samchain/econo-pairs-v1 huggingface dataset:
The banks were urged to show restraint and downsize, and to follow that up, the Central Bank specifically collected information from them on their downsizing efforts. They realised, of course, that they were in a tight position, and they responded by selling assets and discontinuing selected activities in a number of countries, among other things. Kaupthing Bank’s decision to abandon its plans to acquire NIBC in the Netherlands was very important in this regard, not just for Kaupthing itself but for all of the banks. The Central Bank supported all of these actions wholeheartedly; however, it did not have the statutory authority power to force the banks to change their conduct. It is known that the Central Bank expressed its growing concern over the position of the banks during meetings with governmental authorities. Early last year, the Central Bank’s concern centred not least on the banks’ large near-term refinancing requirement for the coming years, which I have already mentioned, and the opinion, expressed by leaders of a number of international banks, that the global credit crunch was unlikely to ease in the foreseeable future. The Central Bank feared that credit markets could remain closed to Icelandic banks for some time to come. Although various explanations have been given for the swift rise in the Icelandic banks’ CDS spreads, first in early 2008 and again that summer, it is perhaps possible to claim that the most important explanation lay in growing scepticism about the banks’ ability to obtain the medium-term funding they needed for refinancing purposes.

At this point, banks are almost entirely dependent on central bank liquidity facilities, and the interbank markets are more or less non-functional because of the utter lack of confidence. The balance sheets of the world’s largest central banks have grown significantly since the end of last summer, with some expanding many times over. For several years, the Central Bank of Iceland’s rules on liquidity facilities have been largely modelled on those of the ECB. I say largely because for quite a while the Icelandic rules were rather more stringent than those in Europe – that is, the Central Bank of Iceland set stricter requirements concerning eligibility of collateral. Facilities in the Central Bank of Iceland resembled those in the ECB’s jurisdiction; the collateral accepted was similar, and so on. This applied, among other things, to bonds issued by banks. Last year, steps were taken to align the Icelandic rules more closely with those in Europe in order to increase access to liquidity. In 2008, the European Central Bank responded sharply to what it considered excessive borrowing from the ECB by Icelandic banks through subsidiaries in EMU countries. The loans concerned had been taken in compliance with the ECB’s rules on liquidity facilities for financial undertakings in EMU countries, but the ECB demanded that the Icelandic banks repay, quite quickly, a large share of the facilities of which they had availed themselves in good faith. Those repayments were funded at least partially with deposit accumulation in foreign branches.
But, additionally, in a crisis like this, as I have mentioned earlier, the deterioration of banks’ solvency is expected to hinge on their degree of exposure to the various regions and sectors which are being affected differently by the pandemic. In any event, as in the case of households and non-financial corporations, the public support measures implemented in recent months will help to mitigate the effects on financial stability. In particular, the government loan guarantee scheme and the various measures adopted by the ECB will contribute to smoothing the impact on banks’ solvency. The restrictions on the payment of dividends by banks also contribute significantly to this objective. And, lastly the moratoria will be useful so that the classification of loans as nonperforming is eased and distributed over time. Nevertheless, the impact of the COVID-19 crisis on financial institutions’ profitability is already clear. The banking industry’s already narrow profit margins of recent years – profitability actually stood below the cost of capital in the main European banking systems – were squeezed even further by the outbreak of COVID-19 and the need to record higher provisions to cover adverse developments in banking. Specifically, data from the first half of 2020 showed that listed Spanish banks had consolidated net losses of € billion, compared with profits of a similar order of magnitude in the same period in 2019.

For the big banks, in particular, it is crucial that a sufficient capital base be laid down as soon as possible, so that losses can be fully absorbed. The SNB welcomes the fact that, in 2010, both big banks already took important first steps in this regard, and we would like to encourage them to keep up the pace of their capital expansion. The capitalisation of most domestically focused banks is good by historical standards. However, a combination of high interest rate risk exposure and strong mortgage lending growth has been reported by a number of banks. In order for these banks to bear the risks in the medium term, it is important to ensure that their capital base is strong enough. I would now like to take a closer look at the situation of the two big banks, before turning my attention to the situation of the domestically focused banks. Situation of big banks Compared to 2009, the two Swiss big banks saw a marked improvement in their profitability and capital situation last year. In 2010, these institutions reported combined net profits of around CHF 13 billion, as opposed to roughly CHF 4 billion in 2009. This positive development was driven by UBS, whose situation improved further over the course of last year. In addition, both UBS and Credit Suisse continued to increase their regulatory capital ratios (ratio of Tier 1 capital to risk-weighted assets), which were already very high by international standards. Moreover, their financial strength ratings also improved.
For instance, Eurosystem staff 15 calculated that imports of goods from low-wage economies reduced euro area CPI inflation through direct effects and increased competition by 0.16 percentage points per year in the last two decades, although this is thought to be an upper bound. There is also debate as to whether globalisation has contributed to reducing the sensitivity of inflation to domestic output shocks; in other words, to a flatter Phillips curve. In general, ECB calculations show that more integrated economies have a flatter Phillips curve, and, as a consequence, a higher monetary policy sacrifice ratio . However, there is  11  Fo rbes, K. (2019). “Inflation dynamics: dead, dormant or determined abro ad? ”. Bro oking Papers o n Economic Activity, Fall. 12  Bianchi, J. and A. Civelli (2015). “Glo balization and inflation: Evidence fro m a time-varying VAR”. Review o f Eco no mic Dynamics, 18(2), pp.406-433. 13  Fo rbes, K. (2019). “Inflation dynamics: dead, dormant or determined abro ad? ”. Bro oking Papers o n Economic Activity, Fall; and Attinasi, M. A. and M. Balatti (2021). “Glo balization and its implications for monetary po licy”. ECB Economic Bulletin, Issue 4. 14  Kamber, G. and Wo ng, B. (2020). ”Global facto rs and trend inflatio n". Journal o f International Eco nomics, vo l. 122, 103265. 15  ECB Wo rk Stream o n Glo balization (2021). "The Implications o f Glo balisation for the ECB Mo netary Po licy Strategy". Occasio nal Paper no . 263.

It is also encouraging to note that the report makes a similar positive assessment for a group of reforms undertaken by the Albanian government and other authorities in the area of market liberalisation, privatisations, energy sector and infrastructure. 1/2  BIS central bankers' speeches  Looking ahead, the report assesses objectively the global macroeconomic environment as overall favourable. The nature and origin of capital flows toward the transition economies is immune from the adverse effects from the Brexit or increase in interest rates in the US economy. For the Central and Southeastern Europe, during 2017, the economy is expected to grow faster, driven by domestic factors and a slight and stable improvement of the economic situation in foreign trading partners. The main risks relate to the performance of commodity prices, and in particular to geopolitical and global economic developments. The deepening social inequality is an issue of particular concern that has been present across the board in transition countries. The report evidences that inequality in the economy, in terms of opportunities and financial inclusion, has been expanding, contributing negatively to economic welfare in transition countries. Finding solutions is a difficult challenge, with financial education and financial inclusion considered as tools for addressing this issue successfully. I would like to take advantage of this opportunity to emphasise that the Bank of Albania and the banking system are paying particular attention to these two topics.
In view of the medium-term challenges posed by the high debt-to-GDP ratio and the impact of population ageing on public expenditure, the process of redressing fiscal imbalances must be compatible with an increase in the quality of public finances. In this respect, the composition of the income/expenditure adjustment in the necessary mediumterm programme is of utmost importance in order to achieve the objectives set without BANCO DE ESPAÑA  14	 TESTIMONY BY THE GOVERNOR OF THE BANCO DE ESPAÑA BEFORE PARLIAMENT IN RELATION TO THE DRAFT STATE AND SOCIAL SECURITY BUDGET FOR 2019  THE QUALITY OF PUBLIC FINANCES  CHART 14  TAX STRUCTURE IN SPAIN  GENERAL GOVERNMENT INVESTMENT % of GDP  % of public expenditure  12  18  10  15  8  12  6  9  4  6  2  3  0  0  100 90  70  75  80  85  90  95  00  05  10  PUBLIC EXPENDITURE IN SPAIN (2017)  80  CONSUMPTION  70 60  CAPITAL  50 40 30 20  LABOUR  10 0  16  2017  GEN. GVT. (% of GDP)  GENERAL GOVERNMENT  SOCIAL SECURITY  GEN. GVT. (% OF TOTAL EXPENDITURE) (right-hand scale)  REGIONAL GOVERNMENT  LOCAL GOVERNMENT  SOURCES: IGAE, INE and Banco de España. hampering economic growth.

Recognising the risk of self-fulfilling cycles, the ECB reacted quickly and forcefully by launching the pandemic emergency purchase programme. The message we sent was clear: there are no limits to our commitment to the euro. And that message holds true today. Equally important was the response by governments. The decision to launch Next Generation EU (NGEU) was a clear demonstration of European unity that broke with the past in many ways. Its size of € billion; its structure, which benefits most those worst hit by the pandemic; and its funding via European common debt – all represented a watershed. As a result, I believe that the intrinsic fragility of the euro area has now declined. Europe has proven that it will come together and take decisive action when needed. This is what the euro crisis taught us about how crises must be managed: they require the commitment of all policymakers for the benefit of all Europeans. The importance of policy alignment The euro crisis in turn led to a third, more slow-moving crisis. Europe slipped into a period of what I termed at the time “lowflation”: a persistent low-growth, low-inflation environment. This gave rise to the third lesson I want to underline: the importance of a balanced policy mix. 2/4  BIS central bankers' speeches  When inflation is low and interest rates fall towards zero, the optimal policy mix changes. Monetary policy becomes more effective in lifting demand when fiscal policy reinforces it. In the mid-2010s, however, the euro area saw the opposite happen.
Consolidation of balance sheets has continued, productivity is strong and normal business activity patterns indicate that the conditions should be relatively favourable for an increase in industrial production during the spring. Low stocks levels in relation to sales and an investment ratio that is below the long-term trend would indicate this is the case. An expansionary economic policy provides further support for the optimism. However, the question most people are asking themselves now, as they were in 2002, is whether the adaptation to the imbalances has reached a sufficient stage to enable a broad, lasting increase in demand that can take over as the driving force behind a production increase. It is much too early to be able to give a clear answer here. If we look at households in the USA, we can see that they have become more passive since the December Inflation Report was published. The explanation could be the security policy unease and the still weak stock markets. Continuing high oil prices will also cut into disposable incomes. However, the expansionary economic policy should partly counteract these effects. All in all, I believe that the picture of a relatively prolonged recovery in the USA, where growth gradually increases over the year and attains the economy’s long-term sustainable level, remains for the most part intact. … while the conditions for a turnaround in the euro area are poorer. The total international recovery expected during the coming year does not look to be as strong as the Riksbank anticipated in December.

Given these conditions, when the signals of a recovery became clearer at the beginning of 2002, the Riksbank elected to raise its steering interest rate on two occasions during the spring, by a total of 0.5 percentage points to 4.25 per cent. These increases should also be regarded in the light of the fact that inflation was still at a high level then and risked having a negative effect on inflation expectations. During the spring the rate of price increase turned back towards the target of 2 per cent as forecast. As an external analyst my assessment differed slightly from that of the Riksbank. This applied to both the international picture, where it was uncertain whether a turnaround had actually taken place, and resource utilisation in Sweden and the risk of tension that could cause rising inflation. I interpreted the high rate of wage increase that we had then as a delayed effect of an overheated labour market during 2000 and part of 2001. Shortages on the labour market had eased considerably in spring 2002. In the services sector, as in construction, capacity utilisation had fallen significantly, which indicated that wage increases would gradually become more subdued. I therefore perceived the inflation risk as less evident and did not see any immediate need for raising the interest rate. It is clear that the inflation risk the Riksbank seemed to see declined as unease on the financial markets grew in the wake of bankruptcies and corporate scandals in the USA.
Considering this, we wrote, in Monetary Policy in Sweden, that the Riksbank, in addition to achieving low and stable inflation, should also strive to stabilise output and employment around long-term sustainable paths.5 This means that we also strive to hold resource utilisation at a normal level. We usually say that the Riksbank is thereby conducting a flexible inflation-targeting policy. We have also chosen to take a broad approach when it comes to interpreting resource utilisation, instead for only looking at a single measure of resource utilisation. 2  Sveriges Riksbank, Monetary Policy in Sweden, June 2010. 3  My colleague Lars Svensson has a different interpretation of our task, namely that, during the forecast period, we should strive to hold inflation measured in terms of the CPIF (the CPI with a fixed interest rate) as close to two per cent as possible and resource utilisation measured in terms of unemployment as close to an estimate of the long-term sustainable level of unemployment as possible. See, for example Lars E.O. Svensson, “For a better monetary policy: Focus on inflation and unemployment”, 8 March 2011. 4  The figure is based on the ten-year period 1997–2006. This period is not extended further than 2006 so as not to be affected too much by the period after the outbreak of the financial crisis in the autumn of 2008. However, the differences do not become so great even if the years 2007 and 2008 are included. 5  Sveriges Riksbank, Monetary Policy in Sweden, June 2010.

Sources: Statistics Sweden and the Riksbank  Table 1. Resource utilisation, second quarter 2011 Gap as percentage and RU indicator in standard deviation  GDP gap, HP  0.4  GDP gap, PF  -0.4  Hours gap, HP  0.3  Hours gap, PF  -0.8  Capacity utilisation¹  -0.3  Employment rate²  0.3  RU indicator  0.2  Unemployment gap³  -1.0  Labour shortage¹  2.3  ¹ Deviation from mean value, percentage points, 1996–2008 ² Deviation from mean value, percentage points, 2000–2008 ³ Percentage points, reverse sign  BIS central bankers’ speeches  17
Beyond the Pandemic  Address by Dr Mario Vella Governor, Central Bank of Malta during the IFS webinar Continuity Post Pandemic: An Economic Perspective  Thursday, 10 December 2020  Undoubtedly, 2020 will be remembered as the year of the COVID-19 pandemic, which has tragically led to loss of lives and economic hardship for very large numbers world-wide. The outbreak of COVID19 and the measures to contain the spread of the virus brought about a global economic shock without precedent after the Second World War. The world economy entered a recession, which has been far deeper than that experienced during the Great Financial Crisis of 2008-2009. Containment measures were highly effective in controlling the first virus outbreaks, though this came at a very significant economic cost. With the initial lifting of measures, economic activity began to recover and sentiment did improve. However, active cases rose sharply again and the health situation deteriorated by the end of the summer, forcing many countries in Europe to re-introduce containment measures by October. Although the level of stringency of the latest containment measures were less than those implemented during the first wave, activity is still more restricted compared with the third quarter, undermining global recovery prospects. Similar developments could be observed in Malta. Activity was significantly restricted during the second quarter of this year, in an effort to contain the spread of the virus. Travel was practically banned – barring for repatriations – with severe consequences for the tourism industry.

However, in view of the coincidence between this event and the ongoing saga, I will not do so today. Page | 5 Document Classification: Public
Nonetheless, I hope to be able to give you some fresh insights into Switzerland’s position in the European framework. I shall first give you a brief overview of the present economic situation in Switzerland and then talk more specifically about our relationship with our neighbour countries. As you know, Switzerland is not a member of the European Union. But it is by no means an island or an isolated place in the Alps. Second, I should like to focus on Switzerland as a financial centre located in the heart of the continent and the challenges it currently faces. Finally, I shall outline the Swiss National Bank’s monetary policy and what degree of freedom it has in a country fully surrounded by the euro zone. This question is particularly relevant, since progressive globalisation and Switzerland’s close economic links with Europe regularly raise the question whether pursuing an autonomous monetary policy is still appropriate. Let me begin with the current economic situation in Switzerland. 2. The economic situation in brief  In Switzerland, as elsewhere, the boom of the late nineties has been followed by a prolonged period of stagnation accompanied by rising unemployment. Not only was last year disappointing, but 2003 also began badly. Given the sluggish economic development, especially in Europe, we have been forced to gradually downgrade our forecasts. On the exchange market, the strength of the Swiss franc has been an additional factor creating further difficulties for our export sector.

16/17  A cyclical downturn not associated with prior excessive credit growth may also affect the profitability and solvency levels of financial institutions. It is thus advisable to improve banks’ capital levels when the macroeconomic circumstances are propitious. In short, to address these macro-financial challenges and risks, we need to internalise in our decision-making what should constitute responsible and efficient management of private and public matters: accumulating buffers in good times so they can be used in hard times. And this applies not only to lenders, but also to borrowers and, above all, to those responsible for managing economic policies, including myself. Contributing transparency and rigour to the establishment of this culture of stability is part of the mission entrusted to the Banco de España as an independent institution at the service of the community. Thank you for your attention. 17/17
Those who look for a sharp downward adjustment typically point to the ratio of household debt to income, and to the ratio of house prices to earnings. They discount the relatively low debt-service to income ratio on the grounds that it could rise sharply if interest rates went up, and ask what might happen if unemployment were to start to rise sharply. To my mind those arguments have a degree of circularity. The possibility of a sharp rise in unemployment depends substantially on a sharp slowdown in consumer spending rather than the other way round. Similarly a sharp rise in interest rates is less likely if consumer spending is slowing down. So it is not all obvious to me at least that the household sector will suddenly run for cover in the  current environment, where the labour market remains remarkably robust, and the prospect for inflation - and hence the prospect for interest rates - remains relatively benign, remaining somewhat above target in the near term but moving down gradually as we move into next year. I don't say that things could not turn out rather worse than that - and there are other uncertainties, like development of the exchange rate, or the effect of the upcoming increase in National Insurance Contributions, which I have not touched upon this evening. Uncertainty is a fact of economic life.

But I do say that it would be unwise - as some have implied - to set monetary policy on the basis of the worst possible outcome, even if one knew what that would actually mean in policy terms. At the time of our last Inflation Report published in November the MPC's collective view of the most likely outcome for the UK, looking over the next two years, was for growth at around trend with inflation close to target. But we were - and we remain - acutely conscious of the uncertainties and risks around that prospect. And we review the position intensively both at our regular monthly policy meetings and in the context of our quarterly forecasting round. And in that context, I give you my assurance that, despite the fact that we have not changed interest rates now for over a year, we stand ready to do so at any time if and when we see the risks to our central expectation beginning to crystallise in either direction. Mr President, let me conclude by suggesting once again this year that yes, we can keep the UK economy moving forward, but I don't pretend that it will be easy. Sadly I am attending this dinner for the last time as Governor this evening, so I will not be accountable to you for how we get on.