samchain/econo-pairs-v1 huggingface dataset:
The biggest challenge for an autonomous institution is to not stay behind the new demands of its environment, acting with timeliness and effectiveness to meet its institutional objectives in new circumstances, gaining the trust of the public. This confidence is far from being a sure asset. In today's ever-changing world, where confidence can be lost in a wink, we must work day after day to preserve it, especially considering the challenges that we face, both economically and socially. In this context of greater transparency, better communication and contribution to the people's needs, I want to mention two elements that accompany this Report: a report on the determinants of the trend growth of the Chilean economy and a set of modifications to the monetary policy decision-making process. Determinants of the Chilean economy’s trend growth As I said a while ago, alongside this Report we have published a document summarizing a body of research that our technical teams have made on the determinants of long-term economic growth. Although these investigations date back many years, they have tended to remain at an academic level. However, because in recent years our economy has slowed down quite significantly, it seemed to us on the Board that it would be appropriate to make an additional effort to consolidate our analysis, in an area that is not only key to adequately achieving the objectives mandated by the law, but also of general interest for the country.

We have taken this step not because banks are weak but because they are in fact strong. Unlike in 2008, the banks are not the weak link in a crisis which this time is of public health; a crisis which is economic, but, at least in terms of its causes, non-financial in nature. This is notably the result of the regulations that we have implemented and reinforced over the last ten years. And it is what now gives us greater leeway to ease certain capital requirements, such as the counter-cyclical buffer, and to push back the entry into force of the Basel III accords by one year to 2023. All these measures should be considered in light of the – often heated – discussions on the degree of financial solidarity in Europe. Arguably, Europe could perhaps do more, but let’s not forget that it is already doing a great deal, thanks to major efforts from the Eurosystem or the easing – agreed quickly and unanimously – of the Stability and Growth Pact, which gives natural priority to national action. If we consider a possible role for the European Solidarity Mechanism (ESM), the amounts involved – around EUR 410 billion – would certainly be significant. However, the support provided by the ECB alone represents EUR 1,050 billion on the markets and up to EUR 3,000 billion in bank liquidity. Furthermore, the Monetary Union allows Italy and Spain to borrow at a far lower interest rate than before the euro.
We believe it essential for financial market participants, businesses, and households to understand how our policy responds to changes in the economy and how we ensure price stability. To this end, beginning from April 2021, the Bank of Russia publishes the projected path of the key rate as one of the indicators of its medium-term forecast. We have also systematised and released the materials about the model-based approaches we apply to build our forecasts. People’s confidence in the monetary policy pursued is critical to anchor inflation expectations, reduce the inflation risk premium, and maintain interest rates at a moderate level. The Monetary Policy Guidelines we present annually promote this confidence. Economic situation in 2020–2021 For the second consecutive year, the global economy has been developing in the conditions of the coronavirus pandemic. The main problem a year ago was plummeting aggregate demand, whereas the major challenge since the beginning of this year has been increasingly higher inflationary pressure. Russia is no exception. After the downturn of last year, our economy has swiftly recovered. The rebound was faster than many expected. Russia’s GDP returned to its pre-crisis level as early as 2021 Q2, despite the remaining oil production cuts under the OPEC+ deal. This rise was driven by, among other things, fiscal support measures and accommodative monetary policy.

However, due to the pace of the recovery, disruptions and bottlenecks in production chains caused by anti-pandemic restrictions, shifts in the structure of final demand from services towards products, a number of industries faced a situation when the expansion of demand surpassed their potential to ramp up output. This involves not only a shortage of production capacities, but also of labour resources. Among other reasons, this was caused by restrictions on the inflow of labour migrants and a larger number of employees who are on the sick leave 1/4  BIS central bankers' speeches  or in self-isolation. Although many of the factors fuelling inflation this year are due to supply issues, this is the expansion of demand which makes it possible for companies to simultaneously and fully pass their increased costs on to output prices and build up their output. No less important is the fact that higher inflation expectations also boost demand, especially for durable goods. In the middle of this year, households’ and businesses’ inflation expectations in Russia rose to their five-year highs. When the expectations regarding future inflation are elevated, households have a lower propensity to save and rather prefer to spend more for current consumption. Moreover, as interest rates are low, households opt to invest in higher-risk securities market instruments, rather than deposit their savings. Companies tend to revise their prices more often. Employees assume that the growth rate of wages will be higher.
From my vantage point as a banking supervisor, the most prominent impact of the pandemic has been a substantial increase in the popularity of digital banking among consumers. Customers were kind of “crash-coursed” into accepting the provision of banking services through digital means. As an example, we have seen that the total applications for personal banking credit products via digital channels recorded a significant growth of more than 40% in the second half of 2020 compared to the first half year, and among that, those made via mobile apps already surged to account for 40% of the total digital applications. So the digital transformation has basically become a new normal. 3. Against such a rapidly surging acceptance of online services, it is indeed extremely important for banks to substantially enhance their operational resilience on top of all the challenges that they face due to changes in the pandemic situation. The industry has been doing a fantastic job in that, but also we should not lose sight of the impact that this is having on some areas which may not surface immediately. From our supervisory dialogue with banks, two notable impacts on bank culture caused by the pandemic situation are particularly worth our attention. 4. First, the pandemic disruptions may be taking away the momentum of culture effort which banks have been investing a lot in the past 4-5 years.

I understand that this is a very good participation rate when compared to similar exercises done in other jurisdictions. 19. Given the scale and breadth of the Focused Review, the exercise is expected to complete around early next year. After that, we plan to share with the industry the identified insights as well as practices that lead to good customer outcomes. Through this exercise, we also aim for better alignment of incentive systems whilst preventing potential misconduct behaviour. We trust this would advance bank culture development in Hong Kong to the next level. Accountability 20. While a proper incentive system will encourage desirable staff behavior, we should not lose sight of the other side of the coin, which is accountability framework. In the past few years, the HKMA has been making greater use of accountability reviews as a tool to identify those responsible for misconduct incidents. The idea is that those who have pursued undesirable behavior have to face the consequences of their own misconduct. Another aspect of accountability that banking supervisors in several jurisdictions have been trying to tackle is how can we effectively address the problem of “rolling bad apples”. 21. As this phrase literally means, “rolling bad apples” refer to individuals who have committed misconduct behaviour, but are able to obtain subsequent employment elsewhere without disclosing their earlier misconduct to the new employers. 22. When “bad apples” tried to “roll” from one institution to another, this cannot be easily dealt 3/4  BIS central bankers' speeches  with by individual banks working alone.
The residual impact of the one-off factors on annual inflation is set to be entirely gone in one year’s time – in the first quarter of 2020. Now, I will say a few words about the economy and the forecast. Economic growth rates remain close to their potential levels. Unemployment is invariably low and close to its natural rate. Having said that, certain economic activity indicators continue to post a mixed performance. The forecast remains essentially unchanged. Given the state of the global energy market over recent months, we have downgraded the oil price path somewhat in the baseline scenario. The assumption has been updated to reflect faster declining oil prices in the course of 2019 – based on the calculation that the average oil price will total $ per barrel (from the previous estimate of $ a barrel). Moving forward, the average price is set to remain at this level between 2020 and 2021. As before, our approach to oil price assumptions is conservative. The oil price volatility we saw in the fourth quarter (from $ to $ a barrel) is an indication of the validity of this approach. The running fiscal rule will ensure that the impact of changing oil prices on economic growth 2/3  BIS central bankers' speeches  remains limited. We therefore leave our GDP growth forecast unchanged at 1.2-1.7% for 2019, admitting it may rise to 2-3% in 2021 as the Government implements its structural reforms. Changing oil price assumptions have stronger implications for our estimated balance of payments.

Hence, in the second half of the year, when the buildup of government reserves ground to a halt, a considerable part of export revenue, if unspent to reduce external debt, ultimately settled in bank accounts as extra foreign currency liquidity. Incidentally, this is why the response of the foreign exchange rate to the purchase suspension decision was fairly muted. The market essentially continued to expect their resumption and accumulated assets. Next year, our baseline scenario provides for a return to the 2017–2018 situation, with a significant amount of oil revenues being used to rebuild international reserves and the private sector’s capital outflow declining. Importantly, in this logic we do not foresee a strong response of either the current balance or the foreign currency exchange to resumed purchases. To conclude, let me reiterate that the Bank of Russia will explore the need for further upgrades to the key rate, taking into account inflation and economic developments against the forecast, as well as the risks of external conditions and the response of financial markets. In the current context it is crucial that our approach remains conservative as we assess risks and conduct monetary policy. Inflation stays close to 4%. More so, it has never climbed above this figure since the second half of 2017. Although the rise in inflation early next year is set to be driven by transient factors, considering the need to limit their negative effects and ensure a speedy return of inflation to 4%, it is critical that the response of monetary policy is well-timed.
4  For a review of current studies and an analysis of the effects in Sweden, see De Rezende, R. B., Kjellberg, D. and Tysklind, O., “Effects of the Riksbank’s government bond purchases on financial prices”, Economic Commentary no. 13, 2015, Sveriges Riksbank. BIS central bankers’ speeches  5  The bond purchases have had the intended effect on interest rates To get an idea of the effects of the bond purchases, staff at the Riksbank have studied the financial markets’ immediate reactions to the announcement of the decisions.5 On those occasions on which the decisions were deemed unexpected, yields fell over the days on which the decisions were announced. In addition, they fell in comparison to corresponding yields abroad, for example in Germany. It therefore seems reasonable to conclude that the bond purchases have pushed interest rates in the economy down – Swedish government bond yields are now probably lower than they would have been without the purchases. These effects are in line with those observed in studies of the Federal Reserve’s bond purchases in the United States. Our analyses of the financial market’s reactions to the monetary policy decisions have also concluded that the decisions have entailed a weakening of the krona exchange rate. It thus seems to be the case that the additional monetary policy measures that we introduced over the past year have given us lower interest rates and a weaker krona than we would otherwise have.

The gap between actual and potential growth does not appear to be completely closed, while the Riksbank and others perceive that this gap is well and truly closed in the USA. 5  BIS Review 89/2000  There are thus a few pieces of the puzzle remaining before we can feel convinced that Sweden is moving towards a US development: how large is the IT sector in the Swedish economy? How important is the IT sector to the rest of the Swedish economy? What does IT mean to productivity in Sweden? Unfortunately I have to say now that we know too little about this. We know that productivity in Sweden has developed unevenly during the 1990s - a disjointed period disturbed by a bank crisis, currency crisis and problems with public finances. Investment has developed more weakly than in the USA, although it has picked up in recent years. Capital intensity does not, therefore, explain the growth in productivity. What does become more evident, on the other hand, is a break in trend in that part of productivity attributed to technology and more efficient organisation, ie total factor productivity TFP (slide 5). This showed a weak and tentative development up to the mid-1990s, but has really picked up over the last five years. 5.
1)  Considered theoretically as risk-free securities, government bonds are usually considered as floor rates and constitute the benchmark for pricing almost all other securities. Thus, rising sovereign yields mechanically shift funding costs upwards for all private agents. Interest rates on government bonds usually include small premia to compensate for liquidity and credit risk. For a proper monetary policy transmission, these risk premia should not reach such level and volatility that the signal from the key policy rates is no longer perceivable and no longer reaches the real economy. In recent months, the tensions rapidly spread to other markets to a point that jeopardized the transmission of monetary policy, as European government bond markets became largely dysfunctional. 2)  The second contagion mechanism goes through the banking system. On the liability side, banks are already suffering from increasing government debt issuance which has a crowding out effect and contribute to steepen the yield curve; it is a real issue as banks debts maturing in the next three years are significant while government support and central banks facilities are expected to be gradually removed. In that tense context, the sovereign debt crisis trigger increasing funding tensions for European banks owing to the contagion of sovereign to banks spreads. It reflects the traditional belief that domestic financial institutions cannot be less risky than the sovereign which are supposed to back them in case of need.

It is very likely that once the dust has settled, banks everywhere will have to face a much changed operational and regulatory environment. This will entail a number of longer-term challenges. For a start, when established business models no longer work, innovation cannot be far behind. New banking institutions, both physical and virtual, will appear. This will accentuate the degree of competition in the limited retail deposit and loan markets and result in narrower interest rate spreads. In Malta, the traditional dependence on retail funding will also be put to the test. All this will happen against a backdrop of a more stringent regulatory regime. In sum, the challenge will be to meet the higher regulatory standards without stifling the dynamism that has characterised our banking industry in recent years. In the remaining part of my remarks, I will focus on some issues that are likely to become especially relevant in the future. New accounting regime Changes in the regulatory framework are expected to include revisions to accounting rules. Accounting standards are a key aspect of the financial infrastructure and essential for market discipline. In line with the recommendations of the recent de Larosière Report, accounting standards should not distort business decisions or promote pro-cyclical behaviour nor discourage long-term investment. Several standard-setting bodies had already emphasised the need for the exercise of sounder judgement in the estimation of fair values, particularly for instruments that do not trade in active markets. This raises concerns of both a macro- and micro-prudential nature.
Because of the long lag before monetary policy changes elicit effects, parrying this impact from import prices would have required the Riksbank to identify the Asian crisis’ damping consequences for commodity prices long before they actually occurred. But the weak development of import prices is not the only explanation. Inflation in this period was lowered still further by changes in interest expenditure as well as in indirect taxes and subsidies. On several occasions I have shown the Committee how monetary policy exerts direct effects on CPI inflation through house mortgage interest expenditure. Reducing the interest rate, in order to stimulate demand and thereby hold inflation around the target, has the initial effect of lowering the CPI because house mortgage interest expenditure decreases. This effect continues until after households have renewed the loans at the new, lower interest rate. The greater part of the difference between the CPI and UND1X in Diagram 1 is due to this interest rate effect. The Riksbank has considered the possibility of using some other index for targeting monetary policy but we concluded that there are grounds for continuing with the CPI as the overriding policy target. Among other things, the index is well known and relatively comprehensive. In the light of the problems I mentioned and the ensuing discussion, the Riksbank has chosen to present a clearer description of how the CPI target is to be interpreted.

This could lead to higher growth being feasible for longer without inflation taking off. There are arguments in favour of each of these explanations but the empirical support is not clear-cut. The issue of potential growth and higher productivity has recently attracted particular attention in the light of economic developments in the United States, for example. Productivity growth in Sweden has improved but we do not yet have any notable evidence that potential growth has risen as it has in the American economy. An expected increase in trend productivity can also affect components of demand. The prospect of higher corporate profits leads to higher share prices for listed companies. Besides prompting companies to step up investment and improving the supply of venture capital, the appreciation of shareholdings may make households feel more wealthy and stimulate consumer demand. The strong upward stock market trend in Stockholm in recent years may be a sign that players have incorporated expectations that economic growth in Sweden will be appreciably higher than earlier. The relative paths of supply and demand in the Swedish economy and the development of the inflation propensity are obviously central issues in the assessment of inflation. If supply and demand develop at the same rate, no inflationary pressure will build up. This is what seems to have happened for a time in the United States. But there is, of course, a risk of one of them predominating and that would alter the conclusions for monetary policy.
Finally, both big banks are in the process of finalising their Swiss emergency plans, in which they have to demonstrate that they would be able to maintain their systemically important functions without interruption in a crisis. Credit Suisse and UBS have taken important measures in this context over recent years. For instance, they have both established Swiss subsidiaries to house their systemically important functions. According to FINMA, further efforts by the big banks are required to ensure their plans are finalised by the statutory deadline of end-2019. 1 Domestically focused banks  I would now like to turn to the domestically focused banks. The mortgage and real estate markets remain the biggest source of risk for these banks. Imbalances persisted on these markets in 2018. Both mortgage lending volume and prices for single-family houses and privately owned apartments continued to rise at a moderate rate in 2018. In the residential investment property segment, transaction prices fell slightly in 2018. Nevertheless, the risk of a price correction in this segment remains particularly high. On the one hand, this is due to strong price increases in previous years. On the other, the further rise in the number of vacant dwellings suggests that the brisk construction activity in rental apartments may have led to an oversupply. The risk appetite of domestically focused banks in this environment remained high. Mortgage growth at these banks continued to be robust at around 4.2% last year. Banks’ current lending policy in the residential investment property segment should be viewed as particularly risky.

Furthermore, after rising in the second half of 2018, credit default swap premia are now back at roughly the same level as in mid-2018. In the area of resolution, the Swiss big banks have improved their gone-concern lossabsorbing capacity since last year’s Financial Stability Report. Credit Suisse and UBS already meet all look-through requirements on a consolidated basis. Page 1/3  Berne, 13 June 2019 Fritz Zurbrügg  News conference  In addition to those at group level, the Federal Council has drawn up requirements on big banks’ loss-absorbing capacity at the level of individual group entities, and in early April initiated a consultation on a corresponding amendment to the Capital Adequacy Ordinance. These requirements are intended to ensure that not only the group as a whole, but also material group entities have sufficient loss-absorbing capital in the event of a crisis. The SNB supports the proposed amendments to the Capital Adequacy Ordinance. Work is also underway with regard to liquidity in a crisis, known as ‘funding in resolution’. It is aimed at ensuring that the big banks have sufficient liquidity during preparations for and in the phase immediately after resolution. For this purpose, FINMA is drawing up resolution funding plans in line with international standards. In cooperation with the SNB and the two banks concerned, it is currently assessing the big banks’ liquidity needs under possible crisis scenarios.