samchain/econo-pairs-v1 huggingface dataset:
In a slowly developing crisis there is time to prepare action, which may even include new legislation, for instance on bank resolution. BIS Review 58/2003  3  To detect such a crisis may sound easy, but is in practice very difficult. For instance, when does a gradual increase in asset prices actually turn into an unsustainable bubble and no longer constitute a reflection of fundamental values? Look at the housing markets in some countries around the world right now. Are there bubbles and, if so, where are they? Another problem is timing. At what point should the central bank sound the warning bell? By acting too early, we might add to the volatility in the market place and hence worsen the situation. Remember that the central bank will be held accountable for the negative repercussions of pricking the bubble, not only for the potential but less tangible benefits of having done so. By acting too late, on the other hand, we do not fulfil our mandate and a full-blown crisis might not be prevented. In addition to the problem of timing, there is the problem of selecting an appropriate response to the threat. The first line of defence is moral suasion, i.e. trying to convince the banks and other market participants to act in a proper fashion. The problem with moral suasion is that it may be difficult to calm a market that is rushing to new heights.

The government issued a general guarantee for the banks’ liabilities and set up a special Bank Support Authority to cope with the banks that were in serious difficulties. The government, explicitly supported by the opposition, acted just as vigorously and promptly as the situation required. But this did entail making a decision on the basis of insufficient information about the causes and depth of the crisis - that could have burdened the government budget with at least 10 billion US dollars. Having to take such important decisions at short notice and without adequate information about the financial system is an experience we do not wish to repeat. The Riksbank is accountable to the Swedish parliament with regard to keeping a stable price level our inflation target - but also with regard to promoting financial stability and a safe and efficient payment system. After the crises there was room for some self-criticism in this respect. In practice, we had not supported our stability target with any systematic analytical work on overall stability. To address this, we started to build up knowledge and analytical capability in the field of stability. By publishing a Financial Stability Report in 1997, we were among the first central banks to issue a periodic public account of our appraisal of financial system stability. Its example has been followed to date by about thirty other countries, including Indonesia. Today, interest in financial stability is well established.
Under the internal ratings-based (“IRB”) approach to credit risk, the third consultative paper originally would have required capital sufficient to absorb expected and unexpected credit losses. At the time, we considered this a practical arrangement to address differences in national accounting practices and the authority of supervisors regarding provisioning. However, in the light of the public comments we received on CP3 - including from quite a few banks in the United States - and after subsequent research, we agreed in Madrid to adopt an approach based on unexpected losses only. Fifty-two organisations commented on the Madrid proposal to re-orient the IRB capital charge to unexpected losses only. The Committee was pleased to note the tremendous level of support for the solution and the strongly expressed view that this change will align the calculation of regulatory capital  BIS Review 12/2004  3  requirements more closely to the economic capital calculations that leading institutions already perform. The technical note issued last month on the treatment of credit-related losses set out details concerning how risk weights would be calculated only on the basis of unexpected losses. Of course, banks should provide for expected credit-related losses, so the New Accord will require banks to compare their actual level of provisions with expected losses. Any shortfalls will be deducted from capital - equally from Tier 1 and Tier 2 components - while excess provisions will be includable in Tier 2 capital up subject to a limitation.

This correction has also affected the establishment of more steady balances of the demand and supply for foreign currency in this period. Notwithstanding these encouraging developments, lending activity at home remains far from its potentiality, responding to the lower demand for banking loans and the tightened lending conditions as applied from banks. Lending to private sector marked an annual growth of 4% in real terms, providing an annual growth of 7.8 percent of monetary supply in January. All denominated credit continues to rule the lending activity, which mainly covers the businesses’ needs for circulating capital. January 2010 embodied a particularity, that is the improved state of the banking system assets denominated in foreign currency, has started to be mirrored on the growth of credit denominated in foreign currency. Notwithstanding, the stable increase of lending should be assisted by the re-activation of the demand for loans and the parallel easing of lending conditions as applied from the banking system. Bank of Albania deems that banking system should reveal more visionary in assessing potential sectors of economic growth and to take a more active role in encouraging the economic activity. Annual inflation in February 2010 pointed to 4.4%, exceeding by 0.4 percentage points the upper limit of the Bank of Albania target’s tolerance. The annual average inflation pointed to 2.6%.
In the longer term, an unbalanced fiscal policy has a negative effect on economic efficiency and on price developments. It increases the strains on the monetary policy and, in a monetary union, there may be significant adverse spillover effects on other euro area countries. An institutional framework that guarantees sound government finances is an important contribution to macroeconomic stability and is conducive to sustained output growth and employment. It also helps to underpin the monetary policy. The implementation of the Stability and Growth Pact provides sufficient scope in the medium term for a stabilising role for fiscal policy in Monetary Union. While, on the one hand, an unbalanced fiscal position creates difficulties for the economy concerned, if the government debt level is reduced to a reasonable level and fiscal deficits are close to zero or in surplus, this creates room for manoeuvre in economic downturns for fiscal policy to act as an automatic stabiliser. But this should then also apply if the ecomony grows rapidly or inflation is relatively high. Windfalls occurring in such cases should then lead to lower deficits. Of course, in making this remark I am not addressing one country in particular. Fortunately, however, the Dutch language gives me the opportunity to say: “If the shoe fits, wear it”. Concluding remarks To summarise, national differences in growth and inflation observed in the euro area in the recent past do not appear to be unusual either in a longer-term perspective, nor compared with that which has been seen in the United States.

Harmonised prices data do not exist over a longer time period, but available national figures point to the fact that differences are much smaller than they were in some other periods in the past. For example, in the early 1990s, the differences between the highest and lowest inflation rates were of the order of magnitude of over 10 percentage points. Thus, a more stable price environment in the euro area as a whole has also been accompanied by a considerable degree of narrowing in inflation rate differentials. The move to a single currency and the introduction of the euro are based on the success of this convergence process towards low inflation rates in all participating countries. It may be recalled that the achievement of a high degree of price stability is one of the convergence criteria established in the Treaty to be used to assess whether countries have fulfilled their obligations regarding participation in Monetary Union. However, this does not mean that after countries have joined the Monetary Union they will - at all times - have the same rate of inflation. To put the current differences in inflation in the euro area into context, it is useful to compare developments in the euro area with variations in inflation in the United States, a large single currency area which has been established for a long period of time and which is highly integrated in terms of labour and product markets.
Therefore, it seems rather intuitive that a “Swiss-made” monetary policy would potentially fit Switzerland’s needs better than a “one-size-fits-all” European policy. The latest recession is a case in point. The investment spree of the late nineties created a massive worldwide capital overhang. The collapse in asset prices, in 2001, and the ensuing worldwide recession had a particularly strong impact on Switzerland, whose exporters are specialized in the production of capital goods and where the production of financial services represents about 13% of GDP. Because ensuring price stability means avoiding deflation as well as inflation, the SNB had to cut interest rates much more aggressively than the ECB from March 2001 to April 2003. The case of Switzerland is not unique in this respect. Canada, Australia, New Zealand, Norway, Sweden and the UK, for instance, also let their currencies float and pursue successful national monetary policies. They all follow a clear strategy of preserving long-term price stability, and they all have an independent central bank pursuing an independent policy. So we can definitely say that monetary independence and monetary stability are two sides of the same coin. 4  BIS Review 70/2004

Commensurate with the diversity and complexity of takaful operational framework, products and services, the continuous upgrading of risk management practices, with improvements in governance standards and enhancements of information management systems will be critical. Under this environment, it is envisaged that takaful operators, individually or collectively, will play a bigger role in enhancing risk management practices, developing market conduct standards, fostering fair market practices and improving financial literacy among consumers. This will be even more important with the implementation of the risk-based regulatory regime, whereby the responsibility for the implementation of sound risk management and market conduct governance, as well as assessment of risks and management of the financial condition of a takaful operator, will rest increasingly with the Board of Directors and Senior Management of the takaful operators. Moving forward, a differentiated regulatory approach will increasingly be adopted, where companies that exhibit strong corporate governance and risk management practices will be given greater regulatory flexibility and may enjoy greater capital savings. Secondly, it is vital to have in place an efficient and cost-effective delivery channel for the takaful business, strategically aligned to fulfil the participants' reasonable expectation. BIS Review 84/2006  1  Bancatakaful strikes as an attractive value proposition that enables takaful operators to tap into banking institutions' large customer base and attract the existing clientele of the latter to have access to integrated financial service offerings in the most cost effective manner. Strategic alliance in the bancatakaful arrangement has indeed shown a significant improvement in the takaful contributions over the past few years.
They do not directly influence the supply side, which depends upon a whole host of structural characteristics of the economy which are largely beyond the direct reach of monetary policy. What we have to do in managing short-term interest rates is to keep overall demand growing broadly in line with the underlying - sustainable supply-side capacity of the economy as a whole to meet that demand. In other words we are trying to maintain overall, macro-economic, stability in a much broader sense, in the medium- and longer- and not just the short-term; and the Government's inflation target is the criterion against which our success, or otherwise, in achieving that broader macro-economic stability is to be measured. Our problem is that we don't know with any great precision or confidence exactly what is happening on the supply-side - that's to say precisely what rate of growth we can hope to sustain. We don't know precisely either what is currently happening, or what is likely to happen looking forward over the next couple of years or so to overall, aggregate, demand. And we don't know precisely what the full impact of a change in interest rates will be on aggregate demand, or how long it will take before the full impact is felt. Ours is not a precise science. In fact it's more of an art than a science.

And, although we bring as much economic and statistical science to bear as we can, we know that our forecasts, and indeed our policy judgements, are subject to a range of error. They cannot be accurate to every last digit. We can't expect to hit the target all the time, but by consistently aiming to do so (and we do consistently aim to do so looking 2 years or so ahead - whatever you may have read in some recent media commentaries) we can hope to get reasonably close to the target on average over time. Given the uncertainties, which are well illustrated by the sudden - and no doubt to some extent erratic - jump in the RPIX inflation rate in the year to January of 2.6% announced this morning, the overall results over the past decade since the recession of the early 1990's have been encouraging. Whether that's a result of good luck or good judgement I leave to others to decide - I'm more interested in the outcome. Since the Summer of 1992, inflation, on the target measure has averaged just 2.6% - and has been more stable than at any time in our history. And it has been consistently remarkably close to target over the past 5 years. But the even better news is that stable, low, inflation has been accompanied by steadily increasing overall output and employment, and by a progressive fall, until very recently at least, in the rate of unemployment.
The City of London will of course remain a major global financial centre but will no longer be in the position to serve as the European financial hub. Against that backdrop, further integration of capital markets in the EU is all the more needed. Succeeding in that endeavour requires an integrated approach combining and coordinating the Juncker Investment Plan, the Banking Union and the Capital Markets Union to achieve a true “Financing Union for Investment and Innovation”. This Financing Union will be built on the EUR 390 billion in annual surplus savings in the euro area. Another consequence of Brexit is that a number of financial activities will be relocated within the EU 27. The competitive landscape between financial centres will therefore change even though we do not expect the emergence of a continental “City of London” but a more multipolar and specialised competitive structure. It is our collective responsibility to foster a competitive and fair ecosystem for international players; as we have a single rule book, this competition will exclude any regulatory or supervisory “race to the bottom”. Against this backdrop, the Paris financial centre has many assets. Paris hosts one of the most developed capital markets in continental Europe, the first asset management industry, a leading bond market, the largest commercial paper market with NEU-CP and the largest private equity investor in continental Europe. Moreover, Paris offers an attractive pool of highly skilled staff in financial services.

The French government and the French financial authorities, including the Banque de France, are also working together to facilitating the dissemination of sound and safe financial innovations and fostering the scaling up of sustainable finance. These investments are protected by a very resilient banking system, accompanied by consistent regulation. Let me remind you that Paris is already home to the European Securities and Markets Authority and will soon host the European Banking Authority. In addition, the Paris Court of Appeal was granted an 3/4  BIS central bankers' speeches  international chamber last February, with international commercial affairs falling within its remit. That will duly complete the Paris court organisation, which already includes an international chamber in its commercial court. Last but not least, let me stress that the French authorities are making sure that the Paris financial centre and its participants benefit from a streamlined and business-friendly regulatory framework, for instance in areas such as bond issuance and securitisation. Meanwhile, significant efforts have been made by the French government to alleviate the tax regime and social contributions of “impatriates.” Starting in 2016 under the previous government, they have been amplified by the new one, including on the eve of the business summit last January. *** France is changing, for the better. But it is still dependent on its economic environment, obviously. Let me conclude with two wishes. First: that Europe is courageous enough to strengthen itself through this cyclical upswing.
The adequacy of European institutional arrangements for financial stability The adequacy of European institutional arrangements for financial stability has been reviewed in depth at the EU level. In two reports, in April 2000 and April 2001, the Economic and Financial Committee (EFC) took stock of the supervisory and regulatory mechanisms in the EU and examined the issue of financial crisis management. It concluded that the current arrangements provided a coherent and flexible basis for safeguarding financial stability and recommended a further strengthening of cross-border and cross-sector co-operation. I fully share the assessment put forward in these reports and I would like to stress here the special responsibilities of central banks, due to: their position at the heart of financial systems, their role as liquidity supplier to the economy, their close and constant contact with credit institutions, their contribution to banking supervision and to the safe and efficient functioning of payment systems, and at least for some of them, their contribution to the safe and efficient functioning of securities clearing and settlement systems. To sum up, an institutional framework in which the Eurosystem’s responsibilities for monetary policy in the euro area are coupled with extensive supervisory responsibilities of NCBs in domestic markets, and with reinforced co-operation at an area-wide level, seems appropriate to tackle the changes triggered by the current financial trends and the introduction of the euro.

Moreover, the pace of internationalisation of the euro area economy has been further spurred by the euro. Allow me to give just one example: the level of accumulated foreign direct investment abroad by French residents since 1999 amounted to EUR 380 billion (i.e. four times its pre-1999 level). Indeed, capital flows between the Euro area and the rest of the world mirror a high degree of attractiveness: over the years 1999-2001, the Euro area has registered total inward direct investments worth 719.8 billion Euros. At this point, one may wonder which conditions are required to ensure the success of the euro and EMU in the medium term. I believe that we have to tackle three main challenges: structural reforms, financial stability and the accession to the EU of new Member States. ***  BIS Review 11/2003  5  Challenges ahead Structural reforms The first challenge is, beyond dispute, to implement structural reforms in the euro area’s economies. Structural reforms were crystallised at the European level in what is called the Lisbon strategy. The first objective of this strategy is to substantially raise our potential output growth. The second is to make our economies more competitive. Implementing the reforms: the Lisbon strategy The European Council meeting held in Luxembourg in December 1997 explicitly mentioned structural policies among the items selected to achieve enhanced co-ordination. The Lisbon European Council, held in March 2000, further enhanced the medium-term strategy to introduce structural reforms in the Union.
Lars Heikensten: Euro entry before reforms or reforms before euro entry? Speech by Mr Lars Heikensten, Governor of the Sveriges Riksbank, at the Frankfurt European Banking Congress, Frankfurt, 21 November 2003. *  *  *  The outcome of Sweden’s referendum was an unambiguous “no” to euro adoption. This means business as usual for Swedish monetary policy. Since 1993 we have had an inflation target of 2 per cent, which has gained credibility with the public and the markets. Since the introduction of the inflation target, inflation has averaged 1.7 per cent while average growth has been 3 per cent. This compares well with the Swedish experiences of previous decades. It also compares favourably with the recent performance of the euro area. This relative strength of the Swedish economy was in my opinion an important factor behind the result in the referendum. However, the outcome of the referendum does not mean business as usual in our relations vis-à-vis the rest of Europe. We will not have a seat at some of the negotiating tables in Frankfurt and Brussels that we could have had. Of course, we will try to compensate for this. To some extent, this can be done by keeping our own house in order - by conducting sound economic policies. Also, we will do our utmost to contribute to European policy discussions. Being outside the euro certainly doesn’t mean that we want to be on the margins of the debate on monetary integration in Europe.

In combination with transparent processes, including recurrent evaluations by national parliaments or in other arenas, this could put pressure on politicians to act. Is the Stability and Growth Pact not sufficient in itself? After all, it is designed to ensure fiscal discipline in the member countries. The answer here is clear; it could have been had the Pact only been followed. But now the situation is different. As the Pact has not been followed by the larger euro countries, there is a risk that the newcomers will take the same attitude. However, this could be a dangerous conclusion. It would be wiser to look at the issue the other way round. Both Germany and France attained the 3 per cent mark for the public deficit criterion by the narrowest of margins despite what was a global upturn. But they clearly did not do enough afterwards in terms of consolidation, despite intense pressure from many of the smaller countries. Today, this is a significant problem not only for the euro area as a whole; the countries themselves are also paying the price in terms of a deeper and longer downturn. This, if anything, is a warning to new euro adopters. Conclusions Having raised these complex issues, let me be very clear about my sentiments. I do not wish to see any new obstacles or separate rules for the new member states; equal treatment is essential.