samchain/econo-pairs-v1 huggingface dataset:
I would also like to share with you some thoughts on each session, which – far from pre-empting future discussions – aim to spur the debates with our audience. The first topic today concerns the challenges of conducting monetary policy with large public debts. Numerous questions arise including fiscal dominance, the trade-off between debt sustainability and fiscal discipline, multiple equilibria and financial instability. First, I will comment briefly on how high public debt increases the risk of fiscal dominance on monetary policy. Low interest rates may very well be justified by specific business cycle conditions or risks of undershooting the inflation target. They also facilitate the sustainability  BIS central bankers’ speeches  1  of higher public debts. Hence the need to ascertain whether risks related to public debt sustainability considerations might in turn jeopardize price stability. Another paramount risk of very low interest rates is to entertain the illusion that governments can continue to borrow rather than make difficult and yet necessary choices and indefinitely put off the implementation of structural reforms. Such risks are very real in the euro area. Very high public debts are also a factor of financial fragility. Market participants therefore expect central banks to intervene on public debt markets to safeguard financial stability. Indeed, in extreme circumstances a central bank should mitigate the effects of confidence shocks on sovereign yields by purchasing government bonds.

Thus, from December 2013, when the deterioration in bank balance sheets was at its worst, to June 2018 the volume of non-performing loans in transactions with the resident private sector has declined by 60%. And the amount of foreclosures has done so by 40% since its 2012 peak. The consolidated return on equity, which in 2012 stood at around -25%, has gradually picked up to levels of 7% on data as at June 2018, and the overall capital ratio has risen from 11.4% in 2012 to 15.1%. Despite this notable improvement in its financial position, the Spanish banking industry continues to face significant challenges. These are largely shared by other banking systems in the euro area, and include i) the reduction in assets impaired by the crisis, ii) the recovery in profitability, such that Spanish banks may draw closer to the solvency levels of other euro area banks, iii) adaptation to the new regulatory framework and, iv) the configuration of a new competitive setting characterised by the emergence of new technologies and competitors. I shall now focus on describing each of these challenges, beginning with that of the reduction in assets impaired by the crisis. As stated, the volume of non-performing loans has diminished significantly from its 2013 peak. This reduction has been assisted by the economic recovery, insofar as it has favourably impacted debtors’ ability to pay, and also by the disposal of impaired portfolios.
The SFBC is mainly responsible for the supervision of banks and institutions, while the National Bank is entrusted with overseeing payment and securities settlement systems and promoting the stability of the financial system. Our activity in this area focuses on analysing the structures, the behaviour and the results in the Swiss banking system. Up until now, the National Bank was known primarily for its banking statistics. Furthermore, it frequently conducted and published banking surveys. We are now increasingly turning our attention to the analysis of topical issues, including a periodic analysis of the situation in the financial system. In so doing, we concentrate on those aspects which are relevant for assessing system stability. For this reason, banks are the main focus. Developments in the insurance world jeopardise system stability only indirectly at the most, e.g. in the case of a financial conglomerate. The situation in the Swiss banking sector The Swiss banking sector found itself in a hostile environment in the past few months. There was a slowdown in economic development. Hope for a prompt recovery was dampened. The number of corporate bankruptcies increased substantially compared with the previous year. Uncertainty surrounding company profits hit the stock markets with full force. As elsewhere, Swiss stock prices dropped significantly amid high volatility. While the Swiss market as a whole (SPI) lost 22% from the beginning of the year, the SPI banking index weakened by 30% and the share index of insurance companies plummeted by as much as 47% (as of 9 December 2002).

This creates a tension between the domestic and the external, or exchange rate, dictates of policy - a dilemma which, in one direction or the other afflicts most countries from time to time, and which we ourselves have experienced at times in the past, though not during the past few years. The trouble in this instance is that the stronger exchange rate does not directly affect the build-up of domestic demand pressure, which is the problem we start with. It will, if it persists, have a one-off downwards effect (directly or indirectly) on the prices of perhaps a quarter of all goods covered by the retail price index, which will reduce the RPI during the course of this year; but this effect will gradually drop out of the 12-month calculation during 1998. The stronger exchange rate will also, if it persists, cause the external trade balance to weaken, and by relieving to this extent the pressure of overall demand, that may have a more lasting effect on the rate of inflation. We, of course, take these factors into account as best we can in making our forecasts of future inflation and in giving our policy advice, though there is inevitably a great deal of uncertainty over the timing and scale of their effects.
In order to have a more accurate picture of the delinquency rate, we calculate the “effective delinquency rate” by excluding this 46 percent of borrowers not in repayment; the result is shown in the right-hand panel of Chart 5. This effective delinquency rate is nearly double the measured delinquency rate, with almost onethird of borrowers in repayment being delinquent on their debt. It is important to note that because of the unique character of student debt, an increasing delinquency rate defined either way does not necessarily imply that a greater percentage of new borrowers are falling behind on repayment. Borrowers who became delinquent in the past and remain so are included in the delinquency rate. Some may also default, which is defined as being more than 270 days past due in the case of federal loans. Because student debt is not generally dischargeable, even in bankruptcy, the delinquency rate may continue to increase even when the percentage of borrowers becoming newly delinquent remains constant. We therefore also computed the proportion of borrowers in repayment who became newly delinquent on a quarterly basis. As shown in Chart 6 in 2005 about 6 percent of nondelinquent borrowers in repayment transitioned into delinquency each quarter, on average. By 2012, that rate had increased to almost 9 percent. This confirms that indeed there was an increasing trend of borrowers becoming newly delinquent over time. Our delinquency numbers may seem higher than those reported elsewhere.

We will, in any event, reassess the value of each portfolio component before making the transfer to the special purpose vehicle. The lowest valuation will be applied. To secure initial financing for the operation, we will obtain US dollars through a Dollar-SwissFranc swap with the Federal Reserve. Thereafter, we will turn to the market for refinancing. The SNB will therefore not incur any currency risk. Since the entire operation will be effected in US dollars, it will not affect the National Bank's monetary policy in any way. Reasons for operation This operation is nevertheless unprecedented with regard to the reasons for it. In carrying it out, we are making a contribution to an essential element of the Swiss financial system, at a time when financial markets have been in turmoil for some months now. A better functioning of the financial markets – in particular the banking sector – is essential so that our country will be able to weather the economic difficulties resulting from the anticipated global economic slowdown in the months ahead. It is therefore preferable that we go ahead with this operation now, in an orderly fashion, despite the fact that the markets have regained a certain degree of optimism in the past few days – rather than at a later point under potentially more adverse conditions. The Federal Council and the Swiss Federal Banking Commission have been kept abreast of the preparations underway and our negotiations with UBS. BIS Review 125/2008  1
In particular, to quote Solvency II directly, “the Matching Adjustment must not include the Fundamental 9  Spread, reflecting the risk retained by the insurance or reinsurance undertaking” . Since the credit rating is the main driver of the Fundamental Spread, this means the credit rating must reflect the risk retained by the insurer. One key characteristic of illiquid assets is that they are not usually externally rated. Instead, Solvency II permits insurers to use internal ratings to determine the Fundamental Spread. Since illiquid assets will often not have market valuations, insurers will often also base the asset valuation on the internal rating by mapping to equivalent traded assets of the same rating. The internal rating may therefore drive both determinants of the Matching Adjustment: the spread over risk-free rates and the Fundamental Spread. Getting it right is important! The PRA set out its views on this subject in a supervisory statement (SS 3/17) last year. 10  We said that  internal ratings must lie within a plausible range of the ratings that would be given by external rating agencies. Individual ratings may vary, depending on credit judgements, but there should be no overall upward bias in internal compared to external ratings. Supervisors are reviewing insurers’ internal ratings and may seek greater assurance where assets have spreads that look large for the rating, leading to a large matching adjustment in absolute or relative terms. We will also consider the complexity of the assets and their materiality to the overall solvency position of the insurer.

It also explains the effects that monetary policy is having on the economy and how that's helping to bring inflation back down. During the pandemic and its aftermath, we saw an enormous swing in demand, away from services like travel and entertainment and toward goods and housing, as people adjusted to work from home and avoided contact-intensive activities. More recently, we are seeing a rotation in demand from goods back into services. But through all these shifts, overall demand has remained very strong and has far exceeded supply. This misalignment of supply and demand is true for the labor market as well. Although several indicators of labor demand-such as job openings, quits, and hiring-have stepped down from their very high levels of the first few months of 2022, they show that demand still far exceeds available supply. And the unemployment rate of 3.5 percent is historically low. The same dynamics play out in the Federal Reserve's Second District, the region that the New York Fed represents. Our regional business surveys indicate that activity is slowing, with an especially sharp decline in the manufacturing sector. That said, many businesses continue to add staff, and consumer confidence is strong. Overall, inflationary pressures in the region are moving downward, but are still quite high. Gears Are Turning With inflation running persistently above its longer-run goal of 2 percent, the FOMC has taken strong actions to align demand with supply in the economy and bring inflation down.
Prasarn Trairatvorakul: “The Role of the Central Bank in Driving Thailand’s Sustainable Growth” Speech by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, before the Thai Forum, New York, 8 October 2014. *  *  *  Ladies and gentlemen, Thailand has undergone much change this year, and the usual visitors from abroad may have chosen, understandably, to watch developments from afar. It is thus my sincere pleasure to bring some of Thailand to your very doorstep. The country is now at an important junture. Political uncertainty has subsided and some promising government plans have taken place. Therefore there is no better time for domestic and international investors alike to capitalize on the new wave of growth. Thailand’s immediate challenge is to restore growth to its potential. For much of the past seven years, we have been experiencing sub-par growth rates. As the economy now wakes up from its third contraction since 2008, it is time to focus on Thailand’s avenues for restoring normal growth again. How can an economy rebound from a contraction back to growth? Part of the answer lies in the economy’s strong fundamentals, and the Bank of Thailand, as the central bank, plays a part in safeguarding them as attested by quick rebounds of the Thai economy after the Great Recession in 2008 and the Thai floods in 2011. In addition, as caretaker of the country’s banking system, the Bank of Thailand also fosters development of the financial system to bring about growth.

The changes I have just described show that market participants and departments responsible for financial control, and also portfolio and other managers, are often unaware of some of the risks to which their institutions are exposed. For all these reasons, the sound measurement of financial risks and methods for their effective management have become an absolute necessity. It is also important to make regular announcement of information on which market participants can base sound decisions about a bank’s financial standing and risk structure. It is well known that markets have a natural disciplinary mechanism which rewards banks that manage their risks effectively and penalize banks that show themselves to be risky. Everybody knows that the successful operation of this mechanism depends on the regular dissemination of information making banks and the banking system transparent and allows market participants to arrive at sound decisions. In an environment that is home to all these kinds of activity, the task of maintaining the stability of national and international banking systems has come to require new arrangements and dispositions in the banking sector. To lead the way for progress in this area, a committee was established, led by the Bank for International Settlement (BIS) and made up of central banks and banking supervisors from several countries. Almost all of the proposals that ultimately originated in the work of this ”Basle Committee” have been adopted for the banking systems of many countries, even though the Committee has no power to apply sanctions.
The banks have been addressing their bad debt problems and have been assisted in this by capital support from the Government; two of the weakest banks have been nationalised and subsequently sold back into private ownership; and four mega-mergers have been announced which offer the banks concerned the chance to improve their competitiveness at home and abroad. However, you will be more aware than I am that important challenges lie ahead for the Japanese banks. The domestic environment within which they are operating is still uncertain. Although the Japanese economy is showing signs of recovery, the IMF has recently pointed out that the pickup remains “fragile and subject to downside risks”. Consumer confidence is still weak and the corporate sector remains under some strain as shown by the rise of 21% in corporate bankruptcies in the year to July. The recent termination of the Bank of Japan’s zero interest rate policy has led to fears that corporate finances may be put under further pressure. This is a difficult environment in which the Japanese banks are embarking on their mergers. From my discussions with the banks concerned it is clear that they know what needs to be done in order to achieve the desired synergies and economies of scale. But it all depends on the quality of the implementation. Unlike the case with some past Japanese mergers, the banks will need to achieve full integration in their operations, technology, management and culture as quickly as possible, and jobs will have to be lost.

While financial transparency among Mainland companies is by no means perfect, lenders are now at least better equipped to identify those companies that have sound underlying businesses and good management. The long saga of GDE is now drawing to a close. The banks have, I believe, managed to negotiate the best deal possible, and the last remaining step is for the banks to review and sign the detailed documentation to put the restructuring into effect. I understand that when the documentation is sent to the banks, they will have plenty to read. But I hope that they will try to do this as quickly as possible and that we can avoid any last minute problems and delays. There is unlikely to be any opportunity for renegotiation of the deal, and if it were to collapse at the final stage, the banks would certainly be worse off. So far I have been concentrating on the position of the Japanese banks. Let me now review the more general state of banking in Hong Kong after the Asian crisis. The first point to make is that the local Hong Kong banks have survived the crisis in good shape. Although one or two banks lost money, most banks remained profitable and actually managed to improve their capital ratios during the period as their risk assets declined and their capital base expanded.
(2009), “Speech by Mervyn King, Governor” to Scottish Business Organisations, Edinburgh, October 2009. 8  Basel Committee on Banking Supervision (1992). “The insolvency liquidation of a multinational bank”, Bank for International Settlements. Its key conclusions were: (1) when closing a multinational bank, supervisors should pay attention to the nature and timing of communications among themselves and of their communications with creditors, shareholders and management; (2) the nature of liquidation rules may be relevant to the manner in which multinational banks are supervised; (3) differences in liquidation rules across jurisdictions in a windingup can affect returns to depositors and other creditors and the operations of deposit protection schemes; and 4) coordination and cooperation between liquidators can affect the returns to creditors in a liquidation and can be affected by the role of supervisors in a liquidation. BIS Review 144/2009  7  in order to realise financial collateral. But we do not yet have compatible bank resolution regimes, and some existing Directives were designed without resolution in mind. We now have another chance. The Basel Committee on Banking Supervision has published an extensive review of impediments to the resolution of cross-border banks arising from national insolvency laws, resolution regimes, or supervisory practices. And the European Commission has recently launched a consultation asking what changes to the European legislative framework are needed to address these issues. We need to focus on who should take what concrete actions. I think the FSB will be picking up that issue. Resolution and support operations: who should pick up the tab?

In the first place, let me tell you that it is very information-intensive. It requires a lot of detail on how a bank’s business is structured and run. And that information needs to be available at an early stage. Amongst many things, it includes details of netting and derivative contracts, and I am struck that, in the US, the FDIC now requires troubled banks to demonstrate that they could report each day the relevant details of derivative portfolios. The Bank of England plans to consider whether or not something like that might be warranted in the UK. More generally, the UK FSA has said that the authorities will need to be assured that firms are able to provide the necessary data to assess resolution options and to execute the authorities’ chosen strategy. But it is not just the resolution authority which needs lots of information. Potential bidders for all or parts of an ailing bank do too – of the kind typically offered to bidders in a “friendly” M&A transaction. Banks probably need routinely to maintain such “Data Rooms” as part of their contingency plans – something which the FSA is examining. As will be abundantly clear from this brief review, the “recovery and resolution plan” enterprise requires the regulators to work closely with the resolution authorities, and with central banks as liquidity providers.
Such a mechanism would enable resources to be swiftly deployed when such shocks occur, contributing to ensure that the joint fiscal impulse of the euro area is appropriate for the cyclical situation (for example, by implementing a permanent macroeconomic stabilisation fund in the common budget, a cyclical stabilisation function or a pan-European unemployment insurance scheme). In parallel, the European fiscal framework is also in need of a thorough overhaul. We must not forget that in a monetary union, fiscal policy is the main instrument available to countries for tackling asymmetric shocks. It is therefore crucial that each economy maintains a countercyclical fiscal policy that generates sufficient room for manoeuvre in the expansionary phases to respond to adverse situations. The Stability and Growth Pact (SGP) was designed for this purpose. It provides a framework of rules that is essential to the macroeconomic stability of the euro area. However, we have to acknowledge that the Pact has not been able to contribute to the design of countercyclical fiscal policies. Its excessive complexity results in its being somewhat opaque and difficult to communicate to the general public, which does not facilitate its implementation. This complexity also makes uneven application across countries and over time more likely, undermining its legitimacy and credibility. Hence the pressing need to overhaul the current fiscal framework.

Lower real interest rates mean that it becomes cheaper for households to take out loans when buying housing. The low interest rates are therefore an important driving force behind the price increases. Secondly, developments in the real economy have been favourable after the crisis. Although unemployment has periodically been high measured by Swedish standards, households’ disposable incomes have increased substantially. Higher incomes have meant that households can afford to pay more for their housing. Thirdly, prices have also been affected by the fact that construction declined considerably directly after the crisis. When the demand for housing accelerated, it took some time before this could be met by a growing number of new houses on the market. Quite simply, it takes time to build houses. It was not until around 2000, when house prices had become higher and made new production of housing more attractive, that construction really accelerated. Moreover, there have been some significant changes in the mortgage market, which have also contributed to house prices rising so sharply. I will return to these changes shortly. The development of these factors largely explains why house prices have risen as much as they have in recent years. It does not appear to be a question of general over-optimism among households and lenders. I therefore do not see any serious risks to financial stability from developments in house prices at present. Household indebtedness has also risen substantially Household indebtedness has kept pace with property prices and has thus risen substantially.