samchain/econo-pairs-v1 huggingface dataset:
Adopting a more risk-sensitive treatment of credit risk will require significant work by all of us. What we learn about the factors driving losses from default, and how we can better measure and reduce our exposure to losses, means much more to all of us than simply a more favourable capital requirement. Instead, our efforts on credit risk, combined with advances on the operational and market risk fronts, will advance our understanding of the many risks banks face and improve our ability to navigate them successfully. For all of us, that offers the reward of a more stable banking system less susceptible to systemic risks and the business cycle and one better able to ensure the circulation of credit, the lifeblood of the economy, to businesses and consumers alike. 6  BIS Review 46/2003

So how can the experience of this region contribute to a better understanding of the interplay between finance and growth and the various policy choices? The countries of emerging Europe gained experience from their own deep crises over a decade ago. In most of them, output collapsed at the start of transition. Then almost everywhere there was a banking crisis, leading to heavy private and public losses. But  BIS central bankers’ speeches  1  valuable lessons were learned during the economic transformation. Some of the pressing issues were bank insolvencies, debt restructuring and privatisation. The key lesson was that everyone, including not only the general public but also the elected politicians themselves, pays a higher price when reforms are delayed. This is true even if such reforms seem painful and unpopular in the short run. Ten of the former transition economies are today members of the European Union (three of them – Slovenia, Slovakia and Estonia – already joined the euro area). But EU accession was not granted automatically. Membership was not a gift. Many criteria had to be complied with, including the assessment of whether the country had a “functioning market economy” and its “capacity to cope with competitive pressure and market forces within the Union”. That necessitated radical legal and institutional reforms in the candidate countries. Transition Europe had no choice but to learn by experience, well before the recent global crisis, what policies were ultimately beneficial for sustainable economic growth and for the stability of the banking system.
14  See P. Hartmann, F. Heider, E. Papaioannou and M. Lo Duca (2007), “The role of financial markets and innovation in productivity and growth in Europe”, ECB Occasional Paper Series, September, as well as ECB (2007) “Financial integration in Europe”, Frankfurt a.M: ECB. 15  Some authors have calculated that if the average size of capital markets in the European Union was bigger in the United States for instance, it is around 450% of GDP instead of 220% as in the European Union (based on an overall indicator measuring total financing in the economy by aggregating bank credit to the private sector, stock market capitalisation and the outstanding amount of domestic debt securities issued by the private sector) - then annual GDP per capita growth in the European Union could be positively influenced (see G. Favara (2006), “An empirical reassessment of the relationship between finance and growth”, mimeo). BIS Review 18/2008  5  2005, and telephone prices charged by the former monopolies for national and international calls for instance, fell by more than 40% on average in Europe between 2000 and 2006. This supported the purchasing power of consumers, who have now more of their income available to spend on goods and services. Supporting an innovative environment To fully exploit productivity potential, the product market reforms I have just mentioned need to be accompanied by policies that support innovation and technological changes.

To facilitate banks’ access to borrowing from Norges Bank during the period of financial turbulence, collateral requirements for loans were temporarily eased. In October 2009, it was announced that the temporary rules for collateral requirements would be changed. Acceptance of new securities eligible under the temporary rules was discontinued in October. Securities already approved under the temporary rules would be eligible as collateral until maturity, or at the latest until 15 February 2012. Changes in the so-called bank quota were also announced. Under the current rules, up to 35 per cent of a bank’s borrowing facility can be based on collateral in bonds issued by other Norwegian banks. Debt instruments issued by foreign banks will be included in the bank quota as from 1 December 2010. Securities issued by banks will no longer be eligible as collateral for loans as from 15 February 2012. Covered bonds will still be eligible as collateral, including, until further notice, bonds to which no credit rating has been assigned and bonds issued by a bank’s own mortgage company. This is expected to contribute to the development of the Norwegian covered bond market. The housing market – a source of disturbances in the economy Banks have had strong incentives to extend credit for house purchases. Even during the banking crisis around 1990, Norwegian banks’ losses on residential mortgages were low. This is reflected in the low risk weights for residential mortgages in banks’ risk models. For an individual bank, residential mortgages are low-risk loans.
Gross fixed investment as a per cent of GDP 30  30  25  25  Gross fixed investment  20  20  15  15  Grossfixed investment, excl residential 10  10  5  5  Källa: SCB 0  0 1950  1955  1960  1965  1970  1975  1980  1985  1990  1995  Savings, Investments (net) and Current account as a per cent of National Disposable Income 1950-96 20  15  10  5  0  -5 1950 D :\ex\d-sv\data\datany  55  1960  65  Nettosparande  (Net savings)  1970  75  N ettoinvesteringar  (Net investment)  1980  BIS Review 20/2000  6  1990  (Current account)  Source: National accounts. Note: From 1986 reinvested capital gains is included. Source: Lennart Berg  85  Bytesbalans  95  Labour productivity growth 5 SWEDEN 4,5 4 3,5  USA USA  3 2,5 SWEDEN  2 USA  1,5  SWEDEN  1 0,5 0 60-74  75-94  7  95-99  BIS Review 20/2000

Earlier this week, the Central Bank published a report on Iceland’s underlying external position, in which it addresses the question of whether Iceland is facing a debt sustainability problem or a balance of payments problem as I have just defined them. But in order to answer that question, it is necessary to peer through the settlement of the estates resulting from the financial crisis – a process that is nowhere near completion – and correct for the effects of certain international corporations operating in this country. These companies have a profound effect on Iceland’s international investment position as measured according to international standards, but they would have a negligible impact on the state of the domestic economy if they defaulted on their debt. As a result, the task requires a great deal of estimation and entails some uncertainty, as previous findings have shown. The estimates are now more reliable than before, however, as time has clarified a number of factors concerning the failed banks’ estates and analysts have now gained access to the best available data. The results are the same as in previous appraisals, however, in that there are no signs of a debt sustainability problem as I have just defined it. Iceland’s net underlying debt position is estimated at 60% of GDP, the lowest since 1999. Furthermore, it is lower than that of many countries that no one would claim faced a sustainability problem. New Zealand’s net debt position, for instance, has hovered around 80% for more than one decade.
https://www.bankofengland.co.uk/-/media/boe/files/speech/2016/redeeming-an-unforgivingworld.pdf?la=en&hash=7B7AC35CC3017FCD8EF5BE7D5F2D0C4EA22C7E05  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  resolution failed, and defaults occurred, it would take the failure of more than the CCP’s two largest clearing members in extreme but plausible market conditions to lead to the exhaustion of the default fund – this is a scenario, in the tail of the tail, which would almost certainly be more severe than those we have seen historically, including in the crisis. The crisis has, of course taught us, that we need to think about events in the very tail of the probability distribution. So we do need to ask what happens when prefunded loss absorbency is exhausted and insufficient to cover losses. Unlike banks, if prefunded resources are insufficient to absorb losses, the CCP does not become insolvent. CCP’s rulebooks, to which all members agree in advance, allow a further series of recovery actions, in a prescribed sequence. A CCP could require its members to contribute more resources, it could reduce its liabilities to some of its members, and ultimately it could “tear –up” (i.e. cancel) all or some of its contracts – in effect the closure of the clearing service. The sequence of ever more draconian actions, reflect the fact that CCPs are not independent risk takers. In fact, they should not be risk takers at all. They are services that, for a fee, manage the risks of derivative counterparty default that their members would otherwise face directly and at far greater cost. Again, the comparison with banks is instructive.

Certainly, as far as loss absorbing resources are concerned I do not believe that it is likely to be justified to require CCPs to hold an extra shot, in the form of bail in debt – to enable them to replenish their own resources. If, following the default of more than two major wholesale financial market institutions in stressed market conditions, the margin held by the CCP, the default fund, and further cash calls on the membership have been insufficient to meet the losses, we will have gone considerably further into the tail of systemic stress events than we have experienced before or that we require banks to withstand. In those circumstances, a reload of the CCP’s resources by bailing in debt is unlikely to resolve the problems. On the other side of the ledger, holding bail in debt would be of no other use to a CCP but could put up materially the cost of clearing. All else equal, this would be passed onto the users of clearing, reducing incentives to use the risk reduction that clearing offers. Resolution, however, is about more than access to extra loss absorbing resources. Its objective is to ensure that when systemic financial institutions get into trouble, financial services critical to the real economy are maintained. The latter stages of a CCP’s recovery plan that terminate, in the tearing up of contracts, would probably be “orderly” only in the sense that it would be a prescribed sequence of pre-agreed actions.
Øystein Olsen: A changing global economy Speech by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the Norwegian School of Economics and Business Administration (NHH) annual Spring Conference, Oslo, 31 May 2011 The text below may differ from the actual presentation. This speech does not contain assessments of the economic situation or current interest rate setting. *  *  *  Over the past decade, the pace of change in the global economy has picked up. Emerging economies1 have assumed a more prominent role. These developments have generated challenges and opportunities, not only in emerging economies but also in the advanced economies. In my speech today, I would like to focus on three key macroeconomic trends:   First, the global economy has long been characterised by substantial imbalances in international trade. Large surpluses in many emerging economies have their counterpart in large deficits in traditional industrial economies. This generates tensions.   Second, capital markets have not been able to cope with the high level of saving in emerging economies. Real interest rates have been low for a long period and new imbalances have arisen. Sovereign debt is now high in a number of countries.   Third, growth in emerging economies has resulted in higher demand for energy and commodities. While the price of money has fallen, prices for energy and commodities prices have been pushed up. This has amplified the imbalances for many countries, but has had a favourable impact on Norway.

This inflation corrodes the households' purchasing power, increases the uncertainty for the future in every cell of the economy, heightens the volatility of financial markets, and damages the long-term perspective of development. Therefore, the primary focus of economic policies should be the undertaking of coordinated measures to mitigate the cost borne by inflation, and control and return it to its target, in the shortest time period and with the lowest cost possible. Against this backdrop, the Bank of Albania has embarked on the gradual normalisation of the monetary policy. This normalisation is undertaken in parallel with all the other central banks, across the region and around the world, which are facing the same high inflation phenomenon. It engenders a progressive raise of the key interest rate, by slowly changing the nature of the monetary policy stance from the current position, which has been stimulating, towards a more neutral position, which provides a more sustainable support for the long-term growth of Albania. During the discussions of the past two weeks, we have gladly observed that our viewpoint is also shared by the IMF Mission and the Ministry of Finance and Economy. 1/2  BIS - Central bankers' speeches  Our future projections suggest that inflation will continue to remain high in the two next quarters as well. Furthermore, the stabilisation of prices in foreign markets and the normalisation of the monetary policy stance will induce a progressive reduction of inflation, until its return to the target in 2024 H1.
Nevertheless, the increased amounts are likely to prove particularly useful for the Confederation and the cantons at present, giving them greater latitude to support households and companies in dealing with the current crisis. Closing remarks Ladies and gentlemen, I would like to remind anyone demanding ‘more’ from the SNB that over the course of time, the SNB does actually distribute everything it can. If we do temporarily retain profits, this is not at the cost of the public sector. However, it does enable us to facilitate a more even spread of distributions to the Confederation and the cantons from 2  In February 2020, the FDF and SNB signed a supplementary agreement to the profit distribution agreement of November 2016. This supplementary agreement increased the maximum annual distribution to CHF 4 billion for the financial years 2019 and 2020. The 2016 agreement provided for an annual distribution of up to CHF 2 billion for the years 2016 to 2020. Page 6/7  year to year, while also reducing the risk of the SNB being temporarily undercapitalised. The SNB’s long-standing practice with regard to distributing profits has proved its worth. However, let me stress once again: the greatest contribution that the SNB can make for society and the economy in our country is to carry out its statutory mandate. And we will continue to do our utmost in this regard. Thank you for your attention.

By curbing the strong upward pressure on the Swiss franc through extensive foreign exchange market interventions, and by providing financing for COVID-19 loans on favourable terms via our new SNB COVID-19 refinancing facility, we have made an important contribution to stabilising the Swiss economy in this once-in-a-century crisis. Nevertheless, we are still frequently confronted with demands that the SNB should do more. And what is meant by ‘more’ is above all increased distributions. I would therefore like to use my speech today to discuss the SNB’s profit distributions. Who owns the SNB’s profits and how are they generated? The profits generated by the SNB and the distributions it makes were the subject of discussion in Switzerland long before the coronavirus pandemic broke out. There was already heated debate on this more than 100 years ago, as the rules governing the distribution of profits were one of the most contentious issues in the run-up to the creation of the SNB. The cantonal banks had to cede the right to issue banknotes to the newly established central bank, and the cantons wanted compensation in return. The fundamental question of how the profits generated by the SNB were to be distributed already had to be addressed back then. The following principles were set: the profits should first be used to build up the SNB’s equity capital and pay a modest dividend to shareholders; and any remaining profit would go to the public sector, with at least two-thirds accruing to the cantons.
Put differently, there is the risk that the deterioration in pricing behavior might spread to other sectors of the economy. This situation necessitates a measured, gradual and predictable phase of monetary tightening. The measured and gradual nature of monetary tightening is important in face of an already moderating economic growth while having a monetary tightening that is predictable is important to prevent undesired fluctuations in financial markets. 6  BIS Review 82/2008  Dear Guests, I would like to stress once more. Macro-economic stability is one of the key inputs of sustainable economic growth. Macro-economic stability cannot co-exist with high inflation. Countries that concede higher inflation for the pursuit of economic growth in the short-term are bound to be deprived of both in the medium-term. Policies to attain price stability will entail a cost in the short-term. We need to pay this cost to achieve price stability and ensure sustainable and high growth rates. If we hesitate today and step back from our ultimate target of price stability, we will still face similar problems in the near future, but possibly in worse circumstances. In conclusion, disinflation in Turkey is an on-going process. The disinflation process was disrupted over the past two years due to the extraordinary effects of supply side shocks and inflation targets were overshot considerably. In this environment, the Central Bank of Turkey has made necessary assessments and reacted accordingly. Within the framework of the monetary policy adopted recently, the target has been revised.

The European Central Bank, on the other hand, has followed a more hawkish attitude and focused on attaining its primary objective, which is price stability. The disparity between the consumption patterns is another factor causing divergence in monetary policies. In comparison to the industrialized world, food expenditures in developing countries constitute a larger share in the basket of consumer prices. That is why increases in food prices typically lead to higher increases in the inflation rates of developing countries. This is one of the reasons why central banks of developing countries focus more on price stability and display a tighter monetary policy stance in recent months. To put it in figures, since mid-2007, policy rates in sixteen major developing countries have increased by 110 basis points on average – in contrast to developed countries where policy rates have been cut by 98 basis points on average. The exchange rate regime also affects the conduct of monetary policy. As you may all know, many developing countries peg their currencies against the US dollar or the Euro. As the US dollar has lost value against many currencies in recent years, this has led to sharp increases in the inflation rates of those economies whose currencies are pegged to the US dollar. In the period of January 2006 to May 2008, inflation rates of countries whose currencies are pegged to the US dollar have increased three-fold to 15.1 percent from 3.9 percent.
In this case formalism is based on task performance and makes the control structures become dormant or inhibits their positive progress. So it is crucial that the law itself and regulations be as clear and implementable as possible in order to establish confidentiality and facilities in their implementation process. Passing in the definition of the risk profile of the client, is the only way that would permit the compliance with the spirit of the law. This approach is based on a sound “know your client” policy of the bank, which should be a standard requirement nowadays. This approach has several advantages, where one could mention improved capabilities on tightening the system to prevent or detect cases of ML. Furthermore, it allows better distribution and focus of financial and human resources, resulting in a lowering of compliance costs. At the same time, it allows those institutions responsible for implementing the law and analysing the information, to focus on the full investigation of those transactions that represent higher risk of being ML. Another delicate issue that I would to stress on in my speech is keeping and protecting the confidentiality on giving and managing the information on suspicious transactions. Our practice has shown that problems with this issue are complex. We have had cases of confidential information being public in the press, the next day they were filed.

An effective system of AML, means advanced systems of information technology, especially on those parts that deal with the database of the clients, the aggregation of the information from any single point in the network, and those that enable the continuous monitoring and filtering of any bank transaction. For our institutions, especially for those that are not branches or subsidiaries of any stronger financial institution, those costs can be substantial and difficult to be absorbed. BIS Review 49/2005  1  Furthermore, we have been witnesses of a somehow difficult dialogue with the institutions that implement the law. I must say though that such a problem exists almost in any jurisdiction, including the most developed countries. But their attitude toward the abidance to the law, of constructive discussion of problems and of quick reactions in implementing changes, facilitates the solution of different problems. Dear bank directors, I do like though to consider the issue from what we as bankers, can contribute more in this process, in spite of above-mentioned difficulties. Furthermore, history shows that the cost of dealing with those difficulties, whatever their size in normal times, can be easily exceeded in instances of unusual events that are linked with scandals on ML.