samchain/econo-pairs-v1 huggingface dataset:
This G-SIFIs loss absorbing capacity is a complex matter, involving the need to clarify or determine a long list of questions, for instance: its characteristics, minimum amount, intragroup distribution and triggers for it, enforceability of bail-in; regulatory limits on loss absorbing holdings, and disclosure. Let me underline that a shared view on the characteristics and levels of this “loss absorbing capacity” is critical for a “level playing field” among G-SIFIs. Also, we must avoid any approach that might be considered as an additional layer of differentiated capital requirements, a sort of differentiated “Tier 3” requirement. As I mentioned before, determination of the appropriate levels of GLAC must be dependent on the complexities and risk of the activities developed by each institution. The approach currently being worked out in the European Bank Recovery and Resolution Directive, in terms of both identifying characteristics and specific levels or of “eligible liabilities” is, in our opinion, a correct approach to the problem. Now, my last point, the discussion in Europe regarding the European Union bank recovery and resolution directive and the entry into force of the bail-in arrangements included in that directive. Although still under discussion, the Bank Recovery and Resolution Directive bail-in is to be introduced in a sequenced way. Bail-in of regulatory capital instruments will be applicable from the moment the Directive is transposed, while bail-in of senior creditors can be postponed to 2018, depending on each Member State.

These strategies are broadly based on two approaches: •  The one called “single point of entry resolution” (SPE groups), in which resolution powers are applied at the top of the group by a single resolution authority;  •  And the one called “multiple point of entry resolution” (MPE groups), where resolution tools are applied to different parts of the group by two or more resolution authorities acting in a coordinated way. Of course, the choice of the strategy needs to take into account the structure and business model of each banking group. A “Single Point” strategy may be better suited to a firm that operates in a highly integrated manner (through, for example, centralised liquidity, trading, hedging and risk management). On the other hand, an “Multiple Point” strategy may be suitable for financial groups with a decentralised structure and greater financial, legal and operational separation along national or regional lines, with sub-groups of properly capitalised, self-funded subsidiaries, which have enough managerial resources as stand-alone businesses. The feasibility and credibility of the “Multiple Point” strategy will mostly rely on two main issues: •  First, an effective cross-border coordination based on the cooperation agreements, the resolution plans and with the involvement of the resolution authorities of the main jurisdictions in which the groups operate. •  Second, a balanced loss absorbing capacity allocation across the group, according to local business risk profile in each jurisdiction.
Flexible inflation targeting means in practice that the aim is not to bring inflation back to the target as quickly as possible if it deviates from 2 per cent. But a precondition for being able to be flexible is that there are expectations of inflation still returning to target in the longer run. The inflation target has been the nominal anchor in the Swedish economy for so long that it is easy to assume that inflation expectations automatically stay around 2 per cent. But, as developments after 2011 have shown, long-term inflation expectations are not immune to influence. A long period of sub-target inflation caused expectations to creep further and further below 2 per cent. It therefore became increasingly urgent for the Riksbank to focus on reversing the trend and bringing inflation up to the target. This turned out to require major monetary policy efforts over a long period of time. An insight gained in recent years that therefore needs to be highlighted is that confidence in the inflation target cannot be taken for granted. The main task of monetary policy is to maintain the nominal anchor in the economy and the expectations and demands placed on monetary policy should take this as a starting-point. But on condition that confidence in the anchor is not jeopardised, monetary policy has a certain amount of scope to allow deviation from the inflation target to take a back seat in favour of other considerations.

Upturn cut short by sovereign debt problems in 2011–2012 An effect of the severe crisis of 2008 was a shutdown in global trade, which brought the Swedish economy to a sudden halt. To support the economy, the Riksbank quickly lowered the repo rate to a, at the time, historically low level of 0.25 per cent. Around the world, other central banks and governments made herculean efforts to kick-start the financial system and reverse the trend. As the situation on the credit markets improved and global trade picked up, the recovery occurred more rapidly than expected in Sweden. From mid-2010, the Riksbank began raising the repo rate towards a more normal level. But during 2011, the recovery stuttered when unease linked to the problems of heavily burdened public finances in several European countries started to affect the credit markets to an ever-increasing degree. Measures by institutions such as the EU and the ECB helped to stabilise the situation, but weak confidence and low demand among households and companies subdued European developments. This, in turn, led to a slowdown in Swedish economic activity, despite relatively high domestic demand. GDP fell again in 2012 and the Riksbank lowered the repo rate in a number of steps. Focus on inflation and maintaining confidence in the inflation target has produced results Something which provoked head-scratching around the world during these years was that inflation remained at a relatively high level to begin with, despite the major economic slowdown after 2008.
Perceived risks to financial stability: credit growth and real estate markets The acceleration of credit growth is a prominent but natural part of the picture of robust economic growth and general optimism in the region. Improved access to credit in the Baltic countries has led to higher investments (much needed in rapidly developing economies) and helped to smooth consumption over time. For example, in Estonia the overall increase in bank credit and leasing accelerated to around 60 percent in mid-2006. This has by far exceeded the growth rates seen in the Nordic countries. On the other hand, the accompanying rise in indebtedness and current account deficits has given cause for concern to both domestic and international evaluators. It is always worthwhile to put things in perspective. During the past five years, the growth in household indebtedness in terms of GDP has been fast in several "old" EU Member States, including Denmark in fact, even faster than that in the Baltic countries. At the same time it cannot be forgotten that the level of household savings (especially long-term savings) in Estonia and other Baltic countries is still low when compared to that in the Nordic countries. Therefore, households face a non-negligible risk to their balance sheets, as their financial assets are still rather low in international comparison. It is the lenders - banks and leasing companies that need to take these risks into account. Of all the factors of credit growth I would point out two. Firstly, there are longer maturities of real estate loans.

The pick-up in our competitive capacity is highly tangible in terms of Spain’s unit labour costs relative to those of the rest of the euro area. These costs fell by 14% between 2008 and 2019, after rising forcefully during the pre-crisis years. The gains in competitiveness vis2/6  à-vis the euro area were reflected, in the early stages of the crisis, in heavy job destruction, and throughout the subsequent period, in wage moderation. Contributing to this were the successive amendments to the labour market legal framework during the crisis, which proved to be effective levers for boosting the recovery in employment. Overall, these developments enabled the competitiveness lost in relation to the other euro area countries – measured via relative unit labour costs (ULCs) – to be restored. Specifically, while for the market economy as a whole ULCs growth in Spain from 1999 to 2008 exceeded that observed in the euro area by 16 pp, the current relative level is 5 pp below that of 1999. We must add to these improvements the enhanced financing conditions for resident agents as a whole. Included among these agents are Spanish firms which, from end-2012, saw their financial costs ease strongly. Also, most particularly, there was a correction to the differences in the interest rates they had previously to pay compared with their competitors in the core euro area countries.
The second is the belief that the ability of the central bank to act with speed and force to mitigate the effects of financial crises is substantially greater if responsibility for the monetary policy and lender of last resort instruments that are most critical in crises is combined with authority for bank supervision and payment system oversight. The confidence to make quick judgments about liquidity and solvency – judgments that are central to effective decision making in a crisis – is significantly enhanced by our direct involvement in the supervision of the core institutions of the U.S. financial system. Put another way, we are more comfortable managing the moral hazard risks that are inherent in having the capacity to respond to systemic financial crisis if we have a direct role in assessing the appropriate level of capital and the overall risk profile of the institutions that are the most likely sources of systemic financial distress. The rationale for this integrated model is closely related to the belief that our financial system works better without combining in a separate, single entity supervisory authority over banks and non-bank financial institutions and responsibility for market regulation. The special role of banks in the economy, the special nature of the risks in the types of intermediation they provide, and their access to the safety net justifies a different type of supervision and a different relationship to the central bank than would be appropriate for non-bank financial institutions.

Interest rate risk measures the potential for loss which results from a mismatch between the term structure of a bank’s assets (e.g. mortgages) and that of its liabilities (e.g. customer deposits). While the term structure of assets gets increasingly longer, that of liabilities remains very short. The rise in credit risk was due, on the one hand, to the deterioration in the outlook for the Swiss economy. A slowdown in economic growth in Switzerland could have a negative impact on domestic credit quality, with the result that banks would face the prospect of writeoffs on their assets. On the other hand, the continued strong rise in mortgage loans and real estate prices has also caused credit risk to increase further in the past few months. Furthermore, the results of our mortgage lending surveys suggest a high risk appetite on the part of individual banks. In this regard, the Federal Department of Finance (FDF) submitted two important measures for consultation which should counter potential imbalances in the real estate and mortgage markets: more risk-sensitive capital requirements for mortgage lending and a countercyclical capital buffer. With more risk-sensitive capital requirements, incentives for mortgage lending should be structurally improved. The countercyclical buffer is a component of the Basel III framework and represents a variable capital requirement which is only activated in the event of excessive credit growth. As soon as credit growth weakens again, the buffer can be deactivated.
This would be partly offset by the introduction of a new tax on certain digital services, which might contribute to raising resources by around € million in 2018 and by € billion in 2019, according to the Programme. However, this new instrument is still relatively undefined, meaning it is difficult to judge its tax-raising potential. Overall, and as stated in my last appearance before Parliament in relation to the Budget, achieving the public revenue targets for the current year, 2018, will entail a greater response by tax revenues to growth in economic activity than has been historically observed. As regards the expenditure forecast for 2018, its more expansionary trend relative to previous years is mainly due to the agreements reached on employment and compensation of public-sector employees, on one hand, and on the revaluation of pensions, on the other. 6/9  The agreement reached by the Government with the main trade union organisations includes an increase in public-sector employees’ remuneration of 1.75% in 2018, plus additional funds for targets and specific bodies that might entail a further 0.4 pp increase in total gross wages. In the following years, to 2020, there would be even higher increases than these. The budgetary plan also includes an extension to the hiring policy of the last two years, raising replacement rates in some sectors and enacting additional measures affecting working hours and temporary employment. Against this background, the estimated 2% increase in public-sector employees’ remuneration in the Stability Programme for 2018 will probably be surpassed.

With respect to welfare benefits, the Stability Programme reflects the 1.6% settlement for the revaluation of public pensions, both in 2018 and 2019. This increase will be 3% this year, 2018, in the case of minimum and non-contributory pensions. I shall later return to this. In any event, given the trend growth in the number of pensions and the substitution effect arising from the new pensions replacing those that are terminated, which are generally higher than was earlier the case, the forecast growth in the budget earmarked for welfare benefits in 2018 (3.7%) may also be surpassed. Among the remaining expenditure items for this year, goods and services purchases will notably continue to be contained, and interest payments to decline, while there will be a significant increase in public investment. This latter development is partly in response to the inclusion in 2018 of the expenditure associated with amounts for which the government may be liable under the insolvency-related legal proceedings currently affecting certain toll motorways. But even after adjusting for this effect, public investment is expected to be more expansionary than other items, as was the case in 2017. All told, public investment is expected to stand at 2.1% of GDP in 2018, excluding the temporary effect arising from the above-mentioning legal proceedings, a level far below the average for the previous two decades, which was 3.6%. Overall, it may be concluded that the attainment of the budget deficit target for this year, namely 2.2% of GDP, is subject to significant risks.
Andrew Sentance: Let it grow – how monetary policy can support sustainable economic growth Speech by Mr Andrew Sentance, External Member of the Monetary Policy Committee of the Bank of England, at the Confederation of British Industry (CBI) East of England Annual Lunch, Horringer, Bury St Edmunds, Suffolk, 22 March 2011. All speeches are available online at www.bankofengland.co.uk/publications/speeches. *  *  *  I would like to thank Tomasz Wieladek and Adrian Chiu for research assistance and I am also grateful for helpful comments from other colleagues. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. Good afternoon, ladies and gentlemen. I am delighted to have the opportunity to address this year’s CBI East of England annual lunch. In my time as a member of the Monetary Policy Committee, I have particularly appreciated the opportunity to talk to businesses and business groups around the UK. As an economist with strong roots in the business world, I place great weight on the input that the MPC receives from the business community, which we get from a wide variety of sources – including business surveys and the reports from the Bank’s Agents. But there is no substitute for visiting individual companies and meeting business groups to gauge economic sentiment at the grass roots level around the country.

(2011) “The UK’s Inflation Problem: Selling England by the Pound?” Speech at to the IEA State of the Economy Conference on 17 February 2011. BIS central bankers’ speeches  9
It requires instruments that impose tighter standards for individual institutions whose contribution to system-wide risk is larger, the so called Global Systemically Important Financial Institutions (G-SiFis), whose list was last updated by the Financial Stability Board (FSB) in November 2012. The second one, looks at how aggregate risk evolves over time. This requires the use of instruments that contribute to moderate the typical pro-cyclicality of the financial system. I will come to that later on, when commenting on the new Basel III capital framework. Before this, allow me to mention the Spanish experience with the so-called “dynamic” or “statistical provisions” which were introduced in 2000. This can be considered a pioneering case of a macroprudential response. The tool proved to be useful in Spain during the financial crisis in the two dimensions identified earlier: mitigating the build-up of risks – even if to a limited extent – and providing capacity of loss absorption to the banks. But the Spanish experience also showed that “dynamic provisions”, although, in my opinion, well targeted and designed, should have been complemented with other instruments. In order to develop and implement this new policy, the main developed economies have created new authorities in charge of macro-prudential supervision, such as the Financial Stability Oversight Council in the United States or the Bank of England’s Financial Policy Committee.

These developments in the growth rate and in the twin deficits highlight the need to critically evaluate the economy’s overall performance and its prospects. The recent IMF mission has done just that and we at the Central Bank concur with its findings. The IMF team concluded that while there do not yet appear to be clear signs of a loss of competitiveness, there are warning signals. What then are we to do? What viable strategic options are available to seek to overcome the obstacles that threaten the continued enjoyment of current living standards? In difficult times such as these some might be tempted to seek shelter from external shocks by pursuing an inward-looking growth policy. Numerous experiences of countries far larger than ours have shown that this course of action only serves to promote inefficiencies that would defeat the original purpose. Malta’s own experience during the early 1980s amply confirms this fact. The fastest-growing economies have been those who faced international competition head-on and pursued outward-oriented policies designed to achieve integration into a globalizing world economy. Malta itself recently reaped the benefits of a similar approach when the removal of protective levies last year was followed by an increase in output and employment in the hitherto protected sectors. Others advocate fiscally-led growth through an expansion in expenditure or a reduction in taxes. In this context, it must be understood that government expenditure puts money in people’s pockets without necessarily expanding the economy’s supply capabilities.
According to this Act, the objective of monetary policy is to maintain price stability. The Riksbank has specified this as an inflation target, which states that the annual rate of change in CPI should be 2 per cent, with a permitted deviation of ± 1 percentage point. The Riksbank shall also promote a safe and efficient payment system. The preliminary work to the Sveriges Riksbank Act also makes clear that the Riksbank as a public authority under the Riksdag, without neglecting the price stability target, should support the general economic policy objectives of sustainable growth and high employment. The Sveriges Riksbank Act also established increased independence for the Riksbank. Since 1999, decisions on the repo rate have been made by the Executive Board of the Riksbank and the members of the Board are expressly forbidden from seeking or receiving instructions when carrying out their monetary policy tasks. Price stability is thus the objective of Swedish monetary policy, but like Norges Bank and most other inflation-targeting central banks we conduct monetary policy that also to some extent takes into account activity in the real economy. The fact that the interest rate is often adjusted in relatively small and predictable steps can partly be regarded as an expression of this. If the aim had instead been to bring back inflation to the target as quickly as possible, without any other considerations, it is probable that larger and more frequent adjustments would have been warranted.

Conclusion Let me say in conclusion that the assessment of monetary policy is an important part of an independent central bank’s endeavour to be open and clear and of the endeavour to attain and maintain confidence in the inflation target. In Sweden, we publish a substantial amount of information that enables the general public to examine our analyses and to understand how monetary policy decisions are made. The developments in the economy in recent years have given rise to many important issues, not only for us decision-makers, but also for those who assess us. We are several central banks who have faced structural, unforeseen factors contributing to keeping down inflation, while monetary policy is expansionary, the economy is showing robust growth, and household borrowing and asset prices are rising rapidly. An inflation rate lower than the target level need not be interpreted in this situation as due to excessively tight monetary policy and as a failure for monetary policy. It is interesting to note that this has not been the conclusion in the most recent assessment of Norges Bank. Developments in recent years have raised issues which are extremely important in the discussion and which require improved analysis. If we were to aim at keeping inflation on target at any cost, without taking into account developments in the real economy, what would the consequences be of trying to stimulate demand further so that inflation comes closer to the target?