samchain/econo-pairs-v1 huggingface dataset:
By 1873 Bagehot had seen enough to declare that the correct policy for the Bank to pursue in order to head off an incipient panic would be to lend “freely and vigorously…on all good banking securities”, but to do so only “at a very high rate of interest...that no one may borrow out of idle precaution.” 1 Bagehot had two other pieces of advice for the Bank that are relevant today. First, he advised that there should be a “clear understanding between the Bank and the Public that, since the Bank holds [the] ultimate banking reserve [it] will recognise and act on its obligations”. Second he advised that the Deputy Governor must be “a man of fair position” who “must not have to say ‘Sir’ to the Governor”. This is a slightly old-fashioned way of saying that the Deputy Governor should be independent minded, that the Bank should empower its staff and must always remain credible with the public. (Even though Bagehot foresaw many things, even his liberal mind hadn’t foreseen the day when the Bank would have more than one Deputy Governor, and among them a woman!) 3. A balance sheet that has evolved to meet the needs of monetary policy  From a £ million loan to the government in 1694, the Bank’s balance sheet has grown a long way to its current size of £ billion.

The key point is that even though interest rates had been the marginal tool of monetary policy for several decades, monetary policymakers never forgot that this was only one manifestation of the central bank’s unique ability to create narrow money. And when the effective lower bound was reached, stimulus could continue to be provided by expanding central banks’ balance sheets in new ways. Someone recently said to me that Quantitative Easing (QE) is “like magic,” as if central bankers are sorcerers with the capacity to conjure up economic miracles. I wish. In fact QE works through the more prosaic channels of reducing longer-term interest rates in the  1  2  Bagehot (1873). BIS central bankers’ speeches  economy, and encouraging private sector investment in riskier assets by reducing the supply of long-duration government bonds, a phenomenon we call portfolio rebalancing. But the underlying point that the effect of this new monetary policy tool is less intuitively understood is well taken. That makes effective communication and accountability important to monetary policy and indeed all central bank policies. These points were made very clear by Kevin Warsh’s recent review of transparency and the MPC. As a result, this August the MPC will begin publishing the minutes of its policy meetings and the Inflation Report at the same time as its policy decisions, giving markets and the public a clearer understanding of what underlies the judgements we make.
In short, this abundant liquidity, induced by an expansionary monetary policy and an increase in savings among emerging economies, particularly in Asia, has boosted a housing bubble. However, although it was a component of the imbalances which had built up before the outbreak of the crisis, it certainly was not the main cause; rather, such main cause is more related to the functioning of the financial system. That is, with the same path of monetary policy and global balances of savings and investment, an adequate risk assessment system could have averted the crisis or, at least, reduced its very large current scope. Evolution of inflation During most of 2008, concerns about the global economic scenario were split between how to tackle the first effects of the housing bubble burst, mainly affecting the developed world, and, how to deal with the significant increase in inflation. Since the beginning of this process, in the first half of 2007, we argued that its origin was related to factors which had nothing to do with the domestic business cycle, such as prices of food and fuels at international markets and adverse climatic conditions which favored major rises in the cost of electric power. During said year, prices of non perishable foods rose by 15% and prices of fruits and vegetables rose by over 30%, as compared to annual 2% average increases and 2% average decreases for both categories in the 2000-2006 period, respectively. Fuel prices rose by 15% in 2007.

In this view, the Bank of Albania, as the supervisory and promoter institution of the Albanian banking system, in addition to the immediate response to the difficulties created by COVID-19, through a complete package of monetary, supervisory, macro-prudential and operational measures, finds also important the drafting and organisation of educational initiatives, like Global Money Week. Through these educational and awareness-raising activities, we aim at approaching the young generation to the complicated world of finance and banking; to introduce and pass through knowledge on possibilities; the risks that both financial and banking products have; as well as introduce the young public to the necessary information on borrowing and savings. This communication and awareness of young people, in turn help both financial and banking markets become more resilient, comprehensive and efficient. 1/2  BIS central bankers' speeches  The Bank of Albania, has not limited its educational activities only with the Global Money Week. Financial literacy of public is an important part of our daily work. Thus, through virtual educational tools available at our webpage, students and teachers may learn throughout the year on financial issues, by watching videos and reading the literature dedicated to both the pre-university education and students. Our webpage contains simplified information on themes of everyday life, as: the opening of a bank account; personal budget management, drafting a saving plan; applying for a bank credit, etc.
But the fluctuations need not be larger than many other and larger countries appear able to tolerate. Finally, it is appropriate to emphasise that independent monetary policy under a flexible exchange rate regime can take many forms, including different types of price stability target and taking into consideration the role of money and credit in policy formation. It can therefore change from one period to another without necessitating major decisions concerning the currency as such. 1.7  Capital controls and exchange rate regime options  Lifting the capital controls is one of the most important yet most complex challenges facing Iceland at present. The controls have proven an important means of achieving stability in the wake of the financial crisis. Because of this, they were approved by signatories of the EEA Agreement even though they are contrary to the spirit of the Agreement. In the long run, however, it is critical that they be abolished. There are at least two main reasons for this. First, the costs associated with the capital controls grow over time and will ultimately exceed the benefits. Second, they are in contravention of Iceland’s international obligations. For the long term, it will be impossible to retain universal restrictions on capital outflows and remain in the EEA. Iceland must therefore make a genuine attempt to lift the controls. It may prove complicated and time-consuming, but there is no other option. This gives rise to the question of how capital account liberalisation is related to the choice of currency and exchange rate policy.

Starting from here, we can say that society is demanding safer and fairer financial systems. The view that financial markets were big casinos, where the betting was done with other people’s money and gamblers walked away unpunished, is quite common around the world. Public opinion has been dominated by that sentiment, which has also affected policymaking. On financial development Let me start by stressing that financial intermediation is good, and with the backlash from the crisis it should be repeated that a well functioning financial system is key to prosperity. It promotes economic growth by channeling investment funds from savers to borrowers (Levine, 2006). It is central to promoting entrepreneurship and to facilitating investment, including human capital accumulation. It provides financing to households in order to smooth consumption, and provides insurance. It provides safe and cheap means of payment. The difficulties faced by households and firms in many emerging market economies due to underdeveloped financial institutions and markets should be a clear reminder of this positive role. But financial depth may also be a source of great problems. As in many situations, more is not always better. There is plenty of research concluding that economies with deep financial systems grow more. However, studying this issue in Latin America many years ago I came to the conclusion that in Latin America growth during the eighties was lower in countries with more developed financial systems, since the collapse of their economies during the debt crisis was larger (De Gregorio and Guidotti, 1995).
On the other hand, I have pointed out the importance of inflation and inflation expectations coming down to around 2 per cent ahead of the next round of collective bargaining in 2010. I have been more concerned about the effects of increases in food and energy prices spreading to other prices in the economy. For example, I have pointed out that food prices have increased more rapidly in Sweden than in the euro area and that the business tendency survey has indicated that the retail sector still planned to increase prices. This indicates that price increases in the world market could spread to other goods. The risk of such a development has now declined in that energy and food prices have fallen on the world markets and the plans to increase prices in the food retail sector are no longer so definite. The decline in demand in Sweden and abroad is further reducing the risk of these contagion effects. 6  BIS Review 154/2008  The Riksbank has analysed what is referred to as the persistency of inflation, that is how long the effects of a sudden increase or decrease in inflation endure. We identify two main results for Sweden, which are similar to the results of studies of the euro area. First, there is a degree of persistency in inflation, but it can be regarded as moderate. This result means, in simple terms, that half of the effect of a sudden increase in inflation remains in the next quarter.

In the Industrial Agreement, the social partners have agreed on a process in which negotiations are conducted under the obligation to refrain from industrial action and in good time before the old agreements expire, as well as on specific processes for handling conflicts, a joint basis for negotiations and so on. I therefore conclude that the manufacturing industry, with a possible expansion to include other parts of the Swedish economy that are exposed to international competition, should also set the norm for the development of wages in the round of collective bargaining that will be held in 2010. A broad consensus that this is an appropriate process would facilitate the negotiations and contribute to effective wage formation. At the same time, I would like to conclude by emphasising that the Riksbank is not a party in the collective bargaining process. It is the social partners that conduct collective bargaining. But the development of wages affects inflation and inflation affects the development of wages. Our job is to maintain a low and stable level of inflation. This job is made easier if wage formation works well. Thank you! 8  BIS Review 154/2008  Figure 1.
In this context, prudential supervisors, working with those responsible for setting accounting standards and capital market regulations, need to systematically examine the interaction among capital, accounting, tax and disclosure requirements to assess their effects on the overall levels of leverage and risk across the financial system. As we change the framework of regulation and oversight, we need to find ways to strengthen market discipline over financial institutions, and to limit the moral hazard that is present in a range of different forms in any regulated financial system. The liquidity tools of central banks and the emergency powers of other public authorities were created in recognition of the fact that individual institutions, including those central to payments and funding mechanisms, cannot protect themselves fully from an abrupt evaporation of access to liquidity or ability to liquidate assets. The existence of these tools and their use in crises, however appropriate, creates moral hazard by encouraging market participants to engage in riskier behavior than they would have in the absence of the central bank’s backstop. To mitigate this effect on risk-taking, strong supervisory authority is required over the consolidated financial entities that are critical to a well-functioning financial system. A more resilient financial system will also require a framework for dealing with the failure of financial institutions. For entities that take deposits, we have a formal resolution framework in place.

Given the changes in the structure of the financial system, maintaining financial stability requires us to look beyond just the stability of individual banks. It requires us to look at market developments more broadly, at the infrastructure that is critical to market functioning, and at the role played by other leveraged financial institutions. Over the past four years, the Federal Reserve has led a number of initiatives with our supervisory colleagues in the United States and in the other major financial centers to improve the OTC derivatives infrastructure, to strengthen the systemically important payment and settlement systems, to improve counterparty risk-management practices with respect to hedge funds, and to place greater emphasis on ensuring robustness to low probability, high severity instances of stress. This forward-looking, cross-institution approach, integrating prudential supervision with market oversight and payment system expertise, offers the best model of broad financial oversight focused on systemic risk. I want to emphasize in conclusion that we are working now, in close cooperation with the SEC, other U.S. bank supervisors, our international counterparts and market participants to improve the capacity of the financial system to withstand stress. These initiatives include joint efforts with the SEC to bolster consolidated oversight of the investment banks, formalized in our recent Memorandum of Understanding. These institutions have made substantial changes over the past several months to bring down overall leverage and risk-weighted assets and to reduce liquidity risk.
Fraziali Ismail: Non-performing loans in East Asia and the Pacific practices and lessons in times of COVID-19 Opening remarks by Mr Fraziali Ismail, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the webinar and the launch of World Bank’s Report on non-performing loans (NPL) in East Asia and the Pacific, 27 October 2021. * * * A very good morning to everyone! It gives me great pleasure to welcome you to this webinar in conjunction with the launch of the World Bank Report on “Non-Performing Loans in East Asia and the Pacific: Practices and Lessons in Times of COVID-19”. This event comes at a time where many of us in the region are still navigating through uncertainties with the pandemic. Recovery in many regional economies including Malaysia has begun to gather pace in recent periods in tandem with the recovery in global economic activity. However, the outlook remains subject to large downside risks as the potential for new variants of COVID-19 remains high. These developments are also happening amid the gradual expiry of policy support extended to households and businesses affected by the pandemic. The unprecedented level of support extended has so far helped to keep loan impairments at bay. But, as these measures are gradually unwound as the economy recovers, we would expect to have much greater visibility on the true asset quality of banks.

Indeed, in many countries, it is envisaged to make the central bank the “systemic supervisor” or, at least, a central pillar in the macro-supervisory architecture. 3. A key question, however, is how this new financial stability function would interact with monetary policy. In theory, things are simple. Central banks would have several tools available for different objectives. One set of tools (interest rates, international  2  BIS Review 147/2009  reserves) would, as now, be used to fulfil the price stability mandate. On the other hand, macro-prudential tools would support and foster financial stability. In such an ideal “Tinberghen” world, each instrument would be precisely assigned to a single objective. Things may be more complex in the real world because these instruments are not independent. For instance, changes in capital requirements will affect credit growth and the transmission channel of monetary policy. Conversely, as I said, levels of or movements in monetary policy rates may increase or decrease the level of risk inside the financial system, hence its vulnerability to shocks. Finally, there may be circumstances in which the objectives of price and financial stability may not be fully compatible. 4. When instruments overlap and the objectives possibly conflict with each other, the potential for confusion is real and significant. To avoid any damage to central banks' credibility and ability to fulfil their mandate, it is essential that a clear and transparent framework should be in place.
It is natural, therefore, as we leave the EU, to have another look at the next-smallest set of UK deposit-takers – small UK banks and building societies (hereafter “firms”) – and ask whether we could do something similar for them. This question may also of course be relevant for insurers, but my focus today will be deposit-takers – in part because the government’s Solvency II review is already underway and can explore these issues on the insurance side. 4  Our habit, within the EU, of applying broadly the full weight of regulation to firms of all sizes is not motivated solely by prudential considerations. Rather, it is driven by the understandable desire to harmonise practice across the different countries within the EU, and by the difficulties of agreeing a definition of “small” which works for everyone given the widely varying sizes of national economies within the EU. This approach gives rise to the “proportionality” problem. The costs of understanding, interpreting and operationalising prudential requirements, which have become more complex since the 2007-08 crisis, may exceed the associated social benefit for small firms (but not large ones). On the cost side, a fixed element of these costs may mean that average costs will be higher for small firms.

Since then, we have motored ahead and put in place that new regime for credit unions. But we have not forgotten about banks. In fact, despite the huge pressures of the Covid crisis we have taken care to preserve one vital part of our work programme: our plans to bring in a simpler prudential regime for small banks and building societies. A new style of regulation  The reason we have kept up work on this topic is that our exit from the EU provides us with the first opportunity we have had in a long time to make real progress on it. 1  But before coming to that, let me make a few brief points about the broader regulatory scene as we exit the EU. I should say first that, despite the fears sometimes articulated by politicians in the EU, we have absolutely no intention of weakening prudential regulation in the UK. It would be mad for us to do any such thing only a decade or so on from a crisis in which the British taxpayer footed the bill for one of the biggest banking disasters in history, with a financial sector around ten times the size of our economy, and with clear evidence in front of us that the post-2008 reforms have allowed the banking system to support the economy through the Covid crisis so far. You only have to ask yourself the question “How would the financial system have fared if Covid had hit in 2007?” to appreciate this point.
4  BIS Review 100/2010  would, to the extent they continued to hold the loans that they make, be more like unit trusts with an origination arm rather than banks. So many – in fact almost all – of the proposals to make banks less fragile will mean they would come to hold more equity capital. I think this is right. And I believe it is the most fundamental response to banking fragility because it directly deals with solvency problems – risks that people who have lent money don’t get it back. I believe that those risks – real or perceived – have been the fundamental drivers of the financial disasters of the past few years. Other problems, which are sometimes described as funding or liquidity problems, often arise because of fears about solvency. I do not want to imply that other measures to make the financial sector more stable – including liquidity requirements and changes to the way asset values are assessed and reported – are not important. But I want to consider whether changes in capital are a powerful tool to make the banking sector robust and whether it is right to see them, rather than monetary policy, as a more natural means to that end. Some are sceptical that higher capital requirements can work because banks may be able to avoid (or evade) them.

Replenishing their inventories, companies substantially increased their demand for commodities worldwide. Russia is a major producer of key commodities. High demand for Russian exports spurs economic growth this year. As companies complete their inventories, the effect of this factor will be tapering off gradually. The growth of oil export quantities will also be supported by the easing of the OPEC+ oil production cuts in response to the recovery of demand. Taking this into consideration, we have raised the oil price path in our forecast by 5 US dollars per barrel in the next three years. According to our preliminary estimates, the expansion of oil output under the new OPEC+ agreements will add about 0.1 pp to GDP growth this year and 0.2–0.3 pp next year. Another important growth driver is domestic demand, including both consumer and investment demand. Considering these trends, we have revised our economic growth forecast for this year upwards from 3–4% to 4–4.5%. After the recovery, the economy will expand at a pace close to its potential. We forecast that GDP will equal 2–3% in the next two years. The possibility to achieve higher economic growth rates will depend both on the expansion of production and logistics capacities and on labour resources, their expertise and performance. T hird. Monetary conditions have been progressively adjusting to the earlier increases in the key rate, but are still accommodative.