samchain/econo-pairs-v1 huggingface dataset:
4  BIS central bankers’ speeches  Chart 4 Rising dislocations across credit and fixed income markets Basis points  Basis points  10 0 -10 -20 -30 -40 -50 -60 -70 -80 -90  5 0 -5 -10 -15  Jan.16  Nov.15  Sep.15  Jul.15  May.15  Mar.15  Jan.15  -20  Nov.14  Sep.14  Jul.14  May.14  Jan.14  Mar.14  30yr swap spread CDS-cash basis IG skew (rhs)  Source: Barclays Live and Bank calculations. IG skew refers to the difference between US CDX.IG index and single-name CDS (SNCDS), 10-year swap spread is the spread between 10-yr USD swap and 10yr US treasury note, and CDS-cash basis is the spread between SNCDS and a basket of equivalent cash bonds. Chart 5 Bank equities down 25% since end 2015 UK  US  Euro area  Japan  105 100 95  85 80 75  (Dec 2015 = 100)  90  70 65 01  December 2015  17  04  January 2016  20  05  February  23  Source: Thomson Reuters Datastream and Bank Calculations. BIS central bankers’ speeches  5  Chart 6 UK banks’ ROE down 11pp since 2006(a) Per cent 30 25 20 15 10 5 0  Pre-tax  -5  Post-tax  -10  -15 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 H1 Sources: Published accounts and Bank calculations.

In any given country, a monetary expansion aimed at boosting domestic demand will tend to reduce effective interest rates 9 relative to their equilibrium level, generating an excess of domestic investment over domestic saving that must be met with a capital inflow from abroad. But viewed from overseas, the corresponding capital outflow will tend to raise the short-term equilibrium rate (Chart 12), giving conventional monetary policy overseas more traction. In this way, the rising tide of global demand would raise all boats. 8  Svensson (2003), “Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others”, Journal of Economic Perspectives, makes the case that exchange rate intervention can help fight deflation in a small open economy. 9  That is, interest rates adjusted for the effects of any quantitative or credit easing. BIS central bankers’ speeches  13  Chart 12 Smaller domestic current account (CA) surplus lifts all boats  Wider policy implications Ultimately, for monetary policy at the zero lower bound to bridge to a better equilibrium, it must be reinforced by other policies. That is, the low interest rate environment puts a premium on domestic and international policy coordination. For example, lower interest rates create space for fiscal policy to boost domestic demand directly, should it be necessary, by lowering the financing cost faced by governments. And it doesn’t take a genius to recognise that a prolonged period of low interest rates can lead to a build-up of vulnerabilities which could derail an expansion and deepen a subsequent recession.
In the past decades we have made significant advances in our economic policy framework. These advances allow us to feel at peace in the face of the present scenario, being confident that we have the necessary tools to cushion the effects of a scenario of those characteristics. On the other hand, the evolution of the global economy and the causes and consequences of the Great Recession of 2009 have left important lessons for economic policy makers. It is our responsibility now to incorporate these lessons into the design and management of our macroeconomic policy framework. A first lesson is that price stability is a necessary but not sufficient condition for financial stability. In an adverse, highly volatile external environment like we have seen in recent years, our inflation targeting regime with a flexible exchange rate has performed quite well. BIS central bankers’ speeches  5  During the global crisis, the Chilean financial system displayed great strength. However, the experience of other countries has confirmed the importance of paying special attention to financial developments and the possible creation of vulnerabilities on that front. To that end, it is critical to develop a systemic view of financial risks, aside from the soundness of individual financial institutions. The Financial Stability Report we prepare at the Bank seeks to deliver said overall view. The creation of the Financial Stability Board provides a forum to which we have committed our active participation.

Indeed, we expect that given their mandates, they would lead in demonstrating how commercial principles can be fully reconciled with responsible finance and public interests. There are many instances where development financial institutions can play a catalytic role in economic development. They can open new frontiers in discovery and exploration; accelerate poverty eradication and mitigate global climate change. This ought to be a noble aspiration. We share a common vision for them to contribute towards the growth potential of our economies and consequently improve the wellbeing of the people. We have an excellent program ahead to help us move in this direction. I hope it will sow the seeds for individual and collective actions that will both transform development financial institutions and enhance their impact. 4/4  BIS central bankers' speeches
Bean, C. (2006a), Comments on Ken Rogoff: “Impact of Globalization on Monetary Policy” at the Federal Reserve Bank of Kansas City, 30th Annual Economic Symposium, Jackson Hole, Wyoming, 26 August. Bean, C. (2006b), “Globalisation and Inflation”, Speech to LSE Economics Society, London School of Economics, 24 October. Bernanke, B. S. (2005), “The Global Savings Glut and the U.S. Current Account Deficit”, Sandridge Lecture, Virginia Association of Economics, Richmond, 10 March. Borio, C. and A. Filardo. (2007), “Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation”, BIS Working Papers No. 227. Borio, C. and P. Lowe (2002), “Asset Prices, Financial and Monetary Stability: Exploring the Nexus”, BIS Working Paper 114. Bank for International Settlements, Basel. Boivin, J. and M.P. Giannoni (2006), “Has Monetary Policy Become More Effective?”, The Review of Economics and Statistics, 88(3): 445-462, (January 2003) NBER Working Paper Series, No. 9459. Caballero, R. (2006), “On the Macroeconomics of Asset Shortages”, NBER Working Paper Series, No. 12753. European Central Bank (2007a), Financial Stability Review, June. European Central Bank (2007b), Financial Stability Review, December. European Central Bank (2008), “Globalisation, trade and the euro area macroeconomy”, Monthly Bulletin, January, pp. 75-88 Ferguson, R., P. Hartmann,, F. Panetta, and R. Portes (2007), International Financial Stability, IXth Geneva Report, ICMB, Geneva.

The actions needed to enhance market discipline and strengthen the resilience of the financial systems are currently being examined both by market participants and policy-  BIS Review 9/2008  9  makers. The recent experience has provided financial institutions and other markets participants with strong incentives to address the weaknesses revealed in various ways, including via improved transparency about exposures and greater disclosure of risks in products and processes. Financial regulators and supervisors are also examining ways to strengthen the resilience of the financial system through a robust framework that ensures adequate capital and liquidity buffers, and encourages market discipline and promotes effective risk management. At global level, the Financial Stability Forum will present a report to the G7 Ministers and Governors in April 2008 which will include recommended actions to achieve these objectives. What has been the impact of financial globalisation in the unfolding of the ongoing financial turmoil? It is a key factor that had contributed to boosting market liquidity, reducing market volatility and fostering financial development in the preceding years. Moreover, it facilitated the propagation of shocks and the spreading of sub-prime related risks to Europe, as a result of the acquisition of large exposures by European banks to structured finance products based on bank assets originating from across the Atlantic and European banks major involvement in the dollar asset-backed commercial paper (ABCP) market, where, at a certain point in time, they accounted for about 50% of the funding.
And we agreed a new governance structure, giving the second line a key role as independent counsel to our Board’s Audit and Risk Committee, establishing a new Executive Risk Committee and working-level challenge forums, and securing space for risk challenge on all new policy proposals. Now all of this will sound very familiar to you as risk professionals – and that in a sense is the point. In some cases, it is just central banks catching up! But in other cases we have had to blaze a new trail – reflecting the unusual nature of some aspects of risk management at a central bank. To illustrate those points, let me take you through a few brief case studies of specific issues we have dealt with in our early months of operation. The new second line in action: five case studies  (i)  Purchases of government debt for monetary policy purposes (‘Quantitative Easing’)  The introduction of the new second line has in some cases primarily formalised and hardwired approaches which had already been evolving as the balance sheet expanded. By far the largest single item on the Bank’s current balance sheet reflects the outright holding of some £ of UK government bonds (or ‘gilts’) in notional terms, purchased on behalf of the Bank’s Monetary Policy Committee as part of the implementation of their unconventional monetary policy – often known as ‘quantitative easing’.

In the same vein, the UK unemployment rate increased by only 2.5% although output fell close to 6% and Germany underwent a decline in output of about 7%, but its unemployment rate actually decreased. This suggests that labour market mechanisms for adjustment in the face of adverse shocks are not working correctly in Spain, as employment is bearing the brunt of the adjustment and this entails a high cost, in terms of long-term economic growth and social well-being. These differences are not only seen in periods of recession, but also in economic upturns, in the form of diverse levels of unemployment, and of productivity and real wage developments. And we know that there are major differences among countries as regards labour market institutions, thus suggesting that such different unemployment or productivity outcomes may, at least partly, be driven by regulatory differences. This is why it is important to look at the experiences of other countries in order to share experiences and to try to draw some conclusions on the pros and cons of the different institutional settings. The medium-term effects of the crisis I mentioned before are also particularly dependent on the functioning of the labour market. First, the crisis may imply the need for a substantial reallocation of labour across sectors, something that may take time and increase mediumterm frictional unemployment. Labour market institutions may, of course, play a key role in galvanising or impeding this process.
Inflation expectations and the conduct of monetary policy, Speech at an event organised by the SAFE Policy center, 11 july 2019  6  Figure 3. Recent divergence between the evolution of household inflation expectations and market based-measures  Sources: ECB, European Commission  7

On the basis of theoretical analyses of what ought to determine a country’s use of a currency, together with information the Riksbank has obtained from interviews and surveys of Swedish firms and households, we have concluded that the introduction of the euro will not appreciably alter the role of the krona in the Swedish economy. The krona has important functions in Sweden’s economy, both as a means of payment and as a unit of account and a repository of value. The krona is already exposed to competition from other currencies. EMU can be seen as a continuation of this process. One indication of the competition is the very sharp increase in exchange market turnover. Since 1986 this turnover has grown by a factor of eight, whereas foreign trade and GDP have no more than doubled. Only 5 per cent of the exchange market turnover stems from transactions directly connected with foreign trade. In what respects, then, might the advent of the euro alter the position of the krona? What is the line of reasoning behind such a scenario? The discussion about a marginalisation of the krona has started from the view that Swedish export companies will choose to switch to euro in order to reduce the competitive disadvantage of being outside the euro area.
This agreement has reaffirmed the commitment to monetary union, patent both in the supportive efforts of its members and in the observance of the common stability rules governing the functioning of the Monetary Union. The negotiations for the Third Bailout Programme for Greece unfolded as scheduled, and there is every indication the Programme will be launched immediately and that the day after tomorrow, on 20 August, the Greek authorities will be able to meet their ECB payments, thereby avoiding a default with dire consequences. This third bailout is, perhaps, the most complex and demanding of those so far agreed between Greece and the European authorities and the IMF. This is so, among other things, because it will include measures to reinforce the Greek banking system, which has been greatly affected by events in recent months. Evidently, it is in the interest of all euro area members that the new Programme should be properly adhered to, and follow schedule, so that assessments of its implementation before year-end may be positive and provide for its full effectiveness and continuity. Needless to say, the fulfilment of this third programme will boost the growth of the Greek economy – the central and fundamental objective of this third assistance programme – and will strengthen the euro area and its stability as a whole. Recent developments on the international economic front are positive in terms of growth.

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?
Zdeněk Tůma: Challenges of free capital movement and the role of international standards (focusing on money laundering prevention) Introductory remarks by Mr Zdeněk Tůma, Governor of the Czech National Bank, at the IFex Training Course: Fraud, Terrorist Financing And Money Laundering Prevention, Prague, 15 September 2003. *  *  *  Ladies and gentlemen, dear colleagues, It is my great pleasure and honour to give an opening address to this high-level training course. For my introductory remarks today I have chosen a topic related to the questions you are going to discuss during your seminar. I would like to focus on the issues stemming from free international mobility of capital and on the international standards that have been broadened and deepened in recent years to address underlying challenges. I will also come to the anti-money-laundering standards that form an important part of the new financial architecture. The last few decades have seen substantial growth in global capital flows. In the emerging market economies alone, the net inflows of foreign capital have now reached about USD 150 billion a year, despite a contraction following the wave of emerging market crises in 1997-1998. The financial flows between the advanced market economies are of an even higher order, of course. Moreover, the turnover in the international markets is substantially higher than the net flows, exceeding global real economic activity many times over.

telephone banking and e-finance, has made it necessary to ensure that the identification requirement is observed equally strictly for these transactions, too. Financial institutions are also obliged to store data that can be used for detecting money laundering and as evidence during subsequent legal action. Special units have been established either at existing regulatory authorities or as new public institutions, to which financial intermediaries are obliged to report either suspicious transactions or transactions exceeding some pre-specified volume. Private financial institutions must create their own internal procedures, including a clear division of responsibilities and staff training, in order to implement all the aforementioned duties in practice. As in the other fields of financial regulation, supervisors are paying increasing attention to examining whether such comprehensive procedures and their control mechanisms have been put in place, are functioning appropriately and are responding to new money-laundering practices and other innovations. The AML system in the Czech Republic started to be built in 1996 with the adoption of the Act (No 61/1996 Coll.) Concerning Certain Measures against the Legalisation of Proceeds of Criminal Activity (the “AML Act”), which was subsequently amended in 2000. A draft amendment to the AML Act, which implements the EU’s 2nd AML Directive and also the relevant Special Recommendations of the FATF on combating financing of terrorism, has recently been prepared. The Government has approved this amendment and it is currently being debated in the Czech Parliament.
As I previously stated in this House, both of these aspects are essential for adapting labour market conditions to firms’ specific circumstances and, ultimately, for allocating the productive resources available more efficiently, in particular labour, to different economic activities and sectors. On the other, by rationalising the conditions under which permanent contracts may be terminated, the reform shapes an environment which will be more conducive to job creation and job stability, once the current difficult circumstances are behind us. Overall, the labour market changes should help promote the adjustment of working and productivity conditions as means for restoring competitiveness. However, it cannot be ruled out that some of the effects of this reform will not be immediately discernible and that, given the setting of sluggishness and uncertainty in which Spanish economic activity is currently unfolding, there may be some further adjustment in employment levels. This effect would be softened if firms were swiftly to use the various forms of internal flexibility provided by the new labour legislation. In turn, the favourable effects of this reform will be amplified if they are accompanied by measures that enhance the competitive environment in which firms take decisions and that provide for the liberalisation of sectoral aspects that are key to ensuring efficient and flexible economic behaviour. Ambitious measures here would help bring about a virtuous circle which, through job creation and growth, would see more rapid progress in the difficult tasks of the financial deleveraging of the private sector, the normalisation of the banking system and fiscal consolidation.

Admittedly, as I have noted on previous occasions in this House, the evidence on the effectiveness of previous fiscal consolidation processes implemented in other developed economies shows that it increases when they are concentrated on public expenditure, in unproductive expenditure. However, the scale of the adjustment required in our country is so great that we need to make use of all the instruments available, including taxes. The 2012 Budget envisages an increase in revenue from tax measures falling basically on household and corporate income. Also, a special charge is imposed for the regularisation of hidden assets. The revenue-raising potential of these measures is expected to offset the fall in revenue due to the unfavourable trend in tax bases deduced from the macroeconomic scenario accompanying the Budget. Last year’s experience, when the bulk of the budget deviation stemmed from the adverse performance of government revenue, showed that it is essential to budget prudently for this variable. In this respect, the projected course of overall budget revenue is subject to downside risks. The reasons for this are various. First, because both the expected corporate income tax receipts and any other tax revenue will depend on the ultimate effectiveness of the numerous legislative changes, which is particularly uncertain in the case of the special charge on undeclared income.
2  BIS central bankers’ speeches  The credibility of the central bank and our monetary policy is now a tangible reality for Albania. It is reflected in the trust of our economy in the national currency and its purchasing power in the future. The investment made by the Bank of Albania to earn the public trust has required a lot of efforts to be made, but they get rewarded multiple times with the greater opportunities we have now to stimulate the economy without prejudice to the inflation outlook. Against this background, the Bank of Albania has provided the necessary economic stimulus, while there is still room for other additional monetary stimulus in the medium run. The accommodative policies generally aim at boosting economic activity and domestic demand, in order to keep the consumer prices within the Bank of Albania’s target in the medium run. We have also other reasons to support economic growth. We believe that if the economy grows at its potential rate, there will be substantial impact on the improvement of public and private sectors’ and individuals’ financial balance sheets. Their capacity to pay off past-due financial liabilities will subsequently improve, and their creditworthiness will enhance. I think this is one of the challenges that, on one hand, would restore the macroeconomic equilibrium to the pre-crisis level and, on the other hand, would guarantee the financial sector’s stability in the long run.

Before I discuss what’s left to do, let me recap what has been done over the past year. The key initiatives completed by the Committee in the past year include: •  reaching agreement on a package of revisions to finalise Basel III’s Liquidity Coverage Ratio (LCR);  •  revising the Core Principles for Effective Banking Supervision;  •  developing a policy framework for dealing with domestic systemically important banks;  •  establishing disclosure requirements for the new Basel III definition of capital; and  •  updating the supervisory guidance for assessing the effectiveness of a bank’s internal audit function. In addition, the Committee established a sound operating framework within which to assess its members’ implementation of Basel III. As a result, the Committee produced: •  two regular semiannual reports on Basel III implementation in all member countries (along with two special reports to the G20 on implementation);  •  assessments of Basel III implementation in the European Union, Japan and the United States; and  •  a report analysing the variability of risk-weighted asset calculations for market risk in individual banks. Further down the agenda, my colleagues from the Basel Committee Secretariat will provide additional insights on our implementation work. I would like to make the point now, however, that these efforts are critical to delivering on the benefits that Basel III offers. Rules written have no effect if not implemented: we cannot fail on this front, and I will say more about our efforts shortly.