samchain/econo-pairs-v1 huggingface dataset:
And if the foreign exchange market had anticipated a higher cost of finance for sterling borrowers after Brexit you’d probably have seen the same expectation in other financial markets – a steeper yield curve, perhaps, or higher premia in UK banks’ funding markets. That hasn’t really happened. Chart 4: Weaker productivity in tradable sector depresses the exchange rate  Chart 5: Supported by cross-country evidence  PNT /PT SNT /ST  DNT /DT YNT /YT  Source: Penn World Table  A more likely channel, to my mind, involves expected supply. Go back to that relationship in [1] and imagine now that something happens to push up the cost of producing or selling tradable goods. Perhaps productivity 8  in that sector grows less rapidly (relative to that in our trading partners) . Or perhaps tariff and/or non-tariff barriers are imposed on international trade. Either way, if the relative cost of producing or selling tradable 9  output goes up then so must its relative price (Chart 4 ). In effect, the currency falls to help absorb these costs. In doing so it spreads them throughout the economy: even those in the non-traded sector have to work longer to buy the same quantum of imports. 7  Sometimes this point is expressed in terms of the “sustainable” current account deficit but it amounts to the same thing. Cost is inversely related to productivity. 9 Note that a contraction in tradable productivity, which is the denominator in the SNT/ST curve, shifts it to the right.

The FSDP is a comprehensive strategy that is aimed at achieving a financial system that is sound, stable and market-based, that would support efficient resource mobilization necessary for economic diversification and sustainable growth. The weaknesses noted in the financial sector are addressed through a public and private sector partnership. A number of activities have already been undertaken under the FSDP such as the establishment of a Credit Reference Bureau. Similarly policies and the legal and regulatory frameworks have been developed to take into account the fast changing financial environment. These developments have resulted in a considerable increase in the number of banks and other financial service providers in the country. Ladies and Gentlemen, this workshop is therefore timely as it tries to bring together Zambian financial sector players and international financial players who have an interest to see that Zambia takes its rightful place in the world economy. Apart from being a sensitisation platform to the general public, this workshop should diligently explore ways on how entrepreneurs can access venture capital funds in Zambia. Although venture capital organizations in Zambia are not many and evident to the general populace, our expectation is that after this workshop, we shall see the emergence of an interactive and symbiotic alliance between International and Zambia financial institutions. This alliance is expected to provide venture capital funds and financial services that should uplift the well-being of the Zambian people at large.
In this lecture I will try to bring together in an accessible, structured way, summaries of the most important reform initiatives that are in train – at least those that affect prudential supervision – I will try to set out what they are aiming to achieve and how much further there is to go. I will then reflect on how the regulatory jigsaw fits together and the key questions that are being asked of it. Alongside the statutory Financial Policy Committee in the Bank of England (the FPC) and the Financial Conduct Authority (the FCA), the PRA was brought into life on 1 April 2013, as part of a reshaping of the UK’s financial regulation landscape. The PRA is the prudential regulator for deposit takers (banks, building societies and credit unions), insurers and major investment firms. It started with two objectives: (i) promoting the safety and soundness of its authorised firms and (ii) specifically for insurers, to contribute to the securing of an appropriate degree of protection for those who are or may become policyholders. A year later, an additional secondary objective was added: to, so far as is reasonably possible, act in a way which facilitates effective competition in the markets for services provided by PRAauthorised persons in carrying on regulated activities. The PRA’s strategy is to deliver a resilient financial sector by seeking: an appropriate quantity and quality of capital; effective risk management; robust business models and sound governance, including clear accountability of a firm’s management.

Paul Fisher: The Financial Regulation Reform agenda – what has been achieved and how much is left to do? Speech by Mr Paul Fisher, Executive Director for Supervisory Risk Specialists and Regulatory Operations of the Bank of England and Deputy Head of the Prudential Regulation Authority (PRA), at Richmond, the American International University, London, 30 September 2015. *  *  *  It is now 8 years since the start of the great financial crisis, and 7 years since the collapse of Lehman Brothers and AIG in the United States, followed by the bailing out of HBoS and RBS in the UK. The consequences were not limited to the financial sector – the economic recession that followed in much of the developed world was both deep and prolonged. This naturally created an imperative for changes to the regulation of the financial system to prevent the same thing happening again in future. Since I became Deputy Head of the Prudential Regulation Authority (the PRA) in June 2014, I have been asked a number of times to comment on how far the regulatory reform agenda has advanced. How close are we to ending “too big to fail”? How much more regulatory change can one expect?
in 2010–2012, and those foreign currency purchases were made at a considerably lower exchange rate than the recent sales. Furthermore, on 19 February the Bank concluded a forward currency swap agreement with Landsbankinn in the amount of 6 b.kr., which means that Landsbankinn will not need to accumulate foreign currency to comply with the Bank’s foreign exchange balance requirements. The Monetary Policy Committee is of the opinion that intervention of this type is justifiable in order to mitigate temporary exchange rate volatility that is addressed more effectively with  2  BIS central bankers’ speeches  instruments other than interest rates. In recent weeks, the foreign exchange market has been characterised by an unusual combination of features: weakening terms of trade, foreign exchange accumulation in anticipation of heavy foreign debt service, foreign exchange mismatches in the banks’ balance sheets and, in part, self-fulfilling expectations of a currency depreciation. Because these conditions are in part temporary and increased foreign exchange inflows are expected as the spring advances, limited one-off foreign currency sales by the Central Bank were considered appropriate to prevent excessive currency depreciation and stem the tide of these self-fulfilling expectations of market participants. This is consistent with the strategy outlined in the Bank’s report Monetary Policy After Capital Controls, published in late 2010. Capital controls were imposed early in the winter of 2008 as part of the Government’s IMF programme.

Earlier this week, the Central Bank published a report on Iceland’s underlying external position, in which it addresses the question of whether Iceland is facing a debt sustainability problem or a balance of payments problem as I have just defined them. But in order to answer that question, it is necessary to peer through the settlement of the estates resulting from the financial crisis – a process that is nowhere near completion – and correct for the effects of certain international corporations operating in this country. These companies have a profound effect on Iceland’s international investment position as measured according to international standards, but they would have a negligible impact on the state of the domestic economy if they defaulted on their debt. As a result, the task requires a great deal of estimation and entails some uncertainty, as previous findings have shown. The estimates are now more reliable than before, however, as time has clarified a number of factors concerning the failed banks’ estates and analysts have now gained access to the best available data. The results are the same as in previous appraisals, however, in that there are no signs of a debt sustainability problem as I have just defined it. Iceland’s net underlying debt position is estimated at 60% of GDP, the lowest since 1999. Furthermore, it is lower than that of many countries that no one would claim faced a sustainability problem. New Zealand’s net debt position, for instance, has hovered around 80% for more than one decade.
  To overcome these difficulties supervisors need to look ahead, be sensitive to changing practices in banks, and anticipate the impacts of emerging risks not only to new products but also to new or disproportionate sources of income. I believe that some sort of “benevolent skepticism” towards them is warranted from supervisors. Indeed, the potential costs in terms of financial stability and economic output of not digging deeply enough into complex products or not controlling that firms do understand their own risks may simply be too high. Supervision should spur better risk analysis and control at the firm level. 31. Regulated financial entities are complex and evolving institutions. Internal governance processes are the first line of defense against excessive risk-taking whether at the management or technical level. To make sure that this first line of defense is solid, supervisors should pay attention to compensation and governance issues. 32. Under the aegis of the Financial Stability Board, major advances have been made to ensure that compensation policies in financial firms are better aligned with long-term value  BIS Review 113/2010  5  creation, and do not support excessive short term risk-taking. Principles for sound compensation practices have been published at the end of last year. Endorsed by the G20 they will be incorporated into supervisors’ rule book.

This document, which we hope to be able to publish shortly, once we have incorporated a number of comments received during the public consultation period, does not resolve all the problems, but it does represent a significant step forward in improving coordination and the distribution of tasks between supervisors. We are also keeping a close watch on how cooperation is being handled in practice between countries with supervisory responsibility for institutions belonging to international banking groups. In this respect, the AIG is gathering and sharing information and experience on the functioning of bilateral agreements and of supervisory colleges. In my view, either of these two collaboration methods can be fully valid, depending on the size and complexity of the group concerned. Over the years, these kinds of agreements on the exchange of information and reciprocal cooperation have been established among supervisors as a means to perform effective crossborder supervision. Time has shown that such agreements are more effective when the relations between home and host supervisors are based on mutual trust. In this regard, I believe that we as supervisors should steer clear of excessively formalist and legalistic approaches and try to be pragmatic. I think that the questions which need answering are more operational than legal in nature. It is a matter of finding a way of cooperating that makes us all more efficient in the use of our resources, reduces the supervisory burden for the banks and improves the stability of the financial system.
Of course, times change, and with them the economic and monetary environment. This was certainly the case in the 1970s when, following the collapse of the Bretton Woods exchange rate system and the explosion of oil prices, monetary authorities around the world were faced with new and difficult challenges. In many countries, attempting to meet these challenges was accompanied by a move to flexible exchange rates. However, for the most part, we Europeans attempted and eventually succeeded in treading a different path. This was also the case here, when, in the latter years of Governor Zolotas’ time in charge at the Bank of Greece, exchange rate stability was sought by pegging the drachma to the US dollar. As we all know, at that time Greece was not yet a member of the European Community. But this was also soon to change. Indeed, assisting in the successful preparation for membership of the European Community is yet another notable contribution that Governor Zolotas made to Greece’s economic history. Since that time Greece has continued to face challenges as a member of the European Community, and now of course of the European Union (EU). Greece is one of the four EU Member States which have not yet adopted the euro. It has announced its willingness to do so in 2001. In order to join the euro area, the convergence criteria with respect to inflation, long-term interest rates, public finances and exchange rate stability have to be fulfilled. Sustainable convergence is a prerequisite for adopting the euro.

The idea is, if I have understood correctly, that the Riksdag Committee on Finance or some part of it – a special stabilisation policy committee – would be given a greater role, with an analysis function and the authority to implement discretionary fiscal policy decisions when necessary. I have no faith in this idea, for several reasons. One fairly obvious reason is that a stabilisation policy committee would of course face the same difficult problems as the Riksbank and the government with regard to predicting the future. The fact that inflation is currently low is largely due to surprisingly positive surprise shocks that were not predicted by any analysts, rather than to the Riksbank making assessments that deviated from others or holding back demand. Difficulties in predicting and fine tuning the economy are something that everyone entering this field will face and scarcely a good reason for establishing a new public body. Another important reason for my doubts towards this proposal is connected with the leading principle for reforming monetary policy, namely that it should be formulated "at arm's length" from the current party politics. From what I understand of the proposal, the idea is that these problems will be managed by setting rules in advance that will indicate the situations in which discretionary fiscal policy measures shall be implemented and phased out. Of course, one can have different opinions as to how successful this might be.
In the meantime, consumption growth will largely be determined by income growth, the trajectory of wages and the strength of the labor market. The U.S. expansion is now in its eighth year. By historical standards, it is long in the tooth. Despite this, I am optimistic that the economic expansion will continue over the next few years. First, it is important to note that economic expansions don’t simply die of old age. Usually, they end either because inflation climbs and the Federal Reserve responds by shifting to a much tighter stance for monetary policy, or because the economy gets hit with a large unanticipated shock that the Fed and the fiscal authorities cannot respond to quickly enough, or with sufficient force, to prevent an economic downturn. While economic shocks are, by their very nature, difficult to forecast, the risk that the Fed will snuff out the expansion anytime soon seems quite low because inflation is simply not a problem. Not only are underlying inflation trends very subdued—for example, the core personal consumption expenditures deflator has risen at only a 1. 7 percent annual rate over the past year—but the economy is not growing much above its sustainable long-term pace. Thus, while pressures on labor resources have been increasing, but quite slowly. Finally, the recent strengthening of the dollar will put downward pressure on import prices and limit the ability of domestic producers to raise their prices. Second, the household sector’s financial condition is in unusually good shape for this point in the economic cycle.

The drivers of this change in lender behavior are complex, but are likely to include a combination of more regulation and stress testing of banks’ portfolios, more conservative practices by the government sponsored enterprises Fannie Mae and Freddie Mac—which tend to dictate underwriting practices for a large part of the market—and banks’ own experience from the crisis period, when so many lenders faced extreme stress and residential real estate seemed to be the main culprit. The fact that housing prices declined so much and that the foreclosure process was so often drawn out may also have caused lenders to reassess how much to rely on the housing collateral as security for their loans. In response, lenders may have shifted their underwriting to put more weight on the creditworthiness of the borrower rather than relying mainly on the value of the collateral. This is consistent with the fact that mortgage credit is now much harder to get for lower credit-rated borrowers than during the housing boom. So, what’s next? When and to what extent will households again start tapping home equity to fund their consumption? Answers to these questions will determine the degree to which housing equity growth will add to income growth as a fundamental driver of consumption. We do not want to repeat the experience from the housing boom, but there are prudent ways for households to access their housing equity.
But even if all organisations that were in trouble had been rescued, it would have remained necessary for central banks and governments on both sides of the Atlantic to take extremely bold measures in order to be prepared for systemic liquidity and insolvency risks. Question: How do you explain the fact that, despite the ongoing banking crisis, the ECB’s statistics do not yet indicate the existence of a credit crunch in the euro area? Answer: What is true is that we see a certain weakening in the dynamics of loans to enterprises. But the rate of growth of outstanding loans to non-financial corporations has remained robust in double-digit figures. However, since bank lending standards have been tightening significantly for some time and the financial crisis entered a new phase only in mid-September, we must observe all developments very closely and remain attentive to new facts and figures. Question: The major investor Warren Buffett once described credit derivatives as “financial weapons of mass destruction”. Do you share this view? Answer: I wouldn’t necessarily use that formulation myself. But the level of complexity and lack of transparency reached in the production, marketing and selling of these financial market instruments indeed proved to be destructive and contributed substantially to the fragility of financial markets. 2  BIS Review 1/2009  Question: The reputation of the ECB has been strengthened by the crisis. Has it also profited financially from the brisk demand for the greater amount of liquidity made available?

Furthermore, our two-pillar strategy allows us to identify long-term risks to price stability and to financial stability at an early stage through our monetary analysis. In addition to our economic analysis, our monetary analysis examines not only the evolution of monetary aggregates, but also, in close detail, the dynamics of their components and of their counterparts, including the evolution of credit outstanding to categories of borrowers. This also brings potential risks to the stability of the euro area financial system to our attention. Question: But is that enough? BIS Review 1/2009  1  Answer: All central banks make a contribution to financial stability in their respective economic areas. And I would say that in our case macro-prudential matters are certainly part of our responsibility. Question: Is the same also true of banking supervision? Answer: The position of the ECB’s Governing Council has always been that a very close link between central banks and banking supervisory authorities is indispensable. One of the lessons of the first ten years of the euro, and of the recent financial market turbulence, is that if we can make an even greater contribution to the smooth functioning of banking supervision in general and in the euro area in particular – with regard to banking institutions with crossborder activities – this could be a sensible option. It has to be studied very carefully, and we will see afterwards what the position of the Governing Council will be. Question: The spreads on government bonds have widened considerably in the euro area.
William C Dudley: Job polarization in the region Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Quarterly Regional Economic Press Briefing, New York, 30 May 2012. *  *  *  Good afternoon and welcome once again to the New York Fed’s Quarterly Regional Economic Press Briefing. I am pleased to have this opportunity to talk with the journalists covering our region – and through you, to the people in our District. This morning I will focus on regional economic conditions, with particular attention to job polarization, which I would define as the expansion of the number of jobs at the upper and lower ends of the wage and skill distribution and a shrinking of job opportunities for those in the middle. We will see how these trends are playing out in our region. As always, what I have to say reflects my own views and not necessarily those of the Federal Open Market Committee (FOMC) or the Federal Reserve System. National economic conditions The U.S. economy is continuing to slowly recover from the after-effects of the housing boom and bust and the financial crisis. But the recovery has been disappointing. Indeed, when we look back at economic forecasts made over the past three or four years it is notable that growth has systematically fallen short of both the Federal Reserve and private-sector forecasts.

In our region, the recovery of activity and employment has continued, though the data indicate relatively stronger performance in New York State and New York City than in New Jersey, while Puerto Rico has yet to show any meaningful improvement. Our special topic shows a trend toward job polarization both in the nation and the region, which focuses our attention on the ever-growing importance for workers to acquire skills and upgrade their skills on an ongoing basis. I will now ask Jim Orr to present the update of economic conditions in our region. 4  BIS central bankers’ speeches