samchain/econo-pairs-v1 huggingface dataset:
The full reopening of European economies after two summers of pandemicrelated restrictions has unleashed strong demand for leisure, hospitality and tourism. Accordingly, euro area GDP rose by 0.8% in the second quarter, compared with 0.7% in the first quarter, outstripping the 0.2% projected in the Eurosystem’s June forecasts. The growth in GDP in the second quarter was higher than anticipated in many euro area countries, and especially in Spain and Italy which both saw an unexpected surge in private consumption. However, the reopening effects are expected to dwindle and economic growth to slow in the short term, in view of households’ loss of purchasing power, the energy crisis, weaker global demand, tighter financial conditions as a result of the monetary policy normalisation, and the highly uncertain economic and geopolitical setting. Indeed, the latest data for the third quarter point to a rapid economic slowdown in the euro area countries. The Purchasing Managers’ Indices (PMIs) signal a contraction in manufacturing in the big euro area economies in the third quarter, while the PMI services index points to a considerable slowdown, with a contraction in Germany and Italy. Thus, the gas market developments described above contrast with developments in other commodities – such as oil and non-energy goods – whose prices have tended to moderate since the summer owing, among other factors, to the prospects of a global economic slowdown.

Thus, the TPI will ensure that our monetary policy stance is transmitted smoothly and effectively across all euro area countries, a precondition for the ECB to be able to deliver on its price stability mandate. Purchases under the TPI would be conducted such that they cause no persistent impact on the overall Eurosystem balance sheet and hence on the monetary policy stance.7  5  This forward guidance made the first interest rate rise subject to: (i) expected inflation standing at 2% over an 18-month horizon; (ii) it holding at 2% in the medium term; and (iii) the course of underlying inflation being compatible with inflation stabilising at 2% in the medium term. The APP decisions were also linked to these conditions, with the guidance stating that interest rates will only rise some time after net purchases have ended. 6  At an ad hoc meeting held in June, we decided to activate the flexibility in reinvestment of redemptions coming due in the PEPP portfolio, as the first line of defence to counter the pandemic-related risks to the transmission mechanism being seen. 7  In any event, PEPP reinvestment flexibility will continue to be the first line of defence to counter pandemic-related risks to the transmission mechanism.
Using the parlance of the profession, the “bail-out” (or rescue of the bank with public funds) disappears and is replaced by the “bailin” (generation of own funds, capable of absorbing losses, converting debt instruments into capital). 3/10  The internationally agreed principles have been passed through to European regulations through the Bank Recovery and Resolution Directive (BRRD). This framework has been completed within the Banking Union with the establishment of the Single Resolution Mechanism, a system comprising a central authority, the Single Resolution Board (SRB) – which adopts the relevant decisions for significant banking institutions – and the national resolution authorities that participate in the SRB and retain direct responsibility for the less significant institutions. This Mechanism has a Single Resolution Fund, endowed with contributions from the industry, that will enable financial support to be afforded to resolution processes. Despite the undeniable progress that the new resolution framework adopted in Europe entails, its practical implementation is subject to major challenges that I would like to highlight today, drawing on the fact that the BRRD will shortly be revised on the basis of a recently submitted legislative proposal by the European Commission. Accordingly, I shall first refer to the general aspects of the European resolution regulations. Next, I shall look at the loss-absorption requirements for bank creditors, which is one of the central aspects of the regulations. And I will conclude with some brief comments of a more strategic nature.

2 General aspects of the European regulations  The European Union, as reflected in the FSB’s second Peer Review on Resolution Regimes published in 2016, is one of the jurisdictions where the Key Attributes have been most rigorously implemented. Allow me to highlight some of the main features. First, the regulations consider resolution as an alternative mechanism to ordinary insolvency procedures in the mercantile realm, applicable to banks only in specific circumstances pertaining to the public interest. In particular, resolution shall only be applicable to those banks whose failure may generate risks to financial stability, given that they perform critical functions. Second, the use of public funds to support vulnerable institutions is severely restricted. The contribution of any form of State aid – except that received in connection with a stress test – is understood to be a symptom of the institution’s non-viability and, therefore, it may precipitate resolution or, where appropriate, the liquidation in mercantile terms of the institution. Once the institution has been declared in resolution, the regulations require a bail-in for creditors. The ensuing assumption of losses must exceed a minimum amount equivalent to 8% of the bank’s liabilities as a prerequisite for attaining access to public funds, which includes the Single Resolution Fund. Lastly, so as to be able to carry out the bail-in, all institutions liable to be subject to resolution, i.e.
Prasarn Trairatvorakul: Overview of the global economy Statement by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the International Monetary and Financial Committee (IMFC) Twenty-Fourth Meeting, International Monetary Fund, Washington DC, 24 September 2011. *  *  *  On behalf of the Constituency representing Brunei Darussalam, Cambodia, Fiji, Indonesia, Lao P.D.R., Malaysia, Myanmar, Nepal, Philippines, Singapore, Thailand, Tonga and Vietnam. Global and domestic policy actions The IMFC is convening at a time when global growth outlook has dimmed considerably since our Spring meeting. Recovery in major advanced economies has weakened in the last several months. Meanwhile, growth in emerging market economies has moderated. Stresses in the Eurozone periphery have not abated and have impacted larger economies, undermining market confidence. Consequently, the clearest risks currently to the global economy are unstable debt dynamics, sluggish economic performance, banking sector funding stresses and policy responses perceived by markets as inadequate. Further, risk aversion in the current environment has already had an impact on emerging market economies, including those with strong fundamentals. Risks to the global economy and financial system demand decisive policy responses. For advanced economies with some fiscal space, this means a credible medium-term fiscal consolidation plan and policy flexibility to support growth in the near term. Eurozone economies under market pressure should deliver credible commitment to fiscal consolidation and implementation.

For this reason, we support the Managing Director’s call for greater progress in implementing the 2010 quota reform and re-composition of the Executive Board. We also emphasise the importance of completing a review of the quota formula by January 2013. 2  BIS central bankers’ speeches
This concerns public expenditure linked to the economic situation, for instance, expenditure for support to the unemployed, which automatically rises when economic activity deteriorates. In general, these stabilisers are much more important in Europe than in, for instance, the United States, as the public sector’s share of the economy is greater there than in the United States. Economic activity in the world economy and in Sweden has deteriorated rapidly since the February monetary policy meeting Rapid deterioration in global economic activity at the end of last year Global economic activity deteriorated rapidly at the end of last year. GDP fell by around 1.5 per cent between the third and fourth quarters of last year in both the United States and the euro area. GDP fell by around 3 per cent in Japan and by just over 5 per cent in Korea. In Sweden, GDP fell by just over 2 per cent. At the same time, world trade has more or less collapsed. In addition to a decline in demand, world trade is also affected by supply shocks related to funding problems in the form of fewer trade credits. A rapid decline in world trade naturally affects a small, trade-dependent economy like Sweden’s. However, there have recently been some positive signals abroad Around a month or so ago it was difficult to see any positive tendencies at all in the world economy.

In Sweden we are now assuming that GDP will fall almost as much as during the crisis in the 1990s. At that time the crisis was domestically-generated with financial imbalances, high nominal interest rates and an overvalued currency. On this occasion much of the disruption comes from outside. Public finances are in a good condition to begin with, interest rates are low and we will probably continue to have a current account surplus. At the same time, exports are declining rapidly, which has negative repercussions on investment. Household consumption is subdued by the deterioration in the labour market and an increase in precautionary saving. The outcomes and confidence indicators in recent months emphasise the weak developments. The recession is assessed to be unusually deep, which affects the supply of credit. Although corporate borrowing is still increasing, loan terms for companies have been tightened. There are also signs that there has been some substitution from market borrowing to bank borrowing. It is the larger companies that are experiencing the biggest problems with funding in the market and taking up a rising share of bank loans, which contributes to smaller companies seeing themselves at a disadvantage. There are now clear risks that increased credit losses will subdue the banks’ lending to companies. There is also a risk that small and medium-sized companies will be pushed aside. Funding difficulties and weak international demand have led to companies revising down their investment plans. All in all, this points to the Swedish economy being weaker than was expected in February.
Zeti Akhtar Aziz: Islamic finance in a challenging economy – moving forward Opening address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 2nd International Shari’ah Research Academy for Islamic Finance (ISRA) Colloquium 2012 “Islamic finance in a challenging economy – moving forward”, Kuala Lumpur, 27 November 2012. *  *  *  Islamic finance has experienced its most rapid pace of development and growth in this decade, signifying its dynamism and resilience as a form of financial intermediation. This has taken place in a highly challenging international financial and economic environment. It is estimated that the global Islamic finance industry will remain on this growth trajectory, with the continued expansion of Islamic financial institutions, including in new jurisdictions, and with the growing significance of financial markets in the Islamic financial system. Increased liberalisation and greater foreign participation in the Islamic financial markets are reinforcing this trend and resulting in increased cross border financial flows. This is contributing to increased international financial and economic linkages between nations, particularly among emerging economies. During the recent global financial crisis and its aftermath, the international financial system has experienced a series of unprecedented financial meltdowns and disruptions. During this period, the Islamic financial industry has generally weathered these challenging financial and economic conditions. In relation to this, Islamic finance highlights the importance of basic banking and the need to have a clear separation from higher risk-taking activities.

We are now looking at that question and have an open mind on it. But in a way the more interesting thing the robot brought back to us was not these findings, but simply a clearer picture of what the gradient is for small firms which we are therefore publishing today for the first time. Here it is: Chart 1a: Thresholds in UK prudential regulation, translated onto an assets/deposits basis (deposit-takers)  4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  Chart 1b: Thresholds in UK prudential regulation, translated onto an assets/deposits basis up to £ (deposit-takers)  Sources: CRR, BCBS, EBA Technical Standards, PRA Rulebook, Supervisory Statements, and Statements of Policy. Note: Only includes thresholds that are either set using assets/deposits values, or can be translated into assets/deposits values. Assumes average size of transactional accounts of £ The y-axis corresponds to the number of thresholds below the £ value for assets/deposits on the x-axis. I’d like to know what people think about this gradient. To me, the basic gradient looks OK. It feels about right that most of the carve-outs are for firms below £ in assets – once you reach that size, you are a fair-sized bank in a UK context and should expect to meet the great bulk of the rules. And within the £ area the slope does not look particularly troublesome.
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.

I had a unique perspective on this event, witnessing its start when I was a finance minister and seeing it continue to unfold during my time as IMF Managing Director. This crisis produced the second lesson I would like to highlight, which was possibly easier to see when one was looking from the outside. It was clear early on that our monetary union was lacking a full set of institutions and needed to be strengthened. We became painfully aware that the euro area was particularly vulnerable to self-fulfilling panics. What became evident is that the perceived commitment of policymakers was a crucial variable in effective policymaking. Initially, we perhaps underestimated how important those perceptions are. It took time to realise that, in a period of high uncertainty, being seen as fully committed could shift financial markets between polar opposites – from working against us to working with us. That is why the crisis abated very quickly in 2012 when – within a few months – the Heads of State or Government agreed to launch the banking union and the ECB acted to remove unwarranted fears in financial markets. It became clear that our commitment to the euro was beyond doubt. The euro is, of course, irreversible. The lesson was also that, in times of crisis, the most important signal for policymakers is their determination to act. And this lesson was absolutely crucial when the pandemic hit us last year.
For other types of financial activities, no specific regime for accessing EU markets has been established. This is not unusual: most if not all countries place some restrictions on the types of financial services that can be provided across their borders. There may be good reasons for these restrictions, such as consumer protection or financial stability considerations. In the case of the EU, certain bank lending and deposit-taking activities are not covered by the so-called 2/5  BIS central bankers' speeches  third-country regimes and so will no longer be able to be provided from the United Kingdom, but will need to be provided from within the EU. This – together with the fact that equivalence cannot be taken for granted – is why many banks have chosen to relocate activities to the EU27, and have been engaged in very detailed discussions with the ECB and other authorities to obtain agreement on their plans. The ECB expects banks to build up their capabilities in EU27 countries and to implement the agreed relocation plans within the previously agreed timelines. The risks of financial fragmentation Regulatory drivers – and in particular the end of passporting rights for certain UK-based activities – are already having an effect on the geography of financial centres in the euro area. According to preliminary evidence, a small number of financial hubs appear to be emerging as a result of the relocation – or plans for relocation – of certain activities.

In particular, ensuring the resilience of individual institutions is not enough to guarantee the stability of the system as a whole: a macroprudential framework for non-bank financial institutions is necessary for identifying and addressing risks at the system level.5  The links between the capital markets union and the banking union Revitalising the CMU agenda will also bring benefits for the completion of the banking union, as banks and markets complement each other in financing the real economy.6 We need to ensure that this reinforcing loop is strengthened over the coming years. I would like to highlight three key priorities for the banking union. First, it is important to operationalise a credible common backstop to the Single Resolution Fund to provide additional confidence in the bank resolution framework. The policy work on this backstop is at a very advanced stage. Second, in order to close potential liquidity gaps that may still hinder efficient resolution, the outstanding issue of liquidity in resolution needs to be addressed. Progress is needed in the discussions on potential solutions in order to place the banking union on a par with other major jurisdictions, like the United States and the United Kingdom. Third, it is crucial to establish a European deposit insurance scheme (or EDIS) to provide uniform protection to depositors within the banking union, regardless of their bank’s location, and to help reduce the sovereign-bank nexus. More efforts are still needed in this regard.
This story was much more unique, as it involved the first banking crisis in Europe since the EU single market was formed in the early 1990s. Let me briefly discuss each of these in turn, in order to set the stage for the policy discussions. First, the macroeconomic boom-bust story. All the usual suspects were present: very strong capital inflows fuelling a credit and asset price boom that subsequently turned into a bubble at the same time as the economy overheated and an unsustainable external position developed, as could be seen in a double-digit current account deficit. And macroeconomic and prudential policies were not up to the task. At the deepest level, this part of the story was related to three factors: 1. The complications that tend to arise with macroeconomic management as very small, open economies become more and more financially integrated;  2. The specific conditions of ample and cheap credit at the global level;  3. And major policy mistakes in Iceland, both of the type that would be deemed to be such in any book (such as giving an already overheated economy a demand stimulus), and those more closely related to the orthodoxy prevailing at the time: freely floating exchange rates, interest rate policy focusing mainly on low inflation in terms of goods and services, and good micro-supervision; and let the markets do the rest. The first factor is perhaps of interest here.

To my mind, international financial centres cannot be located in such countries without some ex ante mechanism that at least partly insulates the domestic economy from the risks involved. In some sense, this is what Iceland did in the nick of time in early October 2008. Furthermore, in very small, open economies with their own currency, like Iceland, the international activities of domestic banks and FX risks on their balance sheets must be limited and regulated. In this context, we have been thinking about the prudential regime that must be in place in Iceland when we have lifted capital controls and Icelandic banks are again free to use their European passporting rights. We will have more stringent restrictions on permissible currency mismatches than in the past, also taking into account positions of unhedged households and companies, but more importantly, we will, through some combination of LCR- and NSFR-type ratios in foreign exchange, put strict limits on FX maturity mismatches. The combination of these and other measures will make it impossible for the banking system to attain the size and cross-border reach it had before the crisis. The big question is whether it will be deemed compatible with the EEA Agreement. BIS central bankers’ speeches  3  More generally, I think the distinction between macroprudential measures and capital controls can be more complex than many make it out to be.