samchain/econo-pairs-v1 huggingface dataset:
As a result, the spread between the policy rate and the Norwegian money market rate, Nibor, widened markedly in March. Nibor is an important reference rate and has a significant impact on the rates offered by banks. As shown in the chart, Nibor has recently fallen and the spread of Nibor over the policy rate is now close to a normal level, reflecting the large-scale measures taken by central banks, including Norges Bank, to supply liquidity to the market. Norges Bank has provided extraordinary F-loans for banks in several rounds, in NOK and USD. An important aim of these measures is to ensure that changes in the policy rate pass through to banks’ lending rates and to market rates. Chart: Policy rate reduced to zero According to the regulation on monetary policy, the operational target of monetary policy is annual consumer price inflation of close to 2% over time. But monetary policy is also expected to contribute to high and stable output and employment and to countering the build-up of financial imbalances. Norges Bank gives weight to ensuring that monetary policy is forward-looking and flexible. Inflation expectations appear to be well anchored. We have therefore been able to give considerable weight to supporting output and employment in the demanding situation the Norwegian economy is now facing. When the pandemic hit the Norwegian economy at the beginning of March, the policy rate was 1.5 percent. It quickly became clear that we had to act.

As a result, in order to protect their margins banks may not reduce the rate they charge on lending, thus dampening the transmission of monetary policy. The MPC was acutely aware of this when it decided at the beginning of this month to reduce Bank Rate to 0.25%. In order to reinforce the transmission of this change we also launched a Term Funding Scheme (TFS) through which central bank reserves will be lent to banks and building societies for four years. Should they maintain their lending to the real economy, the rate they will pay over this period will be Bank Rate. For each 1% that net lending by an institution falls, the cost of TFS funding will rise by 5bps to a maximum of 25bps. By tethering banks’ term funding costs more closely to our official policy rate, this should create the capacity for them to pass the reduction in that rate through to households and businesses, thus strengthening the transmission to the real economy. Since the MPC’s decision we have published further documentation, technical detail and guidelines for firms considering using this facility. We are now open to applications, and the scheme will be available to be drawn upon from the middle of September. Conclusion Let me summarise. Darell and Arvind’s paper draws attention to some very important issues, namely the decrease in competitive forces and increase in frictions in money markets, which work to reduce the pass-through efficiency of the Federal Reserve’s monetary policy setting.
In my view, it is essential that we move forward in this fashion in order to enhance the responsiveness of required capital to risk and to address the unfortunate incentive problems that have evolved from the 1988 Accord. Because of the Committee’s desire to produce a capital adequacy framework with a greater sensitivity to risk, some observers may note that we inevitably introduce a dynamic element into our standards. That is, the capital requirements for loans to troubled borrowers will tend to increase at just the point when such trouble is becoming apparent. I see an important positive aspect to such an outcome. I would argue that the global financial system needs to become better prepared to address potential credit problems pre-emptively, before these problems have time to grow from minor disturbances into major disruptions. Implementing capital standards that are more responsive to the dynamics of risk could help move us in this direction and away from a mindset that waits too long to address problems. In particular, the Committee is interested in hearing views on how we should think about these issues. The second pillar in the proposed new capital adequacy framework has to do with the supervisory review of capital, a critical complement to minimum capital requirements.

Let me turn first to updating you on the status of the Core Principles for Effective Banking Supervision. This is an initiative the Basel Committee embarked on in the mid-1990s in the belief that there was a need to foster more effective banking supervision throughout the global financial markets. In developing the Core Principles, the Committee sought to craft a document that would have the legitimacy, quality, and flexibility to meet the needs of bank supervisors around the world. To this end, the Committee made it a key point to consult broadly with other supervisors throughout the various stages of the project, particularly those from emerging market countries. The Core Principles document that resulted from this process brings together concisely in one place all of the fundamental elements needed to carry out effective banking supervision - a remarkable achievement in its own right. Equally important, in my view, the document also balances the desire to set high standards for supervisory practices with a pragmatic recognition that not all countries are in the same stage of financial market development. As such, the Core Principles document is of particular importance for emerging market countries because it establishes a clear set of standards against which each country’s current approaches and progress can be measured. I am convinced that the flexibility embodied in the Core Principles - combined with the valuable substantive guidance the principles provide - is the right model for achieving sustainable improvements in financial market practices.
The regulator as well as the external auditor starts their examinations and audits with the financial reporting aspects of companies. The external auditor is basically looking at the financial performance of the company and its compliance with the laws, observance of auditing and accounting standards and rules and regulations set out by the regulator. They also look into aspects such as health of the balance sheet, status of the profit & loss account and the ability of the company to operate as a going concern. The regulator, on the other hand, has to make sure that not only companies adhere to provisions in the governing laws and comply with rules and regulations but also ensure that finance and leasing companies have put in place necessary processes and procedures to mitigate risks, be it credit, liquidity, market or systemic. The regulator makes recommendations to initiate action, if such risk mitigation methods are not considered adequate. The regulator is conscious of not only the viability of the company to operate as a going concern, but also its ability to pay its liabilities to creditors and depositors. Sometimes, there is an over-lapping of the two roles of the regulator and external auditor, but with closer dialogue, coordination and cooperation, the duplication of work can be avoided. The regulator should have quarterly/monthly dialogue with the companies and external auditors which is a healthy practice than working on an isolated basis.

Auditors are appointed by the shareholders, but their prime responsibility should be to ensure that the company can function as a going concern and pay back the depositors’ funds as and when needed. The auditors’ opinion lends credibility to the financial statements and promotes confidence in the system. Auditors generally cover their opinion with a statement in which they certify accounts of the company as true and fair on the basis of information made available to them. While recognizing this clarification, in the interest of wider financial system stability, it is important that external auditors find out the true position of the company and alert regulators, even though it is beyond audit ethics. The audit profession should be independent and they must win confidence of the investing community and the general public by providing accurate and timely audits. In that sense, external auditor also performs the “watchdog’s” and the “whistleblowers” role in the financial system. The new Companies Act, which came into being just a month ago, is somewhat explicit in the role of the auditor in the following areas: 1. Fair judgment: An auditor shall ensure that his judgment is not impaired by reason of any relationship with, or interest in the company or any of its subsidiaries. While regularizing the company under audit, as its client, the auditors must distance themselves in judging the true financial status of the company. 2.
For example, the real growth of assets in the banking system in 2006, was 5% as compared to a nominal growth of 19%. Similarly, the real growth of profits of the banking sector in 2006 was 12% compared to a nominal growth of 26%. In essence, the real value of short term profits recorded by the banking sector is only half of the nominal growth. Eventually, there will be pressures for higher wages which will, together with rising non-performing loans, erode profits and threaten the stability of the banking system. Banks and financial institutions should therefore take a longer term view and be more cautious in expanding their loan portfolios towards consumption oriented credit and promoting consumerism. The Impact of expansion of consumption credit Expanding credit to less productive areas specially consumption, would reduce current as well as potential savings and add to inflationary pressures in a situation where there is limited availability of goods and services and resources. Such lending would also lead to high credit risks as short term consumption credit is not backed by realizable collaterals although banks make high profits on interest income. Banks and financial institutions re-arrange their credit portfolios in a manner that support the growth and investment drive. Arranging funding sources without relying on CBSL funds CBSL wishes to see market liquidity “broadly in balance” as it will enable the Bank to conduct its monetary policy more effectively.

Reducing inflationary expectations The self-fulfilling prophecy that inflation is continuing to rise will eventually result in high inflation. All stakeholders are informed that action has been taken to reduce inflation by relevant authorities and that there is hope of bringing it down. In essence, inflation is eroding the value of assets, wealth and profits of the financial institutions, businesses, investors and public at large. Inflation can only be beaten with adequate commitment by all stakeholders. 4  BIS Review 55/2007
Now some people may argue that “offshore” markets in national or regional currencies complicate the conduct of national or regional monetary policy, with the implication that national or regional currencies should somehow be confined to their national or regional space. I must confess that this view seems to ignore the fact that it has in practice over the past twenty or thirty years proved perfectly possible for monetary policy to be conducted successfully despite the existence of the euro-markets. And I do not see how one could realistically expect to contain the use of a major currency, which the euro will certainly be, within territorial borders in any event. But as I have made clear, the UK’s interest -- “in” or “out” -- lies unambiguously in doing all that we can to ensure that the single currency succeeds. And in this context we would, of course, co-operate with the ECB in any way we could, to avoid potential disturbance to European monetary policy, were it shown to exist. Mr Chairman, London does not hold its pre-eminent position as Europe’s major financial centre as of right. We must continue to earn it. If we are to take advantage -- “in” or “out” -- of the opportunity that the euro will bring, then we must be technically well prepared. We will be. There is increasing evidence that financial institutions in the UK are now taking the steps necessary to ensure that they are ready for the introduction of the euro, whether or not the UK joins EMU.

In the early summer, we invited a representative sample of firms to confirm whether their preparations were on track. The response we received was broadly reassuring, though some of their preparations are dependent on decisions about the euro markets which have yet to be taken, as I shall explain in a moment. But the key point is that the urgency of the need to prepare is now widely recognised. The Bank of England is playing a substantive role in the preparations in two complementary ways. Through our very active participation in the work of the EMI, we aim to make sure that the design of EMU, at least so far as the operations of the ECB are concerned, is capable of being delivered in a technical sense. That is the test that we have applied, for example, to the work of the EMI on the implementation of monetary policy and on the so-called changeover scenario. John Townend talked about this yesterday. Our other role is to co-ordinate the preparations for the introduction of the euro in the City of London, to the extent that co-ordination is required. The Bank’s role in helping the financial sector to prepare for the euro was recognised and reconfirmed by the Chancellor this summer when he launched his complementary initiative to begin preparing the business community for the euro.
They also need to take into account liquidity and market risks, which are not captured in the credit rating. However, it is worth remembering that the market for structured credit products is entirely dominated by professional investors. There is thus no evident need for consumer protection that would justify the intervention of the authorities. 3  For a more detailed discussion, see the Committee on the Global Financial System (2005): "The role of ratings in structured finance: issues and implications”, CGFS Publications no 23. 4  BIS Review 136/2007  The difficulty in grading and pricing the various structured products remains. Some of them will probably disappear without being missed, and for exactly this reason. But it may be possible to develop simpler products that can even be traded on stock markets and thereby form a base for pricing more complicated instruments. The way the market manages this challenge is an important issue for the future. Something that requires more thorough investigation is the directly problematic roll played by the banks’ investment companies. They appear to have often existed because of so-called regulatory arbitrage. The banks have been able to circumvent the capital adequacy rules and liquidity rules by investing assets in apparently independent companies. Moreover, it has also been a mystery which banks have been exposed to which investment companies, how large the exposures are and what they have consisted of. This has made it difficult for market participants and authorities to assess a bank on a consolidated basis.

It is also interesting to note that credit derivatives and hedge funds, which many people claimed would cause the next crisis, have not reinforced the problems in the market, but rather to them being handled. Nevertheless, the market turbulence has shown that the deficiencies in the design and functioning of the credit markets need closer investigation. Some innovations appear to have been a little too fast for the market. At the same time, as I said in my introduction, it is still too early to draw any definite conclusions from what we have seen. When loans pass through several channels and are repackaged along the way, there is often a long distance between the final investor and the party that originally issued the loan. This means that the incentive to make a thorough credit assessment declines. It appears as though the original credit grantor took too little responsibility in the repackaging process. The way that information on credit quality is passed on to investors is also open to debate. One of the credit rating agencies’ tasks is to fill in the information gap between the issuer and the end investor. 3 With hindsight one can note that this has not always been successful. But even if there are deficiencies in the way that the credit rating agencies have worked with regard to structured credit products, there are also signs that many investors misunderstood how a credit rating should be used.
Accordingly, we expect inflation will be, with 70 percent probability, between 6.0 percent and 7.8 percent (with a mid-point of 6.9 percent) at end2015 and between 3.7 percent and 7.3 percent (with a mid-point of 5.5 percent) at end-2016. We estimate that inflation will stabilize around 5 percent in the medium term (Chart 21). In the second quarter of 2015, exchange rate movements delayed the recovery in the core inflation trend, causing the year-end inflation forecast to be raised by 0.5 point. On the other hand, the improvement in import and food prices compared to the previous Report reduced the year-end inflation forecast by 0.1 point and 0.3 point, respectively. As a result, import and food prices are estimated to offset the adverse effects of core inflation figures in the second half of the year. Accordingly, we revised the end-2015 inflation forecast, which was set as 6.8 percent in the April Inflation report, upwards by 0.1 point. We kept the end-2016 inflation forecast, which was 5.5 percent in the previous report, unchanged. Considering that the downward revision in the average oil price assumption will pull down the end-2016 inflation by around 0.1 point, this effect will be compensated for by the effect coming from the rise in inflation forecast for end-2015, so we left the end-2016 inflation forecast intact (Chart 21). We are of the opinion that base effects will continue to determine the course of inflation for the rest of 2015.

Lastly, the challenges of population ageing must be tackled by means of a broad economic policy strategy. It is vital here that the path of fiscal consolidation should be resumed and that the public debt should return to a downward trend, so as to better position public finances to address the issues arising from ageing. The sustainability problems of the pension system may indeed be alleviated if employment and productivity in the economy trend favourably. In this respect, there is much room for improvement in the goods and services markets, in education and employee training, and in the labour market too. 6/6
The value of many assets is being overestimated by investors and increased global political risks are not being taken into account. Political risks lead to greater uncertainty in economic policy. If we look at the indices of uncertainty in economic policy, we can see that they have reached their maximum values. This means that along with improving the prospects for economic growth, it is necessary to take into account possible changes in the functioning of financial markets and potential spikes in volatility. 3) On currency risk and measures for the deforexation of the economy In a climate of lowered yet still high volatility in oil prices, currency risks continue to be potentially significant. From the point of view of currency risk management, I would like to highlight the need, on the one hand for further deforexation of the balance sheets in the banking sector, and on the other for limiting foreign exchange risks in the non-financial sector of the economy. The issue of deforexation of the banking sector was raised at the Forum on Financial Stability last year, with particular emphasis placed on foreign currency lending to those sectors and companies that do not have sufficient foreign exchange reserves. This problem primarily arises in relation to companies from the construction and real estate sectors. As you know, the Bank of Russia made a number of changes to regulation in order to limit the risks associated with such lending, and to ensure that banks have a capital buffer for these loans.

Norges Bank became a member of the NGFS in December 2018. The primary objective of this network is to create an arena for central banks and financial supervisors to exchange experiences and share best practices in developing environment and climate risk management in the financial sector. We consider this network to be an important meeting place to arrive at a well-considered understanding of the role and activities of central banks in this field. 3/3  BIS central bankers' speeches
Other critical factors that may affect the rate of transformation are, for instance, the tax system, the educational system, etc. Various factors that hamper or check an adjustment could thus result in the Swedish economy following a lower instead of a higher, path for long-term growth, with a stronger, not a weaker inflation propensity and a continuation of high unemployment instead of a reduction to the low level that most people want. These risks seldom feature in the general discussion about the new economy. Conclusion From an economic perspective, the 20th century has been a fantastic century. One of the explanations for this has been the existence of an ability to adapt the economy to new conditions and this has also led to rapidly rising living standards. The changes that many people refer to as the new economy unquestionably present a number of challenges to the Swedish economy at the end of the 20th century. The notion of a new economy is not  BIS Review 137/1999  8  correct; that is not what it is all about. It is rather a matter of a new challenge in the long series of challenges the Swedish economy has had to face ever since the dawn of the industrial era more than a century ago. Concepts such as development and winding-up are important components in an ongoing transformation and adaptation of the Swedish economy.

The Swedish economy experienced a fantastic period of growth. After 1970 growth slowed and Sweden fell behind other countries. Annual inflation has averaged around 4% in the 20th century. However, this average conceals relatively sharp fluctuations in the rate of inflation at the beginning of the century and a successively rising trend in the post-war period. This rising trend was first interrupted during the 1990s. In the closing stages of World War One, a remarkable increase of the inflation rate took place. Inflation rate in 1918, for instance, was almost 40%. This inflation period was changed into a period of deflation in the early 1920s when prices fell for three years in a row. Altogether, the price level fell by over 40% between 1921 and 1923. This was truly a period of deflation. 3  BIS Review 137/1999  Figure 4. Inflation in the 20th century  4. Inflation in the 20th century Annual average per decade  12 10 8 6  Average 4%  4 2 0 -2 -4 1900  1910  1920  1930  1940  1950  1960  1970  1980  1990  Swedish price statistics are available from the beginning of the 1830s. They show inflation was relatively stable and averaged just over 0.5% a year between 1830 up to the outbreak of World War One. For the entire period from 1830 up to today, the average rate is around 2.5%, which accords relatively well with our inflation target. Figure 5. Employment in different sectors  5.