samchain/econo-pairs-v1 huggingface dataset:
It is also important that the central bank, even if it does not have direct supervisory responsibilities, closely monitors general financial market developments, including in the major institutions, to detect potential crisis situations that may call for ELA. The traditional view that ELA should never be given to insolvent banks can also be discussed from another perspective. A prerequisite for all kinds of support, including ELA, should be that there is considerable risk for a systemic crisis. Given that, it can be discussed whether it is worse to provide ELA to an insolvent institution, or to refrain from an action that could avoid a systemic crisis. If there is a risk of systemic crisis, it is normally determined that public support even to insolvent institutions may be warranted, but this is normally given by the government through the fiscal budget, not by the central bank. The moral hazard aspects, which are common arguments for not providing ELA to insolvent institutions, will be no different if the central bank provides support or if the government does. The central bank may have a better capability than other authorities to provide financial support if the need arises very quickly. The main reason for this is that the central bank has the instruments for lending available and it has resources in its balance sheet or the credibility to get resources if they are needed (for example in foreign currency).

Caleb M Fundanga: Improved economic and financial developments in Zambia Opening remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Bank of Zambia/Deutsche Bank workshop on Capital Markets, Lusaka, 15 April 2010. *  *  *  The Deputy Governor – Operations at Bank of Zambia Officials from Deutsche Bank Officials from the Ministry of Finance and National Planning Distinguished Resource Persons Colleagues from the Bank of Zambia Ladies and Gentlemen I am delighted to officiate at this important workshop on Sovereign Bond Issuance. Let me from the onset express my gratitude to our colleagues from Deutsche Bank who have demonstrated a desire and commitment to share with us their experiences in the area of international capital markets, particularly with respect to sovereign debt issues and ratings. I am particularly delighted that this workshop is a follow up to an earlier meeting with officials from Deustche Bank in December 2009. The willingness of the Deutsche Bank officials to come back four months later to further discuss the issues with a wider audience is truly heartening to us and commendable indeed. Ladies and Gentlemen, Zambia like many other countries in Sub-Saharan Africa is one of the countries that have for a long time relied on concessional funding and multilateral financial support in implementing her development agenda. Whereas other parts of the world have enjoyed respectable growth rates supported by private capital flows, our region has lagged behind.
Similarly, those extending loans will find it more difficult to assess the real value of collateral security and the borrower’s wealth. This situation must be corrected sooner or later, and when bubbles burst the risk of debt crises and financial instability is high. We have seen examples of this in Norway and in other countries. If we allow imbalances to develop in the domestic economy, this may trigger major capital movements with wide fluctuations in the exchange rate and long-term rates. Distributional effects of monetary policy The distributional effects of changes in nominal interest rates figured prominently in discussions concerning interest rate policy in the 1970s. There is probably a basis for saying that the consideration of distributional effects was an important reason behind the low interest rate policy. However, as developments were to prove, this was not the right approach. The low interest rate policy contributed to increased disparity. People are affected in different ways by a change in interest rates. Households with considerable debt will, ceteris paribus, be adversely affected by an increase in interest rates because they must use a higher proportion of their income to service the debt. However, the increase in interest expenditure in  BIS Review 92/2000  8  relation to household income is about the same for all income groups. This is because households with high income generally have a higher level of debt.

If fiscal policy lacks a long-term anchor, the interplay in economic policy will not function and the result will be a more unstable krone exchange rate and wider cyclical fluctuations. This will also result in poorer use of our resources, partly because strong fluctuations in domestic activity and long-term interest rates and the exchange rate will prompt investment decisions that are made on a very uncertain basis. BIS Review 92/2000  10  Concluding remarks Allow me to conclude where I began. I would like to highlight two points. First, the main function of monetary policy is to contribute to nominal stability. This is the best contribution monetary policy can make to a sound distribution policy, to employment, to economic growth and to welfare. Second, history has shown that monetary policy can be effective. If we set interest rates at a level that is too low, we may trigger strong forces in the credit market, as witnessed in other countries and as we experienced in Norway in the mid-1980s. If we allow imbalances to develop in the domestic economy, this could also lead to sizeable capital movements, accompanied by wide fluctuations in the exchange rate and long-term rates. These are strong latent forces that are far too easily forgotten. References Akram, Q F (2000): “PPP despite real shocks: An empirical analysis of the Norwegian real exchange rate”. Working Paper 2000/7, Norges Bank, Oslo. Bernhardsen, Tom and Øistein Roisland (2000): “Which factors influence the krone exchange rate?”, Economic Bulletin 2000/4 (to be published).
Other labour market indicators have also been strong, with a 200,000 increase in HMRC payroll numbers in May and an increase in job vacancies to above pre-pandemic levels. Most strikingly, private sector regular pay rose by 5.6% in the April data – though it is important to note that this is boosted by compositional effects, and by a base effect from spring last year. Aiming off for these transitory factors ‘underlying’ pay growth appears close to pre-pandemic levels. As Andrew Bailey set out in his recent speech, the compositional and base effect in the data meant that even if the level of average earnings was flat for the rest of the year, the growth rate would peak at nearly 8%. Putting all that together I expect to see another high reading in the May earnings numbers when they are published tomorrow. The latest REC survey for June reported labour demand growth at record highs, staff availability declining at a record rate, and pay growth rising fast. Against that backdrop it is not surprising that the labour market is a recurring theme of the intelligence on economic conditions that we receive from our agents and from our (virtual) regional visits. Finally there has also been significant news in inflation. UK CPI inflation rose to 2.1% in May, and then to 2.5% in this morning’s June data release. That represented material upside news to our May short-term projections, and as a result also represents a faster move to above-target inflation than we had been expecting.

Credit spreads can widen, also at the short end. 10 Another typical effect is the flight-to-quality phenomenon: as in previous episodes of high uncertainty, during the turmoil savers have shunned equity and credit risk products in favour of government bonds and commodities as well as cash and bank deposits. As a result, bank deposits increased significantly. The term asymmetric information, on the other hand, applies to an adverse selection problem, notably in the interbank market, where market players can no longer distinguish solvent from insolvent borrowers. Such a “lemon’s problem” induces banks to demand high risk premia of their creditors and lead to a general increase in interbank market rates. Moreover, it can lead to the rationing of credit provision. Indeed, during the turmoil, a general tightening of credit standards has occurred and has been intense and wide-spread. Counterparty credit risk and uncertainty about the development of entire segments of the financial market – notably of more complex instruments such as collateralised debt obligations and other related products – were important elements in the development of the turmoil. Central banks have to deal with this increase in uncertainty on several accounts. First, monetary policy needs to take into account the heightened uncertainty: central banks need to refine their monetary and financial analysis, and monitor extremely closely the developments in the financial system and their impact on the pass-through of policy rates to the economy. Second, and to turn to the beginning of my remarks, liquidity management has become more active.
In other words, a risk began to gradually build up that the role of the inflation target as benchmark for price-setting and wage formation would begin to weaken – that the nominal anchor that has been an important part of the favourable developments in Sweden since the 1990s crisis would begin to slip. Some say that the Riksbank should not attach any weight to this, but instead hold the repo rate at a higher level. However, I find it difficult to see how the Riksbank could deliberately ignore the risk that confidence in the inflation target, the linchpin of the inflation-targeting policy, begins to be undermined – something the Riksbank alone has the explicit task of preventing – to instead continue to try to counteract financial imbalances building up; a task for which others share the responsibility and have more tools to manage. Should central banks raise their inflation targets? Most of the post-financial crisis debate on the level of the central banks’ inflation targets has been based on rather different trains of thought, as I mentioned earlier. Here the starting points has instead been that problems can arise if inflation and inflation expectations fasten at a too low level for too long. Many economists and debaters have therefore begun to ask whether the central banks’ current inflation targets should therefore be raised. 15 The idea behind the proposal can be described as follows.

2 Financial stability has great significance for monetary policy There is no doubt that financial stability has considerable significance for monetary policy. Monetary policy largely acts via the financial markets and if these function poorly, monetary policy will have less effect on the economy and on inflation. Problems in the banks can also lead to problems in granting credit in general in the economy and thus to lower demand and lower inflationary pressure. But the effects on unemployment, growth and other aspects of the economy can be substantial, even if this does not extend to a full-scale financial crisis. If imbalances linked to credit-granting and asset prices build up that are unsustainable in the long run, there is a risk that the economic downswings will be deeper and more prolonged. 3 Given the links between the areas, there are arguments in favour of monetary policy taking into account risks linked to financial imbalances. This is actually nothing new. Such arguments were put forward even before the financial crisis, although the debate then concerned “bubbles” on the stock market or property market. Some said that monetary policy should react to such sharp rises in asset prices, over and above the impact the upturns have on the prospects for inflation and economic activity.
This pattern is suggestive of a structural trend in the underlying global trend real interest rate, in other words Global R*. This concept can be estimated, using a variety of statistical methods, all of which extract an underlying slow-moving trend from the more volatile data. Some of these estimates, from a range of different academic papers, are shown in Chart 3. The teal line shows a new estimate by Bank staff, based on data for 31 high-income countries. Though there are relatively wide error bands around this central estimate, and alternative estimates from the literature exhibit different patterns, the direction of travel has been clear. In other words, a decline in Global R* over recent decades is common across estimates. Page 6  Chart 3: Empirical measures of Global R* have fallen in recent decades  Source: Consumer prices indices, short-term interest rates and government bond yields for the calculation of Cesa-Bianchi et al. (2022)’s global measure of R* from the Jordà et al. (2017) Macrohistory Database and Eikon Refinitiv. Other estimates from Del Negro et al. (2019), Hamilton et al. (2016), Holston et al. (2017). While these statistical estimates help us to understand the dynamics of the trend real rate, they do not tell us why it has been falling. The dynamics of the trend real rate are determined by slowmoving structural factors that affect the balance between the demand for capital for production and the stock of wealth available to finance it.

In the current uncertain environment, it is a challenging time to make predictions about the future. Nonetheless, to conclude let me say a few words on what these results might imply for the policy landscape going forward. As I discussed earlier, the new analysis presented in this speech suggests that the effects of the key drivers of Global R*, particularly increasing longevity, are expected to persist. Absent a significant reversal in the key trends that have driven down Global R*, we may expect it to remain low. So it is not unreasonable to expect that Global R*, the long-run anchor for UK equilibrium interest rates, will remain low. Therefore, cyclical adjustments in short-term nominal interest rates – like those we are currently witnessing in the United Kingdom and abroad – will for the foreseeable future continue to be played out against the backdrop of low global equilibrium real interest rates. While we have considered several important drivers of Global R* in the past, other factors may  Page 16  come into play over time. You may wonder, for example, whether the pandemic could have impacted some of the key drivers of Global R*, such as productivity growth. The simple answer, of course, is that we do not yet know. It is too soon to tell what the long-run impact of the pandemic will be for the economy.
More banks made such issuances in 2021, giving rise to greater cost dispersion.18 There was also a significant increase in unsecured debt issuances, in this case at a slightly higher cost than in 2020. Meanwhile, deposits at Spanish banks continued to grow in 2021, albeit at slower rates than in the previous year.19  17  The risk-free interest rate benchmark. 18  The rising cost of Tier 2 debt owes, at least in part, to smaller banks issuing these instruments to comply with MREL resolution requirements. This factor may have had an important impact, given that MREL requirements are binding from 1 January 2022 and banks must reach the required levels. 19  The balance of bank deposits held by the resident private sector in Spain rose by 4.1% in 2021, compared with growth of 8.9% in 2020. 10  Overall, the average cost of liabilities20 has fallen in the last two years, down to 0.5% at end-2021, below its pre-pandemic level (slightly over 1%). After falling in 2020, the cost of capital rose in the first ten months of 2021,21 but then fell back again, to 8.1% at December 2021.

Accessibility means it is easy to get hold of cash when you need it, that it is not too expensive or complicated to acquire a card or online banking services or that the mobile network has good cover if I want to use mobile payment or banking services. The same reasoning also applies, of course, to the recipient of a payment. Willingness to accept various types of payment may be undermined by factors such as technical problems, high costs and difficulty in depositing daily takings. Accessibility is also closely linked to uniform payments standards. The methods of payment should be predictable and this is the case if  1  By hijacking a card, we mean skimming and similar activities where the card data is secretly scanned and then used for fraudulent purposes. BIS central bankers’ speeches  1  we all agree on how payments will be made. The more of us that are in agreement the better, as we can then make use of the network effects and economies of scale that are inherent in the mediation of payments. For instance, this type of unanimity means we can be fairly certain that it is possible to pay by card or in cash at the nearest shop. The reason for a positive attitude towards innovation and development is that they enable us to have safe, efficient and accessible payment services.
There are also signs that the strong growth in productivity that has been evident in other countries – for example in the US – is moderating somewhat. And we may see a similar trend in Norway. Second, even without a reversal, profits may fall and unemployment rise. The implications of this will depend on how far businesses, in their search for qualified labour, will go in bidding up wages. It will also depend on how wage-earners react and on their ability to adapt to change. Furthermore, it must be expected that the strong krone will shave profits in some enterprises and industries at the moment, even though many have used currency hedging to safeguard their income. Even though demand for labour is strong, there is a risk that outflows from the labour market to various social security schemes will remain high. Sickness absence is high, and the share of the working-age population on rehabilitation schemes or receiving disability pensions is rising. Many workers choose to take early retirement under the AFP scheme (contractual early retirement) when they reach 62 years of age, and – because this age group is expanding sharply – this number will probably increase in the years ahead. In Norway, close to 600 000 persons of working age receive social security benefits or pensions. This is equivalent to 25 per cent of the labour force. This is the Norwegian economy’s Achilles’ heel. A particularly disturbing aspect is that disability is increasing among young people 1 .

There are many self-regulating mechanisms in the economy, but inflation does not regulate itself. The inflation target of 2.5 per cent also provides a framework for the social partners. Over time, nominal wage growth above 2.5 per cent will entail higher real wages and higher purchasing power. Real wage growth that exceeds productivity growth may lead to higher inflation and higher interest rates. In government-financed enterprises, which are often labour-intensive, budgets are adapted to expected wage growth. This is usually in line with assumptions about cost inflation in the economy as a whole and with the inflation target. If wages rise more than this, efficiency must be increased in order to minimise the adverse impact on service production and customers. 2  Calmfors and Driffill (1988): “Bargaining structure, corporatism and macroeconomic performance”, in Economic Policy, April, 14-61 and Driffill (2006): “The Centralization of Wage Bargaining Revisited. What have we learned?” in Journal of Common Market Studies, Vol. 44, no. 4, November, 731-756. BIS Review 122/2007  3  All economic agents can plan ahead on the assumption that inflation will be about 2.5 per cent over time. This is the most valuable contribution Norges Bank can provide the social partners and other economic agents. Thank you for your attention. 4  BIS Review 122/2007  BIS Review 122/2007  5  6  BIS Review 122/2007  BIS Review 122/2007  7  8  BIS Review 122/2007
capable of both encouraging innovation, protecting adequately customers and maintaining the stability of our financial system. The upheavals experienced by the crypto ecosystem and the confidence crisis that has developed from the fallout clearly show from our financial stability authority stand point that the implementation of such confidence prone regulatory framework is urgently needed. Europe has led the way in this field, defining a new regulatory framework, known as MICA (Markets in Crypto Assets regulation). It is important that its implementation takes place as swiftly as possible, within a broader, international effort, building on the high-level recommendations developed by the FSB. 2/ Beyond supporting the development and adoption of a confidence prone regulatory framework we can also, as a central bank, play a positive operational role in revisiting the central bank money services we provide with the objective of adapting them to the digital age and the possible associated development of tokenised finance. This is the reason why in 2020, the Banque de France launched a large-scale experimentation program on wholesale CBDC with a number of market participants. This program has allowed us to understand better how DLTs work and the benefits that are likely to emerge for financial markets. Our main motivation is to extend the existing trust in our settlement infrastructure and assets to transactions carried out on DLTs. Their settlement in central bank money appears essential to guarantee the players in these markets against the counterparty risks inherent with other, private tokenised settlement assets.

If you read just a few of the comment letters on our website, you will see that many of the latest suggestions from the industry would tend to increase the complexity of the New Accord even further. Still, we know that it is easier to enforce a simpler rule than a complicated one. As we complete the text of the new rules, we will continue to simplify and streamline the framework. Conservatism and the balance between soundness and conservatism A second issue that respondents to the proposals have raised is the sense that the New Accord may be highly conservative in its assumptions about how much risk exists in certain exposures. Questions about conservatism matter to us because we are trying to align capital more closely to risk and in a way that is conceptually sound. A good example would be the treatment of retail exposures, including the small and medium enterprises that fall into this category, where the Committee found persuasive economic evidence to support a significantly lower requirement compared to earlier drafts of the new rules. Another example we are evaluating currently concerns the treatment of credit losses for banks adopting one of the more sophisticated approaches to credit risk, the “internal ratings-based” or “IRB” approach. Our current rules for the IRB approach derived capital charges on mathematical estimates of a bank’s credit losses - both those that could be anticipated versus those that could not.