samchain/econo-pairs-v1 huggingface dataset:
Gent Sejko: Fifth review of the arrangement with the IMF concluded Speech by Mr Gent Sejko, Governor of the Bank of Albania, at the joint press conference with the IMF mission, Albanian MoF (Ministry of Finance) and MEDTTE (the Albanian Ministry of Economic Development, Tourism, Trade, and Entrepreneurship), Tirana, 30 June 2015. *  *  *  Dear media representatives, In line with the already established practice, in the past two weeks, we have constantly met and exchanged views and opinions with International Monetary Fund representatives. As always, these meetings serve to make a comprehensive analysis of economic and financial developments, with a view to identifying the necessary measures for a steady development. Following, I will present a summary of Bank of Albania’s opinion. The Albanian economy is on a positive development trajectory, irrespective of the shocks we have been facing in the first half of the year. Economic and financial balances in Albania are sound. The Banking system is liquid and well capitalised; Albania’s public debt is in control; and, the financial situation of Albanian businesses and households is improving. Long-term development resources for the country remain stable. This situation is an outcome of economic policies oriented towards stability, which we have undertaken. In view of the latest developments in Greece, I would like to emphasize that the external environment appears challenging, but Albania’s economy and financial system are capable to withstand even extreme shocks.

Fiscal data, overall, are in line with this target, albeit work should still be done with regard to the rigorous implementation of public borrowing and spending plan. The monetary policy implemented by the Bank of Albania is at very simulating parameters. Interest rates and financing costs are at historical low levels. The Bank of  BIS central bankers’ speeches  1  Albania has ensured that the market is fully supplied with liquidity and has provided longterm guidance on the monetary policy direction. In accordance with the monetary policy direction, the Bank of Albania has continued to implement easing supervisory and regulatory measures. Also, we will announce a major project very soon, aimed at addressing definitely the issues related with the treatment and reduction of non-performing loans. All these measures have contributed to and are expected to better support the Albanian economy with funds. As I said above, the economic and financial equilibriums of Albania are solid. The current account deficit improved in the first quarter and the Albanian foreign exchange position is quite positive. Banking system’s liquidity and capitalization indicators have been improving. The growth of non-performing loans decelerated and the Albanian banking system is profitable. Taking into account the international setting, I would like to guarantee the public that the banking system has no direct exposure to the Greek crisis. Our analyses, both at individual bank and system level, confirm that that it would maintain the soundness and normal operations even in extreme adverse scenarios.
Jean-Claude Trichet: Global capital – surrender of national policies? Lessons from the recent events in credit markets Speech by Mr Jean-Claude Trichet, President of the European Central Bank, at the 17th Frankfurt European Banking Congress “Global Capital – Threat or Salvation?”, Frankfurt am Main, 23 November 2007. *  *  *  Ladies and Gentlemen, Let me start off with one general remark: The present significant market correction with episodes of turbulences should not come as a surprise to us. The ECB, as well as the other central banks, has issued warnings in the past on the global phenomenon of under-pricing of risks. In many respects the present episode can be interpreted as bringing to the forefront anomalies and structural deficiencies which we have identified earlier. While it is too early to make a full assessment, I believe there are some first provisional lessons which can already be drawn at the current stage. A lesson that can be drawn is that the growing complexity of instruments has to be monitored very closely. Structured credit markets are exposed to valuation problems, which make the market very vulnerable to a shift in investor sentiment. In the absence of reliable market prices, instruments need to be valued by models. But estimates which the models produce are highly sensitive to underlying assumptions.

Sixth, with respect to our own crisis mitigation tools, a lesson that we can draw at this stage is that the operational framework of the Eurosystem has proved able to cope with stressed market conditions. So far, the Eurosystem has been able to manage the turmoil in an effective and flexible manner. Two ingredients of its operational framework have been particularly important: The first is the clear separation between on one hand the ECB’s management of the aggregate liquidity conditions and on the other hand the setting of its monetary policy stance, which is signalled by the minimum bid rate in main refinancing operations. This separation has been extremely valuable under present circumstances. Looking ahead, and in line with its previous communications and actions, the ECB will continue to steer very short term interbank rates close the minimum bid rate. The second ingredient is the Eurosystem’s collateral framework. The broad list of eligible assets has ensured that a broad range of counterparties could access the credit operations of the Eurosystem during the turmoil. This has helped counterparties to effectively mitigate funding liquidity risk when interbank markets stopped functioning properly. As a side effect, the acceptance of ABS in the sizeable refinancing operations has allowed to address also asset refinancing needs of counterparties effectively. This has certainly contributed to a better functioning of the money market since counterparties know that they can turn to the Eurosystem to refinance these assets.
This delaying effect is likely to be greatest for those spending decisions which are largest, lumpiest and most difficult to reverse. There is already some evidence of this delaying effect among companies’ lumpy decisions. Surveys conducted since the referendum, including by the Bank of England’s regional agents, suggest a significant number, perhaps even a majority, may be pausing or trimming their hiring and investment plans. A great many others are still huddled around their board tables, rethinking their strategic plans. There is no sense of slash and burn. But there is a strong sense of trim and singe. Meanwhile, among households there are signs of a significant slowing in both confidence and in the housing market, which are often inter-twined. The latest survey from the Royal Institute for Chartered Surveyors (RICS), covering the period since the referendum, showed the weakest three-month-ahead house price expectations balance since 2010 and the sharpest fall since 2004. This feels like a market braced for disappointment. And where housing leads, the economy often tends to follow. Third, counterbalancing to some degree this downdraught to domestic demand, there has been a sharp fall in the sterling exchange rate of around 9% in trade-weighted terms since the referendum. This will provide a shot in the arm to the UK’s net exports. And, through higher import prices, it will also help the process of lifting inflation back towards its 2% target, from its current level close to zero.

For some time, efforts have been under way worldwide to reform major reference interest rates such as Libor. These reforms aim to put existing benchmarks on a more solid footing and, where necessary, to develop alternatives. In the case of Libor, these reforms are still ongoing. In the context of these reforms, a decision has already been made to discontinue the TOIS fixing on the Swiss money market and replace it with SARON at the end of 2017. This is due to the fact that, despite various reform attempts, the volume of transactions underlying the TOIS reference rate has remained too low for efficient price formation. Transaction volume is not expected to be an issue with SARON. Unlike the TOIS fixing, which is calculated using data contributed by a panel of banks, SARON is based on actual market transactions and binding quotes. This fact reinforces trust in SARON and makes it more attractive as a reference rate for all money market transactions. Progress has already been made in establishing SARON on the Swiss money market. For some weeks now, it has been used as the reference rate for interest rate derivatives; hence, quotes for SARON interest rate swaps (SARON swaps) are already being offered. We can observe this in chart 4, which plots the curves for TOIS and SARON swaps. We see that the yield curve for SARON swaps already covers all maturities. Moreover, the SARON yield curve is below the TOIS curve.
And what if the bad shock the system might need to deal with is fundamentally different to the 2008 recession? What if, for example, it’s a cyber attack? The general point is that it isn’t possible to specify a target for how resilient the system should be that is appropriate for all forms of threat, across all forms of finance. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  And even if one day it were possible to specify a complete set of resilience targets, that would be proved quickly out of date as the financial system evolved and the circumstances in which it operated changed. Any operational target must be flexible so that it can keep up with events. Hardwiring into legislation isn’t a recipe for flexibility. So the challenge was how to specify a clear mandate. Parliament’s secret sauce for doing so had three ingredients. The first was to specify the mandate not as a single target but as a set of preferences. Put simply, Parliament’s intent, enshrined in law, is that we should build as much resilience in the financial system as possible, without harming the expected growth of the economy over the medium to long run 6. We must aim for a level of resilience that involves short-run sacrifices only insofar as they are outweighed by long-run gains. This is our rule for constructing a resilience target for each area of the system at each point in time and for each threat.

In particular, the FPC is charged with ‘the identification of, monitoring of, and taking of action to remove or reduce, systemic risks with a view to protecting and enhancing the resilience of the UK financial system’, but this does not ‘require or authorise the Committee to exercise its functions in a way that would in its opinion be likely to have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term’. 7 This approach, of proposing and testing, is similar to the notion of ‘discursive governance’ proposed for independent regulatory agencies by Gehring (2004) and discussed in the financial stability context by Demekas (2019). 6  7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Together, these three ingredients mean we have a clear mandate to follow but, at the same time, we have the flexibility that’s needed to manage financial stability efficiently and effectively. An example – resilience of major banks Our approach to how resilient major banks should be to economic shocks captures all of these ingredients. We started with Parliament’s preferences: resilience but not at the expense of growth over the medium to long term. Using all the evidence available, we’ve balanced the benefits and costs. On the benefit side of the ledger: the fact that the system will not magnify severe downturns.
The central government, Social Security and regional government deficit to July stood at 3.87%, compared with 4.41% in 2013. Attaining the projected deficit of 5.5% to 2014 as a whole will require sustaining the pace of adjustment in the second half of the year. The draft State Budget for 2015 sets a budget deficit target of 4.2% of GDP, 1.3 pp of GDP below that for 2014. Given the improved macroeconomic situation, the fiscal drive required to attain this reduction, measured by the change in the primary structural balance, will be more moderate than in previous years. In the case of the State, and according to the information from the draft Budget, the planned reduction in the deficit is based primarily on public spending, whose ceiling for the year as a whole has been set at a level 3.2% lower than in 2014. Measures envisaged include most notably those relating to personnel expenses, with the wage freeze on public-sector employees continuing, although one-quarter of the 2012 “extra” payroll payment is to be returned to them, and there is to be an increase in the average staff replacement rate to 50% for the health care, education and security sectors, among others. As to revenue, the projections include the estimated impact of the recently approved tax reform. In the next two years, this reform will specifically entail a gradual reduction in personal income tax and in corporate income tax.

To keep up with the changes and reap the benefits without leaving the majority of people behind, financial services should serve the real economy to promote sustainable well-being of the public at large. The complementary roles of banks and capital markets to enhance “Productivity, Immunity, and Inclusivity” will definitely generate desirable outcomes. On that note, I wish you all a successful and productive conference and an enjoyable stay in Thailand. Thank you for your attention. Sawasdee Krub  6 Source: http://www.un.org/apps/news/story.asp?NewsID=52992
As the structure of the financial system changes, the identity of variables that capture financial conditions naturally changes. Let me now discuss the paper in more detail. I will do this in two steps. First, I will discuss the considerable contributions of the paper. Second, I will talk about where the paper might be extended and other areas of future research that might seem appropriate. In general, I liked the paper. I think it makes some important contributions in how to construct a more complete and robust financial conditions index. In particular, I thought the paper makes two important points:   Financial conditions should measure financial innovations, not changes in financial variables that are due to past changes in economic activity. The endogenous components of financial conditions should be removed in the construction of a financial conditions index.   Both neoclassical (yield curve and stock prices) and non-neoclassical (credit availability) variables should be included. The GSFCI that I helped to develop only included neoclassical indictors and I think that was (and is) a shortcoming. The authors deserve considerable credit for constructing a financial conditions index (FCI) that is more rigorous and complete than any that have been developed in the past – 44 financial variables divided across five categories. Moreover, this is not just innovation for its own sake. The new FCI does a better job than single-factor models in forecasting real gross domestic product (GDP). BIS Review 23/2010  3  So what are the shortcomings of this approach?

First, including 44 variables may generate good results more because the additional variables add greater flexibility to soak up variability in real GDP, rather than providing a more solid theoretical underpinning. As the authors note, the variables were selected, in part, on the basis of what we know today about which variables are likely to be important. But this type of selection process – even if conducted on a pseudo real-time basis – introduces selection bias, which the authors do admit could be important. Second, despite the inclusion of a large number of variables, some important ones may still be missing. In particular, leverage variables – such as the leverage ratio of the major securities dealers – may be an important component of financial conditions. The work of Tobias Adrian and Hyun Shin suggests that the increase in leverage of the major securities was a major factor that fueled the asset bubble preceding the recent crisis. If this was indeed the case as seems likely, this type of variable should also be included in a financial conditions framework. 4 Third, as the authors note, the resulting FCI is complex; it is difficult to estimate, update and to communicate what the results mean. I think FCIs have value as heuristic devices in highlighting what is important. One loses that benefit when the number of variables becomes large and the indexes become complex. Fourth, it would be interesting to know how financial conditions indexes for other countries and regions would differ.
But clearly that is not true of the global economy as whole. Of course we have a great deal of experience in the EU of establishing common rules and policies. We know it is a painstaking process among 27 countries. But on finance and the economy we need to go wider than the EU and wider than the G7 to engage the new economies which account for so much of world growth. That is why it was so important and welcome that the recent meeting in Washington was of the G20 rather than the G7. Alongside the IMF it is going to play a key role in global macroeconomic coordination. 2. Better ground rules for cross-border financial crises  The failure of Lehman Brothers has confirmed that cross-border failures of large and complex firms are just as damaging and difficult to manage as we had feared. We need to ensure that proper contingency plans are prepared between the authorities most concerned for failures not just within the EU, where a lot of work is in hand, but on a global basis. As a start I hope we can establish a robust and predictable framework of rules and conventions that ensure that home authorities will co-ordinate a cross-border response better. The Financial Stability Forum is working on these urgently. This is not easy. In particular emergencies there are often different national interests at stake and the sheer pressure of events can limit cross-border consultation.

We need to ensure that banks build up resources in good times to a greater extent, which can then cushion the shock in bad times. I think of this as “protecting banks from the economic cycle”. But we have seen also how the financial sector can drive the wider business cycle, by becoming over-confident in the upswing and over-constrained (by lack of financial resources – capital and liquidity) in the downswing. It seems to me that mechanisms which oblige banks to build up resources in good times can serve a second useful purpose of dampening the economic cycle. I think of this as “protecting the cycle from banks”. We need two-way protection and I would like to describe three ways you might go about providing it. The first is the Spanish system of dynamic provisions, which requires banks to build a general reserve that can be drawn on in downturns. Each period, banks are required to make general provisions equal to the difference between the “inherent” losses (based on the growth of loans and a long-term average of incurred losses) and the specific provisions on impaired assets for the period. The difference, if positive, is treated as an expense in the profit and loss account. If negative, it is treated as income – provided that the general reserve has been previously built up to the required level. The specific provisions made by Spanish banks fluctuate substantially through the business cycle, as one would expect, falling during upswings and increasing in downturns.
Therefore, we should define ex-ante the exceptional circumstances under which the international community is ready to go beyond the normal lending limits. These conditions should include external debt sustainability, appropriate adjustment policy measures and the perspective of a quick return to financial markets. I also believe that exceptional procedures should be put in place when IMF access limits are to be breached. 4  BIS Review 62/2002  Second, procedures should be settled in order to limit the costs implied by unavoidable suspensions of payments. Indeed, these procedures should support the necessary informal dialogue between debtors and creditors prior to payment suspension and avoid the drawbacks of freezing market processes. Some instruments could help to achieve a timely and orderly process. A co-operative standstill mechanism would help to achieve a more timely and orderly rescheduling or restructuring process. For example, commonly agreed Guidelines or Best practices by debtors and creditors under the aegis of the IMF could ensure that such standstills be implemented. In addition to the appropriate domestic adjustment policy, such Guidelines could cover rules regarding, inter alia, transparency towards creditors, reasonable offers to creditors, comparable treatment of all creditors, seniority for “new money”, and a limited duration of the standstill. Obviously, a more extensive inclusion of collective action clauses (CACs) in debt contracts can greatly facilitate the negotiation of debt restructuring, by promoting agreement among creditors. Industrialised countries could contribute to this strategy by including CACs in their foreign debt issues, a step already made by EU countries.

It appears to me a particular strength of our country and an important part of the Swiss recipe for success that we are able to review new developments impartially and prudently, adapt them to our own situation if we consider them good, and link them organically to tested and tried systems wherever possible. 8  BIS central bankers’ speeches