samchain/econo-pairs-v1 huggingface dataset:
Those issues are for the Treasury and wider Government.11  Regulators have a role to remove distortions that discourage private investment in growth capital. The Financial Conduct Authority is reviewing whether some of its rules set out in relevant Directives and Regulations could inhibit opportunities for equity issuers and investors.12  11  For example, TheCityUK suggests the government could convert certain loans that SMEs are struggling to repay and which it has guaranteed into tax liabilities or other instruments that would be paid down only when companies had the resources to do so. TCUK report available here. 12 See speech by Christopher Woolard (2020): The role of investment managers in the post Covid-19 recovery 8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  And the Bank of England’s Financial Policy Committee has been asked by the Government to examine whether there are changes to financial regulation that can improve the supply of growth capital.13 Banking regulation will not be where we focus. Banks, with their short-term fixed value liabilities – deposits – are not suited to investing in equity, and least of all equity from unlisted companies that isn’t easily traded. Financial institutions with longer-term liabilities – insurance companies and pension funds – are the natural investors in growth capital. They can absorb changes in its value without wider harm and nor do they need to rely on being able to trade out of their positions quickly.

Further to this, in the Q&A on the use of liquidity and capital buffers, the PRA set out its general expectation that any required rebuild of capital buffers would be gradual, and that banks would not be expected to restore their capital buffers in full until a significant time after the end of the current stress. 8 See May 2020 interim Financial Stability Report 7  5  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  5  The financial system is well on the way to filing the financing needs of businesses. [See slide 4 of  accompanying deck]  By no means all the additional finance to preserve productive capacity has yet been delivered, particularly given the limited appetite many businesses may have to run down their cash buffers in the face of uncertainty. Fuel must continue to be injected. And the fuel may need something extra to be added. That additive is equity. The case for equity  There are at least three reasons for adding more equity finance to the mix. First, half of the cash-flow deficit we have identified is accounted for by companies with net debt already more than four times their regular earnings. Although the UK’s corporate sector did not, as a whole, go into this crisis with a stretched balance sheet, a material subset of companies had levered up.
4  BIS Review 85/2001  However, in the short-term and medium-term, real incomes may vary depending on the currency in which wages and prices are contracted, as wages, prices and nominal exchange rates are adapted at different rates to changes in productivity. As we know, in the short-term and medium-term, nominal exchange rates can vary considerably, and to a greater extent than is motivated by the differences in inflation rates between different countries. This means that an article can have different prices in different countries during a fairly long period of time. This can be noticed for instance, in Sweden, where price levels are still higher than in other countries in most fields, without this being fully explained by differences in VAT. While Sweden's membership of the single market has certainly led to stiffer competition and greater price pressure in some areas, competition still appears to be weak in several branches and sectors. Increased competition contributes in principle to a convergence in price levels, as the rate of price increase declines, or as prices perhaps even fall on a market exposed to greater competition. All else being equal, inflation in Sweden would then be lower than the inflation target of 2%, and this would not normally be counteracted by the Riksbank's monetary policy, as it is a temporary effect. Naturally, it is difficult for the Riksbank to decide in practice whether such price trends are a result of increased competition unless they are, for instance, connected to changes in regulations.

But, as with the interest rate markets, there are still important barriers to a complete integration in the stock market. Barriers to further development of the euro market Despite the positive development in trade in securities in the euro area, developments in these markets in Europe are still in general behind developments in the USA. The difference between Europe and the USA is mainly because the USA is one country, while Europe consists of many. However, another explanation for the difference usually given is that Europe's credit markets are dominated by banks, unlike those in the USA. This is mainly because the US legislation, in the form of the Glass-Steagall Act from 1933 and various anti trust laws, has effectively prevented the banks from taking on an overly dominant role. Instead, the securities markets in the USA have played a more important role, and it is apparent that Europe is heading towards an Americanisation in this respect. But as I said, there still remain a number of barriers of varying degrees of difficulty. I will give a few brief examples, using the treasuries market. There are 12 issuers of treasury papers in the euro area, and thereby 12 primary markets with slightly varying credit risk. The countries differ with regard to everything from legal traditions, issue procedures and counterpart systems to market infrastructure and conventions. It is easy to see that these differences mean that the secondary market for euro-denominated treasuries is not uniform. Another problem is which country's papers should form the benchmark.
However, my assessment is that the low inflationary expectations are making it take a longer time before overheating tendencies are expressed in increasing consumer prices. This leads me to make the assessment that prices will not start to rise until the end of the forecast period but that price increases will then be stronger than the majority believes. My assessment is therefore that inflation at the end of the forecast period, in my main scenario, will end up marginally over the forecast that was reported in the last inflation report, which the Executive Board majority did not find reason to revise. My assessments of developments during the next two years differ then only marginally from the majority view. I am more concerned about the price tendency and the risks I see in developments after the forecast horizon. The assessments of the use of resources and future production possibilities are uncertain. Structural changes of the Swedish as well as the international markets make it particularly difficult to draw conclusions about future growth prospects. There is a risk that we go to excess. High, increasing indebtedness calculated as a share of GDP for both households and companies make me concerned for financial imbalances that can be on their way to being created, although our knowledge of what can be assumed to be long-term sustainable development is small. In my view, there is a risk that we overestimate potential output in the coming years and that we therefore accept an excessively high level of demand in the economy.

In terms of its composition, moreover, the draft Budget has most of the adjustment falling on public spending. And this, on past experience, raises the effectiveness of the consolidation strategy. Yet the presence of risks threatening the attainment of these targets should not be understated. The Budget is based on a macroeconomic scenario of significant recovery which, if not confirmed, might lead to a revenue path worse than projected. As I said, if this were the case, offsetting measures should immediately be applied. But perhaps the biggest risk to general government meeting its targets stems from the potential deviations that may arise at the regional and local government level. As known and reiterated on many occasions, the high decentralisation of public spending in Spain means that the collaboration of the regional and local governments is essential for achieving budgetary stability. At the end of this year it will be possible to make a full assessment of the consolidation drive made by the regional budgets, but my impression is that, as matters stand today, the measures announced by most regional and local governments far from respond to the reduction in public spending needed. I therefore believe formulas must be sought to strengthen regional and local government commitment to budgetary stability and to encourage compliance. In this respect, we should not rule out a revision and strengthening of the national budgetary framework, in particular in the case of regional and local governments, a framework that resides essentially on the Budgetary Stability Law.
For outflow liberalization, on the one hand allowing more Thai resident outflows is beneficial as it helps lessen upward pressure on the currency as well as improve the investment profile of the Thai private sector toward a more diversified and possibly more efficient one. On the other hand, if risk assessment capacity of local investors remains low, too rapid outflow liberalization could make the country’s balance sheet more vulnerable rather than more robust. A balancing act is even more difficult when applying re-regulation on capital inflows. A measure that is too mild would lack effectiveness, while too drastic a measure would be too costly. For one thing, its distortionary effects would be large; for another, increased policy uncertainty could turn away productive investors and raise the country’s risk premium. Aware of these undesirable side effects of controls, we would limit their use to only when absolutely necessary and only on a temporary basis. On the use of interest rate policy, some may view the policy interest rate as another tool to deal with capital flows, and there have been public debates whether the recent hikes in the policy interest rate by the Bank of Thailand were consistent with our thinking on recent capital flow developments. Specifically, many have argued that the hikes would actually induce more capital inflows that add pressures on the currency. On this issue, let me say the following. Under inflation targeting, the policy interest rate is used primarily to help maintain price stability to achieve long-term balanced growth of the domestic economy.

The fact that some had to go through a difficult period of adjustment was first and foremost a consequence of their past decisions. Nevertheless, standing on one’s own feet is not the same thing as standing alone. Renationalising our economies is also not the answer. It would not change the basic economic realities that European countries confront – that we are ageing societies which have to grow primarily through raising productivity. And it would not offer citizens any more economic security. There is no country in the world that is both prosperous and insulated from globalisation. In fact, the Single Market process was introduced precisely because European economies, acting alone, could not create enough jobs in an increasingly open world. And that process led in turn to monetary union because – as the ERM crisis in the early 1990s showed – countries realised they could not integrate in part and benefit in full. The financial and sovereign debt crises since 2008 have only reaffirmed that truth. So the answer is not to unwind integration. Nor is it to hold out an unattainable vision of where integration should lead. It is to complete our monetary union in the areas where it can and needs to be completed. We need ambition in our ends and pragmatism in our means. We have already shown how this can be done with the solidarity and stabilisation mechanisms that were set up during the crisis. Banking Union is also a remarkable achievement.
And even if they could replicate them, humans might still prefer humans to carry them out. The future could see a world of work in which EQ rivals IQ for skill supremacy. Professions involving high degrees of personal and social interaction – such as health, caring, education and leisure – could see demand rise. Indeed, it is possible the balance between cognitive and social skills might alter significantly even among jobs which traditionally have been cognitively-intense. Take medicine. The doctor of the future might be valued far less for their clinical competence in diagnosing illness and prescribing solutions. In a world of individual medical records and data-hungry diagnostic algorithms, much of the process of diagnosis and prescription might fall to machine rather than human. Indeed, the UK Prime Minister has recently suggested a strategy to deliver just that. 60  But that is unlikely by itself to eradicate the need for doctors. Patients are still likely to want to discuss their diagnosis and prescription. And they will want this advice delivered personally and empathetically. In surveys of patient satisfaction it is a doctor’s bedside manner, rather than clinical competence, that matters most. 61  In future, that balance between social and clinical skills may shift further. And, most likely, those  social skills will be demanded from flesh-and-blood rather than robo-doctors. If both the nature of a career and the skills it requires are changing, does this carry implications for educational institutions? That seems likely.

2 Those included -  Parliament, in legislation, enshrining the goal of price stability, and requiring the Bank to publish a quarterly report on the outlook for stability  -  the executive arm of government deciding the definition of price stability (2% CPI inflation target) and setting out requirements for the Bank to explain publicly what is going on if the target is missed on either side by more than 1pp  -  the Committee comprising four ‘external’ members as well as five internal (or ‘executive’) members. The external members were necessary to legitimise giving such an important function to the Bank. ‘One person/one vote’, with transparency, was a mechanism for attracting high-quality ‘externals’ and for ensuring that the introduction of ‘new blood’ made a difference – that it did let in ‘fresh air’ and bring useful expertise to the table. And, of course, the system of individual voting had to carry across to the ‘internals’ too. Indeed, as most studies show, there is no difference between internal and external members in our decision-taking. The burden of that rehearsal of some UK institutional history is this: that, in comparing central bank practices, we should not think of our various decision-taking structures solely as technical solutions to the shared technical problem of deciding a path for rates. Rather, our varying structures are efforts to solve that shared technical problem in the context of varying histories and social and political structures.
By combining these two instruments, the SNB is able to determine the volume of liquidity it wants to drain from the system, thereby influencing the three-month Libor. The SNB continues to use a three-month Libor target range as its reference band for monetary policy. The use of SNB Bills and reverse repos The SNB has been issuing SNB Bills since October 2008. At beginning of this month, a secondary market for buying and selling these short-term debt certificates was established. This secondary market improves market liquidity. SNB Bills have other advantages. First, their flexible terms can be adapted to the monetary policy objectives. Second, they permit greater flexibility and can be issued at high volumes. The SNB has been stepping up the issuance of SNB Bills since March 2010. It currently offers SNB bills with terms ranging from one week to three months. The total amount of SNB Bills outstanding last week amounted to about CHF 80 billion. This made it possible to reduce sight deposits to around CHF 70 billion. SNB Bills and reverse repos are characterised by their extraordinary flexibility, allowing for an efficient implementation of monetary strategy that is fully compatible with the monetary policy concept that has been proven and tested for several years now. In employing these instruments, the SNB continues to operate in an environment that is both familiar to and stable for its different partners. It is nevertheless ready to adjust its monetary policy instruments quickly, should this be required by developments in the financial markets.

Today, they have sufficient liquidity to function without having to finance themselves via the SNB. This situation of excess liquidity is of a permanent nature. The transition from a liquidity shortage to excess liquidity does not, however, change the SNB’s monetary policy strategy, which is still aimed at stabilising the three-month Libor within the target range set by the SNB. The implementation of this strategy has nevertheless been  2  BIS Review 85/2010  adjusted to reflect the new liquidity conditions. In times of a liquidity shortage, the SNB must supply the markets with liquidity to keep the Libor at the targeted level. If there is excess liquidity, it must drain liquidity from the market in order to keep the Libor at the same desired level (cf. chart 3). This situation can be compared with that of a driver going up a mountain pass. Driving up the hill, he pushes on the gas pedal in order keep the vehicle driving at a certain speed. On the way down, however, he must step on the brake continue to travel at the same pace. Monetary policy with SNB Bills and reverse repos The SNB is not the only central bank that finds itself in a situation of excess liquidity. The majority of central banks which have taken unconventional monetary policy measures are in the same position. Central banks have a range of measures at their disposal to reduce this excess liquidity.
Despite significant downward corrections, it is still possible for the economy to perform below expectations, particularly towards 2021 and 2022. This could be the case if the control of the sanitary emergency and containment measures around the world need to be kept in place longer than anticipated. This could also happen if the significant financial needs of businesses and households fail to be met by the supply of credit. Such scenarios would entail solvency problems and bankruptcies of companies in the most affected sectors, with a greater loss of jobs and a slower speed of recovery for the next two years. In such case, convergence to the inflation target may require keeping the MPR at its technical minimum for a longer 6  period of time. This is reflected in the monetary policy trajectory that describes the lower part of the MPR corridor (Figure 12). Another possible scenario is that the sanitary crisis is resolved faster, and the economy restarts its normal activities sooner than expected, lending support to inflation towards late 2020 and the turn of 2021. In such a case, monetary policy could begin normalizing gradually some quarters before, i.e. consistently with the upper bound of the MPR corridor (Figure 12). Inflation could also rise if the companies’ downtime results in a large drop in the available supply of goods and services, pushing up prices. In that case, it is not evident that the MPR path has to be changed, in particular if medium-term inflation expectations continue to be aligned with the target.

In Chile, these needs are particularly important because, in the first weeks of the social crisis, many companies found themselves in a similar situation, which may have consumed a large part of their liquidity cushions and may have been unable to replenish them. To facilitate access to credit for individuals and companies, especially smaller ones, the CBC Board established the Conditional Facility for Increased Lending (FCIC) whereby 4-year loans are granted to banks, with an interest rate equivalent to the MPR and in a magnitude that increases according to the refinancing and credit operations in the most stressed segments. This facility will initially provide resources of about USD 5 billion. A third transmission channel relates to the deterioration of business and consumer expectations and its impact on investment and consumption. Prior to the aggravation of the sanitary emergency, both were already in pessimistic territory and the current situation makes a reversal difficult. A box in this Report presents the results of a survey that the Bank conducted in the second half of March among the participants in the Business Perceptions Report. A major deterioration in their outlook for employment and activity during the next six months was revealed, which must be weighed in the light of the impact on businesses since the social unrest of October 2019.
And third, and this would not only affect credit risk but might also have implications for the trading portfolio, there is a possibility that floors to the results of the internal models may be established, floors or minimum points that would be based on standardised approaches. Hence, the final result of a model could not stand below the threshold calculated using a certain percentage of the result that were to be obtained from applying the standardised approach. In our opinion, this review of the use of internal models pursues a reasonable objective, namely to reduce the unwarranted variability of risk-weighted assets that is manifest among banks from different jurisdictions, conditional – as I stated – upon this not giving rise to significant increases in capital requirements. We should further bear in mind that the greater regulatory requirements are not confined to prudential regulation. In this connection, allow me to refer to one of the key questions of the moment, namely the new requirement for own funds and eligible liabilities (MREL), which should allow for the bail-in of losses arising from bank crises, transferring the cost to private agents instead of the public coffers. The current European regulation approved in 2014, i.e. the Recovery and Resolution Directive, is very demanding. Generally, this regulation prevents the use of public funds if there has previously been no burden-sharing by shareholders and creditors for an amount, at least, of 8% of the total balance sheet.

These include: supply chain finance, which enables businesses particularly SMEs, to leverage on the creditworthiness of their anchor suppliers or buyers who are mainly MNCs, to obtain financing at a more affordable rate which may not be possible through direct approach with banks; coverage in takaful products at competitive prices, which for example include coverage for loss or damage to goods shipped on all types of conveyances from manufacturing to trading; the Investment Account Platform or IAP, established by six Islamic banks in 2016 as the world’s first Islamic bank-intermediated fintech platform that offers more competitive financing terms and variations in financing structures for ventures. To date, the IAP has supported eight ventures worth RM161.3 million; and sukuk as an alternative form of financing for businesses, such as green sukuk for green 1/3  BIS central bankers' speeches  businesses. To date, five green sukuk have been issued by Malaysian solar companies to finance solar power projects, amounting to RM866.8 million since July 2017. These are but a flavour of what Islamic finance can offer and I am sure you will hear about many more today. National policy for nurturing SMEs At the national level, the government is indeed supportive of the role of Islamic finance as an important tool to assist businesses and SMEs to flourish. Developing Islamic finance and the growth of SMEs are key national strategies, as reflected in the recent 2019 Budget. The SME Shariah-Compliant Financing Scheme of RM1 billion was established to strengthen SMEs.