samchain/econo-pairs-v1 huggingface dataset:
European Central Bank: Press conference – introductory statement Introductory statement by Mr Jean-Claude Trichet, President of the European Central Bank and Mr Lucas Papademos, Vice-President of the European Central Bank, Frankfurt am Main, 5 November 2009. *  *  *  Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference today. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by Commissioner Almunia. On the basis of its regular economic and monetary analyses, the Governing Council decided to leave the key ECB interest rates unchanged. The current rates remain appropriate. The incoming information and analyses that have become available since our meeting in early October have confirmed our expectations. While annual HICP inflation was -0.1% in October, according to Eurostat’s flash estimate, it is expected to turn positive again in the coming months and to remain at moderately positive rates over the policy-relevant horizon. At the same time, the latest information continues to signal an improvement in economic activity in the second half of this year. The Governing Council expects the euro area economy in 2010 to recover at a gradual pace, recognising that the outlook remains subject to high uncertainty. Medium to longer-term inflation expectations remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term.

In the early days many did not like the stress tests, but this has changed and today stress tests are an established part of the toolbox. While nobody could argue that FSAP assessments will identify all weaknesses, I have observed that in most of the assessments shortcomings and vulnerabilities show up quite clearly. While on this theme, I would also like to express my strong disagreement with the view expressed by some that “country circumstances are highly different so it is fully legitimate that they have very different legal and institutional underpinnings”. While I am not opposed to different approaches, as long as they do the job, my impression after having visited or analysed the majority of the IMF’s 184 member countries is that the circumstances are usually not all that different. My conclusion is that the necessary prerequisites for financial stability are much the same in all countries and this includes sound fiscal balances as well as macro economic structures and developments. Frankly, the talk about “special circumstances” could often be seen as an excuse for not being prepared to apply necessary but unpopular measures. In this, we Europeans are not better than anybody else. This brings me to another added value of the FSAP – the fact that the assessment is conducted by somebody outside your own country, such as the IMF or the World Bank.
Remuneration schemes, for example, should support sustainable business rather than myopic trading. There is one over-arching issue that I would like to highlight: the financial industry has to reconsider its role in the economy. Returning to a role of serving the real economy would be desirable. “Financial engineers” may prefer to create ever more “sophisticated” financial products. But finance has to come back to the basics. Among the basic tasks of the financial industry is the supply of credit to the real economy. This too is a profitable business, the profits from which are justified because they are mirrored by the social value of the intermediation function. Businesses and individuals depend in particular on the steady supply of credit by banks. The ECB and the national central banks of the euro area have taken comprehensive measures during the crisis to help commercial banks and other financial institutions. When the turbulence started in August 2007, the ECB was the first central bank to step in by frontloading liquidity. After the intensification of the crisis in the autumn of 2008, we tackled the paralysis of interbank transactions in the money market. In addition to a swift and substantial reduction of our policy rate, in line with our primary objective of maintaining price stability over the medium term, we decided to implement a set of non-standard measures, which we collectively refer to as “enhanced credit support”. I explained these measures in detail here in Munich in a speech last July. These measures have significantly helped to maintain banks’ liquidity.

Effects of EU accession The EU accession has led to even better market access for local producers and has given Estonia as well as the other new Member States a kind of "seal of quality" as an investment destination. Already the prospect of the EU accession enhanced these countries' credibility in the eyes of investors. But since the accession, the inflow of funds has been especially strong, as economic situation in the euro area was combined with higher global liquidity. Furthermore, the geography of investors has broadened. The prospect of adopting the euro in a relatively near future has lowered interest margins in several of the new Member States including Estonia and has given an additional boost to investments. The above factors, including convergence, as a background, one may speculate about the length of the current economic cycle, and where exactly we stand in that cycle at the moment. In short, there are some suggestions that we might have entered unusually long economic cycle and may be coming closer to the peak of the cycle. However, many of the current vulnerabilities of the Baltic economies are also tied in with these effects of the EU accession and rapid convergence. Understanding these risks requires careful analysis. Let me now turn to my second topic - challenges the strong economic and credit growth are offering.
It is such action, called for at the level of the international community three days ago in Washington by the G7, the IMFC and the G20, that the Europeans considered indispensable, particularly in the euro area last Sunday, with the adoption of a concerted European action plan. This plan has six dimensions: ensuring appropriate liquidity; facilitating the funding of banks through various means (guarantee, insurance or similar arrangements for new medium-term – up to five years – bank senior debt issuance); providing additional capital resources to financial institutions; recapitalisation of distressed banks; ensuring appropriate implementation of accounting rules; and enhancing cooperation among European countries. The very day after the meeting, namely yesterday, a large number of euro area countries displayed their implementation of the Eurogroup commitments at the level of the Heads of State and Government. I will not hide the fact that I am impressed by the degree of responsibility and decisiveness that was demonstrated last Sunday and this week in the euro area. I am impressed by the will of the countries that share the single currency not only to work together, but also very closely with the United Kingdom and all EU Member States. And I see that the new decisions taken in the United States are further reinforcing this very impressive implementation of the plan that has been approved by the international community. This is no time for complacency. Central banks will remain solid anchors of stability and confidence.

And the unemployment rate continues to come down, and now stands at 5.2 percent. But I cannot stress enough that we still have a long way to go to get back to our maximum employment goal. For example, there are still over five million fewer jobs today than before the pandemic, and the unemployment rate is still far above the levels reached early last year. A more nuanced picture appears when you look more closely at the employment story. In typical recessions, the challenge is that there are not enough jobs available for the number of people seeking work. In today’s job market, demand for labor is very high—we hear that from employers who are finding it hard to fill all their openings—and a lot of people are getting hired. At the same time, people are leaving their jobs in large numbers, either to look for new work or exit the labor force altogether. This cycle of hires and quits reflects the extraordinary nature of the pandemic, as workers and employers adapt to rapidly changing circumstances. These vacancies won’t be filled instantly—it takes time for employers to find the right workers. But as demand for workers and progress on hiring remains strong, I am confident that we will continue to see meaningful job gains and continued progress toward maximum employment. The last aspect of the outlook that I’ll speak about is inflation.
The second criterion states that companies that through their acts or omissions are responsible for unacceptable greenhouse gas emissions can be excluded. This conduct-based climate criterion has yet to result in any exclusions. One of the issues that has proved demanding is whether a basic norm for ethically acceptable emissions can be defined. Another issue has been whether it is unethical to emit considerably more than the industry average if the emissions are part of an emission trading system. The Ministry of Finance provided important clarification of the application of the climate criterion in this year’s annual white paper on the GPFG. The clarification provides a solid basis for moving forward on the criterion. Conclusion The impact of climate change is already substantial. In 2018, extreme weather events affected about 60 million people.5 At the same time, the number of fatalities after severe storms and flooding has decreased in recent years. This is partly due to better disaster risk management. Chart: Lower Manhattan, 30 October 2012 The picture shows a Lower Manhattan in darkness after Hurricane Sandy made landfall in October 2012. One building obviously had a backup power system when the power supply failed – the headquarters of the investment bank Goldman Sachs. Let us take this as a reminder that contingency solutions must also be put in place for the economy, and not just to deal with power cuts. Extreme weather, policy measures and technological innovations have financial consequences for households, businesses and investors.

And those four driving forces I mentioned at the start – the economic pressures on traditional business models, sharply-reduced technology barriers to entry, changing consumer preferences and pro-competition regulation – will only intensify the pace of change in the years 11  ahead. So what are the challenges? I would pick out two . First, customer acquisition is hard! Households and firms are loyal to their traditional suppliers: they will only switch if the offering is genuinely innovative, not just a good-looking piece of marketing. Similar considerations apply to central banking applications. Second, widespread adoption also requires attention to those two traditional characteristics of successful financial systems: scaleability and resilience. It is striking how much our conversations with leading firms have increasingly turned to these issues, even over the short period we have been running our Accelerator project. These topics are dear to central bankers’ hearts, and will play a central role in shaping the next stage in our engagement with FinTech. I look forward to our conversation today. 11  For a similar perspective, see also the most recent World Economic Forum report on FinTech: https://www.weforum.org/reports/beyond-fintech-a-pragmatic-assessment-of-disruptive-potential-in-financial-services.
An increase in the capital buffer of 2.5 per cent could then, under slightly simplifying assumptions, be translated into an increase in the banks’ lending rate of around 0.2 percentage points at most.18 Higher capital adequacy thus reduces the risk taken by shareholders and other financiers and should thus lead to a reduction in the banks’ yield requirements and borrowing costs. The increase in lending rates could therefore also be lower. For the family in Upplands Väsby, this means that interest expenditure increases by SEK 204 per month after tax. For the family in Luleå, with a slightly smaller mortgage, the increase is SEK 128 per month after tax. For the family in Stockholm with the larger mortgage, interest expenditure increase by SEK 461 per month after tax. Expressed as a percentage of disposable income, the countercyclical capital buffers entail higher loans costs for our households corresponding to 0.3–0.8 per cent of their disposable incomes. These relatively marginal effects on the wallet will probably not influence the incentives for debt in our standard households to any great degree. To influence households’ indebtedness the capital adequacy requirements made of the banks would need to be raised much more than is now being suggested. On the other hand, the increased capital adequacy requirement means that the banks’ resilience is strengthened, which is desirable in itself and an important purpose of the regulation. Elimination of tax relief would have greater effect If one wants to influence the incentives, there are other measures that could be much more effective.

The tale of the rivalry between Hong Kong and Shanghai is another hotly debated topic. But I have never thought of these two cities as deadly rivals. More than a year ago when Shanghai proposed the establishment of the “Free Trade Zone”, some predicted that, within 2 to 3 years, Shanghai would wrest from Hong Kong the position as Mainland’s offshore financial centre. They thought that further liberalisation of the Mainland’s capital account would enable Shanghai and other Mainland financial centres to take business away from Hong Kong. There is some truth in it. As the Mainland’s capital account liberalises, Shanghai will certainly carry out more cross-border and international financial activities and compete with Hong Kong. However, I would like to point out that the gradual liberalisation of the capital account is a two-way process, meaning a more efficient flow of funds into and out of the Mainland. It will then be much easier for Hong Kong to develop businesses targeting Mainland enterprises and residents, such as financing, debt issuance and wealth management. If we look at the size of the onshore renminbi financial market, with RMB110 trillion in total bank deposits and RMB160 trillion in total financial assets, we can imagine as the capital account continues to liberalise and create the necessary policy headroom for twoway fund flows, it would mean a huge market with enormous business opportunities for Hong Kong’s competitive banks and financial institutions. 8. So, I do not believe Shanghai and Hong Kong are rivals.
It is for this reason that – in our opinion – the responsibility for the countercyclical capital buffer for domestic lending must lie with the SNB. The National Bank must be able to decide when the buffer is activated and how high it should be. It goes without saying that it would do so within legally defined limits. The same should also apply to the activation of loan-to-value ratios and affordability criteria for mortgage loans. All of these instruments are closely linked to monetary policy. Within the context of the implementation of the TBTF regulations, the systemically important banks will have to be determined. This is because the more rigorous capital and liquidity requirements are only intended for these banks. And because emergency liquidity assistance is also reserved for systemically important banks, the decision as to the systemic importance of a bank has a direct impact on the SNB in its function as lender of last resort. These decision-making powers, too, must therefore be placed in the National Bank’s hands. This proposed solution should give the SNB the formal responsibilities it needs in order to fulfil its mandate in the area of financial stability in a preventative manner. In many countries, a transfer of banking supervision to the central bank is currently the subject of intensive discussion. In contrast, the National Bank is by no means calling into question the separation of banking supervision and central bank activities with the solution presented here. This separation has worked for Switzerland.

Notably, the number of STRs disclosed in 2013 has also increased by three times as compared to the previous years. This is mainly contributed by disclosures relating to large network of subjects suspected to be involved in tax/duty evasion, scam/fraud activities and corruption. Proactive disclosures made to the LEAs had also recorded positive feedbacks. Based on the feedback that we received from the LEAs, the STRs submitted have provided leads to their investigation and have resulted in the number of joint initiatives. More than 70% of the STRs disclosed to the enforcement agencies have resulted in the opening-up of Enquiry Papers or Investigation Papers. The remaining of the information disclosed will be is used as part of the database for future investigation. Understanding of money laundering and terrorist financing risks is the foundation to which our legal framework, preventive measures, financial intelligence and enforcement, and cooperation will be based on. Since 2012, the National Coordination Committee to Counter  2  BIS central bankers’ speeches  Money Laundering (NCC) has given the mandate to its 16 members to carry out a comprehensive assessment of our money laundering and terrorist financing risks. Background on National Risk Assessment (NRA) The National Risk Assessment, which is conducted under the ambit of the NCC, seeks to enhance the country’s collective understanding of the money laundering and terrorist financing risks facing the country and draws upon principles set out under the FATF’s International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation.
However, before I go into this further, I should like to provide some background to this by reminding you of a time when some risks were managed inadequately, which led to a serious systemic crisis, namely the Swedish banking crisis at the beginning of the 1990s. The banking crisis from a risk management perspective Taking a narrow view, one could say that the banking crisis was the result of the institutions and authorities lacking the capacity to assess and manage risks. The banks came from an environment that had been strictly-regulated for many decades and where their operations were so firmly controlled and restricted that a cursory awareness of risk management sufficed in day-to-day operations. The demand for credit was much greater than the supply, which meant that only those with the best credit ratings were allowed to borrow. When the regulations were gradually phased out during the 1980s, the banks and other financial institutions lacked the expert knowledge and organisation necessary to manage the new, increased risks, which were also more difficult to assess. As this curb no longer existed and the banks instead began to compete for market shares, they took on hasty and in many cases unhealthy risks. We were not the only country to experience this development. Over the past fifteen years, many countries around the world have suffered financial crises for similar reasons; as the result of financial deregulation, which has not been combined with the necessary improvements in risk management and supervision.

It is possible to view the development in itself as a risk in that it has created new, potent instruments and possibilities for speculation. If used incorrectly or carelessly, these instruments could destabilise the financial system or in other ways lead to inconvenience. It is therefore important that both the financial agents themselves and the authorities responsible in this field closely follow developments in both theoretical and practical work and are prepared to take action if they identify risks to stability. Of course, it is another matter in this context - as in others - that the costs of new methods of control must be weighed against the risks to be managed. Regardless of the fact that there are now outstanding issues to be resolved to improve risk management, my overall conclusion is positive. The development underway with regard to identifying, measuring and managing risks provides possibilities to improve stability in the banks and other parts of the financial sector. We still have some way to go, but the work is proceeding and is presently in an intensive phase in both the financial institutions and the authorities concerned. The Riksbank intends to continue to play an active role in this work. Thank you. 4  BIS Review 10/2004
For these reasons, the euro area Member States are obliged to treat their economic policies as a matter of common concern and, to this end, a number of instruments and procedures have been developed to facilitate the monitoring and, if necessary, coordination of those policies that are still basically conducted at the national level. At the centre of this monitoring and coordination process lies the EU’s Broad Economic Policy Guidelines, which set out general orientations for the conduct of economic policies in the individual Member States, covering areas such as public finances and tax policy as well as structural reform and market regulation. While these Guidelines are not binding in themselves, their elaboration and discussion in European institutions and fora in which each of the Member States is represented usually creates sufficient peer pressure to galvanise governments into appropriate policy action. While monitoring and peer pressure are very effective tools for assuring that the various economic policies of the Member States move in the right direction, specifically in the area of budgetary policy, 3  BIS Review 4/2000  the EMU framework not only specifies commonly agreed targets, but also sets a binding upper limit for Member States’ budget deficits of 3% of the gross domestic product (GDP). The failure of any Member State to respect this upper limit automatically triggers an excessive deficit procedure under which, if the deficit is not corrected in time, sanctions can be imposed on the Member State concerned.

Rather, by adopting a neutral stance, the pace with which the euro acquires its international role - whether as a trade currency, an investment currency or as a reserve currency - will be left primarily to market forces. However, if the Eurosystem is successful in maintaining price stability, confidence in the single currency will automatically foster the euro’s international role. The exchange rate of the euro is to be regarded, primarily, as the outcome of current and expected monetary and fiscal policies as well as of cyclical and other economic developments. At the moment, the European economy is clearly recovering and the outlook is favourable, with economic growth accelerating in the direction of 3%. As a result, the euro has a strong potential for appreciation. This is also firmly based on internal price stability and a sound current account position. *** Before I draw to a close, allow me finally to return to another of those peculiarities of EMU that can sometimes confound the external observer. If any of you have travelled to a euro area country over the past 12 months, you may have been misled into thinking that what you saw change hands were not euro, but rather French francs, Deutsche Mark or Italian lira. In that case, you would be only partially correct. While national banknotes and coins remain in circulation for the time being, they are no longer, despite appearances, actual currencies in their own right.