samchain/econo-pairs-v1 huggingface dataset:
Eva Srejber: The euro in the euro area and in Sweden Speech by Ms Eva Srejber, Second Deputy Governor of the Sveriges Riksbank, to the EU Club of Sweden, Gothenburg, 16 October 2001. *  *  *  I should like to begin by thanking you for giving me the opportunity to come here and speak about the euro and its usage. The euro is evidently hot news right now, which is probably not surprising when one considers that in just two and a half months' time the 300 million inhabitants in the euro area will be replacing the banknotes and coins in their wallets. On 1 January the euro, which so far has existed asmerely an electronic currency it will also finally exist in the form of banknotes and coins. A gigantic logistics project The newspapers have been full of stories about the introduction of the euro for some time now, including fears that the transition to the euro will be a field day for counterfeiters. However, most articles concern the pure logistics behind the transition from the old national banknotes and coins to the new euro ones. It is not surprising that this should be given so much attention. The transition to the euro is a project of gigantic proportions. Someone, probably a Frenchman, has tried to indicate the size of the operation by comparing the weight of the coins to be distributed with the weight of the Eiffel Tower. The coins are supposed to weigh the equivalent of 24 Eiffel Towers!

A normalisation of risk premia in relation to the particularly low risk premia prevailing in recent years has its advantages. But the adjustments seem to be marked by overshooting and considerable volatility. We do not know how long the turbulence will last or what consequences will be for the real economy. So far the turbulence has not led to any major reassessments of the global growth outlook among most observers, although it seems obvious that it will have a negative effect. The turbulence has increased the risk that the problems that were initially linked to one segment of the US residential mortgage market will have consequences for the real economy in the US and the rest of the world. This has led to a fall in short-term interest rate expectations, particularly in the US. Long-term interest rates have also declined, reducing funding costs for solid borrowers. Interest rate expectations have also fallen somewhat in Norway. Developments in the krone exchange rate In recent weeks, developments in foreign exchange markets have also been marked by the turbulence. For example, there has been a substantial reduction in carry trade, resulting in an appreciating tendency for low interest rate currencies and weakening tendency for high interest rate currencies. Let us take a closer look at developments in the krone exchange rate and the importance of the krone exchange rate for monetary policy.
And if and when there were a serious co-ordination challenge – if, for example, one body became concerned about its ability to meet its primary objective, without enlisting the assistance of the other – then I think the current system in the UK would allow that to happen. Equally, there are also clear advantages in a degree of separation. One – something I haven’t gone into today but which still matters a great deal – concerns specialised skills. The two committees at the Bank profit greatly from having external members steeped in particular experience, whether that’s monetary experts on the MPC or financial experts on the FPC. Another, the topic of this talk, is a matter of accountability and focus. I think there would be risks in asking the central bank to meet a wide range of objectives with no distinctive accounting for the use of its various tools. Thank you. 14  All speeches are available online at www.bankofengland.co.uk/speeches  14  References Aikman, D., Giese, J., Kapadia, S., & McLeay, M. (forthcoming), “Targeting Financial Stability: Macroprudential or Monetary Policy?”. Baskaya, Y., di Giovanni, J., Kalemli-Özca, S. Peydro, J., Ulu, M. F. (2017), “Capital flows and the international credit channel”, Journal of International Economics, Vol. 108, Supplement 1. Bianchi, F. and Melosi L. (2018), “Constrained Discretion and Central Bank Transparency”, Review of Economics and Statistics, Vol. 100, No. 1, pp. 187-202. Bean, C. (2010), “Monetary policy after the fall”, Speech given at Federal Reserve Bank of Kansas City Annual Conference Jackson Hole, available at https://www.bankofengland.co.uk/speech/2010/monetarypolicy-after-the-fall-speech-by-charles-bean.

Our investment banks have suffered losses in their trading books and a wider group of banks have lost money on their treasury books because of the fall in the values of structured credit of all sorts. At the same time they have found that some of their major sources of finance, notably securitisation and medium term unsecured lending, have dried up and others, notably shorter term lending in money markets, have become much more expensive (Chart 4). What is more, all these effects have lasted longer than expected and seem set to continue for some time. Banks have responded by hoarding liquidity and trying to reduce their leverage by raising new capital (not without difficulty in some cases) and by constraining the growth of lending. One direct effect has been a marked tightening of credit conditions over the past year (Chart 5), which seems still to be underway. That in turn is pushing down asset prices and demand. Our forecasts and our policy decisions have reflected our best assessment of the likely impact of this feedback. We brought down interest rates earlier in the year to cushion the impact of the change in bank behaviour. In effect we have relied on the credit squeeze in large measure to produce the slowdown we consider necessary. But we are fully aware of the risk that the squeeze on banks and the feedback to the economy could prove more powerful than expected. That risk does not just arise from the drama of the last week or two.
This helps to explain why all banks found it more difficult to raise funding when the deterioration in the performance of sub prime assets became apparent, even though it would later be revealed that some banks were more exposed than others. 35 A further challenge is that the markets for innovative financial instruments can grow very rapidly, outstripping the capacity of back offices to keep up with trading. Towards the end of 2005, CDS trading had run ahead of the processing of trades to the extent that the major CDS dealers on average had unconfirmed trades outstanding that were equivalent to a couple of weeks of trading volume. If the reference entities underlying these CDS trades had defaulted, it would not have been clear – at least for some time – who was owed money by whom. The international authorities then set the major CDS dealers targets to reduce volumes of unconfirmed trades, which subsequently fell significantly. But a backlog of unconfirmed trades did start to cumulate again during the early months of the recent financial turmoil, although this has also diminished over the past six months. Furthermore, the proportion of new CDS trades that are confirmed electronically and hence immediately has increased sharply from around 50% when concerns were raised in 2005 to over 90% at present. 36 It is also important that innovative financial products are documented sufficiently carefully and that their risks are accurately communicated to potential investors. The more complex the instrument, the greater the scope for misunderstanding.

What do you see as the main priorities for the post-programme period? What are the areas that Greece should focus on in the years ahead so as to achieve sustainable growth? And what are the main risks? In line with what I have just said, allow me to focus on the financial sector. Reducing NPLs is certainly top of the list from our point of view. On the one hand, only stronger and healthier banks can provide the necessary basis for an increase in the supply of credit that can support economic growth. On the other hand, the restructuring of private and tax debt that could 1/4  BIS central bankers' speeches  accompany the reduction of NPLs is also expected to help healthy companies restart their activities and thus reinforce the demand for credit. A lot has been achieved under the programme. The legislative framework is in place, but continued implementation will be key. Improving the effectiveness of the judicial system is also essential to guarantee a well-functioning financial sector. We also still envisage improvements in banks’ governance frameworks, which will be essential to establish the conditions necessary to attract both domestic and foreign investors and allow the divestment of Hellenic Financial Stability Fund (HFSF) holdings over time. In any case, it will be very important that the authorities refrain from trying to influence banks’ credit decisions and focus instead on improving the framework within which they operate. Are Greek banks now safe in terms of their capital position?
I am pleased to say that January’s report points to some firming in manufacturing and a pickup in hiring – a big improvement from late last year, when this survey consistently signaled little or no growth. Nonetheless, ongoing weakness in the housing market, coupled with a sluggish jobs recovery has increased financial pressures on families. Attendees at previous press briefings may recall that at the New York Fed we have a special consumer credit panel that allows us to track these trends closely.3 Since the beginning of 2008, many regional households have been reducing their per-person debt for mortgages, credit cards and auto loans quite consistently. However, the last three to four quarters show signs that households may have reached the end of this deleveraging process. Debt levels have been flat to slightly increasing in both New York and New Jersey – as they have also been for the United States as a whole. Only in Puerto Rico have debt levels continued to decline, suggesting that households on the island may not be finished with their deleveraging. The picture for debt delinquencies is similar. Although still quite high by historical standards, as of the third quarter of 2011, delinquencies were subsiding in New York and New Jersey, as they were for the nation as a whole. Unfortunately, Puerto Rican households stand out as now having a higher delinquency rate than the mainland, New York and New Jersey – and one that is continuing to rise.

Alongside the somewhat stronger near-term growth we have also seen some improvement in the labor market. Workers are filing fewer initial claims for unemployment insurance. New claims have fallen to levels not seen since mid-2008. Private-sector employees are working more hours. Aggregate hours worked rose at a 3 percent annual rate in the fourth quarter of 2011, up from essentially no growth in the third quarter. Combined with average hourly earnings rising at a 1.8 percent rate, the increase in hours worked suggests an annual rate of  BIS central bankers’ speeches  1  increase in private wage and salary income of close to 5 percent. This is a respectable rate that might support more spending – if sustained. A firmer labor market has been accompanied by partial recovery in consumer confidence over the past few months. Confidence is rising up from levels that were often – in the third quarter of 2011 – lower than at the depths of the Great Recession. It should be noted that while workers’ hours grew at a healthy pace in the fourth quarter, employers added an average of just 140,000 payroll jobs per month, somewhat less than in the third quarter. Despite this rather tepid increase in jobs, the unemployment rate fell a cumulative 0.5 percentage points from September to December. This apparent discrepancy is due to two factors – faster job growth as measured by the household survey and an outright decline of the labor force.
The budgetary cost of this reform will be relatively lower in 2015, although it will have a greater impact, naturally, once it has been set fully in place. The budgetary projection indicates that this forgone revenue will be offset by the greater buoyancy of revenue against a background of strengthening recovery, particularly in domestic demand. The uncertainty habitually clouding estimates of the impact of tax changes will require a continuous monitoring of revenue-raising in 2015 so as to head off potential slippage and, where appropriate, to react in time so as to prevent such slippage from adversely impacting budget deficit targets. 4  BIS central bankers’ speeches  The public debt/GDP ratio will continue on an upward trend, until reaching 100.3% according to the official forecast. The scale of this figure highlights the challenge facing budgetary policy in Spain, which will have to continue prioritising the gradual reduction of this debt. Outlook and challenges The outlook for the Spanish economy is brighter than that which I outlined to this Committee a year back. The rebalancing of domestic expenditure and net external demand has continued, with greater vigour than was previously expected. The pick-up in employment is proving to be one of the main drivers of domestic demand, attesting to the role that the labour market reform and wage restraint are playing in entrenching the recovery, although unemployment remains unacceptably high. But this scenario of recovery is not free from risks. Some, particularly those stemming from the external environment, have increased in recent months.

Approximation with best EU central bank standards and practices is a crucial process for a central bank not only for the effective discharge of the duties, but also for the efficient and stable functioning of the financial system, and benefit of the economy, overall. I am confident that the implementation of this project will be characterised by the cooperative spirit between the Bank of Albania and central banks in the region, on the one hand, and the European Central Bank and Eurosystem, on the other. I would like to conclude with a heart-felt appreciation and gratitude for all the stakeholders having an active role in the launching of this project: •  the European Central Bank for coordinating all the activities;  •  member central banks for providing a large number of experts to assist us with the project implementation;  •  Delegation of the European Union in Tirana for funding it. 2  BIS central bankers’ speeches  We highly appreciate the Commission’s assistance with regard to adopting the implementation of the European Union legislation and are seriously committed to continuing with the successful cooperation, established with the Delegation in the last twinning project. In this context, I would like to reiterate my message that the road to European Union integration passes through regional integration. The financial system and central banks spearhead this process. We expect that public and private economic agents will determinedly follow this step we are taking.
Each of us inside the 18-member Governing Council has to take into account the superior interests of the whole euro area. My colleagues and I are convinced that our present real time detailed communication is, in our case which is unique, superior to mentioning individual votes which could wrongly suggest in the eyes of some that the Governing Council is a place where we are confronting national interests which is not the case and should never be the case. BIS Review 5/2005  3  As the “porte parole” of the ECB and its Governing Council, I think it is remarkable that we act as a team with high team spirit as regards the handling of a complex communication network dealing with 306 million European fellow citizens speaking their languages. The “single voice” principle in monetary policy was introduced from the very beginning and has been efficiently applied in my judgement. As regards non-monetary policy decisions by the Governing Council we have adopted a new procedure in December by placing a communication on our website one day after the second meeting of the month. Previously we communicated these decisions in various ways, for example by press releases or by inserting information under other matters into the introductory statement. I hope that the new procedure will contribute to easier access to non-monetary policy decisions. The document refers to “Decisions” which means that, as a rule, it will cover those issues for which the Governing Council has concluded its deliberations, i.e. decisions have been taken.

It is ironic that only when problems in advanced economies led to contagion elsewhere and large number of central banks entered into such swap agreements with the Federal Reserve, did the IMF agree to such an instrument. This also reconfirms the need for greater voice and representation of emerging markets in important international financial institutions (IFIs) as highlighted in the recent G-20 Summit Declaration. While the reform is underway under the IMF, it is only with hope that other fora, including, the FSF will take the issue into consideration more seriously. Let me elaborate further on the importance of having emerging markets participated in the systemically important international fora. I think you all agree at this advanced economies or emerging markets are all prone to sectoral imbalances, which, if left unchecked, can lead to a full-blown crisis, anywhere, any time, when the bubbles burst. The impact of a crisis in an advanced, systemically important country can be much broader and deeper, creating a larger scale of world-wide externality. Emerging markets, unlike others, have had our share of coping with new challenges brought on by this phenomenon as well as those created by us one decade ago. It is, therefore, not only the responsibility of advanced countries to be in charge of global surveillance but also the responsibility of emerging markets to share our views and experiences of how to reform ourselves to be better prepared for greater uncertainty.
Third, the extent of barriers - regulatory or otherwise - to adoption and what techniques and tools can enable safe use of this technology. Fourth, an assessment of firms’ perceptions of the risks, to both their own safety and soundness as well as to their conduct towards customers and clients, arising from AI/ML. And fifth, the extent to which the appreciation of these risks has given rise to changes in risk management, governance and compliance frameworks. The full results of the survey will be published by the Bank and FCA in Q3 2019, and are likely to prove insightful. Responses were returned to the Bank in late April, so some early indicative results are emerging. Overall, the mood around AI implementation amongst firms regulated by the Bank of England is strategic but cautious. Four fifths of the firms surveyed returned a response; many reported that they are currently in the process of building the infrastructure necessary for larger scale AI deployment, and 80 per cent reported using ML applications in some form. The median firm reported deploying six distinct such applications currently, and expected three further applications to go live over the next year, with ten more over the following three years. Consistent with the McKinsey survey, barriers to AI deployment currently seem to be mostly internal to firms, rather than stemming from regulation. Some of the main reasons include: (i) legacy systems and unsuitable IT infrastructure; (ii) lack of access to sufficient data; and (iii) challenges integrating ML into existing business processes.

The evidence suggests that investors in funds which offer short notice redemptions and that invest in less liquid assets tend to redeem more in response to a downturn in the funds’ performance than those in more liquid funds. And the redemption behaviour of investors in bond funds seems to have become more sensitive as these markets have become less liquid. 19, 20  Drawing these developments together, it’s possible that just as corporate bond markets have become less liquid, they may have become susceptible to greater selling pressure after a shock. We may have more of a mismatch of liquidity. That could amplify any price adjustment. None of this is conclusive and serious problems have not been caused by this in the past. But we have a duty to take the possibility seriously – to ask ‘could it happen?’ With markets having evolved so much in the past decade, the absence of problems in the past is no guarantee for the future. That’s why we’ve been developing simulations of the impact of this liquidity mismatch. The asset management industry has been a constructive partner in this work. I hope we and this Centre can collaborate as we take this work forward. There is much more to do, but our initial work suggests a case for exploring further, including by incorporating a range of other investors into the simulations and assessing the impact not just on bond markets but on the wider economy. You can expect to hear more from us as these efforts develop.
Without going into detail at this stage, I will just mention: •  the work on the regulatory framework applicable to systemic banks, which will be pursued with the idea of taking into account that, owing to their size relative to a domestic market, certain banks can generate major systemic risk in a given country;  •  the finalisation of liquidity regulation, which must revisit the stress test scenarios applied to banks’ assets and liabilities as well as the scope of assets deemed to be liquid;  •  the adaptation of the French regulatory framework for all of the institutions that are currently credit institutions according to our national definition but which will lose this status under the new European definition, which is much more restrictive;  •  the overhaul of the banking crisis resolution mechanism, with the French mechanism – in anticipation of the forthcoming European projects – not having been updated to integrate the more powerful crisis management instruments resulting from the G20 guidelines;  BIS central bankers’ speeches  3  •  the deliberations, in both the European and French frameworks, about better organisation of banking activities and of the relationships between investment banking and retail banking. The ACP will ensure that there is coherence between these different initiatives so as to avoid any unanticipated negative impacts. *** Before handing over to Jean-Philippe Thierry, I would like to stress that, although the difficult macroeconomic context persists, I remain confident about the robustness of the French financial sector.

Finally, one principle – that has gained much attention during the current crisis – is to keep the determination of the monetary policy stance distinguished from the management of liquidity in money markets. All these principles are captured in the ECB’s monetary policy strategy. And globalisation does not fundamentally alter these principles – which give guidance, in particular, in critical times. To weaken or even abandon these principles would undermine our commitment and credibility. And, in the end, we would risk losing orientation. Our strategy has provided a consistent and coherent framework not only for internal analysis and policy decision-making but also for external communication. Using the same framework for internal and external purposes has helped the ECB to ensure that its monetary policy remains consistent, credible and effective. One key element here is that the ECB, from the outset, has been transparent about its mandate, strategy, and decisions, as well as about what monetary policy can do and, even more importantly, what it cannot do. In this sense, expectations about transparency requirements should be in line with the actual strategy followed by the central bank. Without compromising on its mandate, the ECB has demonstrated a willingness and capacity to react rapidly to exceptional circumstances. It has taken a large number of extraordinary measures to support the functioning of the money market and interbank intermediation.