samchain/econo-pairs-v1 huggingface dataset:
Jon Nicolaisen: Covered bonds and their impact on investors, banks and the real economy Remarks by Mr Jon Nicolaisen, Deputy Governor of Norges Bank (Central Bank of Norway), at the European Covered Bond Council (ECBC) Plenary Meeting, Oslo, 6 April 2017. * * * Accompanying slides Good morning and thank you for inviting me. Today, I will briefly discuss three issues that I believe will be central to further market development. First, the role of covered bonds in asset markets in general; second, the impact of covered bonds on the balance sheet of banks; and, third, the potential impact on the allocation of capital between households and enterprises. The market for covered bonds is perhaps especially interesting for us, given the strong growth of covered bonds in Norway over the last 10 years. Chart 1 Covered bonds outstanding Covered bonds remain a key funding tool for residential mortgage loans in many European countries. They have confirmed their position as a resilient source of funding also under stressed market conditions. This has been particularly evident in the Nordic region. Role in asset markets Covered bonds provide investors with a liquid and safe asset. The small premium above government bonds indicates that these securities are considered almost as safe as triple-A sovereign debt. Relative to senior bonds, covered bonds now appear more attractive than before the financial crisis. Chart 2 Covered bond spreads The fundamental characteristics of covered bonds support this pricing.

Thus, even under extreme market conditions, covered bonds would remain attractive, at least in relative terms. 1/3  BIS central bankers' speeches  Role in balance sheet of banks While covered bonds provide investors with a broad range of options to the investment opportunity set and contribute to deep and liquid markets, they also impact banks’ balance sheets. When banks use covered bonds as a source of funding, a proportion of the banks’ assets become pledged to covered bond creditors. One issue that arises is what effect this may have on the quality of the balance sheet of banks. At the outset, a banking group’s liquidity and credit risk will rise since covered bonds reduce the volume of encumber-able assets available to the bank. In addition, banks are often both significant issuers and holders of covered bonds. Such interconnection may increase systemic risk. However, market participants may assume that resolution rules and liquidity and capital requirements nonetheless limit the risk. For example, all banks are subject to regulation of their core equity – notably through the Basel III standard of the Basel Committee, implemented in Europe through the CRD4/CRR regulation. This is the primary insurance for tax payers and investors against the potential failure of large banks. Sufficient equity and a resilient banking system will always be the main instruments to ensure stability in the financial system as a whole. This is why senior bonds are also considered a relatively safe asset.
It may be the case that the post-crisis financial system may not be adequately structured to provide certain types of long-term financing. •  First, longer-term corporate and project finance loans already attract a higher capital charge compared to short term loans. Coupled with the increased overall capital requirements under Basel III, this may create a disincentive for long-term loans. •  Second, to meet liquidity requirements, banks may substitute long-term lending activities with short-term lending. In calculating the Net Stable Funding Ratio, lower weights are assigned to loans with maturities of less than a year. •  Third, Solvency II, which will impose higher risk charges on longer-dated assets, may result in insurers de-risking by taking on shorter-dated assets. •  Fourth, the interaction between central clearing, margining and capital requirements may impact the variety and liquidity of some derivatives such as long-dated interest rate swaps used to hedge risks associated with long-term financing. 6  BIS central bankers’ speeches  There may be scope for some intelligent, risk-sensitive fine-tuning of regulation: •  The design of risk weights for insurers should not penalise them for holding good quality long term assets, if they are matched by long term liabilities. •  The preferential treatment of sovereign debt in bank regulation should be reexamined, so that banks are not disincentivised from holding good quality, long term corporate debt. •  Better calibration of the risk weights for securitisation for banks and insurers may be necessary.

7/9  Steps towards a more integrated financial system at European level have already been taken since the crisis, with the Banking Union and the Capital Markets Union projects. These projects need to be further developed and implemented. The Banking Union, which was set up to put an end to the link between sovereign risk and banking risk, is now operational. What remains to be done in order to finalise it includes completing the resolution pillar by implementing a backstop and adopting a common framework to enhance the provision of liquidity and putting in place a European deposit insurance scheme. Finalising the Banking Union is of prime importance for the development of pan-European banks, and will make it possible to achieve a better balance of risks, economies of scale, a better allocation of savings towards productive investments and increased competitiveness of European banks at the international level. The other major initiative at the European level to strengthen financial integration is the Capital Markets Union project which aims to boost investment in the EU. Speeding up this Union will not only foster growth but will also enhance risk-sharing across European countries and mitigate the procyclicality of bank financing. We, at the Banque of France, support in particular three initiatives which should have a decisive impact on cross-border investment: First, the harmonisation of the insolvency procedures framework and its implementation by companies to promote investment in equity across Europe.
The UK Banking Standards Board (BSB), for example, provides one lens on assessing culture change for a broad crosssection of financial service firms operating in the U.K.10 I believe diagnostic tools like this are an important part of the cultural assessment toolkit. Moreover, firms and the official sector need to evaluate a wide range of behaviors, signals, and outcomes to draw the most robust conclusions about the depth and pace of culture reform. I think it is critical for both firms and the official sector to continue to experiment with new approaches to assessing culture change, to collect and build new forms of data and measurement, to develop qualitative assessments to complement quantitative ones, to use new techniques and technology to understand how a firm’s culture and conduct are changing, and to continue adapting and course correcting to a sustainable business strategy as the operating environment evolves. Influence Fostering productive behavioral change is at the heart of culture reform. Behavior, in turn, is driven by a multifaceted set of factors including incentives, cues from peers, observations about leaders, and formal policies and procedures. Most of us are not experts in human behavior, so I believe we should be open to incorporating lessons from behavioral economics and other social sciences into programs to mitigate conduct risk and promote cultural change. Behavioral economics blends psychology and economics to provide insight into why individuals may behave in a certain way and make decisions that may not be in their own economic best interest.

Moreover, the disruptive potential of innovation is likely to exacerbate an already complex environment as decision-making becomes more opaque and new roles and responsibilities are introduced. For example, what will effective governance and risk management look like? Do artificial intelligence and machine learning introduce new model risk? Or operational risk? Or conduct risk? What does it mean to supervise or regulate conduct if decisions are made by selflearning algorithms? More broadly, what culture and conduct risk will be embedded in technology-driven financial services in the future? These are hard questions for financial firms and for the official sector, and our approach to the reform of financial industry culture will need to address them. Conclusions To return to the beginning of this discussion, culture reform in finance is a complex problem. Causal relationships are difficult to isolate, linkages are constantly changing, and accurate prediction is impossible. That does not mean that we are powerless, or that we should accept complexity as an excuse for not trying to foster change. Rather, we need a long-term commitment that brings the appropriate tools and approaches to bear. The costs and potential consequences of market failures associated with misconduct risk and culture suggests that it is vitally important that we do so. Both financial firms and the official sector should focus attention on investigating and asking questions to better understand the underlying drivers, motivations and risks behind the behaviors of individuals and groups.
Together these measures will strengthen the resilience of the banking sector, which can surely only benefit our economy and enhance our prosperity. Allow me to conclude by taking this opportunity, also on behalf of my Governing Board colleagues, Fritz Zurbrügg and Andréa Maechler, to thank our employees for their hard work and dedication. We also thank you, our shareholders, for your loyalty to the SNB and your faithful support. Let me also thank our young guests from Gymnase intercantonal de la Broye in Payerne and Kantonsschule Schüpfheim in Canton Lucerne for their interest in monetary policy and the SNB. Thank you all for your attention. Page 8/8

From a broader perspective, the introduction of the PEPP – and the June and December expansions, which increased the maximum volume of net purchases to € trillion – led to a period of gradual easing of financing conditions in the euro area, not only for sovereign debt, but also other market segments such as corporate debt. In addition, according to analysis by the Banco de España, the PEPP is having a markedly favourable impact on GDP growth and inflation in the euro area.1 This easing has been essential for providing fiscal authorities in all countries in all euro area countries with room for manoeuvre, which has allowed them to deploy the measures to support the income of households and firms that I have mentioned earlier. In addition to the PEPP, another key instrument in the monetary policy response during the crisis are the TLTROs. This programme affords banks funding under particularly advantageous conditions, provided they meet certain targets in terms of lending to firms and households (excluding, in the latter case, loans for house purchase). With the onset of the pandemic, this programme was modified to make it even more attractive to banks, enabling them to obtain funding at an interest rate that could temporarily be as low as -1%, on the condition that they do not reduce their volume of eligible lending in light of the pandemic crisis. This instrument has also proved very effective.
Mainland GDP is projected to show sustained strong growth in 2006. The output gap is expected to increase over the next two years, but will peak at a fairly moderate level as gradual increases in the interest rate dampen demand growth. Growth in the global economy is projected to remain high, resulting in both high demand and favourable prices for the Norwegian export sector. There are prospects that high petroleum investment will contribute to sustaining the high level of activity in the Norwegian economy. In 2008 and 2009, a continued high level of petroleum revenues may imply an expansionary fiscal policy. Interest-rate setting since last summer has been oriented towards a gradual increase in the interest rate – in small, not too frequent steps – towards a more normal level. Based on Norges Bank’s assessment of the driving forces in the economy, this strategy appears robust. Output growth is strong and the labour market is becoming tighter more quickly than expected. Higher growth in the economy may in isolation suggest a faster increase in the interest rate ahead. This would reduce the risk of bottlenecks in the economy, with rising cost inflation and continued debt build-up. On the other hand, the objective of bringing inflation up towards the target and anchoring inflation expectations argues for restraint in the upward movement of interest rates. On balance, this implies that the interest rate outlook remains virtually unchanged compared with the previous Report.

Monetary policy is not immune from the complexity of the real world. For instance, some unconventional policies may have had unintentional distributional consequences by pushing up asset prices, hence benefiting some households with important financial wealth. On the other hand, fostering economic recovery and reducing unemployment goes in the direction of helping the most vulnerable part of the population. In other cases, strong intervention may raise legitimate moral hazard concerns. Should Central Banks have refrained from acting at the risk of not fulfilling their mandate? Those simple questions remind us that decision making always involves some tradeoffs. It is all the more important that policy makers keep a clear focus on their ultimate objective. Central Banks should do their utmost to avoid any undesirable allocation or distribution effects of their policies. Those policies should be designed as neutrally as possible. This being said, the possibility of unintended side effects should not paralyze decision making when required by the situation in order to fulfill their mandates. The Eurosystem has faced such a situation when deciding on its program of large-scale asset purchases. I believe the decisions taken reflect an appropriate balance between the necessity of achieving the mandate and the desire to avoid undesirable side effects. Key principles underlying the implementation of the PSPP have been the minimization of unintended consequences and full neutrality, as illustrated for instance by the choice of the capital key to allocate purchases between various Governments debts.
It can be said that Iceland is a step ahead of many other countries in this regard, as the events of the past year show that there is ever-increasing interest in setting even clearer liquidity requirements for banks. The operational climate for banks is difficult all over the world. Under current conditions, Iceland’s banks – and many others – have no other option but to furl their sails, and they have already begun to do so. They must implement stringent cost control and direct their attentions toward their core operations and the areas where they can truly compete. They might also have to sell off some assets. It is important that the banks continue to disclose information on their position, and where transparency is lacking, they must enhance it. The conditions that have developed in the global financial markets were foreseen by very few, and they are virtually unprecedented. However, I would like to mention that the Central Bank of Iceland stated the following in its Financial Stability 2007 publication last April: “The Central Bank underlines that global market conditions can take a sudden turn for the worse and it is important to be on the alert and prepared for such a contingency. The current episode of ample liquidity and lower interest rates which has been ideal for risk-seeking investors may change unexpectedly.” Even though conditions will eventually improve, they are unlikely to improve much in the near future.

Már Guðmundsson: The work of the Monetary Policy Committee Opening remarks by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at an open meeting of the Parliamentary Economic Affairs and Trade Committee on the work of the Monetary Policy Committee, Reykjavik, 17 November 2014. *  *  *  The last meeting between representatives of the Monetary Policy Committee (MPC) and the Parliamentary Economic Affairs and Trade Committee took place on 5 March 2014. At that time, inflation had recently fallen below target, while short- and long-term inflation expectations were still above it. By now, inflation has been below target for nine months and is expected to be at target well into 2015, at least. The main difference in the situation now versus that in March is that inflation expectations have fallen back towards the target and, by some measures, are quite close to it, particularly short-term expectations. The big picture is that the economic recovery is now well enough advanced that spare capacity is disappearing. There still appears to be a sizeable current account surplus, although it has diminished since last year. The surplus covers net capital outflows and significantly more, as the Central Bank has bought foreign currency on the market for the equivalent of 95 b.kr., or 5% of GDP. According to the Bank’s forecast from early November, GDP growth is projected to measure just under 3% this year and then rise to about 3½% in 2015 before easing back to 3% in 2016.
This is to be made up of myself, the two Deputy Governors, two Executive Directors of the Bank - responsible respectively for the Bank’s economic analysis and the Bank’s financial market operations, and four outside members nominated by the Chancellor and having professional knowledge and experience relevant to the Committee’s functions. It also includes a Treasury observer, who may participate in our discussions, and acts as a link between the fiscal and monetary authorities, but who may not vote on our monetary policy decisions. The overriding purpose of these new arrangements is to improve the credibility of monetary policy, and to demonstrate to the world at large the Government’s commitment to achieving and maintaining effective price stability. But it is important to understand that this objective is not simply an end in itself. The ultimate objective, of course, is growth of output and employment and rising living standards - there is no question about that. The argument is about means, not about ends. And effective price stability as the immediate objective of monetary policy is a necessary condition for growth to be sustained into the medium and longer term. The aim of achieving permanently low inflation is a deliberate attempt to break away from the boom-bust cycles of the post-war years, which led, as we can all remember, to a persistent ratcheting up of inflationary expectations and a steady erosion of long-term thinking and planning, saving and productive investment, on the part of consumers and businesses.

And the Treasury Select Committee of the House of Commons regularly summons me and other members of the Monetary Policy Committee to give evidence on the basis of these reports. Finally, the Government has made it a requirement that, if we miss the target of 2.5% by 1% or more in either direction, the Committee must write an open letter to the Chancellor, explaining why, how long we expect to stay adrift from the target, and what we intend to do about it. These arrangements, taken together, provide a framework of transparency and accountability that, as far as I am aware, goes far beyond anything which applies anywhere else in the world. Public understanding of what we are trying to do and why - even understanding that the conduct of monetary policy is not a precise science but rather a matter of balancing risks - is crucial to our success. And transparency and public understanding should - by influencing public expectations - reduce the costs of maintaining low inflation. But, of course, you need broad shoulders. As you know the minutes of our January meeting - published a fortnight ago - revealed that the MPC was for the first time divided in its policy decision. That inevitably led to an excited and over-simple categorisation of BIS Review 18/1998  -5-  individual members of the Committee as either hawks or doves.
Fraziali Ismail: COVID-19 and climate responsibility, commitment, and collaboration  change,  collective  Closing remarks by Mr Fraziali Ismail, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at Malaysia Showcase during Climate Week NYC 2020, New York City, 17 September 2020. * * * From time to time, we chance upon heart-warming stories of how seemingly small and random acts of kindness, result in something miraculous. I am talking about stories like Jadav Payeng, an environmental activist and forest worker from India, who planted a tree almost every single day for 40 years. Jadav was only 16 when he started working with the district’s social forestry division in a tree plantation drive. Upon completion of the 5-year project, Jadav chose to stay and continued on his quest to save his island. This led him to single-handedly create a real man-made forest, the Molai Forest, which houses several species of animals and thousands of trees that is now almost as big as New York’s Central Park. We also marvel at Afroz Shaz, who began picking up trash on Versova Beach in Mumbai, and inspired thousands of volunteers to join the cause. Versova’s dramatic transformation from filthy to fabulous went viral in India, with praises to Afroz and the volunteers for helping to restore the beach that was previously polluted by 15 years of piled up rubbish.

Net lending in the UK was broadly flat in the second half of last year up modestly in the remainder of this year. This compares with an expectation prior to the launch of the Funding for Lending Scheme that net lending would decline over last year and this. I emphasise this point because the record of the first year of FLS needs to be judged against a worse outlook for lending a year ago. Net lending to large businesses remains weak, but these companies tend to have access to alternative sources of external finance, such as corporate bond markets and such bond issuance has been very strong so far this year, more than double the quarterly average precrisis. Small and medium-sized enterprises are more reliant on banks for external finance. Survey evidence suggests some improvement in the pricing of loans to small firms, but applications for credit have not yet picked up, and net lending to SME’s remained negative in the first quarter of this year. Survey evidence suggests that both lenders and borrowers expect an increase in firms’ demand for loans. This is the pattern also seen by firms surveyed by the Bank of England’s regional Agents. But, the extent of any increase will depend on the macroeconomic outlook, as well as the perceived reliability of bank credit as a source of finance.