samchain/econo-pairs-v1 huggingface dataset:
In that Swedish banks are expanding their operations in the other Nordic countries and the Baltic region, developments in those countries are becoming increasingly important for them. Borrowers abroad now account for approximately half of the banks’ total loan stock. The analysis of borrowers has therefore been extended abroad. The major bank groups are analysed in various respects. Profitability trends illustrate the ability of the banks to build up reserves for unexpected losses. Moreover, there is always the strategic risk that a bank with weak profitability will be tempted to try out new, bold lines of business in order to generate a higher return on equity. The analysis of the banks’ credit portfolios can provide an indication of how loan losses are likely to develop in the coming year or two. Another aspect of the analysis is the banks’ liabilities. Traditional banking involves accepting deposits and using the funds for making loans. People’s growing propensity to save in other instruments than bank accounts has forced the banks to finance the growth of credit by borrowing in the capital market. The structure of bank funding provides an indication of the risks in bank liquidity. Monitoring this is perhaps the most difficult part in that the liquidity situation is liable to change very rapidly. If problems in one bank group spread to other players in the system via the banks’ mutual commitments, the payment system may be affected immediately. The Riksbank therefore keeps an eye on interbank exposures.

But it is not just the significance of the banks in the payment system and as a source of credit that warrants their supervision. As The Economist wrote last spring, banks are “the most hazardous economic institutions known to man”. That may sound rather drastic but there is some truth to it. It is not that bankers are a tribe of irresponsible gamblers but that their much-needed function in the economy requires them to act in certain ways. Banking is essentially a matter of taking risks. A bank’s funds (its deposits or its loans from other banks) are liable to disappear at short notice, while realising assets takes longer. Moreover, problems in one bank are liable to spread to other banks. This systemic risk exists because the banks have liabilities with each other in the form of loans or securities transactions and because they participate in the payment system. The similarity of their operations also means that problems elsewhere may hit the banks as a group. Contagious effects may occur, moreover, simply because people suspect that the banks are inter-connected. To a growing extent, oversight of system stability calls for oversight of the financial infrastructure in the sense of the systems that are needed to effect payments and to trade in and deliver financial products. Bankgirocentralen is a case in point. If these systems function properly, there will be less risk of problems either spreading between the participants and from the financial markets, or arising because the system as such is disrupted.
If the fixed-income market is to perform its important function, more is needed than participants who set prices for the various assets. There must also be participants who trade actively at those prices. Neither must the counterparty risks be perceived as unduly high because that may deter participants from trading. Moreover, the market must be capable of handling large volumes without this by itself having an appreciable effect on prices. In other words, the market should be adequately liquid. Why is liquidity important for monetary policy? The answer is that in a liquid market, relevant news shows up quickly in interest rates. An adjustment of the Riksbank’s repo rate, for example, has a rapid pass-through to the short market rates, as well as to somewhat longer rates. This applies, of course, in so far as the repo rate adjustment takes the market by surprise. If market participants instead understand how the Riksbank interprets new information in the form of macroeconomic outcomes, they can draw conclusions about the Riksbank’s future actions. News is then reflected in the formation of interest rates at the time when the macroeconomic outcomes are known. The relevant interest rates also react quickly to various forms of information from the Riksbank. Somewhat longer interest rates may be affected, for instance, when we publish a repo rate forecast, a so-called interest-rate path that presents the Riksbank’s assessment of the future development of the policy rate. The conditions for good market liquidity include low transaction costs, management of counterparty risks and market transparency.

To be sure, these efforts are not necessarily being undertaken with equal commitment and intensity in every country. Nor should they be. No country is like any other. We all recognize that countries differ in their histories, traditions and ways of doing business. This is not a question of thinking that there is only one correct model and that each country must adapt to that model. What is at issue, however, and what is desirable is that all countries grow. What the US experience has shown is that productivity gains driven by new technological advances, coupled with the flexibility to shift resources quickly into high-growth areas and the ability to apply the technology in productive ways, can help contribute significantly to this goal. The United States has no wish to be an island of growth in a sluggish global economy. The costs to the US of being strong when others are weak are very real. One has only to look at the weakness of the US current account deficit in recent years to understand why it is in the interest of the United States for the rest of the world’s economies to be strong and competitive with us. The United States cannot indefinitely be the engine of growth for the world economy - the importer of first and last resort - and sustain ever-mounting current account deficits without running the very real risk of economic and financial difficulties that could well weigh on many of the world’s economies. No one wants that.
Thus, Board Members may never be aware of the company’s problems. If and when they have been informed of the problems, it may already be too late, as evidenced in the case of Enron. It is for the above reasons that the authorities here in Asia, are pushing for the separation of Chairman and CEO positions so that they cannot be occupied by the same person in order to properly balance the powers and functions of the two roles. It is also fortunate for us that the practice of issuing stock options to directors of financial institutions is not yet widespread among banks in Asia. Ladies and Gentlemen, What I have highlighted is only one facet, and in fact only half of the story of good governance: that is what NOT to follow. Let me turn to the other issue of the missing link in the Western concept of governance. In the Western World, the focus of the governance structure is to protect the interest of the organization and its shareholders. It ensures that the management or staff would not abuse their organisation for personal gains. However, there is nothing in the Western structure of governance that talks about the need for the protection of consumers’ interests, and, more importantly, the interests of society at large. A corporation that grows sustainably does so because it has earned the recognition of its customers.

Peter Pang: Economic and financial outlook for the Asia/Pacific region Welcome remarks by Mr Peter Pang, Deputy Chief Executive of the Hong Kong Monetary Authority, at the Launch of the International Monetary Fund’s Regional Economic Outlook, Hong Kong, 28 April 2014. *  *  *  1. Good afternoon. It is my pleasure to welcome all of you to the launch of the latest issue of the IMF’s Asia and Pacific Regional Economic Outlook. We are honoured to have Mr. Changyong Rhee, Director of the Asia and Pacific Department of the IMF, and his colleagues to share with us today their views on the region’s economic and financial developments, the outlook and the challenges, and what can be done to manage the risks and promote further growth that is sustainable over the years ahead. 2. I totally agree with the theme of this issue of the REO – sustaining Asia’s high growth momentum would require continuing vigilance and reforms. There is little doubt that Asia will continue to grow faster than most other regions in the world. Since the Asian financial crisis, policymakers have implemented many structural reforms making the region more resilient. Asia has also been leading the world recovery after the global financial crisis. Having said that, Asia cannot afford to feel complacent as the road ahead is bumpy. And we will be in unchartered waters when the high tide of global liquidity starts to ebb as the developed economies embark on the normalization of their monetary policies.
The borrowers were willing but the banks were also pushing the supply by reducing costs and conditions (culminating some said in NINJA mortgages – for those with no income, no job and no assets). So I have no doubt that we have seen some supply changes to credit. Next we need to distinguish the sustainable changes from the cyclical. Sustained changes either in the economy or in financial sector technology may justify some increase in supply. For example, we have seen a long period of low and stable inflation and unemployment and that is expected to continue. That reduces some of the risks to lenders and borrowers and may increase both the demand and supply of credit and the value of assets on a lasting basis. The development of information technology allows banks to collect and analyse more information about borrowers which should allow them to target credit better and justify a change in supply. Finally the development of derivative markets has allowed the risks in loans to be split into their separate components and distributed to the people best placed to bear them. Again that should lower the supply curve for credit. All these factors were at play in the consumer credit and the sub prime markets but, despite the new sophistication of credit scoring and the derivatives markets, they both also showed all the classic signs of a credit cycle. Banks competed for business by lowering the costs and conditions on lending while the economy expanded, defaults were few, and profits appeared high.

Next January we will be 17, with Estonia joining. This highlights the challenge of permanently strengthening and deepening the governance of the euro area, with new economies coming in. Financial Times: Before we talk about governance, let me ask you some specific questions about the crisis management measures. How are you going to reduce the dependence of the likes of Greece, Portugal, Spain, Ireland on extra liquidity provided by the ECB? Jean-Claude Trichet: As you know, the European economy relies very much in terms of financing on commercial banks. So it’s not surprising that our own “non-standard measures” concentrate much more on bank refinancing than on intervening in markets, in comparison with the Fed. As markets gradually stabilise, our non-standard measures, which are fully consistent with our mandate and, by construction, temporary in nature, will continue to be  BIS Review 115/2010  1  progressively phased out. So we are accompanying the market as it progressively goes back to normal. But, as I said already, it is a process which takes time. Financial Times: Do you have in mind, though, a need to phase out “non-standard” refinancing and do you have a sort of time horizon for this? Jean-Claude Trichet: We of course have to consider all those measures as transitory. They are there to cope with a situation which is abnormal – to help correct those markets that are dysfunctional and thereby help restore a more normal transmission mechanism for our monetary policy.
Second, I worry that taking unusually large policy steps may validate a market narrative that Bank policy is either foot-to-the-floor on the accelerator or foot-to-the-floor with the brake. This narrative was fuelled by the (perhaps necessarily) activist responses to the onset of global financial crisis and pandemic.26 It is not unique to the UK. In my mind, the perceptions underling this narrative may help to explain both markets’ reluctance to price in policy tightening in the middle of last year and the subsequent relatively rapid steepening of the money market yield curve of late as central banks have embraced the need to address inflationary pressures. And such perceptions can shape reality. If such swings in market sentiment and expectations were to weaken central banks’ ability to steer the market rates of most relevance to spending and investment decisions, then the transmission of monetary policy will be at risk. Of course, there may be occasions where aggressive monetary policy actions are necessary. Recent history is littered with them: the global financial crisis and onset of the pandemic are cases in point. I would certainly not wish to rule out changes in Bank Rate of more than the usual 25bp in all circumstances. 13  All speeches are available online at www.bankofengland.co.uk/news/speeches  13  Retaining flexibility is important. And given the inflationary pressures we currently face, I can certainly understand why colleagues on the MPC voted for a 50bp hike last week.

I don’t have the time to survey that literature here today.7 But I will summarise a few points that I think are relevant both to my own remarks, and to the current conjuncture. Much of the analytical discussion has taken place with a framework that casts monetary policy strategy in the form of a control problem.8 Within a system that defines the behaviour of the economy, policymakers seek to minimise the social costs arising from the departure of inflation, employment and economic activity from their efficient levels, using the short-term interest rate (and potentially other monetary policy instruments) as a control variable. This is monetary policy as engineering. That cannot be an adequate or complete characterisation of the challenges the MPC faces. But it can help clarify and codify how to think about some of the important conceptual issues surrounding monetary policy decisions in the face of uncertainty. Characterising monetary policy as a control problem has a long history. It achieved renewed prominence as the academic literature sought to formalise and evaluate inflation targeting strategies, once they were introduced by central banks from the early 1990s.9 Since the UK was in the vanguard of these developments, unsurprisingly the Bank of England – in part, through the efforts of many attendees of today’s conference – contributed richly to that research programme.10  A common starting point was the standard new Keynesian macroeconomic model.
2 Abel, Jaison R. and Richard Deitz, Why Are Some Places So Much More Unequal Than Others?, Federal  Reserve Bank of New York, Economic Policy Review, forthcoming 2019. 3/3  BIS central bankers' speeches

Memo to the Board of Governors of the Federal Reserve System,  December 14, 2000. 5 The first instance was the May 2001 Bluebook. 6 Thomas Laubach and John C. Williams. Measuring the Natural Rate of Interest. Board of Governors of the Federal Reserve System, Finance and Economics Discussion  Paper Number 2001-56. November 2001. 7 Thomas Laubach and John C. Williams. "Measuring the Natural Rate of Interest," Review of Economics and Statistics 85, no.4 (November 2003): 1063-70. 8 Thomas Laubach and John C. Williams, "Measuring the Natural Rate of Interest Redux," Business Economics 51, no. 2 (April 2016): pp. 57-67. 9 Kathryn Holston, Thomas Laubach, and John C. Williams, "Measuring the Natural Rate of Interest: International Trends and Determinants," Journal of International  Economics 108 (May 2017): S59-S75. 10 These issues are discussed in detail in "Adapting the Laubach and Williams and Holston, Laubach, and Williams Models to the COVID-19 Pandemic," and "Measuring the  Natural Rate of Interest After COVID-19," by Kathryn Holston, Thomas Laubach, and John C. Williams. 11 Federal Reserve Bank of New York, Measuring the Natural Rate of Interest. 12 Oxford COVID-19 Government Response Tracker, Blavatnik School of Government, University of Oxford. 13 Note that we no longer produce HLW estimates for the United Kingdom because the model does not provide a good fit for the data. The estimates for the UK were highly  imprecise even before the pandemic and the subsequent data has exacerbated this problem. 14 Thomas Laubach and John C. Williams.
Then, I would like to provide some insights into the preparations banks and supervisors are making to implement the new framework - both internationally and here in the U.S. I’ll end my remarks with some thoughts on where we are in the Capital Accord revision process. 2. Objectives for revising the Capital Accord  As you may know, the Committee’s process to revise the Capital Accord began in the late 1990s. It became clear at that time that the original Accord was becoming outdated. Its broad-brush nature where required capital generally does not differ by degree of risk – has had a tendency to discourage certain types of bank lending. It has also tended to encourage transactions whose sole benefit is regulatory capital relief. Further, banks have been developing new methods for monitoring and managing risk in a manner that the 1988 Accord did not anticipate or address. It is due to the hard work of risk professionals and the ideas advanced through organizations like GARP that banks today have an ever improving tool box for identifying, measuring, and controlling risk. In light of those new tools, it is quite clear that the current Accord provides internationally active banks, for which it was originally intended, with less meaningful measures of the risks they face and of the capital they should hold against them.

The more a bank makes use of its risk rating system, the more confidence supervisors are likely to have in the results of the banks’ assessments of their capital needs. Data requirements and validation Clearly, a system is only as good as the inputs that go into it. Accordingly, banks using the IRB approach will need to be able to measure the key statistical drivers of credit risk. The minimum Basel operational standards provide banks with the flexibility to rely on data based either on internal experience or generated by an external source, as long as the bank can demonstrate the relevance of the external data to its own exposures. Regardless of source, sound data are critical for formulating meaningful internal risk assessments. From a broader risk management perspective, access to high quality data will enable a bank to evaluate the performance of its internal rating and risk estimation systems in a consistent and meaningful manner. The Basel standards outline the data history banks will need to use the IRB approach. The Committee recognizes that banks may not currently have all of the required information on hand. For this reason we have continued to engage market participants in a dialogue on this issue. As implementation of the New Accord approaches, we encourage banks to consider their data needs very seriously and to comprehend fully the techniques they will need to use to derive appropriate estimates of loss based on those data.
These include the rise of non-bank financial intermediation, and the deep pockets of opacity and interconnections with the banking system – as we have seen in cases such as Archegos, Evergrande, Greensill and Huarong. In addition, medium-term structural trends such as the ongoing digitalisation of finance and increasing climate-related financial risks are so cross-sectoral and global in nature that they can only be effectively addressed through greater cooperation across sectors and across jurisdictions. 2/3  BIS - Central bankers' speeches  My third point is that cooperation can, and should, take different forms. While regulation – most notably the Basel framework – is perhaps the most visible product of global cooperation, there are a number of other, equally important, dimensions. Supervisory principles and guidelines, while often high-level in nature, are a powerful tool to help raise the bar when it comes to the quality and effectiveness of risk management practices and supervision, and to help provide a common global baseline. Supervisory cooperation, including through the sharing of supervisory intelligence and best practices, is a vital channel for authorities to assist and learn from one another. Indeed, merely having a continuous and ongoing channel of communication among authorities is perhaps one of the most important levers available to us. Equally, cooperation should be multi-faceted in scope, and should encompass both microprudential and macroprudential financial stability dimensions.

This is reinforced by a dedicated focus on the vulnerable segments of the society, such as how to plan for retirement, the importance of living within one’s means and behaviours that can lead one into high indebtedness. These programmes are delivered to consumers in the workplace and colleges. Our collaboration with employers has proven to be particularly effective in delivering financial education on responsible financial management. Under this approach, strategic alliances have been forged by the Credit Counselling and Debt Management Agency with more than 200 organisations in Malaysia to deliver financial capability programs at the workplace. Equal emphasis is given to developing the enabling infrastructure to support the effective delivery of financial capability initiatives. In Malaysia, the meaningful access to financial education contents and tools, a rigorous assessment framework and an effective partnership that involves the Government, educators, non-Governmental organisations and the financial industry form the vital components of the enabling ecosystem to support the overall financial education strategies. In many instances, changes in consumer behaviour are needed for the intended benefits to be realised. In Malaysia this is the case in the efforts to promote e-payment as a means of improving economic efficiency, productivity and competitiveness. Central to this agenda has been the implementation of various financial education initiatives to encourage changes in consumer behaviour and to inspire confidence in the use of e-payments.