samchain/econo-pairs-v1 huggingface dataset:
It would take too long in this context to analyse what conclusions should be drawn for the future, and it is probably too early to do so yet, but I shall nevertheless share my impressions this far. In conclusion, I shall discuss how monetary policy can complement the more acute financial measures taken, and alleviate the effects of the financial crisis on the real economy. Acute financial crisis… The turn for the worse can be clearly dated to the middle of September when US investment bank Lehman Brothers was forced to file for bankruptcy protection. Money market participants had not expected such a prominent bank to default. When the bank nevertheless defaulted, fears grew that more participants risked the same fate. This was when the confidence crisis broke out in earnest. No one dared to lend money to anyone else because of fears that the other party could become insolvent and the money that had been lent would disappear. Investors preferred to put their money in government securities. One result was that interbank lending around the world more or less ceased. The difficulties the banks had experienced earlier with financing at longer maturities were intensified. The banks’ borrowing costs increased further and companies outside of the financial sector also experienced financing difficulties. At the same time, the large US commercial paper market suffered substantial disruptions. This market is an important source of financing, both for financial companies and ordinary industrial companies.

The purpose is thus to make it easier for companies to borrow in that the banks are given better scope for financing. It is primarily large companies that issue commercial paper, but smaller companies should also benefit as the banks’ increased scope for borrowing from the Riksbank means their total lending capacity will be less strained. So far, however, the banks have chosen to use only a small part of the credit facilities offered by the Riksbank. It remains to be seen whether this is because the companies have  2  BIS Review 149/2008  nevertheless succeeded in borrowing elsewhere or whether they consider the bank loans to be too expensive. Despite the fact that some companies are experiencing problems with borrowing, bank lending in Sweden is continuing to rise. However, this should not automatically be interpreted to mean that the supply of credit is functioning well in every aspect. The international credit markets are still largely closed to Swedish companies and they cannot borrow from foreign banks to the same extent as before. The Riksbank has also granted special liquidity assistance during the autumn to Kaupthing Bank Sverige AB and Carnegie Investment Bank AB. The liquidity assistance was offered in the form of loans against collateral and at a higher interest rate than on normal loans. The market turbulence and the great uncertainty that prevailed were reasons for granting liquidity assistance to safeguard financial stability, even though these institutions were relatively minor participants in the Swedish financial market.
To this end, the regulations stipulate requirements both for loss-absorbing capacity in a gone-concern perspective and for resolution planning. What progress have the two big banks made in implementing the TBTF2 regulations? Regarding the first pillar, resilience, both big banks have improved their loss-absorbing capacity in a going-concern perspective since the last Financial Stability Report. With this further improvement, Credit Suisse and UBS are on track to meet the final capital  Page 1/3  Berne, 15 June 2017 Fritz Zurbrügg  News conference  requirements. 1 In a going-concern risk-weighted perspective, both banks are already fully compliant. However, a further improvement is necessary with respect to the leverage ratio. The SNB acknowledges the progress made in improving the capital situation. Achieving full compliance with the TBTF2 regulations will further strengthen loss-absorbing capacity. This is necessary as the big banks’ loss potential relative to their capitalisation continues to be substantial, when measured on the basis of the stress tests carried out by the SNB as well as the losses experienced during the last financial crisis. Given the big banks’ significance to the Swiss economy, it is important that they remain adequately capitalised in the event of such losses occurring. This brings me to the second pillar of the TBTF2 regulations – resolution. Here, too, both big banks have made progress. On the one hand, since June 2016, Credit Suisse and UBS have significantly improved their gone-concern loss-absorbing capacity.

Also, once a firm has run into trouble, in part because it is in trouble and/or markets are dysfunctional, the marketable value of its assets are often found to be substantially less than valued in accounts – so losses are usually greater than originally expected, once a stress has occurred. Prior to the financial crisis, firms appeared to hold substantial capital to meet their then regulatory requirements, but in many cases this was illusory – the rules on what could count as capital had been weakened over time and much of it was not properly or easily lossabsorbing in the event. So the quality of capital is also of interest. There is also a challenge of what the minimum level of acceptable capital is, and how to meet it, post-stress. Suppose X is the appropriate level of capital pre-stress, then substantial losses will always leave a firm  BIS central bankers’ speeches  3  with significantly less than X. And raising extra capital in the market in those circumstances is not always feasible, nor can a balance sheet be quickly run down to reduce capital requirements. So how can a firm meet the ongoing requirements for the normal level of capital after a stress event? The answer is usually to start with a buffer above the minimum acceptable and/or to have some way of creating extra capital in a crisis.
2  BIS Review 134/2009  In terms of composition the ESRB’s decision-making body will consist of the governors of all the EU central banks, including the President of the ECB, as well as representatives from the European Commission and the three new EU supervisory authorities. National supervisors will be represented in the ESRB, but not have any voting powers. Taken together these pillars imply quite substantial changes in the EU supervisory structure. And even if there is broad agreement among member states on the overall concept, some parts remain highly controversial. The issue of handing over power to the EU supervisory authorities is particularly sensitive. Some member states argue that this cannot be done unless guarantees are in place that it will not impinge on national fiscal responsibilities. Hopefully, the Swedish Presidency will be able to sort out these issues and make its ambitious implementation plan a reality. If so, an agreement will be reached by the end of this year and the new supervisory structure will be up and running already during the course of next year. Supervisory reforms need to be complemented by robust and harmonised frameworks for crisis management and resolution After going through this list of reforms you may ask to what extent they will actually work in practice to promote and maintain financial stability within the EU? A number of questions can be raised, of course, but overall I would say that it looks very promising.

The depreciation of the RMB, alongside a pullback of foreign funds from the region, triggered downward pressures on the region’s currencies. Since the RMB move on 11 August, Emerging Asia currencies have depreciated by an average of 3.2% against the US Dollar, with some falling by as much as 7%. 2  While markets seem to have calmed somewhat, a sense of uncertainty prevails and the risk of renewed volatility remains. What is happening? Financial markets are essentially coming to terms with four significant “re-pricings”. •  First, the stock markets in China are adjusting downwards from unsustainably high levels. •  Second, the RMB has become de-coupled from the US Dollar and is moving towards a more market-determined exchange rate. •  Third, oil and commodity prices have eased considerably this year, marking the end of what some have called a “super-cycle”. 1  Emerging Asia economies refer to China, India, Korea, Hong Kong, Taiwan, Singapore, Thailand, Malaysia, Indonesia and the Philippines. 2  Excluding the Hong Kong Dollar. BIS central bankers’ speeches  1  •  Fourth, the effects of an impending interest rate hike in the US – the first after seven years of extremely easy monetary policy – are being priced in across Asian markets. These are not necessarily unwelcome developments. The correction in China’s stock market is not surprising given the stretched valuations that had developed over the preceding year.
Rising oil prices in a situation with strained resources can lead to a spread effect, with a general rise in prices within the economy. We can thus have a higher inflation rate at the same time as this can have a subduing effect on production and employment. If monetary policy were to be aimed in every situation at using interest rate hikes to eliminate the effects of oil price rises on inflation, it could lead to a deterioration in production and employment. If transitory effects on inflation are expected to abate without spreading to other prices or affecting inflation expectations, there may be good reason to leave the repo rate unchanged. A gradual adaptation of monetary policy directed at achieving the inflation target a couple of years ahead allows us to take into account employment and growth. That is why the Riksbank’s policy is based on achieving its inflation target of 2 per cent one to two years ahead. Acts of terrorism, wars and natural disasters increase uncertainty It is important to observe that knowledge of the effects of monetary policy is not complete. The purpose of the deviation interval is to make clear that deviations are probable, while our ambition is to try to limit them. In practice, monetary policy is governed in such a way that we make forecasts for inflation one to two years ahead. If the forecasts for this time horizon are higher than the inflation target we raise the repo rate, and if they are lower, we cut the rate.

It is not mumbo jumbo that a productivity level of around 1.5 per cent and an inflation target of 2 per cent are incompatible with wage rises of 4 per cent. The scope for wage rises is a maximum of 3.5 per cent at normal profit levels. Our assessment of wage developments in the coming two years is around 4 per cent, i.e. a level that is not compatible with the inflation target, unless productivity develops better than expected. Higher wage increases than expected were one of the causes behind the Riksbank’s two interest rate hikes in March and April. However, wage increases differ between the different sectors and different professional categories. Particularly high wage rises can be noted in the service industries. In some parts of these industries the wages for white-collar workers have increased more rapidly than those for blue-collar workers. This, together with considerable problems in attracting qualified personnel to certain parts of the public sector, entails a risk of a greater wage drift, particularly in a situation where economic activity has improved. Relative wage changes are a normal element in a dynamic economy, but the Swedish labour market has previously shown that large relative changes often lead to a compensatory wage drift. Some large groups have had wage rises of around 5 per cent - this applies to the service industries, the construction sector and white-collar workers in industry - but no large group has received less than the 3.5 per cent that would be necessary to achieve the inflation target.
The report to Parliament underlying the establishment of the National Bank of Romania in 1880 saw Belgium as – and I quote – “a small but happy country”, which developed rapidly with the assistance of its national bank, rendering it a suitable model for the institutional set-up of Romania. As regards the neighbouring Netherlands, the name of Romania’s domestic currency – the leu (meaning lion) – comes from a Dutch silver coin very popular in this part of Europe in the 17th and 18th centuries: the lion-thaler. Crossing the channel, our most beloved Queen Marie was the granddaughter of Queen Victoria of the United Kingdom. It was her son, King Charles II, who reconstructed this Royal Palace. Moving west again, let us not forget that the Irish writer Bram Stoker took Vlad the Impaler as an inspiration for his famous novel Dracula, creating a myth that Romania is frequently associated with. Returning to Romania’s monarchs, under whose reign the country saw a remarkable modernisation, they belonged to the German House of Hohenzollern-Sigmaringen. As for the economic ties with Germany, I would mention the fact that the name of the street where the Old Palace of the National Bank of Romania is located, i.e. Lipscani, derives from Leipzig (Lipsca in Romanian), the place where long ago local merchants used to bring their goods from. Going further back in time, the Saxons (originating also in the Luxembourg area) settled in Transylvania, which they called Siebenbürgen (seven fortified towns).

The benchmark reflecting the neutral position has been constructed in line with the objectives, the asset-liability structure and the liquidity needs of the bank for a one-year period. And it is going to be reconsidered periodically. The Risk Management Division in the Central Bank of Turkey is in the process of establishing a system to carry out risk analysis and to feed the results to the appropriate units. For the last year or so, duration and Value at Risk (VaR) figures reflecting interest rate and currency risks of the FX reserves, and liquidity indicators such as current ratio (percentage of liquid assets in total of liabilities) are being observed. However, these reports are not yet part of a comprehensive risk measurement and control system. Although they give an idea of the general level of market and liquidity risk levels, the actual risk exposure will be clearly seen only after the reserves portfolio is restructured and the benchmarks are included in these reports. The risk management process related to market risk that we plan includes daily marking to market of benchmark portfolios; monitoring risk limits determined in terms of currency and duration limits; daily measurement of actual portfolio’s VaR figures for currency and interest rate exposure; monitoring liquidity ratios and reporting these figures to the top management weekly including stress testing report. There is no specified global risk tolerance limit but our institutional objectives and constraints are reflected in portfolio benchmarks.
I should however be clear about one extremely important caveat in this process of adjustment and about something that seems to be often misunderstood. The risk appetite of the Bank of England – both as macro and as micro prudential regulator of the UK banking system – has not changed. The financial crisis led to a reassessment of our tolerance to risks that could jeopardise financial stability. It brought home that systemic financial crises were not something that only happened in history books and in emerging economies. We learned they were both possible and indeed even more explosive and damaging in modern, advanced economies and in their interdependent financial systems. And we learned the costs to the real economy when financial stability is lost. GDP per person in the UK is barely above its pre-crisis level. This reassessment both of the probability and of the cost of damage to financial stability is the foundation of this unprecedented reform programme. As we learn how the new regulatory framework operates through the credit cycle we may, nay will, adjust – in any direction – reforms that are not operating as intended. We will do this in consultation with the industry and other stakeholders – the Open Forum on financial markets which the Bank of England will hold on 11 November is an example of this process. But, as the memories of the crisis fade, as they inevitably will, we will not reset our underlying tolerance of risks to financial stability. There is no “back to future”.

But it should be seen as the working through of Basel 3 not as a new regime – a Basel 4. Before I test whether Wilde was right and turn my focus to market-based finance, I should observe that this is not because I think either that systemic risks from banking have disappeared or that the new regulatory framework is perfect in every respect. The UK banking system is much more resilient now. For example, major UK banks now have an average CET1 capital ratio of 12%, almost twice their average capital ratio in 2008. Their liquid asset buffers have trebled in size since 2008 and their short-term wholesale funding ratio has halved since 2006 (from 24% to 13%). Last year’s stress test showed that major UK banks could withstand a very sharp increase in unemployment, an unprecedented fall in house prices and with the Bank of England raising interest rates in the teeth of a recession. This year’s test, I should observe, will see if it can withstand the opposite – a prolonged period of deflation triggered by an economic collapse overseas. But while we are advanced in the implementation in the UK of a much stronger regulatory framework, and while UK banks already have much greater resilience, we have not abolished the credit cycle. We have I hope, turned off or dampened some of the more damaging amplifying mechanisms in the financial system that drive up risks and create booms and drive the economy down in the resulting bust.
During the Russia crisis in 1998, for example, the models could not predict that the Russian government would default on payments – this type of event is generally very difficult to build into a model – and the slump in prices this would lead to on many markets. Nor could they predict that liquidity would decline so severely that the banks were unable to sell their securities without this leading to a slump in prices. Asset prices that had earlier moved in the opposite direction and thereby reduced the total risk in the portfolio were now suddenly moving in the same direction. The risks were thus much greater than the models had indicated. These rapid adjustments in market prices with reduced liquidity are one scenario we have repeatedly pointed to as a risk scenario in our assessments of financial stability. If the risk premiums are too low on asset prices in the financial markets, changes in expectations can lead to instability with large price fluctuations and reduced liquidity. If prices of various assets covary to a greater extent than before, the financial agents’ risk exposure could increase rapidly. The fact that many investors have gone over to new types of asset could in this situation lead to declining interest in these assets and to liquidity partly or wholly disappearing from some markets. The events following the collapse of the US hedge fund LTCM in autumn 1998 are an example of this. Do the risk models take these difficulties into account? Yes, or at least in theory.

There are not a few cases when clients are not well informed on the interest rate they have to pay for their loans or on the criteria applied by the banks to benefit credit. Communication from depositors is neither the best. While small changes of deposit interests may be justified by the changes of market conditions, changes somewhat stronger need to be accompanied by full relevant information and explanations. The strengthening of this transparency should be accomplished not only in the name of ethics but also in the name of the increase of market competition. The system can play a greater role in reducing cash in the economy, by increasing and improving further the level of services. The positive recent developments have given their effects in reducing cash quantity in the economy. On the other hand, we have conducted an intense public activity, of informative and promotional character, where meetings of another nature have frequently been held and in which we were concretely involved as a banking system. Allow me just to remind you the open meetings we have already organised with the business of utility services and with that of Treasury bills primary market. I hope that now, after finalising the Automated Electronic Clearing House project, each bank should think seriously of increasing the benefit degree from this new facility offered by the Bank of Albania. After the implementation of this project, I estimate that we should think more seriously of increasing the number and the quality of electronic payments.
The estimates reveal shortfall, meaning that after the crisis, the investment in the 1  The only exception is Macedonia, given the strong investment cycle after the crisis, driven by public investments and structural reforms in the export segment. 2 Transition report 2015-2016 “Rebalancing Finance”, European Bank for reconstruction and development. 4  region is lower than in the peer countries, in the range of around 3 to 6 percentage points of GDP. Similar inference is drawn by the IMF (2016)3, pinpointing post-crisis gaps in the capital stock in the CESEE region compared to estimated benchmarks, being reflection of lower savings rates in the region, narrower borrowing space after the crisis and lower return on investment. This notion is confirmed with the data on the real capital stock in the region, as well, which is around 40% of the EU-28 average, with the SEE region lagging behind significantly. Though this ratio is rising, yet it clearly indicates large scope for improvement. Chart 5: Real capital stock, per capita in CESEE region vis-à-vis EU28 0.70 0.60  0.50 0.40 0.30  2014  2012  2013  2010  SEE  2011  2008  CEE  2009  2006  2007  2005  2003  CESEE  2004  2001  2002  2000  0.20  Baltics  Source: Penn World Table, version 9.0 and NBRM calculations  2. Investment financing Many policy measures for unleashing investment growth are suggested in this context.

7  Survey on the access to finance of enterprises (SAFE), September to October 2017 9  Chart 10: The most important problems that the SMEs are currently facing with (Average 2015-2017, % of the total number of surveyed companies) 30% 25%  30%  EU-28 24%  2017  23%  2016  2015  20%  20% 15%  13%  10%  12%  CESEE region 24%  25%  14%  13%  11%  7%  2015  12%  8%  10%  8%  2016  17%  15%  12%  2017  5%  5%  0%  0% finding competition access to customers finance  costs of availability regulation production of skilled or labour staff or experienced managers  finding competition access to customers finance  other  costs of availability regulation production of skilled or labour staff or experienced managers  other  Source: Survey on the access to finance of enterprises (SAFE), EC and ECB. Despite the fact that according to the Survey, access to finance itself is not the major impediment for the SMEs, it is still an important caveat. And going under the surface and dissecting the sources of financing, one can note important structural features. First, bankrelated products remained the most relevant source of financing for SMEs compared with market-based instruments. The SMEs from the European Union and from the region do not differ much in terms of the main sources of financing.