samchain/econo-pairs-v1 huggingface dataset:
The challenge is to secure also in these cases that the state does not end up with the losses that the shareholders and creditors should bear. The first principle is to ensure that the bank’s owners will bear the first loss in a crisis. This does not need to be very complicated in practical terms. In principle it is a case of the supervisory authority having the possibility to quickly and efficiently write down the capital against losses and ensure that the owners’ control over the bank is reduced to a corresponding degree. Such a write-down in capital must, of course, be final in order to have the desired effect. It is also important to ensure that the owners will not find the time to violate the decision by transferring assets outside of the bank. The appointment of a temporary administrator with a mandate to sign off any large payment or asset transfer may thus be a useful tool. The next step, to ensure that the state does not have to bear the creditors’ losses, is more difficult, however. The reason for this is that the banks’ funding consists to a large degree of borrowing with a short duration, which in turbulent times may tend to disappear. BIS Review 62/2008  7  There are sophisticated regimes under development… It is possible to resort to more or less sophisticated solutions to deal with the problem.

The government has a direct interest in an efficient insolvency and resolution framework So the stakes are still high for the government in a banking crisis. While owners have little to lose when capital is low, and many creditors are protected by the deposit insurance, the state – and the whole economy in the end - may at worse suffer enormous losses. Therefore, unlike the situation in ordinary companies, the lack of an efficient insolvency regime will not primarily be a creditor problem only, but a problem which will fall right into the government’s lap. And if the insolvency framework is not efficient and cost effective, it may be rational for the government to intervene beyond the ordinary regulatory framework. If there is no other way to deal with the problem, it may even be rational to contribute capital directly. This may be the case even if such an investment cannot be justified on the basis of a corporate capital investment appraisal. The alternative of not intervening may simply be very much more expensive. Now, if this intervention by the government makes the owners and creditors better off than they would have been otherwise, the rules of the game change completely. If owners and creditors can speculate on a bail-out, market discipline will be eroded. Clearly, this needs to be avoided. And the conclusion is that, if anything, it is even more necessary to have effective and efficient insolvency and resolution frameworks for banks than for companies in general.
In difficult times, banks will be allowed to fall significantly below the target levels defined for good times. Allowing banks to draw down capital without violating any minimum requirements should help mitigate the potentially harmful effects of de-leveraging. 8 In Switzerland, compatible with these features, FINMA issued decrees imposing higher capital requirements on the two big banks at the end of last year. According to these decrees, the big banks will have to meet risk-weighted capital requirements that are double what they were before the crisis. As a complement, FINMA has introduced a leverage ratio. In good times, the capital base has to account for at least 5 per cent of the total adjusted assets. 9 To prevent a procyclical impact, these targets will apply as of 2013 at the earliest, giving banks enough time to recover from the crisis. Furthermore, the big banks will be allowed to temporarily fall short of these targets in bad times. The Swiss experience suggests that the largest banks can adjust rapidly, even to ambitious new capital requirements, without causing collateral damage to the overall economy. To reduce uncertainty and to facilitate the planning process at banks, it is crucial that the ultimate target levels are clearly communicated, and that a sufficiently long phase-in period is provided for. This will enable banks to adjust to the new rules in an orderly fashion.

To this end, the SNB is investing very substantial resources to contributing actively to international regulatory reform projects, especially within the FSB and the Basel Committee. Indeed, a main raison d’être of these international bodies is to ensure a level playing field. We must accept, however, that not all countries are confronted with the same urgency for reform as we are in Switzerland. As I have already explained to you this evening, given the size and importance of our banking sector, our country is particularly vulnerable to a financial shock. Agreeing on an international common denominator of regulatory reform may turn out to be insufficient for the Swiss case. Ultimately, it will be a political decision to choose the level of risk Switzerland is willing to accept, both for the financial and for the real sector. Given the particular situation in Switzerland, higher-than-average regulatory standards are warranted. Conclusion The worst of the crisis is behind us, and intensive efforts are underway to increase the resilience of the financial system. Banks are again generating profits. In some cases, these profits are very substantial and are clearly linked to the public support measures, many of which are still in place. As the situation improves, complacency can easily become the rule of the game. We will forget the severity of the crisis and fall prey to lobbying by a powerful and recovering financial industry. Ladies and gentlemen, we must not let this happen. The stakes are simply too high.
Debts on the banks’ balance sheets, which is what private bank money is, are usually considered less safe as they could lose value if the bank were to enter bankruptcy. However, deposits in bank accounts are protected by a government guarantee, known as the deposit guarantee, up to a certain amount. 14 As the banking sector fulfils a central function in society for credits and payments and as it also receives government insurances such as the deposit guarantee, there are many regulations aimed at making the banking system secure. With the help of these regulations and the deposit guarantee, the public authorities have attempted to ensure that, for the general public, it should be more or less as secure to use private money as central bank money. This has been done because society gains when there is confidence in the payment system. The special characteristics of the market for payment infrastructure suggest an active role for central government As payments and a well-functioning monetary system form the basis on which economic activity rests, they are also fundamental to growth and welfare. In this regard, the payment system can be seen as a part of the basic infrastructure in a country. And, just as with other parts of it, such as military defence or our national parks, for example, the payment system has the characteristics of a public good. For the payment system, it is confidence in the currency that constitutes the public good that other aspects of the payment system then build upon.

Fortunately, the financial guillotine is not preordained, for Benoît did not spend his days in power as did Louis XV. Where the king grew idle, Benoît remained frenetic (189 public speeches during his eight years). Where the king was conservative, Benoît was radical. Where the king became nostalgic, Benoît always looked forward. If central banks are to rise to their challenges and serve our citizens, we will need to build on Benoît’s legacy. I. Improving market functioning Let me start with market functioning. Before the crisis, financial alchemy appeared to have sliced, diced and distributed risk to those who wanted it most. The revolutions in securitised and derivative finance were cheered on by policymakers who saw more markets as the solution to any market failures and who believed the lie that markets always clear. But of course markets always clear only in textbooks. In reality, people are irrational, economies are imperfect, and nature itself is unknowable. The pre-crisis system had merely spread risk, contingently and opaquely, in ways that often increased it. 2  All speeches are available online at www.bankofengland.co.uk/news/speeches  2  Once the crisis began, risk quickly concentrated on the balance sheets of intermediaries that were themselves capital constrained. And with the fates of borrowers and lenders tied together via hyper-globalised banks and markets, problems at the core spread violently to the periphery. The post-crisis response included major reforms to simplify markets and make them more robust.
Unless all participants provide appropriate contribution, the global economic recovery will not be safe and sustained. It is obvious that the emerging economies will be the major driving force behind the global  BIS Review 101/2010  1  growth but it remains crucial that each country with its capacity should make its contribution to revive global demand. Currently, there are intense debates within the global community, particularly inside the G20 and FSB, to restructure the financial system and put in place a radical and quite ambitious financial sector reform agenda. It is imperative to repair and rebuild a well functioning financial system that can support growth while maintaining financial stability. These reforms are wide ranging, including implementing new capital and liquidity standards, promoting principles for effective supervision, looking at ways to constrain moral hazard, developing cross-border resolution mechanisms, agreeing to reforms on OTC derivative markets to reduce systemic risk and improve market efficiency and integrity, and agreeing on a single set of high quality, global accounting standards. We very much welcome the work carried by the Basel Committee. Strengthening capital and improving liquidity standards should be seen as the main tools to reach a more resilient banking sector. Turkey’s experience shows that a sound capital base, appropriate liquidity and well supervised leverage are the key elements that assure a healthy banking system. The difficulties faced by advanced economies today may be unprecedented in scale, but not unique in nature.

As a result, some people began to orient more towards the MKD. Traditionally our country, like most former Yugoslavian countries are highly Euro-rized, which means people save and use credits in Euros, with a 65% Euro to 35% MKD ratio. During the crisis and continuing today, the ratio of households and their propensity to save in MKD has elevated to 50%. BIS central bankers’ speeches  1  You have been in your post for 2 years with 5 more remaining. How do you view the future development of the economy based on the government’s FDI promotional campaigns that are taking place currently across the globe? We have witnessed in the past 4–5 years several very important foreign direct investments. Some of them are so large that they already equate to roughly 17% of our exports, with the majority of the companies focused on component manufacturing for the automotive industry. There are also several large firms that are in the pipeline which have shortlisted Macedonia for their capacities. Importantly, these incoming large-scale investments are also bringing diversification to our exports, which are traditionally based in textiles, agriculture and metals. It is worth noting that several of these firms not only made the decision to enter Macedonia but are currently in expansion mode based off their operational successes here, to the degree that I predict in 3 years the current and pending FDIs can equate to 30% of our exports.
): Capital Failure: Rebuilding Trust in Financial Services. PCBS (2013), ‘Parliamentary Commission on Banking Standards – Changing Banking for Good’, available at: http://www.parliament.uk/bankingstandards. Putnam, R (1995), ‘Bowling Alone: America’s Declining Social Capital’, Journal of Democracy. Putnam, R (2002), ‘Democracies in Flux: The Evolution of Social Capital in Contemporary Society’, New York: Oxford University Press. Sapienza, P and Zingales, L (2011), ‘Trust and Finance’, NBER Reporter 2011 Number 2: Research Summary, available at: http://www.nber.org/reporter/2011number2/ paola&luigi.html. Shannon, C (1948), ‘A Mathematical Theory of Communication’, Bell System Technical Journal, 27 (3) 379–423. Stiglitz, J (2015), ‘The Great Divide: Unequal societies and what we can do about them’, New York: Norton & Company. Zingales, L (2015), ‘Does Finance Benefit Society?’, NBER and CEPR Working Papers, available at: http://faculty.chicagobooth.edu/luigi.zingales/papers/research/finance.pdf. 22  BIS central bankers’ speeches

These reforms are aimed at providing a more conducive environment for innovation and enterprise while promoting high standards of risk management, so as to help make Singapore a premier financial centre in Asia. But these changes are just the beginning. MAS must continue to review and update its regulatory and supervisory framework, to appropriately address the risks and exploit the opportunities presented by the changing financial landscape. Let me outline three major challenges, and their implications for our regulatory and supervisory framework. Future challenges The first challenge is that institutions will be larger and more complex. Singapore banks are merging, in search of greater scale and efficiency. They are following a worldwide trend. Bigger banks are better-placed to attract high-calibre talent, invest in cutting-edge technology, and diversify their risks. But they will also require tighter management and closer supervision, and the systemic consequences of difficulties in a large bank are more severe. Secondly, the soundness of Singapore’s financial system will increasingly depend on factors outside MAS’ control. As our institutions expand their presence in the region, their financial strength will be tested by their exposure to regional markets. At the same time, we are opening our markets further to foreign players. This will also increase the risk of contagion as the soundness of foreign institutions is dependent on their home market and global operations. 4  BIS Review 67/2001  Thirdly, we have to cope with new business models and financial products that are emerging faster than ever.
Ladies and Gentlemen, The final part of my talk concerns the developmental role of central banks. When it comes to financial stability, this is an often overlooked and underappreciated role. Looking back at history however, one finds a number of financial crises were associated with flawed or ill-timed financial liberalization. Thus the path set forward for the financial sector by central banks may lead to destruction as well as prosperity. The Thai financial crisis in 1997 was a case in point. Although it was an inconsistent macroeconomic policy mix that precipitated the crisis, it was the decision back in the 1970s to allow structurally risky finance companies to operate alongside with commercial banks and the creation of the Bangkok International Banking Facilities in the hope to transform Bangkok into Asia fourth financial center after Tokyo, Hong Kong and Singapore that made the financial sector vulnerable with overloaded risks. Thus, when we started anew with our Financial Sector Master Plan to guide future developments of the Thai financial sector in 2004, the two structural weaknesses were the first two to be eliminated. Fast forward to today, all eyes are now on ASEAN financial integration under the AEC Blueprint to create a semi-integrated financial market by 2020. The ASEAN financial integration framework comprises four areas, namely financial services, payments and settlements systems, capital account, and capital markets. It is noted that the target date is beyond 2015 for the AEC.

Ardian Fullani: The current performance and development prospects of the Albanian economy Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the Bank of Albania’s forum with representatives of main businesses operating in Albania, Tirana, 23 November 2009. *  *  *  Dear Ladies and Gentlemen, It is my pleasure to be among you today, to share with you our views on the current performance and development prospects of the Albanian economy. As the most dynamic part of the Albanian economy, your contribution has been tangible in the country’s economic development during transition. Your incentive, your willingness and devotion have brought about tangible results in the country’s development. In a single figure, the Albanian economy performance may be summarized in the growth of above 65 percent of gross domestic product and well-being per citizen during these years of transition. Our development prospect remains as much positive. The country’s macroeconomic stability, the continuation and deepening of structural reforms as well as the geopolitical reality of approximation to developed economies of the European Union, would help in a fuller release and remuneration of your potential and energies. Today’s forum aims to highlight the economic development of the country and initiate a broad public discussion on alternatives of the future economic growth models. Now, let me start by making a brief statement of the latest developments of the Albanian economy, and further dwell upon our viewpoints on the country’s economic development in the future.
China continues to be a source of risk, since it still has to resolve  4  imbalances in several of its markets. Added to this is the evolution of the oil price. If it increases or remains flat for longer than expected, it could have stronger effects on global growth and inflation. The bias and probability of external risk scenarios reinforces the need to maintain solid macroeconomic fundamentals, particularly for a small and open economy such as Chile’s. Actually, the recent events have had greater impacts in countries with greater indebtedness, fiscal deficit and / or current account deficits. At home, we estimate that the risks for activity are biased upwards. The data of the last few months have been higher than expected and we cannot rule out a scenario in which this greater dynamism persists, especially if investment improves above projections. This risk is partly moderated by the possibility that the labor market, and in particular private salaried employment, could take longer than expected to respond to the higher growth rates. On inflation, we estimate that risk balances are unbiased. The downward risks for its convergence to 3% have moderated. However, we forecast that CPIEFE inflation will remain below 2% for a while longer, considering that the determinants of inflation’s convergence to 3% in the medium term have not change significantly from March.

This is particularly true for sovereign credits where there is BIS Review 50/2000  2  widespread support for finding an alternative to the current OECD/non-OECD distinction. In other words, OECD membership would no longer be relied on for setting regulatory capital for sovereign or bank claims. Notwithstanding this support, many commentators have offered modifications to the Committee’s proposed standardized framework, which several observers have suggested does not go far enough toward risk differentiation. The Committee has taken this concern to heart, and is actively evaluating whether it would be feasible to incorporate additional risk weights into the standardized approach, and, if so, how this should be done. As we work toward greater risk differentiation among claims that are rated, we will continue to give extensive thought to the treatment of unrated claims, given that the penetration of external ratings remains low in most countries. It is difficult to avoid creating incentives to remain unrated while at the same time retaining continuity with the existing Accord’s treatment for these credits. Further work would be needed to develop a standard for unrated claims that would be more risk-reflective but, unfortunately, few commentators offered significant suggestions in this regard. Procyclicality The Committee has considered what some observers have noted is the potential for introducing greater cyclicality in a more risk-sensitive capital framework. That is, the capital requirements for loans to troubled borrowers will tend to increase at just the point when such trouble is becoming apparent.
But more is needed, especially regarding a more solid institutional framework to repair balance sheets in a way that limits systemic risk and avoids damage to the real economy. The Japanese experience has shown the risks created when banks’ balance sheet problems are not recognised and addressed. Weakly capitalised banks initially extended loans to insolvent firms to limit the recognition of losses in the short run. Indications of evergreening became prominent as the share of loans to the construction sector continued rising for years after the bubble had burst, despite the fact that this sector was adjusting and needed to downsize. Write-offs on non-performing loans and necessary recapitalisations were delayed and the financial sector remained highly vulnerable to shocks. But delayed recognition was also facilitated by valuation standards that did not mark non-performing loans to market, unlike much of the losses from securitised products in the recent crises. In addition, the refusal of banks to foreclose on borrowers might have reflected a different resolution culture and code of civility in Japan; namely, one that eschews the large turnover of jobs and the frequent discharging of workers and avoids inducing a humiliating “loss of face” for delinquent borrowers.8 For the real economy, the evergreening of loans implied a weakening of growth prospects.9 Potentially more efficient enterprises were denied financing, thereby hampering the natural entry and exit of firms to the market place. Indeed, with the recession in Japan at the  7  See ECB, Financial Stability Review, May 2013.

While the ratio of financial sector liabilities to GDP has broadly stabilised, euro area large and complex banking groups have steadily increased the median core Tier 1 ratio from 8.3% in 2009 to above 11% in 2013.7 To strengthen their capital position banks have issued equity, converted hybrids, received capital injections and raised the levels of retained earnings. The stronger capital positions also mean that the relative share of debt in financing is reduced and substituted by more equity, which should provide a better buffer against economic shocks. After all, debt is a relatively inflexible form of financing as it requires repayments on time and in full. But the stronger capital positions have also meant that banks have been shedding assets, a process which depresses credit growth and puts a drag on the economy. In addition, as households and non-financial corporations also reduce their indebtedness, they are demanding less financing from banks. Taken together, we can expect that bloated balance sheets will contract further. It is important that this deleveraging process occurs in an orderly manner by balancing the adjustment of assets and liabilities. Most of all, unnecessary fire sales generating detrimental falls in asset prices and credit rationing for productive investments need to be avoided. Throughout the crisis, the ECB has demonstrated its ability to actively mitigate these effects by ensuring abundant funding to the banking sector through its liquidity operations.