samchain/econo-pairs-v1 huggingface dataset:
Office premises have a dominant role as investment vehicles and are therefore most important for the commercial property market as a whole. Investment in new commercial properties partly depends on developments in rental rates and the number of vacant premises. Developments in rental rates for office premises in Norwegian cities over the past twenty years appear to have been fairly uniform, with very high rates at the end of the 1980s, followed by a marked negative correction towards the mid-1990s. Rental rates then rose considerably up to the end of the century, followed by another downward correction. Stavanger seems to have experienced a relatively even rise in real terms throughout the period. Rental rates in Trondheim and Bergen seem to have had  BIS Review 41/2006  1  a less pronounced peak at the end of the century than Oslo, while rental rates in Tromsø have been relatively stable since 1992. Last year rental prices for office premises began to pick up in several Norwegian cities. There is considerable variation within the various quality and location segments. The prestigious segment in central business areas shows the highest rise in prices, while rental prices in some less attractive areas have remained virtually unchanged. During the cyclical peak between 1997 and 2001, only 4 per cent of the office premises in Oslo were vacant. More moderate economic growth in 2002 and 2003 contributed to a fairly sharp rise in the vacancy rate. Over the past two years, the rate has fallen again.

At 8 per cent, the vacancy rate is still relatively high, although in some central areas, it has fallen to below 4 per cent. The share of vacant office premises in Bergen has been lower than in Oslo for the past three years. The value of property has increased, both in Norway and in other countries, even though the rise in rental rates has been moderate and the vacancy rate has been high. Investors have been willing to pay more than previously for a krone, a dollar or a euro in future net rental income. The direct return, i.e. annual rental income minus operating costs as a share of the price paid for the property, for office premises in Oslo has fallen to a historically low level. This is probably related to developments in longterm interest rates. An investor will expect a higher return on property, and property as an asset class is probably midway between equities and bonds in terms of both risk and return. Since nominal interest rates are low, many investors prefer to move their low-risk investments from the bond market to alternative vehicles such as property. Developments in the real value of office premises and our estimates of capacity utilisation in the Norwegian economy seem to co-vary in the period 1980-2005. The effect on the value of office premises prior to the banking crisis was much greater than the effect of a similar level of capacity utilisation in the years 1998-2000.
Migration has led to upward pressures on wages in the emerging Europe and to downward pressures in the advanced EU. The contribution of net emigration to the middle income trap for emerging economies should also be further studied. Still, I would like to share with you some preliminary results of a work in progress4 that I am undertaking on the relationship between wage growth and inflation. If we think in terms of stocks instead of flows, we can introduce the concepts of wage gap and inflation gap (just like the IMF’s REO discusses about unemployment gap, and the classical theory has the output gap). Wage gap refers to the cumulated gap between current wage and a peak reference wage value in the past. The permanent income hypothesis is fundamentally flawed in times of crisis, because of uncertainty of future income. The only certain reference value lies in the past, not in the future: and that is why current consumption is influenced by past income. A recession is a game – changer. In a crisis, the reference is not ahead of us, but it is rather in the past. Retirement savings and linear employment prospects are uncertain. People relate to their peak gains in the not so distant past rather than to uncertain future gains. Inflation gap refers to the cumulated deviation of present inflation from the target inflation or, in the absence of such, from its long-time average.

We’ve also observed community banks participating with other banks on real estate lending, in part to better manage real estate concentrations. Community banks are also seeking to differentiate themselves from their larger competitors by marketing their more individualized customer service. In regard to liquidity, a number of community bankers have noted the influx in public deposits and the challenges associated with putting these deposits to productive use. Finally, although there has been a material improvement in asset quality over the last several years, it will be important for senior management to continue to be prudent in their underwriting practices and in monitoring any emerging risks in their portfolios. The economy continues to show a strong trajectory, but of course we need to remain alert to any potential slowdown. As Second District community banks grow in line with their national peers, we are encouraged by the increased reliance on core funding and strong asset quality. We will, however, continue to monitor developments that may pose a risk to the safety and soundness of the financial and banking system. Fintech A second major change for community banks—like all banking institutions—is the potential competition from new “fintech” firms. Since 2012 there has been over $ billion in US-based fintech investments including online lending-based platforms, capital markets, and payment and 2 2/4  BIS central bankers' speeches  settlement services.2 By offering traditional financial services to customers through new, innovative platforms and channels, these fintech firms pose a challenge to traditional banking business models.
An unduly strong krona, on the other hand, would benefit the other countries’ competitive position, but also dampen economic activity in Sweden to the detriment of demand for the other countries’ exports. Assessments of the appropriate exchange rate cannot be based solely on a particular model. Besides comparing various prices and costs, allowance must also be made for other indicators of the state of the economy and their future paths. In earlier negotiations, the rate-setting decisions have rested on the macroeconomic situation in the country in question and the rest of the world, various indexes of competitiveness and, not least, the exchange rate’s average level and its fluctuations in recent years. The agreed rate has often been the prevailing market rate or a rate close to this. How should economic policy be formulated? The room for discretion in monetary policy will be affected if Sweden participates in ERM II. One extreme in that situation would be for policy to focus on a strict exchange rate target, so that the interest rate is set exclusively in relation to the exchange rate tendency. In practice, the Riksbank would then fully follow the ECB’s footsteps. The other extreme, you might say, would be for monetary policy to continue to target inflation, still with the exchange rate as one of the set of indicators of inflationary pressure in the Swedish economy.

2  BIS Review 39/2005  The main objective remains enforcing legal initiatives that would bring about the modification of legal and sub-legal basis. Modification of regulatory basis of Bank of Albania I have stated even previously that Bank of Albania aims at reviewing its regulatory basis with the sole intent to simplify it and to ease its implementation. For this purpose I have insisted on a continuous basis that the first contacts among mutual technical staffs to raise the banking system concerns on the regulatory framework enforcement should be established. After several discussions we come to the conclusion that the group of the following regulations should be subject of necessary modifications, and I would ensure you that work at the Bank of Albania has already started for this purpose. Methodical guideline on “foreign exchange risks” Observations: inclusion in the calculation of the open position of off-balance guarantees which include as unused credit limit, the financing commitments made and received, and registering of collateral estimated in foreign currency and received for guaranteeing the credit (all banks in the matrix). These are commitments that remain in force and for which, according to the current regulatory framework interpreting, the bank is required to create a real position (within the balance). It is proposed: to reformulate the methodical guideline, excluding the guarantees. Guideline “on bank regulatory capital” Observations: To make clearer systemization for the items being deducted from the additional capital, explaining that on which size deductions are to be calculated.
The drop in fuel prices will also help to contain the inflationary pressures and will contribute to sustain disposable income (Figure 5). A second transmission channel relates to the worsening of financial conditions. The global increase in risk perception and deep adjustments of financial prices restrict access to goverment and corporate funds. This has driven various central banks to take action to ensure the proper operation of the markets. In Chile, among other measures, the CBC Board adjusted the operation of liquidity programs it has been applying since November 2019, included corporate bonds among eligible collateral for all the liquidity operations in pesos offered by the Bank and launched the purchase of banking bonds from the open-market operations system (SOMA) participants for an amount in UF1 equivalent to up to USD 4 billion. At our Monetary Policy Meeting yesterday we also communicated that we will raise the amount of this bank bond purchase program to up to USD 8 billion. And for the outstanding balance (USD 5.5 billion) the maturity constraint for eligible instruments will be eliminated. The steep drop in companies’ activity because of social isolation of workers and clients and their inability to carry on their normal tasks has resulted in a significant increase in their financial needs, as they must continue to cover their costs in a context of heavy loss of income.

While it is too early to make a firm call on the longer term consequences of the event, it will certainly weigh on both market confidence and on an already listless global recovery. •  Among the developed economies, the US has been most advanced in its recovery. This provided the impetus for the first interest rate hike in more than nine years in December 2015. However, the Federal Reserve has since held back from further rate increases amid a moderation of growth in the US and in many other parts of the world, as well as a rise in financial market volatility. •  Some central banks in Europe and Japan have adopted negative policy rates alongside other monetary easing measures to further support their economies, with mixed results. Central banks will have to be vigilant against undue financial market stresses arising from last Thursday’s referendum in the UK, and to be prepared for a period of heightened uncertainty that such an unprecedented event might entail. •  In Asia, China’s economic slowdown, softer commodities prices and weak demand in key export markets have been a drag on the region’s economies. Nonetheless, more resilient domestic demand conditions have continued to provide support to growth in many countries, including those in ASEAN. 5. The present low-growth, low-inflation environment, which in all likelihood will continue for some time, suggests that monetary policy settings in many parts of the world will remain accommodative, especially in advanced economies where inflation has been below target for a number of years.
In particular, there has been much greater cross-border activity in Europe, supported by fully-integrated pan-European systems for making wholesale payments. But many systems for the trading, clearing and settlement of securities are still fragmented nationally by sector. Market firms are keen to see consolidation of the arrangements for clearing and settling securities trades, where costs are still considerably greater in Europe than in the US. Even without mergers, market firms can of course trade remotely from a single location, though this does not address the issue of duplicate investment costs. But it seems that full rationalisation may take years to implement and, while the broad vision of integrated European systems is widely shared, there are still differences of view about how best to achieve it. The third change is the diversification of investment. The launch of the euro has begun to encourage a shift in funds away from the particular national market in which they have traditionally been invested, and towards investment across the euro area as a whole. This helps to explain the increasing use by fund managers of European benchmark indices against which to measure investment performance, rather than national benchmark indices. Portfolio diversification has so far been rather slower than originally expected. But there is evidence that diversification is continuing to take place, and it is expected to pick up over time. Fourth, financial institutions themselves are consolidating, including in some cases across borders, so that they can better provide a service to clients across the Single European Market as a whole.

And five days from now, the final phase of the system, which will allow paper cheque clearing and delivery versus payment settlement of debt securities denominated in US dollars in Hong Kong, will fall into place. Those among you with responsibility for corporate treasury functions should consider making use of this system, which will lower costs and considerably reduce settlement risks. 26. Technology changes our lives fundamentally. We are somewhat lucky to be living in an age of rapid technological revolution, and are perhaps luckier than our ancestors who experienced similar revolutions, because the revolution now going on is directed largely towards the arts of peace rather than of war. I say ‘lucky’ because, despite all the uncertainties and disruptions it brings, this technological revolution has the potential to change people’s lives for the better. But it also brings about pain, and, if not applied with skill, can accentuate inequalities of geography, education and  BIS Review 114/2000  6  wealth. Labour is displaced by machines and software, and labour requirements turn away from the purely physical to the more knowledge-based – witness the slowness in the improvement of our unemployment rate. The workforce will need to adapt. And our economy will need to adapt to accommodate the kind of knowledge-based industries that are concentrated into a logistics, financial and digital hub.
One could also conceive, in principle, of a housing market that involved much less of it. Suppose that, instead of putting deposits in mortgage-issuing banks, we all had equity investments in companies that owned residential housing – and that, instead of owning the houses ourselves, we were simply tenants of these corporate landlords. That would be a “model” with no mortgage debt at all. But it’s not immediately clear it would make net wealth any higher, housing any cheaper or, for that matter, the macro-economy more stable.8 Returning to the real world, regulators would rightly be concerned if mortgage debt started growing rapidly again, especially if it was accompanied by other signs of loosening credit supply and greater risk-taking. It was in response to early signs of this sort that the FPC decided in 2014 to cap the share of new mortgages banks were allowed to issue at high multiples of a borrower’s income. However, the fact that the level of UK mortgage gearing is higher than it was a generation ago, or that it’s lower than in the Netherlands, is of less significance. And the aim of the 2014 measures was not to reduce 8 In fact we know that under certain conditions, originally set out by Modigliani and Miller (1958), it would make no difference to anything – this is just an extension of their famous result concerning corporate finance (which I also mention below).

Option-adjusted spread on index of high-yield bonds issued in the US and spread to maturity on index of leveraged loans issued in the US measured relative to the spot Treasury curve. 9  Graham and Leary (2011), Harris and Raviv (1991). Atkinson (1967), Bernanke et al. (1996), Greenwood and Hanson (2013). 11 The characteristic feature of cov-lite loans is not that they have fewer covenants, but that the requirements bind less often, and in particular only in response to particular events (such as additional financing). More traditional, “cov-heavy” contracts require firms to meet such requirements continually (Becker and Ivashina (2016)). 10  15  All speeches are available online at www.bankofengland.co.uk/speeches  15  If you think there are parallels here with the subprime mortgage boom in the U.S., ahead of the last crisis, then you’d be right. Those too were grouped together and sold to investors as packages of loans, diluting the ability and incentive to monitor individual risks; they grew extremely rapidly, particularly in the last year or two of the boom – and, as it happens, they accounted at the peak for a similar share of their underlying market (13% of total U.S mortgage debt). We should recognise that, in aggregate, corporate leverage in the UK has fallen since the crisis (Chart 17, which includes bonds as well as bank loans).12 As with mortgages, interest payments on those debts remain well below average and, if bond markets are anything to go by, will remain so for quite a while yet.
If a business manager is told that she “owns the risk,” she may feel empowered to ignore or otherwise shut out other key stakeholders and control functions. After all, if she truly owns the risk, then why does she have to listen to anyone else? This is obviously wrong. Lawyers and compliance professionals, for example, should be part of an ongoing conversation about risk management. Or, conversely, if those lawyers and compliance professionals do not themselves share some stake in the risk, they may not feel that speaking up or challenging a position by the business line is worth it. After all, the business line “owns the risk” and they (the lawyers or compliance officers) do not. What’s more, certain types of risks, in certain types of contexts, do not fit neatly into the “own the risk” model. Reputational risk is an example. Firms often discover, to their dismay, that reputational risk cannot be neatly contained within one business line, or even within one organization. In a sense, it would be better to think of certain types of risks as shared, with shared accountability, rather than owned. In short, it is important to remember that risk management is a means to an end. Who “owns the risk” is not as important as clearly understanding how that risk may inhibit an organization from fulfilling its purpose or achieving its goals, and clearly understanding how that risk is being managed. That does not mean that responsibility should be unattributed or entirely diffuse.

A framework for doing the latter is set out in the Basel Committee’s Sound Practices paper in the form of the two-dimensional matrix I described earlier, which assigns losses arising from the various loss event types to the major business lines of the bank. Conclusions Operational risk has many facets, and the events which give rise to it cover a huge range from highfrequency low-impact at one end to low-frequency high-impact at the other. There is a correspondingly wide range of controls and techniques that can be used to prevent or at least mitigate losses. Sound  BIS Review 33/2002  3  documentation lies at the more bread and butter end of the spectrum of such controls and techniques. But it is no less vital for all that. The Association is therefore to be congratulated for its initiative in putting in place an essential building block in the form of the standardised documentation that is being launched today. This will help to promote the development of the syndicated loan market in Hong Kong and in the region more generally, and will also serve the objective of enabling banks to better manage their operational risk. 4  BIS Review 33/2002
But the fact that firms are starting to grapple with implementation means that they’ve got past denial and bargaining and settled down to acceptance. Smaller firms may be lower down on the preparation curve, although presumably their total risks are also smaller. In December, the Federal Financial Institutions Examination Council presented a one-hour webinar on LIBOR transition that drew about 1,300 participants from supervised firms. Of those who responded to a polling question during the webinar, about one-fifth said it was the first time they were hearing about the topic. To continue forward, several issues must be resolved. For example, what events should trigger the shift from LIBOR to SOFR or another alternative rate? A definitive end to LIBOR is an obvious trigger. But, short of that, what events should prompt the switch? What if LIBOR was nominally available, but the UK FCA used its supervisory power to declare that LIBOR is unrepresentative of the underlying market? Last month, an FCA official highlighted the possibility that this is exactly how the end of LIBOR might come about, and urged market participants to seriously consider this possibility when crafting their fallback triggers.23 In their various consultations on fallback language, the ARRC has proposed that such a declaration by the FCA would trigger the switch to an alternative rate. A clear majority of respondents supported that proposal. I think every market participant should ask how the fallback triggers in their contracts would respond. In addition, the precise mechanism of changing from LIBOR to, say, SOFR will vary.

My third point is that, for every financial debt there is obviously a corresponding financial asset, owned either by domestic residents or foreigners. There is a lender for every borrower. Net indebtedness, in this sense, is zero by definition. What matters, therefore, is how the debt and assets are matched and how the debt is distributed across the population. If debt is concentrated in households with low liquid financial assets, and high marginal propensities to consume, that is a more vulnerable scenario than if debt is more evenly distributed across the population. I’ll also return to this issue below. Financial cycle And the idea itself of a “financial cycle” is perhaps the best place to start. We are not here talking about the business or economic cycle – that is, the regular “ups and downs” in economic activity we observe in indicators like employment and GDP. By contrast, financial cycles are the persistent and possibly self-reinforcing build up of leverage, increases in asset prices and loosening of credit conditions over time. They don’t always end in tears. But they often do: the peaks of financial cycles tend to be closely associated with financial crises and the possibility of “serious distress and dislocations”.3  2  Although an increase in credit intensity (credit to GDP) is a key part of economic development some studies have found evidence that beyond certain levels of credit to GDP countries experience lower growth. See Cecchetti et al (2011) and Arcand et al (2012). 3  See Borio (2012).