samchain/econo-pairs-v1 huggingface dataset:
Christian Noyer: France’s banking industry in 2007 – key trends Speech by Mr Christian Noyer, Governor of the Bank of France and Chairman of the French Banking Commission, at the presentation of the 2007 Annual Report of the French Banking Commission, Paris, 26 June 2008. *  *  *  Welcome to the working breakfast organised for the press on the occasion of the publication of the Commission Bancaire’s 2007 Annual Report today. I would like to take this opportunity to speak to you about the major trends seen in the banking industry in 2007. Naturally, the main development last year was the subprime crisis. I will also speak about the lessons learned from the crisis for the future. Even though the French banking system’s overall exposure to the risks revealed by the subprime crisis turned out to be less severe than in other G10 countries, our banking system was still affected, as can be seen in the decline in profitability. On a more encouraging note, however, French banks managed to maintain satisfactory solvency ratios, testifying to the system’s resilience and its ability to cope with a very large-scale and complex crisis. However, in addition to the impact on business conditions, the financial crisis calls for an examination of the robustness of some of the banking activities that developed so rapidly over the last ten years. These activities have complicated the task of risk management in major banking groups.

For example, a positive supply shock – as a result of technological progress, for instance – could keep inflationary pressure low for a prolonged period. Expansionary monetary policy conditions could therefore be maintained. But if we look at financial stability, this situation entails the risk of a boom-bust cycle, which would require a tightening of monetary policy. A similar problem is conceivable if the economic outlook is so poor that raising interest rates would be inappropriate because of the risk of deflation. However, maintaining low interest rates would pave the way for potential imbalances, which – from the point of view of financial stability – would actually have to be countered by raising interest rates. Such situations make it clear that a single instrument cannot simultaneously achieve two objectives. A further problem is that a bubble is not easy to identify. Expecting us to be able to tell in advance whether damaging price imbalances are building up within certain asset classes is not realistic. First, that would require us to be better than market forces in assessing the fundamentally justified value of a specific asset. Second, it is not easy to clearly identify which variables are to be used as indicators of imbalances. A third problem is that we do not yet have any sound knowledge of the timing, effectiveness and required scope of the monetary policy response that would be necessary to counter financial imbalances.
Specifying all the circumstances that have to be considered so as to obtain the best picture of underlying inflation and doing this in advance is not a simple matter. Using underlying inflation also has the drawback that essential information about the inflation process may be overlooked. For example, changes in import prices are a part of the domestic inflation process because they affect price setting in trade. In the present state of our art, the drawbacks of changing to a measure of underlying inflation for the Riksbank’s monetary policy are greater than the advantages. As I have indicated, however, the CPI may be markedly affected by transitory effects. It is therefore important to monitor measurements of underlying inflation that have been stable over time. The path of the underlying inflation process is an important factor in the Riksbank’s monetary policy decisions. Gradual recovery In growth terms, 1996 was weaker than 1994 and 1995. The slowdown mainly came from marked stock reductions and a contraction of public sector operations. But even the growth of final demand in the private sector tended to slacken in 1996. There are now clear signs of an economic recovery; the volume growth of exports remains high, along with indications that a stronger increase in private consumption is on the way. What, then, will be inflation’s path in the years ahead?

Provided there is stable confidence in the policy for price stability, price effects from a weakening of the exchange rate are generally BIS Review 32/1997  -3-  transitory. A depreciation is a problem for monetary policy only when it has a lasting expansionary effect or if inflation expectations rise. The economy’s inflation propensity, which seems to have decreased in recent years, is an important factor to consider when assessing the threat from future inflation. The term inflation propensity stands here for the structure of the inflation process, which is liable to be changed by various factors. If stronger competition, for example, in certain segments of trade results in lower price increases than before when consumption is rising, then the economy has a lower inflation propensity. Examples of factors that may have helped to reduce the inflation propensity are the fall in market expectations of inflation and the higher acceptance of the Riksbank’s inflation target. Another cause of a decreased inflation propensity can be lower inflation as such. Price comparisons are easier for households and firms when inflation is low. Price increases are more visible and producers have more difficulty in raising prices without a relative price shift. The situation in this respect is one of the main issues that the Riksbank will have to evaluate. We shall be returning to this later in the year. All in all, the picture that emerges of the Swedish economy suggests that the monetary stance is well balanced.
In the case of employment, the statistics traditionally used in Chile are built by extrapolating the results of surveys to the population, using expansion factors, which in turn are based on population projections that are updated at every Census. Thus, between one update and the next, the surveys do not have the capacity to reflect exogenous changes in demographics. Therefore, a phenomenon of immigration of the magnitude that our country has experienced in recent years cannot be represented correctly until the expansion factors are updated. So, information about levels in the labor force such as employment and other aggregates delivered by the different surveys do not necessarily provide a faithful representation of the reality whenever substantive changes occur in population aggregates. As you can see in Box III.3 of the Report, using different sources of information a revision can be made of the evolution of employment, factoring in the impact of the migrant inflows we have seen recently in Chile. In particular, this exercise shows that between 2016 and 2018 employment would have grown between one and two percentage points annually more than shown by the surveys, that is, between double and triple the data obtained from the surveys over the last few years. The difference in growth originates in the assumptions made regarding the new immigrants that entered the country in the last year, which are not available as yet.

13  Figure 7 Inflation indicators (annual change, percent) 6  CPIEFE for services and disaggregation (1) (2) (annual change, percent) 6  6.0  6.0  5  5.5  5.5  4  5.0  3  3  4.5  2  2  4.0  1  3.5  0  3.0  CPI  5 4  Services  CPIEFE  1 Goods 0  -1 2.5  -1 14  15  16  17  Indexed and/or regulated  4.5 4.0  Other  3.5  Services excluding foodstuffs and energy 16  18  5.0  17  3.0 2.5 18  Figure 8 CPI inflation forecast (*) (annual change, percent)  CPIEFE inflation forecast (*) (annual change, percent)  6 5 4  Sep.18 MP Report  3  6 6  6  5 5  5  4 4 3 3  Sep.18 MP Report  4 3  1  Dec.18 2 2 MP Report 1 1  Dec.18 2 MP Report 1  0  0 0  0  2  11 12 13 14 15 16 17 18 19 20  11 12 13 14 15 16 17 18 19 20  (*) Gray area, as from fourth quarter 2018, shows forecast. Sources: Central Bank of Chile and National Statistics Institute (INE).
We also need to explore the possible channels of contagion that may result in adverse market dynamics. Gaining a better understanding of the functioning of the shadow banking system is a key element of and a precondition for improving the efficiency of financial regulation and supervision across markets and jurisdiction. I strongly encourage the FSB to continue to work very actively on all of its work streams regarding the regulation of the non-banking sector. This includes regulatory reform of money market funds, securitisation and the interaction with the banking sector. I am looking forward to the progress report to be delivered for the G20 meeting in October. Further regulatory challenges In a number of key domains, decisions have been taken by the international community. It is no time to challenge them. It is time to implement. In a crisis period where confidence is of the essence, it would be extremely damaging if the authorities were to hesitate, demonstrate an absence of resolve and of the fortitude that is required by the circumstances. I see resistance of some in the financial sector against Basel III. I see similar messages on the SIFIs. For me, it is crystal clear: what has been decided is decided. But there are other areas of regulatory reform where work is still underway. Let me briefly highlight two key areas on which we need to stay committed and where swift progress is of the essence.

But I also want to look at the road ahead: we must not stop here and leave our task halffinished. There is still very important work to be done on a number of regulatory challenges. And with all our reforms and with all our new institutions of economic and financial governance, we must ensure timely implementation so that we can ensure that we have done everything to make a difference as regards the resilience of the global, regional and national financial systems. The ESRB Let me start with some of our accomplishments before moving on to highlight some key areas where we need to make progress. The first accomplishment is the establishment of the European Systemic Risk Board (ESRB) earlier this year. As you know, the ESRB brings together the policy makers such as central banks, supervisors and the Commission, thus fostering a broad-based review of risks and vulnerabilities and a deeper understanding of interlinkages and spillovers between different parts of the financial system. This wide-ranging perspective, which encompasses both micro and macro elements, is an essential feature of the new European supervisory framework and it fills a gap identified at the global level. Although the ESRB does not have direct binding powers, the effectiveness of its “comply or explain” mechanism builds upon the high reputation of the ESRB’s members and the quality of its analysis.
When the Riksbank did not want to do this, Heckscher decided to do something about it. The right to exchange notes for gold had ceased in connection with the outbreak of the war in 1914, but was reintroduced in 1916. However, since an export ban on gold had been introduced in 1914, this did not mean in practice that the gold standard had been re-established. The export ban allowed the gold price to differ between countries and the value of the krona to change against other currencies. This was also the case as the krona depreciated against the dollar. At the US Federal Reserve, the price of one kilogram of gold in the depreciated Swedish currency was SEK 3,600 at the beginning of 1920. At the Riksbank, the price of one kilo of gold was instead SEK 2,480. If the export ban were to be lifted, then a considerable arbitrage gain could be made. Heckscher decided to draw the general public's attention to this fact and did so through an article entitled “The new price revolution” (Den nya prisrevolutionen), published in the daily newspaper Stockholms Dagblad on 11 March 1920.

This could be the only unambiguously, incontestably good thing to come out of Economic and Monetary Union. We have also conducted some really exciting discussions on the issue of rounding - a subject which I find can cause great excitement among accountants and lawyers. And anything which brings excitement to their sad lives should clearly be welcomed by us all. My general conclusion - and I will end here, you will be pleased to know - is that while EMU will significantly affect your markets, it does not negate the usual rules of competition and success. EMU changes the raw material which you work with to generate your exotic, and sometimes dangerous products. But it does not change the rules of economics, nor does it alter the dynamics of competition. It closes down some aspects of current financial market business, but opens up a big set of new opportunities at the same time. Those who seize those opportunities will be the most innovative, most cost effective, and most fast moving. At the moment, on this side of the Atlantic, most of those people are found in London. I see no reason why they should move. BIS Review 67/1997
As a result, by end-2014, Spanish deposit institutions’ level of exposure to real estate development, net of provisions, had fallen by around € billion since 2011, almost 60% of the exposure then existing. ii)  Consolidation  A second package of measures involved driving greater consolidation in the sector and thus redressing its excessive size. This was achieved through corporate integration operations, the acceptance by most banks of business restructuring strategies and the elimination of non-viable banks, through resolution processes. Overall, since 2007, the number of banking groups has diminished by 40% (or 40 banks). Likewise, the number of offices in the banking sector has declined by 30% relative to the 2008 peak, and staffing numbers have fallen by 25%. That makes for a notable capacityadjustment drive which has been decisive in improving operating efficiency in the industry. iii)  Recapitalisation  Thirdly, the measures aimed at promoting the recapitalisation of banks should be highlighted. As I said, while the Spanish banking sector was generally able to meet comfortably the regulatory requirements in force before the crisis, overall it had insufficient leeway in terms of capital to withstand such adverse scenarios as those arising from the far-reaching downturn in the macroeconomic situation as from 2010, and the acute correction of the real estate market. The recognition of losses caused by the adverse turn in macroeconomic conditions weakened the financial situation of the sector as a whole.

Can this persist in the long term? The ECB’s monetary policy will remain very accommodative until inflation is firmly on a path towards 2%. What other reasons are there, beyond the ECB’s decisions, for interest rates being so low? It is because growth is still weak. It is because our economies are less able than in the past to create growth. The ECB must take account of this environment and, to provide effective support to the recovery, we must set our key interest rates at very low or even negative levels. If the European economy regains the ability to sustainably create growth, interest rates will return to levels more favourable to savings. How do you account for the fact that economic growth has remained low in France in 2016? The pace of economic growth is accelerating throughout the euro area and the unemployment rate is falling, including in France, but at a slightly slower pace. The ECB’s monetary policy has made a strong contribution and the reforms implemented in each country have played a role. The countries that were severely affected by the financial crisis have had to undertake reforms. The reforms that they have implemented, particularly in the labour market, have been hard but are now bearing fruit. In Spain, for example, growth is set to be above 3% in 2016 and the unemployment rate is falling rapidly. France, which weathered the crisis better, faced less pressure to undertake reforms. Today growth in France is weaker and unemployment is higher.
Rajan, Raghuram G. (2005), “Has financial development made the world riskier?” Paper presented at The Greenspan Era: Lessons for the Future—A Symposium Sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, August 25–27. Scholes, Myron and Ash Alankar (2017), “What investors can teach central banks about inflation”, Opinion Markets Insight, Financial Times, 1 November. Summers, L. H. (2017), ”5 reasons why the Fed may be making a mistake”, blog post, 14 June, http://larrysummers.com/2017/06/14/5-reasons-why-the-fed-maybe-making-a-mistake/ Svensson, Lars E. O. (2017), ”Cost-benefit analysis of leaning against the wind”, Journal of Monetary Economics, vol. 90, pp. 193-213. The Economist (2017), “The Phillips curve may be broken for good”, Daily Chart, 1 November. White, William R. (2006): “Is price stability enough?”, BIS Working Papers, no 205, April. Wolf, Martin (2017), “Central banks alone cannot deliver stable finance”, Opinion Central Banks, Financial Times, 24 October. Yellen, Janet L. (2017a), Transcript of Chair Yellen’s Press Conference, 20 September. Yellen, Janet L. (2017b), “Inflation, uncertainty, and monetary policy”, speech at “Prospects for growth: Reassessing the fundamentals”, 59th Annual Meeting of the National Association for Business Economics, Cleveland, Ohio, 26 September. 16 [20]  Figure 1. Swedish inflation ’ahead of the international cycle’ Annual percentage change  Note. Inflation for Sweden is measured as the CPIF, for the US as ‘core PCE’ and for the euro area as the HICP. Sources: Bureau of Labor Statistics, U.S. Department of Labor, European Commission (Eurostat) and Statistics Sweden  17 [20]  Figure 2.

Even if it were possible, going back to the ECU would present major disadvantages compared to today’s euro: until the euro was introduced, France did not actually participate in decisions on interest rate levels and had to follow German monetary policy; the franc was at the mercy of speculative attacks from the financial markets that drained our currency reserves as we saw in the 1992-1993 period. The euro was introduced to solve these problems. Today, the euro is alive and well. It is the currency of 340 million Europeans, is recognised worldwide and is trusted by the people of France. Almost 70% of French citizens are in favour of the euro because it protects their purchasing power, with prices that increase three times less rapidly than previously; because it makes borrowing easier, with interest rates that are 1.5% to 3% lower; and because it safeguards the value of their savings. Finally, I would like to add that the Eurosystem has not modified its sovereign debt purchase programme in relation to France’s presidential elections. The distribution of monthly purchases between the various countries is based on the ECB’s capital allocation principle. 1/1  BIS central bankers' speeches
Gradually, there is also an increase in output in the services sector, which boosts employment in that sector. Our judgement is that this will also be the case this time. At the same time, it is important to remember that a process of structural change has been underway in the Swedish economy for some time, where jobs in the manufacturing sector have been replaced by jobs in the private services sector. This development, too, is likely to continue in the period ahead. Consequently, there is no reason to expect robust growth in manufacturing employment in the coming years. Furthermore, in the current economic upswing, it appears to be taking somewhat longer than usual for jobs to pick up. The number of hours worked, on the other hand, has risen more than normal for the current economic climate. Firms thus appear to have boosted production by making greater use of already employed staff instead of recruiting new employees. Although there is still considerable uncertainty about developments in the labour market, it is nevertheless likely that the number of employed will increase some time around the turn of the year. At roughly the same time unemployment should be able to begin to fall. The other side of the coin of robust growth and a subdued jobs market is continued high productivity growth and low cost pressures in the Swedish economy. The extent to which this is temporary and due to economic activity, or is a result of longer-term factors, is hard to determine.

They have also made some progress in improving their international competitiveness, though there remains an opportunity for further structural reforms in labor and product markets – and not just in the periphery – to increase productivity and strengthen long term growth prospects. The European Central Bank’s (ECB) introduction of the outright monetary transactions (OMT) program has reduced financial market tensions considerably in the peripheral countries, so that sovereign debt funding costs in those countries are at more reasonable levels. The risk that interest rates in the periphery could spiral upward has been significantly diminished. Also, the commitment to European integration remains strong, a factor that U.S.based analysts and investors do not always sufficiently appreciate. Over the past few years, when the situation has been the most bleak, the choice in favor of the Union with the euro at its core has always won out. The bad news is that the eurozone is still in a recession and the political support for further rounds of budget-tightening has clearly lessened. The eurozone financial system is being fragmented and the partial easing of pressure on peripheral sovereign debt markets has not translated into a corresponding easing in private-sector borrowing costs in these nations. If growth does not resume relatively soon, then the political support for continued fiscal and structural adjustment could further erode. In Europe, a key challenge is to strengthen the economic foundations of monetary union at the system level.