samchain/econo-pairs-v1 huggingface dataset:
Finally, it is my view that, over and above the formal standards and protocols, the really important thing is cooperation and communication in good faith between supervisory colleagues. Cooperation is, therefore, a two-way street, and I believe that we all understand that we need to accept a minimum level of flexibility, based on mutual trust and reciprocity, if we want cooperation between supervisors to be effective. Basel II implementation: other aspects Turning now to the other topics currently being discussed, I would like to mention Pillar 2 of the revised Framework as an aspect which is receiving increasing attention. Concretely: the Group is currently exchanging views on how this pillar can and should be applied consistently within an international banking group. As we can see, the question of cooperation among supervisors is not limited to the use of advanced models under Pillar 1, and it is thus necessary to be able to exercise this degree of flexibility as regards the nature and scope of such cooperation. There are also certain topics on which it would be desirable that both banks and supervisors move forward more decisively.

Yet during this entire period the Committee has been devoting considerable efforts to drawing up recommendations that we consider to be key from a supervisory perspective, but which have not received as much attention as Basel II. The Core Principles revision is a case in point. Perhaps the fact that they are recommendations aimed specifically at supervisors, centred around the effectiveness of supervision without imposing direct requirements on the banking industry - although they obviously affect that sector’s activities indirectly explains why this has not generated the same glut of headlines as other initiatives. However, I believe that we would all agree on the important place that the Principles have occupied and continue to occupy, and we know that compliance with them is a priority for virtually all supervisors. The aim of the Core Principles is to establish a set of minimum requirements to be met in order for banking supervision to be considered adequate. This permits the identification of areas in need of improvement and facilitates planning to achieve these improvements. The passage of time has shown that the Core Principles have satisfactorily met these objectives since they were first issued in 1997. Moreover, they have permitted the establishment of an internationally accepted benchmark with which to evaluate the supervisory approaches of different countries. In so doing, they have helped to  BIS Review 45/2006  1  improve and encourage the convergence of banking supervisory standards, thereby contributing to global financial stability. So why revise them, even if the changes are only minor?
I am also delighted to welcome to our shores and the conference the Secretary General of ASBA, Mr. Rudy Araujo, the Chief Representative of the BIS Office of the Americas, Mr. Gregor Heinrick, the Senior International Adviser of the Comptroller of the Currency, Mr. Lester Miller and Advisor on Economic Crimes in the US Treasury Department, Mr. Thomas Noller. I have no doubt that your considerable experiences will add value to this conference. It is also fitting that I welcome the Hon. Minister of Finance, Dr. Ashni Singh and the Hon. Minister within the Ministry of Finance, Bishop Juan Edghill. The importance of this Conference is underscored by the fact that both Ministers enthusiastically agreed to adjust their work schedules to be present at this opening ceremony with Dr. Singh consenting to deliver the feature address. Delegates and invitees can expect a very insightful presentation by the Minister. Ladies and gentlemen, the theme of the Conference refers to the evolving financial landscape which is quite evident in many tangible forms though not always easily manageable. As a matter of fact, the changing financial landscape has brought challenges almost every step of the way. It is a testimony to the quality of our regional banking supervisors and the support and nurturing provided by the Caribbean Group of Banking Supervisors over the years that our region met the challenges posed by the changing landscape and has remained safe and sound.

Wage costs have great significance As total wage costs comprise almost 70 per cent of the total value added in the economy, developments in wage costs have decisive significance for the development of costs and prices. Making an assessment of future developments in wage costs is therefore a natural and central element in the Riksbank's analysis of inflation prospects. If there is an overly rapid increase in wage costs, companies may be forced to raise their prices significantly and this would result in inflation exceeding the target level. This would require tightening monetary policy, i.e. raising the repo rate. Although this would bring inflation back to the target level, it would be at the cost of an increase in unemployment. In the long term, however, developments in unemployment are essentially dependent on how well the labour market and wage formation function. Monetary policy has affected the wage formation process; the uncertainty over future price developments has declined thanks to inflation targeting. Wage-earners no longer need worry that their pay rises will be eaten up by overly rapid price increases. At the same time, employers find it easier to determine the size of the scope for wage increases. It also appears as though what is usually termed "monetary illusion" may have disappeared. The labour market organisations appear today to focus to a greater extent on real wage cost increases. The strong confidence in the inflation target has meant that these organisations' inflation expectations have been at a level of around 2 per cent since 1996.
We Central banks should investigate the many questions it raises – and we have started this work at the Banque de France –, and then decide on its own merits. III. Green finance, “a new frontier for the 21st Century” Let me now turn to green finance. For me, it is “a new frontier for the 21st Century”. First and foremost, I would like to pay tribute to the Governor of the Bank of England, my colleague and friend Mark Carney, who was a pioneer when he pointed out “the tragedy of the horizon”2 in 2015. Much has already been undertaken since then. We are currently witnessing a growing awareness from central banks, supervisors and 2/4  BIS central bankers' speeches  financial institutions about climate-related risks. Clearly, green finance and climate risks management have gone from the “nice to have” to the “must have”, from emotion to reason. In financial institutions, climate change is no longer confined to Corporate Social responsibility (CSR) policy. Concerning central banks and supervisors, the creation of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) in Paris in December 2017 has been a decisive step forward. In 18 months, this coalition of the willing has increased from 8 founding members to almost 50 members and observers from all 5 continents, with the Banque de France acting as its permanent Secretariat and the active involvement of the Bank of England.

This momentum has an important meaning: supervisors and central bankers have collectively acknowledged that climate change-related risks are a source of long-term financial risk. In April 2019, the NGFS published its first comprehensive report issuing four recommendations for central banks and supervisors, and two additional recommendations for policy makers. Looking down the road, I see three priorities for the near future. First, we will require enhanced disclosures that need to be built on sound taxonomies. The taxonomy framework published by the Technical Expert Group (TEG) on Sustainable Finance of the European Commission on 18 June is a welcome step. Second, we have to better anticipate long-term climate-related risks, through what I call “the video of the risks”. We must push for the development of comprehensive climate stress tests in order to build a forward-looking approach of the impacts of climate risks. Third, green finance needs to mature and upgrade its professional standards. The financing needs for the energy transition are huge; in Europe alone, it is estimated that an additional EUR 177 billion per year will be necessary over the period 2021-2030 to reach the EU’s energy and climate objectives for 2030.3 The European Green Bond Standard proposed by the TEG should ultimately help to further develop the green bond market and channel more investments towards green projects. Furthermore, many proposals have been made to allow monetary policy to play a direct and sector-focused role in financing the transition to a low-carbon economy.
The interest rate is also the price of money – the price we pay in order to have liquid holdings and the compensation we receive for storing our savings in less liquid forms. The interest rate is also used as an instrument in economic policy. Setting the interest rate to achieve a monetary policy objective, often price stability or low and stable inflation, is usually the responsibility of the central bank. This is also the case in Norway. Low and stable inflation provides the economy with a nominal anchor, and is the most important contribution monetary policy can make to sound economic developments in the long term. This contributes to increased predictability for those who take decisions about saving and investment today, although the result of those decisions also depends on how the economy develops in the future. In its conduct of monetary policy, Norges Bank operates a flexible inflation targeting regime, so that weight is given to both variability in inflation and variability in output and employment. Flexible inflation targeting builds a bridge between the long-term objective of monetary policy, which is to keep inflation on target and provide an anchor for inflation expectations, and the more short-term objective of stability in the real economy. Monetary policy influences the economy with long and variable lags. Norges Bank sets the interest rate with a view to stabilising inflation at the target within a reasonable time horizon, normally 1–3 years.

A stronger krone also dampens exports and reduces profitability in Norwegian business and industry. The effect on the exchange rate of a change in interest rates will vary as themes and sentiments shift in the foreign exchange market. The expectations channel: We believe that expectations play an important role when prices and wages are set. Expectations concerning future inflation and economic stability have considerable impact, not least in the foreign exchange market. Inflation expectations also influence wage demands and have an effect when companies adjust their prices. It is difficult to be precise about how expectations are formed. Confidence in the inflation target may provide an anchor. Past inflation rates may also influence what we think inflation will be in the future. There is thus an interaction between inflation expectations and inflation. If there is confidence in monetary policy, expected inflation in the medium term will be close to the inflation target. This contributes to stabilising inflation around the target. It is thus important for the central bank to ensure that households, companies, the social partners and financial market participants are confident that inflation will remain low and stable. Let me introduce the concepts of the “neutral rate” and the “long-term equilibrium rate”. Both should be seen as real rates, that is nominal interest rates adjusted for expected inflation. The neutral real interest rate is defined as the rate that does not in itself result in an increase or a reduction in price and cost inflation in the economy in the course of a business cycle.
Improved profitability is, furthermore, one of the requirements for banks to be able to generate capital organically and raise their solvency. 10/17  In recent years the legal risk of Spanish banks associated with litigation has increased significantly. Banks have been involved in a large number of legal proceedings questioning certain contractual conditions of their mortgage exposures. In many cases they have already paid the cost of these proceedings (for example, in relation to floor clauses more than € million was refunded to customers up to January 2019), but there are still many major legal proceedings yet to be resolved. Above and beyond the cost that litigation may entail for banks, a more general implication is the loss of reputation for the banking sector. Banks must make an effort to reverse this perception by providing their customers with necessary information in a clear and transparent manner and affording them access to financial products suited to their needs and financial knowledge. 11/17  All this must not distract banks from persevering in their efforts to improve their efficiency ratios and pursue investments, particularly in new technologies, to enable them to reduce costs in the medium term. It should be kept in mind that in the coming years banks will have to issue considerable volumes of debt with various levels of subordination to meet minimum requirements for own funds and eligible liabilities.

The average debt ratio is then higher than 200 per cent in all of the income groups, and in fact highest in the lower income groups (see Chart 3). If we look at households instead, which may be reasonable considering that many borrowers in fact live in a household with more than one income earner and thus share responsibility for servicing the loan, the picture is till one of high debts in relation to incomes in all of the income groups. And here too it is clear that the highest debt ratios are mainly to be found among low and middle-income earners. Our results thus contradict the picture that it is only those with high incomes that have the highest debt ratios, that is those who are traditionally regarded as having a higher level of  BIS central bankers’ speeches  5  eduction, a stronger position on the labour market and wealth that they can draw from in difficult situations. Chart 3. Debt ratios in different income groups Per cent 800 700 600 500 400 300 200 100 0 1  2  3  All households (SOU)  4  5 6 7 Income deciles  Indebted individuals  8  9  10  Indebted households  Sources: SOU 2013:78 and the Riksbank  High debt ratios are not only a metropolitan phenomenon It may also be of interest to look at the geographical distribution. It has often been claimed in the debate in recent years that debts are mostly a “Stockholm problem”.
Last but not least, I will share my views on good policy preparations and highlight the importance of policy collaborations, so that we, collectively, could better withstand the impact of the crisis going forward. Part I: Major developments that have contributed to the past global financial crisis Ladies and Gentlemen, looking back on what we have experienced in the past decade, the recent crisis has caused tremendous impacts with repercussions at the global level. On a more positive side, however, the crisis has revealed three major developments in the financial system, which have shaded some light on the inadequacy of existing policy framework for our future preparations. First is innovation, in response to the shift in the global financial system landscape. The sophisticated financial instruments have been developed to serve rising demands from all types of investors with different risk-return appetites. However, such a creation has resulted in products that disguised the genuine financial risks. Moreover, systemic risk stemming from complex nature of such products have led to increasing contagious consequences in global economic and financial system. Second is the institutional shift represented by an increasing role of non-banks and shadow banks, especially in some Advanced Economies. This has long been a trade-off for policymaking between economic and social considerations. On one hand, the shadow banking sectors undoubtedly provide financial opportunity to those with limited access. This institutional development also has encouraged higher competition in the financial system, leading to greater efficiency.

I do see the enhancement of international cooperation as a seed towards success in policy preparation for our region. I believe that, in the middle of a dark tunnel, with each of us holding a torch focusing in the same direction, we could see better along the way and can be sure that it is the right way out. Thank you. 4  BIS central bankers’ speeches
In the Baltic countries, which have not yet adopted  4  BIS Review 56/2010  the euro, but have retained fixed exchange rates throughout the crisis, one can even see falling wages. The situation of the United Kingdom has certain similarities to that of the group of countries I have just described. Following several years of a deficit in the region of 3 per cent of GDP, the crisis entailed a rapid deterioration to a deficit of 13 per cent in 2009. According to the OECD’s forecast, gross public debt in the United Kingdom will double between 2007 and 2011. Here, too, we can see an increase in unit labour costs compared to the euro area, but the crucial difference is that the weaker pound has made it possible to strengthen competitiveness. (Slide: General government net lending in the United Kingdom). Things look better in Sweden Public finances in Sweden are in a much better state than in many other countries. However, our experience of the severe Swedish crisis in the early 1990s is reminiscent of the situation I have just outlined for some of the euro countries today. At that time, our public finances deteriorated from a surplus of 3 per cent of GDP in 1990 to a deficit of 11 per cent of GDP in 1993. (Slide: General government net lending in Sweden).

This deterioration in competitiveness can be illustrated by the fact that unit labour costs have increased by between 10 to 20 per cent more than in the euro area as a whole since 2000, and even more in relation to unit labour costs in Germany. The deterioration in competitiveness entails less chance of a boost from exports and thus poorer opportunities for a rapid recovery as international demand increases. (Slide: Unit labour costs compared to the euro area). The strong growth in domestic demand in recent years and the weaker competitiveness have resulted in a current account deficit and thus rising foreign debts. (Slide: Current account deficits). In the case of countries with their own currencies one would expect a depreciation of the currency to restore competitiveness. This opportunity is not available to the countries in the euro area. Here, it is instead necessary for wages and prices to fall in relation to other countries. One difficulty in this context is that both public and private debts and the interest payable grow in real terms – that is, a larger part of production goes to meeting the costs of the debts. Developments in Germany show that such internal cost-cutting in relation to other countries is fully possible. The combination of a muted growth in nominal wages and productivity improvements has led to unit labour costs in Germany falling by 15 per cent since 2000, compared with the euro area as a whole.
Second, it would also be advisable to avoid arrangements that automatically link wages to past inflation or indexation clauses, with the aim of reducing the risk of a wage-price feedback loop. In addition, the incomes agreement should include multi-year commitments relating both to wage increases – where the nominal benchmarks for wage bargaining should exclude components associated with energy products and be based on the projected trend in underlying inflation – and to job protection. Lastly, the agreement needs to be complemented by explicit and verifiable profit margin moderation commitments. Monetary policy The third economic policy element I would like to refer to is monetary policy. In the inflationary context I have already described, the ECB has embarked on the process of monetary policy normalisation, starting from an extraordinarily accommodative position. Before the onset of the pandemic, the ECB maintained highly accommodative financial conditions through the asset purchase programme (APP) and negative interest rates. The aim was to drive inflation, which had remained persistently below 2%, to levels close to our target. During the pandemic, in an effort to combat the risk of financial fragmentation and  11  the deflationary trends, the ECB rolled out, among other measures, the pandemic emergency purchase programme (PEPP). The measures taken by the ECB are part of the new strategy approved by the Governing Council in 2021, which established a symmetric medium-term inflation target of 2%. Medium-term guidance means that decisions are conditioned by the inflation projected over a two or three-year horizon.

In this way, experimentation allows us to send the right signals for the ecosystem to realise the potential of new technologies without fearing a delayed and unexpected “backlash” from the Supervisory Authority. The experiments underway at the Banque de France on a central bank digital currency (CBDC) are an illustration of the same experimental approach in the field of work specific to central banks. They present with issues directly related to the need for the Eurosystem, should circumstances require it, to be ready to issue a CBDC in order to ensure that central bank money is accessible to the general public and to preserve their freedom of choice of means of payment and their confidence in our currency. By testing the possible uses of a CBDC, we investigate not only the potential of blockchain technologies but we also question the players in the ecosystem on what tomorrow’s landscape could look like, on subjects as fundamental as the methods of exchanging financial instruments for CBDCs, the improvement of the conditions for executing cross-border payments or new ways of making CBDCs available to financial sector players. 2/4  BIS central bankers' speeches  *  *  The second thrust of our work is to promote a regulatory framework and appropriate supervisory practices. In this respect, our immersion, as a player, in the innovative FinTech ecosystem is a valuable asset that we intend to build on in order to contribute to the impending and necessary changes in regulations and supervision.