samchain/econo-pairs-v1 huggingface dataset:
For large banks, we are making progress on resolution planning, and this world is different to five years ago, but we are not there yet by any means. I have a background in resolving banks, and I regard having the capacity to resolve failed large banks – including the largest – as the holy grail of resolution. Unlike the legendary Holy Grail, I think there is a good reason to believe that the objective of being able to resolve large banks that fail can be within our grasp. I am very clear that when firms mess up, they should be allowed to fail, and by doing so they are putting at risk the money of their shareholders and if necessary after that those who provide debt funding according to levels of seniority. But I am also very clear that really achieving the objective of avoiding a no failure regime requires a fundamental change of mindset both inside firms, the authorities and in society more broadly. Fear of failure is an important conditioner of behaviour in a financial regulator, and achieving a change on this front depends on establishing a wide acceptance of our approach that orderly failure which does not compromise our public policy objectives is an acceptable outcome. BIS central bankers’ speeches  3  To be clear, we should be criticised where failure compromises those objectives and we could have taken steps to avoid it.

But, challenges remain as we have learnt that the key pressure points that can lead to difficulties for small-open economies can be externally-induced, particularly when we do  BIS Review 163/2008  1  not know if we are still caught in the eye of the financial storm or whether the turbulence has ceased. Let me now turn the focus of my discussion to the need for closer cooperation as we all face challenges on how to combat the global financial crisis. The ongoing global financial crisis is not dissimilar to other crises as it is and will be followed by intensive reforms at international level. It also highlights that international cooperation remains important and necessary in maintaining global financial stability. In fact, it has become more and more important given globalization process, which makes us better interconnected. However, we might have taken it for granted that international cooperation is the first best solution and could solve global crisis. We have all learnt that in a number of occasions, when a solution is needed, good implementation comes too little too late. Taking the International Monetary Fund’s or the (IMF) Short-term Liquidity Facility as an example, this new facility is somewhat similar to the swap lines extended among central banks to fellow members that do not call for typical IMF-supported adjustment programs. Emerging markets have been proponents of this facility for several years, but the IMF has previously been reluctant to endorse it due to fear of moral hazard.
The implication is that in order to reap the full benefits of the policy reforms currently under way, Malta does not only need to integrate further internationally, but has to do so through a structured approach that seeks to exploit potential synergies with other economies. The question then arises, “What kind of regional arrangement and with whom?”. Malta’s potential partners for regional integration Traditionally, partners to regional integration arrangements exhibit strong trade ties based on complementarity in terms of resource endowments and geographical proximity, as well as a common historical and cultural background. These criteria limit the scope for integration between Malta and a number of outlying European countries such as the transition economies of Eastern Europe and the EFTA countries. In fact, Malta’s commercial links with these countries are weak, with only a few economic sectors that could be of potential interest to both parties. In 2001 Malta’s exports to EFTA countries represented less than 0.5% of its exports to the European Union (EU). It follows that the EU and the countries of North Africa, many of which are participating in the Euro-Mediterranean Partnership known as the Barcelona process, are more likely to be potentially viable regional partners for Malta. As far as the latter countries are concerned, there is no doubt that they have made considerable progress in recent years. Most of them, however, require more time to be able to take full advantage of their potential.

As investment activity is becoming increasingly complex, so are the demands of corporate governance. In conformity with the private financial sector, central banks - the SNB counts itself among them - have professionalised their investment and risk control processes and improved their accountability toward the public. With increased professionalism, particularly as a result of applying the mark-to-market principle, the SNB’s profits are more volatile than in the past, however. In order to safeguard the independence of monetary policy and so as not to restrict investment policy, the SNB’s annual profit distribution - as already spelled out in the message of the Federal Council on the new National Bank Law - must remain a variable residual amount in the long term and must not be tied to any specific purpose. BIS Review 55/2003  1
These two anchors, which are enshrined in the Treaty, form the legal basis for our action, but, more than that, they are the basis for the confidence that 76% of euro area citizens have in our currency: this is our essential asset. Paradoxically, at a time when the ECB and the Banque de France are doing more than ever before, criticisms are being raised over their mandate, and whether it should be extended beyond price stability to include debt sustainability or the fight against the health crisis, and over their independence, and whether they should be placed “under political control”. With regard to independence, there are sometimes even strange resonances between Karlsruhe and certain debates in Italy or France. I would therefore like to clarify the reasons behind these two anchors and set out precisely what they contain. What does the future hold for price stability? Our price stability mandate is defined as inflation below, but close to, 2% over the medium term. This 2% figure has been the subject of frequent debate, but it represents the equilibrium point in discussions by economists – who all recommend a target of above zero – and is the target currently pursued by all major central banks. Naturally, there is a huge amount of uncertainty over how the economic environment will evolve, but this is probably less true for inflation. Nonetheless, it is important to share a few insights into its possible trajectory.

There can be a strong temptation in this case to give in to fiscal dominance. This can take different forms, including two that are frequently cited, and seductive precisely because they are illusory: the cancellation of the public debt held by the central bank, or the similar idea of converting it into perpetual debt. The cancellation of this debt would be tantamount to the monetary financing of public deficits, the prohibition of which is one of the founding pillars of the agreement creating the euro. More importantly, we need to do away with this myth of “magic money”. There is no such thing as a free lunch. If the central bank cancelled the debt it holds, it would book an equivalent loss on its balance sheet and collective wealth would be reduced by the same amount. Moreover, the bank deposits linked to this monetary creation will have to be remunerated by the central bank when interest rates return to positive territory, and will therefore cost as much as a short term debt. And if, as some people are suggesting, the central bank committed to never raising interest rates, that would trigger a potentially uncontrollable inflationary spiral. As for perpetual debt, with no prospect of repayment, investors would demand high risk premiums and therefore interest rates, which would be much more expensive than on the current debt.
Mr Bäckström discusses the monetary policy situation in Sweden Speech by the Governor of the Bank of Sweden, Mr Urban Bäckström, at Stockholm Chamber of Commerce and Veckans Affärer on 2/2/99. Thank you for the invitation to attend this conference and talk about “The krona and the interest rate”. I shall be speaking mainly about the current monetary policy situation and the factors that may be crucial for the policy’s future formulation. However, now that the Riksbank is directed by the six members of the new Executive Board, which also makes the monetary policy decisions, the decision-making process has changed. So I shall begin by briefly describing how monetary policy will be decided and presented in this new environment. The new process for monetary policy decisions At 1pm on Thursday 11 February, the new Executive Board of the Riksbank will be convening for its first meeting specifically devoted to monetary policy. Compared with the Board’s ordinary sessions, the discussion at what are called monetary policy meetings is to cover monetary policy more comprehensively and conclude with a decision on the policy’s future stance. The discussion will be minuted and published in this form on 6April, around eight weeks after the event. Moreover, a brief account of the grounds for the decision will be presented in a communiqué on the day after the meeting, in this case at 9.30am on Friday 12 February.

Figure 5 Real annual contribution to GFCF (*) (percentage points)  16  16  12  12 Other  8  8 Non-mining  4 0  4 0  -4  -4  Housing  -8  -8  Mining  -12  -12  -16  -16 09  10  11  12  13  14  15  16  17  18  (*) For sectoral GFCF, variations of the 2008 Benchmark Compilation are used. Since total GFCF is expressed using the 2013 Benchmark Compilation, annual variation of other GFCF is adjusted for consistency purposes. Estimations for 2015 and 2016 based on available information from listed companies (FECU), Capital Goods corporation surveys, Chilean Chamber of Construction and National Accounts by institutional sector. For 2017 and 2018, Central Bank projection models and sectoral sources are used, including investment plans and Capital Goods Corporation surveys. Source: Central Bank of Chile. 9. The labor market continues to gradually adjust and could become a drag on consumption. Wage employment declined by 2% annually in the moving quarter that ended in February, and annual wage growth moderated. In addition, the number of hours worked declined, at a time when an increasing number of workers suggest their workdays are shorter than desired. In any case, this has not translated into an increase in open unemployment, due to flexibility in the Chilean labor market: the unemployment rate is still low from an historic perspective.
However, taking into account the stronger-than-expected effects of the monetary tightening implemented in the first quarter, the output gap is expected to close at a slower pace compared to the previous period. In sum, due to developments beyond the monetary policy control such as the significant surge in oil and other imports prices as well as the renewed tariffs, we have revised our inflation expectations upwards (Chart 17). In addition, I would like to remind you that we will not respond to first round effects of rising oil and other commodity prices, but second round effects will be closely monitored and deterioration in the pricing behavior will not be tolerated. It should be emphasized that any new data or information regarding the inflation outlook may lead to a change in the monetary policy stance. Therefore, assumptions regarding the monetary policy outlook underlying our inflation forecasts should not be perceived as a commitment on behalf of the CBRT. 3. Risks and monetary policy  In the last part of my speech, I would like to mention risks regarding inflation outlook in the upcoming period and prospective monetary policy strategies to be implemented should these risks materialize. BIS central bankers’ speeches  9  We envision that the impact of the ongoing monetary tightening on loans and domestic demand will be more apparent starting from the second quarter. However, the extent and the timing of the impact may vary depending on developments beyond the control of monetary policy.

This is because either the desired policy rate is sufficiently below the ELB or the central bank has committed to keep 3/5  BIS central bankers' speeches  interest rates unchanged through forward guidance. However, conflicts of objectives between fiscal and monetary policies may arise in the future. The ongoing accumulation of public debt and the large expansion of central banks’ balance sheets increase the likelihood of such conflicts. On the one hand, large fiscal stimuli for too long may lead to concerns about debt sustainability and, via the expectation of future fiscal tightening, offsetting the favorable effects on output and inflation. On the other hand, central banks should keep the risks taken in their balance sheets under control to avoid threatening their own independence. Indeed, low inflation today is not a guarantee that it will remain low forever. They must keep a sound balance sheet with adequate capital in order to keep full control of their monetary stance all along the road. The key question is then how to reconcile the benefits of a mutual reinforcement of monetary policy and fiscal policy in the short-term with the challenges of keeping inflation under control and public debt to sustainable levels in the long-term. There is no magic answer to this question but I will try to sketch here some basic principles that are in my opinion ingredients of a sound policymix recipe: 1. Each authority should be guided by and stick to its mandate.
At the same time, the resolution authority in the home country, working with the home country lead supervisor, could begin taking the necessary steps to prepare for a possible resolution as a contingency. If the supervisory intervention does not produce a successful private restructuring and recovery, the home country resolution authority leads a coordinated resolution process. Let me elaborate on a couple points. First, I believe that economists can be invaluable in helping financial supervisory and resolution authorities understand more fully where coordinated actions and cooperative solutions improve outcomes and where they do not, something I don't believe we now really know. The potential gains from cooperation will reflect the distribution of asset and liabilities (or net worth) across legal entities, assumptions about the rate of decay in the values of assets and business lines pre-entry and post-entry into insolvency, the length of time spent in each state and any one-time markdown on entering insolvency. With analysis or simulation, various decision rules can be explored about how a lead resolution authority could foster a cooperative, coordinated resolution using  BIS Review 140/2010  5  tools such as bridge banks, transfers of assets and liabilities, sequencing of sales or liquidations and other techniques. An analysis can also explore how sensitive the decision rules are to timing, distribution of net worth across entities and decay or markdown factors.

I have talked about early, coordinated supervisory intervention to activate a recovery plan for a systemically important firm and of a coordinated resolution process. Is there an opportunity between those two stages to intervene more forcefully, but not incur the potential asset markdowns and administrative costs of resolution? Considerable interest has been expressed in developing a “bail-in” mechanism to provide that intermediate step. Let me comment by stressing that what I am expressing is strictly my own view. And let me start by saying that a bail-in mechanism cannot substitute for the national resolution tools and resolution planning called for by the CBRG. There must be a last stop where systemically firms can be resolved, because we will inevitably need it and we must work to make cross-border resolution possible at acceptable cost. Where can bail-in fit? I’ve described a process in which supervisors deal first with a troubled financial firm by encouraging its board of directors and management to activate its recovery plan and develop a private restructuring. In my personal view, the possibility of a restructuring prior to insolvency with potentially more forceful outside supervisory or contractual intervention is interesting and deserves more study. Given the number and range of stakeholders in a large financial company, such a mechanism could help solve a coordination problem that can be costly in terms of time and sub-optimal in terms of ensuring the equitable treatment of stakeholders for a financial company on the threshold of, or in, distress.
However, this should not stop an action started by the supervisor to deal with a presumed problem in the bank. The supervisory management and staff must also have reasonable protection should they be sued for their bona fide decisions taken as supervisors. In some countries the supervisors are harassed by frivolous lawsuits by bank owners, managers or other parties. Even if the supervisor is in the end acquitted from any guilt, the process may take years. During this time the supervisor will be severely hampered in performing her job having to concentrate on her defence. Such lawsuits will also reduce the willingness of other supervisors to take necessary supervisory decisions, since they are themselves afraid of being sued. A first line of defence is to take all major supervisory decisions in a collegiate fashion at the top level. Thus only the agency such can be sued as an institution. Nevertheless, should individual supervisors be sued, they must be provided assistance in the court proceedings, such as legal counsel and protection against any costs. Of course, if the supervisor is finally found guilty and have not acted in good faith, the supervisory agency could reclaim any outlays. The second issue is that the supervisors must have a sufficiently large and skilled staff with satisfactory resources. With too few, or not adequately skilled supervisors, bank problems may not be detected early enough which may lead to major crises. With too many supervisors interventions in the banks might become excessive, thus interfering in banks’ daily business.

There is sometimes a tendency by the authorities to try to solve all problems by more regulation. It is  BIS Review 104/2006  5  true that we could regulate away all the risks in the banking sector – but such regulation would hamper economic development. There must be a balance. Thus for each regulation we introduce we must also conduct a fair analysis of its costs, also non-financial, as well as its benefits, also non-financial. I agree that this is not easy, partly since in most cases you will not find any clearly measurable indicators, but the process of conducting the cost/benefit analysis will in itself help you in your decision. Supervision Good regulation is closely linked to good supervision. Supervisors must be able to build their work on a broad and relevant regulatory framework. Supervisors must also possess the necessary powers and other prerequisites to conduct efficient work. There are at least four important aspects: First, the supervisory authority must have operational independence from industry as well as from politicians. These must not interfere in the operational decisions of the supervisors, e.g. to take remedial measures or to close banks. Such decisions must be taken on purely prudential grounds. Of course, the supervisors are still responsible for their actions and could be criticized afterwards, e.g. in Parliament hearings, but they must be able to perform their operational duties independently. Also the bank, its owners and management should be able to sue the supervisors for malpractice and they may receive compensatory payments.
In the normal case, a well-balanced monetary policy means that inflation is close to the inflation target two years ahead without there being excessive fluctuations in inflation and the real economy.” (See p.2 in the Riksbank’s Monetary Policy Report). BIS Review 132/2008  3  In the assessment, potential effects of asset prices, such as property prices, equity prices and the krone exchange rate on the prospects for output, employment and inflation are also taken into account. Assuming the criteria above have been satisfied, the following additional criteria are useful: 3. Robustness  Interest rate developments should result in acceptable developments in inflation and output also under alternative, albeit not unrealistic, assumptions concerning the economic situation and the functioning of the economy. 4. Gradualism and consistency  Interest rate adjustments should normally be gradual and consistent with the Bank’s previous response pattern. 5. Cross-checking  It is important to cross-check the Board’s judgments concerning the interest rate path against other information. One natural cross-check is market expectations about the future interest rate, as represented by implied forward interest rates (adjusted for risk and term premia). In addition, simple interest rate rules like the Taylor rule and other variants suggested in the literature provide potentially useful cross-checks. Experiences What are our experiences of our communication approach? The ultimate objective of our communication is to achieve better outcomes in terms of improved stability in inflation and the real economy.

The criteria used by Norges Bank to assess the interest rate reflect policymakers’ general views and assessments. They are therefore not “carved in stone”, but can be changed and modified due to new insights. Currently, the Bank uses five criteria, which can be summarized as follows: 1. Achievement of the inflation target  The interest rate should be set with a view to stabilising inflation close to the target in the medium term. The horizon will depend on disturbances to which the economy is exposed and the effects on the prospects for the path for inflation and the real economy. 2. Reasonable balance between the inflation gap and the output gap  Norges Bank conducts flexible inflation targeting, which implies that stabilising inflation around the target should be weighted against stability in the real economy. The chosen interest rate path should therefore imply a reasonable balance between the objectives if there is a conflict in the short term between stabilizing inflation around the target and stabilizing the real economy. What is meant by a “reasonable” balance is obviously a matter of judgment and is an important element in Board discussions. 3  For example, the Swedish Riksbank communicates the criteria behind the forecasts as follows: “The Riksbank’s forecasts are based on the assumption that the repo rate will develop in such a way that monetary policy can be regarded as well-balanced.