samchain/econo-pairs-v1 huggingface dataset:
The Basel Committee is therefore working intensively on completing the current reform work by the end of the year 1. 1  However, it is still not clear when the review of the exposures to governments and public bodies will be complete. 3 [5]  Critics have expressed fears that the reforms I am talking about now will lead to minimum capital for certain banks increasing radically, which in turn risks resulting in a real economic decline. Here I would like to point out that the Basel Committee’s ongoing reform work does not aim to significantly increase the total global capital requirements. Instead, it concerns ensuring that all banks around the world have adequate resilience to manage financial crises and that risks are covered by capital in a uniform way in all banks and all countries. One result of this exercise is that banks that currently have very low risk weights will probably face higher capital requirements, while banks with very high risk weights may face lower capital requirements. Designing a uniform global regulatory framework is not an easy task, particularly as banking systems differ from country to country, but also because we are living in a changing world. The Basel Committee's work is therefore largely a question of finding compromises that all member countries can support and which will stand the test of time. Naturally, the Basel committee is also evaluating very carefully the effects of the proposals now under negotiation. This applies to the effects on the banks as well as on society.

Considerable fluctuations in demand in the Norwegian economy, which amplify cyclical fluctuations, would be the result if petroleum revenues were to be used as they accrue. Third, the use of petroleum revenues has an impact on competitiveness in Norwegian business and industry. A high level and substantial variations in the use of petroleum revenues would have a negative impact on internationally exposed industries. The establishment of the Government Petroleum Fund and the guidelines for the use of petroleum revenues are intended to meet these challenges.1 The Petroleum Fund serves as a buffer between current petroleum revenues and the use of these revenues in the Norwegian economy. In this way, the economy is shielded from fluctuations in prices and extraction rates in the petroleum sector. Petroleum revenues may be gradually phased into the Norwegian economy. The Fund is also a savings fund that allows petroleum wealth to be distributed across generations. The objectives are best achieved by investing the Petroleum Fund outside the Norwegian economy. The Act relating to the Government Petroleum Fund stipulates that all central government revenues from petroleum operations shall be transferred to the Petroleum Fund and that the Fund’s capital may only be spent over the central government budget. The Act prohibits using the Fund’s capital in any other way. Once a year, the government authorities decide in accordance with the Act how much of the Fund may reasonably be used. All use of central government funds is thus subject to the same assessment and alternative uses must be weighed against one another.
However, today I would like to return instead to the subject of liquidity regulation. 1  One important pre-requisite is that the authorities have access to up-to-date and accurate information about financial firms, on which they can base shared assessments of the position of individual firms and the likelihood of a crisis affecting the financial system as a whole. The information needed includes, inter alia, a firm’s group structure, capital, liquidity asset holdings, large exposures, and its involvement in markets and in payment, clearing and settlement systems. This information can be collectively thought of as a ‘Fact Book’ on a firm. In some countries much of this information is already available. The FSA recently published a paper outlining the information that the UK authorities collectively deem it necessary to have in a financial crisis, and asking for firms’ cooperation in making available a limited amount of additional information that is not already collected on a routine basis. 4  BIS Review 79/2005  The potential willingness of the authorities to supply discretionary—as opposed to routine—liquidity in a crisis is likely to give rise to moral hazard, because in the real world, faced with incomplete information, it is difficult or impossible to identify ex ante a ‘pure’ liquidity crisis. By, for example, relaxing normal criteria on collateral quality authorities may move from the injection of liquidity to what is effectively the provision of risk capital.

BIS Review 144/2009  5  Resolution of bank failures If recovery plans prove wanting, then distressed banks need to be “resolved” – laid to rest, but without undermining crucial economic services. Sometimes the best course will be a straightforward, whole-bank liquidation, with retail depositors receiving a payout from the insurance fund. But, alternatively, resolution can involve selling the deposit book – and so the vital payments services – to another bank. Good assets might go with the deposits, or be transferred elsewhere. Bad (or at least unsaleable) assets go into run off. Choosing the best course is central to effective resolution planning. To split up and transfer the different parts of a bank, the authorities obviously need specific and extensive powers. The broad model is provided by the Deposit Insurance Corporations of the USA and Canada. The UK has recently introduced such powers, having learnt the hard way that we needed them. A number of other countries in the EU adapt their normal corporate insolvency regime for the special structure of banks, but do not all have the option to break up and transfer different parts of the business. This is the subject of the recent consultation paper published by the European Commission. 5 In the UK, the Bank of England has become the Special Resolution Authority. We have been helped by the hands-on operational expertise necessary for our market operations and for running the wholesale payments system. This new responsibility has given us an interesting vantage point on the preconditions for effective resolution.
As you know, VSEs are usually defined legally as undertakings with fewer than 10 employees, annual turnover or a total balance sheet of under EUR 2 million, and which are not part of a group managed by a larger enterprise. France’s 2.1 million VSEs account for around 20% of private sector employment and close to 20% of total enterprise value added. If we include micro-enterprises, firms with very low turnover and which have a special tax and social security status, this segment comprises some 3 million business. This is a lot more than we tend to think. What’s more, companies in this segment are spread out across the entire country rather than being concentrated in just a few dynamic industrial centres. VSEs are also an important source of investment in France and one that is badly in need of stimulus: according to estimates, at least half of all VSEs chose not to invest in 2013  BIS central bankers’ speeches  1  and 2014. Fostering the expansion of these firms is vital for economic growth and for jobs. But to do this, they need to want to invest, and to have sufficient financing to do so. *** What are the main approaches the Banque de France is taking to encourage the financing of VSEs? The Banque de France’s actions in this field are guided both by its knowledge of the statistics and its vision of the reality on the ground. On the whole, French firms do not appear to have any particular difficulty accessing credit.

However, the indications are that overdue payments pose a huge problem for businesses in general and in particular for VSEs: at end-2014, outstanding payment claims amounted to EUR 600 billion, of which some EUR 420 billion were owed by private sector firms… and the remainder by the public sector. This requirement should of course apply equally to the public sector, both at national and local level. Various surveys and qualitative assessments show that the situation has stopped improving in the past few months, and that payment times are no longer falling, and in some cases may even be increasing again. Long payment times are not just a financial problem for VSEs, they also place a brake on their expansion, as they spend too much time chasing up overdue invoices, time that could better be devoted to growing the business and investing. The government is acutely aware of this issue and, in conjunction with the Observatory for Payment Times, is taking decisive action to resolve it. The Banque de France intends to help reduce these difficulties by drawing attention to all the solutions available to help small businesses. It will work actively with the Observatory for Business Financing, as well as through its day-to-day contacts with credit institutions and financing companies, to help develop financial products that can better reduce this obstacle to VSE growth. The determined efforts that the Banque de France intends to undertake or to participate in, will of course benefit greatly from your input here today at this symposium.
For a small open economy like Switzerland, we have seen that there are considerable advantages in having a definition of price stability that anchors inflation expectations at a low level while at the same time allowing a certain degree of flexibility with regard to the accepted inflation rates. In our monetary policy strategy, we define price stability as a rise in consumer prices of less than 2% per year. Deflation – that is to say a sustained decrease in the price level – also breaches the objective of price stability. We thus do not have a point target in our definition of price stability, and we do not seek to achieve a specific value between 0% and 2%. Furthermore, the SNB focuses on the medium-term inflation outlook, which means that negative inflation or inflation rates in excess of 2% can also be temporarily permitted. In recent years, there has been intense debate in academic circles and also at central banks on how to best set inflation targets or define price stability. Some central banks have also adjusted their inflation targets. These adjustments have been primarily aimed at reducing potential constraints on the ability to take monetary policy action resulting from the low interest rate environment. Would adjusting the definition of price stability also make sense for the SNB? We are firmly convinced that our definition of price stability has proved its worth, even under the difficult circumstances of the past 15 years.

Furthermore, the SNB is obliged to give full account of its actions. This serves to make its decisions readily understandable for the general public, and to show whether and to what extent the targets have been met. The phrase ‘the overall interests of the country’ means that monetary policy is to be focused on the economy as a whole, rather than individual interests. It does not provide a basis for pursuing other objectives with monetary policy, even if the desired goals – as in the case of climate protection – are right and important for society. The SNB will remain committed to maintaining the current institutional framework in the future. Price stability is the most important contribution monetary policy can make with regard to growth and prosperity. This can also be seen in the current situation. High inflation has quickly pushed other important problems down the list of societal and political priorities. Ensuring price stability is thus also a prerequisite for successfully tackling other challenges facing society. Page 11/16  V. Concluding remarks The environment in which we conduct our monetary policy has changed. In recent years we have been concerned about inflation being too low; now we are concerned about it being too high. In this difficult and changing environment, a narrow mandate and a definition of price stability that anchors inflation expectations at a low level while at the same time allowing a certain amount of leeway with regard to the accepted level of inflation are important factors for a successful monetary policy.
This applies even if a devaluation, in isolation, has a favourable short-term impact on the real economy. The disadvantage is that devaluations tend to fuel expectations of further devaluations, which makes it difficult to break with this form of policy. As a result, inflation will be higher than in other countries while neither employment nor economic growth will be systematically higher. On the contrary, higher inflation will most likely have considerable negative effects on the real economy, partly because this will amplify the adverse effects of the tax regime. However, there may be considerable real economic costs associated with the transition to a consistent fixed exchange rate regime. It may take time for devaluation expectations to fade and for wage, price and interest rate developments to adapt fully to the exchange rate regime. The less credible a fixed exchange rate policy is at the outset, the longer it takes for devaluation expectations to fade, and the greater the transitional costs will be in connection with a regime change to a consistent fixed exchange rate policy.” This analysis shows that at the time there was a realistic understanding of the transitional costs associated with bringing down inflation. Inflation fell gradually, down to 2-3 per cent in 1991-1992. If inflation targeting had been an available option in 1986, we might indeed have chosen to aim for just such a gradual fall in inflation. Economic policy had to be anchored more firmly after 15 years of short-term fine-tuning.

Today’s allocation of zakat contribution to INCEIF by the three Islamic banks is another commendable act of industry in support of learning. INCEIF has received monetary contributions from several other Islamic financial institutions since 2007. This has enabled INCEIF to continuously enhance its internal capacity as the leading provider of Islamic finance education and knowledge. The contributions are being utilized to create the provision of scholarships, research and facilities development. In this regard, INCEIF has recently been accorded the “Project of National Interest” (Projek Berkepentingan Nasional) status. This status, which accords contributors with tax benefits in the forms of tax rebates for zakat contributions and tax deductions for non-zakat contributions, will incentivize more individuals and institutions in providing monetary support to INCEIF. The contributions will indeed go a long way towards the growth and development of Islamic finance in Malaysia and beyond. Thank you. 2  BIS Review 87/2010
It also BIS Review 48/1998  -3-  reflects the fact that some banks are wanting to cut back on their Asian exposure and Hong Kong is one of the few markets where it is possible to do so. This will have the benefit, from the local banks’ point of view, that it will push up lending margins; and over time this will attract more banks back into the market and encourage them to lend. But the appetite for new lending is likely to remain subdued in the short-term. As already mentioned, the fear of increased bad debts is another factor which is making the banks wary about increasing their credit exposure. The combination of regional difficulties and domestic slowdown makes it inevitable that asset quality will deteriorate this year. In the first quarter of the year there was a noticeable rise in loans overdue for more than 3 months, although as a percentage of total loans the figure for the local banks (less than 2%) is still reasonable by international, let alone, regional standards. As to how much worse the situation will get as we go through the year, it is difficult to say. But we can take comfort from the fact that although loan arrears in the all-important residential mortgage market are creeping up, the amounts involved are still very small in percentage terms (only around 0.3% of the local banks’ mortgage portfolio at end-March).

In the first place, banks have become much more conscious about the need to remain liquid. The spikes in interest rates that occurred in October 1997 and in January 1998 have made the banks more reluctant to rely on borrowing from the interbank market to meet their funding needs. This is because of the interest rate risk that this entails and because of the reduced amount of funds in the market that are available to be borrowed. In particular, the supply of funds to the longer maturities in the interbank market has greatly diminished. Banks that do have liquidity prefer to place it at very short term, even overnight, to ensure that it is readily available. The banks also wish to improve, or at least avoid further deterioration in, their loan to deposit ratios. Taking the various factors together, there is now much greater competition for customer deposits than there was six months ago. This is not confined to the smaller banks: the large banks and the foreign banks are also involved. It is happening at a time when the overall growth in customer deposits has slowed down in line with the economy. The effect of this is evident in the additional margin over HIBOR which banks are prepared to pay in order to attract deposits. This clearly has an effect on profitability: the net interest margin of the local banks fell to 2.33% (annualised) in the first quarter of this year compared with 2.43% in 1997 as a whole.
But I want to emphasise that such an outcome would not mean that the public finances have been made worse off. The ongoing dynamic effects of the programme will have been to make it cheaper for the Government to issue its debt in the interim. More importantly, over the lifetime of the programme, it would have delivered great benefits to the public purse by stimulating the economy and avoiding deflation: the increase in taxes received as a result of higher nominal GDP should be an order of magnitude larger than any financial deficit on the purchases themselves. To genuinely assess the impact on the taxpayer, one would have to take these and other factors into account. The counterfactual story will never be known precisely but the  13  Speech available at http://www.bankofengland.co.uk/publications/speeches/2010/speech437.pdf. 14  The DMO’s objectives include: “to conduct its market operations, liaising as necessary with regulatory and other bodies, with a view to maintaining orderly and efficient markets and promoting a liquid market for gilts.” See page 31, “Debt and Reserves Management Report, 2010–11”, HMSO, March 2010. BIS Review 135/2010  5  scale of the boost to the economy means that the all-round financial benefits for the public finances should far outweigh any cash deficit that might be left at the end of the programme. The gilt sales programme will not be the only technical issue surrounding an exit from unconventional policies. The Bank is also likely to re-introduce its reserves averaging framework for commercial bank reserves, for example.

10 The market responded rapidly to that development and, towards the end of the £ programme, some contacts were telling us that gilt market liquidity had actually improved relative to March 2009. One small point to clear up in relation to maintaining the programme is whether we should be re-investing the interest receipts earned on the gilts. In the United States, the Federal Open Market Committee recently decided that, to maintain the effectiveness of their asset purchases they needed to re-invest the proceeds from maturing assets and interest receipts. That reflects the fact that in large part they purchased (pass-through) mortgage-backed securities where, in addition to receiving coupon payments, a proportion of the underlying assets are constantly maturing or being pre-paid. Absent a re-investment programme, and making assumptions about pre-payment rates, the stock of assets in the US programme might have declined at a rate of around 17 ½ % pa. In the UK purchase programme we bought nearly all gilts 11 , with at least 3 years to maturity. The earliest gilt redemption won’t occur until the second half of 2012. We are receiving dividend payments and those have currently cumulated to a value around 5% of the total stock of purchases. 12 These receipts were anticipated, are currently held in the Fund and will contribute to repaying the original funding of the programme. A good argument can be made that, to keep the monetary stimulus of asset purchases constant, this cash should be reinvested in more gilts.
It may also be difficult for an individual central bank to raise the inflation target alone as long as an international debate is underway on whether or not a higher target would be advantageous. 13 There may be reason to wait for a reasonable degree of consensus among central banks and in the research community. If the conclusion were reached that raising the inflation target would be justifiable, this would probably also increase the possibility that several central banks would simultaneously decide to do so. This would probably further increase confidence for such a measure. Greater acceptance of falling short of the target? If monetary policy should now turn out to be less effective in the period ahead than it has been historically, one consequence could be that the central banks would be forced to accept below-target inflation for longer periods of time. This would make it important to try to create acceptance for this among households, companies and market participants, so that these do not start to believe that the central bank has abandoned the inflation target. Expectations among economic agents would thus play a completely central part in this. The problem can be illustrated, in a stylised manner, with the use of Figures 3–5. To maintain the credibility of an inflation target, inflation cannot be allowed to deviate from the target indefinitely. Economic agents can tolerate a deviation in the short term, but, the more time that passes, the closer to target inflation has to be to maintain confidence.

Understanding this diversity is critical to better understanding the health of the labor market and the overall economy, and is important for informing policy. Now let’s turn to housing. Macroeconomists focus on aggregate residential construction as a measure of how the housing sector is contributing to overall economic growth. It is important to note, however, that housing market experiences vary substantially across individuals in ways not reflected in the aggregate construction data. For example, the type of housing units typically occupied by low-income households saw higher-than-average rent inflation from 2009 to 2011. Much of this difference appears to be due to contrasting ways that additions to the housing stock enter into different segments of the housing market. For households in the highest income quintile, new construction more than accounts for the net increase in housing  BIS central bankers’ speeches  1  units, which in turn tends to hold down rent increases for these households. However, as one moves down the income distribution, new construction represents a smaller share of the net increase in housing units. For households in the lowest income quintile, additions to rental supply come more from units that with age have depreciated and are no longer rented by higher income households. These supply additions tend to have higher rents than existing units rented by low-income households, thus putting upward pressure on rental costs.