samchain/econo-pairs-v1 huggingface dataset:
The second, again rather obvious, point is that the bond market is one of three broad channels of financial intermediation, along with the better developed, at least in this region, banking and equity markets. Less obvious, perhaps, is the importance of ensuring that the bond market commands a degree of robustness and efficiency capable of channelling suddenly enlarged flows of savings to investment that may be diverted from one or both of the other two channels as a result of crises there. These channels should reinforce each other in order that financial intermediation and therefore economic growth can continue in times of financial stress. We have witnessed how the US bond market helped substitute for bank intermediation in the credit crunch of the late eighties. We have also witnessed how the US banking system in turn played the back-up role when the bond market failed to intermediate funds as a result of the LTCM crisis, thus minimising the disruption to economic growth. In contrast, the less developed bond market in this region failed to provide the necessary backup when banks in a number of jurisdictions faced difficulties. Funds simply dried up and there were debilitating economic and financial consequences. Bond market development in this region is thus an urgent task. This task is, however, hindered by a third point, which is that the three channels of financial intermediation are in competition with each other.

Source: Average values by estimates of Chinn (1998), Goldstein (1998), Tornell (1998) and Berg and Pattillo (1998). BIS central bankers’ speeches  15  Chart 15 Current account balances in East Asia and the euro area East Asia (1996) – Euro area (1999)  Note: % of GDP. Source: Haver Analytics. Chart 16 Fiscal costs of recapitalisation as % of GDP  Note: high scenario. Source: IMF (1999). 16  BIS central bankers’ speeches  Chart 17 Argentina public sector debt as % of GDP  Share of foreign currency denominated debt in 2001: 97.59% Source: Haver Analytics. Chart 18 Exchange rates vis-à-vis the USD for selected emerging Asia countries  Note: 02/01/1997=100. Source: Federal Reserve Board of Governors. BIS central bankers’ speeches  17
While these evaluations form the core of the supervisory program for large, complex banking companies, they are far from the only important activities pursued by supervisors. Day-to-day oversight of individual firms is a critical complement to these cross-firm, horizontal evaluations. There are three key channels that generate insight on firms: 1) continuous monitoring through meetings with bank senior management, business line management, risk managers, auditors and others; 2) review and analysis of internal reports; and 3) independent analysis by supervisory teams. These insights guide supervisory assessments and supervisory actions for individual institutions, as well as contributing to the assessments made as part of CCAR, CLAR and other horizontal exercises. We have come a long way since the financial crisis, and the financial sector today is much more resilient as a result of the evolving supervisory framework. However, more work still lies ahead. A key challenge in assessing the effectiveness of supervision is that much of what supervisors do, by necessity, is confidential. This reliance on confidential information and confidential actions can make supervision seem mysterious to outsiders, which complicates the evaluation of what policies may be effective or ineffective. For example, if a bank fails, is this evidence of poor supervision, or instead evidence that even good supervision can’t prevent all bank failures? Improving our ability to do this diagnosis is critical. I am confident that today’s panels and paper discussions will help us move forward in this direction. Thank you for participating in this conference. BIS central bankers’ speeches  3

Also, as long as our primary objectives are not threatened, we should do what we can to support other objectives of economic policy. These include favourable economic growth, high employment, etc. It means that we should conduct monetary policy in such a way that we do not cause unnecessary fluctuations in production and employment. In practice this again comes down to difficult empirical questions which need to be weighed up carefully. If we see that financial imbalances are building up, and come to the conclusion that these either threaten the security of the payment system or risk leading to an abrupt real adjustment in the future, with negative consequences for economic growth or employment, we then have, in principle, a motive for taking action with the interest rate. Whether the knowledge that we can act diminishes the risk of "bubbles", is a different question, but it is a link in the chain of argument which strengthens the case for monetary-political activism. Another thing is that this is naturally not a simple decision to take in any given situation. There are also possibilities of working with other instruments, for example, capital requirements on financial institutions, supervision, etc. Our Financial Stability Reports are intended to play a role in this context. They should bring problems of this sort into the open, partly with the intention of attempting to contribute to improvements on a voluntary basis.
Peter Praet: Interview in Knack Interview with Mr Peter Praet, Member of the Executive Board of the European Central Bank, in Knack, conducted by Mr Ewald Pironet and published on 6 January 2016. *  *  *  For over a year now, the European Central Bank (ECB) has been printing heaps of money, pumping it into the economy and pushing interest rates down to almost 0%. When may this policy be deemed a success? You may label that ECB policy a success if inflation, the rise in the cost of living, stays below, but close to, 2% over the medium term. That is our mandate. I admit that our policy has not yet been successful enough: inflation rates in Europe have been at the very low level of almost 0% for quite some time now. That is why we are continuing to take the necessary measures to drive inflation up to 2% over the medium term. However, the point at which we think we will reach 2% is constantly postponed, because all kinds of things are happening that are dampening inflation, such as the decline in oil prices or lower economic performances in the emerging countries. We have decided to maintain our policy until March 2017. But we need to be careful not to jeopardise the ECB’s credibility by shifting that horizon. It is up to the ECB to keep inflation at just below 2%, but it is failing to do so.

For example, we explore what the consequences would be if we were to raise interest rates rather than lower them. But our analyses convince us that we are following the correct strategy. Besides, that strategy has not been determined by Mr Draghi and a handful of ECB Executive Board members; it came about with the agreement of the large majority of the Governing Council, on which all national central banks governors in the euro area have a seat. I would never have imagined that the euro area could break up, as almost happened in 2012. Nor did I think it possible that the ECB would have to print more than an additional € trillion (i.e. € and pump it into the economy in order to respect its mandate. The ECB has acted resolutely but the story is not over yet. In order to emerge from the crisis, it is crucial that the other authorities also do their homework. It is not up to monetary policymakers to resolve structural problems. 2  BIS central bankers’ speeches
The duration of these stops will depend on the COVID-19’s behavior, but in any case, it will take a big toll on second-quarter investment. The baseline scenario assumes that these projects will resume normally towards the third quarter of this year. We must bear in mind that the economy’s performance since last October provides a weak starting point to deal with the COVID-19 emergency. Although the latest IMACEC2 showed a recovery in activity levels— including the February figure (2.7%) we published this morning—the sanitary measures affect more acutely those sectors that had already been hit by the social unrest. Also, household consumption is coming from a significant contraction in the latter part of last year, while investment was sustained by construction and other works, mainly mining projects. In the labor market, the national unemployment rate as reported by the National Statistics Institute for the moving quarter ending in February showed a bigger increase than in previous months, while other indicators point to a marked worsening in employment quality. Particularly striking is that in recent months a large proportion (92%) of the increase in total employment has been in salaried informal jobs, which do not provide the benefits that formal salaried employment does, including paid sick leave (Figure 7). Some financial variables such as the exchange rate, stock prices, and credit growth were also in less favorable levels than they showed at the onset of the social crisis.

This fact has been recognized by the markets so that, since the onset of the global alarm about the pandemic, in Chile asset prices have fallen less than they have in other comparable economies. As Central Bank, we are actively working to ensure the full implementation and effect of the measures adopted. At the same time, we will be vigilant on how events unfold, ready to deploy all our instruments to support the economy. At this juncture, however, the actions of one institution alone will not do the job. In recent weeks we have been strengthening our coordination with the Ministry of Finance and the Financial Market Commission, to align rules and incentives so that the funds flow to the most stressed businesses and households. The challenges we face require intensifying this coordination, including a response from the banking system to measure up to the circumstances, and cooperation of the National Congress to speed up the legal reforms that require urgent implementation. Although this emergency affects the day-to-day lives of many people, if we know how to manage it well, with good policies and collaboration of everyone involved, the impact will be temporary and, as the pandemic is controlled, we can all return to our activities as usual. This will allow the economy to recover its growth rate and leave the period of contraction behind. However, for this to happen, it is essential that those needing help to get through this shock obtain it. Households and businesses must have access to credit at a reasonable cost.
As the Swedish banks have grown so rapidly in recent decades, mostly by expanding overseas, it would not be out of place to ask whether they have become too large for Sweden. Is there, perhaps, a limit for how large a banking system can be in relation to the total production capacity and fiscal capacity of one country? The risks for society may, quite simply, become too high. Experiences from Iceland and Ireland during the last crisis undeniably suggest this. And the Swedish banks are certainly large. The combined balance sheet totals of the major banks are equivalent to slightly more than four times GDP (Figure 6, left-hand diagram). This multiple is among the highest in Europe, in the same order of magnitude as the United Kingdom and the Netherlands (prior to the crisis, Iceland was in ninth place). However, I think that we should perhaps be cautious in assessing the risks in a banking system merely on the basis of the size of its balance sheets. For example, imagine that Nordea moved its head office from Stockholm to Helsinki, suddenly becoming a Finnish bank. This would take Sweden below the European average (Figure 6, right-hand diagram). Would the level of risk in the Swedish banking system then have decreased considerably? I don’t think so. The risks in a large banking system have many other dimensions than just balance sheet total in relation to GDP. Large banking systems can be associated with low risks and small banking systems can be associated with high risks.

It intensified in August the same year, with the bankruptcies of the British bank, Northern Rock, and troubled banks in Denmark and Germany. On 15 September 2008, the crisis took a new and dramatic turn when Lehman Brothers filed for bankruptcy. The next day, money markets seized up. Confidence between banks had been compromised. Liquidity dried up, interest rates rose sharply and equity prices fell. Exchange rate volatility – the daily fluctuations in the exchange rate – showed a marked rise. Bond markets in turn shut down. In the days and weeks that followed, banks tightened credit standards on new loans to households and enterprises. At that time, global economic growth was already slowing, but the situation deteriorated significantly throughout the last few months of 2008. The turnaround hit hard, with synchronised effects on virtually all financial and goods and services markets, not only in the US but also in Europe, Asia, Latin America and Oceania. For a long period there were hopes that growth in China and other emerging market economies would hold up. But they are also severely affected by the crisis. During the year, we saw a bank, credit and liquidity crisis in the financial system which gradually came to encompass a crisis in the real economy. The contraction in the world economy has resulted in a substantial decline in traditional exports, and global trade has fallen markedly since autumn last year. The global downturn also led to a marked fall in prices for oil and other commodities through autumn 2008.
First, these are improvements in comparison with the unsustainable imbalances which characterised both the situation prevailing in 1988-89 and that of the years 1993-94. Second, the price paid by the majority of Hungarians was very heavy indeed: a drop in net real earnings of 12% in 1995, followed by another of 4% last year. Even if this was arguably unavoidable, given the size of the imbalances which had to be corrected (and which themselves had been caused, to some extent at least, by the premature rise in real earnings in 1994), the size of the sacrifices remains a fact. Against this background, any further erosion of average living standards would be just as unsustainable as were the macroeconomic imbalances in 1993-94. Third, the rate of inflation is still far too high. Admittedly, since the postdevaluation peak reached in the late spring of 1995 - of more than 30% - the rate has been declining steadily, to stand by December last year at a shade below 20%. But I am seriously worried by the fact that the Hungarian rate of inflation, while never moving towards three digits, has remained stuck within the 18-35% range over the past seven years. The worst was avoided by maintaining positive real interest rates during the greater part of this period, but the distorting effects of such inflation rates on the economy remain substantial, not to mention their socially unacceptable impact on those people whose earnings cannot be adjusted to inflation. 6.

Now let me come to the risks that a generalised move towards universal banking could entail, and the ways and means of containing them. The main risk, of course, is the emergence of conflicts of interest. One such potential conflict of interest may arise within any bank, between the bank’s own risk-taking activity and risk-taking for its customers. The classic example of this is the potential conflict of interest between credit-granting and securities underwriting, but this is only one example. The traditional way of avoiding the misuse of such conflict-creating situations is (a) to devise an organisational structure with clearly distinguishable lines of responsibility, (b) to avoid flows of “inside” information between the various activities, (c) to attribute to each activity costs, income and profits, and (d) to entrust external auditors with the surveillance of the systems put in place. The end-result will, of course, never be entirely safe. Moreover, the building of “Chinese walls” inside a multi-polar banking organisation may weaken, or even destroy, the synergy between those poles, i.e. it may undermine the rationale of a multi-polar organisation. I would not want, however, to overstate the internal conflict of interest argument. In the long run, the kind of conflict to which I have referred is unlikely to be very strong. In a longer-term perspective, no bank can afford to favour its own risk-taking activity at the expense of its customers - especially if auditing makes it certain that any misuse of the bank’s powers would come to light. 3.
This account has been persistently in deficit, although there was a marked improvement in the deficit in 2006 to 6.3% of GDP. In the long run, however, this imbalance needs to be further reduced to a more sustainable level. This can only be achieved to the extent that growth is driven more by export-oriented activities and less by consumption. In view of the large amount of currency in circulation and your interest in ensuring a smooth changeover to the euro, what advice would you give to the public in this regard? As I said earlier, the amount of currency in circulation has been contracting and there is evidence that cash hoards and bank deposits are being converted into euro. We are trying to discourage this premature conversion because portfolio diversification at this stage is expensive and makes little sense. In the case of Maltese lira bank deposits, these will be converted automatically, and at no cost, into euro on the changeover date. As for cash conversions, people who are buying euro currency notes from banks and other financial institutions are having to pay exchange commissions; those who obtain euro notes outside the banking system are being offered an even more unfavourable exchange rate, besides running the risk of receiving counterfeit notes. These early conversions, moreover, constitute a drain on the Bank’s reserves. We are, therefore, encouraging the public to deposit Maltese lira cash holdings into the banking system and retain them in Maltese lira denominated deposits, thereby earning interest.

In trade in value-added terms (“TiVA”), more than one-third of the exports from the five economies of Northeast Asia and the eight economies of Southeast Asia 1 ends up in the region itself – this is nearly twice their exports to the US. ASEAN in particular is becoming a major economic force in Asia. It is a $ trillion market with over 630 million people. Based on current growth rates, ASEAN is expected to become the fourth largest market by 2030, behind the EU, China, and the US. ASEAN has emerged as a key global manufacturing region, with extensive supply chains linking the individual economies and to China. ASEAN is the world’s fifth largest manufacturing economy in value-added terms. So, in the face of rising trade protectionism, it is important for Asian economies to strengthen trade, investment and infrastructure networks to sustain long term growth. Indeed, the best response to trade restrictions is to further liberalise trade among willing economies. And this is exactly what Asia is doing. The Regional Comprehensive Economic Partnership (“RCEP”) is a good example. It brings together the ten ASEAN economies and China, India, Japan, Korea, Australia and New Zealand. It signals the region’s commitment to freetrade. Negotiations are ongoing, but when successfully concluded, the RCEP will create the world’s largest trading bloc, covering one-third of global GDP. And by the end of next month, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (“TPP-11”) will enter into force.
Cyclical factors have been at work here; the United States and Britain are leading an upward phase and there have been expectations about future monetary policy that tended to strengthen both their currencies. But the krona has also fallen, particularly during the winter and spring, against most Central European currencies, including the German mark. At times this has had to do with unrest in Europe over the EMU process. Many market observers, however, also point to some uncertainty about the durability of Swedish economic policy. BIS Review 56/1997  -8-  In the longer run there are good grounds for a stronger krona. Productivity in the Swedish economy has risen rapidly in recent years. The current account shows a large surplus and the expansion of export production should ultimately spread to the domestic sector. The outlook for inflation is favourable and government finance shows a considerable improvement. Still, there is reason to take the weakening of the krona seriously. Policy must continue to focus on consolidating government finance; budgetary improvements in connection with strong economic activity cannot be used for easing the fiscal stance. Under these circumstances, neither are there grounds as regards the exchange rate for appreciably modifying the March assessment. To date in 1997, however, the krona has been somewhat weaker than envisaged and this, together with the available indicators, points to marginally higher export growth.

Of course, considerations of market sensitivity, commercial confidentiality, and statutory restrictions on disclosure of confidential information place some limits on the amount of material we can make public. Given the increasing transparency and the extremely limited discretion over the currency board arrangements, which draws its credibility from a strict rule-based system, a certain constructive ambiguity is also necessary if we are to have the flexibility to deal decisively with sudden crises. Within these limits, we are committed to developing our policy of transparency, and to increasing the quality and comprehensibility, and not just the quantity, of the materials we put out for public consumption. The challenges of this year We see it as one of our challenges to seek to maintain public interest in our work, even though it is possible that some of the controversies and concerns that sustained that interest in 1998 will fade away as economic recovery moves closer. This brings me to the prospects for the remainder of this year and beyond. I leave the predictions and forecasts to others in the Government entrusted with this task. But I think it appropriate to say something here about the monetary environment. Recent months have witnessed the return to a more stable monetary environment in Hong Kong. Speculative pressures on our currency have moderated sharply, allowing a significant decline in interest rates from the peaks last year. As you know, under the linked exchange rate system, our interest rates are closely tied to those in the United States in normal circumstances.