samchain/econo-pairs-v1 huggingface dataset:
News conference  Berne, 15 June 2017 Fritz Zurbrügg  Introductory remarks by Fritz Zurbrügg  In my remarks today, I will present the key findings from this year’s Financial Stability Report, published by the Swiss National Bank this morning. In the first part of my speech, I will look at the situation of the big banks, focusing on the progress made in implementing the revised ‘too big to fail’ regulations (TBTF2) that came into effect almost a year ago. In the second part of my remarks, I will outline our current assessment of the situation at domestically focused banks. Big banks  Let me start then with the big banks and the TBTF2 regulations. The revised regulations are designed to resolve the ‘too big to fail’ issue in Switzerland, so that systemically important banks no longer have to be bailed out with taxpayers’ money in the event of a crisis. The TBTF2 regulations rest on two complementary pillars. First, they are aimed at strengthening the resilience of systemically important banks in a going-concern perspective. They therefore specify higher requirements for going-concern capital in particular, thereby reducing the likelihood of a systemically important bank getting into financial distress. Second, if a systemically important bank nevertheless gets into financial distress – this is called the gone-concern perspective – the regulations provide a framework for orderly resolution, ensuring the continuation of systemically important functions without the use of public funds.

To this end, the regulations stipulate requirements both for loss-absorbing capacity in a gone-concern perspective and for resolution planning. What progress have the two big banks made in implementing the TBTF2 regulations? Regarding the first pillar, resilience, both big banks have improved their loss-absorbing capacity in a going-concern perspective since the last Financial Stability Report. With this further improvement, Credit Suisse and UBS are on track to meet the final capital  Page 1/3  Berne, 15 June 2017 Fritz Zurbrügg  News conference  requirements. 1 In a going-concern risk-weighted perspective, both banks are already fully compliant. However, a further improvement is necessary with respect to the leverage ratio. The SNB acknowledges the progress made in improving the capital situation. Achieving full compliance with the TBTF2 regulations will further strengthen loss-absorbing capacity. This is necessary as the big banks’ loss potential relative to their capitalisation continues to be substantial, when measured on the basis of the stress tests carried out by the SNB as well as the losses experienced during the last financial crisis. Given the big banks’ significance to the Swiss economy, it is important that they remain adequately capitalised in the event of such losses occurring. This brings me to the second pillar of the TBTF2 regulations – resolution. Here, too, both big banks have made progress. On the one hand, since June 2016, Credit Suisse and UBS have significantly improved their gone-concern loss-absorbing capacity.
Notes: Surprise impact normalised to 10 basis points for the six-month maturity. Why do we see a stronger effect on longer maturities when the rate cut takes place in negative territory? One factor here is that cuts in negative territory were often accompanied by communication or at least market perceptions that the ECB was willing to lower the negative rate even further, if warranted by subsequent economic conditions. As a case in point, for the final two of the last five rate cuts, the introductory statement at the press conference clarified that the ECB’s Governing Council “expects the key ECB interest rates to remain at present or lower levels”. This type of communication about the scope of negative rates can provide accommodation even in the absence of actual rate cuts. This mechanism adds another dimension to the standard channels of rate forward guidance. Let me elaborate on this point. Consider the situation in which the central bank is perceived to be constrained by the zero lower bound. Guided by an understanding of the central bank’s reaction function and a depressed macroeconomic outlook, markets may think that in one year’s time, the central bank would like to set negative rates with positive probability but that, if constrained by the zero lower bound, the best the central bank can do in those states of the world is to keep rates at zero. In technical terms: the presence of the lower bound induces a censored distribution for future short rates.

The achievement of such a target will be facilitated by continued economic growth resulting from high public and private investment and savings, improving competitiveness, gradually rationalised expenditure which leaves sufficient funds for development work, and reducing the budget deficit resulting in low demand pressure. Needless to say, the Central Bank will actively support strategies that ensure such outcomes. In addition, transparency of monetary policy decisions and operations will be maintained to enhance the policy effectiveness and during the year we will also seek the views and advise of experts in the field of economics and on macroeconomic management in order to benefit by their expertise in our monetary policy decision making process. Further, as done in the past, the policy announcements will continue to be made according to an advance announcement calendar, and the Calendar for 2007 is set out below. Table 3 Monetary policy announcements for 2007  10  Month  Date of Monetary Policy Announcement  January  18 Thursday  February  15 Thursday  March  16 Friday  April  11 Wednesday  May  16 Wednesday  June  15 Friday  July  18 Wednesday  August  16 Thursday  September  14 Friday  October  17 Wednesday  November  16 Friday  December  14 Friday  BIS Review 8/2007  6.
They are unlikely to be the right response to the fourth. The rise of the thinking machine means the future world of work will no longer require narrowly cognitive skills. And in a world of 100-year lives and 70-year careers, educational institutions will need to equip old and young alike with these skills. Developing cognitive skills in the young was a brilliant model for the past 300 years, but not one for our educational future. Many different models are possible. Elsewhere, I have called one possibility multiversities, as distinct from universities.44 The multi serves double-duty. It connotes the need for these new institutions to expand their disciplinary horizons and become less subject-singular. History shows that creativity breakthroughs are often sourced in straddling disciplinary boundaries, in being subject-plural. Creating the right environment for creativity often means breaking free from disciplinary silos. Indeed, if we are to embed a cross-disciplinary culture, we may need to rethink how we classify subjects. Traditional domain-knowledge may make less sense in a creative rather than knowledge-based economy. A new classification system might recognise subjects like creativity and digital literacy, emotional intelligence and empathy, entrepreneurship and design. These would, by design, straddle disciplinary boundaries. The multi also signifies the need to straddle generational, as well as disciplinary, divides. Education will need in future to cater for old and young alike, making lifelong learning a reality. Rather than the sequential model, with first education and then work, we would instead have a rotation model over a career.

That has been true of every industrial revolution. Nowhere have these costs been felt more acutely than here in Glasgow.   These disruptive side-effects do not self-heal. They need to be managed if the fruits of innovation are not to rot in the fields. That means social safety nets to protect the livelihoods of those disrupted by innovation. And it means social institutions supporting the up-skilling of people. The GSA is a social institution created precisely to meet the latter need. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2    The next 50 years may bring opportunities and challenges every bit as great as any in the past. The Fourth Industrial Revolution will offer huge potential to individuals, economies and societies. But the engine of growth may change, with artificial rather than human intelligence playing a much larger role. Some have called this Life Version 3.0.   The creative forces unleashed by the Fourth Industrial Revolution will need to be carefully managed to avoid a tear in the social fabric. This is likely to require new sets of skills, with creative and social skills at a greater premium. It may require new sets of social institutions and safety nets. And it may require a reorientation of our approach to education, training and work.   The “creative industries” are a thriving sector of the UK economy, generating £ billion of value-added each year. But, in future, we may need every industry and every worker to see themselves as creative.
As a result, the expenditure items in households' consumption basket with very high inflation have increased significantly. In February, more than 30% of the expenditure items in households’ usual consumption basket experienced inflation above 4% both in Spain and in the euro area. The proportion of consumption basket components with inflation rates above 2% has increased significantly, from 30% in June 2021 to 80% in April. Meanwhile, the percentage of items with a year-on-year price decrease is at a 15-year low. Looking ahead, the available projections indicate that inflation in the euro area will remain high in the coming months, moderating gradually thereafter to levels compatible with the ECB’s medium-term inflation target of 2%. In any event, these forecasts are subject to considerable uncertainty. In particular, these projections assume a slight reduction in energy commodity prices, in line with futures on international markets, and a gradual easing of bottlenecks in the coming months. However, the dynamics of these variables in the coming quarters will crucially depend on the scale and persistence of the disruptions caused by the war in Ukraine, the extensive trade sanctions imposed by Western countries on Russia and the retaliatory measures taken by the latter. More generally, price developments will also depend on the effect of the war on economic growth which, if greater than currently anticipated, could eventually reduce inflationary pressures over the medium term. However, other factors may also significantly determine the persistence of the current inflationary episode.

Regarding incomes policies, based on the findings of the assessments required by law, further adjustments must be made to the conditions governing eligibility for Spain’s minimum income scheme (MIS), to ensure that this instrument can effectively fulfil its mission of eradicating extreme poverty while avoiding undesired effects. To that effect, social security authorities have recently signed agreements with several research institutions in order to evaluate social inclusion itineraries linked to the MIS. Housing affordability has tightened in recent years. According to Eurostat data, 48.7% of Spaniards living in market-price rented accommodation in 2020 were at risk of poverty or social exclusion, the highest rate in the European Union (where the average stands at 32.3%), while 35.9% devoted more than 40% of their disposable income to housing, versus the EU average of 25.8%. The Draft Law on the right to housing seeks to ease such difficulties, which hit the young and lower-income households particularly hard. However, some of the measures envisaged, such as rent control, may not have the desired effect or may even have adverse effects in the medium term. Conversely, certain measures that could give a significant structural boost to the supply of rented housing, such as offering greater effective legal certainty to landlords, are absent. 17  (iv) The challenge of increasing firm size, facilitating cross-sector reallocation and fostering innovation Another major challenge is the small size of businesses, which results in less innovation and low productivity.
If workers are surprised on the upside by inflation they will build that higher expected inflation into their bid for the next year and vice versa. It is this mechanism that drove the inflationary wage price spirals of the 1970s and disinflationary spirals of the 1980s. A drop in inflation expectations, in the inflation expectations adjusted Phillips curve framework, will therefore have the effect of shifting the curve downwards and reducing pay growth at any given level of unemployment (Chart 8). Some in the US have argued that a reduction in inflation expectations could lie behind much of the weakness in US pay growth at current very low, by historic standards, levels of unemployment. 13  In the UK, as I have noted, the current rate of inflation does not seem to have affected pay growth very much over the last 10 years. Indeed we have seen relatively large moves both up and down in real pay that do not seem to have been reflected much in nominal pay growth. One reason for this might be the stability of inflation expectations around the Bank of England’s 2% target. This is not a self-congratulatory point. Central bank credibility is crucial to anchoring inflation expectations. It was the de-anchoring and subsequent re-anchoring, through the establishment of central bank credibility – of expectations – that led to the inflationary and disinflationary spirals of the 1970s and 1980s.

Given the post-crisis fall in the economy’s productive capacity we appear to be operating close to full capacity, even at a growth rate of less than 2%. Unemployment is at a 42 year low. Labour market indicators such as job to job flows, quit rates, and recruitment difficulties are signalling tightness in the market. Domestically generated inflation pressure, however, appears low. Measuring domestically generated inflation when externally generated inflation pressure is high, as at present, is not straightforward. Higher import prices work their way into the domestic production chain and can appear as domestic inflation. Bank staff calculations suggest that adjusted for this effect indicators of domestic inflation pressure are below levels consistent with the 2% target. And that is particularly true for the most domestic of the domestic measures, pay and unit wage costs. 23  See Farmer (2013) and Farmer and Nicolo (2017) 11  All speeches are available online at www.bankofengland.co.uk/speeches  11  Whole economy average weekly earnings grew in the year to August at a rate of 2.2%. Higher frequency indicators suggest a faster rate of growth: 3 month on 3 month annualised AWE growth for regular pay is 2.9%. But wage data are volatile and can mislead. Between 2014 and 2016, the 3 month on 3 month measure annualised AWE gave readings well above 3% which did not translate into sustained higher rates of pay growth.
Lenders report that loan spreads have fallen for companies of all sizes, and that credit availability has increased, but the improvement has been less marked for small and medium-sized businesses. We have seen banks take different approaches to SME loans: one bank has scrapped some of its arrangement fees, another is offering guaranteed discounted borrowing costs and another offers a cash back scheme. So one can’t capture the impact of the FLS on the cost of borrowing for businesses in a single simple, headline, interest rate measure. Survey evidence from the Federation of Small Businesses suggests that the pricing of loans for small businesses was more favourable in 2013 Q2 than in mid-2012 – but availability was reportedly poor. So it’s a mixed picture overall for SMEs. Going forward, SME credit conditions should be supported by the extension to the FLS announced in April, which provides additional incentives for participants to increase lending to SMEs both this year and in 2014. A large proportion of FLS participants have indicated their intention to participate in the extended Scheme. It is likely that any person or business who has borrowed from a bank since the middle of last year will have done so at a cheaper rate than they would have done in the absence of the Scheme. If so then the FLS will have had a monetary impulse on the economy. We think that the FLS will continue to bear down on lending rates to households and businesses in the rest of this year and beyond.

Notably, such organisations have also been instrumental in encouraging the development of a vibrant rental market as a viable alternative to home ownership. For example, in Australia and Hong Kong, social enterprises have had an important role in building affordable housing units or revitalising existing properties for sale or rental, typically targeted at lower-income groups. We need to consider how similar models could be developed here and the role of public policy to enable this. In the context of rental properties, a robust legal and institutional framework to safeguard the rights of tenants and landlords, mechanism to protect tenancy deposits, and arrangements for dispute resolution have been key success factors for countries that have a thriving rental market. At the same time, the introduction of “rent-to-own” schemes could also complement this. The Government has recently launched such a programme. We would welcome the private sector, particularly developers, to also explore such a strategy. Sound, innovative and coordinated public policy is central to addressing the affordable housing challenge. We have advocated that this should reside with a central authority that leads, oversees and coordinates affordable housing initiatives for the nation. This would promote greater strategic and operational cohesion at the national level. Regulatory processes that increase the cost of supplying affordable homes should be reviewed and streamlined. The central authority can also spearhead more effective communications and build stronger collaborations with key partners to advance the affordable housing agenda.
Tight monetary policy (Figure 13), well-targeted macro-prudential measures (Figure 14) and strong fiscal balances have all contributed to lower levels of domestic demand by stabilizing loan growth and reducing risk taking behavior. Going forward, the current low levels in oil prices and depressed producer prices in most part of the world due to weak economic activity are expected to lead to further improvements in external balances. Therefore, it is highly likely that Turkey will record a current account deficit of below 4 percent of its Gross Domestic Product in 2016, representing a major achievement in satisfying the norm of the European Union’s Macroeconomic Imbalances Procedure (Figure 15). Unlike these positive developments in the economy, inflation increased and its outlook worsened in 2015 reflecting the pass-through from the TL depreciation, elevated food inflation, and markedly increased minimum wages. These factors together with some deterioration in inflation expectations led the MPC to revise its inflation forecasts for 2016 and 2017 up to 7.5 percent and 6 percent respectively and postpone the projected realization year of the 5 percent target to 2018 (Figure 16). Going ahead, I see three potential developments, which would improve the inflation outlook a great deal. First, the latest improvement in the external balances together with the already strong fiscal balances is likely to boost the effectiveness of the monetary policy. The ongoing tight monetary policy stance is then likely lead to lower inflation than otherwise.

The insufficient volume of external safety nets as well as the underdeveloped nature of financial markets in EMEs made financial crises unavoidable. In addition, inability to implement countercyclical policies made EMEs suffer from larger damaging effects of financial crises on their real economies than otherwise. It is noteworthy that despite the lack of capacities in avoiding financial crises, EMEs mostly managed to recover swiftly from their acute past financial crises succeeding severe economic recessions. Likewise, most EMEs survived the – a once in a century event – GFC of 2008 in spite of its profound impacts on the financial systems of AEs with the subsequent “balance sheet recessions”. EMEs again largely escaped the great recession though some of them had brief economic recessions. With lessons learned from previous episodes and improvements over the years EMEs are, on average, better positioned to withstand financial turbulences, both now and in the near future, than in the past. First of all, they embarked on extensive structural reforms aimed at overhauling financial regulatory and supervisory systems, strengthening public finances and fiscal discipline, granting central banks independence, and adopting flexible exchange rate systems. These reforms enabled them to implement more prudent and countercyclical policies as well. EMEs solidified their post crisis reforms by accumulating adequate foreign exchange reserves as an alternative to the IMF provided financing, which carries strong conditionality, as well as further deepening and broadening their domestic financial markets.
Other countries were later incorporated into the benchmark portfolio. In 2007, small companies were included in the benchmark portfolio. Today, the Fund has equity holdings in 8,000 companies in almost 50 different countries. The bond portfolio was expanded from 10 to 18 countries in 1998. Since 2002, the Fund has gradually moved into the corporate bond market and mortgage-backed securities. Chart: Fund returns In 1998, analyses indicated that returns would be higher than achieved to date. It should be noted that the Fund is nevertheless considerably larger than expected 10–12 years ago. High oil and gas prices have resulted in substantial transfers to the Fund. Sizeable returns on oil in the ground have more than offset low returns on securities. Since equity investment started in 1998, the annual average real return on the Fund has been a good 3 per cent after expenses 8 . This figure is partly a reflection of the financial crisis. The Fund’s short history includes a lost decade in the stock market, with two periods of sharp decline. During financial crises of the type we have recently experienced, the government as investor has no place to hide. Even though it is less visible, the return on government real investments in Norway is also lower during economic downturns. The estimated size of Norway’s offshore oil wealth naturally varies widely with oil and gas prices and frequent changes in petroleum reserve estimates.

This phenomenon has been supported by the progressive financial liberalisation, the development of domestic financial markets, the greater use of domestic currency to facilitate bilateral trade activities and the development of the payments and settlement systems. The economic and financial regional integration has also been reinforced by a higher level of regional cooperation. Earlier regional cooperation had focused mainly on trade, investment and development. This decade has seen the cooperation shift to efforts to address financial stability issues, including in surveillance, crisis management, liquidity support arrangements, financial supervision and financial market development. The approach in forging greater financial integration in Asia will be different from that adopted by Europe. The region does not have centralised institutions to coordinate financial integration but has leveraged on the existing intra-regional groupings and networks to forge greater cooperation and collaboration in areas of common interest. The region has its own monetary and financial stability committee that is supported by arrangements for regional surveillance to identify risks and vulnerabilities to the region. Also in place is an integrated crisis management framework that will be operationalised in the event of an imminent financial crisis in the region. Recently the region successfully organised two schemes for reserve pooling, the Asian Bond Fund and the ASEAN+3 Chiang Mai Multilateralised Swap arrangement as a liquidity support facility.