samchain/econo-pairs-v1 huggingface dataset:
Because the standards represent a comprehensive compendium of best practices, even the best-managed institutions will have to improve in some areas to take full advantage of the various approaches offered by Basel II. For institutions whose risk management practices are not leading edge, the benefits of Basel II implementation will be even more obvious. The Basel II framework contains many useful lessons and can serve as a good roadmap on how to improve internal risk management. With the exception of small banks with relatively simple business models, the risk management practices and standards under the more sophisticated approaches of Basel II will be useful for all institutions. Admittedly, not all aspects of Basel II will be of use to every bank. For example, some of the quantification tools used in large complex institutions may not be necessary for the smaller and less sophisticated institutions. But, common tenets of good risk management embodied in Basel II - such as good processes to identify risks, the exercise of sound judgment to assess the extent of threats to solvency posed by the risks, and the discipline to control risks if they are disproportionately high - are equally applicable to all institutions, large or small. Basel II and financial stability One of the criticisms of Basel II is that capital cushions required under Pillar 1 will tend to become more cyclical, dropping at the peak of economic cycles and increasing at the bottom of cycles when capital can be more scarce and expensive.

One of the biggest challenges to supervisors now is to develop more detailed guidance for the implementation of Pillar 2 and to follow that guidance in a consistent and coordinated manner across the supervisory community. Despite work done by the Basel Committee to encourage coordination among supervisors in this area, there remains a significant risk of inconsistent approaches and resulting supervisory arbitrage. While the rollout of the Basel II principles will be extraordinarily demanding, I am heartened to observe that there is momentum gathering among banks and supervisors around the globe to meet the challenge. BIS Review 42/2004  3  Beyond Basel II: what would further installments look like? Even though the ink is still drying on the final version of the new framework, and we are just starting to tackle the implementation issues, it is not too early to think about how Basel II capital framework might evolve in the future. Because we can be sure that Basel II is not the “End of History” as far as regulatory capital requirements for banks are concerned. Greater applicability of risk quantification techniques Beyond Basel II, there may be greater scope for use of quantitative tools in setting minimum regulatory capital requirements. The most promising areas are quantitative tools for interest rate risk in loan portfolios and concentration risk. Three robust pillars I also think, despite my fears about inconsistency and arbitrage, that over time supervisors will develop more consistent approaches to Pillar 2 of the capital framework, and greater harmonisation of supervisory reviews across jurisdictions.
Norman T L Chan: The power of 3Cs Address by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the Treasury Markets Summit 2012, Hong Kong, 12 October 2012. *  *  *  Good morning, ladies and gentlemen, I welcome you all to this fifth Treasury Markets Summit co-organised by the Treasury Markets Association and the Hong Kong Monetary Authority. In the past four Summits, discussions focused mainly on business opportunities available to financial market participants. This year, I am glad to note that, the Summit will also devote a session to analysing some of the fundamental elements of a first-class financial centre. Being an ardent believer of these fundamental elements, I would like to take this opportunity to share with you some of my thoughts on them. From time to time visitors from overseas come to see me and, during our conversations, the question of how Hong Kong has turned itself into a thriving and dynamic financial centre in Asia is often raised. It is not surprising that Hong Kong’s transformation from a trading port into an IFC within several decades has drawn a great deal of admiration as well as envy from neighbours within the region and beyond. This is because of the fact that an IFC will bring about much-desired economic growth, employment and prestige. So it is also not surprising that many cities in the region harbour ambitions of becoming international financial centres.

However, the large array of unconventional measures employed successfully by various central banks around the world to engineer further policy easing has dispelled the fear that the zero bound is like hitting a wall, rendering monetary policy helpless. The management of a central bank’s balance sheet has been understood as an important policy tool. We have also learned, in some cases while forced to innovate on the way, about operational aspects  1  I would like to note that the views I express are my own and do not necessarily reflect views of my colleagues on the Governing Council of the European Central Bank. 2  See also the instructive analysis by John C. Williams, the newly appointed President of the Federal Reserve Bank of San Francisco, who has examined the role of well-anchored inflation expectations for containing deflation risks in the US (Williams, 2009). BIS central bankers’ speeches  1  that matter for policy. Examples include the collateral framework and the list of counterparties. In revised editions of central banking textbooks, I expect to find discussions of these things that were absent from the pre-crisis editions. *** There have also been lessons about the strategy of monetary policy. In my view, the crisis has reaffirmed the danger associated with the temptation to fine tune the real economy, in addition to maintaining price stability. One way to pose this debate is by contrasting two views.
In the eight quarters since the trough of the recession in the middle of 2009, real household income has fallen 2½ per cent, as only modest wage growth has been more than offset by elevated inflation. And with higher utility prices pushing consumer prices up another 1¼ per cent since June, it is probable that real household disposable income will turn out to have fallen during the second half of this year too. Against that background, it is not surprising that real consumer spending growth has been weak. Although elevated inflation has been the medium through which some of this squeeze in living standards has been brought about, the squeeze reflects three deeper real economic forces that monetary policy can do little to negate. The first force is the aforesaid rise in the price of commodities, relative to the prices of global goods and services, associated with the confluence of strong demand growth in the emerging economies and commodity producers’ inability or unwillingness to increase supply to match the extra demand. The second force is the fall in the purchasing power of sterling. Before the financial crisis, the UK was operating with an unsustainably low level of national savings and an associated current account deficit. In addition, the crisis has probably led to a long-lasting hit to the demand for financial services exports.

Last Thursday’s agreement represents an important element of a satisfactory resolution to the euro area crisis, but there are still many details to be worked out. Moreover, the announcement by the Greek government that it plans to hold a referendum on its package has injected additional uncertainty. And, even if the 27 October agreement is eventually implemented, the peripheral economies of the euro area will still be faced with substantial adjustment challenges, including the need to rebalance their economies and improve their competitiveness. So the strains in the euro area seem likely to continue for some while yet. The second factor behind the unexpected slowing in growth is the substantial rise in energy and other commodity prices during the latter part of 2010 and first part of this year, associated with strong growth in the emerging economies as well as interruptions to the supply of oil as a result of geopolitical developments in the Middle East and North Africa. UK inflation over the past year has consequently been around 1½ percentage points higher than the central view in our November 2010 Inflation Report, with the twelve-month rate reaching 5.2% in September. That has added to the squeeze on real household incomes already taking place as a result of earlier increases in energy and other import prices, together with the increase in the standard rate of VAT to 20 per cent.
Confidence in the Swedish financial system could have been seriously damaged if a failure like the one at Lehman Brothers had been allowed to occur. The Riksbank’s assessment was that the two banks were experiencing temporary liquidity problems, but that their solvency was not threatened. Finansinspektionen later revoked Carnegie’s licence to conduct banking activities owing to serious deficiencies in the company’s risk management and violation of the law concerning asset management. The decision to revoke the licence thus had nothing to do with Carnegie’s liquidity problems or with the Riksbank’s loan. Carnegie is now owned by the Swedish National Debt Office and the Riksbank’s liquidity assistance has been repaid. The Riksdag (the Swedish parliament) has also introduced a new act concerning support to credit institutions, which will give the government the opportunity to take the necessary measures to strengthen stability in the financial system. For instance, a government guarantee programme has been presented to support the banks’ and mortgage institutions’ medium-term funding, and a stability fund has been established to manage potential future solvency problems in Swedish institutions. The current situation Despite the crisis in the global financial markets and the increasingly gloomy economic prospects, the assessment is that the Swedish banks still have good resilience to facing the situation that has arisen and future developments. 1 The losses arising from the international crisis have so far been limited, not least in an international perspective, and the Swedish banks have good financial strength.

Villy Bergström: Is the Riksbank to blame for unemployment? Speech by Mr Villy Bergström, Deputy Governor of Sveriges Riksbank, at Brunnsvik adult education college for trade union officials, Brunnsvik, 4 November 2004. *  *  *  Thank you for the invitation to come to Brunnsvik to speak about the Riksbank and how we work. Over the past ten years, Sweden’s macroeconomic performance has been relatively robust, both in comparison with other OECD countries and with the economic performance of the 1970s and 1980s. But there are problem areas, and I intend today to discuss perhaps the most serious of these - the employment situation. It’s natural in the employment debate that questions are put to the Riksbank, since our conduct of monetary policy affects short-term economic developments. This makes it tempting to criticise the Riksbank and to expect us to be able to solve the employment problems through a looser, more inflation-tolerant monetary policy. However, the experiences of many decades of research and of actual economic developments are unambiguous: inflation is no solution to unemployment problems. To elucidate this it’s important to differentiate between two issues: on the one hand the long-term relationship between a stable, low inflation rate - which is the Riksbank’s statutory objective - and employment. On the other hand the impact of monetary policy on economic activity and employment in the short term.
What is the reason for this? It is largely due to developments in Sweden’s real economy in relation to other countries. The Riksbank’s forecasts for the exchange rate are based on changes in the real exchange rate reflecting differences in growth in relation to other countries and being consistent with foreign trade, being balanced in the long run. Relative growth and the current account explain changes in the real exchange rate Countries that have a higher GDP growth than their trading partners usually have a stronger real exchange rate. 26 The real trade-weighted krona rate has been on average 30 per cent weaker during the period since 1993 than it was in the 1970s. Figure 6 shows Sweden’s GDP in relation to TCW-weighted GDP abroad. We can see that Swedish GDP in relation to other countries fell heavily from the 1970s until the beginning of the 1990s. The Riksbank’s assessment is that the weakened exchange rate from the 1970s to the 1990s is linked to lower growth in Sweden than abroad. As we can see in Figure 6, Sweden has over the past 15 years recovered some of the relative GDP level and had higher growth than other countries. This tendency is expected to continue over the coming years, which would in this case imply a stronger real exchange rate. One factor that is often discussed in connection with the exchange rate is the development of the current account.

Our current account surplus has been running in the positive for 4 years and is projected to be at 35.4 billion USD for this year, or 7 percent of GDP. Moreover, Thai corporations and banks rely mostly on domestic funding and thus carry with them low currency mismatch. These factors provide us with particularly strong cushions and allow us to exercise our domestic monetary policy with autonomy. In conjunction with these buffers, a range of policy tools are also available to be deployed should the need arise, including macroprudential measures. In addition to building immunity against external volatilities, the Bank of Thailand also puts great emphasis on maintaining financial stability on the domestic front which is necessary for a sustainable growth. As mentioned earlier, the search-foryield behavior under the prolonged period of low interest rate environment poses vulnerabilities to financial stability. In response, the Bank of Thailand strives to mitigate impacts from these underpricing of risk behaviors. We continually monitor warning signs of the aforementioned risks and address them accordingly. Last year, we tightened credit card regulations as well as uncollateralized personal loan limits to mitigate household debt problems. We will soon conduct a public hearing on mortgage lending standard to curb underpricing of risks in the mortgage market. Financial stability is also engrained in the Bank of Thailand’s monetary policy conduct. It is our view that macroprudential measures alone is not sufficient in preventing potential risks in the financial system.
A look back at 2004 Developments in 2004 Sweden’s economic performance in the past year was characterised by high growth coupled with markedly low inflation. Economic growth last year was in actual fact considerably higher than normal; in the past 25 years growth has been higher on only six occasions. Even though demand in general grew strongly in 2004 the same cannot be said about employment. We have yet to see a clear turnaround in the labour market. The Riksbank’s monetary policy decisions in 2002 and 2003, which are relevant to the inflation outcome in 2004, were initially guided by the measure of underlying inflationary pressures that the Bank has used most in recent years, UND1X. In 2003, though, the Bank shifted its focus for a period to the measure UND1X excluding energy prices. Inflation according to these measures averaged 0.9 per cent and 0.8 per cent, respectively, in 2004. In terms of the CPI, inflation was 0.5 per cent. The fact that CPI inflation turned out significantly lower than the other two measures is essentially because the fairly extensive monetary easing that began at the end of 2002 and continued through 2003 and into 2004 has kept down households’ mortgage interest expenditure. So why was inflation in 2004 so low? In order to get a better picture of one of the causes we need to go back to the turn of the year 2002-2003. At that time inflation was pushed up unusually high after electricity prices rose to record levels.

Forecasts of UND1X at different times and actual outcome Annual percentage change  4  4  UND1X, outcome Inflation Report 2004:4 Inflation Report 2003:1 Inflation Report 2002:1  3  3  2  2  1  1  0 2000  0 2001  2002  2003  2004  2005  2006  Sources: Statistics Sweden and the Riksbank  2. Productivity growth in the business sector since 1980 and HP trend Annual percentage change 8  8 Business sector Forecast HP-trend  7 6  7 6  5  5  4  4  3  3  2  2  1  1  0  0  -1  -1  -2  -2  -3 -4 1981  1981-1990: 1.7%  1984  1987  1991-1994: 2.8%  1990  1993  1995-2000: 3.2%  1996  1999  -3  2001-2004: 3.0%  2002  -4 2005  Sources: Statistics Sweden and the Riksbank  BIS Review 18/2005  7  3. Forecasts of CPI inflation in 2004 at various times: the Riksbank and an average of other forecasters Annual average  3.0  3.0  Riksbank Average of other forecasters Outcome (0.5) Lowest forecast Highest forecast  2.5  2.5  2.0  2.0  1.5  1.5  1.0  1.0  0.5  0.5  0.0 Dec-02  Jun-03  Dec-03  0.0 Dec-04  Jun-04  Sources: Consensus Inc., Statistics Sweden and the Riksbank  4.
Financial markets appeared at that time to take the view that European Monetary Union was being driven increasingly by political determination – even if that meant softening the interpretation of the economic convergence criteria written into the Maastricht Treaty. They concluded that this implied a broad rather than a narrow initial euro membership; and that that, in turn, implied a weak rather than a strong euro. But whatever the reason – and whether it was valid or not – the effect of sterling’s appreciation was to introduce a pronounced imbalance into the UK economy. It dampened net external demand, and had a restraining influence on cost and price inflation, at a time when domestic demand growth remained unsustainably strong, and when we were approaching full capacity. We understood very well that, after a relatively favourable exchange rate environment, following our exit from the ERM, the abrupt appreciation meant that the internationallyexposed sectors of the economy, including large parts of manufacturing industry, were now suddenly confronted with much harsher trading conditions. That, as I say, had a dampening  BIS Review 19/1999  4  effect on the UK economy and on inflation. But we couldn’t just rely on that to cool the economy for us. Clearly at some point the exchange rate would stop appreciating, and this external dampening effect would have worked its way through. In the meantime, we needed to slow the rate of growth of domestic demand sufficiently to avoid overheating in the economy as a whole.

As we all know, the choice of exchange rate regime is of critical importance for a central bank. The empirical findings show that in economies with serious balance sheet mismatches, the policy makers prefer fixed or controlled exchange rate regimes 5 ..  2  Eichengreen, B.; Hausmann, R. (1999); “Exchange rates and Financial Fragility”; NBER Working Paper No:7418. 3  De Nicolo, G.; Honohan, P.; Ize, A. (2003); “Dollarization of the Banking System: Good or Bad?”; IMF Working Paper; WP/03/146. 4  Galindo A.; Leiderman L. (2003); ”Living with Dollarization and the Route to Dedollarization”; Inter-American Development Bank; Working Paper; 526; p. 14. 5  Choi, W.; Cook, D. (2004); "Liability dollarization and the bank balance sheet channel"; Journal of International Economics; Vol. 64(2), p. 247-275. 2  BIS Review 124/2006  On the other hand, flexible exchange rate regimes provide more room for monetary policy that enables to respond to external shocks freely. It has also been found by using cross-country data for the banking sector that more volatile exchange rates reduce the share of the foreign currency denominated loans and deposits 6 , thus contributes to prevent dollarization. However, even if a flexible exchange rate regime is chosen de jure, dollarization and high pass through effect from exchange rates to inflation may cause “fear of floating”, thus monetary authorities are put under pressure to intervene in fluctuations in exchange rates at all costs.
In the Eurozone, despite progress in the financial and banking industries – as revealed by stress tests – credit growth is still slow and a sharper deceleration is a latent risk. All these risks in the external scenario could trigger new episodes of volatility in world financial markets, with important negative effects in credit costs and output. They could also result in an additional depreciation of emerging currencies – our peso included – affecting the short-term inflation outlook. On the bright side, it is possible for the oil price to have a stronger than forecast effect on both external and internal activity, either because the effect of a reduction is greater than assumed in the baseline scenario, or because the drop is steeper. Locally, one risk has to do with output, but especially with domestic demand dynamics. Prospects for recovery have been postponed time and again, while the possibility of true recovery has lost strength. The baseline scenario assumes that business and consumer confidence will improve gradually. If not, the slowdown in spending and output may become persistent and translate into longer-lasting capacity gaps and reduced inflationary pressures. It cannot be ruled out that the current size of gaps – an unobservable variable with quite an uncertain measurement – turns out to be smaller than estimated and thus contributes less than expected to slowing down inflation. Low unemployment and strong growth in nominal wages put a note of caution in the evaluation of inflation dynamics.

14  BIS central bankers’ speeches  Figure 13 Consumer credit flows and Interest rate, UF50 - UF200 (annual rate, thousands of UFs) 60  6.000  48  4.500  36  3.000  24  1.500  12  0  Jun.12  Oct.12 Feb.13 P90  Jun.13  Mediana  Oct.13 Feb.14 P99  P95  Jun.14  Sep.14  TMC Flujos  (*) Statistics weighted by amount; periods adjusted to the month of TMC change; flows normalized by effective number of days. Source: Central Bank of Chile based on SBIF data. Figure 14 Impact of various scenarios on capital adequacy index (1)(2) (actual net worth over risk-weighted assets) 18  18  16  16  14  14  12  12  10  10  8  8 Jun. 14 25th percentile - 75%  Escenario base Median  Escenario de estrés System  Max. (3) Mín. (1) Figures weighted by each institution's core capital. (2) Estimates do not consider foreign trade and th  treasury banks. (3) Max figures correspond to 90 percentile. Source: Central Bank of Chile based on SBIF data.