samchain/econo-pairs-v1 huggingface dataset:
But insolvency had generally been avoided by the Bank of England twisting arms to ‘encourage’ other banks, to support a rescue ‘lifeboat’, as in the secondary banking crisis of 1973 or to take over the failing bank as with Barings in 1995. The failure of BCCI in 1991 did lead to a protracted and difficult insolvency. But the bank’s activities in the UK were not of a scale that posed risks to the UK financial system and economy The Bank of England’s approach to bank failure, an approach shared by many central banks, was one of ‘constructive ambiguity’. The aim was to guard against moral hazard by maintaining uncertainty about whether a bank in trouble would get liquidity support with the threat of insolvency in the background. In the event the threat of insolvency proved neither credible nor effective. When Northern Rock got into trouble with £ in customer deposits and a balance sheet of £ the UK financial authorities were left with no way of rapidly transferring parts of the failed bank’s business to another bank; or of recapitalising the bank by imposing losses on shareholders and creditors without serious risks to financial stability. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  And so, on 17 September 2007, the Chancellor was compelled to guarantee all Northern Rock deposits. Subsequently the bank was nationalised to avoid insolvency and to allow the bank’s critical functions to continue while a buyer was found for its deposits.

The public authorities had no means of directing the insolvency process to prioritise the protection of depositors, the continuation of the bank’s critical functions or wider financial stability concerns. There was no way to recapitalise a failing bank by bailing in its creditors. As a result, when faced with the failure of a bank of any size, the UK authorities had only a stark choice between a very disruptive insolvency, putting financial stability at risk, or a taxpayer bailout. The UK was not of course the only jurisdiction to discover in the financial crisis that it did not have an effective regime for dealing with the failure of banks. And, as we discovered when Lehman Brothers failed, the authorities in different jurisdictions had no preagreed means of coordinating with each other on how to deal with the sudden failure of a major cross-border bank. Nor had they any confidence that the actions taken by authorities in another jurisdiction would align to their own national interest. With hindsight it is clear we had been lulled into a false sense of security. In Britain, Northern Rock represented the first major run on a bank since the failure of Overend Gurney in 1866. Unlike, for example, th  the US, the UK had not experienced bank runs in the 20 century. Banks in the UK had failed.
Obviously, if the starting point is a structural budget deficit, then the return to budget balance will require spending to grow more slowly than nominal growth or else a discretionary increase in revenues, until balance is achieved. Evidence suggests that the application of a rule of this type during the upswing prior to the last crisis would have substantially curbed the public spending permitted each year, allowing the generation of significant room for manoeuvre that would have limited the deterioration in public finances during the crisis. Finally, pressing ahead with the various pending reforms would raise the economy’s growth potential which – through its effects on employment and productivity – is one of the basic determinants of reductions in public debt. These reforms include, in the regulatory area, revision of regulations that hinder the market entry of new firms or that limit their growth; in the labour market, reforms to reduce the degree of duality and to improve the employment prospects for the long-term unemployed; and the need to increase the efficiency of the legal system and of the education system and to promote the accumulation of technological capital, among others. Accordingly, any delay in their implementation or, worse still, a hypothetical reversal of reforms already introduced since the start of the crisis, would significantly worsen the prospects for economic growth and would make the fiscal consolidation still needed more costly. Conclusions Let me conclude by recalling the challenges and risks for the economy as a whole raised by the current fiscal imbalance in Spain.

These strains in household finances from suddenly excessive debt service burdens are met by households in a variety of ways: through default, foreclosures, and bankruptcy, or renegotiation of the terms of repayment, but also through continued higher principal and interest payments accompanied by much lower consumption than the household had previously planned. As we see in Chart 1 (Employment declined dramatically) job losses in the recent recession were extremely large and prolonged, a problem that resulted, in part, in significant delinquencies in debt repayment. Furthermore, the significant decline in house values imposed a much stricter limit on how much households could borrow if they needed, for example, to adjust to the effects of a temporary loss of income. Recent economic research has examined how the macroeconomy is affected when households suddenly experience reduced borrowing capacity. Eggertsson and Krugman consider the case of households that have borrowed up to some limit and now see their debt limit reduced; these households suddenly find themselves over-indebted and are forced to cut spending.1 If the required cuts in spending are large enough, then even a very active monetary policy will be unable to offset them completely. Other research has also suggested similar mechanisms.
The creation of a macroprudential framework with its own objectives, authorities and tools provides an important complement to monetary policy. In the long term, the complementarity naturally arises because the respective objectives are intertwined and one cannot be achieved without the other. At the same time, they complement each other equally well in the short term. When asset prices, leverage, financial exuberance and strength of the economy and inflationary pressures move in the same direction, monetary policy and macroprudential policy typically pull in the same direction too. On the other hand, when financial imbalances increase amid an environment characterised by relatively muted inflation, the twin goals of price stability and financial stability can be best achieved by resorting to two separate instruments, in line with the Tinbergen principle.4 While more restrictive monetary policy may be able to lean against the build-up of financial imbalances, targeted macroprudential measures are typically a more efficient way of addressing their causes. This is especially relevant in the euro area, given its multi-country composition. Macroprudential measures can be targeted to specific member countries to address the build-up of local imbalances, which cannot be addressed in an efficient manner by the single monetary policy. The presence of macroprudential policy should, however, not lead monetary policy to neglect financial stability issues.

I hope that over the course of this two-and-a-half days' conference, the deliberations, emerging from the experts and audience on a wide array of supervision-related issues, will shed more light on how best to deal with weak banks and systemic crisis. All banking supervisors and central bankers seek the “Holy Grail” aspiration for a stable financial system which is resilient and capable of returning to a balance after a shock. To fulfill this common goal, let me repeat a golden principle of sound banking supervision - prevention is fundamental to avoiding a banking crisis. We all know that handling a crisis is always very difficult and painful; therefore, supervisors and bankers have a shared responsibility and accountability to prevent banking problems. Supervisors must create a sound framework, foster a robust and effective system, and establish clear procedures to identify and deal with weak banks. This means the supervisors must be equipped with the legal power to effectively carry out their duties and have the necessary tools, resources and capacity to solve the problems. These are the necessary infrastructure or building blocks of a sound and stable financial system. Equally important, the Board and management of individual banks must shoulder the responsibility of monitoring and addressing bank weaknesses. They cannot fail in their oversight and risk managerial duties, just as supervisors cannot fail in their on-site and off-site supervision. In this respect, I am a strong believer that good governance is the corner stone of a stable financial sector.
Kerstin af Jochnick: Monetary policy and the current economic situation Speech by Ms Kerstin af Jochnick, First Deputy Governor of the Sveriges Riksbank, to the County Administrative Board, Kalmar, 22 August 2013. *  *  *  It has become something of a tradition for a member of the Executive Board of the Riksbank to hold a speech on the current economic situation at the end of August. I think this is a good idea; starting off the new term by summarising what has happened during the summer. I appreciate being given the opportunity to come here to Kalmar to talk about the economic situation. Kalmar is part of a region where economic developments are greatly affected by cyclical fluctuations. Kalmar and Kronoberg, together with Blekinge, are the counties that have experienced the largest fluctuations in growth since the early 1980s. One reason for this, of course, is that a large share of the companies in the region comprises subcontractors to the cyclically-sensitive manufacturing industry. Today I intend to start off with the economic assessment we made in July and in particular to describe my view of developments at that time and of the monetary policy we have decided on. The main message in July was that the Swedish economy is heading for a recovery. But we decided to hold the repo rate at a low, unchanged level to help the economy along.

After the most recent financial crisis, which demonstrated how costly a crisis can be as a result of a large build-up of debt, the pendulum has swung towards the belief that monetary policy should to a greater extent lean against the wind, and take such imbalances into consideration. Personally, I think that as long as there are no other tools in place that can counteract the build-up of financial imbalances, monetary policy must take into account the risks the imbalances entail. Let me explain my view of these questions before I move on to summarise the information received during the summer. BIS central bankers’ speeches  3  Monetary policy and financial imbalances International experience shows that a high level of indebtedness in all its forms can pose major risks to the economy. It makes the economy more vulnerable to various types of shock, such as a fall in house prices, and it can also increase the risk of shocks actually occurring. The flexible inflation targeting conducted by the Riksbank is compatible with giving consideration to this type of financial imbalance in our monetary policy decisions. Such imbalances ultimately risk jeopardising both the stability of the real economy and the inflation target. In a really bad scenario the imbalances could also entail risks for financial stability. As the Riksbank’s two main tasks are to attain price stability and financial stability, we must take these risks into account.
Then there are the standing invitations from us to other central banks in the region to have their real-time gross settlement (RTGS) payment systems, when constructed, linked up with our own. And if such linkages are also established among themselves then we will have a robust network of RTGS payment systems to facilitate the safe transfer of money in this region. We also have another standing invitation to others to have debt clearing systems similarly linked up to form what we would like to call the Asiaclear, to facilitate investment flows across markets in this region. This will also help the development of a regional debt market. We shall persevere with these efforts. * This could be a reformed IMF or a BIS with enhanced roles. Or it could be a new World Finance Organisation (WFO), mirroring the WTO. BIS Review 120/1999  6  Domestic responses On the domestic front, we all, in the first place, have to put our own house in order, if indeed there are shortcomings in economic policies generally, or monetary and financial policies in particular. But one lesson from the financial crisis is that, even if you are white as snow, you are still vulnerable to the vagaries of international finance, and will continue to be so, if they are not satisfactorily addressed soon at the international or regional levels. This vulnerability makes the authorities, particularly those of small open markets, uneasy, as the task of maintaining monetary and financial stability has become a very onerous one.

Financial liberalisation has further taken this process of financial intermediation to the international level, in which, for example, UK pension funds are invested in Thai equity and US depositors are funding infrastructure investments in the Philippines. And this is not a one-way process either. A large part of Asian savings - to the extent that they are increasingly allowed, by the relaxation of exchange controls - to be invested overseas, have been funding the budget deficits of developed 3  BIS Review 120/1999  economies and providing capital, for example, for Microsoft, Citibank or British Telecom. Indeed, the Asian miracle would not have been possible without the advent of international finance. But, alas, it was also international finance that was responsible, at least in part, for turning the Asian miracle into Asian misery. International financial architecture In the history of this world, it has not been unusual to see the riches of a family surpassing the wealth of a poor nation. However, with a free and open global trading system, economic differences generate opportunities for business interactions of mutual benefit. The sharing of that benefit has nevertheless been the subject of controversy, where the distinction between doing business and exploitation is blurred. But then this is a fact of life, with different perspectives when viewed from different angles. And so arguments arising from such issues as protectionism and dumping remain, and there are established institutions and mechanisms, as part of the global trading system, to tackle them at the international level.
Moreover, the profit-sharing and risk-sharing characteristics of Islamic financial transactions strengthen the incentives for Islamic financial institutions to undertake the appropriate due diligence on the Islamic financial transactions to ensure that the profits are commensurate with the risks assumed. The Shariah board of Islamic financial institutions additionally serve as a rigorous process of endorsement of the experts, thus representing a vital institutional safeguard to ensure that the inherent strengths of Islamic finance are fully realised. This ensures that the products are offered with the intention to achieve real benefits for the investors. It would therefore reduce the tendency for extreme behaviour in the financial system. More recently, the world’s attention had shifted from troubled banks to troubled countries with rising sovereign risks, leading to further rescue packages and increased anxieties over contagion to financial markets in other parts of the world. Whilst these challenges continue to be addressed by the developed economies, the emerging economies have emerged from this crisis with stronger growth performance. The Asian region in particular, has entered the crisis with solid economic fundamentals and more resilient financial systems and institutions. This has in turn substantially limited the consequences of the contagion. With the internationalisation of Islamic finance in this decade, it has further reinforced the trend of greater financial integration in emerging economies. This has reinforced the changing global pattern of financial and economic integration as financial and economic linkages strengthened between the emerging economies.

I would like to say that, as we all know, the Spanish financial system has undergone intense restructuring and recapitalisation, as well as a significant consolidation process. I am confident that Spanish banks are prepared for this rigorous exercise. Setting up the Single Supervisory Mechanism and making it operational is not going to be a simple task. Both from the procedural and organisational standpoints, it will be a complex process, requiring great effort, and will be a major responsibility for those who take on the leadership of this new European Union-wide institution. BIS central bankers’ speeches  1  Ms Sabine Lautenschläger’s responsibilities as member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the SSM place her in a unique position. I have no doubt that her intervention will be extremely interesting and informative to us all. 2  BIS central bankers’ speeches
The mandatory savings scheme was intended to inculcate in the beneficiaries the value of thrift as an integral part of making any sustainable livelihood 18 . This is because without learning how to save, an individual is unable to learn how to spend wisely. Accordingly, each member of the group was required to save per week a minimum of Rs. 5 19 in a group savings account which later served as an insurance against unexpected future eventualities such as family illnesses or crop or business failures. Group members were encouraged to meet in rotation in one of the member houses at least once a week so as to ensure group cohesiveness and facilitate member education programme. At these meetings, they were encouraged, guided by the change agent, to discuss among themselves freely why they were poor, what skills they were lacking for gainful enterprise, the working of the free market system and how they could benefit by being integrated to the market system. These meetings also gave them vital training on how they could conduct meetings democratically and listen to each other without being offended or having to embarrass others when a disagreeable opinion is made. Groups were chaired by a member who was also selected by rotation and records of group meetings were kept by a member who functioned as its secretary.

BIS Review 22/2008  1  it was felt that, unless an effective strategy is adopted to alleviate poverty among those who could not get integrated to the market economy policies, the country was within sight of another socio-economic explosion similar to the one which it experienced in 1971 in the near future 4 . As a counter strategy, several poverty alleviation schemes were initiated by the government with focus on the poor. Along with these schemes, the Central Bank too entered the foray by implementing some pilot projects based on microfinance and support services so that it could develop microfinance techniques and systems for others to emulate. One such project, funded by the International Fund for Agricultural Development (IFAD) and Canadian International Development Agency (CIDA) was implemented by the Central Bank in four districts where the incidence of poverty was the highest under the title “Small Farmers and the Landless Credit Project (SFLCP) or Isuru Project. To supplement this project, another initiative was taken to introduce a Forward Sale Contract Scheme for agricultural produce to facilitate farmers to obtain a pre-agreed price for their major agricultural crops. This paper will cover the strategy, methodology and the techniques adopted in these initiatives so as to develop a sustainable socio-economic security system in Sri Lanka. The paper is organised into four parts. Part I will critically review some aspects of the current theoretical knowledge on socio-economic security systems from the point of view of costeffectiveness and sustainability.
While employment in the agricultural sector decreased by 3.6 percentage points compared to the same period last year, employment in the services sector rose by 2.9 percentage points. In this context, the share of the agricultural sector in total employment fell from 38 percent in 2001 to 28.4 percent, as of May 2006. However, taking into account that this ratio was 3.7 percent for EU-15 countries in 2004, Turkey still has a long way to go. Similarly, when we look at the labor force participation rates, we see a significant discrepancy. The labor force participation rate, which fell by 0.7 percentage points and became 48.6 percent in Turkey in May 2006, compared to the same period last year, was around 65 percent for EU15 countries by the year 2004. Meanwhile, a relative improvement is observed in unemployment rates. The unemployed population and the unemployment rate are at their lowest levels since the third quarter of 2001. Compared to the same period last year, the unemployment rate decreased to 8.8 percent from 9.2 percent in May. During the same period, the unemployment rate in sectors excluding agriculture fell by 1 percentage point and became 11.5 percent. Similarly, it can be said that there is a relative improvement in the unemployment rates in urban areas. The unemployment rate, especially among the young population  8  BIS Review 89/2006  in urban areas, decreased by 2.3 percentage points and fell to 19.4 percent from 21.7 percent.

However, today marks not an end, but a beginning. In just over a week the Single Supervisory Mechanism will become fully operational, and the immediate future poses challenges of the first order both for supervisors, involving the adaptation of our structures and functioning to the needs of the new European mechanism, and for banks. I would not like to conclude without thanking the whole team at the Banco de España, which has been working for months in collaboration with the European Central Bank, the banks and the audit firms to successfully see through this complex exercise. And, naturally, I would also like to extend my thanks to the teams at all of the banks which, for months, have devoted their best technical capabilities to this end. Thank you very much for your interest and for being here today. 4  BIS central bankers’ speeches