samchain/econo-pairs-v1 huggingface dataset:
FINANCIAL STABILITY Globally, risks to financial stability remain elevated, amidst high levels of indebtedness. In the Eurozone, the large exposure of banks to government securities means the risk of a sovereign-bank debt crisis remains. In the US, corporate debt has increased by 30% since the Global Financial Crisis, with a sizeable allocation of credit to highly-leveraged corporates. 5 / 11  BIS central bankers' speeches  I n China, the total leverage in the system is about 300% of GDP, with high levels of indebtedness among local governments, state-owned enterprises, and households. In Asia, there has been a surge in the issuance of foreign currency bonds, denominated mainly in US dollars and concentrated in the real estate sector. High leverage in itself does not suggest an impending financial crisis but, if coupled with a sudden shift in investor sentiment, can lead to financial instability. The potential triggers for such a sudden shift in investor sentiment are not hard to find – escalation of trade tensions, disorderly Brexit, sharp slowdown in China, or unexpected tightening of financial conditions. In Asia, the key risk is an abrupt reversal of portfolio flows and consequent stresses on indebted corporates with large foreign currency liabilities. Singapore’s financial system, corporate and household fundamentals remain sound. MAS’ most recent stress tests indicate that our financial system is resilient to an adverse scenario of a severe global downturn as a fallout from rising trade tensions. That said, continued vigilance is warranted.

This is probably the biggest risk to Asia, given the region’s exposure to the corporate investment cycle. 2 / 11  BIS central bankers' speeches  Beyond the tariff war, there is a new and unknown risk on the horizon – the broadening of the trade dispute to the technology front. With global value chains, production is distributed and technology dispersed over several countries, industries, and products. Moves to restrict the supply of critical technologies could potentially lead to significant disruptions in these value chains. Some of these technologies are deeply embedded across multiple products and there may be mutual dependencies across these products. We do not fully understand the dynamics of these value chains and technology dependencies. But it is not difficult to imagine how restrictions on the use of key technologies – like advanced semiconductors – can potentially disrupt activities ranging from data centres to communications between network devices. The disruptions to supply chains and economic activity could potentially be even larger than from tariffs. A prolonged technology conflict could lead to a bifurcation of technology infrastructures globally. While downside risks have clearly increased, we should not over-react. The engines of manufacturing, trade, and investment have stalled, but the global economy is not headed for a crash. Two other engines are providing support: easier monetary policies in the major economies; and resilience in services and consumption. Monetary policy in the US has turned more accommodative against the backdrop of benign inflation.
Pre-determined trigger events do not only have to be weather–related risks 5. Travel, power outage, cyber threat and business interruption risks caused by supply chains may also benefit from pre-determined payouts. There are thus ample opportunities for the industry to test or pilot such innovative offerings. On our end, the Bank is committed to provide a more enabling environment for the industry to explore, test and introduce innovations. For areas that may require regulatory flexibility, we plan to enhance the Regulatory Sandbox with pathways to accelerate time-to-live testing by simplifying the gatekeeping process for institutions with strong risk management capabilities. We expect to announce more details on this later in the year and hope to see greater participation by the industry to offer innovative protection solutions through the enhanced Regulatory Sandbox. Expanding the horizons for the future of insurance – augmenting protection with prevention Lastly, it is also imperative to augment the future of insurance to include risk prevention. Insurers and takaful operators have always played this role. For years, the industry has provided consumers with loss prevention advice for commercial lines. Ways and demands on risk prevention, however, are evolving. We expect to see a collective shift in the role of the industry from loss reimbursement to loss control and prevention in the upcoming years.

The future of augmenting protection with prevention can be distilled through three pillars: First, by creating awareness of current risk levels Second, by suggesting a change in behaviour And third, by offering incentives for changes in behaviour The first two pillars are closely linked and is typically in the form of real-time risk mitigation as well as early warning systems. For instance, prevention triggers such as missed safety task notifications and water leakage alerts to activate emergency repair services can help prevent accidents. Telematics can also connect insurers and farmers to data from weather systems for potential safety warnings. However, raising awareness of risky behaviour and how to address them are not enough. It is also fundamental to encourage people to instigate real and sustainable changes in behaviour. Jonas Salk, one of the first successful medical researchers to develop polio vaccines once said that "the reward for work well done is the opportunity to do more". Insurers and takaful operators can leverage consumers' perception of the value of rewards by nudging them to adopt safer and healthier behaviours. Elements of  4/6  BIS - Central bankers' speeches  gamification and behavioural economics can also be integrated – for example, a driving score leader board can motivate drivers to collect higher scores by adopting safer driving behaviours. We recognise that many of these successful models require tie ups and expertise beyond traditional business lines. To cater to these new digital realities, the Bank has been proactive in ensuring our regulations are adapted regularly.
Benoît Cœuré: Short-term crisis management and long-term vision – how Europe responds to the crisis Speech by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, at CEMLA’s 60th Anniversary Commemorative Conference “Central Bank cooperation at the beginning of the 21st century”, Mexico City, 20 July 2012. *  *  *  I wish to thank Jonathan Yiangou for his contribution to this speech. I remain solely responsible for the opinions contained herein. Ladies and gentlemen, Thank you very much for inviting me to speak at this session on central bank cooperation in times of crises. From the euro area perspective, central bank cooperation has worked very well during the crisis. We have had continuous dialogue since the early stages of the crisis in 2007, which continues to the present day. Our network of currency swap lines with the Federal Reserve, the Bank of England, the Swiss National Bank, the Bank of Japan and Bank of Canada have helped ensure foreign liquidity for the euro area and euro liquidity abroad. There has also been successful international cooperation through the IMF. Overall, these measures have played an important role in easing strains in financial markets. As the success of this cooperation is broadly recognized, I would like to use my intervention today to discuss a different and more contested issue: the management of the crisis by the euro area authorities. When I travel outside of Europe, I am often struck by the level of misunderstanding of the euro area’s approach.

The Government has indicated in the National Budget that monetary policy should be the first to react when the outlook for the economy changes. A situation may nevertheless arise where an active use of fiscal policy is required, either because capacity utilisation is particularly low, or because pressures in the economy are very strong. Under certain conditions, the interplay between monetary and fiscal policy may fail to function. Interplay functions well when the decision-making bodies recognise that one body's decisions  4  BIS Review 65/2002  influence the decisions of the other. In the absence of such recognition, a decision will not produce the intended result. The economy might move in a highly unfavourable direction, with high interest rates, sluggish economic growth and a deterioration in the state’s financial position. The best contribution Norges Bank can make is to clarify our response pattern within the framework of our mandate. When the response pattern in monetary policy is known and remains unchanged over time, the social partners can also take any monetary policy response into account when wages are being determined. The outcome of this year’s wage settlements, which resulted in average wage growth between 5½ and 6 per cent, may indicate that there is not an adequate anchor for wage formation in Norway. Under the traditional wage formation model, manufacturing industry negotiated first. Wage growth in Norway was to be on a par with wage growth among our trading partners in order to maintain competitiveness.
This combination of slow output growth and continued job gains has meant that productivity growth has been unusually weak, with non-farm business productivity declining significantly during the past two quarters and rising by only 0.3 percent over the past year. It also implies that the future path of productivity growth will be important in determining the outlook for employment growth and the prospects for further progress in U.S. labor market conditions. Because it is unclear exactly why productivity growth has slowed recently, it is difficult to be confident about what it will do in the future. One reading of the data is that some of the slowing seems likely to be persistent. For instance, the weakness in capital spending evident during much of this economic expansion means that the contribution to productivity from capital deepening has dropped sharply in recent years. 2 Also, the U.S. labor market appears to have become less dynamic – perhaps due, in part, to an older workforce. Less movement of workers across jobs could lead to a less efficient allocation of workers’ skills, which would hurt productivity growth. That said, it seems unlikely that productivity growth will remain as weak as it has been over the past year. There is considerable evidence that technological progress continues at a healthy pace. Just look at the advances that have occurred in health care, oil and gas extraction and the development of smartphones.

They were hosted at Saint Catherine monastery. Once returned, they established a convent quite here, in the heavily forested area, at the bottom of the Carpathians. The new monastery was called Sinaia, in the memory of their journey to the Sinai Peninsula. A century later, the first King of Romania, Carol I fell in love with the place and built Peles Castle, his summer residence. Following the establishment of the Peles Castle a railroad connecting the capital to the king’s new summer residence was built. Little by little, Sinaia became popular among the members of the high society: they started building summer residences as well as hotels, villas. You can visit the Peles Castle and the Sinaia monastery on Friday. And now about this seminar. The topic of this seminar is integrated supervision to ensure financial stability. It relies on several conceptual layers. First of all, to understand that the frontiers among financial activities have been blurred by financial innovation and the formation of conglomerates. Secondly, effective Regulation and Supervision involves a working together of regulators and supervisors, who oversee various financial markets. And thirdly, macro prudential concerns are increasingly on the radar screen of Regulation and Supervision. Above all one needs to understand the functioning of overall finance. The program of our seminar is quite rich.
To ensure stability in the financial system and to increase its efficiency in achieving the price stability, the Central Bank will have the power of taking necessary measures to strengthen the financial system and to determine the systemic risks. Besides removing the burden of the state-owned banks from the financial system and restructuring the banking system, the measures that would reduce the public sector borrowing requirement will boost the economic efficiency and secure the price stability. The Central Bank will not in any manner whatsoever extend credit to the Treasury and to the public sector, including outright purchase of government papers, as envisaged in the Maastricht Criteria. However, a transition period of six months is needed, before we can adhere to this principle in view of the operations we have to conduct in this post-crisis environment. Having said all this let me end my remarks by making a last point. The extraordinary period, which Turkey has undergone recently, should not create an obstacle for Turkey on its way to become a part of Europe in the medium-term. On the contrary, I think we should take advantage of the opportunities arisen from the turbulences, in order to reinforce the steps being taken by Turkey for the attainment of its goals. We must take the necessary structural measures to disinflate the economy and to boost the growth potential of the economy. Decisive steps must also be taken to meet the requirements of the Information Age.

In the near future, Turkey will unquestionably attain an economic and social level it deserves by reaching a social consensus and by taking appropriate policy actions today. Thank you all for listening to me. 4  BIS Review 35/2001
However, the procyclicality debate should include not only whether capital requirements will rise and fall with economic cycles, but also whether the new requirements provide useful signals to banks, supervisors, and market participants that will lead them to take appropriate action in response to a changing economic environment. With more gradations in the Basel II framework, banks, supervisors and the marketplace will have an early warning signal when credit quality deteriorates and when it improves. A more risk sensitive  4  BIS Review 35/2005  measure should give bank managers accurate signals to adjust lending policies in a more gradual manner early in cycles, dampening severe contractions or expansions in lending. With its emphasis on planning and risk analysis, the new Accord will require banks (and their supervisors and rating agencies) to think more systematically about the level of capital needed during upturns in order to weather downturns. Herding behavior Another concern that some have raised is that the uniformity imposed by Basel II in calculating capital requirements will result in homogeneous assessments of risk, which in turn will amplify herding behavior in the market place. The new Accord does set requirements for bank risk management by requiring certain types of inputs, and it does set the correlation factors for asset types, but it does not mandate that all banks must have the same assessment of their inputs.

Individual banks will still have different methodologies for arriving at the inputs based on their reasoned assessment of risk, and banks’ estimates will clearly vary according to their business strategies and the nature of their portfolios. Concerns that Basel II will be destabilizing for emerging markets Another charge leveled at Basel II is that increased capital requirements for lending to emerging market economies will cause banks to reduce credit extensions. Here I think it is particularly important to consider the current reality of banks’ decision-making processes. Internationally active banks are not currently making lending decisions primarily on the basis of Basel I capital requirements - rather, they are using their internal risk ratings systems and economic capital models for pricing and lending decisions. These internal models and capital requirements are far more constraining than Basel I requirements. Therefore, when we try to gauge the impact that Basel II will have on emerging market lending, the pertinent comparison is not with Basel I, but with the internal risk ratings and economic capital systems that internationally active banks now use. As such, we do not expect major changes in international lending as a result of Basel II requirements. Additionally, Basel II will bring stabilizing benefits to emerging markets that are often overlooked. The sharp distinction in capital charges for longer-term lending versus short-term loans under Basel I has created some distorted incentives, particularly with regard to emerging market lending.
The Riksbank’s calculations show that employment in the manufacturing industry has been slightly stronger than the historical pattern implies during this economic downturn, given the large fall in production, while employment in the services sector has been much stronger than one might have expected given historical relationships. As mentioned earlier, it appears as though the Okun coefficient has declined during 2009. I mentioned earlier that GDP fell by almost 5 per cent last year. According to the estimated Okun’s law, unemployment in the economy as a whole should have risen by around 3 per cent, but the increase was only around 2 per cent. Although cuts in staff have been made, companies have not adjusted their workforce to the falling demand to the same extent as they would have if the historical pattern had applied. Many companies have instead chosen to retain existing personnel to a much greater extent than during earlier downturns. In some cases, they have instead introduced measures such as freezing wages or shortening the working week. One explanation might be that companies expect demand to be restored quickly and that they want to be prepared to quickly increase their production again. Another explanation as to why production has fallen more than employment, which is mentioned in the IMF’s latest World Economic Outlook 4, could be that production has fallen most in those sectors of the economy with the highest productivity level. 2  Aranki, Friberg and Sjödin, 2010, “The relationship between the business cycle and the labour market in Sweden”, www.riksbank.se.

The relationship between economic activity and the labour market Each economic cycle is unique, which became particularly clear during the most recent economic downturn. However, there are some patterns that often recur in economic cycles and forecasters have therefore often used them as a base in their forecasting work. For example, it is normal that changes in activity in the labour market occur with some time lag compared with changes in production. This is mainly because it is expensive for companies to adjust production to a new demand situation and to employ and give notice to staff. Firms may therefore initially choose to wait and see whether the change in demand is temporary. This means that the first thing to happen in an economic downturn is that productivity growth falls. Firms gradually adapt to the new situation by reducing the number of hours worked without reducing the number of employees. However, if the downturn is long-lived, the personnel force is also downsized over time. The time lag between GDP and the number of hours worked is usually one quarter in Sweden, while the time lag between GDP and employment is usually twice as long, that is, six months. A well-known relationship between economic activity and activity in the labour market was formulated by Arthur Okun in the early 1960s. 1 This describes a negative relationship between GDP growth and changes in unemployment, which has become known as “Okun’s law”.
Several considerations need to be made. By adopting a single currency, the country foregoes independent monetary policy and the central bank can not act as a lender of last resort. The loss of monetary policy independence can be problematic if a country has achieved little in the way of real convergence (both structural and cyclical convergence) and is susceptible to asymmetric shocks. On the other hand, the loss of the lender of last resort function by the national central banks implies high and protracted fiscal costs in the case of financial crises. For this reason, a healthy and resilient financial system would be required for participating in the monetary union. It is partly a reflection of these economic challenges that the new EU members appear to be following different trajectories towards EMU. On one hand, Slovenia, the Baltic countries, Malta, Cyprus and Slovakia have proceeded to join the ERM II with a view to enter EMU in the future. The other countries, notably the larger Central European ones, have opted to stay out of the ERM II in order to have more time to do the necessary economic adjustments. (II)  Challenges of the ERM II  Once the economic argument and the political consensus are strong enough to support EMU membership, the acceding country can decide to enter the ERM II mechanism. What could go wrong for accession countries during the ERM II? Some often-cited issues are related to fiscal consolidation, financial stability and the choice of the central parity.

Conclusions  I don’t think that you were much surprised by my saying that I don’t think much of lax regulation. Given the obvious tendency towards exaggeration and erroneous developments in financial markets, and the potential damage for the economy and society, good regulations are an indispensable prerequisite for ensuring that the financial sector is able to function properly in the long term. This does not mean that the consequences of regulation and supervision for the banking industry’s ability to function should not be considered. The desire of some to make up for the rigour of the rules with less stringent supervision is something I reject. That would be the wrong approach. But what are required are not only good regulations, but also a well-functioning supervisor that exercises tough but fair control to help ensure a stable banking system and a level cross-border playing field. A decisive factor for the success of the SSM will not just rest on banks in the euro area being subject to a consistent supervisory approach. Rather, both supervisory legislation and the powers of European supervision must take further steps in the direction of harmonisation. Finally, it is not possible for every conceivable situation to be covered by regulations, nor can every crisis be anticipated from a supervisory point of view. Although regulation and supervision can ensure a certain measure of protection, or build a line of defence, as it were, they cannot and should not eliminate every risk.