samchain/econo-pairs-v1 huggingface dataset:
First, the Committee is still undershooting both its employment and inflation objectives. Unemployment is too high and inflation is too low. Thus, monetary policy needs to be very accommodative in order to close these gaps relative to the Committee’s objectives. Second, when interest rates are at the zero lower bound, the risks of tightening a bit too early seem considerably greater than the risks of tightening a bit too late. A premature tightening might lead to financial conditions that are too tight, resulting in a weaker economy and an aborted lift-off. This would be problematic in that it would harm the Fed’s credibility and, more importantly, would be difficult to rectify. The U.S. experience during the Great Depression and the Japanese experience over the past two decades illustrate the risks of raising interest rates too soon, especially when inflation is running below the central bank’s objective. Finally, given the still high level of long-term unemployment, there could be a significant benefit to allowing the economy to run “slightly hot” for a while in order to get these people employed again. If they are not employed relatively soon, their job skills will erode further,  BIS central bankers’ speeches  3  reducing their long-term prospects for employment and, therefore, the productive capacity of the U.S. economy. All that said, I hope the economic outlook evolves so that it will be appropriate to begin to raise interest rates sometime next year.

The most narrow definition of capital,4 tangible common equity, is a measure of capital widely used by investors (and increasingly so during the crisis) because it focuses on the “core” capital readily available to cushion the bank against losses. The tangible capital measure – specifically the ratio of tangible common equity to tangible assets – was a bit above 2 percent for Wachovia and about 3 percent for WaMu,5 providing only a small cushion against the losses accumulating from their subprime exposures. The regulatory capital ratios use broader definitions of capital, relative to risk-weighted assets. To be considered adequately capitalized, a bank needs to have at least 4 percent Tier 1 risk-based capital to risk-weighted assets, and at least 8 percent total risk-based capital to risk-weighted assets. To be well capitalized a bank needs to have at least 6 percent Tier 1 risk-based capital to risk-weighted assets and at least 10 percent total riskbased capital to risk-weighted assets.6 Figure 1 shows that under these definitions both banks were well capitalized in their final quarter – despite the fact that more narrow definitions of capital indicated only a very small capital buffer. Figure 2 plots the capital ratios for the period leading up to the “run” on Wachovia. The broader definitions of capital – Tier 1 and total risk-based capital – were actually rising in the period when holders of Wachovia’s liabilities were becoming concerned, and thus the broader definitions of capital were not particularly informative.
The public authorities cannot afford to ignore such dysfunction if it reaches a scale that threatens financial stability. But equally we cannot rely on central bank medicine of the scale and duration seen in 2020 every time we see an inflammation. The costs, in terms of bloated public sector balance sheets and mispriced private sector risks, will be too high. And the policy actions needed to secure monetary and financial stability may not always be as well aligned as they have been during the current crisis. If financial markets are to support the increasing reliance placed on them safely, we must do more to reduce the scale of inherent vulnerabilities ex ante, and build better-targeted tools for dealing with financial instability caused by market dysfunction ex post. And that, in turn, requires work in three separate but self-reinforcing areas – as illustrated in Chart 2. 3  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  3  Chart 2: Strengthening market functioning  Step 1: reforms to strengthen the resilience of private non-bank financial institutions to liquidity shocks  Step 2: strengthened market-wide infrastructure  Step 3: Better targeted central bank backstops  Step 1 – ensuring that non-banks active in financial markets are more resilient to future liquidity shocks – is under way, co-ordinated by the Financial Stability Board.2 If successful, this should both reduce the likelihood of instability arising in the first place, and improve the private sector’s ability to deal with it, if it does occur.

The challenge of managing risks in the financial sector is made greater by the tremendous spirit of innovation that fuels growth and healthy competition among banks and other firms. Bankers have long competed on their abilities to tailor products and services to each client’s unique needs. New opportunities for profit often change the nature of the known risks a bank may face - they may also expose an institution to unknown pitfalls. As a former commercial banker, I know that responsibility for understanding and managing risks and potential pitfalls rests with senior management and its board of directors. As a supervisor, I believe that we should create incentives to help motivate responsible behavior within firms. Further, as Chairman of the Basel Committee, I see the work of the Committee as helping to foster safe and sound banking systems by creating incentives for banks to improve their understanding and management of risk, and, in turn, to contribute to greater stability within the financial sector. Encouraging the improvement of risk management in banks, is, indeed, the overarching goal of the Committee's efforts to revise the Basel Capital Accord. In my remarks today, I’d like to focus on the challenges associated with implementation of the new framework now that the revision process is coming to an end. First, I'll spend a few moments discussing the evolution and structure of the New Accord.
Moreover, given the prevailing uncertainty as regards both the global economy – which could suffer a greater-than-expected slowdown – and the fallout from the international financial  BIS Review 80/2008  3  turmoil – which has hit Switzerland fairly hard compared to other industrial countries – we consider that a prudent attitude remains appropriate and that a change of monetary policy is not called for in the current circumstances. Nevertheless, we must remain very vigilant. A renewed rise in energy prices, a stronger economy than expected, a weakening of the Swiss franc or an increase in inflation expectations would pose a threat to medium-term price stability. We will therefore continue to keep a close watch on these factors, so as to be able to react quickly in order to maintain price stability in the medium term. Inflation forecast chart How has our inflation forecast been revised? The dashed red curve on the chart represents the new forecast. It covers the period from the second quarter of 2008 to the first quarter of 2011, and maps the future development of inflation on the assumption that the three-month Libor remains unchanged at 2.75% over the forecasting period. For purposes of comparison, the dash-dotted green curve shows the inflation forecast of the March monetary assessment, based on a three-month Libor of 2.75%. The new forecast shows inflation rising in the short term, and exceeding 2% by the first quarter of next year.

A more significant slowdown in the global economy might ease inflationary pressure. Given these conditions, the SNB is maintaining its cautious stance and leaving its monetary policy strategy unchanged. In view of the medium-term inflation outlook, it can afford to do so. After all, there is enough reason to suggest that the current inflationary trend is of a transitory nature. The SNB will keep a close watch on the price of oil, movements in the Swiss franc, the economy, and developments in the financial markets, so as to assess their impact on the inflation outlook and react swiftly, in order to maintain price stability in the medium term. Global economic outlook With exports accounting for 52% of GDP, the Swiss economy has a strong global presence. This is an opportunity, but it also means that the international environment has a considerable impact on economic developments in Switzerland. The US economy – until recently the principal driver of global economic growth – has made scant headway over the last three quarters. However, the period of near-stagnation which the US economy is currently experiencing is not likely to be too prolonged. The resolutely expansionist nature of US monetary and fiscal policy, combined with a weak US dollar that favours exports, should help to reenergise the US economy.
The spread of the Delta variant has so far not required lockdown measures to be reimposed. But it could slow the recovery in global trade and the full reopening of the economy. Consumer spending is increasing, although consumers remain somewhat cautious in the light of the pandemic developments. The labour market is also improving rapidly, which holds out the prospect of higher incomes and greater spending. Unemployment is declining and the number of people in job retention schemes has fallen by about 28 million from the peak last year. The 1/3  BIS central bankers' speeches  recovery in domestic and global demand is further boosting optimism among firms, which is supporting business investment. At the same time, there remains some way to go before the damage to the economy caused by the pandemic is overcome. There are still more than two million fewer people employed than before the pandemic, especially among the younger and lower skilled. The number of workers in job retention schemes also remains substantial. To support the recovery, ambitious, targeted and coordinated fiscal policy should continue to complement monetary policy. In particular, the Next Generation EU programme will help ensure a stronger and uniform recovery across euro area countries. It will also accelerate the green and digital transitions, support structural reforms and lift long-term growth. We expect the economy to rebound firmly over the medium term. Our new staff projections foresee annual real GDP growth at 5.0 per cent in 2021, 4.6 per cent in 2022 and 2.1 per cent in 2023.

You know people talk about, well, it’s hard to know where to operate in a gray area, I think a lot of the behavior was way over the line. When people are getting together in chat rooms trying to talk about how they can collude to rig a market, that’s not in the gray area. That’s way over the line. When people are consciously doing things to evade any money laundering rules and sanctions, that’s not in a gray area, that’s way over the line. So I feel that most of the things that have resulted in fines can be tied to things that are not in a gray area. They’re just way over the line. Now the question of whether the fines are excessive – I mean it’s hard to know how you take the behavior and then map it back onto the fine. I think the important thing, though, is to make the fines big enough so that the senior management of these institutions doesn’t just say, “Well, I can just write a check, accept the bad behavior, and move on." If the fines are substantial, then it actually gets some senior management’s attention, and I think that’s one of the reasons why banks are working harder on the issues of culture in their institutions. I’ve actually been very – you know, you asked me the question, is bank bad behavior over?
Conventional policy options at the zero lower bound Conventional macroeconomic theory states that, when interest rates are at the zero lower bound, monetary policy becomes ineffective and economic policy action should concentrate on fiscal measures. In slide 1, the depiction of the economy using the standard IS/LM model summarises this point of view. As you can see, the economic situation is represented in terms of two key variables, the interest rate and output (or GDP). Economic equilibrium is represented by the intersection of the IS and LM curves. The first corresponds to the interest rate and GDP levels that balance savings and investment and the second represents the combinations of these two variables, which equilibrate the demand and supply of money. Expansionary monetary policy corresponds to pulling the LM curve to the right. When interest rates are at the lower bound, however, the LM curve is horizontal. At this point, pulling a horizontal to the right has absolutely no impact on the intersection of the IS and LM curves, and therefore on the equilibrium level of output. Conventional monetary policy hence becomes ineffective. Intuitively, if interest rates are at the zero lower bound they cannot be lowered further, yet it is precisely by lowering interest rates that monetary policy can stabilise the real economy. By contrast, it is at the zero lower bound that the potential benefits of fiscal policy are most significant. As the same diagram suggests, it is precisely when the LM curve is flat that it becomes most appealing to use fiscal policy.

The measures recently announced by the European Central Bank (ECB), aimed at containing the risk of the euro area running an excessively low inflation rate over a prolonged period, likewise contribute to bolstering the growth outlook for our economy and assisting the adjustment under way. But let us not forget that the crisis – complete with double-dip recession – in the Spanish economy has had a most severe impact on employment and income levels, and has caused a most pronounced setback in terms of real convergence with Europe. Merely restoring pre-crisis levels of well-being will take several years. Evidently, here, maintaining the reform drive is crucial for speeding the process of recovery of the levels of economic prosperity lost due to the crisis. BIS central bankers’ speeches  1  2. Banking sector: situation following the reform  The Spanish banking sector has concluded a far-reaching transformation, entailing the cleanup, restructuring and recapitalisation of the most vulnerable banks, all resulting from the transformation of the former savings banks. The consequences of this reform have been reviewed on various occasions, so I need not detail them here. Allow me merely to summarise the three key elements of the process. i)  Firstly, the reform has driven an intense restructuring and re-sizing of the banking industry, enabling its excess capacity to be corrected. Of note has been the integration of savings banks into existing or newly created banking groups, which has enabled the number of credit institutions to be reduced by over 30.
In other words, whilst these may be a set of more or less necessary conditions for market development, they are unlikely to prove sufficient. However good the infrastructure may be, it is the issuers, investors and financial intermediaries which eventually determine whether there is a active market or not. Here in Hong Kong the debt market has grown significantly in the recent past, and the increase in issues by non-financial corporates has been encouraging. But we cannot escape the fact that we are still a relatively small market and that, despite the increases in primary issuance, secondary activity remains subdued. “So”, people ask me, “what is the Hong Kong Monetary Authority going to do about it?” In fact I am not particularly comfortable with the implied presumption that we should be the first port of call when any problems or deficiencies are identified. Thus, while I should like to take this opportunity to explain what we are in fact doing or intending to do, I want also to indicate what, in my view, we cannot or should not do. We are involved in the working group established by the Securities and Futures Commission to review Hong Kong’s laws and regulations relating to offers of securities. Over the years, several of the procedures have become outdated or have failed adequately to accommodate market innovations. In some instances they are an obstacle to bond market development. There are some complex legal and administrative issues here, which will take time to address.

Philipp Hildebrand: Global economic prospects and key challenges for monetary policy Summary of a speech by Mr Philipp Hildebrand, Member of the Governing Board of the Swiss National Bank, at the Money Market Event, Zurich, 23 March 2006. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch)  *  *  *  Summary Current economic developments are basically in line with the SNB’s expectations. Global economic activity is robust and the outlook is bright. The SNB expects broad-based growth of over 2% for 2006 and a moderate rate of inflation of approximately 1%. In addition to the usual economic risks, monetary policy today is faced with three key challenges. First, the effects of globalisation on inflation must be anticipated. Second, the way in which the interaction between globalisation and an ample supply of liquidity affects the price development of several assets needs to be analysed. The SNB's monetary policy concept enables it to take a long-term view and to recognise possible distortions early on. Third, identifying the neutral interest rate has become more difficult in today's environment. Many factors tend to support a lower neutral interest rate, while others would support a higher neutral rate. Against this background, the SNB will continue the gradual normalisation of its monetary policy. The scale and timing of this normalisation process will depend on further economic developments. Owing to a favourable inflation trend and well-anchored inflation expectations, we are in a position to cautiously approach a neutral interest rate level.
At the same time, it is necessary that the legal and practical adaptations that are a precondition for our participation be prepared and decided upon before the EU’s finance ministers within the scope of the ECOFIN Council take the final decision. If the referendum results in a “yes” vote, the Riksbank will be required to help ensure that entry into monetary union proceeds in a stable, smooth manner. Since the middle of the 1990s, the Riksbank has been collaborating with the financial sector via the SIFS group - Consultation and Information with the Financial Sector - with a view to ascertaining the adaptation measures necessary ahead of a potential Swedish changeover to the euro and how long these measures would take to implement. The aim has been to make the time between a Swedish Riksdag decision in favour of participation and entry itself as short as possible. The Swedish government has recommended that Sweden, in the event of a “yes” vote, should strive to enter monetary union on 1 January 2006, and that this should be carried out through a direct changeover or “big bang”. The switch-over of all electronic transactions in society would then be made simultaneously with the cash changeover. This proposal has been welcomed by the financial sector, and there are good chances therefore of a smooth, efficient changeover to the euro at the beginning of 2006. For the Riksbank, a changeover to the euro would of course be a major project.

For Sweden, the long-term implication is that the central bank governor, once all current and new EU Member States are participating in monetary union, would be able to vote on approximately 60 per cent of the decisions. The central bank governor of a large country like Germany, on the other hand, which has around nine times as many inhabitants, would be able to vote at 80 per cent of the meetings. However, all central bank governors would have the right of attendance and expression at all meetings. From a Swedish perspective, this appears to be a rather advantageous solution in my opinion. The ability to exert influence on the formulation of policy is important of course, particularly from a democratic point of view. But it is not simply a question of voting rights, which is the impression one gets sometimes when listening to the debate. Firstly, it is important to remember that the central bank governors must act in the interests of the entire euro area when setting interest rates. In other words, they must not give priority to national interests. Thus far, there have not been any votes held in the ECB Governing Council; rather, monetary policy has been determined through consensus. In addition, all central bank governors have the right of attendance, even under the new proposal, and can therefore be involved in discussions on the stance of policy.
But the provision of such resources would inevitably require some conditionality, perhaps even more so the greater the resource injection. Yet there is the contention that the assistance should be in support of local reform efforts, based on local circumstances and priorities. Some observers assert that some of the governance problems in these countries arise from the very fact of poverty itself and that is the problem, which requires urgent and direct attention, and not the panoply of governance reforms. But the approach to providing the assistance remains a polemical issue, opposing among others, sovereignty and resource provision. As Martin Wolf stated in the Financial Times of London in March 2004: “If the sovereignty of such dysfunctional states is protected, their people will remain impoverished. If their people are to be helped, the sovereignty of their states must be challenged”. But we may ask, do we have to confront such extremes? Could there not be a mean that could lead to a compromise that reduces the divergence in these polarised positions? Or must the payer of the piper continue to have exclusive control over the tune? What seems really at issue is what Kemal Dervis has identified as the continuation of an ideological struggle. His statement in his book, A Better Globalisation, encapsulates the problem when he asserts: “Humanity has not exhausted the great ideological debates; they are only changing in nature.

This is seen as exploitation by the donor community of developing countries' need for investment, aid and debt relief, to create conditions that will facilitate their infiltration by globalised financial interests. The following statement in the July 2004 issue of South Bulletin is typical of this perspective: “Whence this striking paradox, inherent in good governance, of calls going out from the international organisations to national governments that these latter adopt, indeed “appropriate”, neo-liberal economic policies imposed from without while the globalised financial markets dispossess them of their sovereignty and insinuate themselves into the countries' ownership structure of capital”. 4  BIS Review 109/2007  The controversy continues on the link between governance and development, and while its proponents claim strong empirical evidence for it, there is strong assertion of the contrary, or at least agnostic, view in other quarters. It would seem that the jury is still out on this debate. Aspects of governance in Sierra Leone The principal donor institutions in Sierra Leone, as in most developing countries, are the World Bank, and the IMF. Donor support programmes coordinated by the World Bank are provided within the framework of the Bank’s Country Assistance Strategy and the Poverty Reduction Strategy Paper. Following implementation of an Interim Poverty Reduction Strategy Paper, the Bank approved a full Poverty Reduction Strategy Paper for Sierra Leone in February 2005, covering the period 2006 – 2009. The major instrumentality for Fund assistance to Sierra Leone is the Poverty Reduction and Growth Facility (PRGF).