samchain/econo-pairs-v1 huggingface dataset:
Mugur Isărescu: Opening speech – conference “Investment and Investment Finance in Romania” Opening speech by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the conference “Investment and Investment Finance in Romania”, organized by the National Bank of Romania and the European Investment Bank, Bucharest, 13 February 2020. * * * Vice President McDowell, State Secretary Gyorgy Attila, Distinguished audience, Ladies and gentlemen, It is a pleasure for me and the Board of Directors to welcome you at the National Bank of Romania, to the conference dedicated to Investment and Investment Finance in Romania. This conference has been organized by the European Investment Bank in partnership with the National Bank of Romania. In fact, this partnership has had a long standing as a pillar for progress and investment in Romania. Please allow me to express a heart-felt welcome and to extend my warmest thanks to Mr. Andrew McDowell, Vice-President of the European Investment Bank and to Ms. Debora Revoltella, Chief Economist of the European Investment Bank, for their continuous support and deep commitment to develop investments in Romania, and, moreover, for being trusted partners and friends. I am glad that we have decided to co-organize this conference here in Romania, at the central bank, as this year we honour two landmarks with historic importance. One is the National Bank of Romania’s 140th anniversary and the other is the 20 years’ celebration of the day (February 15th 2000) when the EU formally started the accession negotiations with Romania.

Where the operations of a bank / financial holding company also include non-finance companies (industrial, construction, commercial), such holding would need to set up (or designate) a management company, which will consolidate the statements of the holding’s financial institutions and to which the powers to manage such companies would be assigned. A similar management company for bank and financial assets would need to be created by owners of parallel financial institutions, as well as by holdings and associations where the parent organisation is located overseas. It is important to us that this management company should be in the Russian jurisdiction. We envisage no need for any separate licensing of its activity, as long as it would be covered by the requirements for reporting consolidation, requirements for consolidation-based calculation of required ratios and their observance, as well as those for risk management systems, internal controls and the composition of management as are currently applicable for regulated financial institutions. The Bank of Russia should be authorised to take regulatory action against such parent organisation. We will detail our plans for regulation of banking and financial holding companies in a separate consultation report to be released shortly for public discussion. We will be ready to discuss the report in detail with all market participants. On a final note on the banking sector, I would like to announce another initiative, which is perhaps of a minor scale than those announced today, but still very topical.
By curbing the strong upward pressure on the Swiss franc through extensive foreign exchange market interventions, and by providing financing for COVID-19 loans on favourable terms via our new SNB COVID-19 refinancing facility, we have made an important contribution to stabilising the Swiss economy in this once-in-a-century crisis. Nevertheless, we are still frequently confronted with demands that the SNB should do more. And what is meant by ‘more’ is above all increased distributions. I would therefore like to use my speech today to discuss the SNB’s profit distributions. Who owns the SNB’s profits and how are they generated? The profits generated by the SNB and the distributions it makes were the subject of discussion in Switzerland long before the coronavirus pandemic broke out. There was already heated debate on this more than 100 years ago, as the rules governing the distribution of profits were one of the most contentious issues in the run-up to the creation of the SNB. The cantonal banks had to cede the right to issue banknotes to the newly established central bank, and the cantons wanted compensation in return. The fundamental question of how the profits generated by the SNB were to be distributed already had to be addressed back then. The following principles were set: the profits should first be used to build up the SNB’s equity capital and pay a modest dividend to shareholders; and any remaining profit would go to the public sector, with at least two-thirds accruing to the cantons.

In the light of the prevailing uncertainties, it is essential that the bank lending channel continues to function well. To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need to preserve an appropriate degree of monetary accommodation in order to secure a return of inflation rates towards levels that are below, but close to, 2% without undue delay. Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance supports economic activity. As emphasised repeatedly by the Governing Council, and as again strongly echoed in both European and international policy discussions, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute much more decisively, both at the national and at the European level. The implementation of structural reforms needs to be substantially stepped up to reduce structural unemployment and boost potential output growth in the euro area. Structural reforms are necessary in all euro area countries, although specific reform needs differ across the individual economies. The focus should be on actions to raise productivity and improve the business environment, including the provision of an adequate public infrastructure, which are vital to increase investment and boost job creation. The enhancement of current investment initiatives, including the extension of the Juncker plan, progress on the capital markets union and reforms that will improve the resolution of non-performing loans will also contribute positively to this objective.
At the same time, the exchange rate target took the form of a target zone, which was then widened over the course of the decade, in part because capital movements increased exchange rate volatility and it was considered risky to eliminate investors’ exchange rate risk entirely. When growing economic imbalances were added to increased movement of capital, exchange rate targeting became even more difficult, until the dam was about to burst right before the inflation target was adopted and the króna floated in March 2001. The monetary policy framework adopted in 2001 was based on foreign models that were in the ascendant at the time. But it also reflected the broader ideas about economic policy, prudential regulation, and supervision that had gained currency but have proven in retrospect to be flawed. To simplify, it can be said that these ideas were based on separation and independence of individual aspects of economic and prudential policies, but without sufficient attention to their interactions. Monetary policy was to focus primarily on the inflation outlook, and it was largely to be implemented through a single tool: interest rates. Intervention in the foreign exchange market was to be avoided. Supervision was supposed to ensure that individual financial institutions were sound. Fiscal policy was supposed to be neutral over the business cycle. And the markets would take care of the rest. This did not turn out to be the case. Apart from the question of interactions, insufficient attention was paid to risks in the financial system as a whole.

Már Guðmundsson: Monetary policy after capital controls Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at the Annual General Meeting of the Confederation of Icelandic Employers, Reykjavík, 7 April 2016. *  *  *  Madame Chairman, honoured guests, In my speech today, I would like to discuss the monetary policy that might be appropriate for Iceland after the broad-based restrictions currently imposed on capital outflows have been lifted. More specifically, I will discuss the monetary policy framework rather than its implementation, which would naturally depend on economic conditions and prospects at any given time. But what is meant by monetary policy? In the modern sense of the term, monetary policy entails applying the Central Bank’s balance sheet and other instruments at the Bank’s disposal so as to affect the economy. In that sense, entering a currency union is not monetary policy; it is currency policy. Only central banks can pursue monetary policy, while governments take decisions on currency policy. In my discussion today, I assume that we will pursue independent monetary policy, at least in the near future. Designing a monetary policy framework entails deciding what its objectives should be, which policy instruments should be applied, how decisions on the application of those instruments should be taken, how these decisions should be communicated, and how accounting for monetary policy after the fact should be handled. Exchange rate policy is naturally an important part of this framework; i.e., whether the exchange rate is pegged, free-floating, or somewhere in between.
In any event, the Banco de España has in fact indicated that it will not activate this instrument for a long period of time, at least not until the main effects of the crisis have been absorbed. With this approach it is sought to eliminate banks’ potential uncertainty as to when to build up capital buffers, which might discourage their provision of credit to the private sector. 7  For a detailed summary of country-by-country macroprudential measures, see Box 3.1 of the Spring 2020 Financial Stability Report and the article by Anguren, Gutiérrez de Rozas et al. (2020). 16  We can draw lessons from our experience of the crisis on the usefulness of some of the indicators used for the activation of macroprudential tools. This is the case of the credit-toGDP gap. After the pandemic broke, this indicator increased significantly and has held at values of over 2 percentage points (pp), which is the warning threshold on the basis of which the Basel framework recommends activating the CCyB. However, it should be borne in mind that this increase in the credit-to-GDP gap has been largely due to the very stimulus policies for the economy applied by the authorities and, above all, to the adverse impact on GDP of the COVID-19 shock. Hence, in situations such as the present, the Basel framework itself acknowledges that it is necessary to complement the information provided by the indicators habitually used in upturns with other indicators offering information on the degree of materialisation of systemic tensions.

We can conclude from the results that the activation of the countercyclical buffer in financial cycle upturns gives rise to an easing in credit and GDP growth under the baseline scenario, but, above all, it significantly reduces the severity of the decline in GDP in an economic crisis situation. Moreover, the probability of crises occurring diminishes. These effects would occur with a lag of around two years. The release of the CCyB in crisis periods would mitigate the adverse effects on economic growth, both under the baseline scenario and at the extreme percentile. And, furthermore, its impact would be immediate. 15  In the case of the tools that fall on borrowers, their activation in financial cycle upturns would have similar effects to those of the CCyB. The main difference is that their effects are more immediate: i.e. around one year as opposed to the two years mentioned in the case of the CCyB. This suggests an order for the activation of the different instruments under normal circumstances: the tools that increase banks’ capital requirements should be activated first and, if the risks identified do not abate, the second instruments should then be activated. According to this same evidence, it is found that the release of the macroprudential instruments that fall on borrowers in crisis periods does not significantly impact GDP growth expectations or their distribution. This is perhaps due to the fact that, habitually, it is the banks themselves that restrict these lending standards in contractionary phases.
BIS central bankers’ speeches  11  Figure 11 Long-term real interest rate (percent) 9,5  9,5  7,5  7,5  5,5  5,5  3,5  3,5  1,5  1,5 92  94  96  PRC 8 years (1)  98  00  PRC 20 years (1)  02  04  06  BCU 10 years (2)  08  10  BCU 5 years (2)  (1) PRCs are CBC bonds in UF with six-monthly equal installments (except for the last one), which can involve both interest and principal payments. (2)The BCU is a bond issued in UF, an inflation-indexed unit of account. Source: Central Bank of Chile. Figure 12 Banking loans to the private sector (y-o-y change, percent) Chile  Emerging economies 60  90  90  60  75  75  50  50  60  60  40  40  45  45  30  30  30  30  20  20  15  15  10  10  0  0  0  0  -15  -15  -10  -10  90  95 Housing  00 Consumer  05  10  Corporate (*)  06  Brazil China  07  08  Colombia Chile  09  10  Mexico  11  Peru  Turkey  (*) Sum of commercial and foreign trade credits.

But the growth of the more opaque version of these products marks them out, and unmonitored excess could compromise these markets in the future. Recent history is rife with examples of where over-exuberance has led to opacity, severe market difficulties and financial instability (e.g. the rise of CDO2 in the securitisation markets). In such cases, the costs of collapse can easily outweigh the previous benefits. It is important that the authorities monitor the ETF industry and make sure that market participants understand the risks they may be running. It is for that reason that the interim FPC advised the FSA last week that its bank supervisors should monitor closely the risks associated with opaque funding structures, such as collateral swaps or similar transactions employed by ETFs. http://www.bis.org/publ/work343.pdf, http://www.financialstabilityboard.org/publications/r_110412b.pdf and the IMF’s Global Financial Stability Report (http://www.imf.org/External/Pubs/FT/fmu/eng/2011/02/pdf/0611.pdf) respectively). BIS central bankers’ speeches  11  Regulatory responses The financial crisis exposed a need to not just strengthen but to completely re-design aspects of financial regulation, to try to find a solution to “too big to fail” problem and hence minimise the chances of something similar happening again (if financial institutions could fail without large spillovers then much other regulation might be unnecessary). The resulting regulatory agenda is formidable – including agreeing the detailed rules supporting Dodd Frank in the US; EMIR and Solvency II in Europe; the new Basel rules on capital and liquidity including the SIFI surcharge internationally; the final outcome of the ICB in the UK; various FSB initiatives and many more besides.
I truly believe that transformation can come from constructive and systematic engagement with your value chain. I therefore urge you to convene your opposite numbers in and around the real economy. Chapter Zero is a great network. Who knows, the source of your Scope 3 emissions may be sat in this room! Conclusion Let me conclude. We know the costs of transition to a net-zero economy are lowest with early and wellmanaged action. And we are making good progress in supporting that transition, arguably more than we might have expected given the shocks we have faced. But there is still much more to do. We have not yet reached the tipping point where we have built the capabilities and the transition finance infrastructure that will support the right strategic decisions in an unavoidably uncertain transition. We all have a role to play in driving progress. Governments globally have the key role in developing the policy paths and infrastructure that deliver the transition and draw us closer to this tipping point. Central banks and regulators can operate within their objectives to catalyse, complement and amplify those policies. And, business and finance can – indeed in order to manage their future risks will need to – make progress whilst policy is developing, ahead of clarity on sectoral paths and regulatory practice. Be assured that the difficult conversations that follow are a sign of success on our pathway to net zero, not a sign of failure. Waiting for certainty and perfect information creates an excuse to go slowly.

And for the Bank of England, it is to work within its objectives to ensure the financial system is resilient to the risks from climate change and supportive of the transition to net zero. With that in mind, today I wanted to reflect on a speech I delivered in 2020 on how to move beyond rhetoric to make climate action a reality. I had split our journey into three phases. Firstly, recognising and identifying the financial risks climate changes poses. Secondly, building capabilities to enable us to turn aspiration into action. And thirdly, making business decisions to advance the transition. With almost three years passed, I want now to evaluate our progress, identify the barriers we have encountered, and consider what else is needed if we are to progress. Back in 2020, I suggested that we had probably achieved the first phase of our journey to net zero. Conversations with leaders in the financial sector made it increasingly clear that climate change is central to the future of their businesses, not just the confines of Corporate Social Responsibility departments. I suggested we had entered the difficult second phase of turning aspiration into action, across the financial sector and the real economy. This phase involves a lot of hard work: the collection of data and the building of new tools that better enable climate considerations to be embedded in strategy and risk management.
At the same time, higher rated corporate borrowers took advantage of lower yields to strengthen their balance sheets, accounting for 45% of total issuance. This was despite a general widening of credit spreads – which though they have come back some way from the peak levels of the autumn are – and are likely to remain – substantially wider than before the emerging markets crisis, reflecting a more sober assessment of relative credit risk. Against that, the bond markets generally benefited substantially from continuing low inflation and a further decline in inflationary expectations, so that yields have declined in virtually all the main currency sectors. In terms of government bonds they have come down by 100 basis points in the US, by 150 basis points in bunds, by close to 200 basis points in the sterling gilt market, and even by over 100 basis points in Japan before yields there began to back up late last year. Borrowers have been attracted by lower nominal borrowing costs; and investors in the market have been attracted by the prospect of rising values as yields have declined. Significantly, the decline in yields in the underlying government bond markets has typically more than offset the widening in spreads faced by lesser credits. In the US corporate bond market, for example, BBB spreads widened over the year from around 75 basis points to around 140 basis points, but because of the underlying fall in yields, yields paid by BBB borrowers actually fell from around 6½% to 6%.

We note that whereas most of our colleagues from Francophone countries are able to speak English fluently, our employees cannot even exchange a simple greeting in French without the aid of an interpreter. As you are well aware, Your Excellency, Zambia has eight neighbouring countries amongst whom, at least, one is French speaking; two are Portuguese speaking and the rest are Anglophone. As neighbours and countries falling under the same sub-regional and regional groupings, we collaborate a lot amongst ourselves on a number of regional cooperation agreements where inability to speak, read or write French or Portuguese is sometimes a major communication barrier. For instance, in Africa Zambia belongs to three regional groupings, namely SADC, COMESA and the African Union (AU). All these groupings include Francophone member states, and, at times, our interests, as a nation, have not been well articulated to our Francophone counterparts in these regional groupings due, in part, to our inability to communicate effectively in French. Further, as I stated earlier, Zambia shares a border with one of the largest and populous country in Africa - the Democratic Republic of the Congo (DRC) - where the official language is French. However, in spite of being neighbour to this huge market, Zambian enterprises have not captured the enormous business opportunities offered by the DRC, largely, on account of their inability to communicate effectively in French. The same also applies to Angola where there is a huge reconstruction programme going on, in which Zambian enterprises could participate.
The subsequent fiscal and financial adjustments have put a strong downward pressure on prices and wages (the HICP fell in 2014 in Greece, Spain, Portugal, Ireland and Cyprus). To achieve relative price adjustment while keeping aggregate euro area inflation close to 2% would require higher inflation in the so-called core economies. In principle, this could occur through a rebalancing of financial flows from Core to peripheral countries within the euro area and higher domestic spending in core economies. In practice, net savings rates have remained high in several core economies with capital instead flowing outside of the euro area, mirroring an increasing current account surplus. Downward price pressures are therefore occurring in peripheral economies without offsetting upward price pressures in the core economies. For example, the year-on year inflation rose in 2014 in Germany by 0.8% and in France by 0.6%. In summary, in the Euro area half of the decline in inflation can be attributed to a fall in energy prices and another quarter to the fall in food prices. The remaining quarter is explained by the slowdown in core inflation, which has declined by 0.7 percentage points, reflecting a lower inflation in services and in non-energy industrial goods. 3  European commission forecast of Nov. 2012: 0.1 in 2013 and 1.4 in 2014. Realized growth: −0.4 in 2013 and 0.9 in 2014.

Thereafter, references fell off a bit until rising sharply again recently. Clearly, the recent financial crisis has underscored the importance of financial conditions. Today’s paper makes clear the importance of financial conditions. The paper’s analysis of the many financial conditions indexes that have been constructed as proxies for overall financial conditions finds that many of these indexes have done better than the fed funds rate or other single-variable financial indicators as predictors of real economic activity. However, as the paper also makes very clear, the indexes that have been developed are still very rudimentary. In particular, most financial conditions indexes are ad hoc and incomplete. In their review of the existing financial condition indexes, the authors find considerable differences across the indexes in the way that they are constructed and in terms of the variables included. In addition, there is another difficulty. As the financial system changes over time, both in terms of structure and in terms of financial products, the financial variables that we might determine to be important are also changing. For example, in the wake of the recent financial crisis, the variables that the paper’s authors call “neoclassical” – such as the yield curve and stock market prices – appear to have become less important relative to the variables that the authors term “non-neoclassical” – such as quantity and survey measures of credit availability. Variables that would work best 10 years ago as forecasting tools may no longer be very useful.