samchain/econo-pairs-v1 huggingface dataset:
And the new EU resolution framework has shifted the cost of bank failures away from sovereigns and onto the financial sector, which creates another channel of private risk-sharing. Without entering into the discussion on which further regulations may be necessary for the shadow banking sector, we have to acknowledge that the banking union and the capital markets union are not yet complete. We lack a truly level playing field for cross-border banks and investors, and this stands in the way of deep financial integration. A single financial market should have one set of rules and all market participants should be able to operate freely within it. Yet that is not the case at present. For capital markets, there are differing rules and market practices for financial products across countries, and insolvency and judicial systems vary widely. This matters because a consistent and efficient framework for pursuing failed contracts is vital to reduce uncertainty for cross-border investors. ECB analysis finds that where insolvency and judicial frameworks are more efficient, risk-sharing through both capital and credit markets is higher.21 For banks, the Single Market is still fragmented along national lines. First, discrepancies in the regulatory framework reduce the economies of scale for banks operating across borders.22 Second, an incomplete framework for bank resolution also deters cross-border integration. When resolution is not fully credible, it can create incentives for national authorities to limit capital and liquidity flows so as to advantage their depositors in the event of a bank failing.

Many other countries have applied macroprudential measures. The institutional framework and the formulation of the measures vary. Macroprudential policy will by its nature vary across countries. The credit cycle and systemic risk vary over time and across countries. That being the case, neither banks nor other economic agents should be surprised that macroprudential policy in Norway differs from that of surrounding countries. In many countries, the central bank has a prominent role in macroprudential policy. Monetary policy objectives and macroprudential objectives are not the same. Monetary policy is aimed at securing low and stable inflation and is the first line of defence against cyclical fluctuations. Macroprudential policy is aimed at strengthening the resilience of the financial system and curbing financial vulnerabilities that build up in the economy over time. Macroprudential policy and monetary policy nevertheless share many features. In Norges Bank, we can build on the experience of monetary policy when providing advice on the size of the countercyclical capital buffer for banks. Both macroprudential policy and monetary policy must be based on an assessment of the state of the Norwegian economy and developments in credit, inflation, output and employment. The buffer works through banks, as does monetary policy. The analysis of the capital buffer therefore has much in common with the analysis we perform when setting the key policy rate.
Some investors may also have misinterpreted the risk dimensions covered by a rating. Against this background there is probably scope to improve the information content of ratings and to make the monitoring process more transparent. It also needs to be investigated further to what extent conflicts of interest may have arisen for rating agencies in their credit risk assessment of structured credit instruments. Several international fora are currently looking at those issues. Fourth, the turmoil has revealed some challenges for the liquidity management of banks. BIS Review 137/2007  1  Banks, including those in continental Europe, have increasingly relied on secured funding, both via securitisation and off-balance sheet vehicles. This has rendered them more vulnerable to a sudden disruption of structured credit markets. Let me recall that the regulatory framework requires EU banks to have policies and procedures for the measurement and management of net funding positions on an ongoing and forward-looking basis and have in place contingency funding plans. In this context, recent events have demonstrated that banks need to further strengthen their liquidity risk stress-tests, encompassing for example scenarios such as a protracted closure of a broad range of securitisation markets and the drawing of contingent liquidity obligations by commercial paper programmes. Moreover, those elements should also be incorporated into their contingency funding plans. The ECB, together with the ESCB Banking Supervision Committee, is carrying out work on this important topic.

Jean-Claude Trichet: Global capital – surrender of national policies? Lessons from the recent events in credit markets Speech by Mr Jean-Claude Trichet, President of the European Central Bank, at the 17th Frankfurt European Banking Congress “Global Capital – Threat or Salvation?”, Frankfurt am Main, 23 November 2007. *  *  *  Ladies and Gentlemen, Let me start off with one general remark: The present significant market correction with episodes of turbulences should not come as a surprise to us. The ECB, as well as the other central banks, has issued warnings in the past on the global phenomenon of under-pricing of risks. In many respects the present episode can be interpreted as bringing to the forefront anomalies and structural deficiencies which we have identified earlier. While it is too early to make a full assessment, I believe there are some first provisional lessons which can already be drawn at the current stage. A lesson that can be drawn is that the growing complexity of instruments has to be monitored very closely. Structured credit markets are exposed to valuation problems, which make the market very vulnerable to a shift in investor sentiment. In the absence of reliable market prices, instruments need to be valued by models. But estimates which the models produce are highly sensitive to underlying assumptions.
This leaves a third alternative - that is to boost income through stronger economic growth. A majority of people favour this solution, yet there is no consensus as to how it might be realised. Some support stimulating demand, especially with a view toward monetary policy. Others put the emphasis on supporting the market forces by deregulation and liberalisation. However, these same people will often shy away from drastic measures as soon as their own interests are concerned. The National Bank can support economic growth with its monetary policy as long as the goal of price stability is not jeopardised. This is the case when economic growth reaches capacity limits. However, monetary policy cannot increase the growth potential. To achieve this, measures are needed that provide more room for manoeuvre and foster initiative and readiness for innovation on the part of individuals and corporations. In recent years, Switzerland has seen a number of reforms that head in the right direction and - in some cases - that have proven to be successful. For instance, the telecommunications sector and the hotel and restaurant industry have been liberalised, the cartel laws revised and - last but not least labour market policies have seen changes as a result of the free movement of persons between the EU and Switzerland. Admittedly, some of these reforms have been implemented only half-heartedly and - what’s more - under pressure from outside.

As I have already mentioned, this enabled us to conduct a monetary policy in the heart of the euro area that is suited to the needs of Switzerland. And that brings me to my concluding remarks. 5. Conclusion  Switzerland is a small, open country, with few natural resources, which in many ways has become global. The export industry and the financial sector have adjusted well to the new structures and have become global players. The domestic economy and the political structures, however, are straining to make the equivalent adjustments because changes in those areas would often affect vested interests and future claims on the social security system. Nor has there been sufficient pressure to act. However, in order for Switzerland to stand the test in a dynamic global environment, it must ensure that the reform process currently under way will be continued and accelerated. By now, some observers have come to question Switzerland’s ability to make comprehensive reforms altogether and assert that the country has become a problem case because of its inability to make changes. I do not share this pessimistic view. On the contrary, I am convinced that the understanding for the necessity of reforms, and with it the willingness to temporarily accept disadvantages, will grow. What ultimately gives me cause for optimism are Switzerland’s sense of realism and its wealth of experience. We are aware that neither the European environment nor globalisation will take our national feelings into account.
This matter was raised when the General Council of the Riksbank decided to make two major transfers of profit at the start of the 2000s, which  19  See Andersson et al. (2020) for a discussion. 20 See SOU 2007:51. 2013:9 and SOU 2019:46. 19 [25]  clearly demonstrated that decisions on the transfer of profit were being taken by political forces rather than the Executive Board, in contravention of EU law. 21  The Riksbank’s financial independence Both of the two earlier inquiries made by Ingrid Bonde and Harry Flam, together with the more recent Riksbank Inquiry, have all been based on the idea that, in normal times, a central bank’s balance sheet should be fairly small. The idea is simple: in normal times, the foreign exchange reserves can be small and monetary policy can be conducted using variations in the policy rate. However, the Riksbank needs to fund its operations without annual allocations from central government and therefore needs to have earnings that, on average, are at least as large as expenditure. The size of equity thus needs to be calibrated so that the return on it, together with any seigniorage from banknotes and coins, is at least as large as expenditure. Under the assumption that the balance sheet is small, very little extra equity is needed to cover extra risks. The problem with this approach is that it assumes that we are returning to the normal state of affairs that prevailed before the financial crisis of 2008-2009. Things are seldom that simple.

I look forward to the productive and engaging discussions during this conference, and wish you a pleasant stay in Kuala Lumpur. I shall now invite the ISI President, Professor Vijay Nair to deliver his Opening Remarks. 2  BIS central bankers’ speeches
We have often referred to the benefits of having a floating exchange rate regime in an open economy like Chile, which is regularly subject to shocks in its terms of trade and external financing. Preserving the float during good times provides exchange rate flexibility to address situations like the present one and thus promote a more efficient adjustment of the economy. It also plays a key role in preventing currency mismatches that have been so costly in other countries in the region and in Chile in the past. Thus, the period of favorable financial conditions that we have seen in recent years has not resulted in higher short-term debt or currency mismatches in the banking system or in the non-financial sector. The credibility of the inflation target of the central bank is another important asset, which provides room for monetary policy action, as are compliance with the fiscal rule and the soundness of our banking system, which is well-regulated and supervised. Free trade and diversified target markets for our exports also play a key role in ensuring that the transition to the new macroeconomic configuration is smooth. One example of its usefulness is the way in which non-mining exporters have managed to avoid the appreciation of the local currency in recent years and weather the international crisis. Despite the difficulties they have faced in some markets such as Europe and the United States, they have been able to retain global leadership positions, maintaining or increasing their shares in world trade.

The weakness of the peripheral economies has propagated inwards, which along with the fragility of the fiscal accounts and the banking systems creates a vicious circle difficult to break. Emerging economies are decelerating across the board, most notably China. The Chinese authorities have shown greater tolerance for lower growth rates, in an effort to achieve a more balanced demand structure and address some imbalances in the financial system. Meanwhile, the change in world growth composition, along with expectations of an early withdrawal of the monetary stimulus in the U.S. has led to a realignment of investment portfolios. Thus, long-term interest rates rose across the board, stock markets fell and risk premiums increased. The effects were more pronounced in emerging economies, whose currencies, including the Chilean peso, have depreciated. This has been accompanied by a decline in the prices of commodities, including copper. For Chile, the terms of trade are less favorable than they were in March, and are expected to remain so over the projection horizon. Thus, a new scenario has been created where the very favorable conditions for emerging economies in terms of growth, commodity prices and financing conditions have started to normalize. Although some of the reasons behind these movements are positive, since they reflect better growth expectations particularly for the United States, they have triggered market volatility that may unsettle those economies with more vulnerable financial or fiscal positions. In the baseline scenario, Chile’s GDP will grow between 4 and 5 percent in 2013, less than expected in March.
Thus, policy rates were raised by a total of 425 basis points in June and July 2006. At the same time, the excessive liquidity in the overnight market was cut down via open market operations and foreign exchange sales. These measures soon proved to be effective. The acceleration of inflation stopped in the third quarter of 2006, followed by a marked decline in inflation rate starting from the second quarter of 2007. Favorable developments in the services sector, which had recorded significant price rigidities in the past, were particularly noticeable. As you may know, bringing down services inflation takes longer compared to goods inflation, owing to structural factors such as lack of competitive pressures, high share of labor costs in the production function, and backward-looking pricing behavior. Against this background, it is a favorable development that services inflation declined to single digit levels for the first time in mid2007, after hovering around 14 percent even in the 2004-2005 period where consumer price inflation came down to single-digit figures. The year 2007 was a time when the effects of unfavorable developments in food and energy prices became visible. Nevertheless, uncertainties over the persistence of supply-side shocks in the future and the marked slowdown in core inflation indicators created a favorable environment for a gradual ease in monetary tightening. In this framework, the Central Bank initiated a measured rate-cut cycle in September 2007 and cut interest rates by a total of 225 basis points within a six-month period.

Inflation rates of countries whose currencies are pegged to the Euro rose to 10.2 percent from 4.4 percent. In this period, countries that avoid the nominal appreciation of their currencies have only exacerbated the inflationary effects of supply shocks. The necessary adjustments in real exchange rates have taken place through the rise general price level. 2  BIS Review 82/2008  Until recently, the common view among central banks of developed countries was to give priority to problems in financial markets in absence of inflationary pressures. However, they have slowly acknowledged the fact that the increase in inflation has reached critical levels. Accordingly, with uncertainties in financial markets diminishing, the FED and the ECB have hinted that they may resort to monetary tightening in the near future in the face of rising inflation. What should be the best reaction of monetary policy under these circumstances? Although the factors causing higher inflation are presumed to be exogenous and beyond the control of central banks, there is a lot of controversy on this issue. But before going into detail, let me question the validity of this debate first, because to what extent the increase in commodity prices is supply-driven is questionable in the first place. Certainly, there are structural reasons behind the recent run-up in food and energy prices. However, it is also undeniable that there are significant demand-driven pressures over commodities. Loose monetary policies adopted in early 2000s certainly played a key role, together with excess liquidity in the financial system.
That would not only destabilise our domestic economy, it would also cause the intended euro-entry rate to appreciate in real terms, with adverse implications for our competitiveness within the Eurozone. These effects would clearly be difficult to contain given the constraints on both our interest rate and the exchange rate as we moved towards entry, and very difficult to reverse once we were inside the single currency area. This obstacle would diminish to the extent that the euro itself recovers against other currencies generally – as at some point it surely must. In that case sterling might weaken bilaterally against the euro, but it might be expected to strengthen against the dollar and other currencies, leaving our overall, effective, exchange rate closer to where it currently is. That would have less impact on our domestic rate of inflation. There's no question, my Lord Mayor, that what we would like to see, both in the context of our current monetary management and if we are to join the euro, is a combination of a pick-up in the global economy and a recovery in the euro exchange rate. That would be in all our interests. But it is not at all clear what we can do to bring it about. In the meantime, as we sail out from our island haven, through conflicting offshore currents and variable onshore winds, we may not find it easy to remain on the course set for us by Gordon the Navigator.

Jean-Pierre Roth: Heading for more sustained growth? Summary of an address by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the General Meeting of the Swiss Italian Chamber of Commerce, Zurich, 20 June 2006. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  Lately, Switzerland has been experiencing an encouraging upturn in the economy on the back of growth in the international economy. This development is particularly welcome because it follows a number of years of economic listlessness which have prompted repeated criticism from international bodies, due to the lack of growth in the Swiss economy. However, Switzerland's medium and long-term growth problem has not disappeared. Faster economic growth is the only possible response to the challenges posed by an ageing population. Moreover, it is the sole antidote to Switzerland's continuing loss of ground with respect to the other members of the OECD. Reforms are needed to ensure that, in the future, we can achieve more with fewer resources. The ways and means of doing this are evident. The Federal Council's package of growth measures is a move in the right direction, and the current improvement in the economy gives Switzerland the opportunity to move ahead with the requisite reforms. BIS Review 59/2006  1
If interest rates rose faster and reached a level 100 basis points higher in 2020 than what the CBO has assumed, the net debt service burden would be about 3 ¼ percentage points higher by 2020, all else equal. Given the uncertainties around economic forecasts that far into the future, it would be highly desirable for the fiscal authorities to put in place a medium-term program of fiscal consolidation now, while market conditions are benign. At the same time, I think we must be careful and not focus exclusively on the imperative of fiscal consolidation. That is because fiscal policy adjustments have important implications for  1  2  The 2011 remittance figure is a preliminary unaudited estimate. BIS central bankers’ speeches  the level and composition of economic activity more broadly–both here and abroad. If we must undertake fiscal consolidation– and over time we must–then we need to be cognizant that this adjustment will need to be accompanied by other offsetting changes in the composition of economic activity in our and the global economy. 2 One way of illustrating these interrelationships is to use the following accounting identity, which imposes an adding up constraint on the overall economy: If you define private-sector net saving as the private balance and public sector net saving as the public balance, then: Private balance + public balance = current account balance.

The Principles’ provisions for an FMI’s recovery and orderly wind down will inform upcoming work by CPSS-IOSCO on the potential role and attributes of official regimes for the resolution of FMIs. This work is underway and should be completed later this year. I’m pleased to see what has already been accomplished. But let’s be clear, when the Principles are published that won’t be the end. To quote Winston Churchill, it will only be “the end of the beginning”. Thereafter, the resolution, disclosure and assessment frameworks will need to be finalized later this year. The CPSS and IOSCO members will have to adopt the new Principles into their regulatory and legal frameworks, with a target date of year-end. The new Principles will then be put into effect next year, with FMIs expected to observe the new Principles as shortly thereafter as is feasible. This is obviously an ambitious schedule, but one that is fully consistent with the G20 leaders’ mandate. 6  BIS central bankers’ speeches  Finally, we should recognize that the global financial system is a complex one that is continuously evolving and that we are introducing many significant changes into that system. We have to recognize that there may be trade-offs between some of our objectives, and that the system may evolve in ways that we do not expect. There may be unintended consequences.