samchain/econo-pairs-v1 huggingface dataset:
It is an assumption about the future conduct of the Board itself, because this is the instrument used by monetary policy. When we began publishing the Monetary Policy Report at the beginning of this decade, like many other central banks we worked on the assumption that the monetary policy rate would remain constant for the whole policy horizon. Even though this was not wholly plausible over a horizon of two years, it did seem to be not far off reality since the monetary policy rate was thought to be around its neutral level. However, this working assumption became extraordinarily unreasonable when, towards the end of 2002 and early 2003, the monetary policy rate fell well below its neutral level. That is why, since then we have taken as a working assumption a monetary policy rule that adjusts the interest rate in order to meet the target. 3 This does not involve a commitment to the future rate path but it serves to organize our discussions and deliberations. We communicate this path by comparing it (saying it is higher or similar, etc) to the implicit path seen in the forward curve and the expectations, and in general we indicate what this means in terms of possible rate changes during the year.

Eddie Yue: Remarks at Media Standup Remarks by Mr Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, at Media Standup, Hong Kong, 2 October 2019. * * * Ladies and gentlemen, 1. Today is my first working day as the Chief Executive of the HKMA. Apart from the transition to a new position, I will also be faced with a challenging external and domestic environment. This includes the weakening of global economic momentum, uncertainties over the ChinaUS trade conflict and Brexit, unpredictable monetary policy stance across central banks especially in the US, and the social events in Hong Kong in recent months. All these have presented huge challenges and uncertainties for the Hong Kong economy. 2. Our key priority in the next few years is to maintain Hong Kong’s monetary and financial stability. 3. And, the foundation for this stability is the Linked Exchange Rate System (“the Link”), which has helped Hong Kong weather different financial storms since 1983. I’ve been involved in the operation of the Link throughout my career in the HKMA and I have also gone through two financial crises. I firmly believe that the Link is the most appropriate monetary system for Hong Kong. We see no need and have no intention of changing this well-established system. 4. Our banking system is also robust and sound. I’m confident that Hong Kong’s financial system is well positioned to cope with market volatilities. 5. We will also reinforce Hong Kong’s role as a premier international financial centre.
All this has taken place against the background of various upheavals in the global economic and political environment, the war in Iraq being just one manifestation of this. The defining characteristic of Hong Kong banks during this difficult period has been their resilience. Despite the ups and downs, banks’ balance sheets have remained strong. For the locally incorporated authorized institutions, the aggregate capital ratio remains around 16%, twice the minimum international standard. Many of the smaller banks have ratios well above this. Capital strength has not been impaired by losses during this period. The banks have continued to make money and earn a reasonable return on assets from their Hong Kong operations, averaging 1 around 1.25% (before tax) over the last three years. However, this has not been easy to come by. Growth in mortgage lending, the mainstay of profits in the 1990s, has stagnated, and the spread on new mortgage loans has fallen to 2.6% below prime barely enough to earn a decent return on capital employed. Other sources of loan demand have also dried up as corporates have deleveraged since the Asian Crisis. So the banks have had to change their focus in order to generate revenue. Attention has switched to the liabilities side of the balance sheet as the banks seek to make best use of the large amounts of surplus funds that have built up. Banks have been managing down the cost of their liabilities in order to improve deposit margins.

7  All speeches are available online at www.bankofengland.co.uk/news/speeches  7  In that regard, the growth of open-ended investment funds, many offering investors the chance to redeem their share in the fund at a day’s notice, is notable. They have more than doubled in size since the crisis. As they’ve grown, these funds have invested increasingly in illiquid assets. Open-ended mainstream equity funds have been joined by corporate bond, leveraged loan, commercial property and emerging market debt funds. That growth has been an important source of finance for our economy. For example, these funds hold at least a quarter of the additional corporate bonds issued by UK businesses since 2008. So their stability has economic significance. It has the potential to become a systemic issue. While there is a role for these funds in our system, they do have a structural flaw when they start holding less liquid and truly illiquid assets. Despite offering investors the chance to redeem their share at a day’s notice, they typically offer a price for the share based on the quoted market prices of the funds’ assets. But when you hold anything other than the most liquid assets, it can be difficult to realise those quoted prices in one day, especially if a fund is forced to sell in scale. It can take weeks or sometimes months. This isn’t a problem when some investors are buying in as others are selling out. None of a fund’s assets actually need to be sold to pay redeeming investors.
These products were viewed as “safe” since, after all, the funds were only exposed for a short period of time, and in the case of repo, they were secured by collateral. On the demand side, setting aside any possible instabilities in this funding source, it was more profitable to use shorter-term funds to finance longer-term assets. In fact, the growing reliance on short-term wholesale funding to finance longer-term assets increased liquidity and maturity mismatch risk in the financial system. This was particularly dangerous because many of the assets being financed were structured-credit products, some of which were opaque, difficult to value and illiquid. In periods of market stress, these features increase the run risk by funding providers. BIS central bankers’ speeches  1  Short-term funding of longer-term assets is inherently unstable, especially in the presence of information and coordination problems. It can be rational for a funding provider to supply funds on a short-term basis, reasoning that it can exit if there is any uncertainty over the firm’s continued ability to roll over its funding from other sources. But, if the use of short-term funding becomes sufficiently widespread, the firm’s roll-over risk increases. In this situation, there is a strong incentive for each lender to “run” early if there is any uncertainty that could undermine the borrower’s ability to continue to roll over its funding from other sources.

The Fed also backstopped the commercial paper market (formerly funded in large part by money market mutual funds) by introducing the Commercial Paper Funding Facility (CPFF). When wholesale funding for non-residential mortgage securitizations evaporated, the Fed rolled out the Term Asset-Backed Lending Facility (TALF). These actions ultimately stabilized funding markets and crowded back in private funds. But, they were an emergency response, not a sustainable long-term solution. After all, because most of the special Fed liquidity facilities were authorized under Section 13.3 of the Federal Reserve Act, they were required to be temporary in nature and to end when times were no longer “unusual and exigent.” Much has been done over the past few years to mitigate the structural flaws that make wholesale funding a point of weakness in the global financial system. The New York Fed, for example, has led a Federal Reserve effort to make the tri-party repo system more resilient to stress, while the SEC has taken steps to address risks associated with money market mutual funds. Nonetheless, some important issues and vulnerabilities remain. Moreover, because  BIS central bankers’ speeches  3  the Dodd-Frank Act raised the hurdle for the Federal Reserve to exercise its Section 13.3 emergency lending authority, extraordinary interventions will be more difficult to undertake, perhaps causing investors to be even more skittish in the future. This is why it is essential to make the system more stable. To that end, I look forward to hearing the insights and suggestions that come out of today’s workshop.
21 The results are much the same. On average, the dispersion in banking returns is statistically significantly lower than for non-banks, at the 1% level, both for UK and global institutions. And, in general, we observe a compression of returns during credit booms and a dispersion in busts. There is evidence of an increase in the degree of coordination of global banks’ activities after the financial liberalisation of the 1980s. This suggests credit cycles may have become increasingly synchronous globally. To test this formally, we construct pair-wise correlations between countries’ credit cycles for two post-war sub-samples, 1945–79 and 1980–2008. We plot the cumulative distributions of these cross-country correlations in Chart 16. The same technique can be applied to correlations between countries’ medium term fluctuations in GDP (Chart 17). In each chart, a shift to the right of the cumulative distribution indicates an increase in the degree of crosscountry correlation. Chart 12 Dispersion of equity returns of US banks and top 100 US PNFCs (by market cap)  (1), (2) and (3) represent medium term credit booms. Outside of these areas represent medium term credit busts. Source: Thomson Reuters Datastream and Bank calculations. 20  Theoretical explanations have been put forward by, among others, Campbell and Cochrane (1999) and Mele (2007), who show that habits and cyclically asymmetric risk premia respectively may generate counter cyclical volatility in asset pricing models. 21  This global group of banking institutions included UK and US banks as a subset.

I appeal for this decision to be made this week, if possible, for the sake of assuaging all concerns regarding BNB's governance. Ladies and Gentlemen, thank you very much for the confidence I’ve been given. Thank you for your attention. 2  BIS Review 104/2009
A simulation of the instalments of a standard loan in CHF, RON and EUR respectively, extended in December 2008, shows that: (i) at the credit agreement date, the monthly instalments on CHF-denominated loans were lower compared with similar monthly instalments on loans granted in RON or EUR, and (ii) the impact of the change in the exchange rate and/or the interest rate was stronger on CHF loans than on those in the other currencies. The number of CHF borrowers is on the decline (by 31.8% in November 2014 compared with December 2008, i.e. by around 35,200). The drop is due to loan repayment, loan conversion into another currency, their removal from the balance sheets or their sale. The number of CHF borrowers fell at a faster rate compared with the household loan dynamics at aggregate level, the number of debtors moving down 15% between December 2008 and November 2014. The number of CHF loans witnessed a similar development. Credit risk associated with CHF-denominated loans is relatively higher compared with other currencies. In November 2014, the NPL ratio on household loans in CHF stood at around 12% versus 9.4% for all foreign currency-denominated loans to households, yet the dynamics were similar to those of foreign currency-denominated loans overall. BIS central bankers’ speeches  3  Recent studies also identify heightened risks and correspondingly high costs associated with CHF loans to unhedged borrowers at an international level, particularly in non-euro area countries. Individuals with CHF-denominated loans are not a homogeneous group.

The main proposals by the Ministry of Public Finance to enhance Government Emergency Ordinance 46/2014 refer to: (i) rendering the rescheduling mechanism and the maturity more flexible vis-à-vis borrowers’ financial capacity, (ii) extending the scope of eligible debtors, (iii) simplifying the administrative procedures for loan rescheduling, (iv) strengthening borrower protection in relation to banks, which remain bound, during the rescheduling process, not to tighten contractual terms regarding the interest rate, the level of commissions, or fresh collateral. With a view to tailoring banking prudential regulations to the new financial market conditions, the NBR has initiated several legislative changes to facilitate the conversion of foreign currency-denominated loans into lei and to ensure the effective enforcement of Government Emergency Ordinance 46/2014 with the amendments proposed by the Ministry of Public Finance. Summing up, we at the National Bank of Romania remain open to dialogue for clarifying the issue of CHF lending, finding solutions and getting involved in accordance with the legislation in force. 10  BIS central bankers’ speeches
A Financial Times report in 2008 found that most directors at several large and troubled institutions had no significant experience in financial services 8. An undue deference to management by directors was also prevalent in banks such as Northern Rock, HBOS and RBS, where the boards did not adequately challenge the management’s pursuit of aggressive, high-risk strategies. It is for these reasons that Bank Negara Malaysia undertakes rigorous and frequent supervisory engagements with the boards of financial institutions. Such engagements are crucial to developing a better understanding of board dynamics and their effectiveness in their governance role. As a matter of practice, prospective directors of financial institutions in Malaysia are subjected to close scrutiny through rigorous interviews by the Bank. This approach was also recently adopted by the UK’s Prudential Regulatory Authority 9. Governance arrangements in financial institutions must also be reinforced by a corporate culture which values and reinforces considerations for risk, ethics and compliance at all levels of the financial institution. This starts with the right “tone from the top”, whereby the board and senior management shape the core values for the firm. A common theme in the findings across various inquiries into the crisis is a breakdown in culture, where a disregard for prudence and ethics was tolerated. In some cases, individuals bearing red flags were not only ignored, but punished. The Financial Crisis Inquiry Commission launched by the US government chronicles two such instances 10.

In the United States there seems to have been a further extension of the upward phase this year and a slowdown may be softer and more cautious than anticipated earlier. Even with stronger international growth, external price pressure is likely to be weak. For one thing, after the Asian crisis there is still some unutilised capacity on the whole in the global economy. Other factors are increased price competition and an expected appreciation of the krona. Economic prospects in Sweden also look brighter. Besides the positive cyclical signals from abroad and their expected effects on the Swedish economy, there is the stronger growth of domestic demand. Firms as well as households are optimistic about the future. There are a number of reasons for this. Real wages and employment are rising rapidly and public sector finances are becoming stronger. Fiscal policy in 2000 and 2001 is now assumed to be somewhat more expansionary. All in all, GDP growth is judged to be 3.6% in 1999, 3.8% in 2000 and 3.0% in 2001. These assessments are based on the technical assumption that the repo rate is kept unchanged. The strong growth trend means that in the coming years the economy’s unutilised resources at present will be utilised more quickly than the Riksbank envisaged earlier. Inflation is accordingly judged to move up somewhat faster than the Riksbank assumed earlier. In the main scenario the underlying rate of inflation, measured as UNDIX, is judged to be 1.8% twelve months ahead and 2.1% after twenty-four months.
This showed that the negative interest rate, and our willingness to intervene on the foreign exchange market as necessary, are still essential in order to ease pressure on the franc, thereby stabilising price developments and supporting economic activity. Only in this way can we fulfil our mandate – to ensure price stability while taking due account of economic developments – in the interests of the country as a whole. In September, we also adjusted the basis for calculating the exemption threshold, which defines the portion of a bank’s sight deposits at the SNB on which we do not charge negative interest. This adjustment reduces the overall burden imposed on the banking system by negative interest to the minimum required for monetary policy purposes, 6 while taking account of the possibility that the low interest rate environment may persist worldwide for some time to come. While negative interest rates are unusual and should only be temporary, moderately negative rates are not fundamentally different in terms of their economic effects from interest rates above zero. As the negative interest rate has brought about an easing of financing conditions in the economy, companies are able to take out loans for investments at lower cost. For us, however, this so-called ‘interest rate channel’ is not of prime importance. Rather, it is the effect on the exchange rate that is decisive for Switzerland as a small open economy. With the negative interest rate, we can ensure that the traditional interest rate differential versus other countries is not eroded excessively.

Page 7/8  these outgoings, either benefits could be decreased or the period of benefit payments could be shortened. We do not express any preference as to which of these mechanisms is used. Making such a choice always involves a delicate balancing of interests, which is a matter for political circles rather than the SNB. Under these circumstances, however, it is clear that there is unfortunately no easy, universal solution. Adjusting to the realities of the investment world and demographic change comes at a price. And something else is also clear: in a pension system like ours, in which the key parameters are defined in nominal terms, this price will keep rising until such time as the problems are tackled. But holding on to the status quo also comes at a price. For example, we are seeing a rise in redistributions from young to older insureds, which was never intended by the system. This is also why the term ‘lifestyle’, as used in the relevant article of the Federal Constitution, targets purchasing power rather than any nominal quantity. Workable solutions can be found At the start of my talk I drew your attention to an international ranking of pension systems (cf. chart 6). In other countries, too, the population enjoys rising life expectancy while savers bemoan the low interest rates. Denmark and Sweden, for example, which are now ranked several places ahead of our country, have implemented far-reaching and thus painful measures to stabilise and modernise their pension systems.
In 2007, for instance, the US current account deficit stood at $ billion, while China’s surplus stood at no less than $ billion. Moreover, the deficits are also large in historical terms. A number of competing explanations have been advanced for this pattern of flows. First, it could simply reflect the juxtaposition of strong demand in the United States, coupled with China’s adoption of an undervalued exchange rate in order to accelerate the development of the traded goods sector and to soak up labour from the rural areas (Dooley, Folkerts-Landau and Garber, 2004). Second, it could reflect a “savings glut” in the surplus countries (Bernanke, 2005), resulting from a lack of an adequate household safety net in China, the accumulation of precautionary holdings of international reserves by several emerging market countries after the Asia crisis, and rational savings of the windfall gains from higher oil prices on the part of oil producers. Finally, it has been suggested that the United States holds a comparative advantage in the creation of “high quality” financial assets from real investments, leading to a direction of savings into the US financial markets (Caballero, Farhi and Gourinchas, 2008). Now while these flows are certainly likely to have added to the growth in credit, on the face of it they could only be a part of the explanation. For instance, the cumulative US current account deficit over the 2000-7 period was $ trillion.

But just as there is evidence that increased financial intermediation is often a Good Thing, so there is also evidence from numerous past credit/asset price boom-bust episodes that a juxtaposition of rapid credit expansion and sharp asset price increases is often a harbinger of a painful bust to come. So everything hinges on whether the underlying developments are sustainable or not. The mistake of (most of) the economics profession, along with many others, was a failure to see what was really going on beneath the surface and to understand how disruptively things could unwind. But, as I shall explain, I believe that the standard tools of economic analysis, far from being proved redundant, can shed useful light on what went wrong. Macroeconomic antecedents The proximate causes of the present crisis undoubtedly lie within the financial markets. But it is worth dwelling briefly on the macroeconomic environment in the years preceding the crisis, which was conducive to the formation of what proved to be an unsustainable credit bubble. BIS Review 101/2009  3  The Great Moderation To begin with, this period was characterised by an unusually high degree of macroeconomic stability, with steady growth and low and stable inflation in most of the advanced economies; see for instance Fig. 4, which shows performance in the G5 countries before and after 1992 2 . There are three broad explanations for this “Great Moderation”. First, it could just have been a happy accident, if this was a period characterised by unusually small, or a benign sequence of, shocks.