a good deal of time looking at financial stability from the macro prudential perspective as well. For much of my career we didn’t call it macro surveillance but it was very much in our minds when, for example, in the late 1980’s the U.S. banking system suffered from the collapse of a number of sectors of the economy episodically resulting in a very unhealthy and unstable banking system as a whole. Over 1,500 banks failed and public confidence in the industry was understandably threatened. In fact, on two occasions during that period the system was so close to collapse that major banks were unwilling to settle transactions unless the physical documents were in hand. At that time public policy was being directed toward eliminating weak and unstable banks so that trust and confidence could return – a necessary precursor to turning around a weak economy. That’s why – to use the title of my speech – I wonder whether the trend toward macro prudential surveillance isn’t just a new name for something we, as supervisors, have been doing all along.
With regard to Sweden, in April we could see some positive signs in economic developments after the unexpectedly severe fall in GDP in the last quarter of 2011. The statistics we had for the beginning of the year pointed towards the fall being temporary. We did not make any major changes to the forecast for growth we had made in February. Nor was there any reason to change the forecast for inflation. So far, we have not seen any new statistics that should cause us to change the economic outlook we presented in April, in my opinion. I am one of those people who closely scrutinise the statistics to form an opinion of the economic situation and driving forces behind developments. My long experience in this field has taught me that it is important not to have blind faith in the accuracy of the measures we use to assess the economic situation. It is important not to read too much into individual figures, but to gradually adjust our forecasts as new statistics justify this. This approach to making forecasts reduces the risk of going in the wrong direction. The experiences of recent years provide a good illustration. But of course one should also be prepared to make larger  BIS central bankers’ speeches  1  adjustments if the circumstances so require. Our actions in autumn 2008 provide a good example of this. I have on many occasions expressed my view that monetary policy should normally be conducted on the basis of gradual adjustment.

Robust compliance function The compliance function of a financial institution is an important element in mitigating risks of abuse of the financial system, especially financial crime and terrorism financing risks. To this end, financial institutions are expected to ensure that the compliance function is independent and have sufficient authority, stature and resources to perform its function effectively. The required AML/CFT compliance program of each institution must clearly describe and outline the roles and responsibility of different segments of the institutions with respect to its compliance function. In this regard, the principle of collective responsibility between senior managements and compliance officers should be upheld in the case of failure. In compliance, continued vigilance is necessary and required. The 2017 National Risk Assessment, by the National Coordinating Committee for Money Laundering (NCC) and the financial sector, showed that the banking sector continues to face high money laundering risk and medium high terrorism financing risk. The sector records the highest value of cash transactions and high risk customers; and provides the highest number of high risk products compared to other sectors within the financial industry. This reflects the central role of the banking sector in intermediating money flows within an economy. One important compliance function that needs to be undertaken is the identity of the ultimate beneficial owner of companies, assets and financial transactions. Financial institutions need to have controls and procedures to identify, verify and conduct due diligence on the beneficiaries. This must be complemented by a rigorous monitoring process.
The Bretton Woods Institutions are adapting to new world economic conditions, including greater relative weight of some emerging market economies. The members of the IMF aim to agree on changes in the governance of the Fund by January next year as confirmed in the latest IMFC 10 Communiqué. A review of quotas is central to these deliberations. Quotas determine the voting weight of individual member countries in the institution. Some expect the review to lead to changes in the Executive Board of the IMF. Its current size ensures broad and fair representation of the member countries and avoids an undesirable concentration of power. An important part of the governance reforms should be to enhance the role and status of the IMFC. The composition of the IMFC ensures fair representation of the membership through the constituency structure. Although without formal decision-making powers, it has political power and stature which it can bring to bear. A reinvigorated IMFC requires a firm policy commitment from the membership that strategic discussions for the institution and global economic cooperation take place in the IMFC. Adequately dedicated and effectively managed, it can provide strategic leadership and guidance to the Executive Board. The G20 has assumed a dominant role in matters of international economics and finance. Success in their ambitious tasks can only be welcomed by the rest of us. However, it is a weakness that the members of the G20 represent only themselves. Virtually entire groups of countries and regions are left out.

They have no voice and no representation in the work of the G20 or in the institutions which it chooses to set up to further its agenda. This is at variance with the principles of multilateralism and international cooperation that have prevailed since the end of the Second World War. Over time, this could easily weaken not  8  Mervyn King: Speech at the University of Exeter, January 19, 2010. 9  The Financial Stability Board has been established to address vulnerabilities and to develop and implement strong regulatory, supervisory and other policies in the interest of financial stability. It comprises the G20, five other countries and international institutions and standard-setting bodies. 10  International Monetary and Financial Committee – the policy steering committee of the International Monetary Fund. BIS Review 22/2010  5  only the G20 process, but also the IMF as it will be perceived as increasingly guided and controlled by the G20. I referred earlier to a recent speech by the Governor of the Bank of England and I wish to do so again where he states: “Looking further ahead, the legitimacy and leadership of the G20 would be enhanced if it were seen as representing views of other countries too. That could be achieved if the G20 were to metamorphose into a Governing Council for the IMF, and at the same time acquire a procedure for voting on decisions.” Needless to say, I agree with him, as did the Managing Director of the IMF in a recent interview.
Tharman Shanmugaratnam: Credit Counselling Singapore – ten years of helping individuals recover from debt problems Address by Mr Tharman Shanmugaratnam, Chairman of the Monetary Authority of Singapore, at Credit Counselling Singapore 10th Anniversary, Singapore, 28 October 2014. *  *  *  Mr Kuo How Nam, President of Credit Counselling Singapore, Pioneers of CCS, Distinguished Guests, Ladies and Gentlemen, 1 Good afternoon. I am very happy to be part of CCS’ 10th anniversary celebrations today. I commend CCS and its pioneers for your contributions in helping distressed borrowers over the past 10 years. 2 CCS has come a long way from its modest beginnings in 2004. It has grown in strength, winning the confidence and trust of the people it has counselled as well as the banking industry. This is the result of the dedication of CCS’ leaders, staff and volunteers. 3 I would like especially to thank Mr Kuo How Nam, who as CCS President led and inspired the CCS team, and worked doggedly to establish partnerships with banks and other organisations. He has shaped the CCS of today – a credible source of inputs to Government on matters to do with individual credit, and a valuable partner for the financial and social services sectors.

Admittedly, since the publication of our latest projections more details have become known on the use that could be made of the NGEU programme in Spain in the short term (many of which are included in the Draft Budget we are addressing here today). But notable uncertainty persists over the ultimate level of actual execution of this programme in Spain, and over the capacity of the potential projects finally selected and implemented to increase the Spanish economy’s growth potential. I shall refer again to this matter when discussing the macroeconomic forecasts of the Draft Budget. But first, allow me to mention one final factor which, undoubtedly, has critically influenced recent Spanish and global dynamics. It is a factor that will continue to play a key role in the coming quarters and years in managing and overcoming this crisis. I refer here to the economic policy response. To date, the measures taken by economic policymakers (in the fiscal, monetary, labour market and financial areas) in response to the outbreak of the pandemic have most significantly mitigated its impact. They have eased the downturn in real activity and in economic agents’ income and liquidity, and they have headed off the materialisation of systemic risks to the functioning of the financial markets and banks’ financial stability. From the outset of the health crisis, fiscal policy, both in Spain and in most developed countries, has reacted resolutely.
It is for this reason that, in addition to the CPI, the Riksbank also looks at the CPIF measure, in which interest rates are fixed and not allowed to vary. Figures A2 and A3 in the appendix show the developments in prices in recent years for goods, services, energy and foods. BIS central bankers’ speeches  3  development has generated some attention, as the rate of increase in service prices was relatively stable during the years prior to this. Energy prices are volatile but usually increase faster than the inflation rate, but they have been unusually stable during the past two years. Finally, we have interest expenditure, which has pushed down CPI inflation via lower mortgage rates. Why is inflation low? Our examination of developments in prices for the sub-groups behind the CPI measures shows that the fall in inflation is broad and not due to any individual component. It is also difficult to point to any individual factor that has led to inflation in Sweden being low. It has rather been a combination of factors. One important factor that can hardly be disregarded is monetary policy. The repo rate has been held higher due to consideration of risks linked to household indebtedness than it would have been if the aim was solely to stabilise inflation around the target. It was after the Riksbank began to raise the repo rate in summer 2010 that inflation in Sweden – unlike inflation in other countries – began to fall (see Figures 2 and 4).

17  See the reasoning on this in Williams (2009) and Bayoumi et al. (2014). 18  See for example Krugman (2014) and Pettersson (2014). 19  Bordo and Filardo (2005) note that episodes of deflation have been common throughout history and often been unproblematic. But they also note that these unproblematic episodes often occurred under the gold standard regime and that long-term inflation expectations were then firmly anchored. Mechanisms that are based on expectations of lower prices in the future then do not arise so easily. 8  BIS central bankers’ speeches  phones. The price level for these goods has fallen fairly quickly, as a result of the rapid productivity growth, even during periods when the general inflation rate has been clearly positive (see Figure 5). But despite the falling prices, demand for these goods has not collapsed, but rather increased over time. To summarise, I am thus worried about the low inflation in Sweden in recent years. I see it as particularly problematic that the low rate of inflation risks impairing wage formation and contributing to unnecessarily high unemployment. There is also a risk that the credibility and efficiency of monetary policy will deteriorate and that there will be arbitrary reallocations between lenders and borrowers. But, at the same time, I believe that some concerns and problems have been exaggerated in the debate. I see it as a small risk that Sweden would suffer a prolonged period with falling prices.
The Bank's preliminary assessment of the impact of the rationalisation of the domestic fuel and energy prices on inflation in 2008, is that it will rise to an average of 4.2% for the year. The initial price impact would be felt in June during which inflation is expected to be in the region of 5%. The increases in prices are expected to peak in the first quarter of 2009 before moderating to less than 3% in the fourth quarter. As international prices of commodities are expected to continue to remain high and as direct influence over these prices is limited, efforts will have to be focussed on increasing efficiency and productivity to reduce cost and to shift resources to areas of comparative advantage. From the perspective of monetary policy, the concern would be on the potential secondround impact of these price increases, the extent to which they lead to more generalised price increases and whether they pose a serious risk to inflationary expectations. It must be remembered that the current inflationary pressures is a global phenomenon, and that many of our trading partners and neighbours are having similar or higher inflation rates. Given this fact, the increase in inflation is unlikely to erode Malaysia's comparative advantages in global trade. The experience during current international financial turmoil have demonstrated fragilities in financial systems even among the developed economies.

They reflect diminished uncertainty about the expected path of monetary policy in the United States. And they imply that the imbalances in the global economy will be diffused smoothly. Of course, not much is certain in economics and finance. One cannot know with confidence whether future economic policies and outcomes will justify the confidence in the benign outlook now reflected in risk premia. What are the broader challenges and forces that will dominate the policy agenda and affect economic outcomes? I want to touch on four, though this is a selective list. First, all of the major economies face difficult fiscal sustainability issues, and these will be exacerbated by the approaching demographic cliff. Fiscal policy in most of the major economies is on a path that will lead to increasing, rather than stable or falling debt-to-GDP ratios. In virtually all the major economies, the cost of committed benefits substantially exceeds the stream of tax resources available under current policies. If one were to produce a ten year forecast of the U.S. fiscal position using the  fan charts to illustrate uncertainty that are a feature of the inflation reports of many central banks, the size of the fan would be very wide, indicating a substantial probability of deficits significantly worse than the already troubling central path for the deficit predicted given current policies.