samchain/econo-pairs-v1 huggingface dataset:
Had there been one, the Northern Rock recovery plan should have challenged the management and the Board on how its business model could adapt to and survive the closure of its key funding markets, given the sheer scale of its dependence on securitisation. Likewise, how could it have handled a serious stress when it had pursued a business model of aggressively taking market share by squeezing its net interest margin and accepting more borrower default risk? And then moving further into the guts of the bank, how would it deal with stress to a funding model where the bank was excessively dependent on cash deposits from the securitisation master trust but with a hard rating agency trigger linking that funding to the position of the bank, thus creating a severe amplification of any stress? Finally on Northern Rock, how would the bank deal with a funding stress when it was having to encumber such a high proportion of its good quality assets in order to over-collateralise its securitisation master trust? A very good example of the need for resolution plans is the case of Lehmans in Europe. Two questions are relevant here: what should the resolution plan have contained; and what changes to its organisation and operations might have made the massive task of dealing with Lehmans more straightforward? You will, I hope, appreciate that I can only scratch the surface of the Lehmans case in the time available so I apologise for the laundry list approach.

The main changes consisted in reducing banking credit risk associated with deposits in commercial banks maturing in or before one year. The reference composition for banking risk was reduced from 37% to 20%, while for sovereign risk it was raised from 63% to 80%. Furthermore, during this year the minimum risk rate for banks to be eligible was changed from A- to A, also restricting investments in banking institutions rated A and A+ to a maximum of 5% of the investment portfolio. In line with the new bank deposit policy, deposits maturing in the months of October and November will not be renewed, in order to comply with the newly defined ceilings before December. Regarding asset breakdown by maturity, 60% of resources in the internally managed portfolio are invested in short-term instruments, with average maturity of three months, and the remaining 40% is invested in long-term securities (mainly sovereign bonds) with a duration of 30 months. Thus, average duration for the overall portfolio is 13.9 months. The reference currency composition remains 59% in US dollars and 41% in euros. Despite turbulences in international financial markets, and considering that the biggest fraction of resources is invested in fixed-income sovereign instruments, the annualized return obtained from managing the Central Bank's international reserves in the first half of 2008 was 3.47% measured in foreign currency. 1 The differential return obtained with respect to the benchmark structure was 0.15%.
However, there is also a risk that uncertainty about the future of the Swedish economy will result in households reducing consumption. At present, household’s financial savings are insignificant. In this respect, the situation is similar to the United States although the problems there are more serious. Uncertainty about the development of the krona remains great, however. There is general agreement that the krona is fundamentally undervalued – this has contributed to creating the surplus in the current account that has reduced our foreign debt in recent years. When the foreign debt starts to reach levels that are more sustainable in the long run, the krona should be strengthened. There is thus no reason to depart from the Riksbank’s assessment that the krona will appreciate in the long term. However, asset prices and exchange rates are sensitive to changes in expectations. And just now it seems that the krona is being weakened by the focus on the foreign exchange market on the expected capital outflows, which will be the result of pension funds being invested abroad. Reduced interest in purchasing Swedish shares is considered by others to be the explanation why the krona is so weak  BIS Review ? ?/2001  5  just now. During the years with a floating exchange rate, we have noted short-term fluctuations in the exchange rate do not seem to have any great effect on domestic prices. There is only an effect on prices if businesses believe that changes in the real exchange rate will be of some duration.

Zamani Abdul Ghani: Strenthening vigilance during turbulent times Keynote address by Mr Zamani Abdul Ghani, Deputy Governor of the Central Bank of Malaysia, at the International Financial Crime and Terrorism Financing Conference 2009, Kuala Lumpur, 16 April 2009. *  *  *  It is a pleasure to welcome all of you to this conference in particular, and to Malaysia and Kuala Lumpur as well. Today marks the inaugural of an international conference on financial crimes and terrorism financing, organized by the Compliance Officers Networking Group in Malaysia, or CONG in short. Let me take this opportunity, first of all, to thank the members of the organising committee. This committee comprises of staff of members of the Institute of Bankers Malaysia, the Securities Industry Development Centre, (SIDC), and the Malaysian Institute of Insurance, as well as staff of the Anti-Money Laundering Unit of the Royal Malaysia Police. Members of the CONG, deserve a special commendation for the efforts taken to conceptualise and make this conference a reality. Despite being the first conference of its kind to be organized in Malaysia, and the challenges encountered while organising this conference, we see today a room filled to capacity. I have the honour of being the Chairman of Malaysia's National Coordination Committee to Counter Money Laundering or the NCC, which comprised of 15 government ministries and agencies. On behalf of the NCC, I would also like to say "Tahniah" or congratulations to the CONG and the co-organisers.
1992 Q1 = 100  120  120 Other goods  100  100 Footwear  80  80 Clothing Audiovisual equipment  60 1992  60 1994  1996  1998  2000  2002 2003  Source: Norges Bank  The change in trade patterns has made a considerable contribution to the sharp decline in prices for clothing, shoes and audiovisual equipment. Rapid technological advances have also pushed down prices for audiovisual equipment. In Norway, competition has probably increased in the retail industry and other service sectors in recent years. Initially, heightened competition affects companies’ profit margins. But enterprises will respond by reducing their costs. This will occur in part in the individual enterprise, but subcontractors will also be required to reduce their prices and enhance efficiency. Therefore, increased competition usually triggers higher productivity growth in the economy. Low inflation may therefore be matched by growth in productivity. Chart 19. Import-weighted krone exchange rate and interest rate differential against trading partners Index Per cent 80  5  85  4  90  3  95 100  2  Krone exchange rate (left-hand scale)  1 Interest rate differential (righthand scale)  105 110 2000  2001  2002  2003  0 -1 2004  Source: Norges Bank  BIS Review 11/2004  13  The cyclical downturn last winter, low wage increases last year, fiscal discipline, an unexpected decline in inflation and prospects of low inflation have resulted in a considerable easing of monetary policy.

Nevertheless, developments in the krone are of considerable importance to interest-rate setting because exchange rate developments have an impact on inflation and output. When there are prospects of moderate economic activity, low wage growth and low inflation, Norges Bank will reduce the interest rate. This will normally result in a depreciation of the krone. Prices for imported goods and services will increase. A weaker krone strengthens the competitiveness of Norwegian enterprises and indirectly leads to higher output, employment and inflation. Themes in foreign exchange markets shift. In periods, investor focus on stock returns feeds through to exchange rate movements. During periods of political and economic unrest, investors may choose individual currencies as a safe haven - often the Swiss franc. In the autumn of 2002, the Norwegian krone was probably also perceived as a safe haven. Wide fluctuations between major currencies have a tendency to result in a weaker krone. In the past 12-18 months, developments in the interest rate differential between Norway and other countries appear to have had a particularly marked impact on our currency. Norwegian interest rates have been pushed down to the level prevailing abroad. Chart 10.
It was probably thanks to this flexibility, together with the large volume of asset purchases initially envisaged, that the announcement of the creation of the PEPP on 18 March served to substantially reduce interest rates on sovereign debt – especially that of countries at that time more harshly affected by the health crisis, such as Italy and Spain – and consequently, those on bank and corporate debt. To sum up, the PEPP cut short the downturn in euro area financial markets and gave way to the process of gradual easing of financial conditions which has continued up until the present day. This easing was essential for providing fiscal authorities in all countries in the area with room for manoeuvre, which has allowed them to deploy unprecedented measures to sustain the income of households and firms. Looking ahead, and without detriment to the use of the capital key as a guide for the distribution of asset purchases, the ECB has reiterated its willingness to continue to tailor the volume, composition and type of these purchase to the developments in economic and financial conditions in the euro area. 4  Secondly, we introduced a series of measures aimed at smoothing bank lending in the context of the COVID-19 crisis. In the euro area, banks are the main source of financing for households, the self-employed and firms (especially SMEs). It was thus vital to prevent a severe contraction in the flow of credit to the real economy.

Hence, and to help banks obtain the biggest amount of financing possible in these operations, the ECB relaxed its collateral framework conditions. For instance, it reduced the average haircut applied to collateral assets and accepted riskier assets and, most especially, loans backed by the national authorities’ various programmes, such as the ICO (Official Credit Institute) guarantees in Spain’s case. As a result, commercial banks could increase the liquidity they obtained from the Eurosystem by using their loans to the real economy as collateral. The combination of these measures was successful. The weekly LTRO operations provided substantial amounts of liquidity to banks during the most difficult months of the pandemic. In the June TLTRO-III operation, participating banks received a total of € trillion, a record high in Eurosystem refinancing operations. 5  All these operations played a vital role in preserving the supply of bank lending in the euro area. They contributed to the momentum shown by the new refinancing operations particularly in the case of lending targeted on firms and the self-employed - from the outset of the pandemic, and they kept interest rates on loans at record lows. The complementarity of these measures and those adopted by national governments (in particular through the public loan-guarantee programmes) and by the macro- and microprudential authorities (which enable financial institutions, for example, to use some of the capital buffers built up in recent years) has been pivotal in providing for the flow of financing in the economy during the crisis.
We more or less stuck to our basic activities in-terms of financial stability optimization and inflation control and economic development objective took a slightly backseat. I think now it is incumbent on us to really re-engage with the government, with all the social sector players, with all sorts of industry groups, agriculture groups, service sector groups and really map the way forward on how this country can grow. When you look at the situation it is not bad, but on the other hand there is a lot of work to be done. Take for instance the fact that the entire Northern Province contributes only 4% of the total national GDP. That is simply unacceptable. We have nine provinces in this country and you cannot have one of them only contributing 4%. That is simply unbalanced, and the opportunity is that we have in Northern Province three branches, in Trincomalee, in Jaffna and now in Kilinochchi, and there is no reason at all why we cannot spur all the banking institutions in Northern Province to come under our umbrella and really see that the economic potential of that region is achieved. It is very simple. We just have to see that the banking institutions and ourselves work on a coordinated basis to look at what resources that area of the country has,  2  BIS central bankers’ speeches  whether it is manpower or land that is unutilized, and the agricultural potential.

BIS central bankers’ speeches  1  As an EU institution that has played a central role throughout the crisis, the ECB has become a focal point for those frustrated with this situation. This may not be a fair charge – our action has been aimed precisely at cushioning the shocks suffered by the economy. But as the central bank of the whole euro area, we must listen very carefully to what all our citizens are saying. There are some, like many of the protestors outside today, who believe the problem is that Europe is doing too little. They want a more integrated Europe with more financial solidarity between nations. And there are others, like the populist parties we see emerging across Europe, who believe that Europe is doing too much. Their answer is to renationalise our economies and reclaim economic sovereignty. I understand what motivates these views, why people want to see a change. Yet in truth neither offers a real solution to the situation we face today. Solidarity is central to European integration and it is right that countries have supported each other during the crisis. But the euro area is not a political union of the sort where some countries permanently pay for others. It has always been understood that countries have to be able to stand on their own two feet – that each is responsible for its own policies.
Moreover, in the past CCPs have increased margins and collateral haircuts beyond the levels required by prudential standards or their own risk models. But doing so they may cause liquidity strains and increase volatility in bond prices which, in turn, affects the transmission of monetary policy. To be clear, CCPs should of course make sure they remain resilient to liquidity risks. But they should do so in a predictable manner and based on sound risk models that should not undercut monetary policy decisions. Recent regulatory reforms These challenges were widely recognised when, in June of last year, the European Commission proposed amending the EMIR framework for the supervision and regulation of CCPs. The Commission acknowledges the essential role played by central banks of issue (or CBIs) in monitoring and addressing risks posed by CCPs to their currency, and has proposed an enhanced and binding role for CBIs under the EMIR framework. This would mean that central banks would become non-voting members in the European Securities and Markets Authority (ESMA) structure responsible for CCPs. ESMA aims to improve the functioning of financial markets in Europe by strengthening investor protection and cooperation between national competent authorities. The enhanced role for central banks would tend to avoid harmful mismatches between prudential decisions and monetary policy. And it would grant central banks a flexible and effective role in determining the conditions under which CCPs that are not located in an EU Member State are allowed to provide services in the EU.

(ii)  proactive macro-prudential regulation to prevent unsustainable debt and limit foreign currency borrowing can be useful to reduce the procyclicality of financial flows, avoid excessive risk-taking and ensure an orderly external sector adjustment. (iii)  Finally, one could also explore state contingent financing instruments, such as GDP linked bonds, which could also offer innovative means to smooth external financing needs and avoid expanding scarce resources on assistance programs. However, prevention can never cover all risks and so, we need a stronger GFSN. As highlighted by the IMF the global financial safety net, although larger, has also become more fragmented and asymmetric. Some of its key building blocks have not been fully tested, and some of its key aspects suffer to various degrees from being costly, unreliable, and lacking adequate policy incentives. This shared diagnosis offers a key opportunity to strengthen the GFSN. Reserves, swap lines and Regional Financial Arrangements (RFAs) are not a substitute for having a strong, well-resourced IMF at the heart of it, on the back of the recent approval of the 2010 Quota and Governance reforms, which has strengthened the Fund legitimacy. From our perspective, three elements stand out: First, identify potential ways to improve the use of existing IMF facilities, notably precautionary facilities, and/or consider the possible creation of new facilities. The objective here is to mitigate stigma, without creating moral hazard.
Persistent weakness in housing is particularly problematic because it acts as a drag on spending and job creation in an environment in which such weakness can not be easily offset  8  A number of these issues were documented by an interagency task force that included the Federal Reserve and are being addressed through consent orders requiring supervised institutions to remedy deficiencies. 9  When the amount of debt secured by a property exceeds its likely net sales price, a “short sale” can be a less costly alternative to foreclosure. The short sale agreement between the homeowner and lender often grants the lender final approval of the sales price and may release the homeowner from any deficiency. 4  BIS central bankers’ speeches  by other policy adjustments. Housing policy should seek to break adverse feedback loops, promote more economically efficient outcomes in housing and support growth. In recent speeches,10 I have called for a “comprehensive approach” to stabilize the national real estate market and lay the foundations for recovery. I believe this should include measures to improve access to mortgage credit, reduce obstacles to refinancing, lessen the flow of homes into foreclosure through bridge financing and accelerated principal reduction, and to facilitate the absorption of REO back into use as owner- or renter- housing.

Inflation developments in Malaysia this year reflect the pass-through of some of these costs, as well as the strengthening of domestic demand. Consequently, although headline inflation is still projected to remain low and stable and range within 2.2% to 3.2% in 2022, core inflation increased to an average of 2.2% in the first six months of 2022 compared to 0.7% in 2021. With the economy now on a firmer growth trajectory and no longer in a state of crisis, Bank Negara Malaysia (BNM) through the MPC in May and July this year judged that it was the right time to begin withdrawing the excess monetary support, raising the OPR from its historical low of 1.75%. What’s important is that by acting pre-emptively, we will be in a position to undertake adjustments to the monetary policy settings in Malaysia in a measured and gradual way to avoid hindering economic recovery. Importantly, this is also to restore conditions that will support sustainable growth over the medium and longer term. To this end, the timing, pace, and extent of rate increases will be guided by assessments of how the evolving economic and financial conditions domestically and globally would affect our inflation and growth outlook. Let me emphasise that monetary policy in Malaysia continues to be accommodative to support a sustainable economic growth in an environment of price stability.
The fact that employment depends on a number of other factors than monetary policy decisions and cyclical variations is illustrated, among other things, by the miscalculations of the National Labour Market Board just prior to 2004. In November last year the Board estimated that Swedish economic growth would be 1.4 per cent in 2003 and 1.9 per cent this year, while unemployment was forecast to be 5.1 per cent this year. Moreover, the Board believed that the repo rate should be cut from 2.75 to 2.25-2.5 per cent. These forecasts were roughly in line with those of the Riksbank at that time, with the exception that we, as usual, based our forecasts on the assumption that the repo rate would be kept unchanged. A year later we can say that economic growth has exceeded both the National Labour Market Board’s and our expectations at the same time as the monetary stance has become looser. Nevertheless, labour market growth has been weaker. This shows both that forecasters can be surprised by unexpected developments in the economy and that unemployment at present is not chiefly due to insufficient demand for goods and services owing to low growth and tight monetary policy.

From a historical perspective, capital flows today are currently not so abundant and no imbalances of income and expenditure are seen that might reveal substantial misalignments. After the recessive period of 2009, slack remains in our economies, and tensions in the near future cannot be ruled out. It is therefore advisable to begin exploring the proper policy responses. In such circumstances, the first line of defense must be an active monetary and fiscal management, within a context of exchange rate flexibility and stable inflationary perspectives. This combination proved very favorable to maintain macroeconomic and financial stability in 2008-2009, and has the necessary elements to also succeed in dealing with a potential period of strong capital inflows and appreciating exchange rate pressures. Additional measures, such as a foreign exchange intervention or controls on capital inflows, cannot be a priori ruled out, and will depend on each economy’s specific circumstances and characteristics. However, in implementing them it is essential that they do not become the cause of macroeconomic imbalances by encouraging massive capital inflows. In fact, distortions often do not originate in excessive appetite by foreigners for domestic assets, but in disturbances resulting from the application of inconsistent policies. On the one hand, exceptional measures cannot be used as a substitute for, say, a more austere fiscal policy or a strengthening of prudential regulation and supervision of banking and non-banking entities.