samchain/econo-pairs-v1 huggingface dataset:
Our economy, with its important financial sector and strong presence on the international markets, will not remain unscathed. In addition, the increase in commodity prices, in particular the price of oil, is triggering an inflationary effect. These different factors pose a predicament in terms of monetary policy, and the resultant uncertainty this causes is not exactly beneficial for Swiss companies. I have every confidence, however, that Switzerland will navigate these troubled waters without any major problems. On the one hand, our economy is very competitive. Thanks to the reforms implemented in recent years, Switzerland is well placed to adjust to the needs of the global economy and cope with pressure on the foreign exchange markets. On the other hand, our careful policy in favour of a gradual normalisation of interest rates, which we have been pursuing since 2004, has resulted in a steady tightening of monetary conditions and should ensure price stability in the medium term. On this positive note, I would like to close my remarks. Thank you for listening and, above all, thank you for supporting the National Bank in its efforts to ensure monetary stability in Switzerland. BIS Review 50/2008  5

Once the phase of theoretical debate and standards drafting had been completed, the Committee’s activities, in particular through its Accord Implementation Group (AIG), focused on implementing the Framework. The time has therefore come to confront this practical reality, with all its difficulties and problems, through a dialogue with the industry and the global supervisory community. This is a major task, given that the aim is to strengthen banking systems and the international financial system, rendering them more robust, more stable, and thus more capable of contributing effectively to the growth and stability of our economies. Despite the importance of Basel II, the proposed agenda also shows us that this is not the only topic currently of interest to the supervisory community. Tomorrow, we will be discussing one of the Committee’s key projects, which, I am convinced, affects all these supervisors gathered here today. I am referring to the Basel Core Principles. With these introductory words, I would like to provide a general overview of the Committee’s work in these areas. First, I will focus on the revision of the Basel Core Principles, before moving on to talk about the implementation of the revised Framework. I will be referring to the necessary collaboration and coordination between supervisors, and will briefly touch on the other implementation-specific issues that the AIG is currently working on. Revision of the Basel Core Principles Looking at recent press headlines, one could easily conclude that the Committee’s activities over the last few years have been almost exclusively focused on Basel II.
Despite the strong fundamentals of the Chilean economy, we are not immune. We are a small, open economy, so external developments can and do affect us. Now, allow me to describe in detail the macroeconomic scenario we believe to be the most likely one in the coming quarters, and associated risks. Macroeconomic scenario Our baseline scenario assumes that in 2014 the emerging markets will grow below their averages of recent years. China is a case in point, whose growth forecast has been steadily revised downward during the past several months and is now even below the officially defined target of 7.5 percent per year (figure 4). Other Latin American economies, including Brazil, Mexico and Peru, have also revised downward their respective projections. This owes to a number of factors. On one hand, the weaker fiscal and monetary impulse in Brazil, poor growth in Mexico and a slowdown in investment and exports in Peru. On the other hand, Argentina and Venezuela are making substantial corrections to their growth outlooks for the year, of the order of 3 percentage points down (figure 5). All this contrasts with the developed world, where growth forecasts for the year have been revised upward, although with different nuances. Worth noting is the improved performance of the United States and confirmed signals of recovery in the Eurozone.

This means that this year investment will fall short of projections, with an annual growth rate that is now estimated closer to 1 percent (4.1 percent in December). It also inputs first-quarter data available, as well as the downward revisions to investment in 2013 and the turn of 2014 shown by the latest survey of the capital goods corporation CBC. Another factor behind the lower growth forecast for the immediate future is the upward correction to inventory levels, meaning that this source of expansion will provide a smaller impulse. The baseline scenario also estimates that, as has been occurring for some quarters, private consumption will post a moderate slowdown, grounded on a looser labor income and a stable borrowing trend. This year, growth will go from less to more. Such a trajectory assumes that investment will stabilize, due to several elements coming together. On one hand, the CBC survey shows an increase in investment plans in engineering works in the second half of 2014 and for the period 2015–2016. On the other, there is housing construction that should continue the trend of last year, considering that the supply of homes is still low, housing sales are strong, and financial conditions (i.e. credit cost and volume) remain favorable. Meanwhile, the fiscal budget for 2014 is expected to be more in line with historical patterns, implying greater public spending with respect to 2013, especially investment. Machinery and equipment imports have been stable for some months.
But when the US investment bank Lehman Brothers filed for bankruptcy in September the uncertainty over borrowers' credit ratings increased dramatically. Access to credit in the financial markets around the world declined and the interbank rates, that is, interest on loans between banks, rose substantially in Sweden, too. In a couple of days we went from a situation where Swedish financial markets were functioning fairly well to one where some sub-markets were in principle at a standstill. We also went from expectations of a fairly smooth slowdown in economic activity, to significantly more gloomy economic prospects. I myself was sitting in a meeting in Frankfurt when I was told over the telephone that the Swedish treasury bill market had been put on hold. This was on 18 September and it was now clear that events had put a spanner in our otherwise well-oiled financial works. This changed the conditions for our policy. Although monetary policy and financial stability have always been closely linked, under the circumstances that have prevailed since September one can say that the dividing lines between our two main tasks have in many ways been erased. Financial stability affects monetary policy… Our most important tool in conducting monetary policy is normally the repo rate. By adjusting it we can influence, by means of the banks and the rest of the financial system, the interest rates faced by households and companies when borrowing money. In this way we try to influence activity in the economy and ultimately inflation.

18  4  6  8  10  12  14  16  Sources: Statistics Sweden and the Riksbank  BIS Review 23/2009  Lower interest rate to subdue fall in production and employment and attain inflation target of 2 per cent  The Riksbank will continue to take the measures required to safeguard financial stability  Repo rate forecast 2008, per cent, quarterly averages 5,0  5,0  4,5  4,5  4,0  4,0  3,5  3,5  3,0  3,0  2,5  2,5  2,0  2,0  1,5  Repo rate Repo rate forecast MPR 08:1 Repo rate forecast MPR 08:2 Repo rate forecast MPR 08:3 MPU December 08  1,0 0,5 0,0  1,0 0,5 0,0  02  03  04  05  06  07  08  09  Note. PPR denotes M onetary Policy Report och PPU denotes M onetary Policy Update. BIS Review 23/2009  1,5  10  11 Source: The Riksbank. 19  Profits before credit losses and net credit losses, in the major banks, summarised over four quarters, SEK billion at 2008 prices 100  80 Profit before credit losses Credit losses  60  40  20  0  -20 dec -90  dec -92  dec -94  dec -96  dec -98  dec -00  dec -02  dec -04  dec -06  dec -08  Note. International Financial Reporting Standards applied from and including the first quarter 2005.
Similarly, Singapore has developed into a regional hub by supplying manufacturers and service providers in booming Southeast Asian economies. And not only does it participate in the Association of South East Asian Nations, but it also has a far reaching trade agreement with New Zealand, which is expected to develop into a closer economic partnership that will in time also include Hong Kong and 5 Japan. These countries are not unique in this regard. Recognising that success in world markets requires a critical mass in order to foster competition and competitiveness and to acquire a measure of bargaining power, countries the world over are turning to regional arrangements as a stepping stone 6 to gaining a foothold in the global economy. They know that belonging to a regional grouping also makes it easier to attract FDI and to absorb the necessary technology and management expertise that can be applied elsewhere in the economy. Such arrangements also provide members with a first-hand experience of the negotiation process. The World Trade Organisation estimates that 243 regional 7 8 trade agreements are in force today, covering at least 129 countries. Regional groupings moreover are not only increasing in number, but they are also becoming deeper in scope, encompassing areas 9 of policy other than trade and investment. This brings me to the first point I wish to make today. The experience of other countries shows that the capacity necessary to deal with the competitive forces of globalisation can be optimally built in stages through participation in regional arrangements.

This at a time when Malta has already started to graduate from the General System of Preferences (GSP) through which some developed countries grant non-reciprocal preferential trade access to less developing countries. For example, Malta graduated from the GSP scheme of the USA at the end of last year. In addition, pressures are mounting on developed countries in the WTO to extend any preferential treatment accorded to a subset of WTO members to all other members, such that any preferential treatment given to Malta by any country over and above that accorded to other WTO members will be lost in any case. In a non-membership scenario, moreover, the EU-Malta income gap would tend to widen because the other new members will continue with reforms that are conducive to attracting FDI. Indeed a recent study shows that the EU decision to open negotiations with the first-wave of accession countries had by itself reinforced FDI flows into these countries. This has implications for the catching-up process, because countries that absorb the highest amounts of FDI normally continue to attract the bulk of new 14 investment in later years. So that if the scale of FDI flows into Malta fails to keep up with that going to the other candidate countries, Malta could easily fall behind these countries in terms of GDP growth and living standards.
Among the major non-bank financial institutions, the most important part of the financial system today where we need a stronger capital regime relates to the GSEs. Even with the improvements in risk management at these institutions over the last few years, we are some distance from the point where their regulatory capital requirements appropriately reflect their risk. While critically important, capital alone does not define an institution’s strength. It is vitally important for firms to continue to invest in strong internal controls and to make sure that advances in the operational infrastructure keep pace with rapid growth, particularly in complex transactions. Strong operational controls can help ensure smooth market functioning in times of stress, and when they are weak they can exacerbate adverse market dynamics. An important element of a sound operational control environment is timely and accurate information for senior managers, especially when it is most critical for them to have a clear picture of the firm’s exposure. As such, strong operational controls can help reduce some dimensions of uncertainty and therefore help markets function better in conditions of stress. The challenge of ensuring that operational controls keep up with front office advances in the complexity and volume of transactions is particularly evident today in the area of credit derivatives.

Basel II provides a much better way of determining the appropriate level of capital to hold against risk. It does a better job of capturing default risk and the true extent of risk transfer in securitization, guarantees and credit derivatives. It provides explicit recognition of operational risk, which can be larger than exposure to market risk for some complex financial institutions, not just for processing or clearing banks. But Basel II is not the end of the process of designing a better regulatory framework for capital in financial institutions. As we move to refine and implement the Basel II framework for credit and operational risk, we need to strengthen the framework for market risk and encourage further improvements in how firms capture the possibility of extreme events. The current regulatory treatment of market risk does a good job of capturing directional risk from movements in interest rates, exchange rates and equity and commodity prices. It is less effective, however, in capturing the full range of risks associated with some newer products and trading strategies, where values can react sharply and discontinuously. In particular, the risks of trading strategies based on changes in the correlation between asset returns are not always captured under the current regulatory capital regime, nor are some of the risks associated with traded credit products. And given the relatively short history of some of these products, the current regulatory treatment of market risk may not capture the risks of these products going forward.
This is an important point of departure, but we have now presumably learned that imbalances and risk arise when large countries do not sufficiently take into account that their own choices also influence those of others. The International Monetary Fund (IMF) must be given a more important role. The Fund must enhance its surveillance activities and its advice must be acted upon to a greater extent. However, this probably requires changes in the IMF’s governance structure. Countries that are now gaining in economic strength are seeking greater influence. The IMF must also improve its reputation in these countries. Government wealth and saving International capital markets have been a boon to Norway. We drew on borrowing opportunities abroad when the petroleum industry was being built up. We did the same in order to expand welfare schemes and to finance the countercyclical policy of the mid-1970s and the early 1990s. National oil and gas resources are now converted into equities and bonds abroad. Other small industrial countries are also making active use of global capital markets. Our neighbouring country Sweden has recorded large balance-of-payments surpluses. 8  18  G20: group comprising 19 countries and the EU. Member countries are among the world’s largest economies and include members of the G7. BIS Review 16/2009  Switzerland has a high level of saving and a recurring surplus. Australia, on the other hand, has been able to record a deficit since 1975. This year we are celebrating the works of the Nobel Prize-winning author Knut Hamsun.

In the recent period of expansion, inflation rose to 3 per cent in 2008, but was restrained without raising the key rate to a high level. 5 The advantages of economic agents anticipating low and stable inflation are now clearly evident. They can be quite sure that inflation over time will be close to 2.5 per cent. This enables interest rate setting to be more effective. When the nominal interest rate is reduced, the real interest rate falls accordingly, and it is this rate that influences decisions made by households and enterprises. Interest rate setting still provides some scope for stimulus. When inflation is anchored, economic agents do not expect inflation to accelerate over a period in Norway even if the krone depreciates. The krone can then decrease in value without monetary policy having to be tightened. This will curb the decline in our export industry. In bad times, a marked krone depreciation might even be necessary to hold up inflation close to 2.5 per cent. In the downturns in 1990 and 1998, the opposite action was taken: the interest rate had to be increased in order to stabilise the krone and keep inflation in check. Even though fiscal policy and monetary policy have had the intended effect, there have been fluctuations in output and employment. We have experienced a period of strong credit growth. During the upturn, the housing market was increasingly marked by the belief that house prices would always rise.
But we live in a world of second best, and even very approximate measures would do better than nothing at all. I will stop here, knowing, once again, that I have raised more questions than I have provided answers. But looking at what is happening in this very moment, in our economies, it is necessary to think "out of the box" and look at all possibilities. Those in charge of macroeconomic policies are doing just that. Those responsible for financial regulation should not hesitate to emulate them, at least partially. Thank you for your attention. References Aglietta M. at B. Mojon (2008), Central Banking, in A. Berger, Ph. Molyneux and J. Wilson (eds), The Handbook of Banking, Oxford University Press. Alessi L. and C. Detken (2009), “Real Time” Early Warning Indicators for Costly Boom-Bust Cycles: A Role for Global Liquidity, European Central Bank Mimeo. Allen, F. and D. Gale (2000), Bubbles and crises, The Economic Journal 110, 236-55. Bernanke B., M. Gertler and S. Gilchrist (1999), The Financial Accelerator in a Quantitative Business Cycle Framework, in. J. Taylor and M. Woodford (eds), The Handbook of Macroeconomics, North Holland. Blanchard, O. (2008), The Crisis: Basic Mechanisms, and Appropriate Policies, MIT Working Paper 09-01. Borio C. and P. Lowe (2002), Asset Prices, Financial and Monetary Stability: Exploring the Nexus, BIS Working Paper 114. Borio, Claudio (2008), The macroprudential approach to regulation and supervision: where do we stand? Mimeo. BIS Review 37/2009  5  Holmstrom, B. and J. Tirole (1997), Financial Intermediation, Loanable Funds and the Real Sector.

It only helps if it is conducive to better macroeconomic performance. Volatility may be driven by fundamentals. Sharp movements in asset prices may help the financial system to serve as a cushion, an "absorber" for exogenous economic shocks. This is welfare improving since it avoids, or mitigates, adjustment in more rigid goods of labor markets. 1  I am indebted to Benoit Mojon for many useful suggestions and remarks. All remaining mistakes are mine. Opinions expressed are purely personal and do not necessarily reflect the positions of the Banque de France. BIS Review 37/2009  1  By the same token, not all procyclicality is bad. It all depends on the causal link: is the financial system the origin or the amplifier of destabilizing dynamics? Or does it simply react to cyclical evolutions in the real economy? We should only be concerned by "intrinsic procyclicality", which is created inside and by the financial system. Finally, cyclicality in the real economy can be beneficial to long term growth as it is one mechanism through which "creative destruction" can take place in the productive system. Real and significant damages occur if and when financial imbalances are allowed to build for a long time with two consequences: first asset prices significantly deviate from their fundamental value, which creates distortions in the allocation of resources; and second, those imbalances unwind suddenly and abruptly, triggering major disruptions in growth and the economic cycle. This is what is happening right now. And this closely resembles the definition of a bubble.
In the longer term, however, demand-management macroeconomic policy – be it fiscal or monetary – cannot be used to address structural problems successfully. As such, the Bank of Thailand is also geared towards financial sector development in order to facilitate the country’s long-term structural reforms. Financial sector development is the third element of our policy navigation. The Financial Sector Master Plan Phase III will aim for a “competitive, inclusive, connected, and sustainable” financial sector. Our vision is to have a competitive Thai financial sector which can support more diverse needs at a fair and undistorted price, promote regional trades and investments, while maintaining safety and soundness of the economy and the financial system. Today I hope to share with you some of the highlights and key milestones. BIS central bankers’ speeches  5  Five years from now, I foresee that the Thai financial landscape will look different from today, with more digital banking and electronic payment transactions, and increased competition from nonbanks and foreign players. The landscape will also contain innovative fintech companies who provide alternative solutions to both service providers and users such as data analytics, crowd funding, and product or price comparison services. Ultimately, competition will increase financial access, and lower transaction costs to the economy as a whole. The Bank of Thailand will focus on the development of infrastructures and standards, while ensuring that rules and regulations are clear and supportive of innovation and efficiency.

To this end, the Bank of Zambia will ensure that the Committee that has been spearheading the development of these guidelines become a permanent one and meet every so often to make the necessary changes in an inclusive manner. Accordingly, you are all urged to forward any contributions you wish to make on an ongoing basis. Ladies and gentlemen, allow me now to welcome and thank Mr Mervin King for graciously agreeing to officially launch the guidelines. Mr. King is internationally renowned for his work on corporate governance, and in particular for his work on the King Committee of South Africa which issued its first report in 1994. The King Report, along with the Cadbury Report of the United Kingdom and the Sarbanes-Oxley Act of the United States have become key references on the subject and it is for this reason that we feel both proud and honoured to have Mr. King with us today. BIS Review 119/2006  1  It is now my honour and privilege to call upon Mr. King to launch the Corporate Governance Guidelines. Mr. King!