samchain/econo-pairs-v1 huggingface dataset:
The aforementioned movements in the policy rate and reserve ratios led to a significant reduction in the debt service of borrowers with loans in domestic currency, an increase in leu-denominated loans and a contraction in foreign currency-denominated loans, confirming the stronger preference for loans in domestic currency. Consequently, the currency risk has receded. Prudential indicators show that the banking sector is stable and sound. The loan-to-deposit ratio (LTD), a relevant financial stability indicator, has fallen below 100%, coming in at 91.3% in December 2014. The solvency ratio stood at 17.1% in September 2014 against 15.5% in December 2013, significantly above the international prudential requirements, and liquidity is at an adequate level. The removal of non-performing loans from the balance sheets has led to negative profitability of the banking system, with credit institutions incurring net losses worth around EUR 1 billion in 2014. Out of the total stock of loans to households amounting to lei 101 billion, foreign currencydenominated loans account for the equivalent of lei 62 billion (or 61% of total). Mention should be made that out of foreign currency-denominated loans worth 62 billion when expressed in domestic currency, EUR-denominated loans held 83.8%, CHF-denominated loans accounted for 15.7%, and USD-denominated loans took 0.5%, as of November 2014.

The distribution of such loans shows a large variety in terms of: loan destination, loan value, borrowers’ income level, borrowers’ indebtedness level, and loan maturity. CHF-denominated loans to households have had different purposes. About 35% of CHFdenominated loans are housing loans and 58% of them are mortgage-backed consumer loans. Real estate lending to households is mostly denominated in EUR, with CHFdenominated loans accounting for merely 7.7% of the said loans versus 37% in Poland. CHF-denominated loans are not homogenous in terms of value. Large value loans (exceeding CHF 47,000) are concentrated: 25% of borrowers hold two thirds of the loan stock. At the other end, another 25% of borrowers have taken small value loans (lower than CHF 4,000), accounting for only 1% of the loan stock. The breakdown of CHF borrowers by income group points to the existence of vulnerable social groups among them. About half of the CHF borrowers have a net monthly income lower than lei 1,500 and up to 75% of them have a net monthly income lower than lei 2,500. The average DTI ratio of CHF borrowers currently stands at 92%, higher than in December 2008, i.e. 64%. Indebtedness distribution is strongly uneven, as borrowers with a net monthly income below lei 2,500 are currently over-indebted, as a result of both income contraction during the crisis and CHF appreciation. Borrowers whose income is below the average wage economy-wide were the hardest hit by CHF appreciation.
But much of this investment has been in, or backed by property. UK insurance companies only allocate around 2% of their assets to unlisted equity.5 This is a smaller share than many of their European peers. But liability structures are very different between national markets too, which will contribute to differences in asset allocations. The regulator’s concern here is to ensure that any increase in insurers’ asset allocations to long term, productive investments does not endanger policyholder protection, that is to say does not compromise the first , equally important function of life insurance that I set out earlier, namely the provision of security of retirement income.6  Annuities are not a good match for investments with equity-like characteristics. A fundamental principle of the MA is that some of the market risk on the backing assets is neutralized, by virtue of matching. That can never be the case with a long term real asset like common equity, and no amount of clever restructuring will alter that. Much of the new productive investment needed will be financed outside matching portfolios and indeed outside insurance. That said, any reform of the MA that might arise from the Solvency 2 review might nonetheless play a part in unlocking more funding for things like infrastructure. In its current manifestation, the MA was designed and calibrated with simple, fixed, tradable assets in mind.

3 Sometimes it can be much higher than 2 percent. Presumably, this was the case during the late 1990s as rapid technological change lifted productivity growth. Sometimes it can be well below 2 percent. For example, when credit availability dried up during the financial crisis in late 2008, this drove down the equilibrium real rate far below 2 percent. More recently, the slow growth rate of the economy and the low rate of inflation are evidence that the equilibrium real short-term rate today is well below the 2 percent rate assumed in the Taylor Rule. If 2 percent really was consistent with a neutral monetary policy, then the very low real rates of recent years – buttressed by our large-scale asset purchases – should have been extraordinarily accommodative. As a result, we should have grown much faster than the 2½ percent pace evident over the past couple of years and seen an inflation rate much higher than what we experienced. This conclusion is supported by a number of more formal models. For example, the Laubach-Williams model currently estimates that the equilibrium real short-term rate is around zero percent. 4 Third, the Taylor Rule – and more broadly, any prescriptive rule for the systematic quantitative adjustment of the policy rate to changes in intermediate policy inputs such as real GDP or inflation – is incomplete because it does not fully account for factors that are crucial to how monetary policy impulses are transmitted to the real economy.
Yet the climate risks we face have not subsided, far from it: if the climate transition is put off and carried out in a disorderly manner, the associated costs to our economies will be all the greater. The current context of uncertainty and volatility means that we should increase our vigilance regarding all risks, including those related to the climate, by making progress on the disclosure of climate-related information – which will become compulsory for European banks in 2023 under ESG Pillar 3 – and on how to operationalise transition plans and stress tests. On this latter issue, three European supervisory bodies will carry out an essential stress test in 2024 to assess in particular the transition risks to the entire financial sector linked to the implementation of the "fitfor-55" package. The idea that we could make a short-term trade-off between climate risks and economic and financial risks is misleading: the two are unfortunately increasing in parallel, and, in the longer term, the Russian crisis is yet another reason for us to accelerate our energy diversification and sovereignty through the use of non-fossil sources. What we need then, over the next two to three years, is to chart a "path of compatibility": if we are to be consistent, any measures to support non-fossil fuels, on the supply or demand side – the famous "price shields" – must remain targeted and temporary.

Friedman, at least at the time he wrote, trusted neither of the two and advocated a constitutional rule for constant money growth as his preferred solution of the long-standing debate on “Rules versus authorities in monetary policy” (which is the title of the classic paper by Henry Simons from 1936). His concerns reflect what I would regard as a healthy distrust of the unfettered “rule of men” as opposed to the “rule of law” which he much prefers - in line with the long and venerable tradition of British liberal thinking. Friedman, at the time, was quite sceptical on central bank independence and asked whether it was “really tolerable in a democracy to have so much power concentrated in a body free from any kind of direct, effective political control?” This is why I believe it is important to stress that, if an independent central bank is assigned a clear and limited mandate, this represents a constraint on the discretionary exercise of power by the government but also by the central bank itself. In the absence of a complete and universally applicable rule for monetary policy an independent central bank which focuses firmly on the single overriding goal of price stability is the closest realistic and credible substitute for a literal “rule of law”. In particular such a central bank does not have the discretion to pick and choose at will among several objectives. A clear commitment to a single overriding objective is the key to credibility and it is also the key for accountability, i.e.
The two-year horizon provides scope for flexibility while at the same time setting a limit for how far we can permit inflation to deviate from the inflation target in normal circumstances. However, situations can arise where it is neither possible nor desirable to attain the inflation target within a two-year perspective. This applies, for instance, when the economy has been exposed to a disturbance that makes inflation deviate sharply from the target and a rapid return to the target would expose the real economy to excessive strains. In this case, we should explain our intentions as clearly as we can in connection with our monetary policy decision and point out that inflation will not be on target within the normal time horizon and state the reasons for this. The significance of the interest rate assumption for the inflation forecast As I said before, our inflation forecasts were previously based on the assumption that the repo rate would not change during the forecast period. The assumption of an unchanged repo rate in some ways made it easy to justify changes in monetary policy. Guided by this assumption, monetary policy could, somewhat simplified, be described by the following rule of thumb: if the forecast inflation, given an unchanged repo rate, deviated from the target, the repo rate should normally be raised or lowered. Even though this arrangement worked fairly well from a communication point of view, there are clear advantages in basing forecasts on a more reasonable assumption of the development of the repo rate.

If the forecasts for inflation and the real economy are assessed to show a desirable development, market expectations will provide a reasonable forecast for coming monetary policy decisions. However, it is important to remember that new data are being received all the time, which must be taken into account in our monetary policy. The fact that implied forward rates are being used in our forecasting work should not be regarded as a commitment regarding future monetary policy. There is considerable uncertainty over future macroeconomic developments, and this means that market expectations of the future repo rate path may often be incorrect. This is also illustrated by the considerable uncertainty intervals around the assumed interest rate path (see Figure 4). The current monetary policy situation The principles that I have just discussed apply primarily when we produce and publish complete forecasts in connection with Inflation Reports. At the intervening meetings, we start from the forecast that applied in the previous Inflation Report and study how the information received since then affects both the interest rate assumption and the forecasts. Our next monetary policy meeting on 27 April will involve making this kind of intermediate, more qualitative assessment. The implied forward rates on which the forecast in the Inflation Report published on 23 February was based reflected a 15-day average as per 9 February. On 16 February, an unexpectedly low CPI outcome was published for January.
Naturally, to achieve this homogeneity, bank crisis-prevention and management mechanisms are needed along with risk-mutualisation arrangements that minimise the link between national economic and fiscal conditions and the ability to preserve the value of bank liabilities in each jurisdiction. These requirements include a single supervisory mechanism as a prevention tool, a single resolution mechanism that pursues the homogenous treatment of banks with viability problems and has a common fund to make this economically feasible, and an integrated deposit guarantee scheme that ensures identical coverage throughout the monetary area for eligible deposit-holders. We can already claim that the project to set up a Banking Union that includes the abovementioned ingredients is close to becoming a tangible reality. Just a few weeks back we celebrated the first anniversary of the start-up of the first of the three pillars of the Banking Union project, the Single Supervisory Mechanism (SSM); the Single Resolution Mechanism, the second pillar of the Banking Union, is now under way and will be fully operational from 1 January 2016. Admittedly, certain relevant aspects have still to be set in train. First, the single resolution fund must be strengthened to ensure that it is strong enough to withstand future banking crises, without destabilising the public finances of the countries concerned. Further, we must step up efforts to move forward on the third pillar of the Banking Union, the establishment of a common deposit guarantee scheme, based on the proposal released by the European Commission last week.

BIS central bankers’ speeches  3  As you will recall, in January this year a recommendation on dividend distribution policy was adopted in which banks were urged to keep conservative dividend distribution arrangements so as to preserve their solvency. This recommendation will be shortly reassessed. In turn, common criteria have been laid down for recurring decisions such as authorisations for the acquisition of qualifying holdings in credit institutions, assessment of fitness and properness of board members, or the requirements to be made in capital reductions and issuances. Finally, I must highlight the relevant role played by the SSM in the management of the Greek crisis. The SSM not only monitored the situation of the banks continuously, but, once agreement was reached between the European and Greek authorities last summer, it was entrusted with determining the recapitalisation requirements of Greece’s four significant institutions on the basis of a specific comprehensive assessment exercise, whose results were recently published. In the coming months, the SSM must ensure that the recapitalisation of these banks goes ahead as stipulated. 3. Some challenges  That said, and as I stated at the outset, the SSM has numerous challenges to face in the near future. I would like to mention four in particular. Firstly, the microprudential policy stance sought must be clearly defined. The SSM, despite its exemplary start-up, is still under construction and its criteria, practices and specific objectives have not yet reached the degree of stability desirable.
However, at the same time, this decline in the unemployment rate overstates the degree of improvement. Other metrics of labor market conditions, such as the hiring, job-openings, job-finding rate, quits rate and the vacancy-to-unemployment ratio, collectively indicate a much more modest improvement in labor market conditions compared to that suggested by the decline in the unemployment rate. In particular, it is still hard for those who are unemployed to find jobs. Currently, there are three unemployed workers per job opening, as opposed to an average of two during the period from 2003 to 2007. With respect to the second metric – confidence that the economic recovery is strong enough to generate sustained labor market improvement – I don’t think we have yet passed that test. The economy has not picked up forward momentum and a 2 percent growth rate – even if sustained – might not be sufficient to generate further improvement in labor market conditions. Moreover, as I noted earlier, fiscal uncertainties loom very large right now as Congress considers the issues of funding the government and raising the debt limit ceiling. Assuming no change in my assessment of the efficacy and costs associated with the purchase program, I’d like to see economic news that makes me more confident that we will see continued improvement in the labor market. Then I would feel comfortable that the time had come to cut the pace of asset purchases.4 Regional economic conditions Let me now turn to economic conditions in the region.

In coming weeks, Congress will be considering how to fund the government for the next fiscal year and will also be debating what to do about the debt limit. This creates uncertainty about the fiscal outlook and may exert a restraining influence on household and business spending. One other risk to highlight is the global economic outlook. Even though the euro area appears to have begun to grow again after a protracted recession, growth in that area is still expected to be fairly weak at best. In addition, growth in many of the largest emerging economies has slowed, and some of the countries with large trade and current account  1  2  Based on the CoreLogic home price index including distressed sales. BIS central bankers’ speeches  imbalances have seen their financial markets and currencies come under pressure. If growth abroad were to slow, this could impede the growth of U.S. exports and this could result in less strength in manufacturing production and employment in the U.S. Thus, returning to an analogy I have used in previous speeches, I see the economy in a tugof-war between these headwinds and underlying fundamental improvement, with a great deal of uncertainty over when the improvement in the underlying fundamentals will prevail. In the end, my best guess is that growth for all of 2013, measured on a Q4/Q4 basis, will be near the post-recession average. But I believe a good case can be made that the pace of growth will pick up some in 2014.
Radoslav Milenkov: Banking supervision priorities Publication of Mr Radoslav Milenkov, Deputy Governor (in charge of the Banking Supervision Department) of the Bulgarian National Bank, in the Quarterly Bulletin of the Association of Banks in Bulgaria, issue 57, April 2019. * * * A main priority of Banking Supervision is the participation in the process of effective accession to the Single Supervisory Mechanism (SSM) within the three working blocks, on which work is done at the Bulgarian National Bank. The first one is the development of the required regulatory framework. Work in this area reached an advanced stage at the end of the last year with the adoption by the National Assembly of the necessary package of legislative amendments, allowing for the synchronisation of supervisory processes between the ECB and the BNB, including by expanding the macro-prudential supervision toolkit. A review and possibly an amendment of the applicable domestic regulatory framework – ordinances, guidelines – is pending with a view to achieving compliance with the ECB internal technical regulations and reflecting the ECB’s discretionally policy in key areas of prudential supervision and risk management. The second is to continue the process associated with the synchronization of the BNB’s supervisory and prudential practices with those of the European Central Bank, of the internal rules and processes and of the information flows between the two institutions.

Priorities: • Carrying on the practice of uninterrupted supervisory cycle by means of ongoing off-site control 1/2  BIS central bankers' speeches  and on-site inspections; • The supervisory review and assessment of banks based on the approach developed in alignment with the ECB Internal Guidelines and the Guidelines issues by the European Banking Authority. The purpose of the supervisory review and assessment is to strengthen the link between the dynamics of risks within the system, a bank’s risk profile, its own funds, its liquid assets and risk management systems and internal control environment, which would serve as the basis for reaching an overall assessment of the viability of each credit institution individually; • Continuing the policy of conservative macro-prudential supervision aiming at accumulation and maintenance of capital buffers during the economic upturn. The objective is upholding the stability of the banking system, including by preventing or reducing the systemic risks involved in the activities of credit institutions and identifying and limiting the emergence of macroeconomic factors that would threaten the stability of the banking system. 2/2  BIS central bankers' speeches
Sources: Na tional Institute of Economic Research, Statistics Sweden and the Riksbank  The real return on capital and the real interest rate should be strongly associated with each other, i.e. the exact opposite to what we observed in both the United States and Sweden. A falling real interest rate tends to reduce the cost of investment, which should increase the rate of investment and thereby decrease the return on capital. The various premiums that measure the difference in return on capital and government bond yield should therefore not show a trend, even though that appears to be the case. An important factor that can often explain some of the difference between return on capital and government bond yield is the so-called credit risk premium, which compensates the investor for the risk of the company going bankrupt. There is  9 [23]  reason to believe, however, that the credit risk premium has been stable as the number of bankruptcies has been constant or falling. Another premium is the so-called liquidity premium. Risk-free assets such as government bonds can often be used as collateral for various loan contracts. Government bonds and other risk-free assets that can relatively easily converted into liquid funds therefore have an added value given by the liquidity premium. The higher the liquidity premium is on an asset, the higher the price and the lower the yield will be. The falling trend in the real interest rate should, at least in part, be due to the premium on government bonds having risen.

However, it must be noted that the economy desires much lower lending rates than so far recorded to make credit affordable and effectively contribute to expansion of economic activity. The external sector has continued to score remarkable improvement as lately reflected in a the resilience of the Kwacha against major foreign currencies, and the country posting in 2006, an estimated overall balance of payments surplus of US $ million compared with a deficit of US $ million in 2005. For instance, the Kwacha appreciated by 12.0% against the US dollar while the local currency gained by 10.4% against the South African Rand during the period end-December 2006 to 21st September 2007. This improvement largely occurred due to increased export, which mainly arose from continued high copper prices and complimentary higher export volumes coupled with the buoyant growth in non-traditional export earnings. The maintenance of an appropriate monetary policy, in the wake of a higher than expected inflation outcome in the first quarter of the year, also contributed to the resilience of the Kwacha. The developments in the Kwacha should not only enhance competitiveness of the country’s exports, particularly the non-traditional exports but should overall have a positive bearing on inflation developments in the coming months. Esteemed colleagues, the financial sector has continued to enjoy stability and growth this year, characterised by improved banking services and emergence of new products. The overall financial condition and performance of the banking sector has been assessed as satisfactory.