samchain/econo-pairs-v1 huggingface dataset:
In better run firms, the rules are built on a foundation of the shared and well‐understood values of the institution. These values reflect a bank’s public function as a financial intermediary and recognize the privileges that come with a banking charter. 4 In other firms, however, compliance rules can be undermined by the values of the organization, resulting in an unhealthy dissonance. For example, if there are elaborate rules for complying with the tax laws of a particular jurisdiction, but the organizational value is to facilitate flight capital, a mixed message may be sent that tax compliance rules are just technicalities. Similarly, in the area of economic sanctions, if the sanction is perceived as something technical and implicating only a single currency, the bank might be sending an unintended message – that we comply with the sanction only because it represents a mandatory but silly rule of a single sovereign issuing a specific currency, and not because the sanction seeks to address a problem that all should find abhorrent, like financing a jurisdiction engaged in genocide. 5 What to leave out Thinking about culture like a package, there are some things that I would leave out. Again, without being exhaustive, here are three examples. First, I would leave out any depiction of the persons that an organization does business with as “counterparties.” If you went to your doctor and overheard her refer to you in conversation with office personnel as a “counterparty,” rather than as a “patient,” would you worry? I would.

This proposal will enhance worker remittances into the country and help to finance the widening trade deficit and maintain a positive balance of payment position. The budget reiterates the need for permitting professionals to earn in foreign currency and retain such funds in foreign currency accounts within the country. The budget also allows expenditure incurred on acquiring international accreditation as a deductible expenditure from taxation. These measures are expected to enhance foreign currency earnings and further facilitate the management of foreign reserves. The down-side risks Effective policy coordination is certainly the way forward as set out in the budget 2007 and it is interdependent on action by all policy-making authorities. If one or two policy areas lag behind, then the sustainability of achievements over the long term will become an issue. The monetary policy has to play its part to bring down inflationary expectations, while the investment policy has to attract FDIs and  BIS Review 7/2007  3  other investment flows. The reserve management policy should attempt to enhance foreign reserves through increased worker remittances and other flows. Pushing all these policy fronts to work within the open economic policy framework and keeping pace with each other is critical to the success of the medium term development plan. Very close coordination is essential for it and it is certainly a challenge. At the same time, the fiscal policy should make all attempts to stick to its revenue and expenditure targets.
Given this objective, the monetary policy has been adjusted to avoid persistent deviations from 3% due to the second-round effects of supply shocks or the widening output gap. This is why the Board increased the monetary policy rate in 25 basis points in July, August and September 2007, to a current level of 5.75%. In September, due to the turbulences in global financial markets and their possible consequences on the Chilean GDP growth, the Board decided to change the upward bias in the monetary policy rate to a neutral bias. This was then confirmed in the monetary policy meeting of October, when the Board decided to maintain the monetary policy rate and remarked that future trends would depend on new information and its implications on inflation forecasts. This time the Board added that the future of monetary policy would depend on developments of the World Economy, the eventual propagation of the inflationary shock to other prices, wage trends, medium and long-term expectations of inflation, and the evolution of the output gap. The market has also adjusted its expectations on the future course of the monetary policy, given both the news on the internal inflationary front and the expected evolution of the worldwide GPD growth. As a result, financial prices have internalized the fact that the monetary policy rate will increase another 25 basis points during this year and another equal increase during 2008.

Second, the longer we keep inflation expectations at target, maintain a current account surplus, and continue to pay down debt, the more the risk premium component of interest rates and the equilibrium real rate in Iceland will continue to fall. The current propensity to save, adjusted for the business cycle position, is much greater than it has been for quite a while, and over time, it will contribute to a reduction in the long-term equilibrium real rate. If inflation expectations remain at target, both nominal and real rates will decline accordingly. Exchange rate of the króna and Central Bank foreign currency purchases Responding to the recent strong inflows into the foreign exchange market is one of the Central Bank’s most complex tasks at present. The problem lies, among other things, in distinguishing between short-term inflows, which are only loosely connected to economic fundamentals and are much more likely to stop suddenly or even reverse, and inflows that reflect more lasting positive changes in fundamentals, although these can change for the worse as well. It can be argued that, other things being equal, there should be more foreign exchange market intervention in the former instance and less in the latter. While the foreign exchange reserves were being increased to the desired size during the prelude to general capital account liberalisation, this distinction was less important for policy responses than it is now, as the premises were in place to buy the inflows and top up the reserves, more or less irrespective of the origins of the inflows.
By far the most effective way of helping SMEs quickly would be to provide incentives for lending by existing banks because they can assess credit risk in a way that no other institution could do in the immediate future. Bank and Treasury officials are working together on such ideas. In the end, however, the shape and parameters of any scheme will be, and properly so, determined by the Government. Let me sum up. From the very beginning of the global crisis there has been a reluctance by governments to face up to the underlying solvency problems generated by apparently unending trade deficits with no mechanism, whether flexible exchange rates or some other means, for correcting these disequilibria. Those solvency problems have shown up on country and bank balance sheets. The initial reaction has always been to provide liquidity: through central banks or an extension of official lending by governments. Providing liquidity to buy time to devise and put in place a coherent response to the underlying problem can be not only valuable but necessary. But liquidity can never be the answer in itself. And if the time bought is not used then the size of the debt problem becomes larger and its cost is gradually transferred from private sector creditors to taxpayers. The main impediment to the strategy of rebalancing our economy is markedly slower growth in our major export markets, especially in the rest of Europe.

After the crisis began, it took a year before governments in Europe and the United States were persuaded that the problems of their banking sectors resulted not from a shortage of liquidity – that was merely the symptom – but from massively over-leveraged balance sheets. Eventually, in October 2008, banks were recapitalised, albeit, especially on the Continent, inadequately so. But the underlying problems of excessive debt have not gone away. As a result, markets are now posing new questions about the solvency of banks, and indeed of governments themselves. What were the causes of the unsustainable build-up of debt in Europe and elsewhere? They lay in the continuing imbalance between those economies running large current account surpluses and those running large current account deficits. Persistent trade surpluses in some countries and deficits in others did not reflect a flow of capital to countries with profitable investment opportunities, but to countries that borrowed to finance consumption or had lost competitiveness. The result was unsustainably high levels of consumption (whether public or private) in the United States, United Kingdom and a range of other advanced economies, and unsustainably low levels of consumption in China and other economies in Asia, and some advanced economies with persistent trade surpluses, such as Germany and  BIS central bankers’ speeches  1  Japan. The burden of debt will go on rising in the former group of countries until these spending patterns adjust and the latter group will find their loans eventually repaid in depreciated currencies, if at all.
At the same time, both total and core inflation, as measured by the Personal Consumption Expenditures (PCE) deflator, slowed in the second half of 2013 relative to the first half, and the overall PCE deflator index is currently running well below the FOMC’s expressed goal of 2 percent for total inflation. Combined with the still-elevated unemployment rate and the drop in the labor force participation rate, these conditions suggest that there continues to be a substantial underutilization of both labor and capital resources. This implies, in turn, that the current, highly-accommodative stance of monetary policy will remain appropriate for a considerable time to come. Let me elaborate on these points. BIS central bankers’ speeches  3  While the timing and magnitude of the pickup of growth were earlier and somewhat stronger than our internal forecast, in qualitative terms the economy has performed much as we expected. First, by several measures, households’ balance sheets are in much better shape, and this has led to faster growth of consumer spending, particularly for durable goods. Key measures of household leverage have declined and are now near the lowest levels they have been in well over a decade. Reflecting rising equity and home prices and declining debt, household net worth relative to disposable income has climbed back to its average of the previous decade. Recently, banks have eased credit standards somewhat after a prolonged period of tightening.

The two elements on which our monetary policy is based – the negative interest rate and our willingness to intervene – are both helping to reduce pressure on the Swiss franc. Thus, despite periods of heightened uncertainty over the last few months, the franc has remained quite stable overall. Furthermore, the negative interest rate has led to lower interest on the capital market, which is facilitating corporate financing. In other words, our expansionary monetary policy is effective. The negative interest rate and our willingness to intervene in the foreign exchange market continue to be both necessary and  Page 4/5  Berne, 15 December 2016 Thomas Jordan  News conference  appropriate. This is because inflation is still very low, production capacity is not yet being fully utilised and the Swiss franc continues to be significantly overvalued. Our monetary policy stabilises price developments and supports economic activity in Switzerland. Ladies and gentlemen, thank you for your attention. It is now my pleasure to give the floor to Fritz Zurbrügg, who will speak about current developments in the area of financial stability. Page 5/5
Indeed, as I have said, the need to guard against this risk is one of the reasons for the faster monetary normalisation that our latest decisions entail. 7  The second risk relates to possible second-round effects, i.e. when high inflation passes through to wage increases and these, in turn, push up consumer prices as firms seek to maintain (or widen) their margins. This scenario is to be avoided, since it would make inflation far more persistent and, thus, increase the likelihood of the feared de-anchoring of inflation expectations. On the information available, there is no evidence of such effects occurring at present, at least on a widespread basis. Wage settlements in the euro area have gathered pace since the end of last year, with increases reaching 2.5% according to the latest data. Although they are expected to rise further in 2023, the increases currently projected would, in principle, be compatible with the 2% inflation target once trend productivity growth is taken into account. Broadly speaking, profit margins have also remained moderate, although unevenly across sectors. However, the longer the current high inflation persists, the greater the probability of these second-round effects occurring. Naturally, the extent of the economic downturn, over which, as I indicated earlier, there is significant uncertainty, and its effects on wages and profit margins, will be key determinants of the medium-term inflation outlook and, therefore, of our monetary policy decisions.

After reaching record highs in late August, it now more than doubles the average prices observed at the start of the year. In the absence of an integrated energy market, the economic consequences of this energy dispute are affecting European countries unevenly, depending on their different levels of dependence on Russian gas. For example, around 18% of mined energy products (gas and coal) and 9% of oil derivatives consumed in the EU are imported from Russia, compared with 3% and 2.5%, respectively, of those consumed in Spain. However, given the surge in energy prices and European economic integration, economies, like Spain, that depend relatively little on Russian imports, will also be affected. Indeed, according to the Harmonised Index of Consumer Prices (HICP), gas consumption accounts for some 2% of households’ consumption basket in the euro area, and for 1.5% in Spain. Yet beyond the direct impact on inflation of higher gas prices, inflationary pressures are also fuelled by firms’ higher production costs, as natural gas is the main source of energy for the industrial and services sectors (except for transport-related sectors),1 and by the impact of gas prices on electricity price formation in the European markets.2 In addition, the slowdown in economic activity in the hardest hit countries will pass through, via trade flows, to the other economies in the form of lower external demand.
Second, economic policy is part of the reality we observe. The outcome of a particular measure will depend both on shifting economic conditions and on economic agents’ expectations of the effect of that measure. It goes without saying that in a situation like that, drawing useful lessons from history can be a challenge.2  1  Thomas Kuhn (1962), The Structure of Scientific Revolutions. University of Chicago Press. 2  Here the natural sciences may be more stringent, and in some cases it may be easier to set up experiments that can refute the theory. For example, Einstein’s theory of relativity was considerably strengthened, and  BIS central bankers’ speeches  1  Scientific truths provide a common basis for further research and development, but they can be a scourge if they are not challenged. The recognition of economic correlations lays the groundwork for good economic policy, resulting in a better life for more people. The outcome can be disastrous if the established truths lay the foundation for bad economic policies. Economics as a discipline has in the past hundred years undergone several prominent paradigm shifts, with widespread impacts and implications. What have we learned from 1930 to the present day? More than five years have passed since the turbulence in financial markets began. Today’s situation resembles the one Governor Nicolai Rygg described in his annual address in 1933: “The figures for world output are truly disheartening.

Headed by Professor Trond Helge Torsvik, this group worked to incorporate the theory of plate tectonics into a broader theory of mantle dynamics as an explanatory model for movements in the Earth’s crust. The aim is to understand the development of the Earth over several hundred million years. This is truly an ambitious example of learning from history. The Centre for Earth Evolution and Dynamics at the University of Oslo was just awarded the status of Centre of Excellence in research. 3  Descriptions of the causes of the financial crisis that began in1929 bear a striking resemblance to today’s headlines: a massive and unregulated shadow banking system, global imbalances and substantial income inequality (see John Kenneth Galbraith (1997): The Great Crash, 1929, Houghton Mifflin). 4  “More than anyone else”, Einar Lie writes, “he adhered to the fiscal policy convictions that he brought along to the postwar Ministry of Finance, which bore the stamp of his experience from a time without sufficiently stringent regulation of government finances”. Lie, E. and C. Venneslan (2010) Over evne. Finansdepartementet 1965–1992 [Beyond our power], Pax forlag  2  BIS central bankers’ speeches  markets were self-correcting. Following the Depression, a new truth emerged, with John Maynard Keynes and Norway’s own Ragnar Frisch at the forefront: prices and wages do not adjust that quickly – nor can we expect that markets will automatically ensure full employment. Hence, government should play a more active role in economic policy. At the Ministry of Finance, Nissen kept to the traditional view.
That is why some of our weaker banks are shrinking their balance sheets. Capital supports lending and provides resilience. And, without a resilient banking system, it will be difficult to sustain a recovery. Although higher capital does not restrict lending, requirements to hold more liquid assets do. Every pound of additional holdings of liquid assets is a pound that could otherwise be lent to the real economy. That is why the Bank has stood ready, through the Special Liquidity Scheme, its new Discount Window Facility, through its market operations (including the ECTR) and through its Funding for Lending Scheme, to provide a backstop for the liquidity needs of the banking system – against adequate collateral and at an appropriate interest rate. Given that backstop, the FPC has over the past year been recommending that regulatory requirements to hold liquid assets should be loosened. The Bank’s provision of liquidity to the banking system has been transformed out of all recognition in the past six years. But here too there is unfinished business. We asked Bill Winters to review our system and make recommendations for further changes. We have reviewed his proposals and will soon be taking steps to expand our regular auctions to a wider pool of collateral and to make our Discount Window Facility both cheaper and more easily accessible. All these policy actions have and will put our economy in position for a recovery.

By taking firm pre-emptive action, we have shown what the new judgement-led approach to supervision means in practice. It substitutes substance for process and judgement for box-ticking. We need not more but better regulation and, just as with monetary policy, we have changed the way regulatory decisions are made. The PRA announcement tomorrow is another step in dealing with the legacy of the past. It will make our banking system more resilient and better able to support recovery. But it is too soon to say that the job is done. Many of our major lenders will still be highly levered. The levels of capital required by the Vickers reforms, on the one hand, and the Basel standards for large international banks, on the other, mean that there is clearly some way to go before we can claim to have a really well-capitalised banking system. In future, the FPC and the PRA will work together to conduct regular stress tests of our banks, starting in 2014. Those stress tests will I am sure be made public, and banks will be expected to set out their plans for making up any identified shortfall in capital. Managing this process, and the transition to a higher level of capital, will be key tasks for the FPC and PRA in the coming years. Those who argue that requiring higher levels of capital will necessarily restrict lending are wrong. The reverse is true. It is insufficient capital that restricts lending.
8  BIS central bankers’ speeches  Chart 1 Major UK bank price to book ratios and wholesale funding spreads Percentage points  Ratio  400  Price to book ratio (RHS) Senior unsecured bond spread (LHS)(a)  350  2.5  2.0  300 250  1.5  200 1.0  150 100  0.5  50 0 2007  2008  2009  2010  2011  2012  2013  2014  2015  0.0  Sources: Bloomberg, Thomson Reuters Datastream and Bank calculations. (a) Constant-maturity unweighted average of secondary market spreads to mid-swaps for the major UK lenders’ five-year euro senior unsecured bonds or a suitable proxy when unavailable. BIS central bankers’ speeches  9  Chart 2 Major UK banks’ approximated CET1 capital ratio Per cent  Interquartile range  14  Weighted average  12 10 8 6  06  07  08  09  10  11  12  13  14  15  16  4  Sources: PRA regulatory returns and Bank calculations. (a) Major UK banks’ estimated common equity Tier 1 capital as a percentage of their riskweighted assets. Calculated as aggregate peer group common equity Tier 1 levels over aggregate risk-weighted assets, according to the CRD IV definition as implemented in the UK. Major UK banks are Barclays, Co-operative Bank, HSBC, LBG, Nationwide, RBS and Santander UK. (b) From 2006, the chart shows Bank calculations approximating common equity Tier 1 capital ratios.

After all, the levels of dealer  BIS central bankers’ speeches  7  activity and of market liquidity in the run-up to the crisis were ephemeral. They did not serve the real economy. It is important that other parts of the financial system, such as asset managers, adapt to the new environment and manage liquidity positions prudently. But these developments should, and they are, prompting us to assess whether targeted amendments to the design of regulations could benefit the real economy, without exposing it to more risk. The design of new requirements was macroprudential. So must be their implementation. The system has come a long way on the march to more capital and greater resilience. The benefits of that are being seen today. Lending to real economies is growing again. Resilience is more insulated from questions about returns. With resolution regimes well advanced and game-changing bail-in principles established, the upward march to higher capital levels can soon reach the new baseline. A baseline that, on what we know today, protects the real economy without unnecessary risk of holding it back. And with the flexibility to adapt and continually align resilience with threats, we have a compelling answer to the question of how to marry prudence with macroeconomic sense. So that you can protect and serve the real economy in good times and bad. Thank you.