samchain/econo-pairs-v1 huggingface dataset:
In Luxembourg there are one or two institutions that rank among those with the highest exposure to mortgages in Europe. If a shock affects this cluster of assets, then they are at risk. Household indebtedness in Luxembourg is higher than in other countries – however the wealth of these households is also higher than in other countries, and disparities between the holders of assets and liabilities also have to be considered. What is specific to Luxembourg is that the price pressure on the housing market is growing faster than in many other countries. We’re speaking of a 7% increase while the economy is growing at only half that rate. We’re speaking of a more than 50% increase in house prices over the last eight or nine years. This is mostly explained by the insufficient supply and by the strong demand resulting from labour inflows. This also results in wealth per capita in Luxembourg not growing. In turn, that creates the impression that wealth is not being fairly distributed. To sum up, Luxembourg is not running into a wall but risks are clearly there and actions have to be taken, as recommended by international and domestic institutions. What actions? That’s up to the national authorities. It’s not a matter of monetary policy. Monetary policy is a blunt weapon. But those best equipped to deal with the situation are the national authorities, as they are the closest. This is why macroprudential policy, as it is called, is in the hands of the national authorities.

Yves Mersch: Interview in Luxemburger Wort Interview with Mr Yves Mersch, Member of the Executive Board of the European Central Bank, in Luxemburger Wort, conducted by Mr Pierre Sorlut and Ms Barbara Tasch on 8 March and published on 14 March 2018. * * *  Mr Mersch, the Governing Council has not yet decided to raise the interest rate. When that happens, the debt-to-service ratio will increase and put pressure on households who took out loans to buy their houses. How big is the danger? Let me say first that the bigger the imbalances, the less the economy is prepared for a monetary policy change. Any change in the monetary policy stance is always a shock to the economy, positive or negative. It’s not in our mandate to consider the households of any particular country when we change the monetary policy stance. That includes Luxembourg. We set interest rates for the euro area as a whole. We are not yet ready at this stage to change interest rates. We first take the nonconventional measures towards the exit. Only then will we consider the conventional ones. Today, at our press conference, we confirmed that we’re confident with the path which is leading to our objective. The primary objective is price stability, which we have defined as an inflation rate of below, but close to, 2% in the medium term. Second, on some banks’ balance sheets, loans to the private sector are very substantial and in some there is a high concentration of mortgages.
Estimates of unfunded pension liabilities range up to several trillion dollars. While widespread, underfunding of public pensions is not universal. Many states have found ways to keep their public pensions reasonably well funded, demonstrating that pushing today’s costs into the future is not an inevitable outcome of a democratic government. Nonetheless, we have seen evidence that high debt levels combined with diminished services provision can, in cases such as Detroit and Stockton, make the public sector finances unsustainable. At a certain point, the debt service burden clashes with maintaining a sufficient ongoing provision of services to forestall people from voting with their feet. This may occur well before the point that debt service capacity appears to be fully exhausted. In other words, the prioritization of cash flows to debt service may not be sustainable beyond a certain point. While these particular bankruptcy filings have captured a considerable amount  2  BIS central bankers’ speeches  of attention, and rightly so, they may foreshadow more widespread problems than what might be implied by current bond ratings. We need to focus our attention today on addressing the underlying issues before any problems grow to the point where bankruptcy becomes the only viable option. So, I am especially pleased to see that your agenda today focuses, in part, on helping cities and states avoid such levels of fiscal stress, where the risks of going past such a tipping point become significant. In summary, state and local governments have enormous financial obligations, as well as critical service delivery responsibilities.

14  Examples include Norges Bank (2013), p. 8: “Weight was also given to the fact that house prices and debt have risen faster than income for a long period. A lower key policy rate may increase the risk of a renewed acceleration in house prices and debt accumulation and of build-up of financial imbalances.”; Bank of Canada (2013): “[T]he Bank must also take into consideration the risk of exacerbating already-elevated household imbalances.”; and the Reserve Bank of New Zealand (2012): “In addition, the PTA’s stronger focus on financial stability makes it clearer that it may be appropriate to use monetary policy to lean against the build-up of financial imbalances, if the Reserve Bank believes this could prevent a sharper economic cycle in the future.”  BIS central bankers’ speeches  7  intend to go into these here, but merely point out that if the supply had adapted better to demand, the price increases in the housing market would have been more limited and thus household debt would have given less cause for concern.15 Merely slowing down the demand side, without trying to make the supply side function better, is probably not sustainable – at any rate it does not appear to be a particularly wise long-run strategy. Housing policy probably also needs to be included in the equation for a lasting solution to be achieved.
Zeti Akhtar Aziz: Building a comprehensive Islamic financial system - new financial opportunities Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Institute of Islamic Banking and Insurance’s International Conference on Islamic Insurance, London, 26 September 2003. *  *  *  “Islamic banking and finance initially evolved as a form of financial intermediation for the Islamic community to conduct financial transactions that conform to Islamic tenets. Today, the Islamic financial industry has gained wider acceptance and appreciation and has expanded beyond the traditional borders of the Muslim-based economies into the major industrial economies to become an integral component of the global financial system. In a global environment that has become increasingly challenging, an environment that is subject to the powerful forces of change, and that is characterized by volatile and unstable market conditions, Islamic finance has emerged as a competitive and resilient form of intermediation. Although Islamic finance is still at the early stage of development, it has experienced rapid expansion and is fast emerging as a viable and robust form of financial intermediation with significant potential.” It is indeed an honour for me to be here today before a distinguished gathering of scholars, researchers and practitioners of the takaful industry. I wish to take this opportunity to congratulate the Institute of Islamic Banking and Insurance for their efforts in organizing this international conference on Islamic insurance or takaful.

Once again I would like to point out that these outcomes are not accidental and do not come out of the blue. All that we have achieved so far is a result of both the long-standing and consistent efforts made by the Bulgarian National Bank for creating cushions and maintaining the stability of the system, and of the common sense and efforts of each and every one of you. Thank you very much for this! The crisis could not make us turn away from the strategic tasks facing us, i.e. to be competitive, to provide the services needed by individuals and businesses, to be innovative and stand in the lead among the EU member-states so as to meet the demands of the future. In one of the most rapidly developing areas – payment systems, Bulgaria marked a significant progress in 2010. The merger of the two most important operators BORICA and BANKSERVICE is accomplished. On 1 February, we launched into operation the national  BIS Review 169/2010  1  component of TARGET2 (TARGET2-BNB). The connection of the national banking community to TARGET2 is an important step in our integration into the euro area payment system, providing to the participating banks an opportunity to execute real-time eurodenominated transfers at an exceptionally low price. In parallel with launching TARGET2 and the developments in the large payments area, we had the system for processing customers’ payment in euro – BISERA7-EUR – started from 1 February. The system processes eurodenominated payments in line with SEPA standards.
If you want to know what behaviors are valued or esteemed in reality, look to see who is promoted and well-compensated and the behaviors that they embody. Do the results match what is said? Do they match your expectation of fairness? Do you aspire to be one of these individuals, not because of their status and compensation alone, but because of the esteem you hold for them and their values? Over the long haul, the economy needs a vibrant and trustworthy financial sector in order to thrive, just as the financial sector needs a vibrant economy to thrive as well. You are the rising leaders of your firms. You can help accomplish these aims. A strong and ethical culture in the banking industry will make it more trustworthy, and therefore more effective in performing its mission. It will also help the industry be held in higher esteem and this will help attract the talent needed to sustain the industry. I am encouraged by today’s gathering, and hope you will take heart that an improved culture in the financial services industry is both necessary and possible. Thank you for your continued efforts and your kind attention. 1 Stephanie Chaly, James Hennessy, Thomas Noone, Joseph Sommer and Joseph Tracy assisted in preparing  these remarks. 2 See Criminal Accountability and Culture, Remarks by Preet Bharara, Reforming Culture and Behavior in the  Financial Services Industry: Expanding the Dialogue, October 20, 2016. 3 See John C. Bogle, Enough: True Measures of Money, Business, and Life, 45 (2009).

Without that, the financial industry cannot be effective in performing its key roles. Cultivating these three traits emphasized by Onora O’Neill—competence, reliability and honesty —will help enable you to have a personally fulfilling career. The best doctors or lawyers do their work not only because it pays well, but because it is interesting and contributes an important service to society. I hope you feel the same about what you do. And if you don’t, I urge you to consider how your industry can become more professionally fulfilling. What is needed for you to feel better about your work, to sleep more soundly, to worry less about the risk posed to your business by potential misconduct? Your professional fulfillment will grow if you also contribute to promoting these qualities in others —that is, by helping to improve the culture of financial services. It is easier to be smart, dependable and trustworthy when you are surrounded by other people who also fit that description. My second message is to reject the idea that a separate regime of ethics or morality applies in banking. I’m sure you have heard this, or perhaps even thought this, at some point in your career. 3/6  BIS central bankers' speeches  Let it end there. We often teach our children by asking them if they would engage in that type of behavior at home. This is good professional advice as well. Bankers have been criticized for their ethical and moral shortcomings. That criticism has legitimate grievances at its roots.
The connection measure takes value 0 when none of the directors of a given firm are directors of other firms. 38  All speeches are available online at www.bankofengland.co.uk/speeches  38  Table 2: Distribution of director connectivity  Sources: Bureau van Dijk and Bank calculations. Notes: Measurement of director connectivity as in Khwaja, Mian and Qamar (2011). Table 3: Regression of firm-level productivity growth on director centrality  Sources: Bureau van Dijk and Bank calculations. Notes: The table shows results from a panel regression of yearly productivity growth on firm size, the natural logarithm of the number of directors and the natural logarithm of firm centrality. Productivity is measured as gross value added per employee; size is measured as the natural logarithm of the balance sheet item “Total Assets”; centrality is measured as the number of connections (with other directors via other companies) of the most connected directors of the given firm. The sample period covers 2000-2013. T-statistics correspond to standard errors that are clustered at the firm-year level. Significance levels are * p < 0.1, ** p < 0.05, *** p < 0.01. 39  All speeches are available online at www.bankofengland.co.uk/speeches  39  Chart 20: UK vs. US labour market churn Percentage of employment in previous period  8% 7% 6% 5% 4% 3% 2% 1% 0%  2000  2002  2004  2006  2008  2010 UK US  2012  2014  2016  2018  Sources: ONS, United States Census Bureau and Bank calculations.

It is also well-known, including from historical experience, that productivity depends importantly on a number of structural features of the economy, including levels of education and skills in the workforce, the quality and quantity of infrastructure and innovation and the scale of financing to companies. Price and financial stability are necessary conditions for rising productivity. But they are far from being sufficient ones. When it comes to those structural features of the economy, central banks do not have the tools to affect lasting change. Central bank tools are cyclical, rather than structural, because their impact on the economy is temporary, not permanent. We do not build schools, colleges, houses, roads, railways or banks. Nor do we finance them. Those tools, rightly, are in the hands either of governments or private companies. So too is the financing of them. Through their role in securing stability in prices and the financial system, central banks do have a clear interest in understanding the forces shaping productivity and the supply-side of the economy. Central banks can also help in diagnosing productivity problems and in identifying policies that could lift barriers to productivity improvement. That is the purpose of this lecture. It is also the reason several Bank colleagues have given recent speeches on this topic. 51  Before turning to that, let me say something about monetary policy. The job of securing price stability falls to the Bank of England’s Monetary Policy Committee (MPC), of which I am a member.
Who would have thought that Balcerowicz, the initiator of shock therapy in Poland, whose name will always be linked to its transition from a centrally-planned economy to a market economy, considered a hero of reforms in the ’90s and even before the global crisis, would become now a sort of scapegoat for the less positive aspects of transition – the leader of Law and Justice Party in Poland, Jaroslaw Kaczynski, committed to “ finally reject the unfortunate concepts of the pest Balcerowicz”1 . I don’t have now the time to discuss in detail these complex processes or the differences between countries. I am sure that this conference will lay another brick to the better understanding of these processes. My intervention aims at sharing with you a few lessons that I am formulating from my present position as a central banker. The first lesson I would like to mention refers precisely to real convergence. In almost two decades, all CEE economies have made significant progress – at various paces – in terms of real convergence, with the catching-up process benefiting substantially from their EU accession. 1/4  BIS central bankers' speeches  In Romania’s case, GDP per capita as a percentage of euro area average (based on PPS) expanded almost threefold compared to the year 2000, reaching 61 percent in 2018.

Poland and Hungary stand at around 67 percent (both posting values of no more than 45 percent in 2000), Czechia at 86 percent (from 61 percent in 2000) and Bulgaria at 47 percent (against 24 percent in 2000). As a matter of fact, Romania boasts the fastest growth rate in the group of peer countries with similar trends. Can we, therefore, say that this is proof of a successful catching-up in real terms? Furthermore, can we claim that having a flexible policy framework (including a managed floating exchange rate) helped us in this respect? Allow me to assert that more time is needed in order for these questions to be appropriately answered. However, a general remark can be made: the EU and NATO anchors helped us all make progress as concerns real convergence. The second lesson derives from the answer to the following question: did the strategic decisions on the exchange rate regime and monetary policy framework matter? It is known that some countries in the region (Romania, Poland, Czechia, Hungary) opted for flexible exchange rate arrangements and adopted inflation targeting, while others (Bulgaria and the Baltic states) resorted to a fixed exchange rate regime under a currency board. At first sight, it seems that the latter group of countries are better prepared in terms of euro adoption (the Baltic states have already taken this step but they, being much smaller and more open economies, are a special case), given the fiscal discipline pursued and the nominal convergence stage in those economies.
Enter a title for the industry  Source: Labour Force Survey (user guidance)  10  BIS central bankers’ speeches  Chart 7: Compositional effects driven by  Chart 8: Job creation fell further, and has  characteristics of employees, not sectors  since recovered faster, for low skilled  Source: Labour Force Survey  Source: Labour Force Survey  Chart 9: Over longer sample, shifts in  We can’t demonstrate this with the detailed  average qualifications driven compositional  LFS dataset from 1994, as it includes only one  effects  proper cycle. But the positive relationship with unemployment exists even during the Great Stability (1994–2008). And, at the cost of a smaller set of variables – the survey didn’t ask people about their occupation and sectors before 1994 – we’ve managed to extend the estimates back a few years, to the late 1980s. The aggregate series you’ve already seen in Chart 310. The more detailed breakdown is in Chart 9. You can see clearly the same cyclical pattern during the last-but-one cycle: steeper falls in employment for the less well qualified during the recession, resulting in a positive  Source: Labour Force Survey  10  compositional effect, the opposite pattern in the upswing. The longer series simply splices on the pre-1994 estimates, based on the narrower sample, to the existing post-1994 series. One might ask how similar the two sets of estimates are in the overlapping post-1994 period, and the answer is that they’re close.

In the past two years, more than RM 100 million in fines were meted out for breaches under the purview of Bank Negara Malaysia and the Securities Commission Malaysia. A study led by the University of Malaya and the AICB in 2014 revealed that 43% of employees within the Malaysian conventional banking sector “had observed or had first-hand knowledge of wrongdoing in the workplace”. I believe that the survey findings which the FSPB will present later today will reveal that not enough has improved since then. It is crucial and timely that we take the ethical challenge seriously in Malaysia. We must ensure that the unflattering history that we have seen elsewhere does not repeat itself here. As stewards of the people’s money, the finance community must step up to the moral obligation we owe to our society. Making sense of ethics We have seen some shocking behaviour around the world of finance in recent years. The examples I have relayed are replete with “greed”, “dishonesty” and “recklessness”. We are led to consider – how can respectable and well-educated human beings behave in this way? In answering this question, I find the work of Philip Zimbardo on the psychology of evil to be very helpful. Ethics is a slippery subject. Concepts like professionalism and integrity are inherently subjective. As financiers, we often feel – out of our depth – when dealing with issues of human behaviour. We tend to be more comfortable with hard numbers and data.
A regime largely contained in the PRA’s rulebook is also easier to update when it seems that a rule is not working properly. The most obvious current example is the current implementation of the risk margin – no one here can be unaware of this issue, or if you are you’ve come to the wrong webinar! At a more granular level, while we will always take a very close interest in internal models given they set capital requirements, I have long wanted to simplify the bottom-up process for approving them, which entails assessing compliance with more than 300 tests and standards – all of them currently set out in legislation. That is just one example of our more general, longterm aspiration to condense and reduce the volume of material that defines the regime – the original Solvency II came in at nearly 1000 pages of legislation plus many hundreds more of 1/5  BIS central bankers' speeches  technical standards. Having a streamlined set of rules all in one place would substantially ease the burden of compliance on firms and on us, without reducing resilience. In short, now that we have left the EU we have no interest whatsoever in lowering levels of resilience or policyholder protection, but we can and should make changes to tailor regulation so it fits our market better and is more efficient and coherent. That process will take some time but it will work better if the detailed rules are placed into our rulebook.

I see no appetite to tear those up and start again from a blank sheet of paper, given the huge investment we have all made in their adoption. And broadly Solvency II has served the UK well – as evidenced by the resilience of your firms through the pandemic to date. But the regime is in my view somewhat over-specified, and it also does need tailoring in places – particularly on the Life side. It is common ground between us that the risk margin is not correctly calibrated, resulting in levels of offshore reinsurance of longevity risk in the provision of UK retirement income that will become increasingly uncomfortable over time if we take no action. The risk margin will come down from current levels, and become less volatile. But for us risk margin reform in isolation is not synonymous with discontent about the overall levels of capital in the system. We have not seen persuasive evidence that this is either too low or too high: I discussed the health of returns on equity briefly earlier; nor do I see evidence of current capital requirements meaning that demand for insurance goes unmet. Some big numbers are being bandied about in lobbying for an overall weakening of prudential standards. I have to say that I think these numbers – being based on multi-decade forecasts – are a little speculative.