samchain/econo-pairs-v1 huggingface dataset:
This would build on the single supervisory mechanism now under development and ideally lead to a European version of the FDIC, financed by contributions from the private sector. 2. The second building block is a fiscal union, with powers at the euro area level to prevent unsustainable fiscal policies and to limit national debt issuance. With these powers in place, a path towards common debt issuance would also be possible, but only at the end of the process. 3. The third building block is an economic union, which would help euro area members to remain fit and to adjust flexibly within monetary union. This could entail, for example, moving from soft coordination of structural reforms in Member States to an enforceable framework at the euro area level. 4. And the fourth building block is a political union, which aims at strengthening democratic participation. This final building block is equally important, as the other measures cannot be effective unless they are legitimate. This requires innovative thinking as regards the involvement of the European Parliament and national parliaments in decision-making on euro area issues. 4. Conclusion  The roadmap towards a stronger EMU, seen together with the decisions on the ESM and the Compact for Growth and Jobs, represents a comprehensive response to the crisis. The euro area has clearly understood that the time of partial solutions and piecemeal reform is over. In implementing this response, there are sure to be difficulties along the way. This is the reality of operating in a union of 17 democracies.

Against this background, this calls into question whether the surveillance mechanisms available at the moment and the role played by emerging markets in international cooperation are adequate in ensuring international financial stability, the essence of the mission of IFIs. It is therefore in times of crisis that the value of the international cooperation be measured and the voice and representation of emerging markets be heard IFIs. The unprecedented events of the past months present a historic opportunity for the international bodies to rise to the challenge. The time has come for them to be more proactive and become truly global institutions. Apart from strengthening the roles of IFIs, I believe that regional cooperation can play an important role in supplementing both national and global responses. I’d like to raise two observations on this issue. First, the global financial crisis highlights the need to put in place an effective regional surveillance mechanism that can detect weakness early on. International financial institutions will remain useful for global surveillance and financing balance of payments need when necessary. However, waiting for the global community  2  BIS Review 163/2008  through international financial institutions for regional surveillance may be too little too late for timely policy measures that can safeguard the region from contagion from other parts of the world. Indeed, it is very important for policymakers with common challenges to put greater efforts in having a clear and in depth understanding of one another’s policy and practices.
Chart 11: “Alternative work” arrangements  Number of people on different employment contracts , millions  5 4 3 2 1 0 2001  2003 Self employed  2005  2007  2009  Agency workers  2011  2013  2015  2017  2019  In employment on a zero-hours contract  Sources: ONS and Bank of England calculations. Notes: Agency workers calculated on a quarterly basis using LFS data on those reporting to work for, or receive payment from, an employment agency in their main or second job. Data on zero hour contracts is published annually up to 2012, and then bi-annually from 2013. Zero hour contract and agency data are not seasonally adjusted. Some of the increase in the agency work and zero hours lines may reflect increased awareness and reporting. These structural shifts in the workplace are often called the “gig economy”. Their common denominator is greater working time flexibility in the jobs contract. For some, this increased flexibility has been welcome. In  10  All speeches are available online at www.bankofengland.co.uk/speeches  10  surveys, around 30% of workers says they have benefitted from this flexibility, particularly female workers (re-)entering the workforce and older workers tapering into retirement.5 For others, though, these shifts in working arrangements have been a cause for concern. In surveys, around half to two-thirds of workers say they would prefer either to be working more hours or to have greater certainty around their hours.6 For them, AWA are not welcome flexibility but unwelcome insecurity.

Chart 32: Real interest rates and unemployment (1999 – latest) Unemployment rate (per cent)  14  UK  12 US 10 Euro area 8 6  Euro area latest  4 2 UK latest  0 -6  -4  -2  US latest  0 2 Real interest rate (per cent)  4  6  8  Sources: Thomson Reuters Datastream, ONS and Bank of England calculations. Notes: Real interest rates defined in simple terms as current short-term central bank policy rate minus headline CPI inflation rate. 31  All speeches are available online at www.bankofengland.co.uk/speeches  31  The UK occupies an unusual, mid-Atlantic position. It has similar levels of real interest rates to those in the euro area, at the same as having similar levels of unemployment to those in the US. Put differently, relative to both the US and the euro area, and its historical past, the current UK monetary stance looks relatively accommodative. For the same output gap and a higher rate of inflation, the UK’s monetary stance is 2 percentage points looser than in the US. There may well be good grounds for these international differences – for example, differing levels of neutral real rates and different natural unemployment rates. Nonetheless, the very different starting positions of the economy and monetary policy should give us cause to pause before simply assuming central banks should be moving synchronously, even when faced by a common global shock.
Lars Heikensten: EMU - cohesion or diversity? Speech by Mr Lars Heikensten, First Deputy Governor of the Sveriges Riskbank, to The Swedish Institute of International Affairs, Stockholm, on 10 November 2000. *  *  *  First a word of thanks for inviting me to speak. I greatly appreciate the opportunity of talking about matters to do with European integration to an audience outside the circles in which I normally move. This is all the more stimulating given that there is little more than a month to go before Sweden takes over the presidency of the EU Council of Ministers. I intend to begin by saying something about the history and principles behind the European Monetary Union and how they can be related to our theme today: cohesion or diversity. Although EMU was fully launched so recently, I must then comment on what has happened to date, as regards economic developments as well as the economic policy cooperation. I shall then briefly conclude with my view of the future for EU’s economic policy cooperation. Political as well as economic grounds for a monetary union Let us bear in mind that none of the things we are discussing today are entirely new. Common currencies were in use more than a century ago and some of them were valid throughout the continent of Europe. A joint standard and a rapidly growing economic exchange were already seen as natural goals around the turn of the 19th century.

There has been a clear endeavour to counter the upward price tendency. In my opinion, however, it would have been an advantage if management of the exchange rate had been clearly assigned to the central bank, instead of the leaving the responsibility to so many. As regards fiscal policy, experience has not been entirely positive. As I mentioned earlier, in Stage Three of EMU the Stability Pact is monitored with annual stability programmes. This process has worked fairly well in exerting peer pressure on countries with large deficits: no country has yet exceeded the Pact’s lower limit. But assessments of individual countries have tended to differ without there always being factual grounds for this. Neither has particularly good use been made of the golden opportunity that Europe’s present economic upswing provides for faster budget consolidation. Countries should now be making the most of the chance of quickly turning a deficit into a surplus but that is not happening. This may prove to be unfortunate further ahead and it runs counter to the spirit of the Pact. Peer pressure has evidently not been strong enough. Examples of short-run considerations gaining the upper hand in this respect were evident when the dramatic oil price rise led several countries to cut petroleum taxes or subsidise oil-intensive industries, which is hardly sustainable in the longer run for either the economy or the environment. Before concluding I should also like to say something about financial stability in the EU area.
One explanation for the increase may be that Icelandic companies have been undervalued by the markets, for example relative to comparable businesses in other countries, and another that bold and determined investment ventures have driven up their value. But risk and gain often go hand in hand. Sometimes the stakes may be raised too high. It has long been customary to pay a premium for attractive investment options. Such goodwill used to be depreciated in companies’ accounts over a long period and rarely affected their operations. The situation has changed whereby companies now need to make impairment tests of the goodwill they enter on the asset side of their balance sheets. If their original ventures fall flat, the goodwill must be depreciated accordingly. Thus there is a risk, if conditions deteriorate, that this rule could amplify a company’s negative results at the worst possible time. Goodwill totalling more than 500 b.kr. was entered in the financial statements for 2006 of companies listed on Iceland Stock Exchange, and at certain companies, goodwill and other intangibles account for more than half of the total assets on their books. This is a cause for some deliberation. Although the Central Bank’s main function on occasions such as this is to draw particular attention to causes for concern, it should of course take note, like everyone else, of the factors conducive to strengthening the long-term economic outlook. Iceland’s economy is advanced, transparent and vibrant.

Davíð Oddsson: Review of recent economic and financial developments in Iceland Address by Mr Davíð Oddsson, Chairman of the Board of Governors of the Central Bank of Iceland, at the Bank's annual meeting, Reykjavik, 30 March 2007. *  *  *  Chairman of the Board of Governors, Prime Minister, Ministers of Government, Ladies and Gentlemen: On behalf of the Board of Governors I welcome you all to this, the 46th annual meeting of the Central Bank of Iceland. At the Bank’s last annual meeting it was announced that the Government of Iceland and the Central Bank had been in consultation on the need to boost the Bank’s foreign reserves substantially and also to improve its capital position. Their motivation for doing so was not, however, that either position had weakened, nor that the Bank no longer met the benchmarks for capital and foreign reserves. For a long time the minimum foreign reserve has been set at an amount equivalent to three-months’ imports, and this level has always been ensured. However, the major changes – which could even be called revolutionary – that have taken place in Iceland’s financial sector over a relatively few years prompted the Board of Governors to regard it as prudent to take other factors into account, such as the size and scope of the financial sector. As far as the capital position is concerned, it can be said that clear guidelines are to be found in recent legislation on the Central Bank.
Many of these policies simply seek to solve or bypass the legal and incentive problems in the market today and mimic efficient private actions that might be taken if mortgage loans were all held in portfolio and accounting rules did not discourage net present value maximization. Others seek to solve coordination problems and take account of the externalities or spillovers to generate outcomes that are superior from the broadest perspective of the nation as a whole. Earlier this week Chairman Bernanke sent members of Congress a thoughtful analysis of housing policy11 by staff at the Board of Governors in Washington that evaluates a number of these same issues. What I would like to do today is to elaborate on some specific proposals we have developed in New York, in order to try to persuade you that there are workable solutions to our housing problems at costs that I deem very reasonable relative to the economically inefficient path we are on. Of course, I am open to other promising alternatives that would address the same issues. I note also that a truly comprehensive approach would also include long-term reform –including reform of Fannie Mae and Freddie Mac – to put housing finance on a more stable footing and to equip the market to deal more effectively with any future systemic shocks. But I will not discuss these issues in-depth today. Access to mortgage credit Restoring demand for housing requires new mortgage debt to be offered to creditworthy borrowers on reasonable terms.

For mortgages that are part of securitizations, the legal obstacles to loan modification that preserve value are substantial. Meanwhile, mortgage servicers lack the systems, processes, governance, resources and incentives to deal effectively with a large volume of delinquent borrowers – who often suffer poor customer treatment at a time of personal distress.8 The result is inefficiently low levels of mortgage modification, too few “short sales”9 by mutual agreement between distressed borrowers and lenders, and too much reliance on the foreclosure process. This process also has many legal impediments and has become even more inefficient as the volume of loans in the pipeline increases. One consequence has been lengthening delays in completing foreclosures – including unavoidable foreclosures. These delays have increased the economic damage caused by foreclosure and reduced recovery rates. The damage caused by inefficient foreclosures is worth emphasizing. It is not just the direct loss of value in terms of deterioration of homes that are ultimately foreclosed. In addition, as I have personally witnessed in my outreach visits across the New York Fed’s District, foreclosures impose significant costs on families, surrounding neighborhoods and communities. Unmaintained homes facing foreclosure drag down the value of nearby homes. Also, property taxes on non-foreclosed homes often go up due to a declining tax base and this puts additional downward pressure on housing prices. Foreclosures also undercut housing demand. Households that go through foreclosure need to repair their credit records and to accumulate new downpayments.
These risks and their effects on the real economy should not be underestimated. The markets' increasing dependence on one another both within and between countries could lead to considerable contagion effects when there is a disturbance in one part of the system. To summarise; the risks of large financial imbalances building up in economies have probably declined over the past decade as a result of more predictable economic policy. Regulations and risk management systems have also improved. At the same time, the complexity of the financial instruments and the opportunities for extensive positions off the balance sheets have increased the difficulty in assessing future profits and risks in companies. Meanwhile, increased saving and financing in market-listed instruments have made households and companies more dependent on the safe and efficient functioning of the financial markets. This could mean that the effects of disturbances from the  BIS Review 18/2002  3  financial system on the real economy could increase in the long term if regulatory frameworks and supervision are not adapted sufficiently rapidly. Can we live with large imbalances? When share prices plummeted almost two years ago and when uncertainty increased following the terrorist attack in September last year, there were fears that expectations for the future would be revised down so strongly that households' willingness to consume and companies willingness to invest would decline drastically. The fears concerned the US economy in particular, but the uncertainty was also expected to affect the rest of the world.

The scenario I described above was that encountered by the Governing Council of the ECB at its meeting in the first week of June and required resolute and more expansionary monetary policy action. Such action was required because, although available indicators still pointed to medium-term inflation expectations remaining anchored at levels compatible with the definition of price stability, if inflation becomes entrenched at excessively low levels for an extended period, there is a significant risk that these expectations will ultimately be for deflation and a long period of low growth. And we know from Japan’s experience that once this disanchoring has taken place, it is very difficult to return to normal. Before June, the ECB had already reduced its policy interest rates to very low levels on several occasions. The rate on the main refinancing operations stood at 0.25% and that on the deposit facility at zero. The ECB had also embraced the policy of forward guidance, both in the area of liquidity, by announcing in advance that it would extend the fixed-rate tender procedures with full allotment, and in the area of interest rates. Here, forward guidance was introduced in July last year when the uncertainty surrounding the Federal Reserve’s intentions led many investors and analysts to anticipate a change in monetary policy stance not only in the United States but also in the euro area – a change evidently not on the ECB’s agenda. The ECB had also resorted to assets purchases before June.
So far the international regulatory community has not been successful in getting a grip on the extent of the possible systemic problem. It is a gap which needs to be filled quickly. Similarly, I am not sure we know enough about the hedge fund market. I chaired a working group on highly-leveraged institutions for the Financial Stability Forum, which reported a couple of years ago. Our conclusion then was that there needed to be better risk management by hedge fund counterparties, better risk management by highly-leveraged institutions themselves, enhanced public disclosure by those institutions, and some other related changes. I am not one of those who believes that hedge funds are inherently dangerous beasts in the financial jungle. Indeed in many cases hedge funds have been useful in being prepared to take positions, sometimes counter-cyclical positions, which have helped stabilise markets. But the sector has grown dramatically, and as the Long-Term Capital Management problem showed, if leverage is uncontrolled, even one fund alone can be a destabilising factor. So while I do not believe that the case for direct regulation of hedge funds is made out, I do think we need more transparency, particularly about the extent of their leverage, and the recommendations to that effect in my earlier report have not been effectively implemented as yet. It is encouraging that under its new Chairman the SEC are holding a series of roundtables on the subject in New York.

The second important development, less widely discussed, yet which may be of equal significance, is a radical change in the focus of the IMF’s surveillance work. In institutional terms this change in focus is highlighted by the creation of a new Capital Markets Division in the Fund, which prepares a regular Global Financial Stability Report. That document, which has attracted too little international attention so far, is a brave attempt by the Fund’s staff, reinforced by new recruits from the financial markets under Gerd Hausler, late of Dresdner Bank, to focus attention on potential sources of financial instability in institutions and markets. That means, at times, drawing attention to weaknesses in the banking and insurance systems even of G7 countries, which has hitherto been difficult territory for the IMF. Yet it is important for it to do so, not wholly because of the potential benefit for G7 countries themselves, but also to show that developed countries are taking the medicine which they now impose on others. This is because the second major change at the IMF has been the rapid expansion of its work on financial regulation. The Fund is now committed to preparing financial sector assessments (FSAPs) of member countries, and indeed of some non-members too, such as the significant offshore financial centres. These assessments review the effectiveness of regulatory structures, financial regulation and adherence to internationally accepted financial sector core standards and codes.
The consequence of the crisis is therefore not only that the supervision of banks has shifted from the national level in the euro area to a European level, but also that supervision has changed in its basic approach and in what is expected of it and the supervised entities. •  The SSM has allowed us to start afresh in our relationship with banks. It has broken with traditions and customs that were often no longer being questioned. Supervisory teams from different countries see the banks with fresh eyes and on the basis of their common experience. This creates the necessary critical distance for sensible supervision. •  Banking supervision in Europe should take tough but fair action (the emphasis being on “action”). European supervision, the SSM, sees itself as a supervisor which identifies and addresses risks at an early stage, and thus contributes to ensuring that the banking system is able to function properly. A light touch and reactive supervision should belong to the past. •  European supervision should create a level playing field. That is why the first thing that we developed in the SSM was a consistent supervisory approach with a consistent methodology for assessing banks’ risks and governance structures, as well as their equity capital and liquidity positions. •  For the supervision of systemically relevant and large, internationally active banks in particular, the SSM represents a quantum leap forward.

This makes sense, as ON RRP is a good substitute for tri-party repo with private counterparties, and therefore this facility forms a fairly firm floor on overnight repo rates for lenders that have access to the facility.40 As I’ll show in a moment, volumes declined in the private repo market, as is typical on quarter-ends. Evidence to date on other “lenses” Turning to the second lens I noted earlier, we have achieved excellent control while avoiding any unintended change in the structure of the financial system. Figure 11 shows RRP take-up over time, grouped by counterparty type. Take-up, both in aggregate and at the counterpartytype level, has been stable since liftoff. Among the money funds shown in this figure, government-only funds make up more of the demand on typical days, with funds that can invest in a broader universe of money market instruments, called prime funds, accounting for the balance. This has also been stable since liftoff.41 Indeed, more recently, usage has come down as unsecured and secured rates have firmed some. Even with zero usage, the ON RRP facility  BIS central bankers’ speeches  7  could still be effective in underpinning the level for money market rates by supporting lenders’ bargaining power. In addition, as shown in Figure 12, lending volumes in secured and unsecured money markets have been stable, suggesting that the Federal Reserve’s facilities have not displaced activity in the private sector.42 Figure 13 shows activity in unsecured markets by select lender types.