samchain/econo-pairs-v1 huggingface dataset:
The pre-requisites for such a switch of demand towards net exports seemed to have been put in place by the substantial depreciation in sterling that occurred during the financial crisis – sterling fell more than 25% between the middle of 2007 and the beginning of 2009 (Chart 6). Despite the slowdown in our main export markets, that should have been sufficient to give a kick to net exports. The performance of exports – particularly exports of services – has, however, to date been somewhat disappointing. It may be that this is just a matter of time – for instance, we are starting to hear stories of businesses bringing back activities that they had previously off-shored to emerging economies. But any further appreciation of sterling, which has risen almost 10% in trade-weighted terms since March, would not be particularly helpful in terms of facilitating a rebalancing towards net exports. Let me now turn to the role for monetary policy in supporting the recovery. When the MPC first provided explicit guidance over the future course of policy last August, the economy had shown early signs of recovery but we believed that there were still considerable underutilised resources in the economy that needed to be absorbed, otherwise we were likely to find inflation falling below our 2% target in the medium term. Our worry was that the mere sign of a return to decent growth rates could prompt premature expectations of rises in Bank Rate, dampening the recovery.

During 2013, consumer spending increased by 2.2%, while housing investment – which includes both the construction of new dwellings and the value added in the facilitation of housing transactions – rose by almost 10%. Together, these two factors accounted for around two thirds of the rise in activity, though note that is in line with their overall share in GDP. This pickup in household spending has not so far been driven in the main by faster growth in incomes: real household income after tax rose by just 1% in the year to 2013 Q3. Press reports sometimes characterise the rise in spending as being fuelled by borrowing and so destined to end in tears. This is not really the case. It is true that unsecured lending growth has picked up over the past year, but the pace of growth is still well below the levels prevailing during the pre-crisis period. And while there has been an expansion in gross mortgage lending accompanying higher housing activity, there is little sign that this has been used to release housing equity in order to finance higher consumer spending. The rise in spending has, though, been associated with a reduction in the fraction of income that is saved. This rose sharply in the aftermath of the collapse of Lehman Brothers as households responded to the increased uncertainty about income and job prospects by building up extra savings, or reducing their debts, as a precaution.
We have said that the prerequisites for capital account liberalisation are macroeconomic stability, sufficient foreign exchange reserves, and a financial system that can stand on its feet without capital controls. The first of these conditions has been met, and the next will be met upon successful conclusion of the third IMF review. The prospect of meeting the third condition in the next few months has improved in view of strong interim earnings reports from two of Iceland’s large commercial banks and the recent Supreme Court judgment concerning the interest rate to be used for loans with nonbinding (illegal) exchange rate linkage clauses. But it would be a misunderstanding to assume that the timeframe can be measured in terms of weeks rather than months. We must receive the next tranche of the IMF loan after the third review, and we probably cannot pronounce the banks sound with respect to capital account liberalisation until late November. Furthermore, it is appropriate to bear in mind, as the recent unrest in the bond market shows, that there are short-term risks related to the removal of the controls; thus it is important that each step be well prepared. But if nothing unexpected arises, the time is coming closer, and preparation is underway within the Central Bank. BIS Review 130/2010  3  Of course, we won’t make much progress in lifting the controls or gaining access to foreign credit markets if the Icelandic Government is considered unlikely to be able to fulfil its foreign loan obligations.

Fortunately, though, once the next IMF review is complete, there will be no doubt about it. The foreign exchange reserves now total 1.7 billion euros, apart from shortterm obligations. In the next few months, they will expand by 453 million euros due to transactions related to Avens, 255 million euros from the sale of FIH bank in Denmark, and 620 million euros following the third IMF review. The reserves will then exceed 3 billion euros. In comparison, the next two years’ interest and instalments on two Treasury bond series total 1.5 billion euros, 400 million of which have already been bought back at a discount. The following two charts show clearly how much foreign liquidity will improve. They show that the foreign exchange reserves will grow as large as 4 billion euros if Iceland draws the full amount of the loan facilities available through the IMF programme, and that they will cover the Treasury’s instalments and interest payments through 2015. Of course, access to foreign credit markets will open up long before that time, and a part of the debt will be refinanced in the market. 4  BIS Review 130/2010  I know that all of you who are assembled here today are very interested in how the exchange rate will develop once the Icelandic economy rights itself, hopefully within a few quarters. The chart below shows the real exchange rate of the króna, which is currently about 20% below its historical average but dropped as far as 33% below that average during the crisis.
But that is not the issue either. The question is whether the distinction between banking and non-banking financial functions has been eroded, again whether those functions are carried out in separate entities or on the same balance sheet. I do not think it has. Take, for example, long-term savings institutions - life insurance companies and pension funds. They clearly perform a vital economic and social function, and they are subject to separate functional regulation because of their special importance as homes for the long-term savings of the personal sector and as providers of long-term capital. But their liabilities are totally unlike the very liquid liabilities of banks, and the liquidity of their assets and liabilities are much more closely matched - indeed their marketable assets tend to be more liquid than their liabilities. The distinction remains even where these activities are carried out in a banking BIS Review 13/1997  -6-  group, though in this case the different businesses have to be conducted on ring-fenced balance sheets and subject to different prudential tests, reflecting the quite different nature of the contracts and the different risks involved. That is not to deny that there may well be risks running from one part of the group to another - for example reputational risks or operational risks arising from shared systems or personnel and so on. It is not to deny either that there can be large cross-functional financial exposures.

One measure in the UK is a decline in the banks’ (and building societies’) share in the assets of the whole financial sector (including securities firms, collective investment vehicles, and life assurance and pension funds’ investments etc) which has fallen fairly steadily over the past 10 years, from close to 70% to some 55%. I believe that in the US, where financial innovation has probably been even greater, comparable figures also show this decline, from around 45% in the mid-1970s to about one third now. In the UK, bank lending to the corporate sector has fallen, erratically, from some 27% of total corporate borrowing outstanding (including all forms of debt as well as equity issuance) in 1985 to less than 17%. This mainly reflects the increased access of larger corporate borrowers to the domestic and international capital markets for short and longer-term corporate paper, where they often have a better credit rating than banks. Smaller corporates, on the other hand, remain very heavily dependent upon bank finance - for well over half their overall needs. Meanwhile the banks’ share of net external finance of the personal sector has not changed much at all over the past decade, at around 80%. Trends in the liquidity of bank assets are difficult to assess because liquidity itself is so hard to judge simply from balance sheet categories. The advent of securitisation and the direct sale of loans ought to have helped.
The second emerging trend that I highlighted earlier relates to technological advancement in recent years, which has drastically transformed the ways in which banking and finance can and should be conducted in the real world. Technology has provided many new and very convenient means to conduct financial transactions, ranging from the basic payment and banking services to the more sophisticated trading and investment activities. While very few people would dispute the convenience and speed in which new technology can offer in financial services, there is an important catch that no regulators should and could overlook. The issue is whether the new technology is safe enough for the consumers and investors. 11. There are two aspects of safety: the operational dimension and the investor protection dimension. Just like the physical world, the digital space is full of risks. There is no lack of hackers and fraudsters who spare no time in stealing money  2  BIS central bankers’ speeches  from the innocent people. More fundamentally, the use of new technology does not in any way alter the nature of financial transactions. For example, the marketing and selling of financial or wealth management products through the internet or mobile devices carry the same, if not higher, risks as those sold through face-to-face channels. Does the public accept less or no consumer or investor protection, such as suitability test and product due diligence, simply because new digital technology is being used?

In the context of pricing, consumer/investor protection, distribution, dispute handling and resolution, the interests of the financial firms or intermediaries must not take precedence over those of the consumers or investors. This is a difficult mission to accomplish as it requires not only a robust and yet user-friendly regulatory regime, but also a corresponding change in the culture, values, mind-set and behaviour of the financial firms and their staff. As hard as it seems, I strongly believe that we cannot afford not to accomplish this mission. We must try harder and harder until we have got it right. I simply cannot envisage how a financial centre can thrive and sustain its competitiveness over time if it cannot build a credible reputation for treating customers and investors fairly. Conclusion 23. Ladies and gentlemen, with quality products credibility of fair treatment, trust of customers will follow naturally. Customers who use Hong Kong for their financial needs would feel safe because they know, and trust, that their moneys and wealth are in good hands and that their interests are being looked after. If you earn the trust of the customers, you have won their loyalty as well. With the reputation and words of mouth, more customers would wish to use Hong Kong as the hub for their financial transactions. However, the regulators and the Government cannot do it alone. The private sector, the industry and the practitioners must also own this mission and, most importantly, join hands with the public sector to do it together.
When the FOMC wanted to adjust its federal funds rate target – that is, the interest rate banks earn or pay when lending or borrowing overnight reserves with another bank – it directed the System Open Market Account (the Desk) manager in New York to alter the supply of reserves within the banking system (up or down) as needed to match the estimated demand for reserves in order to keep the federal funds rate very close to the FOMC’s target.2 In this setup, the amount of banking reserves in the system – required and excess – was very small and the Desk typically conducted open market operations that added or drained no more than a few billion dollars of reserves from the banking system to ensure that the federal funds rate traded around the FOMC’s target. In October 2008, after passage of the TARP legislation, the Federal Reserve was authorized to implement a new tool, the ability to pay interest on required and excess reserves.3 This tool was significant because it meant that the FOMC would be able to control interest rate policy even with a much larger balance sheet and a much larger amount of excess reserves in the banking system. This was important because it gave us more scope to expand the Federal Reserve’s balance sheet to help address the financial crisis and to provide support for the economic recovery, knowing that later, when the recovery took hold, we could raise interest rates even with an enlarged balance sheet.

In the blockchain space, the industry in a number of jurisdictions has pooled resources to defray the cost of experimentation involved in developing scaleable use cases for the technology’s application. In Malaysia, nine banks have done this by coming together to develop blockchain applications for trade finance. Establishing shared networks, or opening up previously closed ones, is also gaining traction. This can be seen in the growing use of Open Application Programme Interfaces (or Open APIs). Over the last five years, publications of APIs in the financial sector have increased exponentially, with an estimated 200 new APIs published every year. In a survey that we conducted earlier this year, more than half of banks and insurers in Malaysia indicated plans to roll out open APIs in the near to medium term. At the industry level, the Bank has established an open API implementation group with members drawn from the industry, fintech community and key stakeholders to develop open API standards 2/5  BIS central bankers' speeches  for the financial sector as part of efforts to broaden access and promote innovation and competition. On the risk management front, the World Economic Forum announced less than three weeks ago the creation of a consortium to facilitate more coordinated efforts in addressing cybersecurity risks. This entails developing common principles for risk assessments, guidance for implementation, and a scoring framework. In the area of payments, the Bank has just last week issued the Interoperable Credit Transfer Framework (ICTF), which promotes collaborative competition or ‘co-opetition’ for mobile payments.
And as I’ve just discussed, the growing belief that the degree of spare capacity in our economy was probably less than might appear at first sight. But I also suggested that policymakers should approach their task with considerable pragmatism, and that if some of the downside risks to growth materialised, I’d reverse my vote. And that indeed is what has happened. The outlook for demand over the past few months has weakened quite materially. Consequently, at the August MPC meeting, I reversed my position and voted to maintain Bank Rate at 0.5% and the stock of asset purchases at £ billion. And as shown in the minutes published this morning, I voted the same way at this month’s MPC meeting. So what has happened to our economy over the past few months? The deterioration in the outlook largely reflects developments outside of our shores. Growth in the world economy, including in our core trading partners in Europe and the US, has slowed. Concerns about the fiscal positions of some countries, particularly within the euro area, have intensified. This in turn has fuelled worries and uncertainties about the resilience of the international banking system. And perhaps most fundamentally of all, confidence that the authorities have the ability to respond to these challenges in a decisive and timely  BIS central bankers’ speeches  7  manner has diminished. These four factors have fed on each other, leading to a pronounced downward spiral. The UK has been caught in the fallout from these external developments.

Niklaus Blattner: Developments in the Swiss banking sector Introductory remarks by Mr Niklaus Blattner, Vice-Chairman of the Governing Board of the Swiss National Bank, at the half-yearly media news conference, Berne, 16 June 2005. *  *  *  With its Financial Stability Report, the Swiss National Bank (SNB) informs the public of the state of the financial system and presents its assessment of system stability. Moreover, the Bank provides indicators that may be used for an in-depth analysis. The SNB tracks developments in the banking sector from a macroprudential, i.e. a system-wide perspective. In so doing, it complements the task of the Swiss Federal Banking Commission (SFBC), which is responsible for microprudential oversight, i.e. for individual institutions. The part of the report that focuses on the banking sector mainly highlights strains or imbalances which could pose a threat to system stability in the short or longer term. In addition, the SNB reports on its activities in connection with the oversight of payment and securities settlement systems. This year it also provides information on the “Business Continuity Planning” (BCP) project, i.e. on preventive measures to overcome disruptions, thus strengthening the operational resistance of the Swiss financial centre. Banking sector The banking sector is currently stable. The stress index developed by SNB – an indicator which combines comprehensive information on potential stress symptoms in the banking industry – shows that the strains on the Swiss banking industry were extraordinarily low compared with the historical average. This is mainly attributable to three factors.
Strong imports result in negative trade balance  The smaller than expected effect of the pandemic on Iceland’s economy can therefore be attributed to rather agile expenditure switching, helped by a 12% depreciation of the króna relative to the trading partner currencies from end-February until early May 2020. Local consumers and firms transferred their expenditures during the pandemic from imported consumer durables, investment goods and tourismrelated services to domestic services and housing. As in other countries, they also ramped up their savings. Iceland’s imports contracted by 21%, more than elsewhere in the OECD. The contribution of net trade to output growth was still negative by 5.5 percentage points. The combination of agile expenditure switching, and fiscal and monetary stimulus, considerably softened the shock to household finances and corporate profitability. After a short pause, the housing market recovered, as households took advantage of record low interest rates. The impact of the pandemic on the economy was therefore not as strong as expected. Recovery amidst a war in Europe The global recovery turned out to be stronger than expected and rekindled inflation in most parts of the world. In Iceland, the recovery was particularly strong, driven by a sharp reversal of the contraction in services exports. Like other countries, Iceland suffered from the inflationary impact of global bottlenecks as the structure of global demand changed and expanded post-COVID, but a significant share of the increasing inflation in Iceland can be attributed to excess demand for housing and faster wage growth than in most other OECD countries.

This time around, there has been an additional push effect from the war in Ukraine as Iceland has received a significant number of Ukrainian war refugees. The number of asylum seekers from other parts of the world has also risen. Many refugees and asylum seekers have already found work, but finding permanent housing has been a challenge. This may have contributed somewhat to higher housing prices recently and thus higher inflation in Iceland. Iceland’s strong economy and relatively good employment prospects will likely continue to attract migrants and asylum seekers even after the war ends. The strong link between net migration and house price inflation suggests that policymakers need to pay attention to the role of the housing market in Iceland’s inflation dynamics. There are two roads to a more balanced outcome. Firstly, better demand management could make the demand for foreign labour and hence immigration more stable. Secondly, if the supply of housing could be made more elastic, housing price volatility would diminish. In the face of the large external shocks the economy has suffered in the past few years, both will be needed, but these are challenging tasks with no easy solution. Due to the strong recovery of tourism, the output gap returned to positive territory at an earlier stage than in most other OECD economies. In addition to the housing market, emerging overheating has become most visible in the labour market.
All these 5/8  BIS Central Banker's Speeches  proceedings are also meticulously minuted, with the intention that the Bank will one day release the minutes for transparency purposes, and for the benefit of the research community. Even after the formal institutionalisation of our conduct of monetary policy, continuous efforts were made in the years after to further strengthen our policy decision-making framework in face of the ever-challenging policy environment. For instance, the establishment of the Joint Policy Committee in 2010, which combines members from both the MPC and the Financial Stability Committee, was done in recognition of the need to have effective coordination of monetary and financial stability policies given their increasing interdependence. The year 2015 also marked another significant milestone for the Bank. We appointed for the first time two external members to our MPC, a progress that reflected the ongoing maturity and inclusiveness of the MPC as a decision-making committee. The inclusion of the external members has brought about additional diversity of views, and their relevant experiences have further enhanced the collective expertise of the MPC. It is important for us to outline the philosophy that underpins our policymaking. The first is pragmatism – the need to do the right thing without necessarily being dogmatic and rigid in approaches. Our monetary policy framework is not on inflation targeting, but one with primacy placed on the price stability mandate while giving due regards to developments in the economy. This was amply illustrated in the way that we managed the challenges in 2007 and 2008.

We also stated that, in view of the economic situation and outlook, the current interest rate level appeared broadly appropriate for the next several months. In other words, significant new developments would be required for the MPC to raise interest rates – or lower them – at upcoming rate-setting meetings. I notice that the bond market seems to have realised the implications of this, as yields at the longer end of the market have not risen since the last interest rate announcement. But looking further ahead, it should be clear to everyone that if GDP growth forecasts materialise in coming  BIS central bankers’ speeches  3  years and the slack in the economy disappears, the monetary slack manifested in a negative real policy rate of over 1% must be removed over time. So where do we stand with respect to the monetary policy stance? Is monetary policy lax or tight? Chart 3 shows the Central Bank’s real interest rate measured by the effective policy rate and twelve-month inflation. The chart shows that, in spite of two recent rate hikes, the real interest rate will be lower in Q4/2011 (assuming unchanged interest rates in December) than at any time since the financial crisis struck, with the exception of Q1/2009, when inflation soared up above 18% and a dramatic disinflation episode was in the offing. Chart 3  Chart 4  But what about the Taylor rule, shown in Chart 4? There is a significant deviation at the moment – one that perhaps requires some explanation.