samchain/econo-pairs-v1 huggingface dataset:
6  BIS Review 62/2008  Many schemes rely on a mutual responsibility, where the remaining banks will come up with the financing to cover the insured depositors of a failed bank, in some cases relying on a fund which has been built up in advance. This works fine as long as it is only small banks that suffer problems. However, if a larger bank is affected, there is a risk that the problems will spread as other banks are forced to contribute substantial funds from their own balance sheets. Given that many markets are very concentrated, with a few banks dominating the market, the failure of the largest banks will be difficult to finance in these kinds of mutual systems. Particularly vulnerable are the kind of small private schemes which rely solely on the remaining banks coming up with money after a failure. The deposit guarantee can then rather become a destabilising factor without the problem bank necessarily needing to be a particularly important actor in the payment system or on the financial markets. Clearly, you want to avoid a situation where government intervention may be necessary simply because of a poorly designed deposit guarantee system. A solution to the problem was put forward in a Swedish government enquiry a few years ago. The trick is to make the banks internalise the cost of the guarantee not at the industry level, but at the level of the individual bank.

The more promising approach is to invest in the complement of institutions and policies that enable an economy to live more comfortably with openness. Focusing on those measures that will enable an economy to be more flexible and to adapt more quickly to change ultimately will be a more effective policy strategy. It is politically more difficult, but economically more effective than those solutions that seem to offer protection from competition and volatility. Crisis resolution A fourth lesson, or series of lessons, comes from our experience in crisis resolution. The strategies adopted to stabilize markets and then to foster recovery varied significantly across the crisis economies. Each involved a somewhat different mix of policy reforms and temporary financial assistance, tailored to the different conditions that prevailed. Where there was success, the common feature was what Larry Summers called the Powell Doctrine applied to international finance – the overwhelming use of force, with a clear strategy for resolution. The “force” in this sense applied both to the scale of financing made available relative to the need and to the quality of the policy measures. Very substantial resources were deployed in support of the recovery efforts, and a large share of the resources was made available upfront, in order to try to mitigate the liquidity problem and to stem the loss of confidence.
Let me share with you another observation from Preet Bharara. A common element in many of the frauds his office has prosecuted is the failure of colleagues to call out bad conduct by raising their hands. This is so telling of a culture that condones or promotes misconduct. People see something, but do not say something. And, it is so shortsighted. It prevents problems from being addressed while they are small. By not raising their hands, these colleagues are “quietly adding risk to your books [and] invisibly enlarging your liabilities.”8 They are also tacitly encouraging bad conduct by skewing incentives. There may be many reasons for choosing silence over raising your hand. You may face a conflict of loyalties. It’s uncomfortable to tell on a colleague. You may think that the problem will just go away, or that calling attention to a problem will harm the firm. Raising your hand is difficult. But, it is also absolutely necessary. As rising leaders in the industry, you need to lead by 4/6  BIS central bankers' speeches  example. In doing so, you will make it easier for others to follow your lead. My final message is a request that each of you commit to a candid assessment of yourselves, your firms and your industry. For Adam Smith, candid observation was a cornerstone of economic behavior: “We suppose ourselves the spectators of our own behavior, and endeavor to imagine what effect it would, in this light, produce upon us.

I doubt that rules alone can accomplish this. Telling people to be ethical doesn’t make it so. Seeing others engage in ethical decision-making is, by contrast, quite powerful. With that prologue, let me turn to my first message: Stay in banking. This might be a surprising message in light of my introduction. Nonetheless, banking is important work. Society relies on its financial system to “create substantial value for our society.” 3 As investor and author John Bogle has written: “[Banking and finance] facilitate the optimal allocation of capital among a variety of users; it enables buyers and savers to meet efficiently; it provides remarkable liquidity; it enhances the ability of investors to capitalize on the discounted value of future cash flows, and other investors to acquire the right to those cash flows; it creates financial instruments [. . . ] that enable investors to assume additional risks, or to divest themselves of a variety of risks by transferring those risks to others.”4  To fulfill its potential for creating value for society, the financial system needs talented and dedicated people at the helm. This is especially true for banks, which are indispensable to our economic system. As the philosopher Onora O’Neill has observed, banking requires more than just technical competence.5 Bankers must reproduce their efforts and results with reliability. And, above all, bankers must be honest. They must do what they say and say what they mean. This is necessary for the financial system to be viewed as trustworthy.
The krone was very stable in the first years following this episode, with small daily fluctuations in the exchange rate. Looking back at developments in the Norwegian foreign exchange market in the 1990s, it appears that no significant change really occurred in 1992. However, there was a marked shift in January 1997. From that time, daily and monthly variations in the krone exchange rate show that the krone is floating. Monetary policy is oriented towards stability in the value of the krone. The Exchange Rate Regulation - which is the mandate assigned to Norges Bank by the political authorities - states that monetary policy shall be aimed at maintaining a stable krone exchange rate against European currencies. Since 1 January 1999, Norges Bank has defined European currencies as the euro. 3  BIS Review 92/2000  The Exchange Rate Regulation takes into account that the krone exchange rate may remain outside its normal range. In the event of significant changes in the exchange rate, Norges Bank shall orient instruments with a view to returning the exchange rate over time to its initial range. Norges Bank considers an exchange rate change to be significant if it influences expectations concerning price and cost developments to the extent that the change in the exchange rate becomes self-reinforcing.

This has partially been driven by the introduction of the risk margin under Solvency II but also by an increasingly competitive marketplace. Indeed, in feedback to the Discussion Paper (DP2/22)[4] we issued in April, firms generally told us they see the continued use of high levels of longevity reinsurance over the long-term as an inherent part of their new business strategy, even after substantial cuts to the risk margin. The PRA is therefore considering how well the resulting risks are managed and mitigated, including risks on recapture. A recapture event requires the insurer to reassume the transferred risk on reinsurer default or if  Page 4  legal conditions are breached[5]. Recapture thus necessitates taking control of any collateral assets and separately, putting aside sufficient capital to back the reassumed risk. Firms may argue that they could reinsure the risk to a different reinsurer but with a market dominated by a small number of counterparties whose financial position may be positively correlated, this assumption may be unrealistic. Beyond the risk to individual firms, there is the potential for systemic risk to arise where a large proportion of the UK insurance and pension[6] industry’s exposure to longevity risk is ceded to a small number of reinsurers. Funded reinsurance The second development in the annuities market is an emerging appetite for funded reinsurance. In its most extreme form, this is a fully funded transaction that involves the insurer paying a single, upfront premium which will be invested by the reinsurer to make the annuity payments.
23.06.2020  The main post-pandemic challenges for the Spanish economy Appearance before the Parliamentary Committee for the Economic and Social Reconstruction of Spain after COVID-19 – Congress of Deputies Pablo Hernández de Cos Governor  1. Introduction Ladies and gentlemen, I appear before this Committee to set out what should be the guiding principles, in the opinion of the Banco de España, of Spain’s economic policy strategic priorities at present. Before elaborating on these priorities, allow me to convey my praise and gratitude to Spanish citizens for their exemplary behaviour in the especially difficult circumstances we have faced in recent months. Naturally, my support also goes out to all those who have lost loved ones as a result of the pandemic. The crisis has disrupted economic activity on a massive scale. To such an extent that, on all available forecasts, this year will see the biggest declines in GDP recorded in peacetime. As I argued in my appearance last May before the Parliamentary Economic Committee, the severity, temporariness and global nature of this shock initially warrants forceful economic policy measures that are time-limited and internationally coordinated. The goals of this shock therapy should be to lessen the effects of the pandemic in the short term and provide for an exit from the lockdown of the past few months with the least economic harm possible. Broadly, the response of the authorities - with measures I described and assessed in the aforementioned appearance - has been significant.

The measures that can still be used are often described as unconventional in order to distinguish them from the customary instruments. Most central banks in advanced economies make use of these unconventional measures. While the Federal Reserve and the Bank of England are chiefly focused on ensuring a more expansionary monetary policy, the goals of the European Central Bank (ECB) and the SNB are somewhat different. In the case of the ECB, its unconventional measures are directed against disruptions in the transmission mechanism of monetary policy arising out of the deterioration in government finances and credit conditions in the single currency area. The SNB, for its part, took a stand against an unwarranted tightening of monetary conditions as a  BIS central bankers’ speeches  1  result of the strength of the Swiss franc – a strength whose origin was to be found in international developments. Unconventional measures mainly take one of the following three forms – forward guidance regarding the future path of policy interest rates, quantitative easing (QE), or foreign exchange market interventions.1 What is involved here, and what do we hope to achieve? In the case of forward guidance, the central bank provides explicit information on the expected movement in short-term interest rates. To a certain extent, central banks had already provided such indications previously. This applies, in particular, to countries that communicate their monetary policy on the basis of an inflation forecast conditioned on a given interest rate path.
On the other hand, they may lead to creation of bubbles that down the road may burst. Against this background, at the last meeting of G20 finance ministers and central bank governors it was acknowledged that technological innovation may be conducive to higher efficiency and inclusiveness of the financial system. Many risks, however, were also pinpointed with their proliferation – consumer and investor protection, market integrity, tax evasion, money laundering and terrorist financing. In this changing and challenging environment, staying aside is not an option for the Republic of Macedonia. To tackle the rising challenges, we have already drafted a new Law on payment services and payment systems (in cooperation with the Ministry of Finance) which transposes the PSD2 as well as other European Union relevant directives and regulations in the payments area. The new payment regulation aims to boost the competition in the traditionally bank dominated payments market by opening the entrance for FinTech companies which can provide innovative payment services as well as establish and operate new payment systems. At the same time, we assert our focus on maintaining financial stability by enhancing the resilience of payment market infrastructures which are being assessed against the Principles for Financial Market Infrastructures.

The improvement reflects the expansion of domestic demand - that is increase in consumption and private investments - whereas foreign demand appears weak and fiscal policy continues the consolidating trend. The new information obtained in the first half of the year is in line with this judgement. The intensity of supply shocks, which led to the rapid decline in inflation over the first half of the year, seems to decrease. Inflation recorded a slight increase in May, reaching at 0.7%. This performance confirms our judgement about the transitory nature of the abovementioned shocks. However, our analyses confirm that the balance of inflationary pressures is still weak. Economic activity remains below potential, suggesting that the return of inflation to target will be a gradual and medium-term phenomenon. Our monetary policy has assumed a stronger stimulating stance over 2016. After two consecutive cuts in April and May, the key interest rate currently stands at 1.25%. The strengthening of the monetary stimulus has led to lowering the interest rates across all segments of the financial market, thus stimulating the increase in consumption and private investments. The Bank of Albania deems that the financial setting - characterised by low interest rates and ample liquidity - should encourage banks for a more positive approach towards lending. Banking sector’s soundness indicators have been improving, in response to economic activity recovery and other measures undertaken by Albanian authorities. Liquidity and capitalisation indicators maintain good parameters, whereas the stock of nonperforming loans - albeit fluctuating - has been put under control.
2  0609  1208  0608  1207  0607  1 1206  0609  1208  0608  1207  0 0607  -2 1206  1 0606  -1 1205  2  0606  3  0  1205  1  Source: Bloomberg, CBRT. Monetary policy response  After commenting briefly on inflation developments, I would now like to cover the policies pursued by the Central Bank during the last quarter. Anticipating that inflation would decrease sharply following the last quarter of 2008, when the global financial crisis deepened, the Central Bank of Turkey (CBRT) focused on alleviating the potentially harsh impact of the global financial crisis on the domestic economy. Throughout this process, the CBRT has delivered sizeable cuts in policy rates, while providing liquidity support to facilitate the smooth operation of credit markets. In this respect, the CBRT continued to cut interest rates in the third quarter, bringing the cumulative rate cuts to 1000 basis points since November 2008. Therefore, the CBRT lowered policy rates more than any other emerging market central bank since the intensification of the global crisis (Figure 13 and 14).

Therefore, such labour market reforms can help with containing the level of private and public debt by increasing household incomes via enhanced job creation owing to better matching of job seekers with vacancies. Third: An acceleration of fiscal policy reforms such as the enactment of a fiscal responsibility and budgets systems law, so as to ensure medium and long term fiscal sustainability. These stipulate a medium-term orientation as regards budget formulation and provide for binding expenditure ceilings. For example, the annual growth rate in total public expenditure must not exceed the growth rate of potential GDP, unless corrective measures on the revenue side are introduced to compensate the higher growth rate of expenditure. In this respect, such policy frameworks can directly tackle the level of public debt by promoting lower public deficits. I will not leave out the banking sector reforms: having effective foreclosure and insolvency frameworks and actively and efficiently managing Non Performing Loans should be encouraged in order to tackle elevated risks related to high levels of private debt. However, the adoption of an improved insolvency framework will not be in a position to achieve its full potential if its application is impaired by inefficiencies in the judicial system. 3/5  BIS - Central bankers' speeches  Let me now give some remarks on the situation in Cyprus. Public debt increased rapidly during the economic crisis of 2012-2013, going from 65.8% of GDP at the end of 2011 to 112% in June 2014.
Since the second half of 2018, when we enhanced our forward guidance on interest rates (and especially since the monetary policy meeting of the Governing Council in March 2019), the reassessment by investors of information regarding the outlook has led them to expect a somewhat longer horizon over which rates are more likely than not to remain unchanged. Accordingly, the EONIA forward curve has shifted down substantially over recent months (see Chart 3). 5 / 19  BIS central bankers' speeches  In light of this endogenous adaptability of the state-contingent leg through investor behaviour, occasional gaps may emerge vis-à-vis the date-based leg, since the latter can only be recalibrated at each Governing Council monetary policy meeting. In March and June 2019, the Governing Council assessed that the risks to price stability warranted a recalibration of the datebased leg, thereby conveying the Governing Council’s updated assessment of the direction that the ECB’s key interest rates will have to follow. The Governing Council now expects to keep policy rates unchanged “at least through the first half of 2020”. It should be fully understood that a change to the date-based leg is not intended to ratify market views. Rather, it provides information on the Governing Council’s assessment of the rate path that, given the evolving state of the economy, we view as the likeliest to be realised. Finally, the inherent flexibility in our forward guidance framework always allows for additional enhancements to ensure that inflation remains on a sustained adjustment path.

Moreover, by helping to spread market and credit risks more widely, they may increase the resilience of large banks. 2  Unlike regulated investment funds, HLIs can use leverage without any restrictions; in other words, they can borrow to increase the capital available for investment. If a HLI had capital of USD 1 and borrowed a further USD 1, it could invest a total of USD 2. In this example, leverage would be 1. In other words, leverage is the ratio of debt to equity capital. 3  McCarthy, 2006. 4  Financial Stability Forum, 2007. 5  De Nederlandsche Bank, 2007, table 1. 2  BIS Review 74/2007  HLIs have proved to be quite robust to stock market drops. In stress situations in the last decade, the HLI industry incurred less losses than stock indices. The exception was the Russian crisis in 1998 with the collapse of LTCM. 3. Are HLIs a threat to financial stability? In this section I analyse first, whether HLIs represent a direct risk to financial stability and second, whether there are transmission channels through which HLIs could indirectly weaken either systemically important banks or the banking sector as a whole. As already mentioned, the size of the HLI industry is comparatively small, from both an individual and an aggregate point of view. Moreover, the HLI industry is highly segmented and there is a broad range of different investment strategies.
Mugur Isărescu: Monetary policy during transition. How to manage paradigm shifts Presentation by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the Annual Conference of the European Association for Banking and Financial History, organised by the European Association for Banking and Financial History and the National Bank of Romania, Bucharest, 7–9 June 2012. *  *  *  Ladies and Gentlemen, I started my career back in August ’71, the day after President Nixon announced the suspension of gold-convertibility of the US dollar and the introduction of a 10 percent surcharge on American imports, thus marking the dismantling of the Bretton Woods System. We all know what happened next: in an attempt to preserve a system of fixed exchange rates, the Smithsonian arrangement – which set a fluctuation band of +/–2.25 percent – was introduced in December 1971. It only lasted for six months, so that during 1972–73 fixed exchange rates were replaced by floating regimes in most economies around the world. Exception made the countries of the European Economic Community, which decided to implement a joint floating arrangement and introduced rather funny concepts such as the “snake in the tunnel”. Those were also years of intellectual controversy – I remember reading alternatively the Newsweek articles of Samuelson and Friedman, one preaching the virtues of Keynesian policies, while the other praised free markets and non-intervention. I witnessed the end of an era and the dawn of another.

But, borrowing from the central bank is just a single transaction and the Treasury could use it immediately for making payments. Second, because of the limitations of the tax bases in developing countries, there is resource paucity for governments to undertake much needed infrastructure projects. Hence, it has been argued that the governments in developing countries could initiate the development efforts by mobilizing resources through inflation. The initial inflation so created would get reversed once the new economic development increases the production of goods and services and raises the market supply. So, inflation would become a self-destroying process and, therefore, it is argued that there is no danger of using inflation for economic development. Third, taxes are mandatory payments and therefore, there is resistance on the part of tax payers to pay the taxes. Because of the pressure coming from the lobbying groups, political authorities too sometimes are unwilling to raise the tax rates to generate higher tax revenue. However, the resistance of the citizens to inflation tax is virtually nonexistent. This is because no one realizes that they are paying a tax to the government, when the prices move up. Any resistance by them is not against the  2  BIS Review 64/2007  inflation tax per se, but against the inflation. That again takes place after sometime when they have been very badly hit by inflation. Fourth, inflation is said to be bringing about some salutary effects to an economy from the point of view of its long term growth.