samchain/econo-pairs-v1 huggingface dataset:
BIS central bankers’ speeches  9  Chart 4 Average headline and core inflation (PPP-weighted) and the price of oil Percentage change on a year earlier  100 80  7 6  60  5  40 20  4  0  3  -20  2  -40  1  -60 -80 2005  2008 2011 2014 Global PPP-weighted core CPI inflation Global PPP-weighted CPI inflation Oil price (LHS, YoY)  0  Notes: Weighted average (with PPP-GDP weights) of headline and core year-on-year inflation across a balanced panel of 18 countries (solid lines) and Brent Oil price (dashed line). Source: DataStream, ONS and Bank calculations. Chart 5 Index of participation in global supply chains Forward participation (2009) Backward participation (2009) Total participation (1995)  Global supply chain index  80 70 60 50 40 30 20 10 0  Note: The participation index adds together two components: the share of foreign value added embedded in a country’s exports (backward participation) and the share of exports made of domestic value added which is then subsequently used by an importing country to produce their exports (forward participation). For more information please see: http://www.oecd.org/sti/ind/global-value-chains.htm. Source: OECD and Bank calculations.

The time to push ahead on tackling climate change Speech given by Andrew Bailey, Governor of the Bank of England Corporation of London Green Horizon Summit, Mansion House 9 November 2020  1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  It is a great pleasure at least to have the opportunity to meet virtually. Today, I want to focus on how we ensure that we get back to the vital subject of tackling climate change and the role of the financial system. First, I want to say what a pleasure it is to be sharing a platform today – so to speak – with Mark Carney. As I have told Mark quite a few times, timing is everything, and midnight on March 15th was an interesting choice of date to hand over as Governor. But let me also say that in everything that has happened since at the Bank we have benefitted from the many things that Mark did during his term, and for that we owe him great thanks. Mark has gone on to push forward his deep commitment to tackling climate change, and the role of the financial system in doing that. There have been times since March when we have faced very stark decisions in the face of the Covid crisis. We decided in the spring to prioritise preserving people’s jobs and livelihoods in this emergency, and as far as possible the businesses that provide employment and the life blood of the economy.
The proposal was drawn up after consideration and examination of 35 examples of such schemes from around the world, and examining the stimulus packages that are being implemented worldwide which come to the value of USD 11 trillion, almost 15% of gross global product so far. The result of the examination was that supporting concessional financing and guarantees accounted for 40% of total global stimulus packages. Three main elements were found to be essential for the success of any financing support system in meeting its objective effectively and in timely manner. First: banks must possess and have access to sufficient cash flow and liquidity. Second: interest rates must be attractive and suitable for both lender and borrower, which is achieved by use of monetary policy instruments and subsidizing the cost of financing. Third: banks must be motivated to extend credit amid the current harsh conditions, as they shy away due to apprehension and uncertainty regarding the scope and severity of the crisis. Therefore, countries stepped forward to guarantee loans and partner with banks in shouldering the risks involved. Inspired by the principles and criteria of regional and international financing support and guarantee schemes, the Committee developed its own scheme which is most suited to the legal requirements in the State of Kuwait, caters to the national economy, and takes into consideration both the conditions of the economy and estimates regarding financing companies’ working capital requirements. The Committee recommends introduction of the scheme as one measure targeting both SMEs and companies.

As for the other 11 measures, some were implemented by CBK and the banks, while others were proposals presented to the Council of Ministers to take the appropriate action. The Households Sector: Where this sector is concerned, the committee specified the goal as guaranteeing basic needs, providing financial support, and maintaining job security for nationals. Accordingly, it introduced a set of measures to protect and safeguard the stability of this important sector. Among the measures were guarantees to protect nationals employed in economic sectors impacted by the Central Bank of Kuwait - Public ‫ عام‬- ‫بنك الكويت المركزي‬  -4-  crisis, whether in the government or private sector, as well as maintaining the stability of prices of food items and medical goods, in addition to depositing of six months’ retirement pay (pension) for those eligible. As well as support for salaries covered under Chapter Five 1 of the budget as stated in Council of Ministers Resolution (455), the committee added an item to double the support extended to nationals registered under Chapter Three2 for six months. This was in addition to guaranteeing a minimum income level that is sufficient to meet livelihood needs for affected workers and the provision of basic humanitarian needs for all those living on Kuwaiti soil. Banks meanwhile took the initiative and implemented a moratorium on personal loans and waived point of sale and ATM fees.
I do not intend to use my remarks this evening to recall our many private conversations – they shall remain private – nor your many achievements: we all know what they are. I would like instead to focus on three of the qualities that I have personally witnessed, and that have marked you out as one of the pre-eminent leaders of your generation: your commitment, your rigour and your statesmanship. Wolfgang is receiving this award tonight in recognition of his commitment to a unified Europe and stable democracy in Germany. Commitment is a quality that has run like a thread throughout your public life. On this very day 30 years ago, only a few blocks from here, a million people demanded reform, democracy and freedom in the largest demonstration East Germany had ever seen. The fall of the Berlin Wall ushered in a profound transformation of German and European history, and you, as Minister of the Interior, were at the heart of this process. Your commitment to your own country was always matched by a commitment to Europe – and you understood that each made the other stronger. You saw immediately that German reunification could trigger optimism at home but anxiety abroad. You knew that the best way for Germany to demonstrate the strength of its historical responsibility to Europe was to share a currency with its neighbours. At the same time, a single currency would safeguard the single market against the risk of competitive devaluations.

The result is a staggering bank restructuring cost of an estimated 25% of GDP for the crisis-hit economies in Asia. 1  The Manila Framework Group is a forum comprising senior finance and central bank officials from 14 economies, namely, Australia, Brunei Darussalam, Canada, China, Hong Kong SAR, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the United States of America. Senior representatives of the International Monetary Fund, the World Bank, the Bank for International Settlements and the Asian Development Bank also attend the meeting. The Group meets twice a year. 1  BIS Review 24/2000  Since the outbreak of the Asian financial crisis, economies all over the region have taken important strategic steps to promote conditions that foster a full and speedy recovery. But recovery cannot be sustained unless it is accompanied by thorough structural reforms. It is encouraging to see that notable initiatives are taking place in Asia where extensive programmes are in progress to restructure and recapitalise banks. There are also efforts to tackle the problems posed by over-stretched and highly indebted corporations. But there is a risk that the problems that were so evident then will be swept under the carpet in the face of rapid growth. It is crucial that the reform momentum should not be allowed to falter, as it could undermine the fledgling recovery.
It has helped entrench Hong Kong as a testing ground and pilot market for China’s continuing financial reform and liberalisation. There is clearly immense scope for us to leverage on our key strengths as a close business partner, a capital formation centre and a financial intermediary for the Mainland economy in the development of Islamic finance. There are opportunities for us to extend our reach to potential Islamic investors and financiers in the Middle East and Asia. The addition of Islamic finance as a new asset class in our financial system will add value to Hong Kong as a thriving financial centre and a leading financial services hub in Asia. As a major financial centre, Hong Kong – with its flexible and innovative market participants and its responsive government – has always stood ready to adapt to and embrace new ideas. Even if the current financial environment appears unfavourable to the development of Islamic finance in the short term, this is, at worst, a temporary setback as future prospects remain promising. We at least do not intend to be put off by temporary difficulties from our goal of making Hong Kong an Islamic financial hub. Indeed we believe that this is a good time to do the groundwork of installing the necessary legal, taxation and market infrastructure. 4  Source: World Federation of Exchanges.

On the international front, global and European GDP growth forecasts have been revised downwards in recent months. To mention what appear to have been the most important factors, this has been due to the decline in activity in some of the main emerging economies and to the sluggishness of world trade. BIS central bankers’ speeches  1  As a result, for this year and for next year too, we should expect more moderate growth in the Spanish economy than in 2015. Indeed, the latest projections published by the Banco de España and by various analysts and international institutions are along these lines, with GDP growth rates of 2.7% in 2016 and 2.3% in 2017. This lower growth will come about when we are still far from having sufficiently corrected the serious imbalances that built up in the expansion and in the early years of the crisis. These may be listed under four headings: the labour market; fiscal consolidation and public debt; private debt and dependence on external funding; and productivity. Let us look more closely at each of these four aspects. 1. The reduction in unemployment  Firstly, unemployment. The main challenge facing the Spanish economy is to reduce the unemployment rate, which stood at the end of last year at almost 21%, 6 pp down from its peak at the start of 2013, but still far above the average for the European Union and the level in almost every other euro area country.
The current economic situation Before the war, the world economy was on a path of gradual recovery, following the most acute phase of the pandemic, although the recovery was already flagging from the second half of 2021 owing to global bottlenecks and the increase in inflationary pressures. The gradual path of recovery in activity prior to the Russian invasion of Ukraine was, in any case, highly uneven across geographical areas and sectors of activity. Thus, while some economies had already regained or even surpassed their pre-crisis levels of activity, others had not. Spain, despite having one of the highest levels of vaccination in the world, was among the latter. At the end of 2021, Spain’s output was still 3.8 percentage points (pp) below its pre-pandemic levels, while in the euro area as a whole this gap had already closed. One factor that would explain the difference in progress is the sectoral composition of activity. In particular, the recovery tends to be more delayed in those countries, like Spain, in which services that are highly dependent on personal interaction, such as those linked to tourism, account for a large share of the economy. Economic developments in Spain, and in the rest of the world, have been affected by upward inflation surprises since the second half of 2021, driven in particular by energy and food, although there has also been a slight rise in underlying inflation. Between December 2020 and March 2022, the annual increase in consumer prices rose from -0.6% to 9.8%.

Investment in the petroleum sector is an important source of business cycle fluctuations in Norway. Investment rose sharply in the 1970s and 1980s and reached a peak in 1998. Mainly as a result of persistently high oil prices and expectations that oil prices will remain high, investment in the Norwegian petroleum sector may again reach record levels this year. Norges Bank’s regional network currently reports a very high level of activity among suppliers to the petroleum industry. However, investment may decline as large development projects like Ormen Lange, Kristin and Snøhvit near completion. It is uncertain how sharp the fall will be, but today’s high level of exploration activity and a long period of high oil prices imply that petroleum investment will remain high in the years ahead. Investment in the petroleum sector has spillover effects on the mainland economy, initially on the engineering industry and the construction sector. Looking forward, the scale of petroleum investment and its spillover effects are highly uncertain. The last time petroleum investment showed a sharp increase, in 1997/1998, growth was substantially stronger than had been assumed. An upturn occurred in the Norwegian economy as a whole at the same time. The unexpected increase in petroleum investment contributed to an economic upturn that was substantially stronger than projected. If oil prices rise further or remain at the current high level for a long period, petroleum investment may again amplify the cyclical upturn to a greater extent than projected. Let me now return to the framework for economic policy in Norway.
10 The fact that capital flowed from emerging economies with great growth potential to the United States – where it was apparently used to a large extent to finance investment in housing – indicated that this was not a case of capital seeking a higher marginal return but rather of an excessive provision of credit. At the same time as the US households became increasingly indebted, major currency reserves were built in, for example, China. It was at this time that Ben Bernanke spoke about a ”global saving glut”. 11 There were, however, good reasons why the level of saving was high in many Asian countries. Following the crisis in Asia in the early 1990s, the countries wanted to build up currency reserves to protect themselves against future stoppages in capital flows. Research indicates that countries that had reduced their vulnerability in this way were also hit less hard by the latest crisis. 12 Furthermore, there were, and still are, weaknesses in the social safety nets of several of these countries which mean that households have to save in order, for example, to be able to afford medical costs in the future. China also has an ageing population as a result of the one-child policy, which may also justify a high level of saving. There have been claims from the United States, however, that the substantial current account surplus is largely due to the fact that China's currency is undervalued and thus indirectly favours Chinese exports and production that competes with imports.

Another possible explanation for the high level of saving may be that the households underestimate how much is saved in the public pension system following the reform of the system. 18 If this is the case, our level of saving could be unjustifiably high and could remain so for some time to come. Figure 5 shows saving in different sectors in Sweden. Figure 5 Finance balance in different sectors in Sweden Percentage of GDP, current prices 10  10  5  5  0  0  -5  -5  Households  -10  -10  Public sector Companies  -15  -15 80  82  84  86  88  90  92  94  96  98  00  02  04  06  08  10  12  Sources: Statistics Sweden and the National Institute of Economic Research  It may also be the case that the explanation has more to do with investment. Sweden has had a lower investment ratio than both the OECD and the EU averages since the 1990s. The difference is almost entirely explained, however, by the fact that investment in housing has been lower in Sweden (Figure 6). This has partly been an adjustment following the very high level of investment in housing in the 1980s, but also probably relates to changes in the regulation in connection with the tax reform of 1991 and the fact that a new housing finance system was introduced in 1993.
All else equal, the end result will be that the ECB is forced to tighten its stance a little more. In that way, a less disciplined policy in one or more member states to some extent hits all the countries in the union. In the extreme case, it is conceivable that a country might deliberately refrain from managing a debt problem and, when the crisis becomes acute, try to shift the payments onto the other countries. Problems of another type have come to the fore with the past year’s weakening of the euro. When the mood is negative, every potential problem gets an airing regardless of its weight in practice. Difficulties in small countries, for example in connection with inflation being considerably higher than in the core countries, can then be presented as a threat to the whole, with consequences for the euro’s exchange rate. BIS Review 102/2000  2  Rules and processes for promoting cohesion All the problems and risks I have mentioned were essentially well-recognised and thoroughly discussed before the EMU was formed. Various rules were therefore constructed to prevent what is called destructive diversity. The Maastricht Treaty, for instance, includes rules to prevent excessive government debt being dumped onto others. This is explicitly prohibited by the ban on government financing in the central bank. The Treaty also rules out privileged access to bank loans as well as bail-outs by other countries or the EU as a whole.

IPSs have to obtain the same improvements in organisation, efficiency, economies of scope, diversification and quality and unity of management as traditional mergers. They must do so in the same length of time as a normal merger, and they must strive to ensure that their results are clearly perceived by the markets as lasting. 2  BIS Review 173/2010  In this connection, it is vital that the initiators should be particularly diligent in countering the danger that the “raw novelty” of this legal formula – whose features have had to be rapidly devised – may be used as an excuse for rigidities, procrastination or half-measures. Compared with traditional mergers, where the combining of objectives and efforts to advance in a single direction is more natural, all the participants in IPSs must be on their guard to prevent the essential goal of unity from becoming distorted. They must strive to ensure that the mind-set of directors, managers and staff alike is geared towards a single goal; individual visions are no longer appropriate here, and nor are decisions not aimed at achieving a better future for the single corporate project that has replaced its predecessors. All the participants in institutional protection schemes are assuming a very specific responsibility here, an institutional responsibility and a personal responsibility.
Firms have begun to take a hard look at their legal entity structures, including having identified and mapped material legal entities. This was a necessary first step for a lot of firms, which have begun the difficult task of making sense of their legal entity structures. This will be a focus of our future supervisory work on firms’ preparedness for recovery and resolution planning. Another positive step was recently made in the area of financial contracts – wherein 18 global firms recently agreed to sign a new ISDA Resolution Stay Protocol. The Protocol will provide for a stay of certain early termination rights triggered by resolution proceedings. The stay is intended to give jurisdictions time to orchestrate an orderly resolution of a troubled institution. It will be important that firms adhere to the protocol and amend ISDA Master Agreements consistent with the terms of the protocol. Firms should carry out a similar effort with respect to other types of financial contracts not covered through the protocol.

However, at the rate it is growing, we will only reach 16% in 2020, from the 14.8% today. This would be even lower if we were to correct for double counting of policies. Clearly, the data proves that takaful is still far below its full potential, and is nowhere near where it should be. Second, individual takaful operators have not reached optimal size. Takaful operators are dwarfed by their conventional counterparts. Without sufficient scale, takaful operators are hampered in making meaningful inroads against their larger competitors. This is not just about competition within the takaful and insurance industry, but also of technology. Technology is reshaping the landscape of finance and lowering the barriers to entry from adjacent industries. Takaful operators must shape up, or risk being marginalised, or worse, made irrelevant. Third, the value proposition of takaful needs to be more apparent. As it currently stands, many view it as being no different from insurance. Some even view it as being unnecessary. It is disheartening to learn that 51% of respondents to a MTA survey cited these very reasons on why they have little knowledge or interest in takaful products. The issue of misperception also remains, with many non-Muslims deeming takaful as being only for Muslims. Opportunity to reposition takaful for the future This is the grim reality of the state of the industry, but it need not be so. In fact, I am positive about the prospects and potential of takaful. However, to get out of this “predicament”, we need an immediate and radical change.