samchain/econo-pairs-v1 huggingface dataset:
Overall, in the years following the COVID-19 crisis, the average CET1 ratio has been slightly more than 1 pp above the average ratio of the period between the end of the global financial crisis and the start of the pandemic. In any event, Spanish banks’ CET1 ratio is at the lower end of the distribution for European banks of different sizes and business models. But it is well ahead of the average requirements and offers good aggregate loss-absorbing capacity. Final assessment Over a broader timescale, it is clear that the solvency and liquidity of both the Spanish and the European banking sector have improved substantially over the last decade. This has been driven, in part, by the internationally agreed regulatory reform, which in the European Union applies to all banks, irrespective of size. Indeed, the strengthening of the banking sector and the regulatory reform have proved vital to enable the sector to successfully overcome the extraordinary stress episodes of recent years. In Spain, the fact that business models are strongly oriented towards the retail segment bolsters their capacity to absorb adverse shocks to wholesale market financing conditions and has enabled them to record a favourable financial performance of late, both in terms of higher profitability and improved balance sheet quality. However, confidence in our banking system must not allow us to overlook the existing risks, which remain significant in both the short and the long run.

Growth is projected to stabilise in the second half of the year, and to remain stable in 2024 and 2025, underpinned by a recovery in real disposable income thanks to the anticipated easing of inflation, rising wages and resilient employment. Conversely, the tightening of monetary policy will exert increasing downside pressure on economic activity. All told, GDP is projected to grow by 0.9% in 2023 and by 1.5% in 2024, with both figures revised down by 0.1 percentage points (pp) compared with the March projections. The GDP growth forecast for 2025 is unchanged at 1.6%. Inflation declined further in May (to 6.1%), with a zero contribution from the energy component. Meanwhile, food and services prices have barely dropped from their recent alltime highs. Underlying inflation stood at 5.3% in May and has shown greater downward stickiness than expected a few months ago. The Eurosystem projections point to a gradual reduction in inflation as a result of base effects, the expected gradual moderation of energy and food prices and their progressive pass-through to underlying inflation. These factors should offset the mounting pressure from wages. Profit margins, which grew in recent quarters, are expected to moderate over the projection horizon. Overall, inflation is forecast to stand at 5.4% in 2023, to subsequently ease to 3% in 2024 and 2.2% in 2025. These inflation projections are similar to the March ones.
In the region as a whole, the US plays a vital, constructive role, moderating tensions and keeping potential flash points from boiling over. “Can Asia make it?” A year ago, many analysts and investors would have said no. The Asian miracle appeared to have been an illusion, built on flimsy foundations. Today, in light of the rapid economic rebound, the rank of the sceptics is thinning rapidly. My own view has been an unequivocal “yes”. Asia will recover its former dynamism. Not automatically, and not all at once; but as countries rebuild and put things right, recovery will come. The fundamentals which supported two decades of high growth in Asia have not disappeared – a sturdy work ethic and high savings rates, skilled and disciplined workforces, and an entrepreneurial culture. In time, these strengths will enable the countries to grow and progress again. The recovery will create new investment opportunities. Asian governments have recognised the need for foreign equity, and relaxed restrictions on foreign investments. Prices are down, and fundamentally  BIS Review 117/1999  4  sound companies facing difficulties are looking for strategic alliances. Investors should keep their eyes open, invest discriminately, and ride on the region as it picks up. At the height of the crisis, I asked one European banker what his bank would do. He said that the bank had been in Asia for over a century. It had seen far worse upheavals. It would take the latest problems in its stride, and wait the storm out.

Ladies and Gentlemen: At this point, kindly allow me to call upon our Guest of Honour, Honourable Ms Chileshe Kapwepwe, MP, the Deputy Minister of Finance and National Planning to deliver the key note address and to officially open this Conference. Honorable Minister Sir! BIS Review 46/2009  3
6  BIS Review 158/2010  objectives, there would appear – all else being equal – to be a case for further action”. Since then, the Federal Open Market Committee (FOMC) has announced that interest rates will remain low and announced a new programme for buying government bonds (called Quantitative Easing, QE2). As we saw in Figure 3, GDP in the United States fell less than that in Sweden during the crisis. As I noted earlier, potential GDP in the United States may well have fallen more than that in Sweden. A correct GDP gap could then very easily be more negative in Sweden than in the United States. The repo rate is not a target variable that needs to be “normalised” Another argument in favour of raising the repo rate has been that it needs to be “normalised”. According to this argument, it would be better – all else being equal – to have a repo rate closer to a normal level. As the repo rate is now so abnormally low, a “crisis rate”, it should be raised or at least not cut, even if this means we are further from the inflation target and resource utilisation is even lower than normal. I do not agree with the normalisation argument. In my opinion, the repo rate and the repo rate path have no value in themselves – they are not target variables. A “normal repo rate” is not a target for monetary policy.

For instance, if I had to mention three of them, I would choose: (i)  overseeing the development of awareness and training within the organisation;  (ii)  monitoring patch management in order to make sure that identified flaws are corrected in due time;  (iii)  and, last but not least, capturing the effectiveness of the identification and authentication processes. In a nutshell, key indicators help to improve the governance of the IT security system. ** To conclude, I believe that it is necessary to better structure the international governance of cyber security in the financial sector: it is clear that the different regulatory and supervisory authorities are aware of “cyber risks”. This is becoming apparent through the numerous initiatives at various levels (domestic, European, and international). While this is welcome, it is both delicate but necessary to strengthen international cooperation in order to ensure that there are neither loopholes nor overlaps and that there is convergence towards proposals and solutions that can easily be shared with others.
The credit cycle and monetary policy The knock on effects of defaults in the US sub prime market and the impact of big investors on asset prices are factors we need to assess not just in trying to understand the financial sector and the stresses it faces but in gauging the state of the economy more widely. The story of the sub prime market illustrates a wider point. In traditional banking markets in the past there has been an observable tendency for banks to overshoot both in offering credit at the top of the cycle and retrenching afterwards. That feeds through into asset prices and can have an impact on the wider economy. Despite the sophistication of the new capital markets, a very traditional cycle seems to have been alive and kicking in sub prime. 3  The definition of the official sector in the US Treasury survey also includes public bodies such as oil stabilisation funds. 4  See ‘International capital flows and US interest rates’, NBER working paper 12560, October 2006. 6  BIS Review 84/2007  A similar story could be told about the credit card and other unsecured lending over the last few years. The growth rate rose in the late 90s until defaults began to build up over the last 2 years and the banks and other lenders tightened up terms and conditions sharply (Chart 13). The path of commercial property prices in recent years suggests the same has been happening there (Chart 14).

We have seen shocks to credit markets in the last two summers which were swiftly reversed. Could recent events be the beginning of a more lasting change? There are some good reasons for doubting it. First the underlying economic and corporate fundamentals remain encouraging. Not only is world growth running at over 5% but it seems better balanced with the recovery of Germany and Japan and slightly lower growth in the US (although one of the explanations for the rise in longer term risk free rates has been a more optimistic view on US growth prospects). In the corporate sector overall gearing is not unusual, pension deficits have diminished, and profitability is high. Defaults in the prime housing market in the US have not shown dramatic increases. Losses on mortgage lending in the UK are still very low and there seems no prospect of a significant rise in unemployment that led to sharp rises in repossessions and defaults in the past. Equity markets remain strong at multiples of earnings which are little above average. Again, within financial markets, liquidity remains high overall (Chart 4). Against that background, there is a risk of becoming alarmed by good news. In our last Financial Stability Report we identified the low risk premia in credit markets as the principal vulnerability in financial markets because of the risk it carried of a swift and disorderly return to more normal levels.
The Regulatory Sandbox which we introduced last year – itself an innovation in regulatory approaches – helps us 3/4  BIS central bankers' speeches  to achieve this in a way that contains the external risks that can come with innovation, while allowing the opportunity for great new ideas to unfold and take root. As regulators, we are also continuously learning ourselves about the best way to deal sensibly and proportionately with risks associated with innovation. In this regard, I am pleased to announce that the Bank will shortly be issuing proposed regulatory parameters for the conduct of electronic Know-Your-Customer or e-KYC processes for remittance transactions. We expect to finalise the standards for e-KYC by October after receiving industry comments. Following this, the existing requirement for face-to-face verifications for onboarding new customers will be removed for companies that have received approval to conduct e-KYC. It goes without saying that the Bank fully expects MSB companies licensed in Malaysia to ensure that innovation is not pursued at the expense of obligations to comply with applicable laws and regulations, and to safeguard legitimate interests of customers. Having worked hard to build confidence and trust in the industry and to avert the damaging effects of de-risking that continues to a key challenge in more than a few jurisdictions, actions by any firm to undermine the integrity of the financial system will be met with a strong regulatory response from the Bank.

When we think of “innovation and disruption”, it usually brings up images of companies acting to ward off imminent threats from challengers to their business. “Innovation and sustainability” on the other hand, focuses on opportunities to do things better, increase long term value and strengthen a company’s agility to adapt and respond to changing conditions. Put another way, “disruption” often keeps an eye on your competitor, while “sustainability” focuses attention on the customer and understanding one’s own inherent strengths and weaknesses to build stronger, more responsive and more resilient companies. It would be a mistake to associate innovation solely with technology, or assume that it can only be achieved with huge investments in research and development. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. Steve Jobs underlined the point that innovation is not about the money, but the people you have, how you’re led and how much 2/4  BIS central bankers' speeches  you get it. Einstein famously said that “we cannot solve problems with the same thinking we used when we created them”. He reminds us that innovation is fundamentally concerned with solving problems, having an open mind to ideas and the ability to convert those ideas into an organized and disciplined process to create a positive and lasting impact. Viewed in this perspective, the frontiers of innovation are almost boundless; limited only by our ability to define problems and our imagination.
Something that further fuelled the slowdown in productivity during the second quarter this year was the low holiday absence in June, which we assess to be a temporary effect. Our forecast is that productivity will once again accelerate, but increase at a slower rate than it has in recent years. If one looks at the forecasts for the labour market and productivity together, one can also see that companies’ costs in production are expected to increase more rapidly than in recent years. Unit labour costs are rising according to our assessment, by 4.8 per cent a year, but the rate of increase will then fall back as productivity begins to increase more rapidly once again. Expectations confirm the picture of increased cost and inflationary pressures If I very briefly summarise the domestic situation, the wheels of the Swedish economy are turning at a good pace. We have a high level of utilisation of economic resources and cost pressures are increasing. Something that supports this picture is that both households and companies have adjusted their inflation expectations upwards, according to various surveys. And if one instead measures inflation expectations by looking at the difference between nominal and real bonds, the results point in the same direction. … is counteracted by slightly weaker international developments International developments appear to provide some counterbalance to the slightly stronger Swedish economy. Although we are counting on international growth being good, it will probably be lower than we predicted in June.

This provides a tool that allows Fed officials to tighten monetary policy and raise private sector interest rates by raising the rate paid on excess reserves. Some skeptics note that when interest on excess reserves was first implemented, the federal funds rate traded somewhat below the rate on excess reserves. This has created worry in some quarters that paying interest on excess reserves might not work very well as a tool for controlling the federal funds rate. On this issue, two points are warranted. First, the relatively large gap between the interest rate on excess reserves and the federal funds rate was due, in large part, to the impaired condition of the banking system, which inhibited the willingness of banks to arbitrage that gap. Because balance sheet capacity was scarce, banks were reluctant to use their balance sheets to purchase federal funds at a slight discount to the interest on excess reserves rate. As the banking system returns to health, this arbitrage is likely to become more attractive, causing the gap between the interest rate on excess reserves and the federal funds rate to narrow. Second, the Federal Reserve could alter its monetary policy framework in order to increase its control of monetary policy in a large excess reserve environment. It is beyond the scope of this speech to get into the details, but we have plenty of options in devising incentives for banks to hold reserves at the Fed that would improve our ability to control the federal funds rate.
The rise in broad money during the pandemic and the current inflation So the lesson of history is that most movements in broad money occur independently of variations in the size of the central bank’s balance sheet. Nor are many of them driven by exogenous changes in supply with no accompanying shift in the demand for money. They’re not necessarily Friedman’s “helicopter drops” and accommodating them needn’t have any implications for asset prices or for demand. However, there may be times at which this is the more appropriate description. Arguably, the significant growth of M4 during the pandemic – and specifically the build-up of money in households’ bank accounts – counts as one such episode. Unable to spend during the lockdowns, but still receiving income (in part thanks to the government’s furlough scheme) households accumulated significant “excess deposits” (Chart 3). This was surely involuntary (hence the word “excess”) and was always likely to support the recovery of consumer spending once lockdowns were lifted. And monetary authorities – including the MPC – treated this issue very much through this somewhat “monetarist” lens. There was every reason to expect a strong recovery anyway, whatever the form of that additional wealth. As we emerged from the last lockdown in the spring of 2021 the level of consumer spending was still extremely low and, given the additional impetus provided by the rise in “W”, even equation [1], which makes no distinction between monetary and non-monetary assets, would have predicted a very rapid bounce-back.

The implication, as my colleague Silvana Tenreyro emphasised in a recent speech[13], is that it makes more sense to think of the impact of the policy through the lens of prices – what it does to bond yields – than quantities. This was also the recommendation of the Bank’s Independent Evaluation Office in a report issued a couple of years ago: “Rather than explaining QE in terms of ‘injecting’ or ‘printing’ money, QE could be framed as a continuation of conventional monetary policy that pushes down long-term interest rates …Framing QE as a change in an interest rate rather than the creation of a quantity of money may also reduce the perception that QE is a transfer of wealth to the rich or to banks.” I think this makes a good deal of sense. The demand for commercial bank money: If desired holdings of central bank money can move around (even for given levels of aggregate spending and economic activity), the same appears to be true of commercial bank deposits. As we’ve seen, the supply processes aren’t the same: in the case of broad money it’s the commercial banks themselves (not the central bank) that directly create the deposits, and effectively accommodate such shifts in demand[14]. But the basic intuition is the same.
Page 3  To simplify, I will focus on three factors driving the monetary policy outlook: a common process of monetary policy ‘normalisation’ after the long period of exceptional support initiated in the face of the global financial crisis in 2007-08 and continued to a large extent through to the pandemic of 2020-21; the need for monetary policy to address the inflationary consequences of tight labour markets and strong firm pricing power in the US and the UK; and the challenges for monetary policy created by the significant adverse terms of trade shock to Europe – including the UK – which has followed from Russia’s invasion of Ukraine, disruptions to natural gas and food supplies, and the resulting much higher level of European wholesale natural gas and food prices. As the simple schematic sets out, none of these challenges is unique to the UK. But – at least in the way I have described it – the UK is distinctive in facing all three of these challenges at the same time. In itself, this simultaneity creates its own challenges for monetary policy. In formulating its decisions, the MPC needs to layer the consequences of each of these driving factors on top of one another in coming to its final policy choice. The more layers involved, the more complex is that process – and its communication.

But the extent to which an easing in the labour market induced by monetary tightening will weigh against inflationary pressures will depend on the wider context. It is here where the interaction with developments in energy prices plays out. Higher energy prices and the terms of trade In contrast with developments in the US, wholesale European natural gas prices have risen very sharply over the past year, and continue to show substantial volatility. Owing to the importance of pipeline infrastructure to the transport of natural gas, there is much less integration than for other energy commodities like oil. Notwithstanding Brexit, for these reasons, the UK remains closely integrated into the European natural gas market. Gas price developments in Europe have departed very significantly from those in the US, owing to the disruption to supplies of gas from Russia in the aftermath of the Russian invasion of Ukraine last February. The rise in European gas prices came as a genuine surprise: the Russian invasion was not foreseen in the autumn of 2021, and the duration and intensity of the subsequent conflict have anyway proved greater than expected at the outset. The rise in gas prices has therefore been substantial: at its peak in late August, the April natural gas future stood more than ten times higher than a year previously.
In addition, the reduction in the interest rate has probably contributed to holding up expectations of future inflation even when inflation is low. If there is confidence in monetary policy, economic agents will expect inflation to be close to target over time. Companies will draw up their budgets on this basis. This will then contribute to stabilising inflation. Many companies change their prices only once or twice a year. When they change prices, they probably take into account the expected rise in other prices. It has been important to prevent inflation expectations from falling and becoming entrenched at a low level. Surveys of inflation expectations nevertheless indicate that expectations are well anchored around the inflation target in the long term. The first signs of the effects of the interest rate cuts appeared in the foreign exchange market. The interest rate differential against other countries narrowed. It became more attractive to borrow and less profitable to invest in the Norwegian krone. The movement in the krone exchange rate was reversed and the krone depreciated through 2003 and into 2004. However, the impact on the krone exchange  2  BIS Review 27/2005  rate has been considerably dampened because external interest rates have remained low. High prices for oil and gas and other export goods also contributed to an appreciation of the krone last year. The depreciation of the krone in 2003 contributed to restraining the fall in prices for imported goods. The effect occurred gradually.

We need a more structural view of QE transmission. In the annex to this paper, we sketch out a very simple monetary framework as a starting point. [16] That monetary framework may help answer important questions about the dynamics of these polices. As we will see in the next section, such a model helps address questions such as: what is the relative importance of the stock of purchases announced versus the flow of purchases conducted? Does the impact of QE fade over time? What influences the relative potency of QE over time? By their nature, event studies cannot answer such questions. I apply this highly stylised model to the current situation in the next section, in order to develop and illustrate some high-level views about the potential conduct and impact of QT. Thinking about QT Just to be clear from the outset, the discussion here is not intended to front-run the MPC’s discussion of asset sales and quantitative tightening. As I have already said, in February the MPC decided to start shrinking its holdings of gilt accumulated via QE by ceasing to reinvest the proceeds of maturing bonds. Bank staff have been commissioned to think about the potential  Page 12  modalities of gilt sales in the future. But no decisions have yet been made about whether or, if so, how to conduct gilt sales. Nor is the discussion here intended to develop a quantitative view of QT transmission.