samchain/econo-pairs-v1 huggingface dataset:
In 2004, the Basel II accord established a new capital framework aimed at improving risk measurement, enabling banks to use their own models while providing a more detailed and risk-sensitive method than that of Basel I. The in-house measurement models, which were assumed to be more advanced, were under supervisory authorisation, available to the banks with the greatest internal risk management capacity. These models were deemed to reflect best market practices and the shared objective was to promote their use. The search for risk sensitivity prevailed over other considerations of simplicity and comparability. That said, following the international financial crisis that broke in 2008 and the lessons drawn from it, shortcomings have been identified in the Basel II framework relating to the ability of the models to correctly measure risks. Moreover, questions have been raised about the actions of banks, which might have been able to benefit from incentives to develop new models that tended to reduce the risk calculated and, therefore, the capital consumed. And this not to mention the doubts raised about supervisors’ capacity to validate increasingly more complex models. In sum, the validity of risk-adjusted capital ratios as a measure of banks’ solvency has, in some cases, been questioned, along with the usefulness of this metric to compare the relative position of each bank.

To illustrate this problem we can cite certain analyses published in 2012 which concluded that around half of all investors did not believe banks’ RWA figures, while 80% considered that the risk measurement framework should be simplified in order to be more credible. The Basel Committee conducted various studies attempting to cast light on this matter. Work on the credit and market risk areas was carried out. While this type of study should be viewed with all due caution, it is worth recalling some of the conclusions reached. 4/7  For instance, according to a study by the Committee published in July 2013, when different banks applied their own internal models to a single portfolio selected for the purposes of the study, there was seen to be high variation among the resulting RWAs. Only a portion of this variation was due to genuine factors, i.e. to risk factors, and to methodological differences permitted by the supervisors (and which were, therefore, in principle, acceptable or relevant differences). What was most interesting, or worrying, depending on one’s standpoint, was the fact that 25% of the variation could not be explained by either of the factors I have just mentioned. Market criticism and doubts, combined with the findings of the studies, led the Basel Committee to launch a far-reaching internal debate. At the risk of excessive simplification, at one extreme are those who have lost confidence in banks’ capacity to properly use their own models, and also in supervisors’ ability to validate and oversee increasingly complex models.
Inflation has also remained on an upward trajectory in Malta, despite the generous subsidies which kept wholesale and retail fuel and electricity prices at 2019 levels, hitting 7.4% in September and remaining at that level in October. Still, they are nowhere near the level of prices experienced in most other euro area countries. The assessment of Malta's HICP excluding energy is even less encouraging. While since the start of the year, food inflation has been only moderately below that in the euro area, non-energy industrial goods (NEIG) and services inflation have exceeded the corresponding euro area averages. In particular, services inflation in Malta averaged 5.8% since January, far above the rate of 3.4% recorded for the euro area. In part this reflects the higher cost of imported inputs used to generate services, but it also reflects domestic inflation processesthat have been triggered by the strength of demand for services – the latter in the context of a tight labour market, households' strong balance sheet and considerable fiscal support. While domestic economic activity can be expected to gradually slow down during the current and coming quarters, the European Commission's forecasts that Malta isstill expected to have the second highest rate of growth in the euro area. In our view, even this forecast is quite cautious given the resilience of the economy, as shown, for example by the unemployment rate, which is still below the lowest rate  1/5  BIS - Central bankers' speeches  recorded pre-pandemic.

The reduction in the Eurosystem's monetary asset holdings is expected to be pursued in a predictable and gradual manner, with the first principles being announced in December. This will undoubtedly change the financing environment which borrowers have grown accustomed to. The most immediate impact will be on money markets and government bond yields, which later propagate to the cost of bank and corporate debt. Indeed, euro area sovereign yields have already risen markedly since last year and could increase further when balance sheet normalisation starts. Turning now to Malta, while the transmission of the latest monetary impulses to bank lending and deposit rates appears rather slow, government bond yieldsin Malta have already begun to increase. Such increases and tighter financing conditions abroad will eventually be reflected in a higher cost of funding for domestic banks, and eventually, households and corporates. It is essential to be reminded that on monetary, financial and economic terms Malta is very much integrated with the rest of Europe and that the decisions taken in Frankfurt ripple across the whole euro area, Malta included. 2/5  BIS - Central bankers' speeches  The transmission of tighter monetary conditions to the interest rates that banks offer to their customers is necessary for inflation to return to the policy target of 2% in a timely manner. But it is not sufficient. Other policy actors also need to do their part. In particular, fiscal support has to be temporary and targeted, so that it avoids supporting demand for longer than is necessary.
I experienced the interplay of public and private sector efforts in the early 1990s, in the wake of the commercial real estate and leveraged buyout downturn in the US Northeast. In the public sector, the supervisors pursued an aggressive program of remediation for troubled banks with three major elements. Because the problems at that time were simpler, the remediation program imposed by supervisors was easy to understand and it was effective. The three principal actions were: a troubled bank had to raise additional capital and strengthen its liquidity; it needed to fully identify its problem assets and exposures, isolate them and place them in workout; and it needed to develop a new business plan. At the same time, Congress passed the Federal Deposit Insurance Corporation Improvement Act, otherwise known as FDICIA in 1992; for its time, it contained a large number of provisions to guide supervisory and market practice. Its lasting contributions were the prompt corrective action framework escalating the intensity of supervision as capital levels fall in a bank culminating in the ability to close banks before capital is fully depleted and a management attestation about the quality of internal controls that foreshadowed SarbanesOxley. Today, however, much of FDICIA has been forgotten. The reason? At many financial firms, bankers struck the theme of “never again”. That conviction spurred them to identify lessons learned and institute stronger controls on commercial real estate lending and buyout lending and maintain them.

Reforms also are being considered for money market mutual funds, where the inherent run risk in the event that a money market mutual fund “breaks the buck” continues to be a significant vulnerability. Yet a third set of initiatives in the reform agenda seeks to strengthen the clearance and settlement infrastructure for over the counter derivatives. In addition to creating incentives to move derivative transactions into trade repositories and central counterparties, which provide the benefits of risk management mechanisms and encouragement of standardization of  BIS central bankers’ speeches  3  contract terms, the reform efforts extend to improving the international legal framework for derivatives transactions in the event of default and failure or resolution. Regulatory reform can create guardrails for the financial system, but in my view, those reforms are far more effective if accompanied by similar reform efforts in the private sector. Private sector reform can take the form of enhancing internal governance, re-evaluating strategy and business models, and strengthening risk management and internal controls within individual firms. It can also take the form of industry collective action to improve market structure and practice, to invest in financial infrastructure and to recommend best practices. In the U.S., the combination of public sector – and private sector – driven reform has historically played an important role in our financial system and should play a role today.
Large shares of the sizeable revenues from the petroleum sector over the past 20 years have been transferred to the oil fund. Norway’s sound public finances have been a great advantage to the economy, particularly through the financial crisis. But the management of the government’s large petroleum revenues through our 40 year-long oil history has not always been equally well planned. In the mid-1970s, the budget deficit – including petroleum revenues – reached a high level. And we could not know then that oil prices would more than double a few years later – with the second oil shock in 1979, known as OPEC II. But we learned from our mistakes. The oil fund mechanism in 1990 and the fiscal rule in 2001 were introduced to discipline fiscal policy in such a way that Norway’s petroleum wealth would also benefit future generations. Oil fund assets are now equivalent to more than twice the GDP of Norway’s mainland economy, and the oil fund, or the Government Pension Fund Global (GPFG), is today one of the world’s largest sovereign wealth funds. The GPFG represents the nation’s savings, to be managed for the benefit of both current and future generations. As an investor, the GPFG makes capital available to other countries for economic activity, and the return on that capital will depend on the economic performance of those countries. The GPFG is a long-term, responsible investor. The objective of investment management is to achieve the highest possible return at an acceptable level of risk.

On augmenting economic adaptability, the BOT will ensure that the exchange rate moves broadly in line with the underlying economic fundamentals while its volatility is manageable by Thai businesses. In the long run, we view a flexible exchange rate regime as the most effective buffer for capital flow volatility. In this context, a more balanced capital account is an important supporting factor. To this end, the BOT is currently formulating a Capital Account Liberalization Master Plan. This plan seeks to promote Thai investment abroad and streamline foreign exchange regulation, thereby increasing economic adaptability and  2  BIS central bankers’ speeches  promoting greater awareness and capability for the private sector’s foreign exchange risk management, which relate directly to the businesses of many of you present here. In addition to maintaining stability, BOT can also enhance competitiveness by ensuring financial institutions’ role as effective intermediaries of capital, thereby improving financial access and inclusive growth. In this regard, I like to mention that we have launched the Financial Consumer Protection Center to boost financial literacy. Clearly, a more competitive financial sector will support the process of structural change I discussed before. The second Financial Sector Master Plan, which takes into account major global developments such as regional integration and global regulatory reform, will further this vision of a modern financial sector landscape. In designing such a landscape, many key policy issues will need to be explored in depth.
at the time the Federal Law on Currency and Payment Instruments enters into force. If the revision of the Constitution is approved, it will become effective immediately, which means that the SNB will be able to transfer its excess reserves as soon as the implementing bills will be ready. Should the revision of the Constitution fail to pass, the excess reserves would remain on the SNB’s books, and the Bank would then have the responsibility of managing them with the objective of generating more profit for the government. Nothing fundamental would change as far as the possible selling of gold is concerned : gold sales would remain on the agenda. With regard to the sale of gold, the essential element is thus that the Federal Law on Currency and Payment Instruments be passed. The amendment to the Constitution is only important to the extent that it determines where the excess reserves will be administered. 4. Perspectives for the SNB’s gold policy Ladies and gentlemen, I have been talking to you for twenty minutes now without actually giving you an idea what the SNB will concretely do. Given the political uncertainty which still exists regarding the process of demonetisation of gold and the transfer of excess reserves, you will understand that this is neither the time nor the place to set out a sales programme.

Our domestic assets are too low and a transfer of foreign reserves would have a negative impact on the Bank’s operations: • •  the SNB would be impeded in conducting its monetary operations (interventions, money market operations) the bank’s profitability and liquidity would diminish drastically. Consequently, a transfer in gold of a part of the valuation gain is the obvious solution. A group of experts has been asked to make an estimate of the excess reserve of the bank. 2.2 The proposals The group of experts has come to the conclusion that a capital corresponding to 1300 tonnes of gold could be withdrawn from the SNB’s balance sheet to be used for other purposes than monetary policy. Of these 1300 tonnes, 500 tonnes are to be set aside for financing the Swiss Foundation for Solidarity previously announced. What to do with the remaining 800 tonnes? A first idea would consist in transferring the remaining excess reserves to a public investment fund having more extensive investment possibilities than the SNB. Currently, our asset management policy is basically limited to fixed-income investments. The fund’s regulations should provide for investment in shares in order to achieve a higher long-term yield. But there is usually no limit to the imagination of politicians when money is to be distributed! Other concrete proposals exist. Some would like the excess gold reserves to be earmarked for specific goals such as improving the capitalisation of our social security schemes or for educational purposes.
In these cases, the existing general prudential framework requires that banks reclassify exposures as restructured or in default in a timely and adequate manner. The actions of the banks in this regard will also engage 2/3  BIS central bankers' speeches  the supervisory process as important input information in the supervisory review and evaluation by the Bulgarian National Bank. The above outlines the framework for action in the short term. The main points of this framework are: continuing the previously adopted anti-crisis measures for as long as necessary, including with regard to the dividends, the risk exposures and the countercyclical capital buffer; maintaining the high capital and liquidity requirements, in this regard we are ready to respond to a scenario in which the banks may have to operate temporarily under the combined capital buffers requirement; and implementation of the newly adopted EBA framework for a moratorium on loan repayments. We are ready to activate additional measures if the development of the situation so requires. It is very important in the difficult environment, in which we find ourselves, and strongly committed to anti-crisis measures, not to lose our strategic focus, which is aimed at successfully continuing and finalising the project we started a few years ago for joining the euro area. The Bulgarian National Bank has serious responsibilities in this process and has been ceaselessly pursuing them.

For the purpose, in March we adopted such measures with a total effect of over 8% of GDP. They comprised full capitalization of the sector’s profit, significant reduction of riskier foreign exposures, and cancelling the two planned increases of the countercyclical capital buffer. The intended effect of these measures was along two key lines: maintaining lending activity and relieving bank borrowers – companies and households, by enforcing a private moratorium, proposed by the industry, on loan repayments. The results confirm that to date this effect has been achieved. As of end-October, we not only evidence no stagnation in lending, but rather the loans to companies and households have increased on an annual basis by 2.5 % and 7.3 %, respectively. At the same time, the approved applications for deferral of payments under the private moratorium reached nearly 109 thousand at their peak in August, with gross balance sheet value of deferred loan payments of over BGN 9 billion, which is a significant financial relief for the affected companies and households. The tasks related to the mitigation of COVID-19 consequences for banks and their customers involved a considerable effort on our part. Nevertheless, we managed to make arrangements and provide a significant contribution for the completion of the strategic task of membership of the Bulgarian lev in ERM II and accession of our country to the Single Supervisory Mechanism, by establishing close cooperation of the Bulgarian National Bank with the European Central Bank.
Accordingly, when we were at the zero lower bound, we weren’t able to rule out the possibility that initial increases in the policy target might not translate one-for-one into increases in money market rates, as reduced uplift from the zero lower bound could have offset some of the policy tightening. In addition, one might have also worried that various money markets might not move together as rates rise, meaning that, for example, a larger spread might emerge between secured and unsecured rates, or between overnight and term instruments, than had historically been the case. I will discuss some evidence on these issues later on. The second development, in October 2016, was the entry into force of new SEC rules for money market funds. These new rules require, among other things, a floating net asset value for institutional prime money market funds, provide for liquidity fees and redemption gates for prime funds, and establish more stringent rules for portfolio diversification and financial reporting for all money market funds.11 Many of these reforms are aimed at least in part at enhancing financial stability, and in particular at addressing the potential for runs on prime funds to intensify financial stress. They could also make prime funds, which can hold a broad spectrum of money market 3 / 13  BIS central bankers' speeches  assets, less attractive to investors who desire an investment opportunity with a fixed net asset value or who are concerned about redemption fees or gates.

This requires financial institutions to internalize the costs of their risk-taking activities up front and to hold capital and liquidity buffers sufficient to handle a plausible range of adverse outcomes. Finally, on occasions when these buffers prove inadequate and a financial firm does reach the brink of failure, the official sector needs the capacity to smoothly wind down such firms so that future taxpayer-funded rescues prove unnecessary. Regulatory and supervisory efforts to accomplish these goals are proceeding down several distinct but related paths:   Increase the capital and liquidity standards for all internationally active banks, measured by both quantity and quality of capital and liquidity, so that they are better able to absorb financial shocks without disrupting the flow of credit to the real economy.   Introduce a credible resolution mechanism for managing the failure of a large systemic bank or nonbank financial institution, to reduce the economywide costs of such failures and, by making them less disruptive, further reduce moral hazard by diminishing expectations of future public support.   Ensure that the largest and most interconnected financial institutions – whether or not they are chartered as banks – face even more stringent prudential standards, in order to reduce moral hazard for the largest firms and lower the probability of their failure to below that of smaller and less systemically important institutions.   Strengthen financial market infrastructures so that when failures inevitability occur, the shocks generated by these failures are dampened, not amplified as they propagate through the financial system.
Chile has managed to navigate this period with no accumulation of imbalances. Still, we will inevitably be affected. The cycle of high commodity prices is starting to reverse and the copper price will thus approach its medium-term levels. As I noted, the recent reduction in investment is partly associated with this factor and is also one defined risk in our baseline scenario. Thankfully, our policy regime provides us with the tools to mitigate the effects of a more adverse scenario. Moreover, our country is well prepared to deal with future challenges. The depreciation of the peso has been a buffer, especially because it allows relative prices to adjust and thus rebalance resources and lessen the impact on output and employment. It also has an effect on inflation. This effect has been limited, in line with our economy’s fundamentals and the state of capacity gaps. This is also related with the credibility of our monetary policy’s commitment with the inflation target. Inasmuch as macroeconomic conditions warrant, the Central Bank has the room and the determination to continue contributing to mitigate the cyclical slowdown of the economy. But we also reaffirm our commitment to achieving price stability, indicating that we will do everything necessary to ensure that projected inflation is aligned with the 3 percent target over the policy horizon. As we have said time and again, this is the main contribution that monetary policy can make to the development and well-being of our country. Thank you.

Prominent reasons for the disruption in inflation dynamics in May 2006 were the significant depreciation of the Turkish lira due to the deterioration of risk perceptions in an environment where domestic demand was strong and the impact of the exchange rate pass-through on prices as well as increases in non-processed food prices were high. The Central Bank’s response was a rapid and strong monetary tightening aimed to overcome the deterioration in inflation expectations in that period – so that economic units would continue to take the inflation target as a reference in their decisions. Today, the primary cause of the lasting deterioration in inflation outlook is the presence of significant supply side shocks .As I have mentioned previously, the Central Bank’s projections suggest that it will not be possible to bring inflation back to 4 percent in the shortterm even with a sustained maintenance of the tight monetary policy stance. In this case, a strong reaction by monetary policy, as was the case in 2006, would not ensure the convergence of inflation to 4-percent target in the short-term, but would create undesired fluctuations in economic activity and relative prices. It should be kept in mind, however, that the inflation expectations will deteriorate further in the absence of a reaction by the Central Bank. The current path of core inflation indicators demonstrates that the sharp increases in food and energy prices have started to adversely effect pricing behavior. The core inflation indicator that excludes food and energy prices rose to 6.3 percent as of May.