samchain/econo-pairs-v1 huggingface dataset:
I will then describe how the injection of long-term liquidity has helped to avoid a sudden curtailment of financing to the private sector by alleviating funding pressures on the banking system. I will go on to consider some of the challenges the Eurosystem is likely to face in the near future. Credit developments to households, non-financial corporations and small and medium-sized enterprises (SMEs) During the last quarter of 2011, monetary and credit developments to the private sector were exceptionally weak. The annual growth rate of monetary aggregates declined significantly in December, and it was mirrored by similar developments in lending to the private sector, especially loans to households and non-financial corporations. Clearly, as the sovereign crisis intensified it impeded banks’ support for the real economy. The annual growth rate of banks’ credit to the private sector decreased in the last quarter of 2011, reflecting monthly negative outflows and reaching troughs comparable with those prevailing in 2008–2009. In particular, the rate of growth of loans to households declined, reflecting both demand-side factors (such as a deterioration in the prospects for the economy, and notably the housing market) and supply-side factors (such as increasing funding difficulties for banks) (Slide 1). Incidentally, these developments masked significant cross-country heterogeneity, as some countries saw an increase in flows supported by government measures aimed at the housing market. The annual growth rate of loans to non-financial corporations declined as well, reflecting particularly weak quarterly flows (Slide 2).

Christian Noyer: Basel II – new challenges Speech by Mr Christian Noyer, Governor of the Bank of France, before the Bank of Algeria and the Algerian financial community, Algiers, 16 December 2007. *  *  *  I am very pleased and honoured to be here and I wish to wholeheartedly thank my friend Mohamed Laksaci for inviting me to speak on the subject of Basel II. This subject is topical for two reasons: first, we have already entered into (or, in some countries, are about to enter into) the operational implementation of the new capital adequacy framework, which requires a greater-than-ever involvement of banks and supervisors; second, the current financial market turmoil raises questions as to the best way to implement this framework. In view of its topical nature, I will present a few thoughts on “Basel II: New challenges”, while attempting to focus on the practical aspects of the implementation of the new capital requirements. In this respect, and before moving on, I would like to thank the Bank of Algeria for its participation in the Group of French-Speaking supervisors, created at the meeting of Governors of central banks of French-speaking countries in June 2004 in Paris, which coincided with the Basel Committee on Banking Supervision’s publication of the New Basel Capital Accord. I know that this Group is appreciated by many of its members as it enables them to exchange experiences and information and promotes best banking supervisory practices.
Today we have instead a surplus on the current account and sound public finances that provide a different degree of freedom for fiscal policy. Nor do we have a starting situation with nominal interest rates in some cases way above 10 per cent as we did then. The current established inflation target also provides scope for stimulation from monetary policy. The interest rates in the economy are relatively low, despite the crisis, and we are expecting the real repo rate to be very low over the coming years. All of this means that things should go better this time. There probably remains a lot of hard work before we can leave this financial crisis behind us – until we reach a situation where the financial markets are functioning efficiently without the aid of government measures, and where uncertainty over future developments has taken on more normal proportions. But in addition to the measures aimed at managing the more acute stage of the crisis, a number of changes that may provide a more stable, better development have begun to take shape around the world. As I said last time I was here – once we have closed the accounts on this crisis, we will hopefully have purged the parts that function poorly and replaced them with something better. I am still convinced that we will succeed in this together!

It is therefore time for us to reflect on these situations and try to be a step ahead. That is what saves financial markets – being a step ahead! I remember in February 2007, our Central Bank introduced an additional 1% provision for all performing loans of banks, because we realized that there was bubble that was forming. But, the public and media reaction to that policy action was somewhat rough. The next day’s newspaper headlines said that Cabraal has delivered a kidney punch to the banks; some claimed that we were killing the industry; others lamented that we are making it difficult for the banks unnecessarily. Today, one year and 2 months later, people realize that our anticipation has saved the day. We don't want everyone to get up and shout and acknowledge it. But perhaps those of you who are directors of finance companies, as persons who are responsible for about 5% of the financial system of this country, would now realize that, there are certain steps that need to be taken early in order to safeguard the entire industry. Sometimes, some people tell us, “our shareholders have been the ones who have made us. Our depositors have been continuously supported us. Therefore, we are responsible to our shareholders and depositors, and nobody else”. Perhaps, there is some truth in that statement. But, think about this a little more deeply. What would happen if one finance company fails?
Whereas it is common to assume the mean is being reported – implying that respondents generate forecasts under symmetric square loss – the evidence suggests that some individuals’ forecasts are biased away from the mean, suggesting forecasting using an asymmetric loss function. Heterogeneity in loss aversion would contribute to the cross-sectional heterogeneity of inflation expectations. Moreover, asymmetric loss would generate a mean bias that will vary in size with the uncertainty of individual expectations, and hence is likely nonconstant over time. This evidence points to another potential advantage of density forecasts: their reporting may be less affected by loss aversion than simple point forecasts. BIS central bankers’ speeches  5  While there are several possible explanations for the large dispersion of inflation forecasts among consumers, this heterogeneity is typically higher than that observed in various surveys of professional forecasters. In closing, I would like to speculate on a few potential reasons as to why the dispersion measured among professional forecasters may be too low relative to a “true” dispersion in expectations. First, asymmetric incentives may induce a desire to conform. If professional survey respondents have beliefs that are far from the consensus, they might face an asymmetric payoff: a small positive payoff for being correct, but a decidedly negative payoff for being incorrect. This may cause a tendency to converge on a consensus belief.

The initiatives can also fit in with the broader agenda of ASEAN integration, to leverage on regional resources and promote regional economic integration simultaneously. Closing remarks Let me close my remark by thanking all of you once again for your invaluable contributions to the Thai economy. The Bank of Thailand will continue our work of ensuring a stable financial and economic environment, so that businesses can continue to thrive and individuals can enjoy better standards of living on a sustainable basis. I hope that Thailand will continue to be a destination of choice for your investment, and a country of shared opportunity and prosperity for us all. Thank you  4  BIS central bankers’ speeches
EU legislation prescribes that it is the highest decision-making body in the central bank that shall decide on the size of the bank’s equity. It is of course important that the decision is made after a preparatory process that is transparent and predictable, with a healthy balance between promoting on the one side the need of the Riksbank to have sufficient equity on each occasion and on the other side the interest of the Swedish government to minimise the Riksbank’s costs for tying up capital. To summarise, we can note that the Riksbank currently only has one source of funding that it determines itself, namely monetary policy liabilities. In other words, the Riksbank can always make payments by increasing liquidity in the banking system. But all other forms of funding are affected in one way or another by things beyond the bank’s control. At present, the repo rate is at zero and this means that the Riksbank does not have any interest expenditure for the monetary policy liabilities. But this is temporary, and as the repo rate is raised, the bank’s interest expenditure will increase. This will also mean that profits decline. The coming years – profits declining, no dividends I have now spent some time on describing the Riksbank’s balance sheet and discussing some of the challenges the bank is facing. But I have not yet said anything about the largest challenge for the bank in the short term. By this I mean the extremely low interest rates, both here in Sweden and abroad.

Its consequences are still being felt today and the focus of policymakers has, therefore, shifted to the immediate task of giving the economy a quick resuscitation and lifting it out of the short-term slump. After the crisis, foreign direct investments from the eurozone have dropped significantly. However, despite the weakness back home, the UK’s net FDI to Thailand still managed to register a positive number of approximately 48 million USD for the first three quarters of 2009. It is, therefore, to our mutual benefit for the BCCT to have a good understanding of the outlook and challenges for the Thai economy from a policymaking standpoint. This will be the mission of my speech today and I would like to proceed in the following sequence: First, I would like to start by giving you an update on the current economic development; second, I would attempt to draw an outlook for the Thai economy for the year 2010; and third, I will outline the key challenges that await the Thai economy going forward. Ladies and Gentlemen, As you all know, the Thai economy was hard-hit by a sharp drop in the external demand caused by this global financial crisis. The spillovers from the large decline in exports were far-reaching and affected all sectors of the domestic economy, with the manufacturing sector being hardest hit. Consequently, sentiment turned gloomy as more workers started to lose their jobs. To make matter worse, the escalation of internal political tensions adversely affected private consumption and investment.
The MPC published analysis last August suggesting that the trend real rate in the UK has fallen by more than 2pp since 1990. Slower population growth, increased life expectancy and slower productivity growth have all contributed to this fall.9 Looking forward, many of the structural factors currently weighing on the trend real rate – in particular, changes in demographics – are likely to persist for many years to come, though other factors could push in the opposite direction.10  The trend real rate of interest, however, cannot be observed directly. It can only be estimated and while most estimates suggest it has reduced materially, estimates do vary widely. See August 2018 Inflation Report. See also ‘Secular drivers of the global real interest rate’ by Lukasz Rachel and Thomas D Smith (Bank of England Staff Working Paper No. 571). 10 For example, increasing financial integration of lower-income countries, a pickup in overall global productivity growth and increasing automation. 9  7  All speeches are available online at www.bankofengland.co.uk/speeches  7  As to income growth, to the extent that expected low real rates reflect expected lower productivity and hence expected lower income growth, they would not make debt more sustainable. Over the economic cycle, of course, the short-term real rate of interest will be moved around its longer-term trend by more temporary factors. But the persistence of the fall in the trend real rate means interest rates are likely to need to remain low by historical standards for some time to come.

The construction industry is showing a positive trend in the south-eastern region, primarily due to public building projects, while western Oppland is experiencing weaker activity. On the whole, enterprises providing services to the household sector are faring better than those oriented towards the business sector, primarily due to weak developments for customers in the construction industry, corporate customers that are in competition with foreign companies or dependent on customers in these categories. Employment is stable, but many enterprises, particularly in the public sector and the construction industry want to downsize in response to higher costs, lower budgets or as part of general, planned workforce cutbacks. Developments in Raufoss may have a considerable impact on the local community. Pay increases are expected to be considerably lower in 2003 than in 2002. Wage growth is highest in the public sector. There are wide regional variations in unemployment. At end-April, 3.2 per cent of the labour force in Hedmark and 2.9 per cent in Oppland had registered as unemployed. This is well below the national average of 3.9 per cent. The increase in unemployment on a national basis in 2002 primarily occurred in the service industries. In January, manufacturing took over the lead as the industry with the highest increase in unemployment. Manufacturing unemployment is now 3700 higher than a year ago. Agriculture and forestry account for a larger share of employment in Hedmark than in other counties. Because of the large tracts of forest in this county, forestry is a particularly important sector.
Over the past 2 years the share of lending at loan to income multiples above 4 has increased from 19% to 26% (Chart 18). In part this reflects a lengthening of mortgage loan terms. In the past 2 years the proportion of new mortgages with terms of 30 years or more has risen to more than a third of all new mortgages. That lowers initial monthly payments on a given mortgage but means the debt hangs around for longer, in some cases beyond possible retirement ages. The Return of the Regulator  10  11  Drawing it all together we have: signs of complacency emerging in credit cards and personal loans; a risk that the past may not be a good guide to the future in used car prices; and some tentative pushing of mortgage lending standards. Within the overall picture of credit growing in line with the economy, a pocket of risk has emerged. Lenders have not entered, but they may be dicing with, the spiral of complacency. The trailers to the movie have started. The question is: which one are we going to watch? Are we to endure another re-run of Debt Strikes Back or can we instead enjoy a new – and altogether more uplifting – movie: the Return of the Regulator?

Personal Contract Purchase (PCP) plans accounted for one in five new car purchases in 2006. Now they finance almost four in five (Chart 13). At the aggregate level, PCP is the new cash purchase. The Financial Conduct Authority, which regulates car finance, has expressed its concerns about a lack of transparency, potential conflicts of interest and irresponsible lending in parts of the car finance industry. It will explore and address those practices. 9  The Bank of England’s role is to manage any risks to the wider economy from this growth. And those should be kept in perspective. On average, those taking out PCP plans tend to have higher incomes and more savings than the population as a whole. 70% of PCP borrowers have above average income (Chart 14). Arrears rates on banks’ car finance deals are lower than on other forms of consumer credit. Moreover, the true burden of car finance to households overall is much lower than it seems at first glance. 9  Financial Conduct Authority (2017) ‘Business Plan 2017/18’. https://www.fca.org.uk/publication/business-plans/business-plan-201718.pdf 10  All speeches are available online at www.bankofengland.co.uk/speeches  10  PCP plans commit the car buyer to around three years of fixed monthly payments with an option - not an obligation - to make a final balloon payment at the end of that period, to own the car outright (Chart 15). If those optional balloon payments are excluded, this car finance debt accounts for only 1.2% of aggregate household income.
As market participants move to protect themselves against further losses, by selling positions, requiring more margin, hedging against further declines, the shock is amplified and the brake becomes the accelerator. All markets are vulnerable to this dynamic. The degree of vulnerability is not something we can measure with any confidence, for it depends not just on the how market participants behave in the event, but on the complex interaction of a number of different factors. The vulnerability depends, for example, on the size of the asset price misalignment, the conditions that produced it, and the magnitude of the shock to confidence in economic fundamentals. It depends on the scale of leverage in the system, and the incidence of leverage or concentration of exposure to different risk factors. It depends on the diversity of exposures or positions of different financial institutions. It depends on the presence or absence of distortions or market failures, moral hazard being the typical problem. It depends on perceptions of the capacity for monetary policy and other policies to adjust to mitigate the damage. The dramatic changes we’ve seen in the structure of financial markets over the past decade and more seem likely to have reduced this vulnerability. The larger global financial institutions are generally stronger in terms of capital relative to risk. Technology and innovation in financial instruments have made it easier for institutions to manage risk.

However, the increasing fragmentation of capital markets which I described above, and which sometimes has led to a complete drying-up of certain financial market segments, has impaired the monetary transmission channel in the euro area. Monetary policy signals are no longer being transmitted properly to the real sector. The divergence in bank funding conditions is certainly a key factor, in addition to the country-specific economic situation, in explaining the differences in bank lending rates to non-financial corporations across euro area countries. These divergences are leading to a weakening of the pass-through of monetary policy decisions in some euro area countries. For example, among the five largest euro area countries, the maximum difference between short-term lending rates to non-financial corporations (for short-term loans over € million) reached more than 100 basis points in recent months. Across all euro area countries, the dispersion of such lending rates is greater now than it has ever been. In other words, conventional monetary policy has lost its effectiveness in some parts of the euro area. For the ECB, the singleness of its monetary policy has been at stake. Against this background, the ECB has resorted to so-called non-standard measures to ensure the effective transmission of its monetary policy across the euro area. Without a properly functioning transmission channel for its monetary policy, the ECB’s capability to maintain price stability is at risk. The ECB has modified its allotment procedures and its collateral policy. It has also lowered the rate of the minimum reserve requirements and introduced very longer-term refinancing operations.
Protecting intellectual property rights and minimizing regulatory burdens for businesses are the two key areas that continue to require reform efforts. I would like to note that several moves in the right direction are already in place. Government’s massive investment plan in water management and long-term infrastructure is one of them. At the very least, the attempt has managed to elevate the urgency of infrastructure upgrading to the status of a national reform agenda. On a related note, the government also has the plan to push Thailand toward an innovation-driven economy. While these are laudable initiatives, challenges still remain in the implementation phase, and more work remains to ensure that we get the biggest bang for the baht and that fiscal discipline is respected. (3)  Leveraging existing opportunities around us  Ladies and Gentlemen, The third ingredient I would like to discuss today is the importance of identifying opportunities surrounding us and leveraging them. Upgrading efforts that I spoke about at length should put the country in a better position to reap benefits from these opportunities, which can make the route to prosperity less arduous. The timing is still on our side. First is China’s changing role in the international trade – from a large manufacturer of export goods to a large import country of the world. Even with signs of losing some steam, one should not forget that even a 6-to-7 percent growth of today’s Chinese economy still adds far more to global demand than the double-digit growth of the past decade.

Even where we manage to limit the rise in global mean temperatures to 1.5 degrees, physical risks are likely to dominate the potential impacts of transition. And if instead we continue on our current trajectory, losses just from the impact on productivity could be as high as 13% of GDP.8  In addition, many of the leading studies, including those we used in the NGFS, start from past correlations and so find it hard to put an accurate number on the type of low-probability, high impact events that will become more common. As high levels of warming will be unprecedented, we don’t yet fully understand the delicate balance between the climate, living conditions, ecosystems and the economy - for example, the level at which ice melts might accelerate; or methane stores under permafrost might be unlocked. What is clear is that investment is needed now to help adapt to these inevitable changes. And that we should recognise the gaps in our understanding of how large changes to our climate might affect our economies. Challenges in applying scenarios  While these key themes are clear, I know from our own experience, and from the firms we supervise, that applying the scenarios in practice is not straightforward. The models, data and analytical frameworks are new, and the transmission channels are complex and subject to much uncertainty. The results can be sensitive to input assumptions and type of model used.