samchain/econo-pairs-v1 huggingface dataset:
Overall, although, from an empirical standpoint further analysis is needed, it is difficult to reject the view that the policy of low interest rates contributed to the steady credit dynamics in the period preceding the crisis. Certainly, this is a theme that should be studied further in the economic literature in the next few years. 3. The new steady state  Given that the financial crisis has demonstrated the excesses in credit developments in the past, it is necessary to identify a new, sustainable equilibrium point. To reach this steady state, important measures are needed in various areas, many of which are already in  7  Eventually, this required a clean-up programme with an estimated cost of USD 150 billion. 8  See, for example, A. Ashcraft and T. Schuermann. 9  Ben Bernanke, “Monetary Policy and the Housing Bubble”, a speech delivered at the Annual Meeting of the American Economic Association, Atlanta, Georgia, 3 January 2010. 10  T. Adrian and H.S. Shin, “Money, liquidity and monetary policy”, American Economic Review, P&P, vol. 99, No 2, pp. 600–605, 2009; J.B. Taylor, “The financial crisis and the policy responses: an empirical analysis of what went wrong”, National Bureau of Economic Research Working Paper Series, No 14631, 2009. 11  M.K. Brunnermeier, “Asset pricing under asymmetric information – bubbles, crashes, technical analysis and herding”, Oxford, Oxford University Press, 2001; R.G.

Rajan, “Has financial development made the world riskier?”, National Bureau of Economic Research Working Paper Series, No 11728, 2005; G. Jiménez, S. Ongena, J.-L. Peydro and J. Saurina, “Hazardous times for monetary policy: what do 23 million loans say about the impact of monetary policy on credit risk?”, CEPR Discussion Paper, No 6514, 2007; V. Ioannidou, S. Ongena and J.-L. Peydro, “Monetary policy, risk-taking and pricing: evidence from a quasi-natural experiment”, NBER Summer Institute, 2009; A. Maddaloni and J.-L. Peydro, “Bank risk-taking, securitisation, supervision and low interest rates: evidence from lending standards”, ECB Working Paper Series, forthcoming. 32  BIS Review 10/2010  process. I will obviously not go into all of them, given the extent of the work in progress, but I will mention a few initiatives. First of all, the regulation of the banking system must be reviewed, with new rules constraining its assets and balance sheet structure. In December 2009, the Basel Committee on Banking Supervision announced a reform package aiming to strengthen global capital and liquidity regulations. Capital requirements will be more stringent, thanks to the improved quality, consistency and transparency of the regulatory capital base. Proposals include a counter-cyclical capital buffer, and measures to promote provisioning over the cycle and to mitigate the possible excess cyclicality arising from the minimum capital requirements. 12 Measures concerning the role of external ratings and the treatment of securitisation have also been announced. Better risk coverage is also needed, which is capable of capturing major on and off-balance sheet risks and derivative-related exposures.
All told, this means that in the face of foreign shocks, EMEs are forced to compromise their monetary sovereignty, temporarily diverting monetary policy away from targeting domestic output and inflation and instead using it to try to stabilise capital flows. While this strategy is the best EMEs can do given the current structure of the international monetary financial system, outcomes for them are a distant second best when compared to those advanced economies that are less exposed to international financial spillovers. See ‘Pull, Push. Pipes’, speech by Mark Carney, Institute of International Finance Spring Membership Meeting, Tokyo, 6 June 2019. Within the Bank’s Capital Flows-at-Risk framework, these actions are estimated to have Capital Flows-at-Risk (that is, capital outflows as a percent of GDP in the fifth percentile of the distribution) by 3% of GDP. 21 Within this, investment funds are growing, accounting for the bulk of the growth in asset management over the last decade. In parallel, investment fund flows to EMEs now account for around one third of total portfolio flows, compared to around one tenth precrisis. 19 20  8  All speeches are available online at www.bankofengland.co.uk/news/speeches  8  ------------------------------The deficiencies of the IMFS affect EMEs more directly than advanced economies, but their consequences influence everyone because they reduce the global equilibrium interest rate. Against the current backdrop of an inadequate and fragmented global financial safety net, EMEs have chosen to self-insure against capital flow volatility by accumulating reserves of safe assets, contributing to Ben Bernanke’s “global savings glut”.

In recent weeks, the perceived likelihood of No Deal has risen sharply as evidenced by betting odds and financial market asset pricing (the UK now has the highest FX implied volatility, the highest equity risk premium and lowest real yields of any advanced economy). In the event of a No Deal No Transition Brexit, sterling would probably fall, pushing up inflation, and demand would weaken further, reflecting lost trade access, heightened uncertainty and tighter financial conditions. Unusually for an advanced economy slowdown, there would also be a large, immediate hit to supply. The Monetary Policy Committee (MPC) would need to assess to what extent that reflects temporary disruption to 2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  production, with limited implications for inflation in the medium term, or a fundamental destruction of supply capacity because of the abrupt change in the UK’s economic relationship with the EU. As the MPC has repeatedly emphasised, the monetary policy response to No Deal would not be automatic but would depend on the balance of these effects – on demand, supply and the exchange rate – on medium term inflationary pressures. In my view, the appropriate policy path would be more likely to ease than not, using the flexibility in the MPC’s remit to lengthen the period over which inflation is returned to target. But much would depend on the exact nature of No Deal and its impact.
Macro-prudential policy protects the financial system from itself and the wider economy from its consequences. The FPC’s actions to date have been completely consistent with those objectives. For example, it has called for UK banks to increase their capital levels to safeguard their future resiliance. It has also relaxed liquid assets requirements for UK banks to support future growth. Through these actions, the FPC has sought to protect the financial system from itself and the wider economy from its consequences. In future, the FPC will have at its disposal a Countercyclical Capital Buffer (CCB) and Sectoral Capital Requirements (SCR). These are designed explicitly to lean against financial cycles. Like monetary policy, they operate symmetrically to constrain credit booms and cushion busts. They help safeguard today’s younger generation from the impatient grasp of their parents and grandparents, to avoid the ultimate deceit. The FPC can also invest in financial public goods – for example, new financial infrastructure to support resilience. In the past, central banks helped build market infrastructures such as payment, clearing and settlement systems to support resilience. Like lampposts and  4  8  The Financial Conduct Authority (FCA) is the third point of the regulatory triangle of the UK. It has responsibility, among other things, for consumer protection. BIS central bankers’ speeches  language, these are classic public goods. In future, the FPC may wish to help build other types of market infrastructure – for example, securitisation markets – to help create a more diverse financial system.

There are also analysts who say that the interest rate cuts made by the US central bank, the Federal Reserve, have contributed to the price rises. 1 In recent years, portfolio investment in commodities appears to have become an increasingly common means of diversifying and spreading risks. The expected return on many other types of asset has declined and inflation has begun to rise in many areas. As this has occurred, real assets such as commodities have appeared to be a good and safe investment – a “safe haven”. This has reinforced the price rises. Demand from emerging markets – a more long-term driving force There are a number of interacting explanations as to why commodity prices have risen so sharply. It is hardly possible to say exactly how important each of them has been. However, one can say with some certainty that the persistence of the different driving forces differs somewhat. 1  See, for instance, Feldstein, M. “Enough With the Interest Rate Cuts”, the Wall Street Journal, 15 April, 2008 and Frankel, J. “The Effect of Monetary Policy on Real Commodity Prices”, NBER Working Paper No. 12713, 2006. 2  BIS Review 57/2008  What I mean more specifically is that demand for commodities from emerging markets may well have pushed up and may also continue to push up prices more persistently than the other explanatory factors. After all, the emerging economies are undergoing a structural transformation, which will probably be under way for a long time.
A reference value for the annual increase in the monetary aggregate has been set, currently amounting to 4.5 per cent. In general, however, the interest rate adjustments implemented by the ECB have not been justified on the basis of developments in the monetary aggregate. This has been clear on several occasions in recent years, when the refi rate has been lowered in spite of the fact that the rate of increase in the monetary aggregate clearly exceeded the reference value. The evaluation of the strategy in May also resulted in measures of the monetary aggregate being given a role primarily as indicators of future inflation. Naturally, the Riksbank also follows monetary aggregate and credit variables, even if we have not assigned them special significance when assessing inflation. Therefore, the formulation of policy nowadays is also quite similar in this respect as well. Finally, allow me to point out that despite the similarities in the formulation of policy, it can not be ruled out that price and wage increases in Sweden may sometimes be both too high and too low. The main reason is that the ECB’s policy is targeted at average price increases in the euro area as a whole. Partly as a result of this, there is reason to discuss both the role of fiscal policy and the functioning of the labour market in the event of an introduction of the euro in Sweden.

This is an area where the private sector has made enormous advances in recent years, much of it strongly encouraged by the banking supervisors. Risk management has become more sophisticated with more differentiation between risks: the separation of credit and market risk; the recognition of operational risk as a distinct category; and the importance of reputational risk. Notwithstanding that the nature and size of our operations are different and smaller than many private sector institutions, the Bank is exposed to many of these same risks. In managing these risks, we have wanted to ensure that our practices are consistent with best practice in the private sector, to the extent that this is applicable to a central bank. We have invested heavily in technology to allow management of the risks on a consolidated basis and where appropriate in real time. We have also instituted a number of organisational changes, setting up an Assets and Liabilities Committee which I chair and which reviews at senior level the management of our balance sheet; and a Risk Monitoring Department (based in part on the Middle Office model of the private sector), independent from our banking line management. Above this, like public companies, we have a number of Board sub-committees, and in particular an Audit Committee, taking reports from the Internal and External Audit, looking carefully at our internal systems and controls and our policies and processes for management of the main financial, operational and reputational risks.
A reasonable interpretation of this outcome is that the Eurosystem has also been successful in reaching smaller financial  BIS central bankers’ speeches  3  entities, which had more time to prepare their bids in the second operation than in the first, and which are essential for providing credit to SMEs. Analysis of the main determinants of banks’ bidding behaviour, combined with anecdotal information provided by banks, confirms that the funding issues I referred to earlier were of vital importance. As an illustration, Slide 3 shows a positive relationship between spreads on bank bonds at issuance and the amounts bid by banks in both three-year LTROs as a percentage of their total assets. The slide suggests that, for those banks with access to longer-term funds in the bond market, there was a strong correlation between their cost of funding and their bidding behaviour. Banks without outstanding debt securities bid on average even more aggressively. Overall, our internal analysis shows that the most aggressive bidders were characterised by larger amounts of debt maturing in the next three years and a shorter average maturity of the outstanding debt. The results of the Bank Lending Survey further reinforce this interpretation. This evidence supports the Governing Council’s view that banks were facing significant funding problems and that, by removing impediments to their ability to finance the real economy, the three-year LTROs helped to avoid a dangerous credit crunch in the euro area. The large injection of liquidity via the three-year LTROs had an immediate impact on many market segments.

We need more investment in health, in education—especially in the earliest years—in infrastructure, and in training and skills for well-paying jobs. There is so much work that needs to be done to make sure that we are fostering an equitable recovery and ensuring that everyone is able to fulfill their economic potential. That’s why at the New York Fed and across the Federal Reserve System, a key area of focus is to better understand what contributes to economic inequities and to finding solutions.3 Our economic research and analysis, which my colleagues will share shortly, highlights many of these stark disparities.4 In addition, hosting conversations like this one creates dialogue around these issues and builds connections between those working for change. 1/2  BIS central bankers' speeches  Another important role the Federal Reserve plays in promoting economic equity and access is supervising banks with respect to the Community Reinvestment Act. This law requires banks to lend, invest, and offer services to low- and moderate-income communities in areas where the banks operate. To emphasize all of our work in this space, the New York Fed recently published a statement reinforcing our commitment to fostering a more equitable economy and society:5 The New York Fed stands in unity with all those who oppose racism, hate, and violence. We join them in a shared desire to root out the intolerable inequities and injustice grounded in systemic racism that persist in our society.
The effect of the expansionary monetary policy on capital incomes, via rising equity prices, should therefore have led to a more unequal income distribution. However, capital income is only one part of households’ total income; the largest part is comprised of labour income. As with capital income an expansionary monetary policy can affect the labour income of different households in different ways. For some households the hourly wage may be what primarily determines their income development, while for others the number of hours worked is the most important thing – and above all  6 Lundberg and Waldenström (2016). See also Waldenström (2016). 7 Sveriges Riksbank (2011), Swedish Fiscal Policy Council (2013) and SoU 2013:78. 9 [14]  whether or not one actually has a job. As monetary policy affects these quantities in different ways, income distribution will also be affected. In Sweden, it is primarily the differences between the income of those who have a job and those who do not that is important to the income distribution, rather than the wage differences between those who work. 8 This is clearly visible in the dispersion of disposable income, that is, income including work and capital income, as well as various transfers and after taxes are deducted. The higher the disposable income, the less common it is that one’s main source of support is from something other than labour and capital.

Consistent with this global scenario, the ECB has done and, within its mandate, will continue to do whatever is needed to pursue its price stability objective which now implies also trying to foster growth, in order to close the negative output gap that is putting negative pressure on inflation. However, other policies must also act to deliver a lasting and sustainable improvement in economic growth prospects. Such a common European effort should entail a three-point action plan:  1  Since June 2014, euro area government bond yields have fallen, on average, by around 120 basis points. Furthermore, funding conditions for banks and companies in the euro area have improved markedly: the respective bond yields have declined by around 65 and 55 basis points on average. 2  Bank lending rates for non-financial corporations in the euro area have fallen on average by some 80 basis points since June 2014. Lower lending rates, in turn, have triggered a marked response in the supply of, and demand for, bank credit: the volume of credit to both euro area households and firms has been on a steady recovery path since mid-2014. 3  ECB estimates suggest that, had there been no asset purchase programme (including the recalibration of December 2015), inflation would have been negative in 2015. ECB assessments also suggest that the asset purchase programme (including the recalibration of December 2015) will contribute to raising the GDP of the euro area by around 1.5% in the period 2015–18.
It has already carried out useful work, in co-operation in particular with the Financial Stability Institute (FSI) of the BIS, on the theoretical aspects and practical application of Basel II. Today, I will start by discussing the practical challenges arising from the effective implementation of Basel II. I will then stress the need to pursue efforts to implement the new Basel II framework in the context of the current financial market turmoil. Lastly, I will try to draw some initial lessons from this turmoil with a view to ensuring that implementation is optimal. 1. The effective implementation of Basel II is demanding and requires on the part of credit institutions and supervisors considerable efforts and significant resources. The first challenge regarding Basel II is indeed of a practical nature, i.e. successfully moving from the planning stage of this capital adequacy reform to that of its implementation. This will be particularly challenging since Basel II is a much more ambitious supervisory framework than Basel I, based on three complementary pillars: –  minimum capital requirements (Pillar I), which can be calculated in accordance with various approaches, from standardised approaches to internal ratings-based approaches (IRB), specifically developed by each credit institution.

While it is too early to draw definitive conclusions from the current episode, it is nevertheless apparent that progress needs to be made by credit institutions, for example in the management of credit risk, market risk, liquidity risk, the risks associated with certain activities such as asset management and risks linked to the valuation methods used for some financial instruments. Regarding credit risk: –  It is important to check that banks’ internal rating systems, along with the estimation of the different risk parameters they use, are updated in order to reflect the increase in default risk and losses in the wake of the current turmoil. It is indeed vital that these systems do not lead to risk being underestimated. This update appears all the more necessary at the present time given that in the case of real estate loan portfolios, estimates of risk parameters have perhaps not been sufficiently rigorously tailored by all banks to the specific features of some risky forms of credit such as US subprime mortgages. The same thing may have happened in other countries.
Caleb M Fundanga: Corporate governance and its impact on financial institutions Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Institute of Directors Business Luncheon on Corporate Governance and its Impact on Financial Institutions, Lusaka, 27 April 2011. *  *  *  The Institute of Directors National Vice President Mrs. Sue M. Mwaanza The Chairman Membership and Publicity Committee, Mr. Augustine C. Seyuba Directors and Chief Executive Officers Present Distinguished Invited Guests Members of the Press Ladies and Gentlemen I am honoured to be here today to share with you some thoughts on Corporate Governance and its Impact on Financial Institutions. I am certain that Corporate Governance is not a new topic to all of us in this room. It is obviously of fundamental importance to this audience, given that most of you are company directors. Corporate Governance is critical to the Bank of Zambia, in its capacity as supervisor and regulator of the banking system. Until fairly recently, corporate governance was not a topic that attracted much public attention. It was a topic reserved for discussion in the Board room or in academic environments. However, recent events, such as the Enron scandal and other corporate governance failures including events that led to the recent financial crisis, have made corporate governance a major topical issue. The recent events have highlighted the important role that corporate governance plays in a modern financial sector and the economy at large.

Born in Louisville, Kentucky, Benjamin Friedman went to Harvard University with the intention of studying law, but soon realised that economics suited him better. He pursued his studies at Harvard and at Cambridge University in England. Early in his career, Ben worked for various entities of the Federal Reserve System and at Morgan Stanley. In 1972, at the age of 25, he was appointed assistant professor of economics at Harvard University. Ben has remained a loyal faculty member at Harvard for five decades, including a three-year spell as the chairman of the economics department. Page 2/4  When Ben recently celebrated 50 years as a professor at Harvard, many of his former students travelled from all around the world to attend the occasion. The interaction with his students has been of utmost importance to Ben, and he would remain in contact with them for decades following their graduation. A number of these former students today occupy leading positions in academia, central banking and government. This shows that Ben has been not only an outstanding researcher, but also an influential teacher of economics. Spending 50 years in the same place is not as unusual as one might think, at least not when we consider some of the great Enlightenment thinkers Ben so deeply admires. Take Immanuel Kant, who developed his philosophy without ever leaving his hometown of Königsberg. According to legend, Kant became such an integral part of the city that people would set their watch by the time he left his house for his afternoon walk.