samchain/econo-pairs-v1 huggingface dataset:
While other measures, including the new PEPP, must exercise great flexibility in targeting the more temporary, and even unpredictable, consequences of the crisis itself, it is only by using and combining them all that we can properly cover the entire court. Our “baseline game” instruments Prior to the crisis, a very accommodative monetary policy stance was already needed and to ensure its implementation we had what I often called a quartet of – from hereon in – “quasiconventional” instruments. First, in September 2019, we amended our use of negative rates with a tiering system to mitigate their adverse impacts on bank intermediation. I see no reason to change these rates now. Meanwhile, asset purchases, in operation since mid-2014, reached a total of EUR 2,800 billion in April 2020 and will continue at a monthly average pace of more than EUR 30 billion. Let’s be clear: the PSPP for sovereign bonds is and continues to be, following the Karlsruhe judgement, a powerful tool in terms of volume for maintaining an accommodative monetary policy and containing the medium and long-term risk-free rate. Consequently, the principle of proportionality is ensured by its very predictability and strict compliance with country capital allocation keys and issuer limits. We reinforced the supply of liquidity through Targeted Longer-Term Refinancing Operations (TLTROs), and expanded the range of eligible collateral.

We can also add forward guidance to this arsenal, on PSPP (including the reinvestment horizon) and policy interest rates, which we could strengthen further through a condition of a greater degree of persistence in inflation around our target. This forward guidance provides considerable leeway to adapt to economic changes thanks to its self-stabilising endogenous component. However, it would lose its effectiveness if it appeared to be too volatile or too arbitrary and for this reason cannot be considered a flexible adjustment instrument. Our new instruments to cope with the crisis This is why the ECB introduced new instruments in addition to those already available, which are more flexible in dealing with an unprecedented and multifaceted crisis. The supply of liquidity to banks has been reinforced in terms of quantity and, above all, through an incentivising price structure. Interest rates on TLTROIII operations were cut dramatically on 12 March and again on 30 April and are now, at –1%, 50 basis points below the deposit facility rate for any bank that maintains the outstanding amount of its lending to the economy. This is a radical – and yet largely unheralded – innovation that represents several billion euro in support to the European banking sector each year. Above all, we have created the EUR 750 billion Pandemic Emergency Purchase Programme (PEPP). While it was its size that impressed, its greatest innovation lies 4/5  BIS central bankers' speeches  in its exceptional flexibility in terms of time, volume and allocation between countries and asset classes.
First and foremost, euro area countries should regain their ability to save money for a rainy day by adhering to their fiscal commitments in the new framework of the Fiscal Compact. They have already agreed to limited mutual insurance through the EFSF/ESM. A centralised fiscal capacity could be considered too, provided it is not the basis for permanent transfers but is used to promote market integration and better resilience to economic shocks. For instance, a euro area unemployment insurance scheme could be set up, which would support much-needed cross-country labour mobility. Indeed, an integrated economic policy framework is needed to boost economic integration and ensure that unsustainable policies do not jeopardise the stability of EMU. The framework should provide for a better enforcement of commitments to structural reforms, i.e. measures to increase a country’s competitiveness and its capacity to adjust to economic shocks. Structural reforms make EMU more robust. In addition, an integrated financial market framework is required in order to break the bank-sovereign nexus that threatens financial integration. This is another important element to make market-based risk sharing work effectively. While many euro area banks have benefited from the single currency, and significantly expanded their European business activities, they are still supervised at national level. Financial fragmentation, as I described above, has led to the perception that banks’ liabilities, even though they are nominally the same, are in fact different from one euro area country to another. This is not acceptable: the currency union has thus to be complemented by a banking union.

The mean squared gap for the unemployment forecast is defined as T  (ut,t u*)2 /(T 1), where ut+,t signifies the forecast for unemployment and u* signifies equilibrium 0  unemployment rate. BIS Review 158/2010  5  better stabilisation of the variable in question (see Svensson 2010a, b for further discussion). The mean squared gap shows that the lower repo rate path entails better-balanced monetary policy, as both inflation and unemployment are stabilised better. 5 The fact that a majority of the Executive Board chooses to raise the repo rate despite the forecast for inflation undershooting the target and the forecast for unemployment being high, indicates that monetary policy is addressing something other than inflation and resource utilisation. The fact that high GDP growth is used as an argument in favour of raising the repo rate could be interpreted to mean that monetary policy in practice aims to slow down growth. Figure 3 shows GDP developments in Sweden, the eurozone, the United Kingdom and the United States. Compared with the other economies, GDP fell most in Sweden – a total of almost 8 per cent. It has now recovered to a level that is about the same as the eurozone, higher than in the United Kingdom but far below that in the United States. One could claim that the other economies have substantial structural problems, including problems in the financial sector.
Let’s make the most of these strengths in the context of Brexit: without resting on our laurels – the supervisor will always remain vigilant and all of our institutions are aware of the scale of the challenges – but rather by drawing on our collective intelligence. Page 5 of 5  i  Source: Financial disclosures from BNPP, SG, GCA, GBPCE, GCM and LBP. According to the EBA, the ROE of French banks (a broad sample) is 6.60 %. ii ECB, Mario Draghi’s introductory statement to the press conference on 10 April 2019. iii Study by Thomson Reuters.

6  BIS Review 150/2007  more they have recognised their obligation to be accountable to the public. Typically, more accountability has meant more transparency. An independent central bank is therefore likely to be transparent about how it pursues its mandate. The same may turn out to be true for SWFs. There are a number of difficult questions that need to be addressed before a set of SWF guidelines can become operational. What exactly do we mean by a non-political investment mandate? How do we gauge to what extent there might or might not be political interference in the pursuit of such a mandate? Will there be a need for a referee to determine whether a SWF complies with a particular set of guidelines? What happens if a SWF initially signs up to a code of conduct but subsequently fails to comply with its guidelines? As you can see, much work remains to be done and the timeframe is tight. Ideally, a first set of guidelines will be agreed upon jointly between the G7 countries and the most prominent SWFs by the 2008 spring meetings of the IMF and the World Bank. If well designed and agreed upon, such a set of guidelines could serve as a basis for determining which SWFs will continue to enjoy full market access in mature economies. 5. Conclusion  Before I conclude, let me say a few words about the capital participation of the GIC in UBS that was recently announced.
We have seen some idiosyncratic instances of such a dynamic in the UK – with funds having to gate investors as a result. These have not given rise to financial stability risks. But if we saw this happen on a wider front, if for example investors lost confidence in a less liquid asset class, there is a risk of redemption pressures that could not easily be met and consequently contagion and firesales that could damage the financial system. These are international markets so we need to work internationally to assess these risks and any structural remedies that might be warranted. Risks to financial stability don’t all arise in the financial system, however. There is a borrower for every lender. Over-indebtedness in the real economy can amplify economic downturns. That in turn could also lead to larger losses for lenders than the initial downturn alone. The borrower or the lender? If there is risk in a bank lending to a borrower, should an FPC policy focus on the lender or the borrower? Our approach has been that the policy should address the vulnerability as directly as possible. In principle it is most efficient and effective to act on the origin of the vulnerability. Lenders and borrowers do not respond to credit cycle shocks in the same way. If the risk originates in the lenders’ balance sheet, if lenders are not able to absorb losses in a severe but plausible stress, action should focus on reinforcing the resilience of the lenders to losses.

As a consequence, the outcomes for inflation and output are worse. Most notably, the policy instruments are initially moved more sharply in opposing directions than is the case with a single policy maker. As he does not care about the capital gap directly, the monetary policy maker raises the policy rate more aggressively in order to contain inflation. And the macroprudential policy maker, who cares primarily about the capital gap, moves to maintain bank capital by cutting the bank levy more aggressively. This therefore has something of a “push-  14  Note that if the macro-prudential policy maker only cared about the capital gap, he would ensure that it was zero at all times. 22  BIS Review 111/2010  me, pull-you” feel to it, though in subsequent periods the policy instruments then move back more quickly towards their steady-state values than under a single policy maker. Although the simulations here do not result in an explosive contest between the two policy makers, this issue clearly warrants further investigation. Delegation of the monetary and macro-prudential instruments to different decision makers with distinct objectives is certainly appealing on the grounds of clarity and accountability, especially since the knowledge and expertise necessary to set interest rates are not necessarily the same as that required for the deployment of the macro-prudential toolkit. But if the instruments are assigned to different decision makers, the likelihood of a “pull-me, push-you” outcome in some circumstances may also be correspondingly greater.
Why shouldn’t I wait until the sky is clear?” Based on past behavior of fiscal policy makers, businesses understandably regard the debt ceiling agreement and the political outcome of negotiations between Congress and the president with the suspicion akin to how the British humorist P.G. Wodehouse regarded his aunts: “It is no use telling me there are bad aunts and good aunts,” he wrote. “At the core they are all alike. Sooner or later, out pops the cloven hoof.”2 It will be devilishly difficult for businesses to commit to adding significantly to their head count or to meaningful capital expansion in the United States until clarity is achieved on the particulars of how Congress will bend the curve of deficit and debt expansion and the “cloven hooves” are revealed. No amount of monetary accommodation can substitute for that needed clarity. In fact, it can only make it worse if business comes to suspect that the central bank is laying the groundwork for eventually inflating our way out of our fiscal predicament rather than staying above the political fray – thus creating another tranche of uncertainty. In the interest of full disclosure, I should add that I was also concerned that just by tweaking the language the way the committee did, our action might be interpreted as encouraging the view that there is an FOMC so-called “Bernanke put” that would be too easily activated in response to a reversal in the financial markets.

Three of the four major banks have carried out new issues since last autumn and Swedbank will soon conduct an additional new issue – all on the private market and without government guarantees. In many countries, where the banking systems have been affected by the current crisis to a greater extent, this has been impossible. In addition, all four major banks have strengthened their capital by reducing or cancelling dividends to shareholders for the previous year. It should be pointed out, however, that the danger has not yet passed. If the situation deteriorates more than expected, credit ratings may come under pressure and the banks may experience funding difficulties once again. The Riksbank's measures safeguard financial stability Since the financial crisis broke out, the Riksbank has entered into swap agreements with two of the Baltic states. We have made it possible for the Estonian central bank to swap Estonian kronor for Swedish kronor should the need arise, and for the Latvian central bank to borrow euros direct from the Riksbank. The aim of these agreements is to make it easier for the central banks in Estonia and Latvia to safeguard financial stability in the respective countries. Entering into these swap agreements also serves to safeguard financial stability in Sweden. In order to secure the supply of liquidity, the Riksbank has also lent kronor and dollars to the Swedish banks when they have not been able to acquire funding on the market.
Decisions on the pace of asset purchase and forward guidance must be based on what is most appropriate to achieve our dual mandate objectives of maximum sustainable employment in a context of price stability. Economic outlook Let’s dig a bit deeper into the tug-of-war between improving fundamentals and the drag exerted by fiscal policy and tighter financial conditions. Starting with the improving underlying fundamentals, one important aspect is the household sector and its balance sheet. In a number of dimensions, households have made significant progress in repairing their finances. Prior to the recession, households took on an excessive amount of debt – much in the form of residential mortgages. The process of deleveraging and reducing this debt overhang is now well advanced. For example, household debt relative to disposable income has declined substantially since it peaked in the third quarter of 2007,  BIS central bankers’ speeches  1  bringing it back to levels last seen in early 2003. Delinquency rates on mortgages, auto loans and credit cards continue to decline. In addition, household wealth relative to disposable income has recovered from the steep decline following the crisis and is now near its 20-year average. Reflecting this improvement, credit standards are beginning to ease, which should support consumer spending on durable goods. Another sector in which the fundamentals have improved is the housing sector. Most importantly, the excess supply of housing created during the boom appears to have been largely worked off.

First, we want to be assured that there are no glitches operationally with somewhat higher transaction volumes than in previous tests, that we can accept cash from a larger array of counterparties, post collateral in the tri-party repo system and reverse the transactions each day smoothly. Second, while the limited size of the operations during this exercise will prevent the operations from having a significant impact on market rates, we will observe how the facility impacts individual  6  During the testing phase, a ceiling will be placed on the maximum amount that can be invested per counterparty. BIS central bankers’ speeches  7  investor demand relative to other market rates. Additionally, we can see how sensitive that demand is to changes in market conditions such as quarter-end that increase the demand for safe assets. These observations will give us some insight into how the facility could affect the entire constellation of money market rates. Only by testing and learning will we be able to assess how best to use the facility. In conclusion, let me turn back to the economic outlook and the role of monetary policy. I do believe that we are making progress towards our objectives of maximum sustainable employment in the context of price stability. The economic fundamentals are improving and I expect that the healing process will continue in the coming months and years. At the same time, it is important to recognize that the financial crisis generated significant headwinds that are only slowly abating.
Today, Europe consists of 27 countries representing a market of around 500 million consumers: the largest domestic market in the world in terms of purchasing power. The acceleration of the integration of European financial markets has radically transformed the international financial environment. All activities are concerned. Regarding bond markets, European debt instruments issued in euro on international markets are now quite comparable to those denominated in dollars. If we take into consideration bonds issued on external markets by “non euro area resident” companies, foreign governments and multilateral institutions, we can observe that in 2006, total issues of international bonds and notes in euro represented an outstanding of an equivalent of 1,200 billion (USD) against 1,000 billion (USD) in dollars. BIS Review 51/2007  1  This fact shows that the euro market has grown considerably since the beginning of the 2000s and today constitutes for corporates and governments a vast, safe and liquid source of funds, wider than that of the US dollar. While the US dollar remains dominant as an international reserve currency (65% of international official reserves against 24% for the euro), bond markets have become bipolar with the euro playing a leading role. European equity markets have constantly developed since the 80s although they remain smaller than those of the United States. In terms of ratios of market capitalisation to the GDP of the countries, euro area equity markets represented 55 % in 2005, while those of the United States amounted to 105 % and Japan to 85 %.

Paris has taken a major position in the recent developments of the euro-denominated bond market: The French government bond market is today the most liquid in the world after the US treasury market, with an outstanding of € 900 billion, and has a strong innovative strategy: let’s mention the launch of a range of index-linked products to European and French inflation, or the introduction of a 50-year OAT bond, which represents the new frontier of the euro fixed-income market. The French corporate bond market is the largest in Europe, with an outstanding of € bn, compared to € bn in London and € bn in Frankfurt. Most recently, we have seen strong growth of structured and synthetic products. The new legislation concerning the French covered bond market boosts this market compartment, which represents today an outstanding of € On the equity side, Euronext has been ahead of London and Frankfurt in terms of transactions since 2006. The new alliance between NYSE and Euronext creates the world’s largest exchange in terms of market capitalisation € trillion), the world’s largest liquidity pool, with a daily average trading volume of € billion, & the world’s premier listings venue, with the presence of 80 of the top 100 companies listed world-wide, etc.
BIS Review 7/2003  1  To respond to these challenges, the Committee has sought to develop a more flexible and forwardlooking capital adequacy framework - one that better reflects the risks facing banks and encourages them to make ongoing improvements in their risk assessment capabilities. The Committee believes that all banks should be subject to a capital adequacy framework comprising minimum capital requirements, supervisory review, and market discipline. As you know, these are the three "pillars" of the New Accord. Each is an essential element for ensuring the safety and soundness of banks worldwide. In contrast, the current Accord only has one pillar - minimum capital requirements. As we all agree, risk management is a dynamic process and one that will continue to evolve. Consequently, the New Accord is designed to accommodate future changes in the way banks measure and manage their risks by giving banks a range of options for calculating capital charges and incentives for using best practices. Banks will be expected to apply the option most appropriate to the complexity of their own operations and risk management capabilities. For credit risk, the range of options begins with the standardized approach and extends to the internal ratings based (IRB) approach. The standardized approach, as you know, is structurally similar to the 1988 Accord, where banks are required to differentiate their exposures into broad categories, such as loans they have made to corporate and sovereign borrowers or banks.

The region is now well ahead in the areas of regional surveillance and supervisory arrangement, and in crisis prevention, management and resolution. Regional support mechanisms have also been established. There are also regional institutional arrangements in place for the active sharing of information on the emerging risks to regional stability and on building domestic capacities and to coordinate regional responses in the event of eminent risks to the region. These efforts will be further strengthened into the future. Islamic finance as a growth area in Asia The rapid integration of Islamic finance into the international financial system is a growing feature in the financial landscape of Asia. Developments in several emerging economies in Asia have seen the rapid expansion of Islamic finance. Global Islamic financial assets are now estimated to be more than 1 trillion US dollars. While more than 60 percent of the world’s Muslim population is in Asia, the interest in Islamic finance transcends to beyond this community. The inherent principle of Islamic finance, which requires financial transactions to be accompanied by underlying economic activity, ensures the close link between the expansion in financial assets with the real economy. It also increases its potential in fostering  BIS central bankers’ speeches  3  sustainable growth. This has positioned Islamic finance to be well-anchored to serve the real economy, and enhances its potential as a sustainable and stable form of financial intermediation.